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MARKETING
Real People, Real Choices
Fourth Edition
CHAPTER 2
Strategic Planning and
the Marketing
Environment:
The Advantage is
Undeniable
Michael R. Solomon
Greg W. Marshall
Elnora W. Stuart
Chapter Objectives
• Explain the strategic planning process
• Describe the steps in the marketing planning
process
• Explain operational planning
• Discuss important aspects of an
organization’s internal environment
• Explain why marketers scan an
organization’s external business environment
2-2
Business Planning
• Business plans
– guide entire
organization or its
business units
– Bplans.com
provides several
examples
2-3
Marketing Plans
• Describe the marketing environment
• Outline marketing strategies
• Identify plans for implementation and
evaluation
2-4
Strategic Planning
• Strategic planning is the managerial
decision process that matches the
organization’s resources and capabilities
to its market opportunities for long-term
growth
• Firms may become multi-product
companies with self-contained divisions
– Strategic Business Units (SBUs)
– Example: The Walt Disney Company
2-5
Figure 2.1: Planning at Different Levels
2-6
Lower Levels of Planning
• Functional
– Conducted by
mid-level
managers
– Includes
Marketing as
well as Finance,
Operations,
HRM, etc.
• Operational
– Conducted by
first-line
managers
– Includes day-today execution of
tactical plans
2-7
Operational Planning
2-8
Strategic Planning Steps
Define the organization’s mission
Evaluate internal/external environments
Set objectives
Establish the business portfolio
2-9
Define the Organization’s Mission
• A mission may begin with these
questions:
– What business are we in?
– What customers should we serve?
– How should we develop the firm’s
capabilities and focus its efforts?
2-10
Sample Mission Statements
• MADD: To stop drunk driving, support the
victims of this violent crime, and prevent
underage drinking.
• Armour: To find new technology and
enhance the performance of every athlete
and outdoorsman. Lighter. Faster. Stronger.
Better.
2-11
Evaluate the Internal/External Environment
Strengths
Weaknesses
Opportunities
Threats
2-12
Set Organizational and SBU Objectives
• SBU objectives must support the overall
objectives of the firm
2-13
Establish the Business Portfolio
• For firms with different SBUs, planning
also includes allocating resources
among the businesses
• Each SBU is a separate profit center
within the larger corporation
• Each SBU is responsible for its own
costs, revenues, and profits
2-14
Crest
Crest toothpaste
products are part
of P&G’s portfolio
that ranges from
personal care
products to coffee
2-15
Figure 2.2: The Role of SBUs
2-16
Portfolio Management
• The range of products owned by a large
firm is called a business portfolio
• Portfolio analysis allows a firm to
assess the potential of its products and
businesses
– BCG Growth-Market Share Matrix
2-17
Boston Consulting Group
2-18
Figure 2.3: BCG Matrix
2-19
BCG Matrix
• Method focuses on the potential of a firm’s
existing successful products to generate
cash that the firm can then use to invest in
new products
• New products are chosen for their potential
to become future cash generators
• Two dimensions:
– Market growth rate
– Relative market share
2-20
BCG Matrix: Stars
• SBUs with dominant market share in
high-growth markets
– requires funding to keep up with
production and promotion demands
– strategies seek to maximize market
share in the face of increasing
competition
2-21
BCG Matrix: Cash Cows
• SBUs with dominant market share in a
low-growth potential market
– product is well established and market
share can be maintained with minimal
funding
– firms milk cows of profits to fund growth of
other products in portfolio
– too many cows can become a liability due
to the lack of growth potential
2-22
BCG Matrix: Question Marks
• SBUs with low market shares in fastgrowth markets
– sometimes called problem children
– the firm has failed to compete effectively
• The dilemma? Investing more money
into the SBU may:
– improve market share in a high potential
market OR
– result in negative cash flow and failure
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BCG Matrix: Dogs
• SBUs with small market share in a slowgrowth market
– specialized products in limited
markets unlikely to grow
