CH 02

Strategic Planning for Competitive Advantage
chapter
Prepared by Deborah Baker Texas Christian University

Chapter 2 Version 6e 2002 South-Western 1
Learning Objectives
1. Understand the importance of strategic marketing and know a basic outline for a marketing plan.
chapter
2. Develop an appropriate business mission statement.

3. Describe the criteria for stating good marketing objectives.
Chapter 2 Version 6e
2002 South-Western
Learning Objectives (continued)

4. Explain the components of a situation analysis.
5. Identify sources of competitive advantage. 6. Identify strategic alternatives and describe tools used to help select alternatives.
chapter
7. Discuss target market strategies.
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Learning Objectives (continued)

8. Describe elements of the marketing mix. 9. Explain why implementation, evaluation, and control of the marketing plan are necessary. 10. Identify several techniques that help make strategic planning possible.
chapter
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Learning Objective
Understand the importance of strategic marketing and know a basic outline for a marketing plan.
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Strategic Planning
The managerial process of creating and maintaining a fit between the organizations objectives and resources and evolving market opportunities.
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Strategic Planning
LONG RUN PROFITABILITY AND GROWTH
EVOLVING MARKET OPPORUNITIES
RESOURCES & OBJECTIVES
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Strategic Marketing Planning
What is the organizations main activity?
How will it reach its goals?

The Marketing Plan
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Planning
The process of anticipating future events and determining strategies to achieve organizational objectives in the future.
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The Marketing Plan
A written document that acts as a guidebook of marketing activities for the marketing manager.
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Why Write a Marketing Plan?
Provides a basis for comparison of actual and expected performance

Provides clearly stated activities to work toward common goals Serves as a reference for the success of future activities
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1
Marketing Plan Elements
Business Mission Statement Objectives
Situation or SWOT Analysis
Marketing Strategy
Target Market Strategy
Marketing Mix
Product Promotion Distribution Price
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Learning Objective
Develop an appropriate business mission statement.
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Defining the Business Mission
Answers the question: What business are we in and where are we going?
Focuses on the market(s) rather than the good or service Strategic Business Units may also have a mission statement
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PepsiCos Mission Statement

PepsiCos overall mission is to increase the value of our shareholders investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity. http:\\www.pepsico.com
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Strategic Business Units (SBUs)
Characteristics
1. A distinct mission and specific target market 2. Control over their resources 3. Their own competitors 4. Plans independent of other SBUs
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Learning Objective
Describe the criteria for stating good marketing objectives.
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Marketing Objective
A statement of what is to be accomplished through marketing activities.
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Marketing Objectives
Marketing Objectives Must Be:

Realistic Measurable Time specific Consistent with Organizations Priorities

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Our objective is to increase market share by 40% and to obtain customer satisfaction ratings of at least 90% in 2001.
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Marketing Plan Objectives
Communicate marketing management philosophies

Provide direction Serve as motivators Clarify thinking Provide basis for control
Learning Objective
Explain the components of a situation analysis.
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SWOT Analysis
Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)
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SWOT Analysis
Internal
External
S W O T
Things the company does well.
Things the company does not do well.
Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness. South-Western College Publishing
SWOT Analysis
Strengths and Weaknesses INTERNAL

Production Costs Marketing Skills Employee Capabilities Financial Resources Available Technology Company/Brand Image
SWOT Analysis
Opportunities and Threats EXTERNAL
Social Demographic Economic
Technological Political/Legal Competitive

Environmental Scanning
Collection and interpretation of information about forces, events and relationships in the external environment that may affect the future of the organization or the marketing plan implementation.
Environmental Scanning
Examination of macroenvironmental forces Social Demographic Economic Technological Political / Legal Competitive Helps identify market opportunities Provides guidelines for design of marketing strategy
Learning Objective
Identify sources of competitive advantage
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Competitive Advantage
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.
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Competitive Advantage
Cost
Types of Competitive Advantage
Product/Service Differentiation
Niche Strategies
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Cost Leadership
Obtain inexpensive raw materials Create efficient operations Design products for manufacture Control overhead costs Avoid marginal customers
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Cost Competitive Advantage
Being the low-cost competitor in an industry while maintaining satisfactory profit margins.
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Sources of Cost Reduction

Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design
Reengineering Production Innovations

New Delivery Methods
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Differentiation Competitive Advantage
Advantage achieved when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price
than the competition.
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Common Differential Advantages

Brand names
Strong dealer network
Product reliability
Image
Service
Sources of Differential Competitive Advantage
Value impressions
Augmented products
Features of a product that signal value
Features of a product that are not expected by the customer
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Niche Competitive Advantage
Advantage achieved when a firm seeks to target and effectively serve a small segment of the market.
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Niche Competitive Advantage

Used by small companies with limited resources
May be used in a limited geographic market Product line may be focused on a specific product line
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Sustainable Competitive Advantage
A differential advantage that cannot be copied by the competition.
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Sources of Sustainable Competitive Advantage

Patents Copyrights Locations Equipment Technology
Organizations Skills and Assets

Customer Service Promotion

Strategic Windows
The limited period during which the fit between

the key requirements of a market and the particular competencies
of a firm are at an optimum.

