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MarketingManagement

6th Edition

Knowledge and Skills

J. Paul Peter •

James H. Donnelly, Jr.

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Chapter 1

Strategic Planning and Strategic Planning and

the Marketing Processthe Marketing Process

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The Strategic Planning Process

The EnvironmentCooperativeCompetitiveEconomic

SocialPolitical

Legal

The EnvironmentCooperativeCompetitiveEconomic

SocialPolitical

Legal

INFORMATION

IMPLEMENTATION

Organizational Mission

Organizational Mission

Organizational Objectives

Organizational Objectives

Organizational Portfolio Plan

Organizational Portfolio Plan

The organization’s strategic plan The organization’s strategic plan

Organizational Strategies

Organizational Strategies

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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SOURCE: Patricia Jones and Larry Kahaner, Say It and Live It: The 50 Corporate Mission Statements That Hit the Mark (New York: Doubleday, 1995).

Mission Statements

Organization Mission

• Goodyear Our mission is constant improvement in products and services to meet our customers’ needs. This is the only means to business success for Goodyear and prosperity for its investors and employees.

• Intel Corporation Do a great job for our customers, employees, and stockholders by being the preeminent building

block supplier to the computing industry.

(continued)

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Mission Statements

SOURCE: Patricia Jones and Larry Kahaner, Say It and Live It: The 50 Corporate Mission Statements That Hit the Mark (New York: Doubleday, 1995).

Organization Mission

• Levi Strauss & Co. The mission of Levi Strauss & Co. is to sustain responsible commercial success as a global

marketing company of branded casual apparel. We must balance goals of superior profitability and

return on investment, leadership market positions, and superior products and service. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities

and to society. Our work environment will be safe and productive and characterized by fair treatment, teamwork, open communications, personal

accountability, and opportunities for growth and development.

(continued)

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Mission Statements

Organization Mission

• Merck & Co., Inc. The mission of Merck & Co., Inc., is to provide society with superior products and services— innovations and solutions that satisfy customer needs and improve their quality of life—to provide employees with meaningful work and advancement opportunities and investors with a superior

rate of return.

• Marriott Grow a worldwide lodging business using total quality management (TQM) principles to continuously improve preference and profitability. Our commitment is that every guest leaves

satisfied.

SOURCE: Patricia Jones and Larry Kahaner, Say It and Live It: The 50 Corporate Mission Statements That Hit the Mark (New York: Doubleday, 1995).

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Sample Organizational Objectives (manufacturing firm)

Possible Objective

To make our brands number one in their field in terms of market share.

To be a leader in introducing new products by spending no less than 7 percent of sales for research and development.

To manufacture all products efficiently as measured by the productivity of the workforce.

To protect and maintain all resources- equipment, buildings, inventory, and funds.

Area of Performance

1. Market standing

2. Innovations

3. Productivity

4. Physical and financial resources

(continued)

Figure 1-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Sample Organizational Objectives (manufacturing firm)

Possible Objective

To achieve an annual rate of return on investment of at least 15 percent.

To identify critical areas of management depth and succession.

To maintain levels of employee satisfaction consistent with our own and similar industries.

To respond appropriately whenever possible to societal expectations and environmental needs.

Area of Performance

5. Profitability

6. Manager performance and responsibility

7. Worker performance and attitude

8. Social responsibility

Figure 1-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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What They May What Marketers May Functions Want to Deliver Want Them to Deliver

Research and Basic research projects Products that deliver customer valuedevelopment Product features Customer benefits

Few projects Many new products

Production/ Long production runs Short production runsoperations Standardized products Customized products

No model changes Frequent model changesLong lead times Short lead timesStandard orders Customer ordersNo new products Many new products

Potential Sources of Cross-Functional Conflict for Marketers

(continued)

SOURCE: G. A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 15.

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Potential Sources of Cross-Functional Conflict for Marketers

What They May What Marketers May Functions Want to Deliver Want Them to Deliver

Finance Rigid budgets Flexible budgetsBudgets based on return Budgets based on need to

on investment increase sales

Low sales commissions High sales commissions

Accounting Standardized billing Custom billingStrict payment terms Flexible payment termsStrict credit standards Flexible credit standards

Human resources Trainable employees Skilled employeesLow salaries High salaries

SOURCE: G. A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 15.

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Organizational Growth Strategies

Products

MarketsPresent

ProductsNew

Products

Presentcustomers

Newcustomers

Marketpenetration

ProductDevelopment

MarketDevelopment Diversification

Figure 1-3Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Strategic Planning and Marketing Planning

Implementation and controlImplementation and control

The strategic planOrganizational missionOrganizational objectiveOrganizational strategiesOrganizational portfolio

The strategic planOrganizational missionOrganizational objectiveOrganizational strategiesOrganizational portfolio

The marketing planSituation analysisMarketing objectivesTarget market selectionMarketing mix

Product strategyPromotion strategyPricing strategyDistribution strategy

The marketing planSituation analysisMarketing objectivesTarget market selectionMarketing mix

Product strategyPromotion strategyPricing strategyDistribution strategy

Marketing informationsystem and marketingresearch

Marketing informationsystem and marketingresearch

Figure 1-4Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Criteria

Overall marketingobjectives are clearlystated.

