MARKETING
CHAPTER NO. 2
COMPANY &
MARKETING STRATEGY
Partnering to Build
Customer Relationship
LEARNING OBJECTIVES



Understand company-wide strategic
planning and its four steps.
Learn how to design business portfolios
and develop strategies for growth and
downsizing.
Understand marketing’s role in strategic
planning and how marketers partner with
others.
Cont’d


Be able to describe the marketing process and the
forces that influence it.
Learn the marketing management functions,
including the elements of the marketing plan &
discuss the importance of measuring & managing
return on marketing.
STRATEGIC PLANNING


STRATEGY: The alignment of your
processes, resources, and organizational
structure to maximize benefits
PLANNING:Planning stage includes
setting goals & designing ways to achieve
these goals.
DEFINITION
“The process of developing and maintaining
a strategic fit between the organization’s
goals and capabilities and its changing
marketing opportunities.”
It involves defining a clear company
mission, setting supporting objectives,
designing a sound business portfolio, &
coordinating functional strategies.
Cont’d

Planning which focuses on longer range
objectives and goals. It is essentially
direction-setting and focuses on new
products and new markets.
STRATEGIC
PLANNING

Strategic Planning include:
1.
2.
3.
4.
Defining the company mission
Setting company objectives and goals
Deciding what portfolio of businesses and
products is best for the company
Developing detailed marketing plans for each
product.
STEPS IN STRATEGIC
PLANNING
1. DEFINING A MARKETORIENTED MISSION
MISSION STATEMENT:
“A Mission Statement of the organization’s
purpose—what it wants to accomplish on
the largest environment”
OR
“A statement of purpose
an organization is to carry out”
Cont’d
E.g. Walt Disney Company “making
people happy”; Microsoft
“information at your fingertips”
MARKET-ORIENTED
Vs
PRODUCT-ORIENTED MISSION
STATEMENT
“ A market-oriented
mission statement
defines the business
in terms of satisfying
customer needs”
“Mission statements
defined in terms of
product or
technology”
Company
Product-Oriented Market-Oriented
Disney
We run theme
parks
We create
fantasies—a place
where America still
works the way it’s
supposed to.
Revlon
We make
cosmetics
We sell life-style &
self-expression;
success & status;
memories, hopes &
dreams.
Encyclopedia
Britannica
We sell
encyclopedias
We distribute
information.
Amazon.com
We sell books,
videos, CDs, toys,
consumer
electronics,
hardware,
housewares and
other products.
We make the
internet buying
experience fast,
easy and
enjoyable—we are
the place where
you can find and
discover anything
you want to buy
online.
America online
We provide online
services.
We create
consumer
connectivity
anytime, anywhere.
eBay
We hold online
auctions
Home Depot
We sell tools &
home repair &
improvement
items.
We connect
individuals buyers
& sellers in the
world’s online
marketplace, a
unique web
community in
which they can
shop around, have
fun, and get to
know each other
We provide advice
& solutions that
transform hamhanded home
owners into Mr. &
Mrs. Fixits.
Wal-Mart
We run discount
stores.
Ritz-Carlton Hotels We rent rooms.
We deliver low
prices everyday.
We create the RitzCarlton
experience—one
that enlivens the
senses, instills
well-being, and
fulfills even the
unexpressed
wishes and needs
of our guests.
Nike
We sell shoes.
We help people
experience the
emotion of
competition,
winning, and
crushing
competitors.
Xerox
We make copying
equipment.
We make movies.
We help improve
office productivity.
We market
entertainment
We help preserve
beautiful
memories.
Columbia pictures
Kodak
We make cameras
& films.
Levi-Strauss
Hewlett-Packard
We make blue
jeans.
We offer comfort,
fashion &
durability in
wearing apparel.
We make computer We improve the
printers.
effectiveness of
individuals &
organizations by
helping customers
acquire, display,
analyze,
communicate, store
& manage
information.
Caterpillar
We make
construction
machinery.
We help build the
world’s
infrastructure.
Strategic Planning

Mission statements should . . .





serve as a guide for what the organization
wants to accomplish.
be “market-oriented” rather than “productoriented”.
be neither too narrow, nor too broad.
fit with the market environment.
be motivating.
2-SETTING COMPANY’S
OBJECTIVES & GOALS

Mission statements guide the development
of objectives and goals.


