You are on page 1of 72

LECTURE

ategic Marketing Managem

Slide 1-1
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:

1.Define an organization’s business,


mission, and goals.

2.Identify and frame organization growth


opportunities.

3.Formulate product-market strategies.

4.Budget marketing, financial, and


production resources.
Slide 1-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:

5.Develop reformulation and recovery


strategies.

6.Draft a marketing plan.

7.Emphasize marketing ethics and social


responsibility.

Slide 1-3
FOUNDATIONS OF STRATEGIC MARKETING
MANAGEMENT

INTRODUCTION

Slide 1-4
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.

Slide 1-5
RESPONSIBILITIES OF MARKETING
MANAGERS

Make day-to-day decisions.

Chart the organization’s direction.

Create and sustain a competitive advantage


and affect the organization’s long-term
performance.

Slide 1-6
RESULTS OF THE EVOLUTION OF THE
MARKETING MANAGER

Created the Chief Marketing Officer


(CMO) position in many organizations.
Increased popularity of strategic
marketing management.

Slide 1-7
RESPONSIBILITIES OF CMOs

Define the business mission.

Analyze environmental, competitive, and


business situations.
Develop business objectives and goals.

Define customer value propositions and


their respective marketing strategies.

Slide 1-8
SKILL SET OF CMOs

Interpret extensive market and operational


information.
Sense customer and competitor
motivations.

Frame strategic marketing initiatives in


light of implementation considerations and
financial targets/results.

Slide 1-9
STRATEGIC MARKETING
MANAGEMENT PROCESSES

Define an organization’s business, mission,


and goals.
Identify and frame organizational growth
opportunities.
Formulate product-market strategies.
Budget marketing, financial, and
production resources.
Develop reformulation and recovery strategies.

Slide 1-10
Lecture 01-2

• Prof. Dr. MAK Chishty

Slide 1-11
FOUNDATIONS OF STRATEGIC MARKETING
MANAGEMENT

THE ORGANIZATION’S BUSINES


AND GOALS

Slide 1-12
BUSINESS DEFINITION

Answers the question, “What business are


we in?”
What business an organization is in is
neither obvious nor easy.
An organization defines its business by:
•The type of customer served and the specific
needs to be satisfied
•The means or technology used to satisfy these
customer needs
Slide 1-13
BUSINESS DEFINITION

Customer groups and needs are more


enduring than the offerings and means
or technologies to produce and deliver
them.


What business is the Encyclopedia
Britannica in?

Slide 1-14
BUSINESS MISSION

Consists of a written statement that:


Underscores the scope of an organization’s operations
apparent in its business definition.
Reflects management’s vision of what the organization
seeks to do.

Describes an organization’s purpose regarding its


customers, products/services, markets, philosophy, and
technology.

Crystallizes management’s vision of the organization’s


long-term direction and character.
Slide 1-15
BUSINESS MISSION

Consists of a written statement that (continued):


Provides guidance in identifying, pursuing, and evaluating
market-product opportunities.
Inspires and challenges employees to do what is valued by
the organization and its customers.

Provides direction for setting goals or objectives.

Also applies to not-for-profit organizations.

Slide 1-16
BUSINESS MISSION

CANNON PHOTO COPIER

“Our strategic intent is to help people


find better ways to do great work—
by constantly leading in document
technologies, products, and services that
improve our customers’ work processes
and business results.”
Slide 1-17
BUSINESS MISSION

EIDIH FOUNDATION

“To improve the quality of human life;


to enhance self-reliance and concern for
others; and to help people avoid, prepare
for, and cope with emergencies.”

