978-1337116800 Chapter 2 Solution Manual Part 2

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Chapter 2: Strategic Planning for Competitive Advantage

These are not optimal conditions for the traditional case study approach to learning.

In addition to the objectives of individual courses, we are bound to meet college-wide program

objectives. As with many other schools of business, DePaul’s College of Commerce has made

“the development of both oral and written communication skills” a primary educational outcome

and instituted a program of “writing across the curriculum” as a means of achieving enhanced

communication skills. What we needed was a means of assessing our college course objectives,

which converged with the program objective of the college. The adoption of what we have called

environmental scan reports provided us with a method for satisfying both our course and

program objectives.

As it can be seen in the instructions that follow, the environmental scan reports serve to reinforce

students’ understanding of marketing terminology and strategy. The reports provide a bridge

between the text and contemporary events. To paraphrase our instructions, we want students to

see that text concepts are dynamic and contemporary in their application.

Our experience with using the environmental scan reports over the past several years has been

positive in a number of ways. We’ve found that the reports allow us to determine whether or not

students are developing a working knowledge of marketing principles and are able to

communicate this knowledge effectively. We’ve also found that the skills enhanced by the

preparation of the environmental scan reports transfer quite well to the traditional case studies

encountered in advanced classes. In addition, the written comments on the students’ course

evaluation forms quite frequently cite the environmental scan reports as one of the aspects of the

course they found most beneficial.

What follows are the instructions for preparing environmental scan reports. These instructions

are included in the course syllabus. We invite our teaching colleagues to experiment with

environmental scan reports using the instructions provided or by modifying them to meet their

own course and program objectives.

Handout

Environmental Scan Assignment

Each student will do this assignment three times per term. It will be worth 90 points (3 × 30).

The assignment involves finding a current article of substance in the business press (The Wall

Street Journal, Bloomberg Businessweek, Fortune, etc.). Find something about a company or

industry, which discusses topics in your marketing text.

Chapter 2: Strategic Planning for Competitive Advantage

The objectives of these reports are useful in the ways detailed below:

1. They guide you in discovering that marketing is not simply a collection of static terms and

dated theories. Rather, as you’ll find in reading the articles and preparing your reports, both

corporate and social organizations are living the principles you are learning.

2. The objectives assure that you effectively communicate the important points of the articles

on which you’ve chosen to report.

You will be assigned, along with other students, a group number. Check the list that will be

distributed to see when your number comes up. We will discuss these articles during the week.

Expect to be called upon to discuss your report; I will call on some of the students in the group

throughout the week. You must be prepared to hand in your assignment when requested. Late

assignments will receive only half credit.

Format

Reports are to be typed, double-spaced, on 2 (maximum) sheets of 8 ½” × 11” paper, stapled

together, with no plastic bindings. I expect that these reports will represent your best presentation

quality.

Include the following headings:

I. Introduction

II. Environment

III. Marketing Mix Variables

IV. Questions

At the top of page 1, include the following:

Your name, group number

Mkt. 301

Use the following citation format:

Author’s last name, first name, “Title of the article,” in Periodical, (dates), page numbers.

Follow this outline for your report:

I. Introduction:

This is three paragraphs long.

1. In your own words, provide a one-paragraph summary of key points of the article.

2. List and provide definitions of terms or concepts critical to understanding the key

points of the article.

Chapter 2: Strategic Planning for Competitive Advantage

3. Relate the key points, terms, and concept to the material in your textbook. Cite the

appropriate chapters and page numbers.

II. Environment:

Explain which of the “environments” are relevant to the situation discussed in the article.

Refer to Chapter 4 of the text for a complete discussion of environments. Pay special

attention to the competitive environment and issues bearing on competitive advantage.

III. Marketing Mix Variables

Explain the relevance of the strategy elements (target market and marketing mix) and

especially changes in the strategy elements dictated by the situation discussed in the article.

Presentation

I expect to ask students who submit particularly relevant reports to summarize these reports in

class.

Ethics Exercise

Abercrombie & Fitch, a retail clothing chain based in New Albany, Ohio, launched a line of

thong underwear for preteen girls. Words like “eye candy” and “wink” were printed on the front

of the skimpy underwear that some argued would fit girls aged 5 to 10. Abercrombie is known

for its provocative ads and sexually oriented catalogs. Supporters of the strategy claim that

producing thong-style underwear for 10- to 16-year-olds is a good move; critics think that the

line is tasteless and that marketing it to young girls is contemptuous.

