MKTG Chapter 2: Strategic Planning for Competitive Advantage
Learning Objectives
Explain strategic planning (2-1).
Define strategic business units (SBUs) (2-2).
Identify strategic alternatives with Ansoff’s Opportunity Matrix and the Boston Consulting Group (BCG) Model (2-3).
Explain how marketers use a marketing plan (2-4).
Describe the elements of a marketing plan (2-5).
Strategic Planning Overview
Strategic Planning Definition: The managerial process of creating and maintaining a fit between the organization's objectives and resources and the evolving market environment.
Purpose: Organizations utilize strategic planning to determine the optimal ways to respond to continuous changes within their environment.
Primary Goal: To achieve long-run profitability and sustained corporate growth.
Resource Commitment: Strategic decisions necessitate long-term commitments of organizational resources.
Evolutionary Example (McDonald's Corporation):
10–15 Years Ago (2000s): Characterized by traditional exterior and interior architectural designs, classic mascot branding, legacy menu offerings, and era-specific television commercial advertising.
Today: Modernized restaurant exterior/interior designs, updated menu selection, refreshed branding, and contemporary commercial advertising strategies.
Strategic Rationale: Made to adapt to shifting consumer demographics, technological advancements, changing preferences, and competitive landscape shifts.
Strategic Business Units (SBUs)
Strategic Business Unit (SBU) Definition: A subgroup of a single business or collection of related businesses within the larger organization.
Characteristics of an SBU:
Possesses a distinct mission statement and a specific target market.
Maintains explicit control over its own resources.
Competes against its own set of dedicated competitors.
Exists as a single business or a collection of related businesses.
Formulates and executes strategic plans independently of the other SBUs in the parent organization.
Corporate Examples of SBUs:
PepsiCo:
Frito-Lay brands
Quaker brands
Gatorade brands
Pepsi-Cola brands
Amazon:
Amazon.com
Amazon Web Services (AWS)
Whole Foods
Amazon Fresh
Amazon Prime
Strategic Alternatives: Ansoff's Matrix and BCG Model
Planners must make decisions regarding which SBUs to grow, acquire, or eliminate.
Two primary tools used by companies or SBUs to manage the strategic direction of business portfolios are Ansoff's Strategic Opportunity Matrix and the Boston Consulting Group (BCG) Model.
Ansoff's Strategic Opportunity Matrix:
Matches products with markets across four specific growth strategic pathways:
1. Market Penetration: A strategy aimed at increasing market share among existing customers using present products.
Example: Starbucks sells more coffee to customers who register their reloadable Starbucks cards.
2. Market Development: A strategy that entails attracting new customers to existing products.
Example: Starbucks opens new retail stores in new geographic markets such as Brazil and Chile.
3. Product Development: A strategy that entails the creation of new products for present, existing markets.
Example: Starbucks expands its product menu by introducing cold brew options and energy beverages.
4. Diversification: A strategy of increasing sales by introducing entirely new products into entirely new markets.
Example: Starbucks launches Ethos Water.
The Boston Consulting Group (BCG) Model:
Portfolio Matrix: A technique that uses market growth rate and relative market share to identify what combination of SBUs will generate the best long-term organizational performance.
Market Growth Rate: The annual sales growth rate of the SBU's industry.
Relative Market Share: The ratio between the company's market share and the share of the single largest competitor in that industry.
Four Portfolio Categories:
Star: A fast-growing market leader with high relative market share in a high-growth industry.
Cash Cow: An SBU that generates more cash than it needs to maintain its market share in a low-growth industry.
Question Mark (Problem Child): An SBU that demonstrates rapid growth but yields poor profit margins due to a low relative market share in a high-growth market.
Dog: An SBU that has low growth potential and holds a small relative market share in a low-growth market.
BCG Portfolio Matrix Example: Apple product line analysis across various consumer hardware and service divisions.
BCG Resource Allocation Strategies:
Build: Suitable if an SBU has potential to become a star (typically an SBU currently categorized as a question mark).