Slide 1-18
BUSINESS GOALS OR OBJECTIVES


Convert the organization’s mission into
tangible actions and results that are to be
achieved within a specified time frame.
Are divided into three major categories:

Production Financial Marketing

Slide 1-19
BUSINESS GOALS OR OBJECTIVES

•Manufacturing and service capacity


Production
•Product and service quality

•Return on investment •Profit


Financial •Return on sales •Cash flow
•Shareholder wealth

•Market share •Customer satisfaction


•Sales volume •Customer value creation
Marketing
•Profit •Customer lifetime value
•Marketing productivity
Slide 1-20
BUSINESS GOALS OR OBJECTIVES

A situation analysis is an
appraisal of operations to
determine reasons for the
gap between what was or
is expected and what has
happened or will happen.
Slide 1-21
Lecture01-3

Prof.Dr. MAK Chishty

Slide 1-22
STRATEGIC MARKETING MANAGEMENT

AMING ORGANIZATIONAL GRO

Slide 1-23
CONVERTING ENVIRONMENTAL OPPORTUNITIES
INTO ORGANIZATIONAL OPPORTUNITIES

Ask three questions:


What might we do?
What do we do best?
What must we do?

Slide 1-24
WHAT MIGHT WE DO?

Sources of environmental opportunities:


Unmet or changing consumer needs.
Unsatisfied buyer groups.
New means or technologies for delivering
value to prospective buyers.

Slide 1-25
WHAT DO WE DO BEST?

A distinctive competency
describes an organization’s
unique strengths or qualities,
including skills, technologies,
or resources that distinguish it
from other organizations.
Slide 1-26
WHAT DO WE DO BEST?

Two criteria must be satisfied for a


distinctive competency:
Competitors cannot replicate the skill easily
or without a sizeable investment in time,
effort, and money.
It should make a significant contribution to
the benefits customers perceive, thereby
providing them with superior value.

Slide 1-27
GILLETTE: WHAT ARE ITS
DISTINCTIVE COMPETENCIES?

Slide 1-28
WHAT MUST WE DO?

Success requirements are basic


tasks that an organization
must perform in a market or
industry to compete
successfully.

Slide 1-29
T0WS ANALYSIS

TOWS analysis is a formal framework


for identifying and framing organizational
growth opportunities.
- Type of
Factor -
Organization Favorable Unfavorable

Internal
Strengths Weaknesses
Capabilities

External
Opportunities Threats
Environment

Slide 1-30
TOWS ANALYSIS

Pose dangers to the welfare of the


Threats
organization

Developments or conditions in the


Opportunities environment that have favorable
implications for the organization.

What an organization lacks or does


Weaknesses
poorly relative to other organization

What the organization is good at doing


or some characteristic that gives it an
Strengths important capability.
Slide 1-31
SAMPLE TOWS ANALYSIS
FRAMEWORK

Internal External Threats


Strengths Weaknesses Opportunities
Factors Factors

§Management §Economic

§Marketing §Competition

§Manufacturing §Consumer

§R&D §Technology

§Finance §Legal/Regulatory

§Offerings §Industry/Market
Structure

Slide 1-32
TOWS ANALYSIS

Questions to ask after a TOWS analysis:



Which strengths represent distinctive
competencies? Do they compare favorably with
what are believed to be market or industry
success requirements?

Which weaknesses disqualify the organization


from pursuing certain opportunities?

Does a pattern emerge from the SWOT analysis?


Slide 1-33
LECTURE 01-3

Prof. Dr. MAK Chishty

Slide 1-34
FOUNDATIONS OF STRATEGIC MARKETING
MANAGEMENT

FORMULATING
RODUCT-MARKET STRATEGIE

Slide 1-35
PRODUCT-MARKET STRATEGY

A product-market strategy
involves selecting specific
markets and profitably
reaching them through an
integrated program called a
marketing mix.
Slide 1-36
PRODUCT-MARKET STRATEGIES

Market
s
Existing New

Market Market
Existing
Penetration Development
Offerin
gs Diversificatio
New Offering Development
New
n

Slide 1-37
PRODUCT-MARKET STRATEGIES

A market-penetration strategy dictates


that an organization seeks to gain
greater dominance in a market in
which it already has an offering
(existing offerings  existing markets).
Slide 1-38
MARKET-PENETRATION STRATEGY

This strategy involves:


Increasing present buyers’ usage or
consumption rates of the offering.