Questions

1. Is marketing adult-styled undergarments to a younger audience unethical?

Abercrombie, a company known for using sex as a primary advertising tool, has attracted

3. When the Nederlander Organization developed the Audience Rewards program, which

option were they pursuing from Ansoff’s opportunity matrix?

a. Market penetration

b. Market development

c. Product development

d. Diversification

4. As the Nederlander Organization develops Broadway-wide gift cards and credit cards that

allow customers to accumulate points toward show tickets, they are:

a. implementing a diversification strategy by leveraging mailing lists provided by

partners such as Delta Airlines.

b. practicing adjacent innovation by leveraging their Audience Rewards network of

partners.

c. experiencing transformational innovation by partnering with companies who can

guide them in developing new products.

d. harvesting from their cash cow, Evita.

5. What type of competitive advantage does the Nederlander Organization have?

a. Cost competitive advantage

b. Product/service differentiation competitive advantage

c. Niche competitive advantage

d. Loyalty competitive advantage

6. Understanding that theater-goers would be interested in furthering the “Broadway

Experience” by redeeming points for events such as walking the red carpet suggests that

the Nederlander Organization:

a. divested its dogs and built up some dogs.

b. developed new ideas through Ansoff’s Opportunity Matrix.

c. discovered marketing opportunities through environmental scanning.

d. performed a marketing audit and implemented action items.

7. Audience Rewards developed relationships with the Nederlander Organization and other

theater owners to create the loyalty program that spans most Broadway shows. In a SWOT,

this is:

a. a threat, because the Nederlander Organization is a major backer but competes with

the other theaters.

b. an opportunity, because Audience Rewards can use these relationships to force other

theater companies to become part of the loyalty program.

c. a weakness, because Audience Rewards has to rely on these theater companies to

always get along and support the rewards company.

d. a strength, because partnering with these theater companies allows Audience

Rewards to have a competitive advantage against other, smaller loyalty programs.

8. Shows are produced by a large and variable number of different producers and backers.

Customers who go to the theater (no matter the show) are not typically considered a market

because the shows belong to many different people. However, the Nederlander

Organization performed an implementation analysis and realized that this group is a strong

market, if they had the correct method of reaching it.

a. True

b. False

Chapter 2: Strategic Planning for Competitive Advantage

ANS: B

The bulk of this statement is true, but the Nederlander Organization performed a SWOT

analysis and realized they had a potentially strong strategic opportunity if they could create

the right kind of system to pull the various markets and shows together.

9. One reason the Nederlander Organization wanted to find a way to incentivize its customers

that wasn’t through discounts was because:

a. discounting is a hard way to make money, particularly in Broadway.

b. they already had a niche competitive advantage.

c. it is too easy to lose the cost competitive advantage to the next low price.

d. they depended on backing the best plays to provide the competitive advantage they

needed.

10. An example of a marketing objective for Audience Rewards might be: “To establish a

system of rewards that will encourage customers to purchase at least two more tickets this

year than last year.”

a. True

b. False

Case Assignment: McDonald’s

For years and years, McDonald’s stopped serving breakfast at 10:30 a.m. And for years,

McDonald’s number one request from customers was for breakfast to be available later into the

day. McDonald’s listened, and by 2015 the first steps were underway.

In April 2015, McDonald’s began testing a limited all-day breakfast menu in San Diego.

It did not include McGriddles or biscuits but did include Steak, Egg & Cheese Bagels and

Cinnamon Coffee Cake. By July, an internal memo suggested franchisees and operators should

prepare for a potential all-day breakfast menu as soon as October.

Chapter 2: Strategic Planning for Competitive Advantage

Then October 2015 came, and McDonald’s did indeed launch all-day breakfast

nationwide. Customers were ecstatic, but some of the initial excitement faded when the actual

menu was announced. Due to limited kitchen space, stores would offer either biscuits or

McMuffins, but not both. And fans were very disappointed that McGriddles were not available.

Some franchisees reported chaos in the kitchens as they adjusted to serving breakfast and lunch

items simultaneously.

Due to the popularity of the item, McDonald’s began testing all-day McGriddle sales at

stores in Tulsa, Oklahoma in January 2016. By March, they began testing an expanded all-day

breakfast menu including McGriddles, biscuit sandwiches, and McMuffins and locations in

Tulsa and North Carolina.

After almost a full year of watching sales, listening to customers, and testing new

markets, in September 2016, McDonald’s announced their shift to one national all-day breakfast

menu. This will give customers more of their favorite breakfast items any time of day, no matter

where they are in the country.

