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Kotler02 Im
Kotler02 Im
LEARNING OBJECTIVES
After reading this chapter, students should:
Know how marketing affects customer value Know how strategic planning is carried out at different levels of the organization Know what a marketing plan includes
CHAPTER SUMMARY
The value delivery process (marketing) involves choosing (or identifying), providing (or delivering), and communicating superior value to the consumer. The value chain is a tool for identifying key activities that creates value and costs in a specific business. Strong companies develop superior capabilities in managing core business processes by managing core processes effectively to create a marketing network from suppliers to consumers. Managing these core processes effectively, means creating a marketing network in which the company works closely with all parties in the production and distribution chain, from suppliers of raw materials to retail distributors. Companies no longer compete marketing networks do. Holistic marketing maximizes value exploration by understanding the relationships between the customers cognitive space, the companys competence space, and the collaborators resource space. It maximizes value creation by identifying new customer benefits from the customers cognitive space; utilizing core competencies from its business domain, selecting and managing business partners from its collaborative networks. Maximized value is delivered by becoming proficient at customer relationship management, internal resource management, and business partnership management. Market-orientated strategic planning is the managerial process of developing and maintaining a viable fit between the organizations objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape the companys businesses and products so that it yields target profits and growth. Strategic planning takes place at four levels: corporate, division, business unit, and product. The corporate strategy establishes the framework within which the divisions and business units prepare their strategic plans. Setting a corporate strategy entails four activities: defining the corporate mission, establishing strategic business units (SBUs), assigning resources to each SBU based on its market attractiveness and business strength, and planning new business and downsizing older businesses. 155
Strategic planning for individual businesses entrails the following activities: defining the business mission, analyzing external opportunities and threats, analyzing internal strengths and weaknesses, formulating goals, formulating strategy, formulating supporting programs, implementing the programs, gathering feedback, and exercising control. Each product level within a business unit must develop a marketing plan for achieving its goals. The marketing plan is one of the most important outputs of the marketing process.
OPENING THOUGHT
One of the most challenging concepts of this chapter, to most students, is the definition of strategy. In the case of the definition of strategy, it will be beneficial for long-term understanding and retention to cover what the definition is and what it is not. The second area of concern presented in this chapter, is the understanding of strategic versus tactical. Definitions can be confusing and are often taken for granted, so the instructor is encouraged to spend sufficient class time covering the distinctions between these two. Finally, this chapter contains a case analysis using Marketing Plan Pro software that may present some difficulties to students unfamiliar with its use. It is important to note that the objective of the inclusion of this software is to familiarize students with the many aspects of the marketing plannot for them to become experts in the use of this specific software. The instructor may want to emphasize it usage at his or her discretion.
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As your instructor directs, enter Sonics mission statement, SWOTs, and financial and marketing objectives in a written marketing plan, or type them into the Mission, SWOT, and Objectives sections of Marketing Plan Pro.
ASSIGNMENTS
Small Group Assignments 1. Where possible, have the students visit an H&M as mentioned in the opening vignette of the chapter. While at the store, the students should record their impressions of the store in relation to the companys stated strategy or business concept: To give the customer unbeatable value by offering fashion and quality at the best price. Does the store offer value and quality at the best price? Why did your observations confirm this? Why did your observations not confirm this? The students should be very specific in their answers. 2. Visit the Web site for Netflix (www.netflix.com) does this company and its Web site demonstrate its stated three distinctive capabilities of market sensing, customer linking, and channel bonding to you? Why or why not? Be specific in your answers. Individual Assignments 1. Have students read Peter Doyles Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value, Chichester, England: John Wiley & Sons, 2000 and report on their findings in a written and/or oral presentation. 2. Select a local firm or have the students select firms in which they are familiar (current employers or past employers, for example) and have them answer the questions posed by the Marketing Memo, Marketing Plan Criteria regarding the evaluation of a marketing plan. Make sure the students are specific in their answers. Think-Pair-Share 1. Assign the three titles found in the box, Marketing InsightKeys to Long-Term Market Leadership to three groups of students. Have each group read and prepare an oral report of what they learned from reading these books and have them analyze whether the ideas and concepts of these books can be helpful/would be helpful to marketers in todays environment. 2. As a group presentation project, have each group present their Pegasus Sports International marketing plan to the class. Non-presenting groups should be ready to evaluate the accuracy of the numbers presented, critique, refute, and/or debate the findings of the other groups. Each group presentation should be followed by a written presentation of their marketing plan.
