Chapter 2

Foundations of
Strategic Marketing
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
Focus on return on
investment, return on
sales, profit, cash flow,
and shareholder wealth.
Marketing Goals
market share
marketing productivity
sales volume
profit
customer satisfaction
customer value creation 1-14
 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 internal

Opportunities

Threats 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

Opportunities Developments or conditions in

the environment that have
favorable implications for the
organization

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 New
products products

Existing Market
Market Product
Product
markets Penetration
Penetration Development
Development

New Market
Market Diversification
Diversification
market Development
Development
s

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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 Direct

or Strategic Investment
Alliance

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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 Outcome

Aggressive Estimated profit of

competition $2 million
Market-penetration
strategy
Passive Estimated profit of
competition $3 million

Aggressive Estimated profit of

competition $1 million
Market-development
strategy
Passive Estimated profit of
competition $4 million
The Marketing Mix

Product Communications
Strategy Strategy

Customer

Price Channel
Strategy 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 (multi-
year)
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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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