Hold: Suitable if an SBU is a successful cash cow; the key goal is to preserve and hold existing market share.
Harvest: Appropriate strategy for all SBUs except stars; the core goal is to maximize short-term cash return without significant concern for long-term impact.
Divest: Getting rid of SBUs with low market share in low-growth markets; dogs and non-viable question marks are suitable for this strategy.
Review Questions & Strategic Application Exercises
Question 1: In Ansoff’s opportunity matrix, which of the following strategies increases company sales by getting existing customers to buy more of an existing product?
a. Market development
b. Market penetration
c. Diversification
d. Product development
e. Product penetration
Answer: b. Market penetration
Question 2: Vera Bradley launches a new line of lunch boxes aimed at their existing customer group. This is an example of a _____ strategy.
a. market development
b. product development
c. market penetration
d. product penetration
e. diversification
Answer: b. product development
Question 3: Netflix expands their services to the new market of Brazil. This is an example of ______.
a. Market penetration
b. Product development
c. Market development
d. Diversification
Answer: c. Market development
Question 4 (Mission Statement Matching):
Statement 1: "To prevent and alleviate human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors."
Matched Organization: Red Cross
Statement 2: "We fulfill dreams through the experience of motorcycling, by providing an expanding line of motorcycles and branded products and services in selected market segments."
Matched Organization: Harley Davidson
Statement 3: "To bring inspiration and innovation to every athlete in the world."
Matched Organization: Nike
Statement 4: "To be the world's best quick service restaurant experience."
Matched Organization: McDonald’s
Statement 5: "To organize the world's information and make it universally accessible and useful."
Matched Organization: Google
Question 5 (Competitive Advantage Identification):
McDonald’s: Cost competitive advantage (operational efficiency driving low product pricing).
Amazon Go (grocery store with no check out): Product/service differentiation competitive advantage (frictionless tech-driven consumer experience).
UglyChristmasSweater.com: Niche competitive advantage (focused specialization on a narrow product category).
Lululemon: Product/service differentiation competitive advantage (brand status, high quality, specialized fabric technology).
Question 6 (Marketing Objectives Evaluation): Which of the following is the best example of a well-stated marketing objective?
A) to provide excellent customer service.
B) to increase market share of Ben and Jerry’s ice cream within the next six months.
C) to increase sales of Ben and Jerry’s non-dairy ice cream by 20 percent by December 2025.
D) to hire more salespeople.
E) to increase the advertising budget.
Answer: C) to increase sales of Ben and Jerry’s non-dairy ice cream by 20 percent by December 2025 (adheres to SMART criteria).
Question 7 (Target Market Identification):
Prompt: Within the general market of all ice cream buyers, who makes up the specific target market for Ben and Jerry’s Ice Cream?
Answer: Consumers seeking high-quality, premium ice cream products with unique/novelty flavor combinations and a strong corporate social responsibility orientation.
The Purpose and Utility of a Marketing Plan
Marketing Plan Definition: A written document that acts as a guidebook of marketing activities for the marketing manager.
Preparation Timing: Often prepared when launching a new business venture, product line, or individual brand.
Reasons to Write a Marketing Plan:
Provides clearly stated activities that help employees and managers understand and work toward common, unified goals.
Serves as a clear reference point and benchmark for evaluating the success of future marketing activities.
Allows the marketing manager to enter the competitive marketplace with full awareness of market possibilities and operational problems.
Elements of a Comprehensive Marketing Plan
Structural Flow of a Marketing Plan:
Business Mission Statement
Situation Analysis (SWOT Analysis)
Marketing Objectives
Target Market Strategy
Marketing Mix (4 Ps: Product, Place, Promotion, Price)
Implementation, Evaluation, and Control
1. Business Mission Statement:
Defines the core purpose of the organization and explains why it exists.
Formally answers the foundational question: "What business are we in?"
