Slide 1-1 2013 Pearson Education, Inc.

publishing as Prentice Hall

CHAPTER 1
Foundations of Strategic
Marketing Management
Slide 1-2 2013 Pearson Education, Inc. publishing as Prentice Hall
1. Define an organizations business,
mission, and goals.
2. Identify and frame organization
growth opportunities.
3. Formulate product-market
strategies.
4. Budget marketing, financial, and
production resources.
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
Slide 1-3 2013 Pearson Education, Inc. publishing as Prentice Hall
5. Develop reformulation and recovery
strategies.
6. Draft a marketing plan.
7. Emphasize marketing ethics and
social responsibility.
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
Slide 1-4 2013 Pearson Education, Inc. publishing as Prentice Hall
INTRODUCTION
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-5 2013 Pearson Education, Inc. publishing as Prentice Hall
To create long-term and
mutually beneficial
exchange relationships
between an entity and the
publics (individuals and
organizations) with which it
interacts.
PURPOSE OF MARKETING
Slide 1-6 2013 Pearson Education, Inc. publishing as Prentice Hall
RESPONSIBILITIES OF
MARKETING MANAGERS
Direct day-to-day operations
Make strategic decisions
Create and sustain a competitive
advantage
Affect the organizations long-term
performance
Chart the organizations direction
Slide 1-7 2013 Pearson Education, Inc. publishing as Prentice Hall
RESULTS OF THE EVOLUTION
OF THE MARKETING MANAGER
Created the Chief Marketing
Officer (CMO) position
Increased popularity of strategic
marketing management
Half of Fortune 1000 have CMOs
Slide 1-8 2013 Pearson Education, Inc. publishing as Prentice Hall
Analyze environmental, competitive,
and business situations
Develop business objectives and goals
Define customer value propositions
and their marketing strategies
RESPONSIBILITIES OF CMOs
Define the business mission
Slide 1-9 2013 Pearson Education, Inc. publishing as Prentice Hall
Analytic abilities
Intuitive sense
Creativity
SKILL SET OF CMOs
Slide 1-10 2013 Pearson Education, Inc. publishing as Prentice Hall
Define business, mission, and goals
Identify/frame growth opportunities
Formulate product-market strategies
Budget resources
Develop reformulation and recovery
strategies
STRATEGIC MARKETING
MANAGEMENT PROCESSES
Slide 1-11 2013 Pearson Education, Inc. publishing as Prentice Hall
DEFINING THE
ORGANIZATIONS
BUSINESS, MISSION,
AND GOALS
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-12 2013 Pearson Education, Inc. publishing as Prentice Hall
An firm defines its business by:
The customers served and their needs
The means or technology used to satisfy needs
BUSINESS DEFINITION
Is neither obvious nor easy to define
Outlines the scope of operations
What business is the Encyclopedia
Britannica in?
Slide 1-13 2013 Pearson Education, Inc. publishing as Prentice Hall
Underscores the scope of an
organizations operations
Reflects managements vision of
the organization
Describes an organizations purpose
Crystallizes the organizations
long-term direction and character
BUSINESS MISSION
Consists of a written statement that:
Slide 1-14 2013 Pearson Education, Inc. publishing as Prentice Hall
Helps identify and evaluate
product-market opportunities
Inspires employees
Provides direction for goal-setting
Applies to not-for-profit organizations
as well
BUSINESS MISSION
Consists of a written statement that:
Slide 1-15 2013 Pearson Education, Inc. publishing as Prentice Hall
BUSINESS MISSION
XEROX
American
Red Cross
Do great work
Provide for
victims of
disaster
Slide 1-16 2013 Pearson Education, Inc. publishing as Prentice Hall

Production
Objectives

Convert the mission into tangible
actions and results to be achieved
by a specified time frame
Are divided into three categories:

Financial
Objectives

Marketing
Objectives
BUSINESS GOALS OR OBJECTIVES
Slide 1-17 2013 Pearson Education, Inc. publishing as Prentice Hall
BUSINESS GOALS OR OBJECTIVES
Manufacturing and service capacity
Product and service quality

