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CHAPTER 2
Company and Marketing Strategy:
Partnering to Build Customer
Engagement, Value, and Relationships
Strategic Planning
• Strategic planning involves adapting the firm
to take advantage of opportunities in its
constantly changing environment.
• Strategic planning helps a firm to maintain a
strategic fit between its goals and capabilities
and its changing marketing opportunities.
• Understanding strategic planning helps one
understand the marketing planning process.
Strategic Planning
Mission Statement
• Statement of the organization’s purpose
– What it wants to accomplish in the larger
environment
• Market oriented and defined in terms of
satisfying basic customer needs
• Emphasizes the company’s strengths
• Focuses on customers and the customer
experience the company seeks to create
Setting Company Objectives
and Goals
• The mission should be converted to
supporting objectives at each level of
management.
• The mission leads to setting a hierarchy of
objectives.
– Business/Company objectives
– Marketing objectives
Hierarchy of Objectives
Company Objectives
Finance
Objectives
Marketing
Objectives
Production
Objectives
Management
Objectives
Product
Objectives
Place
Objectives
Promotion
Objectives
Price
Objectives
Sales
Objectives
Advertising
Objectives
Public Relations
Objectives
Effective Goals/Objectives
When developing a goal or objective, one should follow the
SMART format. 1) It should be specific as to what is to be
achieved such as profit, sales, awareness, return on investment. 2)
It needs to be measurable such as a dollar amount or percentage.
However only using a quantitative approach does not always tell
the entire story and qualitative measures should be included when
analyzing the objective. For example, an objective for a store
might be to “increase sales $500 more this month than last
month.” But by the end of the month, sales are $500 less than
last month. By only looking at numbers (quantitative), we would
conclude the manager of the store is not doing their job.
However construction on the road in front of the store was being
done during the month impeding customer flow into the store,
thus causing sales to decline (qualitative).
Effective Goals/Objectives
3) It should be attainable. If it is too hard, people will not try. If
it is too easy, people will stop trying once it has been achieved.
So it needs to be achievable but challenging. 4) It should be
relevant to the mission of the organization. 5) It should have a
time frame so people know how long they have to achieve it and
gives the organization a chance to evaluate the outcome.
Effective Goals/Objectives
Specific: precise description of what is to be achieved
Measurable: quantitative value to show attainment
Attainable: achievable but challenging
Relevant: pertinent to the organization’s mission
Time-based: have a deadline for completion
SMART
Portfolio Analysis
• Evaluation of the products and businesses that
make up the company by the management
• The purpose is to direct resources toward more
profitable businesses/products while phasing out
or dropping weaker ones.
• Techniques used in developing a strategic plan:
Boston Consulting Group’s Growth-Share Matrix
The Product/Market Expansion Grid
SWOT Analysis
BCG Matrix
Strategic business units (SBUs) are key business units within
diversified firms. Each SBU has its own managers, resources,
objectives, and competitors. A division, product line, or single
product may be an SBU. Each SBU has its own distinct mission,
and each is planned independently of other units in the
organization. To evaluate SBUs, marketers need some type of
performance framework. The most widely used framework was
developed by the Boston Consulting Group (BCG), a fourquadrant matrix. Sometimes the “Question Marks” quadrant is
referred to as the “Problem Child” quadrant.
The BCG
Growth-Share Matrix
BCG Matrix
Dog Quadrant – Indicates market growth is low and the
business or product has low relative market share. Although the
business or product may generate enough cash to maintain
themselves, the business or product do not show much promise.
When a SBU falls in this quadrant, companies usually harvest
(suck as much cash out of it as possible) or divest (selling it off
or phasing it out).
BCG Matrix
Question Mark (Problem Child) Quadrant – Indicates market
growth is high but the business or product has low relative
market share. Sometimes people refer to this quadrant as a
Problem Child, you just don’t know what to do. The market is
growing but you are not getting your fair share of the market.
Management doesn’t know what the problem is. At this point, a
“Go/No Go” has to be made. Should more resources be pumped
into the business or product to make it a star? Or should
management cut its lost and let it become a dog?
OR
BCG Matrix
Stars Quadrant – Indicates market growth is high and the
business or product has high relative market share. Although the
business or product is generating large amounts of cash, heavy
investment is needed for the business or product to maintain its
market share within a growing market. Eventually the business
or product will become a Cash Cow.
BCG Matrix
Cash Cows Quadrant – Indicates market growth is low but the
business or product has high relative market share. The business
or product is well established and does not take as much
investment to maintain market share. Money can be used to pay
bills and support other SBU’s.
The Product/Market Expansion Grid
The Product/Market Expansion Grid
Market Penetration – This strategy involves increasing sales to
present customers with the original product. Sometimes this
strategy can be difficult because a company may be required to
take away market share from one of its competitors.
Market Development – This strategy involves finding new
markets for a current product. Gatorade is a sports drink
marketed to adults. The company used market development by
marketing its sports drinks towards kids. “Little people get
thirsty too!” Rogaine is a hair product marketed toward men.
The company used market development by marketing its hair
product toward women.
The Product/Market Expansion Grid
Product Development – This strategy involves modifying or
slightly changing the product for a current market. Sometimes
these products are called “Flanker Brands.” Smucker’s has a
variety of favored jellies and preserves. By introducing
Smucker’s “Sugar Free” jellies and preserves, the original
product was modified to appeal to customers in the current
market (jellies and preserves).
Diversification – This strategy has the most risk. It involves
creating a new product or buying a business that is not associated
with the company’s present products or markets.
