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Chapter 2 ♦ Strategic Planning for Competitive Advantage 1
CHAPTER 2 Strategic Planning for Competitive Advantage
This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use to
deliver the content in Chapter 2.
• Lecture (for large sections) on page 4
• Company Clips (video) on page 5
• Group Work (for smaller sections) on page 8
Review and Assignments begin on page 9
Review questions
Application questions
Application exercise
Ethics exercise
Video assignment
Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 20
2 Chapter 2 ♦ Strategic Planning for Competitive Advantage
LEARNING OUTCOMES
2-1 Understand the importance of strategic planning
Strategic planning is the basis for all marketing strategies and decisions. These decisions affect the allocation of
resources and ultimately the financial success of the company.
2-2 Define strategic business units (SBUs)
Each SBU should have these characteristics: a distinct mission and a specific target market; control over
resources; its own competitors; a single business; plans independent from other SBUs in the organization. Each SBU
has its own rate of return on investment, growth potential, and associated risks, and requires its own strategies and
funding.
2-3 Identify strategic alternatives and know a basic outline for a marketing plan
Ansoff’s opportunity matrix presents four options to help management develop strategic alternatives: market
penetration, market development, product development, and diversification. In selecting a strategic alternative,
managers may use a portfolio matrix, which classifies strategic business units as stars, cash cows, problem children
(or question marks), and dogs, depending on their present or projected growth and market share. Alternatively, the
GE model suggests that companies determine strategic alternatives based on the comparisons between business
position and market attractiveness. A marketing plan should define the business mission, perform a situation
analysis, define objectives, delineate a target market, and establish components of the marketing mix. Other
elements that may be included in a plan are budgets, implementation timetables, required marketing research efforts,
or elements of advanced strategic planning.
2-4 Develop an appropriate business mission statement
The firm’s mission statement establishes boundaries for all subsequent decisions, objectives, and strategies. A
mission statement should focus on the market(s) the organization is attempting to serve rather than on the good or
service offered.
2-5 Describe the components of a situation analysis
In the situation (or SWOT) analysis, the firm should identify its internal strengths (S) and weaknesses (W) and also
examine external opportunities (O) and threats (T). When examining external opportunities and threats, marketing
managers must analyze aspects of the marketing environment in a process called environmental scanning. The six
macroenvironmental forces studied most often are social, demographic, economic, technological, political and legal, and
competitive.
2-6 Identify sources of competitive advantage
There are three types of competitive advantage: cost, product/service differentiation, and niche. Sources of cost
competitive advantage include experience curves, efficient labor, no frills goods and services, government subsidies,
product design, reengineering, production innovations, and new methods of service delivery. A product/service
differentiation competitive advantage exists when a firm provides something unique that is valuable to buyers beyond
just low price. Niche competitive advantages come from targeting unique segments with specific needs and wants. The
goal of all these sources of competitive advantage is to be sustainable.
2-7 Explain the criteria for stating good marketing objectives
Objectives should be realistic, measurable, time specific, and compared to a benchmark. They must also be consistent
and indicate the priorities of the organization. Good marketing objectives communicate marketing management
philosophies, provide management direction, motivate employees, force executives to think clearly, and form a basis for
control.
Chapter 2 ♦ Strategic Planning for Competitive Advantage 3
2-8 Discuss target market strategies
Targeting markets begins with a market opportunity analysis, or MOA, which describes and estimates the size and
sales potential of market segments that are of interest to the firm. In addition, an assessment of key competitors in
these market segments is performed. After the market segments are described, one or more may be targeted by the
firm.
2-9 Describe the elements of the marketing mix
The marketing mix is a blend of product, place, promotion, and pricing strategies (the four Ps) designed to produce
mutually satisfying exchanges with a target market. The starting point of the marketing mix is the product
offering—tangible goods, ideas, or services. Place (distribution) strategies are concerned with making products
available when and where customers want them. Promotion includes advertising, public relations, sales promotion,
and personal selling. Price is what a buyer must give up in order to obtain a product and is often the most flexible of
the four marketing mix elements.