Objectives are developed at each level in the
organization hierarchy.
Strategies are developed to accomplish these
objectives.
Cont’d

E.g. increasing sales or reducing cost to increase
profit; sales can be increased by improving the
company’s share in the home country or entering
a new foreign market; market share can be
increased by increasing productivity, promotion
or cutting prices.

The objectives should be specific. E.g.
“increasing the market share to 15 percent
by the end of the second year.”
ONCLUSION
“It is more important to do what is
strategically right than what is
immediately profitable”
Developing strategies for growth
and downsizing:
One useful device for identifying growth
opportunities is the product/market expansion
grid.
Product/market expansion grid:
A portfolio-planning tool for identifying
company growth opportunities through market
penetration, market development.product
development, or diversification.
Market Penetrations:
A strategy for company growth by increasing
sales of current products to current market
segments without changing the product.
Market Development:
A strategy for company growth by identifying
and developing new market segments for
current company products.
Product Development:
A strategy for company growth by offering
modified or new products to current market
segments.
Diversification:
A strategy for company growth through starting
up or acquiring businesses in new products and
new markets.
Product/Market Expansion Grid:
Existing
markets
Existing
products
1. Market
penetration
New
products
3. Product
development
New
markets
2. Market
development
4. Diversification
.
.
Product/Market expansion grid is used to identify
growth opportunities for the company.
Product/Market Expansion Grid:
Existing
markets
Existing
products
1. Market
penetration
New
products
3. Product
development
New
markets
2. Market
development
4. Diversification
.
.
Product/Market expansion grid is used to identify
growth opportunities for the company.
Downsizing:
Reducing the business portfolio by eliminating
products or business units that are not profitable
or that no longer fit the company’s overall
strategy.
Planning Marketing:Partnering To
Build Customer Relationships

Partnering With Others In The Company

Partnering With Others In The Marketing
System
Partner
Relationship
Management:
Working
closely with partners
in other
company departments and outside the
company to jointly bring greater value to
customers.
Major Functional Departments:
 Marketing
Finance
 Accounting
 Purchasing
 Operations
 Information systems
 Human resource

Partnering With Others In The
Company:
Each company department can be thought of
as a link in the company’s value chain.
Value Chain:
The series of departments that carry out valuecreating activities to design, produce, market,
deliver and support a firm’s products.
Example:
WAL MART is an example of showing value
chain because their success depends upon their
all departments. As if
Purchasing can’t wring the lowest prices
from suppliers.
Operations can’t distribute merchandise at
the lowest costs.
Marketing can’t deliver on its promise of
lowest prices.
Partnering With Others In The
Marketing System:
More companies today are partnering with the
other members of the supply chain to improve the
performance of the customer value-delivery
network.
Value-delivery network:
The network made up of the company, suppliers,
distributors, and ultimately customers who “partner”
with each other to improve the performance of the
entire system.
Example No : 1
MC DONALD’S is an example which is
partnering with other members of the supply
chain to improve the performance of the
customer value-delivering network. As it
successfully partners with its
Franchisees
Suppliers
& others
who jointly deliver exceptionally high customer
Example No : 2
HONDA has designed a program for working
closely with its suppliers to help them reduce
their costs and improve quality. Thus, Honda’s
performance against Toyota depends on the
quality of Honda’s overall value-delivery
network versus Toyota’s.
Conclusion:
Customer value and satisfaction are important
ingredients in the marketer’s formula for
success. Marketers alone cannot produce
superior value for customers. Although it plays
a leading role, marketing can be only a partner
in attracting, keeping and growing customers.
In addition to customer relationship
management, marketers must also practice
partner relationship management.
3. Designing the Business
Portfolio

Management must plan its business portfolio - the
collection of businesses and products that make up the
company.

The best business portfolio is the one that best fits the
company’s strengths and weaknesses and to the
opportunities in the environment.

The company must (1) analyze its current business
portfolio and decide which businesses should receive
more, less, no investment, and (2)it must shape the
future portfolio by developing strategies for growth and
downsizing.
1. Step: Analyzing the Current Business
Portfolio

The major activity in strategic planning is business
portfolio analysis, where management evaluates the
businesses making up the company.

The reason for this analysis is that to put strong resources
into the company’s more profitable businesses and phase
down or drop its weaker ones.
Strategic Business Unit (SBU):

The first step in the business portfolio analysis is to
identify the key businesses making up the company.
The company’s key businesses (a company division, a
product line, or a single product or brand) are called
strategic business units (SBU).

The next step in business portfolio analysis is to
evaluate each strategic business unit, in order to
understand how much support they need.


In portfolio analysis, SBUs are evaluated from two ways;
(a) The attractiveness of the SBU’s market (market
growth) and (b) the strength of the SBU’s position in that
market (market share).
Star 
Market High
growth
share

Question 
Mark 
Low
cash cow
High
The BCG growth-share matrix
Dog
Low
Relative market share
The Boston Consulting Group Approach (BCG)

In BCG approach, the company classifies all its
SBUs according to the growth-share matrix
which can distinguish four types of SBUs.

Stars; are high-growth, high-share businesses
or products. They often need heavy investment
to finance their rapid growth. Eventually, their
growth will slow, and they will turn into cash
cows.

Cash cows; are low-growth, high-share businesses or
products. These established and successful SBUs need
less investment to keep their market share. They
produce a lot of cash to the company.

Question marks; are low-share business units in highgrowth markets. They need a lot of cash to keep and
increase their share. Management must decide which
question mark it should build into stars and which
should be phased out.

Dogs; are low-growth, low-share businesses and
products. They can only generate enough cash for
themselves.

Once the company classifies its SBUs, it
must determine what to do with them.
There are four strategies. The company
can;
1. invest more in the business unit in order to
build (increase) its share.
2. invest just enough to hold (keep) the SBU’s
share at the current level.
3. it can harvest the SBU, milking its short-term
cash flow regardless of the long-term effect .
4. divest (kill) the SBU by selling it or phasing it
out and using the resources elsewhere.
4. The Marketing Process

Marketing process is the process of ;
1.
2.
3.
4.
analyzing marketing opportunities
selecting target markets
developing the marketing mix
managing the marketing effort
(marketing mix).

Target consumers stand in the center of this
process. The company;
identifies the total market
 divides it into smaller segments
 selects the most promising segments
 focuses on serving and satisfying these
segments by designing marketing mix factors
under the control of the company - product,
price, place, and promotion
 analyzes, plans, implements, and controls to put
the marketing mix into action which are
required to adapt to the marketing environment

Target Consumers

In order to be successful, the companies must
understand the needs and wants of the consumers
to satisfy them. But it is impossible to satisfy all
consumers in a given market. Because, there are
too many different types of consumers with too
many different types of needs. That is why,
companies must; (1) divide up the total market, (2)
choose the best segments, and (3) design strategies
to attract and keep these segments better than the
competitors. This process involves three steps:
market segmentation, market targeting, and
market positioning.
Market Segmentation:


Dividing a market into distinct groups of
buyers with different needs, characteristics,
or behavior (e.g. sex, age, income level…)
who might require separate products or
marketing mixes is called market
segmentation.
After segmenting the market, the company
must determine which segments offer the
best opportunity for achieving company
objectives (making profit).
Market Targeting:



Evaluating each market segment’s
attractiveness and then selecting one or more
segments to enter is called market targeting.
A company should target segments in which it
can generate the greatest customer value and
keep it in the long-run.
There are three alternatives in market targeting.
A company may decide to serve  only one
segment (because of its limited resources), 
several related segments or  all market
segments.
Market Positioning:


After a company has decided which market
segments to enter, it must decide what positions
it wants to occupy in those segments. A
product’s position is the place that the product
occupies in consumer’s minds relative to
competitors.
If a product is seen exactly the same as other
products on the market, consumers have no
reason to buy it. That is way, companies
differentiate their products through positioning
to offer more value to the consumers. E.g.
Mercedes “engineered like no other car in the
world”
Developing The Marketing Mix

Once the company has decided on its
overall marketing strategy, it should plan
its activities by using the controllable
marketing tools, in other words, the
marketing mix.
Marketing Mix

Marketing mix is the controllable
marketing tools (known as the 4Ps) product, price, place, and promotion - that
the company use to achieve its objectives.
Marketing Mix




Product; means the “goods-and-service”
combination the company offers to the target
market.
Price; is the amount of money that consumers
have to pay to obtain the product.
Place; includes company activities with the
intermediaries that make the product available to
target consumers. The intermediaries keep an
inventory of the products, shows them to potential
buyers, negotiate prices, close sales and give
service after sales.
Promotion; means activities that communicate the
product and persuade target customers to buy it.
Managing the Marketing Effort

In order to put the marketing mix into
action, four marketing management
functions are used:




Analysis
Planning
Implementation
Control


The company, first, makes the necessary
analysis (analysis) to develop its strategic
and marketing plans (planning), then put
them into action (implementation) and last
measure and evaluate results and if
necessary take corrective action
(controlling).
All these functions are done under the
“marketing planning”.
Marketing Planning


After the company decides what to do with each
business unit (SBU) in its strategic plan, it must
decide what actions (activities) to take to achieve
the company objectives.
The company’s marketing plan involves the
following sections; (1) executive summary, (2)
Current marketing situation, (3) business situation
analysis (SWOT), (4) objectives and issues, (5)
marketing strategies, (6) action programs, (7)
budgets, (8) control.