SWOT Analysis: Strengths (S), Weaknesses (W),
Opportunities (O), and Threats (T)
SWOT Analysis Examples
SWOT Analysis
Goal is to match the company’s strengths to opportunities in
the environment while eliminating or overcoming weaknesses
and minimizing threats.
Strengths
Skilled management, positive cash flow, brands, cost
advantages, financial resources, customer loyalty, patents,
modern production facilities.
Weaknesses
Lack of spare production capacity, absence of reliable
suppliers, too narrow a product line, weak market image, too
narrow a product line, lack of management depth, inadequate
financing capabilities, high cost operation due to high labor
costs and obsolete production facilities.
Opportunities
New technology that improves efficiency, new market niche,
add to product line, enter new markets, acquire firms with
needed technology.
Threats
Competitors’ entrance into niche market once the niche proves
profitable, changing buyer tastes, adverse government
policies, likely entry of new competitors.
STRATEGIC WINDOW
One opportunity organizations should look for is a strategic window, a
limited period during which the firm sees an optimal fit between the key
requirements of a market and its own particular competencies. The process
involves three steps: (1) analysis of current and projected external
environmental conditions, (2) analysis of current and projected internal
company capabilities, and (3) how, whether, and when it will be feasible to
reconcile the two by implementing one or more marketing strategies. For
example, a company produces buggy whips for a small market. A trend in
society slowly begins to develop where people decide to stop driving cars
and go back to horse pulling carriages. The change in the external
environment and the company’s ability to produce buggy whips present an
opportunity for the company.
Marketing Strategy
• Marketing logic by which the company hopes
to create customer value and achieve
profitable customer relationships
• Marketing mix: Integration of product, price,
place, and promotion strategies
• Activities for best marketing strategy and mix
involve:
– Marketing analysis
– Planning, implementation, and control
Market Implementation
• Turning marketing strategies and plans into
marketing actions to accomplish strategic
marketing objectives
• Addresses the who, where, when, and how of
the marketing activities
Marketing Control
• Measuring and evaluating the results of
marketing strategies and plans
• Operating control ensures that the company
achieves the sales, profits, and other goals set
out in its annual plan.
• Strategic control involves looking at whether
the company’s basic strategies are well
matched to its opportunities.
SELF CHECK
Answer the following questions
1. Cosmetics firm SatinSilk is revamping its mission
statement and advertising strategy. The CEO stresses that
the new mission statement should be market-oriented
rather than product-oriented. Which of the following
mission statements will best suit the company?
A. To create the best possible products and sell them at the
best possible prices.
B. To sell hypoallergenic cosmetics products made only from
the finest organic ingredients.
C. To give customers the complexion they dream about by
providing products suited to their needs.
D. To become a market leader in every cosmetics product
category.
E. To increase our market share in the cosmetics segment and
increase profit margins.
2. Which of the following is the BEST goal or
objective?
A. To increase sales in 5 years.
B. To be number one in the country.
C. To make $10,000 in one year.
D. To increase market share by 5000% in one
week.
E. None of the above is the best goal or
objective.
3. Using the BCG matrix, which quadrant
has low market share and low market
growth?
A. Dogs
B. Question Marks
C. Stars
D. Cash Cows
E. Elephants
4. A situation analysis consist of all the
following EXCEPT __________.
A. Weaknesses
B. Resources
C. Opportunities
D. Threats
E. Strengths
5. Which of the following products would the electronics
company CypressSound classify as a cash cow in its
BCG matrix?
A. Cyan–a cell phone that is designed for music lovers and
has a very low market share in a market that is
growing steadily.
B. Boosh–a home entertainment system that has a strong
market share in a market that is likely to expand in the
future.
C. AutoPlay–a car audio system that has a high market
share in a market that has been growing constantly.
D. Unipress–a CD player that has a very low market share
in a market that is shrinking rapidly.
E. Xpress–an MP3 player that has a high market share in
a market that is not expected to grow significantly.
6. Thunder Beverages developed a flanker
brand for its Pop Fizz drink. Thunder
Beverages used the __________
opportunity.
A. Market Penetration
B. Product Development
C. Market Development
D. Diversification
E. Customer Demand
7. Which of the following statements is true in the
context of the BCG growth-share matrix?
A. Stars often need heavy investment to finance
their rapid growth in a market.
B. The positions of SBUs in the growth-share
matrix rarely change over time.
C. The income from one SBU cannot be used to
support other business units.
D. Dogs promise to be large sources of cash.
E. Cash cows typically turn into stars.
8. Using the BCG matrix, which quadrant
generated large amounts of cash?
A. Dogs
B. Question Marks
C. Stars
D. Cash Cows
E. Elephants
9. EcoBean, a chain of cafes, has introduced a
Special Shopper Card that allows customers to
pay in advance for coffee and snacks. This effort
by EcoBean management is most likely an
example of __________.
A. market development
B. product development
C. diversification
D. product adaptation
E. market penetration
10. Which of the following best describes the value chain
of a company?
A. The collection of businesses and products that make
up the company.
B. Profits earned by the cash cows and stars in the
company's business portfolio.
C. Touchpoints at which a company or brand interacts
with its consumers.
D. The series of departments that design, produce,
market, deliver, and support the company's
products.
E. A network made up of the company, its suppliers, and
its distributors working together to deliver customer
value.
ANSWERS
1.
C
2.
C
3.
A
4.
B
5.
E
6.
B
7.
A
8.
D
9.
E
10. D