Chapter 2 – Developing marketing strategies and plans

Firms must stick to a strategy but must also find new ways to constantly improve it.
Marketing involves satisfying consumers' needs and wants. The task of any business is to
deliver customer value at a profit. In a hypercompetitive economy with increasingly
rational buyers faced with abundant (obfity) choices, a company can win only by fine-
tuning the value delivery process and choosing, providing, and communicating superior
value.

The value delivery process

a) Traditional (works for basic goods in developing markets). In this view marketing
takes place in the second half of the process (‘sell the product’).

b) Value creation and delivery sequence

• Choosing the value = marketer’s homework, the STP formula

(segmentation, targeting, positioning)
• In b) the value delivery process begins before there is a product and
continues after it becomes available

Japanese concepts:
• Zero customer feedback time. Customer feedback should be collected
continuously after purchase to learn how to improve the product and its marketing.
• Zero product improvement time. The company should introduce improvements as
soon as possible.
• Zero purchasing time. The company should receive the required parts and
supplies continuously through just-in-time arrangements with suppliers. By lowering its
inventories, the company can reduce its costs.
• Zero setup time. The company should be able to manufacture any of its products
as soon as they are ordered.
• Zero defects. The products should be of high quality and free of flaws.

The generic value chain – tool for identifying ways to create more customer value:
 Primary activities

The firm's success depends not only on how well each department performs its work, but
also on how well the various departmental activities are coordinated to conduct core
business processes.

Core business processes include:

• The market sensing process. All the activities involved in gathering market
intelligence, disseminating it within the organization, and acting on the information.
• The new offering realization process. All the activities involved in researching,
developing, and launching new offerings.
• The customer acquisition process.
• The customer relationship management process. Building relationships with
individual customers.
• The fulfillment management process. All the activities involved in receiving and
approving orders, shipping the goods on time, and collecting payment.

Core competencies (the ones that a firm does not outsource because they make up the
essence of the business (e.g.Nike outsources manufacturing of their shoes (not a core
competence) but it does not outsource shoe design because Nike’s excellent at it and this
is a Nike’s core competency). Characteristics of a core competency:
• It is a source of competitive advantage
• It has applications in a wide variety of markets
• It is difficult for competitors to imitate

Core competencies => refer to special technical and production expertise

WHEREAS
Distinctive capabilities => refer to excellence in the whole business process (from A to Z)

The holistic marketing framework is designed to address three key management

questions:
1. Value exploration - How can a company identify new value opportunities?
2. Value creation- How can a company efficiently create more promising new value
offerings?
3. Value delivery- How can a company use its capabilities and infrastructure to deliver the
new value offerings more efficiently?
Only a handful of companies stand out as master marketers: Procter & Gamble, Nike,
Disney, McDonald's, and several Japanese (Sony, Toyota, Canon) and European (IKEA,
Club Med, Electrolux, Nokia, Lego, Tesco) companies. These companies focus on the
customer and are organized to respond effectively to changing customer needs. All their
departments accept the concept that the customer is king.♠

Strategic planning:
• Extremely important
• Coordinates many different marketing activities
• A central instrument for directing and coordinating the marketing effort.
• Operates at two levels: strategic and tactical.
 strategic marketing plan lays out the target markets and the value proposition
that will be offered
 tactical marketing plan specifies the marketing tactics (product features,
promotion, pricing, sales channels service)

The model of strategic planning

Defining the corporate mission

• a mission can change over time (e.g. Amazon: initially for collectors only, for
everyone now)
• to define a mission a company should address Peter Drucker’s classic
questions (What is our business? Who is the customer? Etc.)
• organizations develop mission statements to share with managers, employees
and sometimes with customers
• a mission statement should define the company’s vision for the next 10-20
years
• a mission statement should focus on a small number of goals, stress the
company’s major policies and values, define the major competitive spheres
(f.ex. which industry, what kind of products etc.)

Defining the business

• don’t define it in terms of products (clothing business, auto business <- wrong!)
• define it in terms of a customer satisfying process so if the customer’s need is
transportation, a car is a product that satisfies it
• in terms of three dimensions: customer groups, customer needs and technology
SBU = Strategic Business Unit1
If a company is large it manages quite different businesses (e.g. one company making
both lighting and air conditioning systems). Then each of these businesses requires its
own strategy so you’ve got SBUs. The purpose of identifying SBUs is to develop separate
strategies and assign appropriate funding. Characteristics of a SBU:
a) It is a single business or collection of related businesses that can be planned
separately from the rest of the company BUT its specific mission has to be defined within
the broader company mission.
b) It has its own set of competitors.
c) It has a manager who is responsible for strategic planning

Target market definition – focuses on selling a product or service (e.g. Pepsi’s target
market: anyone who drinks a cola beverage, so competitors – other cola companies
BUT
Strategic market definition – focuses on a customer’s need (e.g. Pepsi’s strategic market:
anyone who drinks sth to quench (ugasić) their thirst, so competitors – non-cola soft
drinks, tea, coffee, juices producers)

Assessing growth opportunities = planning new business, downsizing (zmniejszac) or

terminating (zamykac) older businesses

Assessing growth opportunities can be done:

• By intensive growth (simplest way) = growth within the current business by
improving the existing business (f.ex. by seeking new distribution channels/new
locations)
• By integrative growth = build/acquire related business (f.ex. by acquiring one of
the firm’s suppliers, retailers or even competitors)
• By diversification growth = add attracted unrelated business. This might be done
in 3 ways:
1. concentric strategy=seeking new products for new customers
2. horizontal strategy=seeking new products for the already existing customers
3. conglomerate strategy=seeking completely new business
Business Unit Strategic Planning

1
Business Unit to jakis dzial/galaz firmy. Zakladajac, ze 1 firma robi systemy oswietlen i
klimatyzacje, to ma 2 business units, ktore razem tworza cala firme.
1. SWOT Analysis
This is the overall evaluation of a company's Strengths, Weaknesses, Opportunities and
Threats is. It involves monitoring the external and internal marketing environment.