Executive Summary; presents a brief overview of
the plan for quick management review. A table of
contents should follow the executive summary.
Current marketing situation describes the target
market and company’ s position in it, including
information about the market, product,
competition and distribution. This section
includes:


A market description that defines the market and
major segments, then review customer need and
factors in the marketing environment that might
affect customer purchasing.
A product review, that shows sales, prices and gross
margins of the major products in the product line.


A review of competition, which identifies major
competitors and assesses their market position and
strategies for product quality, pricing, distribution and
promotion
A review of distribution, which evaluates recent sales
trends and other developments in major distribution
channels.
Business Situation Analysis (SWOT); Under the
SWOT analysis, the major Strengths,
Weaknesses, Opportunities, and Threats facing the
company must be identified.
Threats and Opportunities; identifies the major
threats (negative impacts from the external
environment that could decrease the company’s
sales and profits) and opportunities (positive
impacts from the external environment that a
company could use to increase its sales and
profits).
The company should try to eliminate the negative
impacts of the threats and use the opportunities in
the best way. But the development of
opportunities involve risk, that is why, managers
must decide whether the expected returns justify
the risks or not.

Strengths and Weaknesses; is the analysis of the
company’s internal environment which identifies
the strengths (strong areas of the company relative
to its competitors) and weaknesses (weak areas of
the company relative to its competitors).
The company should try to emphasize its strengths
and correct weaknesses to use the opportunities.
Objectives; After the business unit has defined its
mission and examined its
strengths/weaknesses/opportunities/threats (called
SWOT analysis), it can proceed to develop
specific objectives for the planning period.

Objectives should be stated quantitatively. For
example, increasing the return on investment to
15% within 2 years. Objectives should be specific
with respect to amount and time. Quantitatively
measurable objectives facilitates planning,
implementation and control.
Marketing Strategies; Objectives indicate what a
business unit wants to achieve, on the other hand,
strategy answers what to do to achieve those
objectives (e.g. what should be done to increase
the return on investment to 15% within 2 years).
It consists of specific strategies for target markets
(which segments the company will target),
positioning and the marketing mix (specific
strategies for each P).


Action Programs; turns the marketing strategies
into specific action programs that answer how to
do. The action program also identifies when to do
and who will be responsible.
Budgets; projects the profit-and-loss statement. It
shows both the forecasted revenues (number units
to be sold  average net price) and expenses (cost
of production, distribution, etc.). The difference
between revenues and expenses gives the
projected profit. The budget is the basis for
materials buying, personnel planning etc.

Controls; outlines the controls that will be used
to monitor progress. The management review the
results each period and compare them with the
goals and budgets. If the businesses or products
do not meet with the goals, corrective actions
must be taken.

MARKETING IMPLEMENTATION

MARKETING DEPARTMENT
ORGANIZATION

MARKETING CONTROL
MARKETING IMPLEMENTATION

The process that turns marketing strategies
and plans into marketing actions in order to
accomplish strategic marketing objectives.

Many managers think
that “ doing things
right”
(implementation) is
as important as, or
even more important
than, “ doing the right
things ” (strategy).

Successful marketing implementation
depends on how well the company blends
its people, organizational structure,
decision, reward systems and company
culture into a cohesive action program that
supports its strategies.

Finally, to be successfully implemented,
the firm’s marketing strategies must fit
with its company culture, the system of
values and beliefs shared by people in the
organization.
MARKETING DEPARTMENT
ORGANIZATION

The company must design a marketing
organization that can carry out marketing
strategies and plans.

If the company is very small, one person might do
all of the research, selling, advertising, customer
service and other marketing work.
FORMS OF MARKETING
ORGANIZATION

FUNCTIONAL ORGANIZATION:
Under this organization different marketing
activities are headed by a functional specialist.
EXAMPLE:
a sales manager, advertising manager,
marketing research manager, customer service
manager or new-product manager.
GEOGRAPHIC ORGANIZATION

A company that sells across the country or
internationally often uses a geographic
organization.

Geographic organizations allows sales people to
settle into a territory, get to know their customers
with a minimum of travel time and cost.
PRODUCT MANAGEMENT
ORGANIZATION

Companies with many
different products or
brands often create a
product management
organization.
EXAMPLES:
Procter & gamble
Nestle
MARKET OR CUSTOMER
MANAGEMENTORGANIZATION

For the companies that sell one product line
to many different types of markets and
customers that have different needs and
preferences, a market or customer
management organization might be the
best.
Cont’d

Large companies that produce many
different products flowing into many
different geographic and customer markets
usually employ some combination of the
functional, geographic, product and market
organization forms.
MARKETING CONTROL

The process of
measuring and
evaluating the results
of marketing strategies
and plans and taking
corrective actions to
ensure that objectives
are achieved.
STEPS INVOLVED IN
MARKETING CONTROL

Management first sets specific marketing
goals.

It then measures its performance in the
market place and evaluates the causes of
any differences between expected and
actual performance.
Cont’d

Finally ,management takes corrective
actions to close the gaps between its goals
and its performance.
TYPES OF MARKETING
CONTROL

OPERATING CONTROL:
Operating control involves checking on
going performance against the annual plan
and taking corrective action when
necessary.
TYPES OF MARKETING
CONTROL

STRATEGIC CONTROL:
Strategic control involves looking at whether the
company’s basic strategies are well matched
to its opportunities.
MARKETING AUDIT

A comprehensive,
systematic, independent
and periodic examination
of a company’s
environment, objectives,
strategies and activities to
determine problem areas
and opportunities and to
recommend a plan of
action to improve the
company’s marketing
performance.

The audit is normally
conducted by an
objective and
experienced outside
party.

The findings may
come as a surprise and
sometimes as a shock
to management.
The Marketing Environment
“Surroundings or the place where all
organizations operate.”
 It is very important for an organization to
analyze the environment in which it is doing
business.
 Company operates in a complex marketing
environment, consisting of uncontrollable
forces to which company must adapt.



Environment produces both threats and opportunities
– An organization should analyze its environment in
order to avoid threats and take advantages of the
opportunities.
Marketer should aware of all the forces like
demographic, economic, political, legal,
technological, ecological, social and cultural forces
that affects its ability to serve its various stakeholders.
Measuring & Managing Return on
Marketing
Marketers must ensure that their marketing
dollars are being well spent.
 In the past, they spent freely on advertisements
without thinking about the financial returns on
their spending.
 According to them, it is difficult to measure
financial returns which results from marketing
because marketing produces intangible
outcomes.

Current Scenario:
 Because of today’s tighter economy and
shrinking budgets, marketing managers are
forced to think upon the financial returns of
marketing.
 Companies now consider
“Marketing as an investment rather than an
expense.”
Return on marketing (or Marketing
ROI)



Defined as:
“Return on marketing (or Marketing ROI) is
the net return from a marketing investment
divided by the costs of the marketing
investment.”
Tool for measuring return on marketing.
Measures the profit generated by investments
in marketing.
Marketing returns are difficult to measure.
 68% of marketing executives have difficulty in
measuring ROI of their marketing programs.
 “In marketing, benefits like advertising impact
aren’t easily put into dollar returns. It takes a
leap of faith to come up with a number.”

Assessment of Return on
Marketing

Returns on marketing can be assessed in terms
of:
Brand-awareness
 Sales
 Market Share


Use of customer – centered measures of
marketing impact like:
Customer acquisition
 Customer retention
 Customer life-time value

This concept is here to stay regardless of the
fact that how it’s measured or defined.
 70% marketing professionals believed that
marketing ROI represents long-term change in
how they do business.
 “Projections are made, marketing is delivered,
results are measured and the knowledge is
applied to guide future marketing…the return
on marketing is integral to strategic decisions
at all levels of the business.”

Chapter Summary
In this chapter, we have learned about:
 Strategic Planning & Marketing Process
 Defining Company’s Mission
 Designing the Business Portfolio
 Strategic Business Unit (SBU)
 Evaluation of SBUs through BCG Matrix
 Development of Growth Strategies
 Marketing Process
 Target Consumers











Market Segmentation
Market Targeting
Market Positioning
Developing Marketing Mix
Managing Marketing Effort
Marketing Planning
Marketing Development Organization
Marketing Environment
Measuring & Managing Return on Marketing
Return on marketing (or Marketing ROI)
Assessment of Return on Marketing