Poor Goal

To get people to buy ournew Betty CrockerMicrowave Bread Shopproducts.

Good Goal

To obtain 5 percent of the fresh-backed bread market in 12 months

Behavioral objectivesare clearly stated.

To have sales increase. To stimulate 30 percent of all U.S.households to try one loaf of BettyCrocker Microwave bread.

Expectations arerealistic.

To obtain half the fresh-baked bread market.

Given the strong name of BettyCrocker in the baked bread goodsmarket and that Americans consume50 lbs. of bread a year, we hope toachieve an 18 percent share of thefresh-baked bread market.

Criteria for Setting Marketing Objectives

SOURCE: Charles W. Lamb, Jr., Joseph F. Hair, Jr., and Carl McDaniel, Principles of Marketing, p. 27. Reproduced with the permission of the South- Western Publishing Co. © 1992, Cincinnati, by South-Western Publishing Co. All rights reserved.

(continued)

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Criteria for Setting Marketing Objectives

SOURCE: Charles W. Lamb, Jr., Joseph F. Hair, Jr., and Carl McDaniel, Principles of Marketing, p. 27. Reproduced with the permission of the South- Western Publishing Co. © 1992, Cincinnati, by South-Western Publishing Co. All rights reserved.

Criteria

Adequate supportexists for the program.

Poor Goal

No mention of budgetdollars in the programstatement. No check tomake sure the programmeshes with corporategoals.

Good Goal

Given the commitment by GeneralMills to grow in the baked goodsmarket, the budget for BettyCrocker’s Microwave Bread Shipover the next three years is $45million, $41 million, and $35million, respectively.

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The Cross-Functional Perspective in Planning

Functional area plans derived from strategic plan

The strategic plan

MissionObjectivesStrategiesPortfolio plan

ObjectivesForecastBudgetsStrategiesand programpolicies

ObjectivesForecastBudgetsStrategiesand programpolicies

ObjectivesForecastBudgetsStrategiesand programpolicies

ObjectivesForecastBudgetsStrategiesand programpolicies

Production plan Marketing planHuman

resource plan Finance plan Facilities plan

ObjectivesForecastBudgetsStrategiesand programpolicies

Figure 1-5Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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A Blueprint for Management Action: Relating the Market Plan to the Strategic Plan and the Production Plan

One organizational objective (the profitability objective) from Figure 1-2

Achieve an annual rate of return

on investment of at least 15 percent

Achieve an annual rate of return

on investment of at least 15 percent

1. Market penetrationImprove position of present products with present customers

1. Market penetrationImprove position of present products with present customers

2. Market developmentFind new customers for present products

2. Market developmentFind new customers for present products

Two possible organizational strategies from the product-market matrix, Figure 1-3

(continued)

Figure 1-6Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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A Blueprint for Management Action: Relating the Market Plan to the Strategic Plan and the Production Plan

Two possible marketing objectives and two possible production objectives derived from the strategic plan

1. Marketingdepartment

objectiveIncrease rate of purchase by existing customers by 10 percent by year end

1. Marketingdepartment

objectiveIncrease rate of purchase by existing customers by 10 percent by year end

1. Marketingdepartment

objectiveIncrease market share by 5 percent by attracting new market segments for existing use by year end.

1. Marketingdepartment

objectiveIncrease market share by 5 percent by attracting new market segments for existing use by year end.

2. Productiondepartment

objectiveDesign additional features into product that will induce new uses by existing buyers

2. Productiondepartment

objectiveDesign additional features into product that will induce new uses by existing buyers

2. Productiondepartment

objectiveDesign additional features into product that will open additional markets with new uses.

2. Productiondepartment

objectiveDesign additional features into product that will open additional markets with new uses.

Specific course of action of the marketing and production departments designed to achieve the objective

Marketingstrategy and

programs

Marketingstrategy and

programs

Productionstrategy and

programs

Productionstrategy and

programs

Marketingstrategy and

programs

Marketingstrategy and

programs

Productionstrategy and

programs

Productionstrategy and

programs

Figure 1-6Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Experience Curve and Resulting Profit Curve

Figure A-1

Market share Market share

RIOCost

Experience curve Profit curve based on experience curve

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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The Boston Consulting Group Portfolio Model

MarketGrowth Rate

MarketGrowth Rate

Relative Market ShareRelative Market Share

High

Low

Low

High Stars QuestionMarks

Cashcows

Dogs

Figure A-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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The General Electric Portfolio Model

IndustryAttractiveness

IndustryAttractiveness

Business StrengthBusiness Strength

Strong

Low

Weak

High

Medium

Average

A A

A B

B

B C C

C

Figure A-3Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Components of Industry Attractiveness and Business Strength at GE

Industry AttractivenessMarket size

Market Growth

Profitability

Cyclicality

Ability to recover from inflation

World scope

Business StrengthMarket Position

Domestic market shareWorld market shareShare growthShare compared with leading competitor

Competitive strengthsQuality leadershipTechnologyMarketingRelative profitability

Figure A-4Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.