2. EXTERNAL ENVIRONMENT (OPPORTUNITY & THREAT) Analysis

Macro environment forces (demographic-economic, natural, technological, political-legal,
and social-cultural) and microenvironment actors (customers, competitors, suppliers,
distributors, dealers) affect the business’ ability to earn profits so they have to be
monitored (f.ex. bye a marketing intelligence system). This is done in order to track new
opportunities and threats.
3 sources of opportunities:
1) Supply sth that is in short supply
2) Supply an existing product/service in a new and superior way
3) Supply a totally new product/service

Different forms opportunities can take:

• Introducing hybrid products (e.g. cell phones with cameras)
• Making a buying process more convenient or efficient (e.g. buying books via
internet makes it easier to find a book that you’re looking for, to compare the
prices etc.)
• Customizing a product/service that was formerly offered only in a standard form
(e.g. skin/hair care products produced just for your skin/hair type and needs)
• Delivering a product/service faster (e.g. FedEx)
• Offering a product at a much lower price
... and many other forms.

To evaluate opportunities, companies can use Market Opportunity Analysis (MOA)

1. Can the benefits involved in the opportunity be articulated convincingly to a defined
target market(s)?
2. Can the target market(s) be located and reached with cost-effective
media and trade channels?
3. Does the company possess or have access to the critical
capabilities and resources needed to deliver the customer benefits?
4. Can the company deliver the benefits better than any actual or
potential competitors?
5. Will the financial rate of return meet or exceed the company's required threshold for
investment?

Threats
Some developments in the external environment represent threats. An environmental
threat is a challenge posed by an unfavorable trend or development that would lead, in
the absence of defensive marketing action, to lower sales or profit. Threats should be
classified according to seriousness and probability of occurrence.

3. INTERNAL ENVIRONMENT (STRTENGHTS/WEAKNESSES) Analysis

It is one thing to find attractive opportunities and another to be able to take advantage of
them. Each business needs to evaluate its internal strengths and weaknesses to see if it
is able to do so

Goal formulation
Once the company has performed a SWOT analysis, it can proceed to develop specific
goals for the planning period. This stage of the process is called goal formulation.

Management by objectives (MBO)

Most business units pursue a mix of objectives including profitability, sales growth,
market share improvement, risk containment, innovation, and reputation. The business
unit sets these objectives and then manages by objectives (MBO). For an MBO system to
work, the unit's objectives must meet four criteria:
1. They must be arranged hierarchically, from the most to the least important
2. Objectives should be stated quantitatively whenever possible - The objective
"increase the return on investment (ROI)" is better stated as the goal "increase ROI to 15
percent within two years."
3. Goals should be realistic- They should arise from an analysis of the business unit's
opportunities and strengths, not from wishful thinking.
4. Objectives must be consistent (zgodne ze soba)- It is not possible to maximize
sales and profits simultaneously.

Marketing Strategy
Goals indicate what a business unit wants to achieve; strategy is a game plan for
getting there. Every business must design a strategy for achieving its goals, consisting of
a marketing strategy, and a compatible technology strategy and sourcing strategy.
3 generic strategies
1. Overall cost leadership - achieving the lowest production and distribution costs in
order to price lower than the competitors and win a large market share.
2. Differentiation - achieving superior performance in an important customer benefit
area valued by a large part of the market. Thus the firm seeking quality leadership, for
example, must make products with the best components, put them together expertly,
inspect them carefully, and effectively communicate their quality.
3. Focus - focusing on one or more narrow market segments. The firm gets to know
these segments intimately and pursues either cost leadership or differentiation within the
target segment.

Strategic Alliances
Companies are also discovering that they need strategic partners if they hope to be
effective. Types:
1. Product or service alliances - One company licenses another to produce its product, or
two companies jointly market their complementary products or a new product.
2. Promotional alliances- One company agrees to carry a promotion for another
company's product or service. (e.g. McDonald's offers products related to current
Disney films as part of Happy Meals)
3. Logistics alliances- One company offers logistical services for another company's
product.
4. Pricing collaborations - One or more companies join in a special pricing collaboration.
Hotel and rental car companies often offer mutual price discounts.

Program formulation and implementation

high level of employee satisfaction -> higher effort -> higher-quality of products and
services -> higher customer satisfaction -> more repeat business -> higher growth and
profits -> high stockholder satisfaction -> more investment
...and so on. This is the virtuous circle that spells profits and growth.

Successful business practice (7S)

a) "hardware" of success: strategy, structure, systems
 b) "software" of success: style, skills, staff, shared values
Company’s organization:
• consists of its structures, policies, corporate culture
• structures/policies can be easily changed but it’s hard to change the culture
• corporate culture = the shared experiences, stories, beliefs, and norms that
characterize an organization, the way people are dressed, how they talk to one
another, the way they greet customers

Marketing Plan also called ‘business plan’ or ‘battle plan’

• a written document that summarizes what the marketer has learned about the
marketplace
• indicates how the firm plans to reach its marketing objectives
• contains tactical guidelines for the marketing programs and financial allocations
over the planning period
• usually covers 1 year
• has form 5 to 50 pages
• contains:
- Executive summary and table of contents (spis tresci). (the marketing plan should
open with a brief summary of the main goals and recommendations)
- Situation analysis. (data on sales, costs, the market, competitors)
- Marketing strategy. (mission and marketing and financial objectives)
- Financial projections. (sales/expense forecast)
- Implementation controls. (controls for monitoring and adjusting implementation of
the plan)