Production
Objectives

Return on investment
Return on sales
Shareholder wealth
Profit
Cash flow

Financial
Objectives

Market share
Sales volume
Marketing productivity
Customer satisfaction
Customer value creation
Profit Customer lifetime value
Marketing
Objectives
Slide 1-18 2013 Pearson Education, Inc. publishing as Prentice Hall
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.
BUSINESS GOALS OR OBJECTIVES
Slide 1-19 2013 Pearson Education, Inc. publishing as Prentice Hall
IDENTIFYING AND
FRAMING
ORGANIZATIONAL
GROWTH
OPPORTUNITIES
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-20 2013 Pearson Education, Inc. publishing as Prentice Hall
CONVERTING ENVIRONMENTAL OPPORTUNITIES
INTO ORGANIZATIONAL OPPORTUNITIES
What might we do?
Ask three questions:
What do we do best?
What must we do?
Environmental
Opportunities
Distinctive
Competencies
Success
Requirements
Slide 1-21 2013 Pearson Education, Inc. publishing as Prentice Hall
Unmet or changing consumer needs
Unsatisfied buyer groups
New means or technologies for
delivering value to prospective buyers
WHAT MIGHT WE DO?
Environmental Opportunities
Slide 1-22 2013 Pearson Education, Inc. publishing as Prentice Hall
Describes an organizations
unique strengths or qualities,
including skills, technologies,
or resources, that distinguish
it from other organizations.
WHAT DO WE DO BEST?
Distinctive Competency
Slide 1-23 2013 Pearson Education, Inc. publishing as Prentice Hall
Two criteria must be satisfied:
Competitors cannot imitate it
Provide customers with superior value
WHAT DO WE DO BEST?
Distinctive Competency
Slide 1-24 2013 Pearson Education, Inc. publishing as Prentice Hall
Basic tasks that an
organization must perform
in a market or industry to
compete successfully.
WHAT DO WE DO BEST?
Success Requirements
Slide 1-25 2013 Pearson Education, Inc. publishing as Prentice Hall
SWOT analysis is a formal framework
for identifying and framing organizational
growth opportunities.
Strengths Weaknesses
Internal
Capabilities
Opportunities
External
Environment
Threats
Organization Favorable Unfavorable
- Type of Factor -
SWOT ANALYSIS
Slide 1-26 2013 Pearson Education, Inc. publishing as Prentice Hall
Strengths
Weaknesses
Opportunities
Threats
What the organization is good at
doing or some characteristic that
gives it an important capability
What an organization lacks or
does poorly relative to other
organizations
Developments or conditions in the
environment that have favorable
implications for the organization
Pose dangers to the welfare of the
organization
SWOT ANALYSIS
Slide 1-27 2013 Pearson Education, Inc. publishing as Prentice Hall
EXHIBIT 1.1: SAMPLE SWOT
ANALYSIS FRAMEWORK

Strengths


Weaknesses

Internal
Factors

Opportunities

External
Factors
Threats
Management
Marketing
Manufacturing
R&D
Finance
Offerings
Economic
Competition
Consumer
Technology
Legal/Regulatory
Industry/Market
Structure
Slide 1-28 2013 Pearson Education, Inc. publishing as Prentice Hall
Which strengths represent distinctive
competencies?
Does a pattern emerge from the SWOT?
Which weaknesses disqualify the
organization from pursuing certain
opportunities?
Questions to ask after a SWOT
analysis:
SWOT ANALYSIS
Slide 1-29 2013 Pearson Education, Inc. publishing as Prentice Hall
FORMULATING
PRODUCT-MARKET
STRATEGIES
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-30 2013 Pearson Education, Inc. publishing as Prentice Hall
A product-market strategy
involves selecting specific
markets and profitably
reaching them through an
integrated program called
a marketing mix.
PRODUCT-MARKET STRATEGY
Slide 1-31 2013 Pearson Education, Inc. publishing as Prentice Hall
EXHIBIT 1.2:
PRODUCT-MARKET STRATEGIES
Market
Development
New Offering
Development
Market
Penetration
Diversification
New
Existing
Existing
New
Markets
Offerings
Slide 1-32 2013 Pearson Education, Inc. publishing as Prentice Hall
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).
PRODUCT-MARKET STRATEGIES
Market Penetration Strategy
Slide 1-33 2013 Pearson Education, Inc. publishing as Prentice Hall
Increasing present buyers usage or
consumption rates of the offering
Attracting buyers of competing
offerings
Stimulating product trial among
potential customers
PRODUCT-MARKET STRATEGIES
Market Penetration Strategy Involves
Slide 1-34 2013 Pearson Education, Inc. publishing as Prentice Hall
Examine market growth
Assess competitive reaction
Analyze the capacity of the market to
increase usage or consumption rates
and the availability of new buyers
PRODUCT-MARKET STRATEGIES
Market Penetration Strategy Considerations
Slide 1-35 2013 Pearson Education, Inc. publishing as Prentice Hall
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).
PRODUCT-MARKET STRATEGIES
Market Development Strategy
Slide 1-36 2013 Pearson Education, Inc. publishing as Prentice Hall
Adjusting the marketing mix, such as:
Analyzing competitors strengths,
weaknesses, and potential for retaliation
Modifying the basic product offering
Using different distribution outlets
Changing the sales effort or advertising
PRODUCT-MARKET STRATEGIES
Market Development Strategy Involves
Slide 1-37 2013 Pearson Education, Inc. publishing as Prentice Hall
Identifying the number, motivation, and
buying patterns of new buyers
Determining the organizations ability to
adapt to new markets to evaluate success
PRODUCT-MARKET STRATEGIES
Market Development Strategy Involves
Slide 1-38 2013 Pearson Education, Inc. publishing as Prentice Hall
Licensing
Joint Venture/
Strategic Alliance