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Learning Objective
Identify strategic alternatives and describe tools used to help select alternatives.
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Strategic Windows
Market Penetration Market Development Product Development Diversification Increase market share among existing customers
Attract new customers to existing products

Create new products for present markets Introduce new products into new markets
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Strategic Alternatives
Market Penetration Market Development
Product Development Diversification
Increase market share among existing customers. Attract new customers to existing products Create new products for present markets Introduce new products into new markets.
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Strategic Opportunity Matrix
Present Product New Product
Present Market
Market Penetration
Product Development
New Market
Market Development
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Diversification
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Selecting a Strategic Alternative
Common Tools Philosophy
Profitability
Portfolio Matrix
$
Market Share
Portfolio Matrix
Tools for allocating resources among products or strategic business units on the basis of relative market share and market growth rate.
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BCG Portfolio Matrix
MARKET SHARE DOMINANCE
MARKET GROWTH RATE HIGH LOW
HIGH
LOW
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BCG Portfolio Matrix
MARKET SHARE DOMINANCE MARKET GROWTH RATE
HIGH
LOW
High growth Low market share Need cash Poor profit margins
HIGH
High growth Market leaders Require cash
LOW
$
Low growth High market share High cash flow
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Low growth Low market share Minimal cash flow

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Portfolio Matrix Example
MARKET SHARE DOMINANCE HIGH MARKET GROWTH RATE HIGH Notebook Computer (STAR) LOW Palmtop (PROBLEM CHILD)
LOW
Personal Computer (CASH COW)
Mainframe Computer (DOG)
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Strategies for Resource Allocation
Build
Hold Harvest Divest
Provide financial resources if SBU (Problem Child) has potential to be a Star.

Preserve market share if SBU is a successful Cash Cow. Use cash flow for other SBUs. Increase short-term cash return. Appropriate for all SBUs except Stars.
Get rid of SBUs with low shares in low-growth markets.

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Market Attractiveness Matrix
Tool for allocating resources among strategic business units on the basis of market attractiveness and firms positioning.
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Market Attractiveness Matrix (GE)
BUSINESS POSITON
STRONG MEDIUM WEAK
MARKET ATTRACTIVENESS
HIGH
High Attractiveness Medium Attractiveness
MEDIUM
Low Attractiveness LOW
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Market Attractiveness
Attributes of an Attractive Market

High profitability Rapid growth Lack of government regulation Insensitivity to price increase Lack of competition Availability of technology
Learning Objective
Discuss target market strategies.
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Marketing Strategy
The activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets.
Segment the market based on groups with similar characteristics

Analyze the market based on attractiveness of market segments Select one or more target markets
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Develop a marketing mix that will produce satisfying exchanges with target markets
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Learning Objective
Describe elements of the marketing mix.
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The Marketing Mix
A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.
Marketing Mix: The Four Ps

Price Promotion
Place
Product
Product Strategies
The starting point of the 4 Ps
Product
Includes physical unit, package, warranty, service, brand, image, and value
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Distribution (Place) Strategies
Place
Product availability where and when customers want them.
Involves all activities from raw materials to finished products
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Promotion Strategies
Promotion
Role is to bring about exchanges with target markets
Includes integration of personal selling, advertising, sales promotion, and public relations
Pricing Strategies
The most flexible of the 4 Ps
Price
Price X Units Sold = Total Revenue
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Learning Objective
Explain why implementation, evaluation, and control of the marketing plan are necessary.
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Following Up the Marketing Plan

Implementation Evaluation
Control Marketing Audit Comprehensive Systematic Independent Periodic

The Marketing Audit
A thorough, systematic, periodic evaluation of the goals, strategies, structure, and performance of the marketing organization.
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Learning Objective
10
Identify several techniques that help make strategic planning effective.
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Effective Strategic Planning

Ongoing Process
10
Requirements
Creativity
Management Support

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Strategic Planning for Competitive Advantage

Prepared by Deborah Baker Texas Christian University

2. Develop an appropriate business mission statement.

Learning Objectives (continued)

7. Discuss target market strategies.

Learning Objectives (continued)

EVOLVING MARKET OPPORUNITIES

RESOURCES & OBJECTIVES

What is the organizations main activity?

How will it reach its goals?

Provides a basis for comparison of actual and expected performance

Situation or SWOT Analysis

Implementation 2002 South-Western Evaluation Control

PepsiCos Mission Statement

Realistic Measurable Time specific Consistent with Organizations Priorities

Communicate marketing management philosophies

Things the company does well.

Things the company does not do well.

Conditions in the external environment that favor strengths.

Technological Political/Legal Competitive

Types of Competitive Advantage

Cost Competitive Advantage

Sources of Cost Reduction

Reengineering Production Innovations

Differentiation Competitive Advantage

than the competition.

Common Differential Advantages

Sources of Differential Competitive Advantage

Features of a product that signal value

Features of a product that are not expected by the customer

Niche Competitive Advantage

Niche Competitive Advantage

Sustainable Competitive Advantage

A differential advantage that cannot be copied by the competition.

Sources of Sustainable Competitive Advantage

Organizations Skills and Assets

Customer Service Promotion

The limited period during which the fit between

of a firm are at an optimum.

Attract new customers to existing products

High growth Market leaders Require cash

Low growth Low market share Minimal cash flow

Personal Computer (CASH COW)

Mainframe Computer (DOG)

Provide financial resources if SBU (Problem Child) has potential to be a Star.

Get rid of SBUs with low shares in low-growth markets.

High Attractiveness Medium Attractiveness

Low Attractiveness LOW

Discuss target market strategies.

Target Market Strategy

Segment the market based on groups with similar characteristics

Target Market Strategy

Describe elements of the marketing mix.

The Marketing Mix

Marketing Mix: The Four Ps

Distribution (Place) Strategies

Product availability where and when customers want them.

Involves all activities from raw materials to finished products

Role is to bring about exchanges with target markets

Following Up the Marketing Plan

Control Marketing Audit Comprehensive Systematic Independent Periodic

The Marketing Audit

Identify several techniques that help make strategic planning effective.