Chapter 2 Study Notes: Strategic Planning

Chapter 2: Strategic Planning

Learning Objectives

  • LO 2-1: Discuss the importance of strategic planning for marketing.

  • LO 2-2: Analyze the characteristics of an effective mission statement.

  • LO 2-3: Outline the five main components of the marketing plan.

  • LO 2-4: Explain three tools and techniques for situation analysis: market summary, SWOT analysis, and competition analysis.

  • LO 2-5: Explain the basic tools and techniques of marketing strategy: segmentation, strategic direction, and the marketing mix.

  • LO 2-6: Discuss the strategic decisions involved in reaching international consumers.

  • LO 2-7: Describe the use of four key marketing analytics: return on marketing investment (ROMI), revenue analysis, market share analysis, and profitability analysis.

Thought-Provoking Activity

  • Activity: Answer questions to gain points.

    • Questions:

    1. What is a mission statement? Provide an example of a franchise's mission statement.

    2. What is the BCG matrix? Provide an example for each of the four elements: Stars, Cash cows, Question marks, and Dogs.

Executive Perspective: Melissa Lowry, CMO of Zelle

  • Key to Success: Listening to stakeholders beyond scheduled meetings to gain insights.

  • Advice: Be receptive to opportunities, and be open to the unknown in career paths.

  • Marketing Leadership: Involve cross-functional areas in decision-making focusing on customer experience.

  • Brand Characteristics: Emphasizes being curious, supportive, empathetic, and maintaining a positive outlook.

Importance of Strategic Planning (LO2-1)

  • Definition: Strategic planning increases the likelihood of success by being guided by the organization’s mission.

  • Key Term:

    • Strategic Planning: Process of defining an organization's direction and making decisions on allocating its resources accordingly.

    • Strategic Plan: A document that outlines an organization's goals and the actions needed to achieve them.

Elements of a Strategic Plan

  • Figure 2.1: Components of a Strategic Plan

    • Marketing Plan

    • Financial Plan

    • Risk Management Plan

    • Human Resources Plan

Mission Statement (LO2-2)

  • Definition: A mission statement provides a shared sense of ambition, direction, and opportunity.

  • Characteristics:

    • Focus on limited goals.

    • Customer-oriented, satisfying basic needs.

    • Motivates employees by capturing a shared purpose.

  • Example: Nordstrom’s Mission Statement: Aiming to give customers the most compelling shopping experience possible.

The Marketing Plan (LO2-3)

  • Components:

    • Executive Summary: Elevator pitch summarizing the plan.

    • Situation Analysis:

    • Market Summary: Overview of the market landscape.

    • SWOT Analysis: Identify strengths, weaknesses, opportunities, and threats.

    • Competition Analysis: Evaluation of competition in relation to the market.

    • Marketing Strategy: Leads to higher profits, stronger brands, larger market share.

    • Financials:

    • Overall profitability, projections, sales forecasts, expense forecasts, and break-even analysis.

    • Controls:

    • Implementation strategies, organizational structure, and contingency planning.

Tools and Techniques for Situation Analysis (LO2-4)

  • Market Summary: Sets the context for situation analysis and highlights market trends. Example: McDonald’s analysis of Baby Boomers and Millennials' eating habits.

  • BCG Matrix: Categorizes products into four elements:

    • Stars: High growth, high market share.

    • Cash Cows: Low growth, high market share.

    • Question Marks: High growth, low market share.

    • Dogs: Low growth, low market share.

  • SWOT Analysis:

    • Internal Considerations:

    • Strengths: What the company does well.

    • Weaknesses: Areas of improvement.

    • External Environment:

    • Opportunities: External factors the company can use.

    • Threats: External challenges faced by the company.

  • Example of SWOT Analysis for McDonald's:

    • Strengths: Strong brand recognition, long-term profitability, breakfast reputation.

    • Weaknesses: Difficulty retaining quality employees, traditional high-calorie menu.

    • Opportunities: International expansion, service expansions, interest in ethical practices.