Exporting

Direct
Investment
PRODUCT-MARKET STRATEGIES
Market Development Strategy International Forms
Slide 1-39 2013 Pearson Education, Inc. publishing as Prentice Hall
PRODUCT-MARKET STRATEGIES

Exporting

Involves marketing the same offering in
another country through sales offices or
intermediaries
Is a popular option for entering foreign
markets because it:
Easy to initiate
Requires minimal capital investment
Slide 1-40 2013 Pearson Education, Inc. publishing as Prentice Hall
PRODUCT-MARKET STRATEGIES
Licensing
Is a contract where a firm (licensee) is given
the rights to patents, trademarks, etc. by the
owner (licensor) in turn for a royalty or fee
Is a low-risk, quick, and capital-free entry
into a foreign market
Limits the control of the licensor over
production and marketing by the licensee
Slide 1-41 2013 Pearson Education, Inc. publishing as Prentice Hall
PRODUCT-MARKET STRATEGIES
Joint Venture/Strategic Alliance
Creates a new entity in the host country from an
investment by both a foreign and a local company
Allows the two firms share ownership, control, and
profits of the entity
Is popular because one firm may not have the
required resources to enter a market
Ensures against trade barriers
May cause disagreements between the partners
regarding how the new entity should be run
Slide 1-42 2013 Pearson Education, Inc. publishing as Prentice Hall
PRODUCT-MARKET STRATEGIES
Direct Investment
Involves investing in a manufacturing and/or
assembly facility in a foreign market
Is the most risky and requires the most
commitment
Brings the firm closer to its customers
May be the most profitable market-entry option
Often follows the other three options
Slide 1-43 2013 Pearson Education, Inc. publishing as Prentice Hall
A product- (new offering-)
development strategy dictates
that an organization create new
offerings existing markets.
PRODUCT-MARKET STRATEGIES
New Offering Development Strategy
Slide 1-44 2013 Pearson Education, Inc. publishing as Prentice Hall
PRODUCT-MARKET STRATEGIES
Enhancing the value to
customers of existing offerings
through bundling or improving
functional performance
Product
Augmentation
Developing totally new offerings
Product
Innovation
Adding different features, sizes,
etc. to broaden the existing line
Product
Line Extension
New Offering Development Strategy Involves
Slide 1-45 2013 Pearson Education, Inc. publishing as Prentice Hall
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 (cannibalism)
The capacity of the organization to deliver the
offerings to the market(s)
PRODUCT-MARKET STRATEGIES
New Offering Development Strategy Factors
The presence of significant points of difference
Slide 1-46 2013 Pearson Education, Inc. publishing as Prentice Hall
Occurs when sales of a new offering come
at the expense of sales of existing offerings
the firm already markets
PRODUCT-MARKET STRATEGIES
Cannibalism
Is common in product development
programs
Key issue: Does the new offering detract
from the overall profitability of the firms
total offering mix
Slide 1-47 2013 Pearson Education, Inc. publishing as Prentice Hall
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).
PRODUCT-MARKET STRATEGIES
Diversification Strategy
Slide 1-48 2013 Pearson Education, Inc. publishing as Prentice Hall
Many firms have adopted this strategy to
take advantage of growth opportunities
Is very risky because both the offerings and
markets served are new to the organization
Can be successful if the organization
applies its distinctive competencies to
reaching new markets with new offerings
PRODUCT-MARKET STRATEGIES
Diversification Strategy Considerations
Slide 1-49 2013 Pearson Education, Inc. publishing as Prentice Hall
Strategies are evaluated based on:
The organizations business definition,
mission, and capabilities
Market capacity and behavior
Environmental forces
Competitive activities
PRODUCT-MARKET STRATEGIES
Slide 1-50 2013 Pearson Education, Inc. publishing as Prentice Hall
Strategy analysis depends on:
Availability and evaluation of relevant
market information
Data collected should include :
PRODUCT-MARKET STRATEGIES
Market size
Consumer buying behavior and requirements
Environmental forces
Slide 1-51 2013 Pearson Education, Inc. publishing as Prentice Hall
Costs and benefits of a strategy
Competitive structure, market
dynamics, and opportunity costs
Probabilities of success for a strategy
The offering itself
STRATEGY SELECTION
Strategies are chosen based on:
Slide 1-52 2013 Pearson Education, Inc. publishing as Prentice Hall
EXHIBIT 1.3: DECISION-TREE FORMAT
Action Response Outcome
A
2
A
1
R
1