2-10 Explain why implementation, evaluation, and control of the marketing plan are necessary
Before a marketing plan can work, it must be implemented—that is, people must perform the actions in the plan. The
plan should also be evaluated to see if it has achieved its objectives. Poor implementation can be a major factor in a
plan’s failure, but working to gain acceptance can be accomplished with task forces. Once implemented, one major
aspect of control is the marketing audit, and ultimately continuing to apply what the audit uncovered through postaudit
tasks.
2-11 Identify several techniques that help make strategic planning effective
First, management must realize that strategic planning is an ongoing process and not a once-a-year exercise. Second,
good strategic planning involves a high level of creativity. The last requirement is top management’s support and
participation.
TERMS
cash cow
market development
niche competitive advantage
competitive advantage
market opportunity analysis (MOA)
planning
control
market penetration
portfolio matrix
cost competitive advantage
marketing audit
problem child (question mark)
diversification
marketing mix (four Ps)
product development
dog
marketing myopia
product/service differentiation
competitive advantage
environmental scanning
marketing objective
evaluation
marketing plan
star
experience curves
marketing planning
strategic business unit (SBU)
implementation
marketing strategy
strategic planning
mission statement
sustainable competitive advantage
SWOT analysis
4 Chapter 2 ♦ Strategic Planning for Competitive Advantage
LESSON PLAN FOR LECTURE
Brief Outline and Suggested PowerPoint Slides:
Learning Outcomes and Topics
PowerPoint Slides
LO1 Understand the importance of strategic planning
2-1 The Nature of Strategic Planning
1: Strategic Planning for Competitive
Advantage
2: Learning Outcomes
3: Learning Outcomes
4: Learning Outcomes
5: The Nature of Strategic Planning
6: Strategic Planning is…
LO2 Define strategic business units (SBUs)
2-2 Strategic Business Units
7: Strategic Business Units
8: Characteristics of Strategic Business Units
(SBUs)
LO3 Identify strategic alternatives and know a basic outline
for a marketing plan
2-3 Strategic Alternatives
9: Strategic Alternatives
10: Ansoff’s Opportunity Matrix
11: Exhibit 2.1: Ansoff’s Opportunity Matrix
12: Exhibit 2.2: Innovation Matrix
13: Boston Consulting Group Portfolio Matrix
14: Exhibit 2.3: Portfolio Matrix for a Large
Computer Manufacturer
15: Portfolio Matrix Strategies
16: Exhibit 2.4: General Electric Model
17: What Is a Marketing Plan?
18: Why Write a Marketing Plan?
19: Exhibit 2.5: Elements of a Marketing Plan
LO4 Develop an appropriate business mission statement
2-4 Defining the Business Mission
20: Defining the Business Mission
21: Defining the Business Mission
LO5 Describe the components of a situation analysis
2-5 Conducting a Situation Analysis
22: Conducting a Situation Analysis
23: SWOT Analysis
24: Components of a SWOT Analysis
25: Environmental Scanning
LO6 Identify sources of competitive advantage
2-6 Competitive Advantage
26: Competitive Advantage
27: Competitive Advantage
28: Cost Competitive Advantage
29: Sources of Cost Reduction
30: Examples of Product/Service
Differentiation
31: Niche Competitive Advantage
32: Building Sustainable Competitive
Advantage
33: Sources of Sustainable Competitive
Advantage
Chapter 2 ♦ Strategic Planning for Competitive Advantage 5
LO7 Explain the criteria for stating good marketing objectives
2-7 Setting Marketing Plan Objectives
34: Setting Marketing Plan Objectives
35: Marketing Objectives
36: Criteria for Good Marketing Objectives
LO8 Discuss target market strategies
2-8 Describing the Target Market
37: Describing the Target Market
38: Describing the Target Market
39: Target Market Strategy
40: Target Market Strategy
LO9 Describe the elements of the marketing mix
2-9 The Marketing Mix
41: The Marketing Mix
42: The Marketing Mix is…
43: Marketing Mix: The “Four Ps”
44: Marketing Mix: The “Four Ps”
45: Marketing Mix: The “Four Ps”
46: Marketing Mix: The “Four Ps”
LO10 Explain why implementation, evaluation, and control of
the marketing plan are necessary
2-10 Following Up on the Marketing Plan
47: Following Up the Marketing Plan
48: Following Up the Marketing Plan
49: Post-audit Tasks
LO11 Identify several techniques that help make strategic
planning effective
2-11 Effective Strategic Planning
50: Effective Strategic Planning
51: Techniques for Effective Strategic Planning
52: Chapter 2 Video
Suggested Homework:
• This instructor manual contains assignments on the Nederlander Organization video and the Nintendo case.
