Chapter 1 Foundations of

Strategic Marketing

Management

In this chapter, you will learn about

1. Defining the Organizations Business, Mission, and

Goals
Business Definition Business Mission Business Goals 2. Identifying and Framing Organizational Growth Opportunities Converting Environmental Opportunities into Organizational Opportunities SWOT Analysis
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In this chapter, you will learn about

3. Formulating Product-Market Strategies Market-Penetration Strategy Market-Development Strategy Product-Development Strategy Diversification Strategy Selection The Marketing Mix
4. Budgeting Marketing, Financial, and Production Resources 5. Developing Reformulation and Recovery Strategies 6. Drafting a Marketing Plan 7. Marketing Ethics and Social Responsibility
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The Primary Purpose of Marketing

To create long-term and mutually beneficial exchange relationships between an entity and the publics (individuals and organizations) with which it interacts.

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Expanding Responsibilities of Marketing Managers

They no longer function solely to direct day-to-day operations. They must make strategic decisions as well.

Expanded responsibilities include:

Charting the direction of the organization

Contributing to decisions that will create and sustain a competitive advantage and affect long-term organizational performance
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Evolution of the Marketing Manager

From being only an

implementer.
to being a maker of organization strategy.
This has prompted the emergence of strategic marketing management as a course of study and practice.
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Processes in Strategic Marketing Management

1. Defining the organizations business, mission, and goals 2. Identifying and framing organizational growth opportunities 3. Formulating product-market strategies

4. Budgeting marketing, financial, and production resources

5. Developing reformulation and recovery strategies
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Process One

Defining the Organizations Business, Mission, and Goals

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Business Definition
By defining a business from a customer or market perspective an organization is appropriately viewed as: a customer - satisfying endeavor

not
a product-producing or service delivery enterprise.
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What business are we in?

An organization should define a business by:
The type of customers it wishes to

serve
The particular needs of those customer groups it wishes to satisfy The means or technology by which the organization will satisfy the customer

needs
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Business Mission
Underscores the scope of an organizations operations apparent in its business definition Reflects managements vision of what the organization seeks to do Most statements describe: the organizations purpose customers, products/services, markets, philosophy, and technology
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Benefits of Mission Statements

1. Crystallizes managements vision of the organizations long-term direction and character 2. Provides guidance in identifying, pursuing, and evaluating market and product opportunities 3. Inspires and challenges employees to do those things that are valued by the organization and its customers 4. Provides direction for setting business goals or objectives
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Business Goals
Goals or objectives convert the organizations mission into tangible actions and results that are to be achieved, often within a specified time frame. Three major categories of goals:

1. Production
2. Financial 3. Marketing
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Production Goals Apply to the use of manufacturing and service capacity and to product and service quality.

Financial Goals

Marketing Goals market share marketing productivity sales volume profit customer satisfaction customer value creation

Focus on return on investment, return on sales, profit, cash flow, and shareholder wealth.

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Process Two

Identifying and Framing

Organizational Growth
Opportunities

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Converting Environmental Opportunities into Organizational Opportunities

What might we do?
Sources of environmental opportunity: Unmet or changing customer needs Unsatisfied buyer groups New means or technology for delivering value to prospective buyers
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Converting Environmental Opportunities into Organizational Opportunities

What do we do best?
Distinctive Competency describes an organizations unique strengths or qualities including: Skills Technologies Resources that distinguish it from other organizations.
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Converting Environmental Opportunities into Organizational Opportunities

What must we do?
Success Requirements are basic tasks that an organization must perform in a market or industry to compete successfully. If what must be done is inconsistent with what can be done to capitalize on an environmental opportunity, an organizational growth opportunity will fail to materialize.
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SWOT Analysis
A formal framework for identifying and framing organizational growth opportunities

Strengths

Weaknesses
Opportunities Threats

internal

external

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SWOT Analysis
Framework for focusing attention on the fact that an organizational growth opportunity results from a good fit between an organizations INTERNAL CAPABILITIES (Strengths & Weaknesses) and

its EXTERNAL ENVIRONMENT (Opportunities & Threats)

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SWOT Analysis
Strength What the organization is good at doing or a characteristic that gives it an important capability

Weakness

What an organization lacks or does poorly relative to competitors

Developments or conditions in the environment that have favorable implications for the organization

Opportunities

Threats

Pose dangers to the welfare of the organization

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Questions to be asked once SWOT has been identified

1. Which internal strengths represent distinctive competencies? Do these strengths compare favorably with what are believed to be market or industry success requirements? 2. Which internal weaknesses disqualify the organization from pursuing certain opportunities? 3. Does a pattern emerge from the SWOT?
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Process Three

Formulating
Product-Market Strategies

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Product-Market Strategies
Existing products Existing markets New markets New products Product Development

Market Penetration Market Development

Diversification

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Market Penetration Strategy

Seeking a larger market share in a market in which organization already has an offering
This strategy involves: Attempts to increase present buyers usage or consumption rates of the offering Attracting buyers of competing offerings

Stimulating product trial among potential consumers

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Market Development Strategy

Introducing its existing offerings to markets other than those that the organization is currently serving.
Reaching new markets requires: Carefully considering competitor strengths and weaknesses and competitor retaliation potential Modification of the basic offering Different distribution outlets Change in sales effort and advertising
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Market Development in the International Arena

Exporting

Licensing

Joint Venture or Strategic Alliance

Direct Investment

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Product Development Strategy

Creating new offerings for existing markets.
This approach may be taken for:
Product Innovation develop totally new offerings

Product Augmentation enhance the value to customers of existing offerings

Product line extension broaden the existing line of offerings by adding different sizes, forms, flavors, etc.
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Diversification Strategy
Development or acquisition of offerings new to the organization and introducing those offerings to publics not previously served by the organization.
Growing trend in recent years
High-risk strategy because both the offering and market served are new to the organization

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Strategy Selection Sample Decision Tree

Action Response
Aggressive competition Market-penetration strategy Passive competition Aggressive competition

Outcome
Estimated profit of $2 million

Estimated profit of $3 million Estimated profit of $1 million

Market-development strategy
Passive competition Estimated profit of $4 million

The Marketing Mix

Product Strategy

Communications Strategy

Customer
Price Strategy Channel Strategy

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Process Four

Budgeting Marketing,
Financial, and Production

Resources

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The Budget
A formal, quantitative expression of an organizations planning and strategy initiatives expressed in financial terms
A well-prepared budget meshes and balances an organizations Financial, Production, and Marketing Resources

so that overall organizational goals or objectives are attained.

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Components of a Budget
1. Operating Budget
Also referred to as a pro forma Income Statement Focuses on an organizations income statement

2. Financial Budget
Focuses on the effect that the operating budget and other initiatives will have on the organizations cash position
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Process Five

Developing Reformulation and Recovery Strategies

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The Marketing Audit

Comprehensive, systematic, independent, and periodic examination of a companys marketing environment, objectives, strategies, and activities to recommend a plan of action to improve the companys marketing performance.

Helps answer the questions:

Are we doing the right things?

Are we doing things right?

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The Marketing Plan

A formal written document that describes the context and scope of an organizations marketing effort to achieve defined goals or objectives within a specified future time period. Focus can be on a business, product, or brand Time Dimension can be short-run

(typically one year) or long-run (multiyear)

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Marketing Ethics and Social Responsibility

Marketing decisions reflect an organizations orientation toward the publics with which it interacts The marketplace is populated by individuals with diverse value systems
Their actions will be judged publicly by others with different values

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