R
2

R
1

R
2

O
1

O
2

O
3

O
4

Slide 1-53 2013 Pearson Education, Inc. publishing as Prentice Hall
Estimated profit
of $1 million
Estimated profit
of $4 million
Action Response Outcome
Estimated profit
of $2 million
Estimated profit
of $3 million
Market-
development
strategy
Aggressive
competition
Passive
competition
Aggressive
competition
Passive
competition
Market-
penetration
strategy
EXHIBIT 1.4: SAMPLE DECISION-TREE
Slide 1-54 2013 Pearson Education, Inc. publishing as Prentice Hall
Aggressive
competition
Passive
competition
Aggressive
competition
Price
Strategy
Communication
Strategy
Product
Strategy
Channel
Strategy
Customer
THE MARKETING MIX
Slide 1-55 2013 Pearson Education, Inc. publishing as Prentice Hall
Aggressive
competition
Passive
competition
Aggressive
competition
CUSTOMER VALUE PROPOSITION
A cluster of benefits that an
organization promises
customers to satisfy their
needs.
Wal-Mart Michelin
Slide 1-56 2013 Pearson Education, Inc. publishing as Prentice Hall
Estimated profit
of $4 million
Estimated profit
of$3 million
Aggressive
competition
Depends on the success
requirements of the market
Must be consistent with:
FORMULATING THE MARKETING MIX
The needs of the markets served
The organizations capacity
The marketing mix activities
Slide 1-57 2013 Pearson Education, Inc. publishing as Prentice Hall
Estimated profit
of $4 million
Estimated profit
of$3 million
Aggressive
competition
Requires an understanding of:
Is an art and a science
IMPLEMENTING THE MARKETING MIX
Markets
Environmental forces
Organizational capacity
Marketing mix activities
Competitor reactions
Slide 1-58 2013 Pearson Education, Inc. publishing as Prentice Hall
BUDGETING
MARKETING, FINANCIAL,
AND PRODUCTION
RESOURCES
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-59 2013 Pearson Education, Inc. publishing as Prentice Hall
A budget is a formal,
quantitative expression of
an organizations planning
and strategy initiatives
expressed in financial
terms.
BUDGETING
Slide 1-60 2013 Pearson Education, Inc. publishing as Prentice Hall
A master budget consists of:
Focuses on the income statement.
Also referred to as a pro forma
income statement or profit plan.
Focuses on the effect the operating
budget has on the organizations
cash position.
BUDGETING
Operating
Budget
Financial
Budget
Special
Budgets
Focuses on developing advertising,
sales, and other budgets that
support the master budget.
Slide 1-61 2013 Pearson Education, Inc. publishing as Prentice Hall
DEVELOPING
REFORMULATION AND
RECOVERY STRATEGIES
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-62 2013 Pearson Education, Inc. publishing as Prentice Hall
A marketing audit is a comprehensive,
systematic, and periodic examination of
a firms or business units marketing
environment, objectives, strategies, and
activities to determine problem areas and
opportunities and recommend a plan of
action to improve the firms marketing
performance.
MARKETING AUDIT
Slide 1-63 2013 Pearson Education, Inc. publishing as Prentice Hall
Addresses the following questions:
MARKETING AUDIT
Are we doing the right things?
Strategic
Are we doing things right?
Operational
Slide 1-64 2013 Pearson Education, Inc. publishing as Prentice Hall
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
REFORMULATION AND
RECOVERY STRATEGIES
Slide 1-65 2013 Pearson Education, Inc. publishing as Prentice Hall
DRAFTING A
MARKETING PLAN
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-66 2013 Pearson Education, Inc. publishing as Prentice Hall
A marketing plan is a formal,
written document that describes
the context and scope of an
organizations marketing effort
to achieve defined goals or
objectives within a specific
future time period.
MARKETING PLAN
Slide 1-67 2013 Pearson Education, Inc. publishing as Prentice Hall
Consists of:
Each has these time dimensions:
Focus: 1-year period
Focus: 3- to 5-year period
MARKETING PLAN
Product
Plan
Business
Plan
Marketing
Plan
Short-term
Long-term
Slide 1-68 2013 Pearson Education, Inc. publishing as Prentice Hall
MARKETING ETHICS AND
SOCIAL RESPONSIBILITY
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT
Slide 1-69 2013 Pearson Education, Inc. publishing as Prentice Hall
Most marketing decisions involve
some degree of moral judgment
Marketers should take actions that
are legal, ethical, and socially
responsible
ETHICS AND SOCIAL RESPONSIBILITY
Slide 1-70 2013 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.