CHAPTER 2

Principles of
Marketing

STRATEGIC
PLANNING AND THE
MARKETING
PROCESS
Learning Objectives
After studying this chapter, you should be able to:
1. Strategic Planning
2. Designing the Business Portfolio
3. The Marketing Process
4. Managing the Marketing Effort
Chapter Outline
1. Strategic planning.
2. Designing the business portfolio.
3. Managing the Marketing Effort.

2-3
 1

Companywide Strategic Planning:

Defining Marketings Role

Is the process of
developing and
maintaining a strategic
fit between the
organizations goals
and capabilities and
its changing marketing
opportunities.

2-4
 1

Companywide Strategic Planning:

Defining Marketings Role
Defining a Market-Oriented Mission

Mission statement: The organizations

purpose, what it wants to accomplish
in the larger environment
Market-oriented mission statement:
Defines the business in terms of
satisfying basic customer needs

2-5
 1
Mission Statements

What is our business?

Reveal what an organization wants to be

and whom it wants to serve
Clear mission is needed before alternative
strategies can be formulated and
implemented
The mission of Southwest Airlines is
dedication to the highest quality of Customer
Service delivered with a sense of warmth,
friendliness, individual pride, and Company
Spirit
 1
Companywide Strategic Planning:
Defining Marketings Role
Setting Company Objectives and Goals

Business objectives - Business goals and objectives are

part of the planning process. They are describe what a
company expects to accomplish throughout the year.
Examples, Profitability. ... Productivity. ... Customer Service. ...
Employee Retention. ... Core Values. ... Growth. ... Maintain
Financing. ... Change Management
Marketing objectives - The group of goals set by a
business when promoting its products or services to potential
consumers that should be achieved within a given time
frame.
Examples, Increase sales Improve Product Awareness
Establish Yourself in the Industry Brand Management

2-6
 2

Companywide Strategic Planning:

Defining Marketings Role

Designing the Business Portfolio

The business portfolio is the collection

of businesses and products that
make up the company

2-7
 2

Companywide Strategic Planning:

Defining Marketings Role
Analyzing the Current Business Portfolio

Analyzing the current business

portfolio is the process by which
management evaluates the
products and businesses making
up the company

2-8
 2

Companywide Strategic Planning:

Defining Marketings Role
Steps in Analyzing the Current Business Portfolio

1. Identify key businesses making up the

company
2. Assess the attractiveness of its various/
numerous SBUs (Strategic Business Units)
3. Decide how much support each SBU
deserves

2-9
 2

Companywide Strategic Planning:

Defining Marketings Role
Steps in Analyzing the Current Business
Portfolio

Identify key businesses making up the company

Strategic business unit (SBU) is a unit of the
company that has a separate mission and
objectives that can be planned separately
from other company businesses
Company division
Product line within a division
Single product or brand

2-10
 2

Companywide Strategic Planning:

Defining Marketings Role
Steps in Analyzing the Current Business
Portfolio

Assess the attractiveness of various

SBUs and decide how much
support each deserves

2-11
 2

Companywide Strategic Planning:

Defining Marketings Role
Analyzing the Current Business Portfolio
The Boston Group Approach

Growth share matrix is a portfolio planning method that

evaluates a companys strategic business units in
terms of their market growth rate and relative share
Strategic business units are classified as:
Stars
Cash Cows
Question marks
Dogs

2-12
The Boston Group Approach @
Boston Consulting Group Matrix
Companywide Strategic Planning:
Defining Marketings Role
Analyzing the Current Business Portfolio
The Boston Group Approach

Stars are high-growth, high-share businesses or products

requiring heavy investment to finance rapid growth.
They will eventually turn into cash cows.

Cash cows are low-growth, high-share businesses or

products that are established and successful SBUs
requiring less investment to maintain market share

2-13
Companywide Strategic Planning:
Defining Marketings Role
Analyzing the Current Business Portfolio
The Boston Group Approach

Question marks are low-share business units in high-

growth markets requiring a lot of cash to hold their
share

Dogs are low-growth, low-share businesses and products

that may generate enough cash to maintain
themselves but do not promise to be large sources of
cash

2-14
 2

Companywide Strategic Planning:

Defining Marketings Role
Analyzing the Current Business Portfolio
Problems with Matrix Approaches

Difficulty in defining SBUs and

measuring market share and growth
Time consuming
Expensive
Focus on current businesses, not
future planning

2-15
Companywide Strategic Planning:
Defining Marketings Role
Developing Strategies for Growth and
Downsizing

Product/market expansion grid is a tool

for identifying company growth
opportunities through market
penetration, market development,
product development, or
diversification

2-16
 Companywide Strategic Planning:
Defining Marketings Role

Developing Strategies for Growth and Downsizing

Product/market expansion grid

strategies
Market penetration
Market development
Product development
Diversification

