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MARKETING
Real People, Real Choices
CHAPTER 2
Strategic Planning and
the Marketing Environment
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
Marketing Plans
• Describe the marketing
environment
• Outline marketing strategies
• Identify plans for implementation &
evaluation
2-3
Strategic Planning
• Strategic planning: the managerial
decision process that matches the
organization’s resources & capabilities to
its market opportunities for long-term
growth
• Firms may become multi-product
companies with self-contained divisions
– Strategic Business Units (SBUs)
– Example: General Mills
2-4
Strategic Planning Steps
1. Define the organization’s mission
(management)
2. Evaluate internal/external environments
(marketing)
3. Set organizational or SBU objectives
(management)
4. Establish the business portfolio (management)
2-5
Evaluate the Environment
• Internal Environment
– Strengths
– Weaknesses
• External Environment
– Opportunities
– Threats
2-6
Set Objectives
• SBU objectives must support the overall
objectives of the firm
– Customer satisfaction
– Sales
– Market share
2-7
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, & profits
2-8
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
2-9
BCG Matrix
• Method focuses on the potential of a firm’s
existing successful products to generate
cash that the firm can use to invest in new
products
• New products are chosen for their potential
to become cash generators
• Two dimensions:
– Market growth rate
– Relative market share
2-10
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
2-11
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
2-12
BCG Matrix: Question Marks
• SBUs with low market shares in fast-growth
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
2-13
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
2-14
Developing Growth Strategies
• Product-Market Growth Matrix illustrates
different growth strategies
– Market penetration: increase sales in
existing markets
– Market development: introduce existing
products to new markets
– Product development: introduce new
products to existing markets
– Diversification: introduce new products in
new markets
2-15
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
2-16
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 consumer
spending
2-17
The Competitive Environment
• Analyzing the Competition
– Strengths and weaknesses analysis
– Competitive intelligence (CI)
• Competition in the Microenvironment
• Competition in the Macroenvironment
2-18
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
2-19
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
2-20
The Technological Environment
• Technology is an investment a firm must
make to succeed
• Patents protect inventions
• Trends in electronic commerce
– eBay
– Amazon
2-21
The Legal Environment
• Laws impact industries
• Regulatory Agencies impact industries
– Food and Drug Administration
– Federal Trade Commission
2-22
The Sociocultural Environment
• Characteristics of society
– Demographics
– Geographics
– Psychographics
• Cultural values & beliefs
2-23
Issues for Discussion
• What are some examples of product
lines that fit in each category of the
BCG matrix?
• 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?
2-24
Issues for Discussion
• What are some ways that the
technological environment has changed
marketing?
• What are the advantages &
disadvantages of governmental controls
of marketing?
2-25