Chapter 2: Strategic and Marketing Planning

CHAPTER 2 STRATEGIC AND MARKETING PLANNING

LEARNING OBJECTIVES
After studying this chapter, you should be able to: 1 Recognize the nature and scope of planning including the five key elements that are crucial to planning activities.

Planning is essential for good business decisions. Planning includes defining the timing of activities, specifying tasks, assigning responsibility, following-up, and budgeting. Strategic planning focuses on the long-range plans at the corporate and business levels of the firm. Marketing planning is done at the marketing level (the product level or product-line level). 2 Understand each of the fundamental steps involved in developing a strategic plan.

Strategic planning allows a firm to coordinate the efforts of all of its departments and to allocate its resources. Steps involved include defining the firms mission, its SBUs, the firms objectives, analyzing SBU performance, finding growth opportunities, and writing marketing plans. 3 Appreciate the fundamentals of marketing planning

Marketing planning occurs at the product level and needs to be consistent with the firms strategic plan. A marketing plan can be written for a product or a product line. It includes an executive summary, an analysis of the firms situation, assessment of opportunities and threats, specifying objectives, forming marketing strategies, preparing actions programs and budgets, and developing control procedures.

MATCHING
Directions: Select the term that best identifies the statement listed below. Place the letter of the correct term in the space provided. A. B. C. D. E. F. G. H. Market development Tactical planning Marketing planning Problem children Strengths and weaknesses BCG matrix Strategic planning Market penetration I. Corporate strategy J. Backward integration K. Product development L. Opportunities and threats M. Strategy N. Build O. Product diversification

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Chapter 2: Strategic and Marketing Planning ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. Marketing plans developed at the product or product line level. 2. Attempting to sell more existing products to existing markets of the firm. 3. Attempting to sell new products to new markets of the firm. 4. Developed the Product-Portfolio analysis procedure for resource allocation. 5. The fit between the organization and its environment. 6. Attempting to sell more existing products to new markets for the firm. 7. Occurs when a business buys out a firm upstream. 8. Specifying planning details for a definite period of time. 9. Internal assessments of a firm using a SWOT analysis. 10. A strategy used to improve an SBUs performance by investing additional resources in the SBU. 11. Designing the firms overall game plan. 12. External assessments of a firms environment using a SWOT analysis. 13. SBUs that are growing fast but have low market shares and low profits in a BCG analysis. 14. Attempting to sell new products of the firm to the firms existing markets. 15. Attempts to answer the question: What businesses should we be in?

TRUE OR FALSE
Directions: Write T (true) or F (false) in the space provided. ____ ____ ____ ____ ____ 1. Strategic planning involves designing ways for a firm to adapt to its changing environment. 2. Budgeting attempts to ensure that a firm can afford to do what it plans to do. 3. Strategic planning and marketing planning are essentially the same thing. 4. The game plan for a firm is called a marketing plan. 5. Mission statements should be the driving force behind strategic planning decisions. 12

Chapter 2: Strategic and Marketing Planning ____ ____ 6. Each SBU should develop its own objectives and strategic plan, but not its own mission statement. 7. When an SBU has the objective: We need to do a better job this year, this is an example of a good objective. 8. The goal of a divest strategy is to use the SBU to generate cash for the other SBUs. 9. The goal of a harvest strategy is to stop investing resources in the SBU. 10. The BCG matrix categories a firms products or its SBUs. 11. Ideally in a BCG matrix, a firm should have only stars and cash cows. 12. The BCG matrix does not assume a causal relationship between market share and profitability. 13. Typically, a marketing channel of wholesalers and retailers is located upstream from the manufacturer. 14. Typically, suppliers of raw materials are located downstream from a manufacturer. 15. The executive summary is the first thing that should be written when preparing a marketing plan.

