Chapter 2
Developing Marketing
Strategies and Plans
2-1
Copyright © 2003 Prentice-Hall, Inc.
Key Points for Chapter 2
1.
2.
3.
4.
5.
6.
Value Delivery Process
Value Chain
Core Competence
Mission statement
Major Competitive spheres
Characteristics of a Strategic Business Unit
(SBU)
7. Intensive, Integrative. Diversification growth
2-2
Copyright © 2003 Prentice-Hall, Inc.
Key Points for Chapter 2
8. Downsizing and Divesting Businesses
9. SWOT analysis
10. Four Criteria of MBO of a business unit
11. Porter’s generic strategies
12. Strategic group
13. Strategic alliance
14. Contents of marketing plan
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Marketing and Customer Value
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The Value Delivery Process
The Value Chain
Core Competences
A Holistic Marketing Orientation and
Customer Value
 The Central Role of Strategic Planning
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Copyright © 2003 Prentice-Hall, Inc.
The Value Delivery Process
 The task of any business is to deliver customer
value at a profit
 Value creation and delivery sequence: 3 phases
 Choosing the value
 Providing the value
 Communicating the value
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The Value Chain
 A tool for identifying ways to create more
customer value
 Porter’s Generic Value Chain consisting of 9 value
creating activities
 Primary activities
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Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
 Support Activities
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Procurement
Technology development
Human resource management
Firm infrastructure
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The Value Chain (continued)
 Benchmarking
 A firm compares its cost and performance in
each value-creating activity against those of its
competitors or furthermore, those of the world
best companies, that is, best of class.
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The Value Chain (continued)
 Core business processes
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The market-sensing process
The new-offering realization process
The customer acquisition process
The customer relationship management
process
 The fulfillment management process
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The Value Chain (continued)
 Winning companies have superior capabilities in
management & linking core business
 Wal-Mart’s Vendor Management Inventory System
 Cross-functional teams of a company
 Value-delivery network (Supply chain)
 Partnering with specific suppliers & distributors
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Core Competences
 Firms outsource less critical resources if they
can be obtained at better quality or lower cost
 Own and nurture the resources and
competences that make up the essence of the
business-Core competences
 Characteristics of a core competency
 Makes a significant contribution to perceived
customer benefits
 Has applications for a wide variety of markets
 Difficult for competitors to imitate
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The Central Role of Strategic
Planning
 Strategic Planning
 Managerial process of developing and
maintaining a viable fit between the
organization’s objectives, skills, and
resources, and its changing market
opportunities
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The Central Role of Strategic
Planning
 A firm’s capabilities for successful
marketing
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Understanding customer value
Creating customer value
Delivering customer value
Capturing customer value
Sustaining customer value
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The Central Role of Strategic
Planning
 Corporate Level
 Division Level
 Business unit Level
 Product Level
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The Central Role of Strategic
Planning
 Marketing Plan
 Strategic Marketing Plan, Fig. 2.2
 Lays out target markets and value proposition
that will be offered, based on an analysis of the
best market opportunities
 Tactical Marketing Plan
 Specifies the marketing tactics, including product
features, promotion, merchandising, pricing,
sales channels, and service
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Corporate and Division
Strategic Planning
 All corporate headquarters undertake
four planning activities
1.Defining the Corporate Mission
2.Establishing Strategic Business Units (SBUs)
3.Assigning Resources to Each SBU
4.Assessing growth opportunities
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Defining the Corporate Mission
 The ultimate goal of an organization, that
is, the reason for its existence
 Shared sense of purpose, direction, and
opportunity
 Guided by a vision, an almost impossible
dream that will lead the organization for
the next 10 to 20 years
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Defining the Corporate Mission
 Three characteristics of a good mission
statement
 Focuses on a limited number of goals
 Stresses the company’s major policies and values
 Defines the major competitive spheres
 Competitive spheres the company will operate in
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Industry
Products and applications
Competence
Market segment
Vertical
Geographical
 Sample Mission Statements (Table 2.2)
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Establishing Strategic Business
Units (SBUs)
 Most companies operate several businesses. GE
49 SBU’s
 Businesses are often defined in terms of
products; auto business, textile business
 Market-oriented definition in terms of
satisfying customers’ needs is considered
superior to product-oriented definition, Table
2.3
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Table 2.3: Product-Oriented versus MarketOriented Definitions of a Business
Company
Product Definition
Market Definition
Missouri-Pacific
Railroad
We run a railroad
We are a people-andgoods mover
Xerox
We make copying
equipment
We help improve office
productivity
Standard Oil
We sell gasoline
We supply energy
Columbia Pictures
We make movies
We market
entertainment
Encyclopaedia
We sell encyclopedias
We distribute
Information
Carrier
We make air
conditioners and
furnaces
We provide climate
control in the home
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Establishing Strategic Business
Units (SBUs)
 Three characteristics of an SBU
 A single business or collection of related
businesses that can be planned separately
from the rest of the company
 Has its own set of competitors
 Has a manager who is responsible for
strategic planning and profit performance
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Assigning Resources to Each SBU
 Management allocates corporate resources to
each SBU.