2-17
Product/market expansion grid strategies
Companywide Strategic Planning:
Defining Marketings Role
Developing Strategies for Growth and
Downsizing

Market penetration is a growth strategy

increasing sales to current market
segments without changing the
product

Market development is a growth strategy

that identifies and develops new
market segments for current products

2-18
Companywide Strategic Planning
Defining Marketings Role
Developing Strategies for Growth and
Downsizing

Product development is a growth

strategy that offers new or modified
products to existing market segments

Diversification is a growth strategy

through starting up or acquiring
businesses outside the companys
current products and markets

2-19
 e.g. F&N
Existing Products New Product
Existing MARKET PRODUCT
Markets PENETRATION DEVELOPMENT
e.g. F&N Carbonated e.G Fruit Tree and
Drinks Zesta

MARKET DIVERSIFICATION
DEVELOPMENT e.g Diversify in
e.g. Seasons and 100 property development
Plus is targeted to all and Hospitality
New active lifestyle
Markets consumers
 Companywide Strategic Planning
Defining Marketings Role
Developing Strategies for Growth and Downsizing

Downsizing is the reduction of the business

portfolio by eliminating products or
business units that are not profitable or
that no longer fit the companys overall
strategy

e.g. Diet Coke in Malaysia

2-20
 3

Marketing Strategy and the

Marketing Mix
Marketing Strategy

Marketing strategy is the marketing

logic by which the business unit
hopes to achieve its marketing
objectives

2-24
 3

Marketing Strategy and the

Marketing Mix
Customer-Driven Marketing Strategy

Market segmentation is the division of a

market into distinct groups of buyers
who have distinct needs,
characteristics, or behavior and who
might require separate products or
marketing mixes. It divides broad
markets--such as male, female, teen
and adult--into smaller segments in
which people are grouped by shared

2-25
 3

Marketing Strategy and the

Marketing Mix
Customer-Driven Marketing Strategy

Market segment is a group of consumers who

respond in a similar way to a given set of
marketing efforts. Market segmentation is
the process of dividing an entire market up
into different customer segments.

Target marketing is the process of evaluating

each market segments attractiveness and
selecting one or more segments to enter.
Will decide which potential customer segments the
company will focus on.

2-26
 3
Marketing Strategy and the
Marketing Mix
Customer-Driven Marketing Strategy

Positioning is the arranging for a product to

occupy a clear, distinctive, and
desirable place relative to competing
products in the minds of the target
consumer

2-27
 3

Marketing Strategy and the

Marketing Mix
Developing an Integrated Marketing Mix

Marketing mix is the set of

controllable tactical marketing
toolsproduct, price, place, and
promotionthat the firm blends to
produce the response it wants in
the target market

2-28
 3
Marketing Strategy and the
Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

Product
Price
Place
Promotion

2-29
 3

Marketing Strategy and the

Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

Product is the goods and services in

combination that the company offers
to the target market

Price is the amount of money customers

have to pay to obtain the product

2-30
 3

Marketing Strategy and the

Marketing Mix
Developing an Integrated Marketing Mix
The four Ps

Place is the company activities that

make the product available to target
customers

Promotion is the activities that

communicate the merits of the
product and persuade target
customers to buy it

2-31
 3

Marketing Strategy and the

Marketing Mix

Developing an Integrated Marketing Mix

The 4 Ps versus The 4 Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication

2-32
 4

Managing the Marketing Effort

Managing the marketing effort requires:
Analysis
Planning
Implementing
Controlling

2-33
 4

Managing the Marketing Effort

Marketing Analysis

Analysis is the complete analysis of the

companys situation in a SWOT
analysis that evaluates the
companys:
Strengths
Weaknesses
Opportunities
Threats

2-34
 4

Managing the Marketing Effort

Marketing Analysis
Strengths include internal capabilities,
resources, and positive situational
factors that may help to serve
company customers and achieve
company objectives
Weaknesses include internal limitations
and negative situational factors that
may interfere with company
performance

2-35
 4

Managing the Marketing Effort

Marketing Analysis

Opportunities are favorable factors or trends

in the external environment that the
company may be able to exploit to its
advantage

Threats are unfavorable factors or trends

that may present challenges to
performance

2-36
 External Audit
Opportunities
1. Rising population in China.
2. Chinese consider drive-throughs a novelty where car ownership is growing
rapidly.
3. Burger Kings market share among quick service sandwich chains dropped
10.95 percent in 2006.
4. Developing a Healthy Lifestyle program to attract health conscious
consumers.
5. Hispanic population has recently increased 14 percent in the U.S.
6. Krispy Kreme Doughnuts possibility going bankrupt.
7. 6 percent increase in social shopping areas (i.e. malls, plazas).

