Foundations of Strategic Marketing Management

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Chapter 1 Foundations of Strategic Marketing
Management
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In this chapter, you will learn about

• Defining the Organizations Business, Mission,
  and Goals
• Business Definition
• Business Mission
• Business Goals
• 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

• Formulating Product-Market Strategies
• Market-Penetration Strategy
• Market-Development Strategy
• Product-Development Strategy
• Diversification
• Strategy Selection
• The Marketing Mix
• Budgeting Marketing, Financial, and Production
  Resources
• Developing Reformulation and Recovery Strategies
• Drafting a Marketing Plan
• 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

• Defining the organizations business, mission,
  and goals

• Identifying and framing organizational growth
  opportunities

• Formulating product-market strategies

• Budgeting marketing, financial, and production
  resources

• 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

• Crystallizes managements vision of the
  organizations long-term direction and character
• Provides guidance in identifying, pursuing, and
  evaluating market and product opportunities
• Inspires and challenges employees to do those
  things that are valued by the organization and
  its customers
• 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

• Production
• Financial
• 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

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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
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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
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Questions to be asked once SWOT has been
identified

• Which internal strengths represent distinctive
  competencies? Do these strengths compare
  favorably with what are believed to be market or
  industry success requirements?
• Which internal weaknesses disqualify the
  organization from pursuing certain opportunities?
• 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 products
New products
Market Penetration
Product Development
Existing markets
Diversification
Market Development
New markets
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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
Licensing
Exporting
Joint Venture or Strategic Alliance
Direct Investment
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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
Market-penetration strategy
Market-development strategy
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The Marketing Mix
Customer
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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

• Operating Budget
• Also referred to as a pro forma Income Statement
• Focuses on an organizations income statement
• 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