END OF CHAPTER MATERIAL
Discussion Questions
2-1 Define strategic planning and briefly describe the four steps that lead managers and the firm
through the strategic planning process. Discuss the role marketing places in this process.
(Objective 1) (AACSB: Communication).
Answer:
Strategic planning is the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities. At the corporate
level, the company starts the strategic planning process by defining its overall purpose and
mission (see Figure 2.1). This mission then is turned into detailed supporting objectives that
Marketing plays a key role in the company’s strategic planning in several ways: (1) it provides a
guiding philosophy—the marketing concept—that suggests the company strategy should revolve
2-2 Describe how a company’s mission statement and objectives affect the way management plans
its business portfolio. (AACSB: Communication; Reflective Thinking)
Answer: Guided by the company’s mission statement and objectives, management plans its
business portfolio, or the collection of businesses and products that make up the company. The
2-3 Describe the differences between a value chain and a value delivery network. (AACSB:
Communication; Reflective Thinking)
Answer:
Each company department can be thought of as a link in the company’s internal value chain. That
is, each department carries out value-creating activities to design, produce, market, deliver, and
support the firm’s products. The firm’s success depends not only on how well each department
2-4 Discuss how a new brand manufacturer would go about defining their market segments and
then begin to target them. (AACSB: Communication; Reflective Thinking)
Answer: The manufacturer would use market segmentation to profile and define their target
markets. They would then have to decide whether to target more than one segment. It needs to
2-5 Identify different marketing department organisation and suggest why they are chosen. (AACSB:
Communication; Reflective Thinking)
Answer: Marketing departments can be organized in several different ways. A function
organization suggests that each discrete marketing discipline is separate and headed by a specialist
in the field (e.g. sales, advertising, and public relations). This approach is adopted by large
Critical Thinking Exercises
2-6 As a student you have individual experiences with your college or university. These may include
managing the application process, enrolling, orientation, choosing a major, setting schedules, and
many more. Conduct a SWOT analysis for your school from your perspective. Discuss how your
SWOT analysis would provide strategic insight for future decisions at your college or university.
(AACSB: Communication; Reflective Thinking)
Answer:
Students’ analyses and recommendations will vary, but they should be aware of the elements of a
marketing plan. A SWOT analysis evaluates an organization’s overall strengths (S),
weaknesses (W), opportunities (O), and threats (T) (see Figure 2.7). Strengths include internal
capabilities, resources, and positive situational factors that may help the college or university to
Students may examine program and course offerings, scheduling options, campus facilities,
Colleges and universities benefit from understanding how their student populations value what
Objectives should logically follow conclusions from the SWOT analysis, and the strategy
2-7 Examine the integrated marketing mix of the Japanese clothing brand UNIQLO. What are their
key marketing mix ingredients? What about their brand, service and IMC? (AASCB:
Communication)
Answer: UNIQLO has a tried-and-tested integrated marketing mix that it adapts to some extent
Product – stylish, affordable, high quality, specially designed colours and fabrics
Price – mid-range pricing, overseas territories are more expensive than Japanese prices
Place – brand-owned, high profile, flagship stores, own delivery chain
2-8 Create a mission statement for a nonprofit organization you would be interested in starting. Have
another student evaluate your mission statement while you evaluate the other student’s statement,
suggesting areas of improvement. (AACSB: Communication; Reflective Thinking)
Answer:
Some organizations define their missions myopically in product or technology terms, but mission
statements should be market oriented and defined in terms of satisfying basic customer needs
—even for non-profit organizations. For example, a nonprofit organization might be a house that
offers emergency shelter for people in need, but defining its mission as a house could be too
APPLICATIONS AND CASES
Online, Mobile, and Social Media Marketing: Google’s (Alphabet’s) Mission
Founded in 1998 as an Internet search engine, Google’s mission statement remains the same to this
day: to “organize the world’s information and make it universally accessible and useful.” Google is
certainly successful, with revenues growing from $3.2 billion in 2002 to $74.5 billion in 2015, 90
percent of which comes from advertisers. Google is expanding rapidly into other areas well beyond
its search engine, such as self-driving cars, smart contact lenses that measure a person’s blood sugar
levels, Internet-bearing balloons to create Internet hotspots anywhere on earth, and even magnetic
nanoparticles to search for disease within the human bloodstream. In fact, Google has innovated into
so many diverse new ventures that it recently created a broader organization—a parent holding
company called Alphabet—to contain them all. Google/Alphabet has been on a buying frenzy
recently, purchasing security, biotech, and robotic companies in a quest to capitalize on the Internet of
Things (IoT) phenomenon. Experts predict there will be 25 million connected devices in our homes
and workplaces by 2020. Google recently announced its new IoT operating system, dubbed Brillo
(after the Brillo scrubbing pad because it is a scrubbed-down version of its Android operating
system), targeted to developers of smart products connected to the Internet, such as ovens,
thermostats, and even toothbrushes. It’s also developed Weave, the corresponding IoT language that
will allow smart products to speak to each other. Perhaps one day you will be sitting in your
Google/Alphabet self-driving car, streaming the news, checking your blood sugar, and cooling your
home by turning down your thermostat on the way home from work.