    • Threats: Weak economy affecting dining budgets, rising production costs.

Competition Analysis

  • Direct Competitors: Example for McDonald’s includes Burger King and Wendy’s.

  • Indirect Competitors: Includes healthy eating options like Subway and Chipotle, illustrating the necessity to analyze both kinds of competition.

Basic Tools and Techniques of Marketing Strategy (LO2-5)

  • Marketing Strategy: Lists specific actions needed to achieve marketing objectives, which must be specific, measurable, and realistic.

  • Segmentation: Dividing a large market into smaller segments.

    • Target Markets: Example: McDonald's targets adults, teenagers, families.

  • Positioning: Example: Ford’s Fusion is positioned as a stylish hybrid compared to Toyota’s Camry.

Strategic Direction

  • Market Penetration: Attempts to increase sales to existing customers. Example: Pizza Hut encourages customers to buy more pizzas.

  • Product Development: New product introduction. Example: Dr Pepper Ten, with reduced calories.

  • Market Development: Strategy to enter new geographical areas.

  • Diversification: Expanding into new areas or segments; Example: Disney owning various television channels.

International Expansion and Market Development (LO2-6)

  • Necessity: International expansion is vital for success in the modern marketing landscape, important for both small and large firms.

Marketing Mix (LO2-5)

  • Definition: Encompasses products/services and related services like warranties.

  • Promotion: How value is communicated to customers; Example: McDonald's increased advertising during Lent.

  • Distribution (Place): Where and when products are available. Example: McDonald’s all-day breakfast

    • Decisions may be franchisee-driven.

  • Pricing: Justification for pricing decisions; Example: McDonald’s focuses on minimal price increases to maintain customer volume.

  • Cage-Free Eggs Decision: McDonald's commitment to using cage-free eggs encountered supply challenges, indicating a long-term strategic shift.

Marketing Strategy in a Global Context (LO2-6)

  • Five Major Strategic Options:

    • Exporting: Least risky for entering international markets.

    • Licensing: Overcomes barriers through local knowledge.

    • Franchising: Split responsibilities and obligations.

    • Joint Ventures: Collaborating with other companies while aligning strategic goals.

    • Direct Ownership: Highest risk, exemplified by Target's exit from Canada due to poor performance.

International Franchisees

  • Example: Burger King allows franchisees in Japan to adapt menus to local preferences, showcasing adaptation to local market needs.

Marketing Analytics (LO2-7)

  • Marketing Analytics: Maximizing marketing effectiveness and ROI.

  • Return on Marketing Investment (ROMI):

    • ROMI=(Sales×Gross Margin Percentage−Marketing Expenditures)Marketing ExpendituresROMI = \frac{(Sales \times Gross\ Margin\ Percentage - Marketing\ Expenditures)}{Marketing\ Expenditures}

  • Revenue Analysis: Evaluates revenue by product or region to identify effectiveness concerning objectives.

  • Market Share Analysis: Relates market share to revenue and profitability.

  • Profitability Analysis:

    • Customer Acquisition: Costs associated with gaining new customers.

    • Individual Customer Profitability: Net profit from a customer over time.

Discussion Questions

  1. Research mission statements from five Fortune 500 companies, rank them, and explain your reasoning.

  2. Conduct a SWOT analysis for a college/university, listing several considerations for each category.

  3. Choose an effective marketing strategy from a large firm/nonprofit and discuss its alignment with strategic directions from the chapter.

  4. Identify target markets and competitors for two businesses you frequent, analyzing their market positions.

  5. Discuss the global marketing consideration's pros and cons, illustrating with successful and unsuccessful international firms.

  6. Analyze a recent purchase from a company, conducting market share and profitability analysis, and provide a performance grade.

Social Media Application

  • Reflect on personal social media presence and its impact on your career, reviewing:

    1. Active social media platforms.

    2. Consistency of content across platforms.

    3. Metrics for performance justifying your self-assessed social media grade.

Conclusion

  • Engage with strategic planning and marketing techniques effectively to enhance both business and personal goals.