Chapter 01 - Strategic Planning and the Marketing Management Process
Chapter 1
Strategic Planning and the Marketing
Management Process
High-Level Chapter Outline
I. Introduction
II. The Marketing Concept
III. What is Marketing?
IV. What is Strategic Planning?
A. Strategic Planning and Marketing Management
B. The Strategic Planning Process
Organizational Mission
Organizational Objectives
Organizational Strategies
Choosing an Appropriate Strategy
Organizational Portfolio Plan
C. The Complete Strategic Plan
V. The Marketing Management Process
A. Situation Analysis
B. Marketing Planning
C. Implementation and Control of the Marketing Plan
D. Marketing Information Systems and Marketing Research
VI. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
A. Marketing’s Role in Cross-Functional Strategic Planning
Detailed Chapter Outline
I. The Marketing Concept
The marketing concept means that an organization should seek to make a profit by serving the
needs of customer groups.
The purpose of the marketing concept is to rivet the attention of marketing managers on serving
broad classes of customer needs (customer orientation), rather than on the firm’s current products
(production orientation) or on devising methods to attract customers to current products (selling
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Chapter 01 - Strategic Planning and the Marketing Management Process
orientation).
The principal task of the marketing function operating under the marketing concept is not to
manipulate customers to do what suits the interest of the firm, but rather to find effective and
efficient means of making the business do what suits the interest of the customer.
Effective marketing requires that consumer needs come first in organizational decision making.
One qualification to this statement deals with the question of a conflict between consumer wants
and societal needs and wants.
II. What is Marketing?
Everyone knows something about marketing because it has been a part of their lives since they
spent their first dollar.
Since everyone is involved in marketing, it seems strange that one of the persistent problems in the
field has been its definition.
The American Marketing Association defines marketing as, “the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.”
This definition takes into account all parties involved in the marketing effort: members of the
producing organization, resellers of goods and services, and customers or clients.
Major types of marketing includes: product, service, person, place, cause, and organization (see
Figure 1.1 for descriptions and examples).
III. What is Strategic Planning?
Before a production manager, marketing manager, and personnel manager can develop plans for
their individual departments, some larger plan or blueprint for the organization should exist.
Senior managers must look toward the future and evaluate the ability to shape their organization’s
destiny in the years and decades to come.
oThe output of this process is objectives and strategies designed to give the organization a
chance to compete effectively in the future.
The objectives and strategies established at the top level provide the context for planning in each
of the divisions and departments by divisional and departmental managers.
A. Strategic Planning and Marketing Management
Some of the most successful business organizations are here today because many years ago
they offered the right product at the right time to a rapidly growing market.
Over three-quarters of the 100 largest U.S. corporations of 70 years ago have fallen from the
list.
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Chapter 01 - Strategic Planning and the Marketing Management Process
oTheir managements failed to recognize that business strategies need to reflect changing
environments and emphasis must be placed on developing business systems that allow
for continuous improvement.
Present-day business managers realize that the true mission of the organization is to provide
value for three key constituencies: customers, employees, and investors.
Strategic planning includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve the
objective for the entire organization.
Strategic planning, if performed successfully, plays a key role in achieving equilibrium
between the short and the long term by balancing acceptable financial performance with
preparation for inevitable changes in markets, technology, and competition as well as in
economic and political arenas.
The strategic planning process is depicted in Figure 1.2.
In the strategic planning process the organization gathers information about the changing
elements of its environment.
This information is useful in aiding the organization to adapt better to these changes through
the process of strategic planning.
B. The Strategic Planning Process
The output of strategic planning is the development of a strategic plan.
Figure 1.2 indicates four components of a strategic plan: mission, objectives, strategies, and
portfolio plan.
Organizational Mission
The organization’s environment provides the resources that sustain the organization,
whether it is a business, a college or university, or a government agency.
Every organization exists to accomplish something in the larger environment and that
purpose, vision, or mission usually is clear at the organization’s inception.
As time passes, the organization expands, and the environment and managerial personnel
change. As a result, one or more things are likely to occur:
oThe organization’s original purpose may become irrelevant as the organization
expands into new products, new markets, and even new industries.
oThe original mission may remain relevant, but managers begin to lose interest in it.
oChanges in the environment may make the original mission inappropriate.
The result of any or all three of these conditions is a “drifting” organization, without a
clear mission, vision, or purpose to guide critical decisions.
oWhen this occurs, management must search for a purpose or emphatically restate
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Chapter 01 - Strategic Planning and the Marketing Management Process
and reinforce the original purpose.