• This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and other resources that can
be assigned or used as the basis for longer investigations into marketing.
LESSON PLANS FOR VIDEO
Company Clips
Segment Summary: The Nederlander Organization
The Nederlander Organization is a global theatre management company that backs productions, rents, and manages
Broadway style theatres. In this video, major managers discuss the strategic decisions behind the development of a
separate company to manage a loyalty program for theatre-goers. This company, Audience Rewards, allows a number of
theatre management companies to pursue strategic growth and other market opportunities.
These teaching notes combine activities that you can assign students to prepare before class, that you can do in class
before watching the video, that you can do in class while watching the video, and that you can assign students to
complete as assignments after watching the video.
During the viewing portion of the teaching notes, stop the video periodically where appropriate to ask students the
questions or perform the activities listed on the grid. You may even want to give the students the questions before
starting the video and have them think about the answer while viewing the segment. That way, students will be engaged
in active rather than passive viewing.
PRE-CLASS PREP FOR YOU:
PRE-CLASS PREP FOR YOUR STUDENTS:
6 Chapter 2 ♦ Strategic Planning for Competitive Advantage
• Preview the Company Clips video segment for
Chapter 2. This exercise reviews concepts for LO1,
LO6, LO9, and LO10.
• Review your lesson plan.
• Make sure you have all of the equipment needed to
show the video to the class, including the DVD and a
way to project the video.
You can also stream the video HERE
• Have students familiarize themselves with the
following terms and concepts: competitive advantage,
marketing mix, target market strategy, mission
statement, product/service differentiation, strategic
planning, and sustainable competitive advantage.
• Review both the Audience Rewards Web site
(www.audiencerewards.com) and Nederlander.com
with those concepts in mind.
VIDEO REVIEW EXERCISE
ACTIVITY
Warm Up
Begin by asking students “What is the goal of strategic planning?” [on the board, write
“long-term profitability and growth”]
In-class Preview
• Segue into a discussion of the elements that make up a marketing plan. Copy Exhibit
2.5 onto the board. Briefly explain each of the elements as you write them if students
have not become familiar with them from previous reading.
• Remind students to keep the marketing plan elements in mind as they review the
video.
• Compare the concepts of market strategy and market mix. Ask students to predict the
Nederlander Organization’s target market strategy from what they learned in the first
video.
Viewing
(solutions below)
1. Based on what you heard in the video, what was the Nederlander Organization’s
marketing objective in creating Audience Rewards?
2. Describe an element that makes up a competitive advantage for Audience Rewards.
Is it sustainable?
3. What drives the Nederlander’s market strategy and which element(s) of the marketing
mix does it rely upon?
Follow-up
• Send students back to www.audiencerewards.com. Have students write a brief
paragraph about how the Web site identifies its target market segment.
• Have students break into groups of up to four students and have each group write a
mission statement for the Nederlander Organization. When students finish, discuss
how the mission statement supports what you saw in the video.
• Ask “How can Audience Rewards sustain its competitive advantage?” The question
can be discussed by the class as a whole, within the small groups with professor
supervision, or assigned as an out-of-class exercise.
Solutions for Viewing Activities:
1. Based on what you heard in the video, what was the Nederlander Organization’s marketing objective in
creating Audience Rewards?
2. Describe an element that makes up a competitive advantage for Audience Rewards. Is it sustainable?
The element that contributes to Audience Reward’s competitive advantage is the partnership with several major
Chapter 2 ♦ Strategic Planning for Competitive Advantage 7
3. What drives the Nederlander’s market strategy and which element(s) of the marketing mix does it rely upon?
The Nederlander Organization’s market strategy is driven by the fact that they have a very high income
LESSON PLAN FOR GROUP WORK
In most cases, group activities should be completed after some chapter content has been covered, probably in the second
or third session of the chapter coverage. (See the “Lesson Plan for Lecture” above.) For the “Class Activity: Marketing
Strategy Analysis, ” divide the class into small groups of four or five people and provide the information and the
questions asked by the class activity, as described later in this chapter.
Class Activity – Marketing Strategy Analysis
In this exercise, students are asked to brainstorm with you, using an overhead projector or blackboard. Let the students
select several high-profile goods and services. Then get the class to help analyze the marketing strategy by answering the
following questions.
1. What is the product?
2. Who is the target market?
3. On what criteria is this market segmented?
4. What demographic factors affected the choice of this target?
5. What is the price strategy? Promotion strategy? Distribution strategy?
6. How is the product packaged? Why?
7. Who is the direct competition? Indirect competition? Which firms would be appropriate benchmarks for this firm?
What competitive advantage does this product have?
8. How are environmental factors affecting the marketing of this product? Consider social, demographic, legal,
political, economic, technological, and competitive factors.
9. Is the purchase of this product affected by psychological or social needs? Situational factors?
10. Is the marketer attempting market penetration? Market development? Product development? Diversification?
11. Does this company appear to have a total quality management orientation? What is its reputation on overall quality
when compared to the competition?
12. Is this firm known for being responsive to customers? Brainstorm a list of adjectives that describe this firm and its
products. How does this list fit with the concept of value?
Chapter 2 ♦ Strategic Planning for Competitive Advantage 9
REVIEW AND ASSIGNMENTS FOR CHAPTER 2
REVIEW QUESTIONS
1. Your cousin wants to start his own business, and he is in a hurry. He has decided not to write a
marketing plan because he has thinks that preparing such a document would take too long. He says he
doesn’t need a formal proposal because he has already received funding from your uncle. Explain why it
is important for him to write a plan anyway.
Strategic marketing planning is the basis for all marketing strategies and decisions. The marketing plan is a written
2. After graduation, you decide to take a position as the marketing manager for a small snack-food
manufacturer. The company, Shur Snak, is growing, and this is the first time that the company has ever
employed a marketing manager. As such, there is no marketing plan in place for you to follow. Outline a
basic marketing plan for your boss to give her an idea of the direction you want to take the company.
The marketing plan should contain the following sections:
a. Business mission statement
3. You are given the task of deciding the marketing strategy for a transportation company. How do the
marketing mix elements change when the target market is (a) low-income workers without personal
transportation, (b) corporate international business travelers, or (c) companies with urgent documents or
perishable materials to get to customers?
Target Market: Low-income workers without personal transportation
Target Market: Corporate international business travelers
10 Chapter 2 ♦ Strategic Planning for Competitive Advantage
Target Market: Companies with urgent documents or perishable materials to get to customers
4. What techniques can make your school enrollment marketing plan more effective?
The effectiveness of the plan depends on the following factors: 1) how realistic the plan is (objectives, scope, and
APPLICATION QUESTIONS
1. How are Coke and Pepsi using their Web sites, http://www.coke.com and http://www.pepsi.com, to
promote their newest product offerings? Do you see hints of any future strategies the companies might
implement? Where?
Answers will vary.
2. How can a new company best define its business mission statement? Can you find examples of good and bad
mission statements on the Internet? How might you improve the bad ones?
The mission statement is based on a careful analysis of benefits sought by present and potential customers and
3. Thinking back to review question 2, write a business mission statement for Shur Snak. What elements
should you include? Evaluate the mission you wrote against some of the mission statements you found
online in question 2.
The mission statement should focus on the market or markets that the organization is trying to serve rather than the
4. Building on our Shur Snak example, imagine that your boss has stated that the marketing objective of
the company is to do the best job of satisfying the needs and wants of the customer. Explain that although
this objective is admirable, it does not meet the criteria for good objectives. What are these criteria?
What is a specific example of a better objective for Shur Snak?
