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Chapter 1 Foundations of Strategic Marketing Management

Foundation of Strategic Marketing Management

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Page 1: Foundation of Strategic Marketing Management

Chapter 1

Foundations of Strategic Marketing

Management

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In this chapter, you will learn about…

1. Defining the Organization’s 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 StrategiesMarket-Penetration StrategyMarket-Development StrategyProduct-Development StrategyDiversificationStrategy SelectionThe Marketing Mix

4. Budgeting Marketing, Financial, and Production Resources

5. Developing Reformulation and Recovery Strategies6. Drafting a Marketing Plan7. 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

Expanded responsibilities include:Charting the direction of the organizationContributing to decisions that will create and sustain a competitive advantage and affect long-term organizational performance

They no longer function solely to direct day-to-day operations. They must make

strategic decisions as well.

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Evolution of the Marketing Manager

This has prompted the emergence ofstrategic marketing management as a course of study and practice.

From being only an implementer….to being a maker of organization strategy.

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Processes in Strategic Marketing Management1. Defining the organization’s 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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Defining the Organization’s Business,

Mission, and Goals

Process One

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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

a product-producing or service delivery enterprise.

not

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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

“What business are we in?”

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Most statements describe:

the organization’s purposecustomers, products/services, markets, philosophy, and technology

Business Mission

Underscores the scope of an organization’s operations apparent in its business definition

Reflects management’s vision of what the organization seeks to do

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Benefits of Mission Statements

1. Crystallizes management’s vision of the organization’s 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 organization’s mission into tangible actions and results that are to be achieved, often within a specified time frame.

Three major categories of goals:

1. Production2. Financial3. Marketing

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Production GoalsApply to the use of

manufacturing and service capacity and to product

and service quality. Financial GoalsFocus on return on

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

Marketing Goalsmarket sharemarketing productivitysales volumeprofitcustomer satisfactioncustomer value creation

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Identifying and Framing Organizational Growth

Opportunities

Process Two

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Sources of environmental opportunity:

Unmet or changing customer needs

Unsatisfied buyer groups

New means or technology for delivering value to prospective buyers

What might we do?

Converting Environmental Opportunities into

Organizational Opportunities

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What do we do best?

Distinctive Competency describes an organization’s unique strengths or qualities including:

Skills Technologies Resources

…that distinguish it from other organizations.

Converting Environmental Opportunities into

Organizational Opportunities

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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.

Converting Environmental Opportunities into

Organizational Opportunities

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SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

internal

external

A formal framework for identifying and framing organizational growth opportunities

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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 organization’s INTERNAL CAPABILITIES

(Strengths & Weaknesses)and

its EXTERNAL ENVIRONMENT (Opportunities & Threats)

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Pose dangers to the welfare of the organization

Threats

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

Opportunities

What an organization lacks or does poorly relative to competitors

Weakness

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

Strength

SWOT Analysis

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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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Formulating Product-Market Strategies

Process Three

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DiversificationMarketDevelopment

MarketPenetration

ProductDevelopment

Existingproducts

Newproducts

Existingmarkets

Newmarkets

Product-Market Strategies

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Seeking a larger market share in a market in which organization already has an offering

This strategy involves:

Attempts to increase present buyer’s usage or consumption rates of the offering

Attracting buyers of competing offerings

Stimulating product trial among potential consumers

Market Penetration Strategy

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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 potentialModification of the basic offeringDifferent distribution outletsChange in sales effort and advertising

Market Development Strategy

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LicensingExporting

Joint Venture or Strategic

AllianceDirect

Investment

Market Development in the International Arena

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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.

Product Development Strategy

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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

Diversification Strategy

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Market-penetrationstrategy

Market-developmentstrategy

Estimated profit of$1 million

Estimated profit of$4 million

Action Response Outcome

Aggressivecompetition

Passivecompetition

Aggressivecompetition

Passivecompetition

Strategy Selection – Sample Decision Tree

Estimated profit of$2 million

Estimated profit of$3 million

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The Marketing Mix

Customer

ChannelStrategy

ProductStrategy

PriceStrategy

Communications Strategy

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Budgeting Marketing, Financial, and Production

Resources

Process Four

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A formal, quantitative expression of an organization’s planning and strategy

initiatives expressed in financial terms

A well-prepared budget meshes and balances an organization’s

Financial, Production, and Marketing Resources

so that overall organizational goals or objectives are attained.

The Budget

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1. Operating Budget Also referred to as a pro forma Income StatementFocuses on an organization’s income statement

2. Financial Budget

Focuses on the effect that the operating budget and other initiatives will have on the organization’s cash position

Components of a Budget

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Developing Reformulation and Recovery Strategies

Process Five

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Comprehensive, systematic, independent, and

periodic examination of a company’s marketing

environment, objectives, strategies, and

activities to recommend a plan of action to

improve the company’s marketing performance.

The Marketing Audit

Helps answer the questions:

Are we doing the right things?

Are we doing things right?

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Focus can be on a business, product, or brandTime Dimension can be short-run (typically one year) or long-run (multi-year)

A formal written document that describes the context and scope of an organization’s

marketing effort to achieve defined goals or objectives within a specified future time period.

The Marketing Plan

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Marketing Ethics and Social Responsibility

Marketing decisions reflect an organization’s orientation toward the publics with which it interactsThe marketplace is populated by individuals with diverse value systemsTheir actions will be judged publicly by others with different values