营销课件第二章

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CHAPTER 2

STRATEGIC PLANNING AND THE MARKETING PROCESS



CONCEPT CONNECTIONS

CHAPTER OVERVIEW

1. Explain companywide strategic planning and its four steps. 2. Discuss how to design business portfolios and growth strategies.

3. Explain functional planning strategies and assess marketing‟s role in strategic planning.

4. Describe the marketing process and the forces that influence it. 5. List the marketing management functions, including the elements of a marketing plan.

To meet changing conditions in their industries, companies need to look ahead and develop long-term strategies. Strategic planning involves developing a strategy to meet competition and insure long-term survival and growth. The marketing function plays an important role in this process in that it provides information and other inputs to help in the preparation of the organization‟s strategic plan.

Strategic planning is described as the process of developing and maintaining a strategic fit between the organization‟s goals and capabilities and its changing marketing opportunities. Strategic planning sets the stage for the rest of the planning in the firm. Formally, strategic planning consists of developing a company mission (to give it direction), objectives and goals (to give it means and methods for accomplishing its mission), business portfolio (to allow management to utilize all facets of the organization), and functional plans (plans to carry out daily operations from the different functional disciplines). Since most companies are interested in growth, this chapter explores several growth alternatives within the context of strategic planning and portfolio analysis. The product/market expansion grid shows four avenues for growth: market penetration, market development, product development, and diversification.

No matter how well the strategic planning process has been designed and implemented, success depends on how well each department performs its customer-value-adding activities and how well the departments work together to serve the customer.

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Principles of Marketing: Chapter 2

CHAPTER OVERVIEW (CONTINUED)



CHAPTER OUTLINE

1. Introduction

a. The chapter begins with an in-depth appraisal of the history and marketing practices of the world famous Intel Corporation.

b. The purpose of this section is to demonstrate that no matter how good a

company‟s basic product may be, the organization can still be vulnerable to decline unless aggressive and innovative policies and strategies are maintained. Changing market opportunities must be explored and pursued.

c. Intel has found ways to grow profitably despite a rapidly changing market. They also found unique ways to connect to their market. Applications have become Intel‟s specialty. Today, everyone asks for products that have the Intel chip “inside.”

d. All companies must look ahead and develop long-term strategies to meet the changing conditions in their industries. Each company must find the game plan that makes the most sense given its specific situation, opportunities, objectives, and resources.

e. The hard task of selecting an overall company strategy for long-run survival and growth is called strategic planning.

2. Strategic Planning

a. Many companies operate without formal plans. However, formal planning can provide many benefits:

1). It encourages management to think ahead systematically. 2). It forces managers to clarify objectives and policies. 3). It leads to better coordination of company efforts. 4). It provides clearer performance standards for control.

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Value chains and value delivery networks have become popular with organizations that are sensitive to the wants and needs of consumers. The marketing department (because of its ability to stress the customer‟s view) has become central in the implementation of most strategic plans. Connecting to customers is central to this process.

As a means of discussing the marketing process, this chapter carefully outlines and discusses the steps in the process, the marketing plan and its component parts, the marketing mix variables and their relationship to planning, the management of the planning process, how marketing departments are organized, how plans are implemented, and how marketing managers attempt to control the process. One of the secrets to success within the context of the marketing process is how the company watches and adapts to the changing marketing and competitive environment.


Principles of Marketing: Chapter 2

5). It is useful for a fast-changing environment since sound planning helps the company to anticipate and respond quickly to environmental changes and sudden developments.

*****Use Power Point 2-2 Here*****



b. There are three different types of plans that companies might use:

1). Annual plans (deals with the company‟s current businesses and how to keep them going).

2). Long-range plans (also deals with company‟s current businesses and how to keep them prosperous).

3). Strategic plans involve adapting the firm to take advantage of opportunities in its constantly changing environment.

c. Strategic planning is defined as the process of developing and maintaining a strategic fit between the organization‟s goals and capabilities and its changing marketing opportunities.

*****Use Power Point 2-3 Here*****



1). Strategic planning sets the stage for the rest of the planning in the firm. 2). There are four steps to the strategic planning process: a). Defining a clear company mission. b). Setting supporting company objectives. c). Designing a sound business portfolio.

d). Planning and coordinating marketing and other functional strategies.