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Have the students conduct an Internet search for all documentation detailing the merger and its subsequent culture and strategy differences and problems relevant to the merger. Was the merger a success? Was it necessary? Why were the two cultures and corporate strategies not compatible? Insure that the students frame their answers in terms of the concepts presented in this chapter.
END-OF-CHAPTER SUPPORT
MARKETING DEBATEWhat Good Is a Mission Statement? Virtually all firms have mission statements to help guide and inspire employees as well as signal what is important to the firm to those outside the firm. Mission statements are often the product of much deliberation and discussion. At the same time, some critics claim that mission statements sometimes lack teeth and specificity. Moreover, critics also maintain that in many cases, mission statements do not vary much from firm to firm and make the same empty promises. Take a position: Mission statements are critical to a successful marketing organization versus mission statements rarely provide useful marketing value. Pro: A well-crafted corporate mission statement reflects the values of the firm as they relate to the community at large, its stakeholders, its employees, and its customers. Once the firms positions are delineated in the mission statement, marketing can begin the process of setting its priorities, goals, and objectives derived from the stated priorities of the firm. With the advent of holistic marketing, what the firm believes about the communities at large and what strategic direction the firm wishes to take should be defined through its mission statement. Con: Mission statements are written for public consumption and rarely if ever do they reflect the actual goals, objectives, and mission of the firm. These statements are for public consumption and are written to placate the corporate stakeholders, employees, and consumers. Although most mission statements are written with good intentions, the real direction of the firm must be found in the application of its business practices. Marketing should not make the mistake of deriving its goals, objectives, and strategies from these platitudes. MARKETING DISCUSSION Consider Porters value chain and the holistic marketing orientation model. What implications do they have for marketing planning? How would you structure a marketing plan to incorporate some of their concepts? Answer: Michael Porters value chain is a tool for identifying ways to create more customer value. This value chain identifies nine strategically relevant activities that create value and cost in a business. There are five primary activities and four support activities in this value chain. The five primary activities are: inbound logistics, operations, outbound logistics, marketing and sales, and service. The four support activities are: procurement, technology development, human resource management, and infrastructure. Before the marketing function begins its planning, it first must examine the costs and performance of the firm in each of these value-creating activities and look for ways to improve or reduce costs/products as needed. Marketing must also force the firm to benchmark itself to the competition in all of these areas. 158
The structure of the marketing plan must take into account each of the five primary activities and each of the four support activities. A marketing plan must incorporate both a downstream and upstream review in the process to deliver superior customer value. This means that the planning process must include areas for improvement in the five primary areas and the four support areas as part of its strategy and product development. Essentially, the marketing plan becomes an improvement document for the firm in each of these nine strategic activities delineating areas for change or modification for the firm. MARKETING SPOTLIGHTNike Discussion Questions (suggested responses): 1) What have been the key success factors for Nike? a. Consistent advertising program and selective spokespersons. b. Tracking consumer-purchasing behavior. 2) Where is Nike vulnerable? a. Loss of key sports figures. b. Loss of incremental growth in high-end products. c. Changes in governmental regulations/rules for production of their products. d. Competitive activities that mimic or improve upon technological processes. 3) What should it watch out for? a. Identifying trends and megatrends in the sports apparel industry. b. Monitoring the six major environmental forces of: (i) (ii) Demographic Economic
(iii) Social-cultural (iv) Natural (v) Technological (vi) Political-legal 4) What recommendations would you make to senior marketing executives going forward? a. Understand peoples views of themselves, others, organizations, society, nature, and the universe as it pertains to sports. 5) What should they be sure to do with their marketing? a. Work closely with local and national governments, pressure groups and other environmental arenas to position the company as being socially responsible to the concerns about shoe manufacturing. Continue to present their advertising showing fun in sports and the use of their products. 159
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Core Competencies
A) Companies need resources (labor, materials, energy, etc.) 1) Own or nurture the resources and competencies that make up the essence of the businessoutsource if competency is cheaper and available. 2) Competitive advantage accrues to companies that possess distinctive capabilities (excellence in broader business processes). 3) Competitive advantage derives from how well the company fits its core competencies and distinctive capabilities into tightly interlocking activity systems. Review Key Definitions here: core competency and distinctive capabilities Competitive advantage ultimately derives from how well the company fits its core competencies and distinctive capabilities into tightly interlocking activity systems.
Figure 2.3 shows the interaction between customers, company, collaborators, and value-based activities (value exploration, value creation, and value delivery) to create, maintain, and renew customer value A) Holistic marketing addresses three key management questions: 1) Value explorationidentify new value opportunities. 2) Value creationcreate more promising new value offerings. 3) Value deliverydeliver the new value offerings more efficiently. Developing strategy requires the understanding of the relationships and interactions among these three spaces.
Value Exploration
A) Customers cognitive space (reflects existing and latent needs and includes participation, stability, freedom, and change). B) Companys competence space (broad versus focused scope of business and depth physical versus knowledge-based capabilities). C) The collaborator resource space (horizontal and vertical partnerships).
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Value Creation
A) Marketers need to: 1) Identify new customer benefits from the customers view. 2) Utilize core competencies. 3) Select and manage business partners from its collaborative networks. 4) Business realignment may be necessary to maximize core competencies. a. (Re)defining the business conceptbig idea. b. (Re)shaping the business scopelines of business. c. (Re)position the companys brand identity.
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The marketing plan operates on two levels: strategic and tactical. 1) The strategic marketing plan lays out target markets and the value proposition. 2) The tactical marketing plan specifies the product, promotion, merchandising, pricing, sales channels, and service. Review Key Definitions here: strategic marketing plan and tactical marketing plan Figure 2.4 shows the strategic complete planning, implementation, and control process.
e. Vertical. f. Geographical.
Intensive Growth
Corporate managers first course of action should be a review of opportunities for improving existing businesses. Figure 2.6 shows Ansoffs product-market expansion grid. A) Market-penetration strategy (gain more market share). B) Market-development strategy (new markets for current products). C) Product-development strategy (new products for current markets). D) Diversification strategy (new products for new markets).
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Integrative Growth
A) Sales and profits may be increased through: 1) Backward integration. 2) Forward integration. 3) Horizontal integration.
Diversification Growth
When opportunities are found outside the present business and the company has the right mix of business strengths to be successful. A) Several types are possible: 1) New products that have technological or marketing synergies with existing product lines. 2) New products unrelated to the current industry. 3) New businesses unrelated.
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1) What will we do if it happens? 2) Watch for signposts that might confirm or disconfirm the scenarios.
Business Mission
A) Each business unit needs to define its specific mission within the broader company mission.
SWOT Analysis
A) The evaluation of a companys strengths, weaknesses, opportunities, and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment.
3) There are several ways to uncover possible product or service improvements: a. By asking customers for their suggestions (problem detection method). b. By asking consumers to imagine an ideal version of the product or service (ideal method). c. By asking consumers to chart their steps in acquiring, using, and disposing of a product (consumption chain method). C) Third is a totally new product or service. D) To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to determine attractiveness and probability of success: 1) Can the benefits involved in the opportunity be articulated convincingly to a defined target market(s)? 2) Can the target market(s) be located and reached with cost-effective media and trade channels? 3) Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits? 4) Can the company deliver the benefits better than any actual or potential competitors can? 5) Will the financial rate of return meet or exceed the companys required threshold for investment? Figure 2.8(a) shows an opportunity matrix for a TVlighting equipment company. E) An environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. Figure 2.8(b) illustrates the treat matrix facing the TVlighting equipment company.
Goal Formulation
Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. This stage of the process is called goal formulation. Managers use the term goals to describe objectives that are specific with respect to magnitude and time.
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A) The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they must meet four criteria: 1) They must be arranged hierarchically, from the most to least important. 2) Objectives should be stated quantitatively whenever possible. 3) Goals should be realistic. 4) Objectives must be consistent.
Strategic Formulation
Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a compatible technology strategy, and sourcing strategy.
Strategic Alliances
A) Companies are discovering that there is a need for strategic partners if they hope to be effective. B) Many strategic alliances take the form of marketing alliances. These fall into four major categories: 1) Product or service alliances. 2) Promotional alliances. 3) Logistics alliances. 4) Pricing collaborations. C) To keep strategic alliances thriving, corporations have begun to develop organizational structures for support and have come to view the ability to form and manage partnerships as core skills (called Partner Relationship Management, PRM).
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C) In implementing strategy, companies must not lose sight of the multiple stakeholders involved and their needs. D) According to McKinsey & Company, strategy is only one of seven elements in successful business practice. 1) The first threestrategy, structure, and systems are considered the hardware of success. 2) The next fourstyle, skills, staff, and shared values are the software a. Style means that company employees share a common way of thinking and behaving. b. Skills means that the employees have the skills necessary to carry out the companys strategy. c. Staffing means that the company has hired able people, trained them well, and assigned them to the right jobs. d. Shared values, means that the employees share the same guiding values.
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