Establishes explicit boundaries for all subsequent organizational decisions, objectives, and strategies.
2. Situation Analysis (SWOT Analysis):
An analytical framework identifying internal Strengths () and Weaknesses () alongside external Opportunities () and Threats ().
Internal Analysis (Examining the Firm Itself):
Strengths: Internal capabilities and resources where the firm excels.
Weaknesses: Internal limitations or factors the firm does not execute well.
Focus on Organizational Resources: Production costs, marketing skills, financial resources, company or brand image, employee capabilities, and technological capabilities.
External Analysis (Examining the External Environment):
Opportunities: Favorable environmental conditions that the organization can actively exploit.
Threats: Unfavorable environmental conditions that present challenges or risks to the organization.
Focus on Six Major Environmental Forces: Social, Demographic, Economic, Technological, Political/Legal, and Competitive.
3. Identifying Areas of Competitive Advantage:
Competitive Advantage Definition: A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition.
Three Types of Competitive Advantage:
Cost Advantage: The capability to reduce operational costs and pass savings on to consumers via lower price points.
Product/Service Differentiation Advantage: The provision of something unique and highly valuable to buyers beyond simply offering a lower price than competitors.
Niche Advantage: The competitive advantage achieved when a firm targets and effectively serves a small, specific segment of the overall market.
4. Setting Marketing Objectives:
Marketing Objective Definition: A statement of what is to be accomplished through planned marketing activities.
Standard Metrics: Stated in terms of sales volume, sales growth percentages, market share, or gross profit margins.
SMART Criteria Framework: Marketing objectives must be:
Specific: Clear and explicit details.
Measurable: Quantifiable tracking parameters.
Attainable: Realistic and achievable.
Relevant: Aligned with organizational goals.
Time-bound: Explicit timeframe or target deadline.
5. Describing the Target Market:
Marketing Strategy Definition: The activities of selecting and describing one or more target markets, while developing and maintaining a tailored marketing mix to produce mutually satisfying exchanges.
Target Market Definition: A specific group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
6. Developing the Marketing Mix Program (The 4 Ps):
Marketing Mix Definition: A unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.
Product Strategy:
Represents the heart and starting point of the marketing mix program.
Can be tangible goods, ideas, or services.
Encompasses the physical unit, package design, warranty terms, after-sale service, brand name, corporate image, and overall value.
Place (Distribution) Strategy:
Concerned with making products available when and where target customers want them.
Price Strategy:
Represents what a buyer must give up or exchange in order to obtain a product.
Promotion Strategy:
Functions to bring about mutually satisfying exchanges by informing, persuading, and reminding target markets of product/organization benefits.
Components include advertising, public relations, sales promotion, and personal selling.
7. Implementing and Evaluating the Plan:
Research, development, and document writing are wasted unless the plan is actively operationalized.
Implementation: The process that transforms a marketing plan into actionable assignments and ensures execution to accomplish stated objectives.
Evaluation and Control: Gauging the precise extent to which marketing objectives have been achieved during the specified timeframe and executing corrective actions as needed.
Applied Case Exercises & Portfolio Tasks
Portfolio Activity #1: BCG Portfolio Matrix Exercise (Hewlett-Packard):
Draw a Boston Consulting Group portfolio matrix for Hewlett-Packard utilizing provided SBU financial data.
Allocate strategic resources for each SBU based on portfolio classification using Build, Hold, Harvest, or Divest strategies.
Portfolio Activity #1: SWOT Analysis Exercise (Ben & Jerry's Ice Cream):
Perform a structured SWOT analysis based on a Ben & Jerry's mini case study.
Identify internal Strengths and Weaknesses along with external Opportunities and Threats.
Portfolio Activity #1: Marketing Plan Exercise (Candy Bar Design):
Design a new candy bar utilizing consumer insights and industry baseline information.
Define a distinct target market segment.
Design product features tailored to the target market.
Establish the remaining marketing mix variables: Price, Promotion, and Place (Distribution).