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MULTIPLE CHOICE
Directions: Write the letter of the best answer in the space provided. ____ 1. a. b. c. d. 2. a. b. c. d. Which of the following should be included in a marketing plan? A customized marketing mix designed to fit the target market A product positioning strategy Definition of the target market All of the above Which type of plan specifies the details of a plan for a specific period of time? Strategic plan Tactical plan Marketing plan Horizontal plan

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Chapter 2: Strategic and Marketing Planning ____ 3. a. b. c. d. 4. a. b. c. d. Which of the following can be an SBU? A product line A product A business All of the above Which of the following is a specific outcome of an objective? A level of brand awareness for a product Sales in dollar amount Number of units to be sold All of the above

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5. Which of the following is a good example of an area for a competitive position objective? a. The image of the product b. Customer retention c. Labor hours d. Earnings per share 6. Focusing a firms efforts on a smaller target market segment in an attempt to satisfy the needs of this segment better than the needs can be satisfied with a larger segment is an example of a(n) ______ strategy. a. harvest b. niche c. divest d. build 7. a. b. c. d. The vertical axis in the BCG matrix consists of the ______ for the market. profit positioning growth rate niche

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8. In the BCG matrix, stars have ______ market growth rates and ______ market shares. a. low; low b. low; high c. high; high d. high; low 9. When a firm tries to stimulate growth within its current businesses, it is engaged in a(n) ______ growth strategy. a. intensive b. integrative c. diversification d. BCG 14

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Chapter 2: Strategic and Marketing Planning ____ 10. A market penetration strategy is typically used for ______ products in ______ markets. a. mature; new b. new; mature c. new; new d. mature; mature 11. Wholesalers and retailers are typically located ______ from the manufacturer in a marketing channel. a. upstream b. diagonally c. downstream d. horizontally 12. When a firm buys out competitors at the same stage along its value chain, this is known as ______ integration. a. horizontal b. vertical c. diagonal d. backward 13. When a firm buys out another firm that has different customers and different products, this is known as ______ diversification. a. lateral b. conglomerate c. backward d. vertical 14. The detailed marketing strategies related to a products marketing mix are known as a(n): a. marketing plan. b. corporate strategy. c. business strategy. d. SBU plan. 15. The synopsis of the marketing plan is known as the: a. budget. b. mission statement. c. SBU plan. d. executive summary.

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Chapter 2: Strategic and Marketing Planning

Application Activity
A firm can choose between four basic growth strategies: (1) market penetration, (2) product development, (3) market development, and (4) diversification. For each of the following examples, code the type of strategy that is being used according to the following codes: PD product development MD market development MP market penetration D diversification _____ 1. _____ 2. _____ 3. _____ 4. _____ 5. _____ 6. A soft drink company buys out a personal computer firm. McDonalds opens its restaurants in two new countries. Harley-Davidson attempts to convince women to purchase its motorcycles. Pepsi has a 2-for-1 sale in a local supermarket. PepsiCo starts selling Sierra Mist as a lemon-lime soft drink. Colgate starts selling a tube of toothpaste that contains 20 percent more toothpaste for the same price.

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Chapter 2: Strategic and Marketing Planning

Experiential Learning Activity

A firm can attempt to grow by using strategies for market development, product development, market penetration, or diversification. Go to a large supermarket and notice examples of each of these types of strategies among the 30,000 products that you find for sale there: 1. What are some examples of a market penetration strategy?

2. What are some examples of a product development strategy?

3. What are some examples of a market development strategy?

4. What are some examples of a diversification strategy?

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Chapter 2: Strategic and Marketing Planning

Internet Exercise pepsico.com

PepsiCo has five major brands that it uses as strategic business units (SBUs) in its strategic planning activities. 1. Go to Pepsis Web site at: www.pepsico.com

2. Click on Company at the top of the screen. 3. Next, click on Brands and Companies and list the five major brands that PepsiCo uses as its SBUs and the number of different products that it sells under each brand name: Brand name (a) _________________ (b) _________________ (c) _________________ (d) _________________ (e) _________________ Number of products ______ ______ ______ ______ ______

4. Were you surprised at any of the products that PepsiCo sells under any of these brand names? If so, which brands surprised you?

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