 Decides whether the market value of a
company is greater with an SBU or without it
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Assess Growth Opportunities
 Assessing growth opportunities involves
 Planning New Businesses
 Downsizing or Terminating Unprofitable Businesses
 Three options for a firm to grow, Fig. 2.3
 Intensive growth
 Integrative growth
 Diversification growth
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Intensive growth
 Further growth within current businesses
 Ansoff’s Product-Market Expansion Grid (Fig. 24)
 Market penetration strategy
 Current products to current markets
 Market development strategy
 Current products to new markets
 Product development strategy
 New products to current markets
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Integrative growth
 When intensive growth is not enough to meet
future desired sales goals
 Growth through integration in industry, or M & A
 Backward integration
 Forward integration
 Horizontal integration
2-24
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Diversification growth
 When intensive growth and integrative growth are
not enough
 Expansion to outside current businesses
 New products to new markets
 Walt Disney Company
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Assess Growth Opportunities (Cont.)
 Downsizing and Divesting Older Businesses
 Carefully prune, harvest or divest unprofitable
businesses
 Should not try to salvage hemorrhaging businesses
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Organization and Organizational
Culture
 A company’s organization consists of its structure,
policies, and corporate culture.
 The corporate culture is very hard to change.
 Shared experiences, stories, beliefs, and norms that
characterize an organization
 Clashing cultures including different management
styles and practices are major causes for failure or
trouble of JVs or Mergers.
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Business Unit Strategic
Planning (Fig. 2.5)
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The Business Mission
SWOT Analysis
Goal Formulation
Strategic Formulation
Program Formulation and
Implementation
 Feedback and Control
2-28
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The Business Mission
 Each business unit needs to define its
specific mission within the broader
company mission
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SWOT Analysis
 A firm’s Strengths, Weaknesses,
Opportunities, and Threats
 External Environment Analysis
(Opportunity and Threat Analysis)
 Internal Environment Analysis (Strength
and Weakness Analysis)
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SWOT Analysis (cont.)
 Opportunity and Threat Analysis (OT)
 External environment analysis
 Identifies the associated opportunities and threats
caused by environmental changes
 Fig. 2.6
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FIG. 2.6: Opportunity and Threat Matrices
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SWOT Analysis (cont.)
 Strength and Weakness Analysis (SW)
 Internal strengths and weaknesses
 Checklist for Performing Strengths/Weaknesses
Analysis: Marketing, Finance, Manufacturing,
and Organization: Marketing memo
 Critical to assess interdepartmental working
relationships
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Goal Formulation
 Goals are objectives that are specific with
respect to magnitude and time
 Use Management by Objective (MBO)
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Arranged from the most to the least important
Quantitatively whenever possible
Realistic to achieve
Consistent (free of contradiction)
 Usually trade-off between growth and profit.
But some companies can “grow profitably.”
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Strategic Formulation
 Porter’s Winning Generic Strategies
 Overall cost leadership:
 Lowest product and distribution cost
 Differentiation:
 Differentiated performance in important
customer benefit area
 Focus:
 Focuses on one or more narrow market segments
 Losing strategies
 Middle-of-the-roader
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Strategic Formulation
 Strategic Group
 Firms pursuing the same strategy directed to the
same target market. Figure 11.2 (p. 296)
 The fiercest competition occurs among firms in
the strategic group
 Strategic Alliances
 Strategic cooperation to compliment or
leverage members’ capabilities and resources
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Program Formulation and
Implementation
 Must work out detailed support
programs and, and then must estimate
the costs using
 Activity-based cost (ABC) accounting
 In implementing, must consider the needs
of all stakeholders:
 Customers, employees, distributors,
suppliers and stockholders
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Feedback and Control
 As it implements its strategy, a firm must
track the results of its strategy and
monitor new developments
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Product Planning: The Nature
and Contents of a Marketing
Plan
 Nature of a Marketing Plan
 Contents of the Marketing Plan
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Executive Summary and Table of Contents
Situation Analysis
Marketing Strategy
Financial Projections
Implementation Controls
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