– firms may sell dogs to smaller firms or
eliminate product from market
2-24
Disney’s Touchstone
Disney
emphasizes
its movie
brand for
grownups as
a star
2-25
Developing Growth Strategies
• Product-Market Growth Matrix illustrates
different growth strategies
– Two dimensions
• opportunities for growth in existing
or new markets
• allocating resources into existing
products or new products
– Four strategies result
2-26
Figure 2.4: Product-Market Growth Matrix
2-27
Steps in the Marketing Planning Process
1. Perform a situation analysis
2. Set marketing objectives
3. Develop marketing strategies
– Select a target market
– Develop marketing mix strategies
4. Implement marketing strategies
5. Monitor and control strategies
2-28
Under Armour Woman
Under Armour
targets athletes of
both sexes who
seek moisture
control when they
play or work out
2-29
Jet Blue
Part of Jet Blue’s
product strategy
is to provide inflight diversions to
bored passengers
2-30
Operational Planning
• Day-to-day execution of the marketing
plan
• Performed by first-line supervisors
• Timed over 1-2 months
2-31
The Internal Business Environment
• Corporate Resources
and Competencies
• Corporate Culture
– Risk-Taking
Cultures
– Profit-Centered
versus PeopleCentered Cultures
2-32
Where to Work
• Fortune Magazine publishes a list of the
top places to work - these represent
balanced firms emphasizing people and
profit
– J.M. Smucker
2-33
The Economic Environment
• The Business Cycle
– All economies go through cycles of prosperity,
recession, and recovery
– The cycle directly affects marketers because
of its effect on consumer behavior
• The Power of Expectations
– Consumer confidence represents consumer
beliefs about what the future holds
– Like business cycles, it affects whether
consumers buy or cut back on spending
2-34
Consumer Confidence Index
Source: http://www.conference-board.org/economics/consumerconfidence/index.cfm
posted July 27, 2004
2-35
The Competitive Environment
• Analyzing the Competition
– Strengths and weaknesses analysis
– Competitive intelligence (CI)
• Competition in the Microenvironment
• Competition in the Macroenvironment
2-36
Competition: The Microenvironment
• In the microenvironment, competition means the
alternatives from which the target may choose
• Level 1: competition for discretionary income
(for income left after a consumer pays for
necessities)
• Level 2: product competition in which different
products attempt to satisfy the same needs or
wants
• Level 3: brand competition in which competitors
offering similar products compete for consumer
choice
2-37
Competition: The Macroenvironment
• Overall structure of industry
– monopoly - when one seller controls market
– oligopoly - relatively small number of sellers,
each with a substantial share of market
– monopolistic - many sellers compete for
buyers; each offers a slightly different product
and has a small share of market
– perfect competition - many small sellers each
offering the same product
2-38
Competition: The Macroenvironment
Share of Market
per Firm:
High
Number of Firms
in Market:
High
Monopoly
Oligopoly
Monopolistic Competition
Perfect Competition
Low
Low
2-39
The Technological Environment
• Technology is an
investment a firm
must make to
succeed
• Patents protect
inventions
2-40
The Legal Environment
• Regulatory Agencies
– Food and Drug Administration
– Federal Trade Commission
– Federal Communications
Commission
– Interstate Commerce Commission
– Consumer Product Safety
Commission
– Environmental Protection Agency
2-41
The Sociocultural Environment
• Characteristics of society
• Characteristics of people in that society
• Cultural values and beliefs
2-42
Issues for Discussion_1
• Do you think the BCG Matrix is a useful
way for organizations to examine their
businesses? What are some examples
of product lines that fit in each
category?
• Do you think planning is essential to a
firm’s success? Can planning ever hurt?
• Can you identify organizations that
should have contracted rather than
expanded?
2-43
Issues for Discussion_2
• What are some ways that the
technological environment has changed
marketing? What predications might you
make for how technology will change
marketing in the future?
• What are the advantages and
disadvantages of governmental controls
of marketing? What new laws would you
recommend?
2-44