Chapter 2: Strategic Planning for Competitive Advantage

McDonald’s made other changes recently in addition to expanding breakfast. They

switched from margarine to real butter in 2015 and announced they would fully transition to

using cage-free eggs in nearly 16,000 restaurants in the United States and Canada by 2025.

Sources: “McDonald’s USA Expands its Popular All Day Breakfast Menu This Fall,”

McDonald’s Newsroom, July 6, 2016, accessed October 20, 2016,

http://news.mcdonalds.com/US/news-stories/2016/McDonald-s-USA-Expands-its-Popular-All-

Day-Breakfa; S. Whitten, “McDonald’s expands all-day breakfast menu,” CNBC, July 6, 2016,

accessed October 20, 2016, http://www.cnbc.com/2016/07/06/mcdonalds-expands-all-day-

breakfast-menu.html; W. Filloon, “McDonald’s Expanding All-Day Breakfast Menu to Include,

Well, Everything,” Eater, July 6, 2016, accessed October 20, 2016,

http://www.eater.com/2016/7/6/12106268/mcdonalds-all-day-breakfast-expansion.

TRUE/FALSE

1. McDonald’s pressed on with the strategic plan of offering all-day breakfast in spite of initial

struggles because strategic decisions require long-term commitment.

2. The dessert menu, like the breakfast menu, is a strategic business unit (SBU) of McDonald’s.

3. The foundation of any marketing plan is the firm’s mission statement, which defines a

business in terms of goods and services rather than in terms of the benefits customers seek.

4. By extending their breakfast menu to all-day, McDonald’s now has a competitive advantage

over Jack In The Box.

5. After their initial offering and then expansion of the menu for all-day breakfast, McDonald’s

can now move forward to the next idea and leave that strategic plan behind.

MULTIPLE CHOICE

1. The breakfast menu is the __________ in McDonald’s portfolio.

a. star

b. cash cow

c. problem child

d. dog

2. McDonald’s would have conducted a(n) __________ to identify the strength of the breakfast

menu and the potential revenue increase by extending its offerings to all-day.

a. competitive advantage

b. marketing myopia

c. SWOT analysis

d. environmental scanning

3. Marketing objectives should be all of the following EXCEPT:

a. realistic

b. measurable

c. time specific

d. abstract

e. comparable against a benchmark

f. Marketing objectives should be all of these.

4. Which of the following is NOT one of the four Ps of the marketing mix?

a. product

b. planning

c. place (distribution)

d. promotion

e. pricing strategies

5. By extending breakfast menu hours and launching a campaign to advertise this, McDonald’s

began the __________ of the marketing plan.

a. evaluation

b. implementation

c. control

d. audit

Great Ideas for Teaching Chapter 2

Chapter 2: Strategic Planning for Competitive Advantage

James S. Cleveland, Sage College of Albany

Discussion Board Topics to Encourage Participation

Discussion board questions provided to students to encourage them to engage in thinking and

writing about the content of the Principles of Marketing course usually take the form of a

provocative statement to which students are asked to respond. An example of this would be “All

PR is good PR.”

Discussion topics such as this one are abstract and often require that the instructor provide an

initial reply to show students what is expected of them in their own responses. For students with

limited work experience, this approach may be quite appropriate. For adult students with

extensive experience as employees and consumers, however, the abstract nature of such topics

can be frustrating.

I have developed, therefore, a series of discussion board questions to use with experienced adult

students. These questions are designed to encourage them to use their experiences as employees

and consumers as doorways to better understand the course material, and to make their own

responses more interesting to themselves and to the other students in the class who will read and

comment on them.

Each question has three parts.

1. First, there is a sentence or two from the students’ textbooks introducing the topic. By

using the text author’s own words, students are enabled to locate relevant material in the

text more easily, the text content is reinforced, and confusion resulting from use of variant

terms or expressions is minimized.

2. Second, there is a reference to text pages the students should review before proceeding.

Since the goal of the exercise is for students to apply the course content to their own

experiences, reviewing the content first is important.

3. Third, there is a request for the students to think about or remember some specific

situations in their experiences to which they can apply the text material, and a question or

questions for them to address in their responses.

The following example is for Chapter 2 of MKTG11. The three parts have been separated here so

they are more readily visible.

1. The term marketing mix refers to a unique blend of product, distribution, promotion, and

pricing strategies designed to produce mutually satisfying exchanges with a target market.