*****Use Key Term strategic planning Here; Use Concept Connection #1 Here; Use Figure 2.1 Here; Use Issues for Discussion #1 Here; Use Internet Connection

Here; Use Power Point 2-4 Here*****



Defining the Company‟s Business and Mission

d. An organization exists to accomplish something.

e. When management senses that the organization is drifting, it is time to renew its search for purpose by asking: 1). What is our business? 2). Who is our customer? 3). What do customers value? 4). What should our business be?

f. The first step in the strategic planning process is defining the company mission. 1). A mission statement is a statement of the organization‟s purpose--what it wants to accomplish in the larger environment.

2). A clear mission statement acts as an “invisible hand” that guides people in the organization.

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Principles of Marketing: Chapter 2

3). Market definitions of a business are better than product or technological defin- itions. Products and technologies can become outdated, but basic market needs may last forever.

4). A market-oriented mission statement defines the business in terms of satisfying basic customer needs.

g. The mission statement must avoid being too narrow or too broad. Mission statements must:

1). Be market oriented. 2). Be realistic. 3). Be specific.

4). Fit the market environment.

5). Indicate distinctive competencies. 6). Be motivating.

h. “Visionary companies” often set a purpose beyond making money.

*****Use Key Term mission statement Here; Use Issues for Discussion #1 and #2

Here; Refer to Table 2.1 for examples of mission statements; Use Concept Connection Chapter #1 Here; Use Marketing Highlight 2.1 Here; Use Internet

Connection Here; Use Company Case #2 Here; Use Power Point 2-4 and 2-5 Here*****



Setting Company Objectives and Goals

i. The company‟s mission needs to be turned into detailed supporting objectives for each level of management. This second step in the strategic planning process re- quires the manager to set company goals and objectives and be responsible for achieving them.

1). The mission leads to a hierarchy of objectives including business and marketing objectives.

2). Objectives should be as specific as possible.

*****Use Concept Connection #1 Here; Use Issues for Discussion #1 Here;

Use PowerPoint 2-4 and 2-6 Here*****



3. Designing the Business Portfolio

a. The third step in the strategic planning process is designing the business portfolio.

1). The business portfolio is a collection of businesses and products that make up the company.

2). The best business portfolio is the one that best fits the company‟s strengths and weaknesses to opportunities in the environment. b. In order to design the business portfolio, the business must:

1). Analyze its current business portfolio and decide which business should receive more, less, or no investment.

2). Develop growth strategies for adding new products or businesses to the port- folio.

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Principles of Marketing: Chapter 2



*****Use Key Term business portfolio Here; Use Issues for Discussion #1 Here;

Use Power Point 2-4 and 2-7 Here*****

Analyzing the Current Business Portfolio

c. In order to analyze the current business portfolio, the company must conduct

portfolio analysis (a tool by which management identifies and evaluates the various businesses that make up the company).

1). The first step is to identify the key businesses (SBUs). The strategic business unit (SBU) is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses.

2). The SBU can be a company division, a product line within a division, or even a single product or brand.

3). The second step is to assess the attractiveness of its various SBUs and decide how much support each deserves.

4). The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment.

d. The best known portfolio planning method is the Boston Consulting Group (BCG) matrix.

1). Using the BCG approach, a company classifies all its SBUs according to the growth-share matrix.

a). The vertical axis, market growth rate, provides a measure of market attractiveness.

b). The horizontal axis, relative market share, serves as a measure of company strength in the market.

2). Using the matrix, four types of SBUs can be identified:

a). Stars are high-growth, high-share businesses or products (they need heavy investment to finance their rapid growth potential).

b). Cash Cows are low-growth, high-share businesses or products (they are established, successful, and need less investment to hold share).

c). Question Marks are low-share business units in high-growth markets (they require a lot of cash to hold their share).

d). Dogs are low-growth, low-share businesses and products (they may generate enough cash to maintain themselves, but do not have much future).

*****Use Key Terms portfolio analysis, strategic business unit (SBU), and growth-

share matrix Here; Use Figure 2.2 Here; Use Issues for Discussion #3 Here;

Use Power Point 2-4 and 2-8 Here*****



e. Once it has classified its SBUs, a company must determine what role each will play in the future. The four strategies that can be pursued are:

1). The company can invest more in the business unit in order to build its share. 2). The company can invest enough just to hold at the current level.

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Principles of Marketing: Chapter 2

3). The company can harvest the SBU. 4). The company can divest the SBU.

f. As time passes, SBUs change their positions in the growth-share matrix. Each has its own life cycle.

*****Use Issues for Discussion #3 Here*****



g. General Electric introduced a comprehensive portfolio planning tool called a strategic business-planning grid.