2-9 Conduct research on Google/Alphabet to learn more about its products and services. Some say the
time has come for Google to create a new mission statement. Do you agree? Explain. (AACSB:
Communication; Reflective Thinking)
Answer:
For a list of Google’s current products, see www.google.com/about/products/. Another source
lists Google’s products as well as discontinued products:
http://en.wikipedia.org/wiki/List_of_Google_products. A list of Google’s mergers and
acquisitions since 2001 can help students see the direction the company might be heading:
Students could argue that even though Google’s/Alphabet’s products have expanded to tangible
products, the focus is still on making information useful. For example, self-driving cars rely on
organizing information from the Internet (such as Google Maps) and sensors around the car to
2-10 Create a new mission statement for Google/Alphabet that will take it through the rest of this
century. (AACSB: Communication; Reflective Thinking)
Answer:
Student answers will vary. However, this is an opportunity for the students to review all the
directions in which Google/Alphabet may devote resources in the future. A new mission
statement will need to account for the current structure of the company and its products, as well
Marketing Ethics: Creating Value or Distracting Consumers?
In 1966, Time magazine made a prediction of the retail world in 2000. It confidently predicted that
remote shopping, although feasible, would never be likely to catch on. Time made this prediction
based on the reasoning that women, in particular, like to handle merchandise before they purchase it.
Not only was the prediction hugely inaccurate, it was chauvinistic as well. Global online sales are
now in excess of $500 billion. It is not only men who spend massive sums online, but also women, in
direct contradiction of Time’s prediction. In contrast to this poor prediction, there are cases of articles
in the press correctly predicting digital trends in the future, but many predictions still fall short of
reality. For example, Robert Metcalf, the inventor of Ethernet, made a prediction in 1995 that, within
a year, the Internet would spectacularly collapse. In 2007, The New York Times predicted that Twitter
would never be any more relevant to modern-day communication than an old-fashioned short-wave
radio. Tuning into predictions can be dangerous, but should they really be ignored?
2-11 In some cases, short-term predictions are far more reliable than long-term ones. To what extent
should businesses base their long-term planning on the views of “experts”? (AACSB:
Communication; Ethical understanding and reasoning)
Answer:
Refer to the Mylab for answers to this and all starred Mylab questions.
2-12 Business Monitor International is one of the several organizations that seek to predict future
trends in sectors, countries, and financial markets. How are these services sold to businesses as
legitimate business planning tools. (AACSB: Communication; Reflective Thinking)
Answer:
A whole industry has been built around the prediction and forecasting business. Business Monitor
International is trusted by many leading global brands. They operate in nearly 200 different
countries and have the advantage of being able to see the bigger picture than a global company
Marketing by the Numbers: Apple vs. Microsoft
In 2014, Apple reported profits of more than $50 billion on sales of $182 billion. For that same
period, Microsoft posted a profit of almost $30 billion on sales of $88 billion. So Apple is a better
marketer, right? Sales and profits provide information to compare the profitability of these two
competitors, but between these numbers is information regarding the efficiency of marketing efforts
in creating those sales and profits. Appendix 2, Marketing by the Numbers, discusses other marketing
profitability measures beyond the return on marketing investment (marketing ROI) measure described
in this chapter. Review the Appendix to answer the questions using the following information from
the two companies’ incomes statements (all numbers are in thousands):
Apple Microsoft
Sales $182,795,000 $86,833,000
Gross Profit $ 70,537,000 $59,899,000
Marketing Expenses $ 8,994,750 $15,474,000
Net Income (Profit) $ 52,503,000 $27,759,000
2-13 Calculate profit margin, net marketing contribution, marketing return on sales (or marketing
ROS), and marketing return on investment (or marketing ROI) for both companies. Which
company is performing better? (AACSB: Communication; Use of IT; Analytic Thinking)
Answer:
Profit
Profit Margin = —————
Net sales
$52,503,000
Profit MarginApple = ——————— = 0.2872 = 28.72%
$86,833,000
Net Marketing Contribution (NMC) = net sales cost of goods sold marketing expenses
Because Gross Profit = net sales cost of goods sold, students just need to subtract marketing
expenses from gross profit:
net marketing contribution
Marketing ROS = ———————————
net sales
$182,795,000
$44,425,000
net marketing contribution
Marketing ROI = ———————————
marketing expenses
$8,994,750
$44,425,000
$15,474,000
While Apple has larger absolute sales, gross profits, expenses, net marketing contribution, profits,
and marketing ROI, Microsoft is performing more efficiently as measured by the profit margin and
2-14 Go to Yahoo! Finance (http://finance.yahoo.com/) and find the income statements for two other
competing companies. Perform the same analysis for these companies that you performed in the
previous question. Which company is doing better overall and with respect to marketing? For
marketing expenses, use 75 percent of the company’s reported “Selling General and
Administrative” expenses. (AACSB: Communication; Analytic Reasoning; Reflective Thinking)
Answer:
Students’ answers will vary. The information used in the previous question can be found at:
Apple – http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual
Income.
Company Case Notes
Facebook: Making the World More Open and Connected
Synopsis
As the world has rapidly adopted social media, Facebook dominates the market. In little more than a
decade, it has accumulated more than 1.6 billion active monthly users—more than 20 percent of the
world’s total population—and some 1.5 billion people now access the network on a mobile device.
More than one billion Facebook members log on daily and five new Facebook profiles are created
every second. In the United States, more collective time is spent on Facebook than on any other
website. Hordes of people have made Facebook their digital home 24/7. Having achieved such
phenomenal impact in such a short period of time, Facebook’s success can be attributed to tenacious
focus on its mission—“to give people the power to share and make the world more open and
connected.”
Teaching Objectives
The teaching objectives for this case are to:
1. Introduce students to the concepts of business and marketing strategy.
2. Highlight the difference between a mission statement and a market-oriented mission
statement.
3. Establish the role of goals and objectives in marketing strategy.
4. Help students understand the importance of the business portfolio in growing a business.
5. Introduce the marketing mix as a core concept of marketing.
Discussion Questions
2-18 Is Facebook’s mission statement market oriented? Explain.
A market-oriented mission statement is defined in terms of satisfying customer needs. Facebook’s
mission statement is: “to give people the power to share and make the world more open and
2-19 How is Facebook’s strategy driven by its mission?
Basically, everything that Facebook has done adheres to the mission of giving people the power
to share and making the world more open and connected. Internal features like News Feed,
picture and video posts, and endless settings that allow for the customization of a person’s
network are designed to enable individual users to quickly and easily share their lives with
2-20 Is it wise for Facebook to give away it technologies for free? Why or why not?
Different companies have taken different approaches to the “giving it away for free” part and
done so successfully. Apple is notorious for guarding its technologies and making them
proprietary. In its early years, this hindered its growth. But looking at where Apple is today, that
approach has clearly served it well. Facebook has taken a different approach. From its
beginning, Facebook wanted its platform(s) to be adopted and used by as many people as
2-21 As it moves forward in fulfilling its mission, what challenges does Facebook face in the future?
Facebook has had more failures of products and features than it has had successes. While
product failure is a challenge, Facebook sees such failures as just another part of building the
Likely Facebook’s greatest challenge is to avoid the “MySpace” syndrome. That is, the nature of
a social network product is such that users can abandon it as quickly as they adopt it. Everyone
was on MySpace. But almost overnight, nobody was on MySpace. Facebook has been careful to
Teaching Suggestions
The only way to really demonstrate the power of Facebook is to take students right inside that social
network that they are all too familiar with. The goal here is to guide them in a way that will give them
a different perspective. To do this, take them inside your own Facebook page. If this is not possible,
prepare ahead of time by asking for a student volunteer to serve as the tour guide of their own
Facebook page. Then ask the following questions to guide the discussion:
1. How many of you are on Facebook? How many of you check in to it at least a few times a
week? Daily? Why?
2. How is Facebook valuable to marketers?
This case was developed for use with Chapter 2. This case also works well with the new products
chapter (Chapter 9), the advertising chapter (Chapter 15), and the digital marketing chapter (Chapter
17).
Go to mymktlab.com for the answers to the following Assisted-graded writing questions:
2-22 How are marketing departments organized? Which organization is best?
2-23 Explain the roles of market segmentation, market targeting, differentiation, and positioning in
implementing an effective marketing strategy.
ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES
Projects
1. Pick a company or brand from which you buy frequently. Visit their Web site and find the
portfolio of products/services they sell. Pretend you are the company CEO. Categorize the
products into logical groupings that will become your strategic business units (SBUs). Using your
best judgment, allocate resources, using percentages, not dollar amounts, to each SBU (make sure
the total comes to 100 percent). (Objective 2)
2. Visit the Web site for Food Television’s Rachel Ray (http://www.rachaelray.com/). Consider
the market for television cooking programs. Who do you believe Rachel Ray is targeting? How is
this “product” differentiated in the marketplace? (Objective 4)
3. Get the current issue of Fortune magazine; most college libraries carry it. Read the cover
story and define the four Ps of one of the company’s products mentioned. Then define the four Cs
of the same product. Are there differences? (Objective 4)
Small Group Assignments
1. Form students into groups of three to five. Each group should read the opening vignette to the
chapter on Rolex. Each group should answer the following questions and then share their
findings with the class. (Objective 1)
a. Define Rolex’s niche in the coffeehouse marketplace, both in its early days and today.
b. Discuss the factors that allowed Rolex to maintain its exclusivity during the Global
Financial Crisis.
c. What comes next for Rolex in the 21st century? What new marketing strategies might
the company develop to remain fresh and relevant?
2. Form students into groups of three to five. Each group should read Real Marketing 2.2
“DuckDuckGo: Google’s Tiniest, Fiercest Competitor”. Each group should then answer the
following questions and share their findings with the class. (Objective 2)
a. Identify DuckDuckGo’s marketing strategy as it fits into market segmentation,
targeting, positioning, and differentiation, as shown in Figure 2.4, Managing
Marketing Strategies and the Marketing Mix.
b. How has DuckDuckGo been able to compete in an industry that is dominated by
behemoths such as Google and Bing?
Individual Assignments
1. Read the opening chapter vignette on Rolex. Think about the answers to the following
questions and share your answers with the class. (Objectives 1 and 4)
a. Recap the main points of Rolex’s Customer-Driven Marketing. How does it reflect
the elements of a customer-driven marketing strategy?
b. In your mind, who was the typical Rolex customer in the company’s early days? Who
is the typical customer today?
c. If Rolex were simply a watch company, how would you describe the company’s
direction and product offering today?
2. How would you describe a “market niche”? Describe four product/services that you own or
consume that you would consider to be “niche” products. Why do you believe this to be true?
(Objective 2)
Think-Pair-Share
Consider the following questions, formulate an answer, pair with the student on your right, share your
thoughts with one another, and respond to questions from the instructor.
1. Compare the Boston Consulting Group’s portfolio analysis method to the product/market
expansion grid. Which method would you rather use in your own business? Why? (Objective
2)
2. Why would a focus on the four Cs be more important than the four Ps? What is a
value-delivery network? How does this concept differ from that of the value chain?
(Objective 4)
3. Explain the concept of return on marketing. Why is this important? (Objective 5)
Outside Examples
1. The marketing mix is the set of controllable, tactical marketing tools the firm blends to
produce the responses it wants from the target market. These marketing tools can all be
collected into four sets of variables known as the “four Ps.” Consider Southwest Airlines
(www.southwest.com). Briefly describe the “four Ps” employed by Southwest. (Objective 4)
Possible Solution:
The product being offered, in the case of Southwest Airlines, is transportation. Just because it
is not a physical entity does not mean it is not a product. Price is the amount of money
customers pay in order to receive the product. In the case of airlines, this price is very volatile
and changes frequently based on availability, time from departure, and a myriad of other
2. The marketing mix is composed of the “four Ps.” Take a look at United Airlines
(www.united.com). Let’s concentrate on the P of pricing. Over a two-week period, track the
fares charged for a round-trip ticket between two of your favorite locations (such as Las
Vegas and Chicago). Be certain to keep your departure and return dates constant so that you
can observe how fares change over time. How can you explain the constant variation in fares?
(Objective 4)
Possible Solution:
Students will observe that there are wildly varying and constantly changing fares over time.
Students may come up with a variety of reasons for fare differences: time of day; first class