5. Competition in the private courier sector is fierce. Companies like UPS and FedEx dominate, but others, like
Airborne, Emery, and even the United States Postal Service, still have a decent chunk of the express package
delivery market. Perform a mini situation analysis on one of the companies listed by stating one strength, one
weakness, one opportunity, and one threat. You may want to consult the following Web sites as you build
your grid:
United Parcel Service (UPS): http://www.ups.com FedEx: http://www.fedex.com
USPS: http://www.usps.gov DHL: http://www.dhl-usa.com
The situation analysis (SWOT analysis) should include the following:
6. Based on your SWOT analysis, decide what the strategic growth options are for the company you chose in
question 5.
7. Break into small groups and discuss examples (at least two per person) of the last few products you have
purchased. What specific strategies were used to achieve competitive advantage? Is that competitive
advantage sustainable against the competitors?
To have a successful marketing plan, one must seek a differential advantage over the competition when examining
8. Choose three or four other students and make up a team. Create a marketing plan to increase enrollment in
your school. Describe the four marketing mix elements that make up the plan.
Students should provide detail for the following elements of the marketing plan:
Business mission statement
Objectives
9. Have your school enrollment marketing plan team (from question 8 above) develop a plan to implement,
evaluate, and control the marketing strategy.
This section can use a number of formats, but a suggested format for the implementation plan is a Gantt chart or
12 Chapter 2 ♦ Strategic Planning for Competitive Advantage
APPLICATION EXERCISE
As you now know from reading the chapter, an important part of the strategy-making process involves scanning the
environment for changes that affect your marketing efforts. This exercise is designed to introduce you to the
business press and to help you make the connection between the concepts you learn in the classroom and real-world
marketing activities.
Activities
1. Find a current article of substance in the business press (the Wall Street Journal, the Financial Times, Fortune,
Bloomberg Businessweek, Inc., etc.) that discusses topics you have covered in this course. Although this is only
Chapter 2, you will be surprised by the amount of terminology you have already learned. If you are having trouble
finding an article, read through the table of contents at the beginning of the book to familiarize yourself with the
names of concepts that will be presented later in the course. Read your article carefully, making notes about relevant
content.
2. Write a one-paragraph summary of the key points in your article; then write a list of the terms or concepts critical to
understanding the article. Provide definitions of those terms. If you are unfamiliar with a term or concept that is
central to the article, do some research in your textbook or see your professor during office hours. Relate these key
points to the concepts in your text by citing page numbers.
3. Explain the environments that are relevant to the situation presented in the article. (Chapter 3 contains a full list of
environmental factors.)
4. How are the strategic elements of target market and marketing mix relevant to the article?
Purpose: The purpose of this application is to demonstrate the importance and the energy it takes for good
environmental scanning. This exercise will introduce students to the business press and so help make the connection
from the classroom to the real world.
Setting it up: The exercise is best used as an assignment. It could also work as an in-class group activity by asking
students to each bring a business article of interest to class, dividing the class into groups, and having each group select
one of its member’s articles as the basis for the activity. Groups would do the scan together and report their findings to
the class.
This exercise was inspired by the following Great Idea in Teaching Marketing:
Robert D. O’Keefe, DePaul University
Philip R. Kemp, DePaul University
J. Steven Kelly, DePaul University
PRINCIPLES OF MARKETING: USING ENVIRONMENTAL SCAN REPORTS AS A MEANS OF
ASSESSING STUDENT LEARNING
Two of the several objectives we’ve set for our Principles of Marketing (Mkt 301) course are common to all principles
courses. We want students to 1) develop an understanding of the fundamental concepts involved in marketing, and 2)
develop skills in analyzing marketing strategies. In other words, we want students to leave the class understanding both
the definition and application of marketing terminology and theoretical concepts.
We’ve found that we can assess a student’s knowledge of terminology and even very basic applications of these terms
via objective tests. Assessing our expectation that students, even at the introductory level, will develop a deeper and
more sophisticated understanding of terminology and strategy requires an alternative method of assessment. Case study
and case reports both written and oral are widely agreed to be an optimal method for assessing student performance. Our
teaching environment, however, presented problems that are not uncommon to business programs. For a number of
reasons, our class sizes have increased often to between 80 and 100 students and we have had to conduct classes in an
auditorium setting with row upon row of fixed graduated seats. Aside from the physical conditions, recent curriculum
revisions required that we add significant content to the principles course over the 10-week-long quarter. These are not