1). It uses an industry attractiveness index made up of market size, market growth rate, industry profit margin, amount of competition, seasonality and cyclicality of demand, and industry cost structure. Each of these factors is rated and combined in an index of industry attractiveness. 2). The grid is divided into three zones:

a). The green cells at the upper left include the strong SBUs in which the company should invest and grow.

b). The yellow diagonal cells contain SBUs that are medium in overall attractiveness.

c). The red cells in the lower right indicate SBUs that are low in overall attractiveness (these should probably be harvested or divested).

*****Use Concept Connection #2 Here; Use Figure 2.3 Here; Use Issues for

Discussion #4 Here; Use Power Point 2-4 and 2-9 Here*****



h. The BCG and other formal methods revolutionized strategic planning. However, such approaches have limitations: 1). They can be difficult.

2). They can be time consuming. 3). They can be costly to implement.

4). Management may find it difficult to define SBUs and measure market share and growth.

5). The approaches focus on classifying current businesses but provide little advice for future planning.

i. In spite of the drawbacks, most firms are still committed to strategic planning.

*****Use Concept Connection #1 and #2 Here; Use Power Point 2-10 Here*****

Developing Growth Strategies in the Age of Connectedness

j. Companies should always be looking to the future. One useful device for

identifying growth opportunities for the future is the product/market expansion

grid. The product/market expansion grid is a portfolio planning tool for identifying company growth opportunities through:

1). Market Penetration--making more sales to present customers without changing products in any way (example, adding more stores).

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2). Market Development--a strategy for company growth by identifying and

developing new markets for current company products (example: demographic markets).

*****Use Power Point 2-11 and 2-12 Here*****



3). Product Development--a strategy for company growth by offering modified or new products to current markets.

4). Diversification--a strategy for company growth by starting up or acquiring businesses outside the company‟s current products and markets.

*****Use Key Terms product/market expansion grid, market penetration, market

development, product development, and diversification Here; Use Concept Connection #2 Here; Use Figure 2.4 Here; Use Issues for Discussion #5 Here;

Use Marketing Highlight 2.2 Here; Use Internet Connection Here; Use

Company Case #2 Here; Use Power Point 2-11 and 2-13 Here; Use DiscussionConnection Power Point 2-14 Here*****



k. The final step in the strategic planning process is planning functional strategies. 1). Once the strategic plan is in place, more detailed planning must take place within each business unit.

2). Each department provides information for strategic planning.

3). All departments must work together to deliver superior value and satisfaction. l. Marketing plays an integrative role in the company‟s strategic planning process by trying to reduce cross-functional conflicts. They are not always successful. 1). Since the marketing department takes the consumer‟s point of view, it can often have difficulties with departments that have different agendas. 2). Other departments often resist the will of the marketing department. 3). However, if the company truly puts the customer first, conflicts can be resolved.

4). “If you are not thinking customer, you are not thinking!”

*****Use Concept Connection #3 Here; Use Issues for Discussion #1 Here; Use Power Point 2-15 Here*****

4. Strategic Planning and Small Business

a. Experts agree that both small and large businesses can benefit from strategic planning.

b. Entrepreneurs are more likely to spend more time “putting out fires” than

planning; however, long-term growth will be more difficult without long-term planning.

c. Strategic planning can help small business managers to anticipate difficult situations and prevent or handle them.

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Principles of Marketing: Chapter 2



5. The Marketing Process

a. Once the strategic plan has defined the company‟s overall mission and objectives, marketing plays a role in carrying out these objectives.

b. The marketing process is the process of analyzing market opportunities, selecting target markets, developing the marketing mix, and managing the marketing effort. c. Target customers stand at the center of the marketing process. The goal is to make strong and profitable connections with these customers.

*****Use Key Term marketing process Here; Use Concept Connection #4 Here and

in the sections that follow; Use Figure 2.5 Here;

Use Power Point 2-16 Here*****



Connecting with Consumers

d. To succeed in today‟s competitive marketplace, companies must be customer centered and win customers from competitors and keeping them by delivering greater value.

1). Sound marketing requires a careful, deliberate analysis of consumers.

2). Since companies cannot satisfy all consumers in a given market, they must divide up the total market (market segmentation), choose the best segments (market targeting), and design strategies for profitably serving chosen segments better than the competition (market positioning).

e. Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing mixes.

1). Every market has market segments, but not all ways of segmenting a market are equally useful.

2). A market segment consists of consumers who respond in similar ways to a given set of marketing efforts.

3). Smart companies focus their efforts on meeting the distinct needs of one or more market segments.

f. Market targeting is the process of evaluating each market segment‟s attractiveness and selecting one or more segments to enter.

