Chapter 2: Strategic Planning and The Marketing Process – Vocabulary Flashcards
What is Strategic Planning?
The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities to achieve long-term goals.
What is a marketing plan?
A written document that acts as a guidebook of marketing activities for the marketing manager.
Defining the Business Mission
Mission statement – A long-term view, or vision, of what the organization wants to become.
Provides a clear direction for the strategic planning.
What Businesses are we in?
Businesses must be viewed as a CONSUMER-SATISFYING process and not a goods-producing process.
Marketing myopia: This concept emphasizes that products are transient and basic NEEDS are not. The key is to have a “market definition” of your business and not a product-based definition.
Example question: Is Xerox in the photocopying business? (Consider a market-definition approach rather than a product-focused view).
Strategic Business Units (SBUs)
Key business units within diversified firms, each with its own managers, resources, objectives, and competitors.
Setting Marketing Plan Objectives
Marketing Objectives: These must be:
Realistic
Measurable
Time specific
Consistent with the organization’s priorities
Example: “Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.”
Conducting a Situation Analysis (SWOT Analysis)
SWOT Analysis: A framework for evaluating a company's competitive position.
Strengths: Things the company does well (Internal factors).
Weaknesses: Things the company does not do well (Internal factors).
Opportunities: External conditions that favor strengths (External factors).
Threats: External conditions that do not relate to existing strengths (External factors).
Competitive Advantage (CA)
The set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition.
Building Sustainable Competitive Advantage
Sustainable CA: An advantage that can be maintained over time.
Goal of Tools and Techniques: To create sustainable competitive advantage.
Mechanisms of Competitive Advantage
Cost Leadership Strategy: Offering comparable value at a lower cost.
Differentiation Strategy: Offering greater value at higher realized prices, not competing on price.
Porter’s Five Forces Model
Summarizes five competitive forces that influence planning strategies:
The threat of new entrants
The bargaining power of buyers
The bargaining power of suppliers
The threat of substitute products
Rivalry among competitors
Strategy implication: Focus on sustainable CA and barriers to entry, supplier/buyer leverage, and differentiation.
Internet’s Impact on Competitive Forces (illustrated):
Internet reduces barriers to entry (Potential New Entrants)
Internet creates new substitution threats (Threat of Substitute Products)
Internet blurs differences among competitors (Rivalry among Competitors)
Internet tends to increase bargaining power of suppliers (Bargaining Power of Suppliers)
Internet shifts greater power to end consumers (Bargaining Power of Buyers)
Describing the Target Market
Target Market Strategies
Target Market Options:
Entire Market
Multiple Markets
Single Market
Implications: Scope of marketing effort and resource allocation.
The Marketing Mix (4 Ps)
Elements of the Marketing Mix:
Product: Goods or services offered.
Price: The amount consumers pay.
Place: Distribution channels.
Promotion: Marketing communications.
Levels of Strategy
Corporate Level
Business Unit Level- SBUs (Strategic Business Units)
Functional Level- Marketing
Market Share and Relative Market Share Computations
Market Share
Definition: A company's sales expressed as a percentage of the sales for the total industry.
Formula (concept): MS = \frac{Sales{company}}{Sales{industry}} \times 100\%
Illustrative Example:
Three firms in the market: L James, King James, James
Sales: L James = 40 units, King James = 50 units, James = 10 units
Total industry sales = 100 units
Market shares:
L James: \frac{40}{100} = 0.40 = 40\%
King James: \frac{50}{100} = 0.50 = 50\%
James: \frac{10}{100} = 0.10 = 10\%
Relative Market Share
Definition: Relative market share = (Market share of specific brand) / (Market share of the leader in the market).
Purpose: Compare a brand’s performance against the market leader.
Formula (concept): RMS = \frac{MarketShare{brand}}{MarketShare{leader}}
Illustrative Example:
2015 market shares in tradesmen segment: Makita 50% (leader), Milwaukee 10%, Black & Decker 5%
Relative shares:
Makita: \frac{50\%}{50\%} = 1.0
Milwaukee: \frac{10\%}{50\%} = 0.2
Black & Decker: \frac{5\%}{50\%} = 0.1
Boston Consulting Group’s Growth-Share Matrix (BCG Matrix)
Axes: High Relative Market Share (horizontal) vs. High Industry Growth (%)
Quadrants:
STARS: High relative market share, high industry growth (require heavy investment to finance growth; eventually become Cash Cows).
CASH COWS: High relative market share, low industry growth (generate more cash than they need to maintain market share; provide cash to fund Stars and Question Marks).
PROBLEM CHILD / QUESTION MARK: Low relative market share, high industry growth (require a lot of cash to hold their share; management must decide to either invest to grow into Stars or phase out).
DOGS: Low relative market share, low industry growth (have low potential for future growth and often generate low profits or even losses).
Market Growth Strategies (Competitive Growth Strategies)
Market Penetration: Present market, present product (Increase sales of existing products to existing markets).
Product Development: Present market, new product (Create new products for existing markets).
Market Development: New market, present product (Introduce existing products to new markets).
Diversification: New market, new product (Introduce new products into new markets).
RISKS associated with each strategy (execution, synergy, and market conditions should be considered for each).