CHAPTER 2 Strategic Planning and the Marketing Environment

1. M A R K E T I N G Real People, Real Choices CHAPTER 2Strategic Planning and the Marketing Environment

2. Chapter Objectives • Explain the strategic planning process • Describe the steps in the marketing planning process • Explain operational planning • Discuss important aspects of an organization’s internal environment • Explain why marketers scan an organization’s external business environment

3. Marketing Plans • Describe the marketing environment • Outline marketing strategies • Identify plans for implementation & evaluation

4. Strategic Planning • Strategic planning: the managerial decision process that matches the organization’s resources & capabilities to its market opportunities for long-term growth • Firms may become multi-product companies with self-contained divisions • Strategic Business Units (SBUs) • Example: General Mills

5. Strategic Planning Steps 1.Define the organization’s mission (management) 2. Evaluate internal/external environments (marketing) 3. Set organizational or SBU objectives (management) 4. Establish the business portfolio (management)

6. Evaluate the Environment • Internal Environment • Strengths • Weaknesses • External Environment • Opportunities • Threats

7. Set Objectives • SBU objectives must support the overall objectives of the firm • Customer satisfaction • Sales • Market share

8. Establish the Business Portfolio • For firms with different SBUs, planning also includes allocating resources among the businesses • Each SBU is a separate profit center within the larger corporation • Each SBU is responsible for its own costs, revenues, & profits

9. Portfolio Management • The range of products owned by a large firm is called a business portfolio • Portfolio analysis allows a firm to assess the potential of its products and businesses • BCG Growth-Market Share Matrix

10. BCG Matrix • Method focuses on the potential of a firm’s existing successful products to generate cash that the firm can use to invest in new products • New products are chosen for their potential to become cash generators • Two dimensions: • Market growth rate • Relative market share

11. BCG Matrix: Stars • SBUs with dominant market share in high-growth markets • requires funding to keep up with production and promotion demands • strategies seek to maximize market share in the face of increasing competition

12. BCG Matrix: Cash Cows • SBUs with dominant market share in a low-growth potential market • product is well established and market share can be maintained with minimal funding • firms milk cows of profits to fund growth of other products in portfolio

13. BCG Matrix: Question Marks • SBUs with low market shares in fast-growth markets • sometimes called problem children • the firm has failed to compete effectively • The dilemma? Investing more money into the SBU may • improve market share in a high potential market OR • result in negative cash flow and failure

14. BCG Matrix: Dogs • SBUs with small market share in a slow-growth market • specialized products in limited markets unlikely to grow • firms may sell dogs to smaller firms or eliminate product from market

15. Developing Growth Strategies • Product-Market Growth Matrix illustrates different growth strategies • Market penetration: increase sales in existing markets • Market development: introduce existing products to new markets • Product development: introduce new products to existing markets • Diversification: introduce new products in new markets

16. Steps in the Marketing Planning Process 1. Perform a situation analysis 2. Set marketing objectives 3. Develop marketing strategies • Select a target market • Develop marketing mix strategies 4. Implement marketing strategies 5. Monitor and control strategies

17. The Economic Environment • The Business Cycle • All economies go through cycles of prosperity, recession, and recovery • The cycle directly affects marketers because of its effect on consumer behavior • The Power of Expectations • Consumer confidence represents consumer beliefs about what the future holds • Like business cycles, it affects consumer spending

18. The Competitive Environment • Analyzing the Competition • Strengths and weaknesses analysis • Competitive intelligence (CI) • Competition in the Microenvironment • Competition in the Macroenvironment

19. Competition: The Microenvironment • In the microenvironment, competition means the alternatives from which the target may choose • Level 1: competition for discretionary income (for income left after a consumer pays for necessities) • Level 2: product competition in which different products attempt to satisfy the same needs or wants • Level 3: brand competition in which competitors offering similar products compete for consumer choice

20. Competition: The Macroenvironment • Overall structure of industry • monopoly - when one seller controls market • oligopoly - relatively small number of sellers, each with a substantial share of market • monopolistic - many sellers compete for buyers; each offers a slightly different product and has a small share of market • perfect competition - many small sellers each offering the same product

21. The Technological Environment • Technology is an investment a firm must make to succeed • Patents protect inventions • Trends in electronic commerce • eBay • Amazon

22. The Legal Environment • Laws impact industries • Regulatory Agencies impact industries • Food and Drug Administration • Federal Trade Commission

23. The Sociocultural Environment • Characteristics of society • Demographics • Geographics • Psychographics • Cultural values & beliefs

24. Issues for Discussion • What are some examples of product lines that fit in each category of the BCG matrix? • Do you think planning is essential to a firm’s success? • Can planning ever hurt? • Can you identify organizations that should have contracted rather than expanded?

25. Issues for Discussion • What are some ways that the technological environment has changed marketing? • What are the advantages & disadvantages of governmental controls of marketing?