The mission statement, or purpose, of an organization is the description of its reason for
existence.
oIn essence, the mission statement defines the direction in which the organization is
heading and how it will succeed in reaching its desired goal.
The basic questions that must be answered when an organization decides to examine and
restate its mission are:
oWhat is the business?
oWho is are the customers?
oWhat do customers value?
oWhat will the business be?
In developing a statement of mission, management must take into account three key
elements: the organization’s history, its distinctive competencies, and its environment.
oThe organization’s history—in formulating a mission, the critical characteristics and
events of the past must be considered.
oThe organization’s distinctive competencies—these are things that an organization
does well.
oThe organization’s environment—it dictates the opportunities, constraints, and
threats that must be identified before a mission statement is developed.
When completed, an effective mission statement will be focused on markets rather than
products, achievable, motivating, and specific.
Focused on Markets Rather than Products
oIn recent years, a key feature of mission statements has been an external rather than
internal focus.
oIn other words, the mission statement should focus on the broad class of needs that
the organization is seeking to satisfy (external focus), not on the physical product or
service that the organization is offering at present (internal focus).
Achievable
oThe mission statement should open a vision of new opportunities but should not
lead the organization into unrealistic ventures far beyond its competencies.
oIt should open a vision of new opportunities but should not lead the organization
into unrealistic ventures far beyond its competencies.
Motivational
oOne of the side (but very important) benefits of a well-defined mission is the
guidance it provides employees and managers working in geographically dispersed
units and on independent tasks.
oIt provides a shared sense of purpose outside the various activities taking place
within the organization.
Specific
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Chapter 01 - Strategic Planning and the Marketing Management Process
oThe mission statement must be specific to provide direction and guidelines to
management when they are choosing between alternative courses of action.
oHowever, it does not provide direction for management.
Organizational Objectives
Organizational objectives are the end point of an organization’s mission and are what it
seeks through the on-going, long-run operations of the organization.
The organizational mission is distilled into a finer set of specific and achievable
organizational objectives that must be specific, measurable, action commitments by which
the mission of the organization is to be achieved.
If formulated properly, they can accomplish the following:
oThey can be converted into specific action.
oThey will provide direction.
oThey can establish long-run priorities for the organization.
oThey can facilitate management control.
Organizational objectives are necessary in all areas that may influence the performance
and long-run survival of the organization.
Obviously, during the strategic planning process conflicts are likely to occur between
various functional departments in the organization.
The important point is that management must translate the organizational mission into
specific objectives that support the realization of the mission.
Organizational Strategies
Strategy involves the choice of major directions the organization will take in pursuing its
objectives.
As many as 70 percent of strategic plans fail because the strategies are not well defined
and, thus, could not to be implemented effectively.
Organizational Strategies Based on Products and Markets
oOne means to developing organizational strategies is to focus on the directions the
organization can take in order to grow.
oThe four paths an organization can take in order to grow are market penetration,
market development, product development, and diversification (Figure 1.4).
Market Penetration Strategies
oThese strategies focus primarily on increasing sales of present products to present
customers.
oTactics used to implement a market penetration strategy might include price
reductions, advertising that stresses the many benefits of the product, packaging the
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Chapter 01 - Strategic Planning and the Marketing Management Process
product in different-sized packages, or making it available at more locations.
Market Development Strategies
oAn organization would seek to find new customers for its present products through
market development.
oMarket development strategies involve much, much more than simply getting the
product to a new market.
Product Development Strategies
oThe new products developed would be directed primarily to present customers.
Diversification
oThis strategy can lead the organization into entirely new and even unrelated
businesses.
oIt involves seeking new products (often through acquisitions) for customers not
currently being served.
Organizational Strategies Based on Competitive Advantage
oMichael Porter developed this model for formulating organizational strategy that is
applicable across a wide variety of industries.
oPorter suggests that firms should first analyze their industry and then develop either
a cost leadership or a strategy based on differentiation.
oUsing a cost leadership strategy, a firm would focus on being the low-cost company
in its industry.
oUsing a strategy based on differentiation, a firm seeks to be unique in its industry or
market segment along particular dimensions that the customers value.
Organizational Strategies Based on Value
oAs competition increases, the concept of “customer value” has become critical for
marketers.
oIt focuses not only on customer needs, but also on the question, How can an
organization create value for their customers and still achieve their objectives?
oIt is unlikely that a firm will succeed by trying to be all things to all people.
oMany firms have succeeded by choosing to deliver superior customer value using
one of three value strategies-best price, best product, or best service.
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