1). A company should target segments in which it can generate the greatest customer value and sustain it over time.

2). A company may decide to serve only one or a few special segments, or perhaps it might decide to offer a complete range of products to serve all market segments.

g. Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. 1). In positioning a product, a company first needs to identify possible competitive advantages upon which to build the position.

2). To gain competitive advantage, the company must offer greater competitive advantage to the target segment. Effective positioning begins with actually differentiating the company‟s marketing offer so that it gives consumers more value than they are offered by the competition.

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3). The company‟s entire marketing program should support the chosen positioning strategy.

*****Use Key Terms market segmentation, market segment, market targeting, and marketing positioning Here; Use Issues for Discussion #6 Here; Use Company

Case #2 Here; Use Power Point 2-17 Here*****



Marketing Strategies for Competitive Advantage

h. Marketing strategies must be geared to the needs of consumers and also to the strategies of competitors.

i. Designing competitive marketing strategies begins with thorough competitor analysis. The company should ask: 1). Who are our competitors?

2). What are their objectives and strategies? 3). What are their strengths and weaknesses?

4). How will they react to different competitive strategies we might use?

j. The competitive marketing strategy a company adopts depends on its industry position.

1). Market-leaders are known leaders in the industry.

2). Market-challengers are runner-up companies that aggressively attack competitors to get more market share.

3). Market-followers seek stable market shares and profits by following competitors‟ product offers, prices, and marketing programs.

4). Market-nichers specialize in serving market niches that major competitors overlook or ignore. They avoid direct confrontation. (****More information will follow in Chapter 18****)

*****Use Issues for Discussion #7 Here; Use Marketing Application #2 Here; Use

Power Point 2-18 Here*****



Developing the Marketing Mix

k. Once the company has decided on its overall competitive marketing strategy, it is ready to begin planning the details of the marketing mix.

l. The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market.

m. The marketing mix consists of everything that the firm can do to influence the demand for its product. These variables are often referred to as the “four Ps.”

1). Product stands for the “goods-and-service” combination the company offers to the target market.

2). Price stands for the amount of money customers have to pay to obtain the product.

3). Place stands for company activities that make the product available to target consumers.

4). Promotion stands for activities that communicate the merits of the product and persuade target consumers to buy it.

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*****Use Power Point 2-19 Here*****



n. An effective marketing program blends all of the marketing mix elements into a coordinated program designed to achieve the company‟s marketing objectives by delivering value to consumers.

o. Some critics feel that the “four Ps” may omit or under-emphasize certain

Important activities. However, most of these activities are listed as sub-categories under the “four Ps.”

p. One concern is valid. The “four Ps” takes a seller‟s view of the market, not the buyer‟s view. From the buyer‟s point of view, the “four Ps” should be “four Cs”: 1). Product = Customer solution. 2). Price = Customer cost. 3). Place = Convenience.

4). Promotion = Communication.

q. Marketers would do well to think through the “four Cs” and then build the “four Ps” on that platform.



*****Use Key Term marketing mix Here; Use Figure 2.6 Here; Use Company Case

#2 Here; Use Power Point 2-20 Here*****



6. Managing the Marketing Effort

a. The company wants to design and put into action the marketing mix that will best achieve its objectives in target markets. This involves four marketing management functions.

b. The four functions are: analysis, planning, implementation, and control.



*****Use Concept Connection #5 Here; Use Figure 2.7;

Use Power Point 2-21 Here*****



Marketing Analysis

c. Marketing analysis involves a complete analysis of the company‟s situation. d. The company performs analysis by:

1). Identifying environmental opportunities and threats. 2). Analyzing company strengths and weaknesses.

3). Feeding information and other inputs to each of the other marketing manage- ment functions.

(****More information will be provided in Chapter 4****)

Marketing Planning

e. Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives.

f. A detailed plan is needed for each business, product, or brand.

g. A product or brand plan should contain the following sections: executive summary, current marketing situation, threats and opportunity analysis,

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objectives and issues, marketing strategies, action programs, budgets, and controls.

h. The executive summary is a short summary of the main goals and recommendations to be presented in the plan.

i. The main section of the plan presents a detailed analysis of the current marketing situation as well as potential threats and opportunities.

i. It next states major objectives for the brand and outlines the specifics of a marketing strategy for achieving them.

k. Marketing strategy is the marketing logic by which the business unit hopes to achieve its marketing objectives. Strategies should be created for all marketing mix components.

l. Specific action programs should be developed that answer what, when, who and why, and how much. Planning deals with the what and why.

m. The marketing budget is a section of the marketing plan that shows projected revenues, costs, and profits.

n. The last section of the marketing plan outlines the controls that will be used to monitor progress. This allows for progress checks and corrective action.