Threats
1. Increased expansion of traditional rivals.
2. Yum Brands are the leading quick service chains in China.
3. McDonalds Europe sales dropped 1.9 percent.
4. Burger Kings sales growth is an estimated 18.2 percent compared to
McDonalds 11.2 percent.
5. Yum Brands variety of food and wide range of prices for selections.
6. Wendys Frescata product line increased sales by 3.2 percent.
7. According to National Restaurant Association (NRA) average menu price
increased by 3.2 percent.
8. Growing public awareness of fast food being unhealthy
 Internal Audit
Strengths
1. Globally recognized brand name.
2. Largest U.S. restaurant chain in international markets with approximately 17,000 stores in 120
countries.
3. Consumption of food away from home accounted for 48.5 percent of total expenditures on
food.
4. Total assets of $29 billion in 2006.
5. McDonalds serves nearly 54 million customers daily.
6. McDonalds beat out Starbucks, Burger King and Dunkin Doughnuts in a coffee taste test
according to the Consumer Report.
7. In 2006 McDonalds return nearly $5 billion to shareholders through shares acquired and
dividends paid.
8. McDonalds sells fast food in Disneys theme parks around the world as well as Ocean Park in
Hong Kong.
9. In 2006, revenue and operating income reached a record high of $21.6 billion and $4.4 billion
respectively.
10. McDonalds increased the companys dividends by 50 percent, raising the annual $0.67 per
share to $1.00 per share totaling about $1.2 billion.

Weaknesses
1. Lack of menu development
2. Publics perception of quality, service, and cleanliness at McDonalds units suffered over the past
years.
3. McDonalds ranked last out of 25 fast-food chains in a recent study of drive thru order accuracy.
4. McDonalds 5 year average sales are 8.14 compared to 8.89 for the industry.
5. Operations loss in Islands of Jamaica, Barbados, Bermuda.
6. Long-term debt remains over $8 billion.
7. Low personnel productivity.
8. Yum Brands return-on-assets of 13.56 compared to McDonalds 9.74.
9. Website not user friendly.
 4

Managing the Marketing Effort

Market Planning

Planning is the development of strategic

and marketing plans to achieve
company objectives

Marketing strategy consists of the

specific strategies for target markets,
positioning, the marketing mix, and
marketing expenditure levels

2-37
 4

Managing the Marketing Effort

Market Planning
Sections of a marketing plan include:
Executive summary
Current marketing situation
Threats and opportunities
Objective and issues
Action programs
Budgets
Controls
2-38
 4

Managing the Marketing Effort

Marketing Implementation
Implementing is the process that turns marketing
plans into marketing actions to accomplish
strategic marketing objectives

Successful implementation depends on how well

the company blends its people,
organizational structure, decision and
reward system, and company culture into a
cohesive action plan that supports its
strategies

2-39
 4

Managing the Marketing Effort

Marketing Department Organization

1. Functional
2. Geographic
3. Product
4. Market or customer management

2-40
 4

Managing the Marketing Effort

Marketing Department Organization
Functional organization: This is the most
common form of marketing
organization with different marketing
functions headed by a functional
specialist
Sales manager
Market research manager
Customer service manager
New product manager

2-41
 4

Managing the Marketing Effort

Marketing Department Organization

Geographic organizations: Useful for companies that
sell across the country or internationally. Managers
are responsible for developing strategies and plans
for a specific region.
e.g Northern Region, South Region, Central, East
Coast

Product Management: Useful for companies with

different products or brands. Managers are
responsible for developing strategies and plans for a
specific product or band.
e.g. Milo, Nescafe (by Brand)
CSD, ASD, Isotonic category
2-42
 4

Managing the Marketing Effort

Marketing Department Organization

Market or customer management organization:

Useful for companies with one product line sold
to many different markets and customers.
Managers are responsible for developing
strategies and plans for their specific markets or
customers.
e.g. Hypermarket, Petrolmart, Provision Shop,
Convenience Shop
e.g. TESCO, MYDIN, GIANT
2-43
 4

Managing the Marketing Effort

Marketing Department Organization

Customer management involves a

customer focus and not a product focus
for managing customer profitability and
customer equity

2-44
 4

Managing the Marketing Effort

Marketing Control

Controlling is measuring and

evaluating results and taking
corrective action as needed
Operating control
Strategic control

2-45
 4

Managing the Marketing Effort

Marketing Control

Operating control involves checking

ongoing performance against annual
plan and taking corrective action as
needed

Strategic control involves looking at

whether the companys basic
strategies are well matched to its
opportunities

2-46
 4

Managing the Marketing Effort

Marketing Control

Marketing audit is a comprehensive,

systematic, independent, and
periodic examination of a companys
environment, objectives, strategies,
and activities to determine problem
areas and opportunities

2-47
The End