Chapter Four Evaluating Opportunities in the Changing Marketing Environment Mission Statement Provides Guidance • Mission statement helps set the course of a firm by explicitly stating the organization’s basic purpose for being – May make it clear that some opportunities (target market or marketing mix alternatives) are not related to the mission – Some opportunities may be a good fit with mission, but not as good a fit or as high a priority as others • Mission statement works in combination with specific objectives and should relate to screening criteria used to evaluate strategy alternatives Mission Statement Provides Guidelines • Mission statement - the organization’s basic purpose for being • Mission statement - works in combination with specific objectives to evaluate strategy alternatives © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Objective’s Should Set Firm’s Course Three Three Basic Basic Objectives Objectives Provide Provide Guidelines Guidelines Socially Socially and and Economically Economically Useful Useful Functions Functions Develop Develop an an Organization Organization Earn Earn Profit Profit © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Mission Statement Provides Guidelines Mission Statement and Objectives Mission Mission Statement Company Company Objectives Objectives Production Production Objectives Objectives Finance Finance Objectives Objectives Product Product Objectives Objectives Personal Personal Selling Selling Objectives Objectives Marketing Marketing Objectives Objectives Place Place Objectives Objectives HR HR Objectives Objectives Promotion Promotion Objectives Objectives Mass Mass Selling Selling Objectives Objectives R&D R&D Objectives Objectives Price Price Objectives Objectives Sales Sales Promotion Promotion Objectives Objectives © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Mission Statement Provides Guidelines Company Resources May Limit Search for Opportunities Financial Financial Strength Strength Producing Producing Capability Capability and and Flexibility Flexibility Marketing Marketing Strengths Strengths © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Examples of Company Resources • • • • • • Financial strength (Intel) Producing flexibility (DaimlerChrysler) Patents (IBM) Channel relationships (Kraft) Loyal customer base (Coke) Technical capability (3M) Examples of Company Resources • • • • • • Financial strength (AT&T) Producing flexibility (Chrysler) Patents (IBM) Channel relationships (Kraft) Loyal customer base (Coke) Technical capability (3M) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing The Competitive Environment Basic Objectives Provide Guidelines Avoid Head-On Competition! Know Know the the Market Market Situation! Situation! Monopoly Monopoly Monopolistic Monopolistic Competition Competition Oligopoly Oligopoly Pure Pure Competition Competition © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Analyzing Competition Competitor Competitor Analysis Analysis Competitive Competitive Advantage Advantage Key Key Concepts Concepts Competitive Competitive Barriers Barriers © 2003 McGraw-Hill Companies, Inc.,with McGraw-Hill/Irwin Courtesy Harley-Davidson Motor Company—for use only Essentials of Marketing Competitive Competitive Rivals Rivals Competitor Analysis: Disposable Diaper Competition in Japan P&G’s Current and Planned Strategy Kao’s Strengths (+) and Weaknesses (-) Target Market(s) Upscale, modern parents who can afford disposable diapers Same as for P&G Product Improved fit and absorbency (+); brand name imagery weak in Japan (-) Brand familiarity (+); but no longer the best performance (-) Place Promotion Price (Potential) Competitive Barriers Likely response(s) Uni-Charm’s Strengths (+) and Weaknesses (-) Same as for P&G, but also budget-conscious segment that includes cloth diaper users (+) Two brands- for different market segments- and more convenient package with handles (+) Distribution through Close relations with and Distribution through 80% of independent wholesalers to control over wholesalers who food stores in best locations both food and drugstores (+), carry only Kao products(+); (+); shelf space for two brands but handled by fewer retailers computerized inventory (+) (-) reorder system (+) Heaviest spending on daytime Large efficient sales force (+); Advertising spending high TV, heavy sales promotion, lowest advertising spending (- (+); effective ads that appeal including free samples (+); ) and out-of-date ad claims (-) to Japanese mothers (+) small sales force (-) High retail price (-) but lower Highest retail price (-), but Lowest available retail price unit price for larger quanities also best margins for (+);price of premium brand (+) wholesalers and retailers (+) comparable to P&G (-) Parent protection (+), limits in Inferior product (-), excellent Economies of scale and lower access to retail shelf space (-) logistics support system (+) costs (+); loyal customers (+) Improve wholesaler and Press retailers to increase inIncrease short-term sales retailer margins; faster store promotion; change promotions; but if P&G takes deliveries in channel; change advertising and/or improve customers, cut price on package to require less shelf product premium brand space The Political Environment Regional Regional Economic Economic