*****Use Key Term marketing strategy Here; Use Concept Connection #5 Here; Use

Table 2.2 Here; Use Power Point 2-22 Here*****



Marketing Implementation

o. Marketing Implementation is the process that turns marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives. p. Implementation addresses the who, where, when, and how.

q. One firm can have essentially the same strategy as another, yet win in the market- place through faster or better execution. r. Successful implementation depends on:

1). An action program that pulls all of the people and activities together. 2). A sound formal organizational structure.

3). The company‟s decision and reward structure (HRM functions and procedures).

4). The firm‟s marketing strategies fitting with its company culture (the shared system of values and beliefs).



*****Use Key Term marketing implementation Here; Use Issues for Discussion #8

Here; Use Concept Connection #5 Here; Use Power Point 2-23 Here*****

Marketing Department Organization

s. The company must design a marketing department that can carry out marketing analysis, planning, implementation, and control. t. Formats for organizing the department include:

1). The functional organization where different marketing activities are headed by a functional specialist (such as a sales manager, advertising manager, etc.).

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2). The geographic organization where sales and marketing people are assigned to specific countries, regions, or districts.

3). A product management organization where a product manager develops a complete strategy for a product or brand.

4). A market management organization where a specific market plan is developed for each specific market.

5). A combination plan where large companies many times combine elements of any of the above.

*****Use Concept Connection #5 Here; Use Marketing Highlight 2.3 Here; Use

Power Point 2-24 Here*****



Marketing Control

u. Marketing control is the process of evaluating the results of marketing strategies and plans and taking corrective action to ensure that marketing objectives are attained.

v. Implementation requires four steps:

1). Set specific goals (What do we want to achieve?). 2). Measure performance (What is happening?). 3). Evaluate performance (Why is it happening?).

4). Take corrective action (What should we do about it?). w. Two broad forms of control are important:

1). Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary.

2). Strategic control involves looking at whether the company‟s basic strategies are well matched to its opportunities. The major tool for accomplishing this form of control is the marketing audit.

*****Use Concept Connection #5 Here; Use Figure 2.8 Here; Use Company Case #2

Here; Use Power Point 2-25 Here*****



x. The marketing audit is a comprehensive, systematic, independent, and periodic examination of a company‟s environment, objectives, strategies, and activities to determine problem areas and opportunities. The purpose is to recommend a plan of action to improve the company‟s marketing performance.

1). The marketing plan covers all major marketing areas of a business, and not just trouble spots.

2). If done correctly, the audit is normally conducted by an objective and experienced outside party who is independent of the marketing department.

*****Use Key Terms marketing control and marketing audit Here; Use Table 2.3

Here*****



The Marketing Environment

y. The company must carefully analyze its environment in order to avoid the threats

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and take advantage of the opportunities. Areas to be analyzed in the environment normally include:

1). Forces close to the company such as its ability to serve customers, other company departments, channel members, suppliers, competitors, and publics. 2). Broader forces such as demographic and economic forces, political and legal forces, technological and ecological forces, and social and cultural forces. (****This material will be more broadly covered in Chapter 3****)

*****Use Marketing Application #1 Here; Use Review of Concept Connections

Power Point 2-26 Here*****



ISSUES FOR DISCUSSION

1. Define strategic planning. List and briefly review the four steps of the strategic planning process. Strategic planning is the process of developing and maintaining a strategic fit between the organization‟s goals and capabilities and its changing marketing opportunities. Strategic planning sets the stage for the rest of the planning in the firm. The four steps are: defining a clear company mission, setting supporting company objectives, designing a sound business portfolio, and coordinating functional strategies. See Figure 2-1 for additional information. The mission is a statement of the organization‟s purpose. The company‟s mission needs to be turned into detailed supporting objectives for each level of management. Guided by the company‟s mission statement and objectives, management now must plan its business portfolio--the collection of businesses and products that make up the company. Lastly, major functional strategies (such as those for marketing, finance, manufacturing, etc.) must be devised and implemented.