Attracting buyers of competing offerings.

Stimulating product trial among potential


customers.

Slide 1-39
MARKET-PENETRATION STRATEGY

Factors to consider when adopting this


strategy:
Examine market growth.

Assess competitive reaction.

Analyze the capacity of the market to


increase usage or consumption rates and
the availability of new buyers.

Slide 1-40
PRODUCT-MARKET STRATEGIES

A market-development strategy
dictates that an organization introduce
its existing offerings to markets other
than those it is currently serving
(existing offerings  new markets).
Slide 1-41
MARKET-DEVELOPMENT STRATEGY

This strategy involves:


Adjusting the marketing mix, such as:
•Modifying the basic product offering

•Using different distribution outlets

•Changing the sales effort or advertising

Analyzing competitors’ strengths,


weaknesses, and potential for retaliation.
Slide 1-42
MARKET-DEVELOPMENT STRATEGY

This strategy involves (continued):


Identifying the number, motivation, and
buying patterns of new buyers.

Determining the organization’s ability to


adapt to new markets to evaluate success.

Slide 1-43
MARKET-DEVELOPMENT STRATEGY

Internationally, this strategy has four forms:

Exporting Licensing

Joint Venture/ Direct


Strategic Alliance Investment

Slide 1-44
MARKET-DEVELOPMENT STRATEGY

Involves marketing the same offering in another


Exporting country through sales offices or intermediaries.

Is a contract where one firm (licensee) is given


Licensing the rights to patents, trademarks, etc. by the
owner (licensor) in turn for a royalty or fee.

Involves investment by both a foreign firm and a


Joint Venture/ local company to create a new entity in the host
Strategic Alliance country. The two forms share ownership,
control, and profits of the entity.

Involves investing in a manufacturing and/or


Direct assembly facility in a foreign market. Is the most
Investment risky and requires the most commitment.
Slide 1-45
PRODUCT-MARKET STRATEGIES

A product- (new offering-) development


strategy dictates that an organization
create new offerings  existing markets.

Slide 1-46
PRODUCT-DEVELOPMENT STRATEGY

This strategy involves:

Product
Developing totally new offerings.
Innovation

Product Enhancing the value to customers


Augmentation of existing offerings.

Product Adding different features, sizes, etc.


Line Extension to broaden the existing line.

Slide 1-47
PRODUCT-DEVELOPMENT STRATEGY

Factors to consider when adopting this


strategy:
The market size and volume needed for
profitability.
The magnitude and timing of competitors’
responses.
The impact of the new product on the sales of
existing offerings (cannibalization).
The capacity of the organization to deliver the
offerings to the market(s).
Slide 1-48
PRODUCT-MARKET STRATEGIES

A diversification strategy involves the


development or acquisition of offerings
new to the organization and the introduction
of those offerings to publics not previously
served by the organization
(new offerings  new markets).
Slide 1-49
DIVERSIFICATION STRATEGY

Considerations regarding this strategy:


Many firms have adopted this strategy to
take advantage of growth opportunities.
Is very risky because both the offerings and
pubic/market are new to the organization.
Can be successful if the organization
applies its distinctive competencies to
reaching new markets with new offerings.
Slide 1-50
STRATEGY SELECTION

Product-market strategies are evaluated


based on:
The organization’s business definition,
mission, and capabilities.
Market capacity and behavior.
Environmental forces.
Competitive activities.
Slide 1-51
STRATEGY SELECTION

Product-market strategies are chosen


based on:
Costs and benefits of a strategy.
Probabilities of success for a strategy.
Analysis of competitive structure, market
dynamics, and opportunity costs.
The product itself.
Slide 1-52
DECISION-TREE FORMAT

Action Response Outcome

R1 O1
A1
R2 O2

R1 O3
A2
R2 O4
Slide 1-53
SAMPLE DECISION-TREE

Action Response Outcome

Aggressive Estimated profit


Market- competition of Rs.32 million
penetration
Passive Estimated profit
strategy
competition of Rs.53 million

Aggressive Estimated profit


Market- competition of Rs.41 million
development
strategy Passive Estimated profit
competition of Rs.64 million

Slide 1-54
THE MARKETING MIX

Communicatio
n
Aggressive
competition
Strategy

Product Channel
Customer
Strategy Aggressive Strategy
competition

Passive
competition

Price
Strategy
Slide 1-55
THE MARKETING MIX

Product
Kind of product, service, or idea offered.
Strategy

How the product, service, or Estimated


idea will beprofit
Communication
communicated to buyers. Informs of$3and assures
million
Strategy buyers that the offering will meet their needs.

Method for distributing the product or service to


Channel Aggressive
buyers. Satisfies buyers’ shopping patterns and
Strategy competition
purchase requirements. Provides information
and offering availability.
Estimated profit
of $4 million
Price Amount buyers will pay for the offering.
Strategy Represents the value or benefits provided.

Slide 1-56
FORMULATING THE MARKETING MIX

Depends on the success requirements of the


market.
Delivers customer value in marketspace,
Estimated profit
the new interactive capabilities ofof$3
themillion

Internet.
Aggressive
Must be consistent with both the needs of
competition
the markets and the organization’s
Estimated profit
capacity. of $4 million

Is as much art and science.


Slide 1-57
LECTURE01-4

Prof. Dr. MAK Chishty

Slide 1-58
STRATEGIC MARKETING MANAGEMENT

ETING, FINANCIAL, AND PRODU

Slide 1-59
BUDGETING

A budget is a formal,
quantitative expression of an
organization’s planning and
strategy initiatives expressed
in financial terms.

Slide 1-60
BUDGETING

A master budget consists of:


Focuses on the income statement.
Operating
Also referred to as a pro forma income
Budget
statement or profit plan.

Focuses on the effect the operating


Financial
budget has on the organization’s cash
Budget
position.

Focuses on developing advertising,


Special
sales, and other budgets that support
Budgets
the master budget.
Slide 1-61
LECTURE01-5

Prof.Dr. MAK Chishty

Slide 1-62
STRATEGIC MARKETING MANAGEMENT

EFORMULATION AND RECOVER

Slide 1-63
MARKETING AUDIT

A marketing audit is a comprehensive,


systematic, and periodic examination of
a firm’s or business unit’s marketing
environment, objectives, strategies, and
activities to determine problem areas
and opportunities and recommend a
plan of action to improve the firm’s
marketing performance.

Slide 1-64
MARKETING AUDIT

Addresses the following questions:

Strategic Are we doing the right things?

Operational Are we doing things right?

Slide 1-65
REFORMULATION AND RECOVERY
STRATEGIES

Have the following purposes:


 Forces marketing managers to ask
“What if…?” questions.

Allows for contingency plans, preplanning


of reformulation and recovery strategies
that lead to faster reaction time in
implementing remedial action.

Slide 1-66
LECTURE01-6

Prof Dr. MAK Chishty

Slide 1-67
STRATEGIC MARKETING MANAGEMENT

DRAFTING A
MARKETING PLAN

Slide 1-68
MARKETING PLAN

A marketing plan is a formal,


written document that describes
the context and scope of an
organization’s marketing effort
to achieve defined goals or
objectives within a specific future
time period.
Slide 1-69
MARKETING PLAN

Consists of:
Business Marketing Product
Plan Plan Plan

Each has these time dimensions:

Short-term Focuses on a 1-year period.

Long-term Focuses on a 3- to 5-year period.


Slide 1-70
STRATEGIC MARKETING MANAGEMENT

NG ETHICS AND SOCIAL RESPO

Slide 1-71
ETHICS AND SOCIAL RESPONSIBILITY

 Most marketing decisions involve


some degree of moral judgment.
Marketers should take actions that are
legal, ethical, and socially responsible.

Slide 1-72