Groupings Groupings Nationalism Nationalism Characteristics Characteristics of of the the Political Political Environment Environment Consumerism Consumerism © 2003 McGraw-Hill Companies, ©2001 Hertz System, Inc. Hertz is a registered service mark and trademarkInc., of McGraw-Hill/Irwin Hertz System, Inc. —for use only with Essentials of Marketing Major Focus of Some Important Laws that Affect Marketing • Sherman Act (1890) – prohibits conspiracy to reduce competition – example: price "fixing" agreements among competing firms • Federal Trade Commission Act (1914) – prohibits unfair methods of competition – example: use of deceptive advertising • Robinson-Patman Act (1936) – prohibits most types of price-related discrimination – example: offering "advertising allowances" to some middlemen but not others (without cost justification) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Exhibit 4-2 The Legal Environment + 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin © 2003 McGraw-Hill © Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Some Important U.S. Federal Regulatory Agencies Agencies Responsibilities Federal Trade Commission (FTC) Enforces laws and develops guidelines regarding unfair business practices Food and Drug Administration (FDA) Consumer Product Safety Commission (CPSC) Federal Communications Commission (FCC) Environmental Protection Agency (EPA) Office of Consumer Affairs (OCA) Enforces laws and develops regulations to prevent distribution and sale of adulterated or misbranded foods, drugs, cosmetics, and hazardous consumer products Enforces the Consumer Product Safety Act— which covers any consumer product not assigned to other regulatory agencies Regulates interstate wire, radio, television, and telephone Develops and enforces environmental protection standards Handles consumers’ complaints © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Examples of Changes in the Political/Legal Environment • Deregulation of energy industries • Less emphasis on antitrust laws by federal government • Maturing of consumerism • More attention to laws governing international trade • Changes in labeling requirements © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing CNN ad Protection Consumer “Let the Seller Beware” © 2003 McGraw-Hill Inc., McGraw-Hill/Irwin Courtesy of CNN—for Companies, use only with Essentials of Marketing Examples of Effect of Technological Environment • Rapid changes in the Internet and World Wide Web • Robotics (better quality control, lower production costs) • Computer scanners at retail check-out counters • Worldwide satellites for data communication • Automated inventory control • Electronic fuel injection on automobiles • Cellular phones and fax machines for communication Examples of Trends in the Cultural Environment • More women in the work force • "Aging" of America, but accompanied by new growth in the “teen” group • More single-person households • More health consciousness • More concern about the environment Examples of Effect of Technological People with Money Make Markets Environment • Rapid Search for changes in the Internet and World Wide Web Growing Markets • Robotics (better quality Other control,Countries lower production Other Countries costs) • Computer scanners at retail check-out counters • Worldwide satellites for data communication Current Population Current Population • Automated inventory control • Electronic fuel injection on automobiles Population Population Trend Trend • Cellular phones and fax machines for www.demographicsnow.com communication 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin © 2003 McGraw-Hill © Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing Age Distribution • Average age is increasing • But there is a big teen cycle under way • Post World War II "Baby Boomers“ – Still a big, influential group • 50 and older group to grow dramatically in next decade Median Family Income, Over Time (in 2001 dollars) 60,000 50,000 40,000 30,000 20,000 10,000 19 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 2098 00 0 Income Distribution • Growth in real income has slowed down • Middle income groups in U.S. enjoy real choices – U.S. distribution like Canada, Western Europe, Japan, Australia, New Zealand • Higher income groups still have much of the spending power – Top 20% income group has over 47 percent of total income! – Bottom 20% income group has only about 4 percent! Percent of Total Income Going to Different Income Groups in 2001 Top 20% 47.7 22.9 Middle 15.4 9.7 Lowest 20% 4.2 0 20 40 60 Each Group's Percent of Total Income Note: the 20 percent of all families who have the lowest incomes account for only 4.2% of total income; the 20% with the highest incomes have 47.7 percent-a 10-fold difference between the “haves” and “have-nots” GE's Strategic Planning Grid • A way of organizing business judgments about existing and/or proposed product-market plans • Business Strengths Dimension – – – – Company size, market share Profit margins Technology position Limiting factors (personnel, capital needed, etc.) • Industry Attractiveness Dimension – – – – Size of market and growth trends Competitive situation Social impact Industry profitability Exhibit 4-9 General Electric’s Strategic Planning Grid © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing