foundation of strategic marketing management
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Chapter 1
Foundations of Strategic Marketing
Management
1-2
In this chapter, you will learn about…
1. Defining the Organization’s 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
1-3
In this chapter, you will learn about…
3. Formulating Product-Market StrategiesMarket-Penetration StrategyMarket-Development StrategyProduct-Development StrategyDiversificationStrategy SelectionThe Marketing Mix
4. Budgeting Marketing, Financial, and Production Resources
5. Developing Reformulation and Recovery Strategies6. Drafting a Marketing Plan7. 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
Expanded responsibilities include:Charting the direction of the organizationContributing to decisions that will create and sustain a competitive advantage and affect long-term organizational performance
They no longer function solely to direct day-to-day operations. They must make
strategic decisions as well.
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Evolution of the Marketing Manager
This has prompted the emergence ofstrategic marketing management as a course of study and practice.
From being only an implementer….to being a maker of organization strategy.
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Processes in Strategic Marketing Management1. Defining the organization’s 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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Defining the Organization’s Business,
Mission, and Goals
Process One
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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
a product-producing or service delivery enterprise.
not
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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
“What business are we in?”
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Most statements describe:
the organization’s purposecustomers, products/services, markets, philosophy, and technology
Business Mission
Underscores the scope of an organization’s operations apparent in its business definition
Reflects management’s vision of what the organization seeks to do
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Benefits of Mission Statements
1. Crystallizes management’s vision of the organization’s 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 organization’s mission into tangible actions and results that are to be achieved, often within a specified time frame.
Three major categories of goals:
1. Production2. Financial3. Marketing
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Production GoalsApply to the use of
manufacturing and service capacity and to product
and service quality. Financial GoalsFocus on return on
investment, return on sales, profit, cash flow, and shareholder wealth.
Marketing Goalsmarket sharemarketing productivitysales volumeprofitcustomer satisfactioncustomer value creation
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Identifying and Framing Organizational Growth
Opportunities
Process Two
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Sources of environmental opportunity:
Unmet or changing customer needs
Unsatisfied buyer groups
New means or technology for delivering value to prospective buyers
What might we do?
Converting Environmental Opportunities into
Organizational Opportunities
1-17
What do we do best?
Distinctive Competency describes an organization’s unique strengths or qualities including:
Skills Technologies Resources
…that distinguish it from other organizations.
Converting Environmental Opportunities into
Organizational Opportunities
1-18
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.
Converting Environmental Opportunities into
Organizational Opportunities
1-19
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
internal
external
A formal framework for identifying and framing organizational growth opportunities
1-20
SWOT Analysis
Framework for focusing attention on the fact that an organizational growth
opportunity results from…
a good fit between an organization’s INTERNAL CAPABILITIES
(Strengths & Weaknesses)and
its EXTERNAL ENVIRONMENT (Opportunities & Threats)
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Pose dangers to the welfare of the organization
Threats
Developments or conditions in the environment that have favorable implications for the organization
Opportunities
What an organization lacks or does poorly relative to competitors
Weakness
What the organization is good at doing or a characteristic that gives it an important capability
Strength
SWOT Analysis
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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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Formulating Product-Market Strategies
Process Three
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DiversificationMarketDevelopment
MarketPenetration
ProductDevelopment
Existingproducts
Newproducts
Existingmarkets
Newmarkets
Product-Market Strategies
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Seeking a larger market share in a market in which organization already has an offering
This strategy involves:
Attempts to increase present buyer’s usage or consumption rates of the offering
Attracting buyers of competing offerings
Stimulating product trial among potential consumers
Market Penetration Strategy
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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 potentialModification of the basic offeringDifferent distribution outletsChange in sales effort and advertising
Market Development Strategy
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LicensingExporting
Joint Venture or Strategic
AllianceDirect
Investment
Market Development in the International Arena
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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.
Product Development Strategy
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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
Diversification Strategy
Market-penetrationstrategy
Market-developmentstrategy
Estimated profit of$1 million
Estimated profit of$4 million
Action Response Outcome
Aggressivecompetition
Passivecompetition
Aggressivecompetition
Passivecompetition
Strategy Selection – Sample Decision Tree
Estimated profit of$2 million
Estimated profit of$3 million
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The Marketing Mix
Customer
ChannelStrategy
ProductStrategy
PriceStrategy
Communications Strategy
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Budgeting Marketing, Financial, and Production
Resources
Process Four
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A formal, quantitative expression of an organization’s planning and strategy
initiatives expressed in financial terms
A well-prepared budget meshes and balances an organization’s
Financial, Production, and Marketing Resources
so that overall organizational goals or objectives are attained.
The Budget
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1. Operating Budget Also referred to as a pro forma Income StatementFocuses on an organization’s income statement
2. Financial Budget
Focuses on the effect that the operating budget and other initiatives will have on the organization’s cash position
Components of a Budget
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Developing Reformulation and Recovery Strategies
Process Five
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Comprehensive, systematic, independent, and
periodic examination of a company’s marketing
environment, objectives, strategies, and
activities to recommend a plan of action to
improve the company’s marketing performance.
The Marketing Audit
Helps answer the questions:
Are we doing the right things?
Are we doing things right?
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Focus can be on a business, product, or brandTime Dimension can be short-run (typically one year) or long-run (multi-year)
A formal written document that describes the context and scope of an organization’s
marketing effort to achieve defined goals or objectives within a specified future time period.
The Marketing Plan
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Marketing Ethics and Social Responsibility
Marketing decisions reflect an organization’s orientation toward the publics with which it interactsThe marketplace is populated by individuals with diverse value systemsTheir actions will be judged publicly by others with different values
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