CH 02

Strategic Planning for
Competitive Advantage
2
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.
2 2. Develop an appropriate business mission
statement.
chapter
3. Describe the criteria for stating good

marketing objectives.

Learning Objectives (continued)
4. Explain the components of a situation
analysis.
5. Identify sources of competitive advantage.

2
6. Identify strategic alternatives and describe
chapter
tools used to help select alternatives.
7. Discuss target market strategies.

Learning Objectives (continued)
8. Describe elements of the marketing mix.
9. Explain why implementation, evaluation, and

control of the marketing plan are
2 necessary.
chapter
10. Identify several techniques that help make

strategic planning possible.

1
Learning Objective
Understand the importance of

strategic marketing and know
a basic outline for a marketing plan.

1
Strategic Planning
The managerial process of

creating and maintaining a
fit between the
organization’s objectives
and resources and evolving
market opportunities.

1
Strategic Planning
LONG RUN
PROFITABILITY
EVOLVING AND GROWTH
MARKET
OPPORUNITIES
RESOURCES
&
OBJECTIVES

1
Strategic Marketing Planning
◆ What is the organization’s main activity?
◆ How will it reach its goals?
The Marketing Plan

1
Planning
The process of anticipating

future events and
determining strategies to
achieve organizational
objectives in the future.

1
The Marketing Plan
A written document that

acts as a guidebook of
marketing activities for the
marketing manager.

1
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 g

it n
success of future activities rke n
Ma Pla

1
Marketing PlanBusiness
Elements
Mission
Statement
Objectives
Situation or
SWOT Analysis
Marketing
Strategy
Target Market
Strategy
Marketing
Product MixDistributio
n
Promotio Pric
n e
Implementation
Chapter 2 Version 6e ©2002 South-Western
Evaluation 12
Control
2
Learning Objective
Develop an appropriate
business mission statement.

2
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
2
PepsiCo’s Mission Statement
“PepsiCo’s 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

2
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

3
Learning Objective
Describe the criteria for stating

good marketing objectives.

3
Marketing Objective
A statement of what is to be
accomplished through
marketing activities.

3
Marketing Objectives
Marketing Objectives Must
Be:
◆ Realistic
“Our objective is to
increase market
◆ Measurable share by 40% and to
obtain customer
satisfaction ratings
◆ Time specific of at least 90% in
2001.”
◆ Consistent with
Organization’s Priorities

3
Marketing Plan Objectives
◆ Communicate marketing
management philosophies
◆ Provide direction
◆ Serve as motivators
◆ Clarify thinking
◆ Provide basis for control

4
Learning Objective
Explain the components

of a situation analysis.

4
SWOT Analysis
Identifying
internal strengths (S)
and weaknesses (W)
and also examining
external opportunities (O)
and threats (T)

4
SWOT Analysis
S Things the company does well.
Internal
W Things the company does not do well.
O Conditions in the external environment

that favor strengths.
External
Conditions in the external environment
T
Chapter 2 Version 6e
that do not relate to existing strengths
or favor areasCollege
©South-Western of current weakness.
Publishing©2002 South-Western 23
4
SWOT Analysis
Strengths and Weaknesses

INTERNAL
◆ Production Costs
◆ Marketing Skills
◆ Employee Capabilities
◆ Financial Resources
◆ Available Technology
◆ Company/Brand Image
4
SWOT Analysis
Opportunities and Threats

EXTERNAL
◆Social ◆Technological
◆Demographic ◆Political/Legal
◆Economic ◆Competitive

4
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.
4
Environmental Scanning
◆ Examination of macroenvironmental forces
◆ Social
◆ Demographic
◆ Economic
◆ Technological
◆ Political / Legal
◆ Competitive
◆ Helps identify market

opportunities
◆ Provides guidelines for

design of marketing strategy
5
Learning Objective
Identify sources of
competitive advantage

5
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.

5
Cost
Types of
Competitive Product/Service
Advantage Differentiation
Niche Strategies

5
Cost Leadership
◆ Obtain inexpensive raw materials

◆ Create efficient operations
◆ Design products for manufacture
◆ Control overhead costs
◆ Avoid marginal customers

5
Cost Competitive Advantage
Being the low-cost competitor

in an industry while
maintaining satisfactory
profit margins.

5
Sources of Cost Reduction
Experience Curves Product Design
Efficient Labor Reengineering
No-frills Products Production Innovations
Government Subsidies New Delivery Methods

Differentiation 5
Advantage achieved when a

firm provides something that
is unique and valuable to
buyers beyond simply
offering a lower price
than the competition.

5
Common Differential Advantages
◆ Brand names
◆ Strong dealer network

◆ Product reliability
◆ Image
◆ Service

Sources of Differential 5
Value impressions Augmented products
◆ Features of a ◆ Features of a
product that product that are
signal value not expected by
the customer

Niche 5
Advantage achieved when a

firm seeks to target and
effectively serve a small
segment of the market.

5
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

Sustainable 5
A differential advantage
that cannot be copied
by the competition.

Sources of Sustainable 5
Patents
Copyrights
Locations
Equipment
Organizatio Technology
n’s
Skills and Customer Service
Assets Promotion
Strategic Windows 5
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.

6
Learning Objective
Identify strategic alternatives

and describe tools used
to help select alternatives.

6
Strategic Windows
Market Increase market share among
Penetration existing customers
Market Attract new customers to

Development existing products
Product Create new products for

Development present markets
Diversification Introduce new products

into new markets

6
Strategic Alternatives
Market Increase market share among
Penetration existing customers.
Market Attract new customers

Development to existing products
Product Create new products

Development for present markets
Introduce new products

Diversification into new markets.
6
Strategic Opportunity Matrix
Present Product New Product
Present Market Product

Market
Penetration Development
New Market Diversification

Market Development

6
Selecting a Strategic Alternative
Common Tools Philosophy
Profitabilit
Portfolio Matrix y
$ Market Share

Portfolio Matrix 6
Tools for allocating resources

among products or strategic
business units on the basis of
relative market share and
market growth rate.

6
BCG Portfolio Matrix
MARKET SHARE DOMINANCE
MARKET GROWTH RATE
HIGH LOW
HIGH
?
$
LOW

6
BCG Portfolio Matrix
HIGH LOW
MARKET GROWTH RATE
High growth
High growth
HIGH
Low market share

Market leaders Need cash
Require cash Poor profit margins
$
LOW
Low growth Low growth

High market share Low market share
High cash flow Minimal cash flow
6
Portfolio Matrix Example
HIGH LOW
MARKET GROWTH RATE
Notebook Palmtop
Computer (PROBLEM
HIGH
(STAR) CHILD)
Personal Mainframe
Computer Computer
(CASH COW)
LOW
(DOG)

6
Strategies for Resource Allocation
Provide financial resources if SBU
Build (Problem Child) has potential to be a Star.
Preserve market share if SBU is a successful

Hold Cash Cow. Use cash flow for other SBUs.
Increase short-term cash return.

Harvest Appropriate for all SBUs except Stars.
Get rid of SBUs with low shares in

Divest low-growth markets.

6
Market Attractiveness Matrix
Tool for allocating resources

among strategic business
units on the basis of market
attractiveness and firm’s
positioning.

6
Market Attractiveness Matrix (GE)
BUSINESS POSITON
STRONG MEDIUM WEAK
MARKET ATTRACTIVENESS
HIGH
High Attractiveness
Medium Attractiveness
MEDIUM
Low Attractiveness
LOW

6
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
7
Learning Objective
Discuss target market

strategies.

7
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.

7
Target Market Strategy
◆ Segment the market based on

groups with similar characteristics
◆ Analyze the market based on

attractiveness of market segments
◆ Select one or more target markets

7
Target Market Strategy
◆ Develop a marketing mix that will produce

satisfying exchanges with target markets

8
Learning Objective
Describe elements of the marketing mix.

8
The Marketing Mix
A unique blend of product,

distribution, promotion, and
pricing strategies designed to
produce mutually satisfying
exchanges with a target
market.

8
Marketing Mix: The “Four Ps”
Price
Promotion
Place
Product

8
Product Strategies
◆ The starting point of
the “4 Ps”
Product
◆ Includes physical unit,
package, warranty,
service, brand, image,
and value

8
Distribution (Place) Strategies
◆ Product availability
where and when
Place customers want them.
◆ Involves all activities

from raw materials to
finished products

8
Promotion Strategies
◆ Role is to bring about
exchanges with target
Promotion markets
◆ Includes integration of
personal selling,
advertising, sales
promotion, and public
relations

8
Pricing Strategies
◆ The most flexible of
the “4 Ps”
Price
◆ Price X Units Sold =
Total Revenue

9
Learning Objective
Explain why implementation, evaluation,

and control of the
marketing plan are necessary.

9
Following Up the Marketing Plan
◆ Implementation
◆ Evaluation
◆ Control
◆ Marketing Audit
◆Comprehensive
◆Systematic
◆Independent
◆Periodic
9
The Marketing Audit
A thorough, systematic,
periodic evaluation of the
goals, strategies, structure,
and performance of the
marketing organization.

1
Learning Objective 0
Identify several techniques that help

make strategic planning effective.

1
Effective Strategic Planning 0
Ongoing
Process
Requirements Creativity
Management
Support

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CH 02

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Strategic Planning for

Chapter 2 Version 6e ©2002 South-Western 1

3. Describe the criteria for stating good

Chapter 2 Version 6e ©2002 South-Western 2

5. Identify sources of competitive advantage.

tools used to help select alternatives.

7. Discuss target market strategies.

Chapter 2 Version 6e ©2002 South-Western 3

9. Explain why implementation, evaluation, and

10. Identify several techniques that help make

Chapter 2 Version 6e ©2002 South-Western 4

Understand the importance of

Chapter 2 Version 6e ©2002 South-Western 5

The managerial process of

Chapter 2 Version 6e ©2002 South-Western 6

Chapter 2 Version 6e ©2002 South-Western 7

◆ What is the organization’s main activity?

◆ How will it reach its goals?

The Marketing Plan

Chapter 2 Version 6e ©2002 South-Western 8

The process of anticipating

Chapter 2 Version 6e ©2002 South-Western 9

A written document that

Chapter 2 Version 6e ©2002 South-Western 10

◆ Provides clearly stated activities to work

◆ Serves as a reference for the g

Chapter 2 Version 6e ©2002 South-Western 11

Chapter 2 Version 6e ©2002 South-Western 13

◆ Focuses on the market(s) rather than

◆ Strategic Business Units may also

Chapter 2 Version 6e ©2002 South-Western 15

1. A distinct mission and specific target

2. Control over their resources

3. Their own competitors

4. Plans independent of other SBUs

Describe the criteria for stating

Chapter 2 Version 6e ©2002 South-Western 17

Chapter 2 Version 6e ©2002 South-Western 18

Chapter 2 Version 6e ©2002 South-Western 19

◆ Provide basis for control

Explain the components

Chapter 2 Version 6e ©2002 South-Western 21

Chapter 2 Version 6e ©2002 South-Western 22

W Things the company does not do well.

O Conditions in the external environment

Strengths and Weaknesses

Opportunities and Threats

Chapter 2 Version 6e ©2002 South-Western 25

Collection and interpretation of

◆ Helps identify market

◆ Provides guidelines for

Chapter 2 Version 6e ©2002 South-Western 28

The set of unique features of

Chapter 2 Version 6e ©2002 South-Western 29

Chapter 2 Version 6e ©2002 South-Western 30

◆ Obtain inexpensive raw materials

Chapter 2 Version 6e ©2002 South-Western 31

Being the low-cost competitor

Chapter 2 Version 6e ©2002 South-Western 32

Experience Curves Product Design

Efficient Labor Reengineering

No-frills Products Production Innovations

Government Subsidies New Delivery Methods