2. In a series of job interviews, you ask three recruiters to describe the missions of their companies. One says, “To make profits.” Another says, “To create customers.” The third says, “To fight world hunger.” Analyze and discuss what these mission statements tell you about each of the companies. Which statement most closely matches the four criteria that all good mission statements should meet? Mission statements should be market- or need-oriented rather than product- or technology-oriented. They should not be either too narrow or too broad. Mission

statements should be specific, realistic, and motivating. By these criteria, the first two examples in question 2 are poor mission statements. Every firm wants "To make profits," but this statement tells you nothing about the firm's business, its customers, or anything else. "To create customers" is a more marketing-oriented view of the firm's mission, but it is a universal business goal, not a specific firm's mission. The third example, "To fight world hunger," is not very specific, but it does describe what the firm wants to accomplish. This mission statement would be more

appropriate for a conglomerate selling fertilizer, pesticides, food distribution and storage

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systems, and so on, than for a company aiming to improve agricultural productivity through improved fertilizers.

To help students understand mission statements, place them in small groups and ask them to write a mission statement for their university or college. Once this is done have them compare their work against the published mission statement in the university or college bulletin. What are the differences? Is the published statement better? Use the four criteria to aid in the critique process. This brief learning activity will aid the

students in understanding not only how to write a mission statement but how to critique one as well. See Table 2-1 and Marketing Highlight 2-1 for additional information on missions and mission statements.

3. An electronics manufacturer obtains the semiconductors it uses in production from a company-owned subsidiary that also sells to other manufacturers. The subsidiary is smaller and less profitable than are competing producers, and its growth rate has been below the industry average during the past five years. Into which cell of the BCG growth-share matrix does this strategic business unit fall. What should the parent company do with this SBU? Why? The first part of this question involves classifying the SBU into one of the four cells of the Boston Consulting Group matrix. As described in the question, the SBU is smaller than competing firms, so it is classed as either a Dog or a Question Mark. Semiconductors are a high-growth industry, so the SBU is a Question Mark. The second part of the question is designed to get students thinking about

limitations of the matrix approaches to portfolio analysis. This SBU sounds like a good prospect for divestment or phasing out, though the company could consider investing enough in it to build it into a Star. But as a guaranteed source of supply for a critical element of other products of the firm, the SBU may be an important resource of the company. As noted by George S. Day ("Diagnosing the Product Portfolio," Journal of Marketing, April 1977, pp. 29-38), $20,000 worth of a particular raw material can affect the production of $10,000,000 worth of finished parts. Therefore, a company might be willing to lose money on a subsidiary to avoid price gouging by suppliers or possible production delays in its major line of business. In today‟s competitive global

environment, securing lines of supply (often through alliances) is critical. This fact would more than likely impact the decision made by the firm described in the example. See Figure 2-2 for additional information on the BCG approach.

4. Compare the General Electric strategic business-planning grid and the Boston Consulting Group approach? How do the industry attractiveness and business

strength dimensions of the GE grid compare with the market growth rate and relative market share dimensions of the BCG grid? What other similarities and differences do you see? Where would a SBU located in the yellow zone of the GE grid most likely be located in the BCG grid? What strategy might this suggest for the SBU?

Like the BCG approach, the GE strategic business-planning grid uses a matrix with two dimensions--one representing industry attractiveness (the vertical axis) and one representing company strength in the industry (the horizontal axis). The best businesses are those located in the highly attractive industries where the company has high business

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strength. See Figure 2-2 (BCG approach) and Figure 2-3 (GE approach) for additional details.

The GE approach considers many factors besides market growth rate as part of industry attractiveness. It uses an industry attractiveness index made up of market size, market growth rate, industry profit margin, amount of competition, seasonality and cyclicality of demand, and industry cost structure. Each of these factors are then rated and combined in an index of industry attractiveness.

For business strength, the GE approach again uses an index rather than a simple measure of relative market share. The business strength index includes factors such as the company„s relative market share, price competitiveness, product quality, customer and market knowledge, sales effectiveness, and geographic advantages. These factors are rated and combined in an index of business strength, which can be described as strong, average, or weak.

Note that the GE grid is divided into three zones. The green cells at the upper left include strong SBUs in which the company should invest and grow. The yellow diagonal cells contain SBUs that are medium in overall attractiveness. The company should maintain its level of investment in these SBUs. The three red cells at the lower right indicate SBUs that are low in overall attractiveness. The company should give serious thought to harvesting or divesting these SBUs.

A company that is positioned in the yellow zone on the GE grid would most likely appear as a Question Mark or perhaps a Cash Cow in the latter phases of its growth cycle in the BCG grid. The answer to a product‟s proper position with respect to the BCG grid somewhat depends on the cell in the yellow zone in which our fictious company appears. Students can speculate on the strategy for this type of firm (again dependent on where in the yellow zone the company appears), however, a maintenance is the usual course for this type of product. This could be achieved through market penetration or market development. Product development might prove to be too resource intensive. By

dividing students into small groups, the answer to this question will come back as diverse mixture of proposed strategies. Students can then debate to derive the superior strategy for the firm in question. This makes for a good class discussion and illustration of the two planning grids.

5. Beyond evaluating current businesses, designing the business portfolio involves finding businesses and products the company should consider in the future. Apply the product/market expansion grid to assess how one of the following companies might grow: (a) Dell Computer, (b) Kodak, (c) Levi-Strauss, or (d) e*Trade online investment services. Be sure that your answer covers all the cells in the grid.

The text uses Starbuck‟s to illustrate the product/market expansion grid. The

students are free to pick from the available choices suggested in this question, however, the instructor should be careful to monitor the application of the choice(s) or give specific directions on how this question should be answered. Each of the cells of the expansion grid are summarized below. The first cell is market penetration. Here the company attempts to make more sales to present customers without changing products in any way. For example, the

company might cut prices, increase advertising, get more of its products into more stores,



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Principles of Marketing: Chapter 2

or obtain better store displays and more point-of-purchase merchandising from its retailers. The second cell is market development. Here the company attempts to identify and develop new markets for its current products. For example, managers could review new demographic markets or new geographic markets. The third cell is product development. Here the company offers modified or new products to current markets. For example, the company could offer products in new styles, sizes, and colors. In addition, the company could offer new lines and launch new brands of their basic products that appeals to different users. Lastly, the company could attempt to obtain more business from current customers. The final cell is diversification. Here the company usually starts up or buys

businesses outside of its current products and markets--the company tries something new. Another method of answering this question would be to assign each of the choices to a separate small group, have the group develop the answer, and then discuss each approach in class. Illustrations can then be amplified and critiqued. See Figure 2-4 and Marketing Highlight 2-2 for additional details on the product/market expansion grid.

6. Today’s companies must be customer centered in order to win, keep, and grow customers. This involves careful market segmentation, targeting, and positioning. Briefly describe these three marketing process steps and apply them to AT&T, MCI, or Sprint in the long-distance communication market. Based on advertisements and other information, assess each company’s targeting and position strategy.

Sound marketing requires a careful analysis of consumers. In order to connect

profitably with consumers in a given market, a company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments better than its competitors do. This process involves three steps: market segmentation, market targeting, and market positioning.

Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate

products or marketing mixes. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.

Market targeting involves evaluating each market segment‟s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Thus, marketers plan positions that distinguish their products from competing brands and give them the greatest strategic advantage in their target markets.

Since most students have telephone (or cell phone) connections, they are usually familiar with the three long-distance carriers mentioned in the question. AT&T has been portrayed as the industry giant that (even though efficient) does not care as much about consumers and charges higher rates than the two other competitors. Rightly or wrongly, this is the image of AT&T among most younger people. MCI and Sprint have

emphasized family plans, calling buddies, clarity of signal, and consumer responsiveness. However, students may have also found that MCI and Sprint hassle friends of customers to join phone service. There is probably no better example of an industry that uses “in

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Principles of Marketing: Chapter 2

your face” advertising with respect to competition that the long-distance communication industry. The amount of “disinformation” is almost staggering. Students should be

reminded to examine perceived strategy and not just concentrate on personal experiences with these carriers. Since the youth and student markets are highly targeted by all three carriers, it should be easy for the students to devise and plot targeting and positioning strategies for the three carriers. Refer to the section of the text for additional illustrations or see Figure 2-5 for additional information.

7. The competitive marketing strategy is best for a company depends on its industry position. Which of the four possible strategies discussed in the chapter would be best for each of the following firms: (a) the Harlem Globetrotters, b) General Electric’s small appliances division, c) Fuji film, and d) Barnes & Noble.com?

Students should recognize the four competitive strategies based on industry position: market leader strategies, market challengers, market followers, and market nichers. Briefly, each strategy is described below. See Chapter 18 for more details.

A firm that dominates a market can adopt one or more of several market leader strategies. In the examples listed, General Electric‟s small appliances division is an industry leader. No one matches their product array, quality, depth of line, extent of distribution, or promotional resources.

Market challengers are runner-up companies that aggressively attack competitors to get more market share. In the examples, listed Fuji film is an intense rival of Kodak. It has been eroding Kodak‟s market share for several years and is a winner in many international markets. Some students will also say that Barnes & Noble.com is also a market challenger. A good case could be made that B&N is really pushing industry leader Amazon.com (because of the rapidly changing online market, this certainly might be true), however, at the time of this writing, Barnes & Noble.com would more correctly be labeled as a market follower.

Market follower strategies seek stable market shares and profits by following

competitors‟ product offers, prices, and marketing programs. A case could be made that Barnes & Noble.com still relies heavily on their retail stores to carry the bulk of their marketing effort. However, as online marketing expands, B&N is forecasted to pour more resources into the online effort. If this occurs, they will soon be classed as a market challenger behind Amazon.com. At present Barnes & Noble is trying a new strategy that might bridge the gap between the two distribution forms. One can order a book or CD via the Internet from the Web site and get one-day delivery from a store in one‟s local area (if there are stores available). This overcomes the time-lag disadvantage of ordering online (or incurring expensive delivery charges).

Market nichers specialize is serving market niches that major competitors overlook or ignore. In the examples listed, the Harlem Globetrotters would be an example of a market nicher. The Globetrotters have a rich and long history. They are pure entertainers in addition to being excellent basketball players. They take their show to the market (especially smaller markets) and often combine their effort with inspirational messages from the Fellowship of Christian Athletes (a worthy and readily available competitor). The Globetrotters also travel abroad, play throughout the entire year, and provide excellent and inexpensive family entertainment.



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Principles of Marketing: Chapter 2

Students may make other choices, however, if this is the case be sure to examine the justification provided and the circumstances or line of reasoning provided.

8. What activities make up the implementation phase of marketing management? Is it better to have a good marketing strategy that is poorly implemented, or a mediocre strategy that is well implemented?

Marketing implementation is the process that turns marketing plans into marketing actions in order to accomplish strategic marketing objectives. Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work. Whereas marketing planning addresses the what and why of marketing planning, implementation addresses the who, where, when, and how.

For implementation to be successful, people at all levels of the marketing system must work together to implement marketing plans and strategies. In addition, successful marketing implementation depends on how well the company blends its people, organizational structure, decision and reward systems, and company culture into a cohesive action program that supports its strategies.

To answer the thought question provided, students should carefully consider the old adage “Best laid plans often go astray.” Poor implementation almost always dooms a great strategy or plan unless there is some mechanism by which the organization can adapt, reorganize, or change quickly. Implementation is difficult--it is often easier to think up good marketing strategies than it is to carry them out. Even though a mediocre strategy is not to be condoned, successful implementation can often improve the original concept during the implementation process--thinking on your feet so to speak. Students should be asked to support either argument and defend their position.

MARKETING APPLICATIONS

Marketing Applications (with comments and teaching suggestions) are found in the F.A.C.T.S. (Faculty Activities and Classroom Teaching Strategies) supplement which accompanies the Instructor’s Resource Manual. Applications are generally best used after completion of chapter material. Since most Applications require thought and time to answer, it usually best to assign the material in advance of chapter coverage. These Applications may be done individually or in small groups.

POWER POINT AND TRANSPARENCY MASTERS

Visual reproductions of Power Point electronic slides (Transparency Masters) for this chapter are found in a special section at the end of the F.A.C.T.S. (Faculty Activities and Classroom Teaching Strategies) supplement which accompanies the Instructor’s

Resource Manual. Specific references for the Power Point slides (Transparency Masters) are found in the Chapter Outline section of this chapter. Note the special designations for the Discussion Connections Power Point (a discussion-oriented power point slide) and the Review of Concept Connections Power Point (a summary of key learning objectives for the chapter) are found in the body of the Chapter Outline.

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Principles of Marketing: Chapter 2

COMPANY CASE COMMENTS

Use Company Case 2 with Chapter 2. See Company Case Comments section at the end of the Instructor’s Resource Manual. This case is best used following the section (a) Defining the Company’s Business and Mission, (b) Developing Growth Strategies in the Age of Connectedness, (c) Market Positioning, (d) Developing the Marketing Mix, (e) Strategic Control, or (f) after all of the chapter‟s key topics have been covered.

VIDEO CASE COMMENTS

See the special Video Case Grid at the end of the Instructor‟s Resource Manual for aid in determining which Video Case can best be used with Chapter 2. If the instructor feels that it is too early to introduce a video case in this chapter, it can be used later at the discretion of the instructor. See the special section on Video Cases at the end of this Instructor’s Resource Manual for a synopsis and comments on the video cases.

INTERNET CONNECTIONS

Note that a suggested usage location point(s) is provided in the Chapter Outline for the Internet Connection found at the end of Chapter 2. The Internet Connection can also be used after the chapter is completed. For more information on Internet applications, projects, and learning activities see the Savvy Sites section of the chapter or the F.A.C.T.S. (Faculty Activities and Classroom Teaching Strategies) supplement.



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