2. Review the four parts of the marketing mix from section 2-10 of your text.

3. Then, choose an idea, good, or service with which you are familiar, and describe its

marketing mix and how it resulted (or did not result) in a satisfying exchange for you.

Chapter 2: Strategic Planning for Competitive Advantage

Martha E. Hardesty, The College of St. Catherine

Buying an Education: The Four Ps on Day One

Students enrolled in my two-credit Introduction to Marketing course may be freshmen exploring

a business major, sophomores fulfilling a requirement for the accounting degree, or even senior

English majors taking the “something” their parents urged to helped them get a job. From the

first day, I must get students to recognize the experiential base of marketing, and I must create

class norms of participation.

I begin the first class by asking students to break into small buzz groups. I then pass out a sheet

with the question, “Why are you buying your education at The College of St. Catherine?”

Students typically look surprised—they have not regarded their college choice as a consumer

purchase. I mention that there are well over a dozen other options for taking an Introduction to

Marketing course for college credit within this term within this metropolitan area. Students are

instructed to spend at least 20 minutes recalling absolutely every influence that caused them to

come to this college. Another question on the same sheet asks them, “What do you have in

common with the other students in your group?” They spend about five minutes discussing this.

Typical answers for the first question might be “Small class size,” “Financial aid package,” etc.

As I collect their responses on the board, I discuss items as choices made by them or by the

institution. They gradually notice that I am listing their comments deliberately in one of four

columns. They note as well that I am keeping a separate list of other colleges they mention that

they had also considered. Inevitably, the discussion produces the four Ps of the marketing mix

and gives the foundation of our course. Typical inputs are listed below.

• Product (specific major, class size, academic reputation, etc.)

• Price (actual costs, financial aid, scholarships, etc.)

• Place (near/far from home, in an urban area where jobs are plentiful, the beauty of the

campus, etc.)

• Promotion (campus recruiting officers, relatives or friends who have attended, high school

counselors, etc.)

The list of other colleges generates the competition.

The profile of the customer, “What you have in common,” is much less obvious to them. At this

private women’s college, gender and religion are sometimes mentioned; more often, students

think about an academic major or a hometown. They rarely generate other demographics like

income and almost never get near psychographics (which, at our particular campus, is the most

significant variable besides gender!). Yet when competitor colleges are mentioned, they are all

able to paint an instant portrait of the student at each of these institutions.

Chapter 2: Strategic Planning for Competitive Advantage

Within the first class, then, we have generated the fundamental concepts of the course. Students

begin to differentiate the four Ps and to recognize the influence of competition on managing the

marketing mix. They begin to explore the complexities of market segmentation and the

significance of knowing your target market fully. They know as well that their contribution to the

class is necessary and valuable. Throughout the term, I refer to this day’s discussion at the

introduction of any new concept. Student feedback has been that this beginning adds significant

coherence to a brief yet broad-ranging course.

Paul LeMay Burr, University of Incarnate Word

Richard M. Burr, Trinity University

Analyzing Company Strategy via Multiple Resources

Beyond basic marketing courses, students can be expected to analyze the marketing strategies of

companies by building a “data base” using widely available sources.

1. Encourage students to choose for a class project a publicly traded company. Owners of

privately held firms can never be expected to divulge confidential data for a class project,

even to a friend of a close family member.

2. Students should immediately request via the firm’s 1-800 shareholder relations number

annual and quarterly reports, 10-K and 10-Q reports, and a student press kit. Some

companies need repeated requests and follow-up. Call 1-800-555-1212 (the 800

information operator), or try an “800” website database to get the shareholder relations 1-

800 number. Students can then follow steps 3–9.

3. Search the company’s website for annual and quarterly reports and press releases of

strategic decisions. Be aware of key-word search opportunities at the company’s website.

4. Utilize the EDGAR website and the Security and Exchange Commission’s database of

filings by public companies to analyze 10-K and 10-Q reports. The reports are voluminous.

Use the “print page” options for printing only the page needed.

5. Analyze Value Line’s one-page profile of highly useful data about the company, an

industry overview, and comparisons of the company to its competitors.

6. Study page B-2 of the Monday through Friday editions of the Wall Street Journal for daily

alphabetical lists of all companies mentioned in that day’s newspaper. A student individual

subscription is useful for cutting and filing daily.

7. Search ABI/Inform, a database of over 1,000 publications that allows keyword subjects

and is updated monthly. The website is updated daily.

8. Analyze Hoover’s Handbook of American Business, which profiles publicly traded

companies, listing information that might not be found elsewhere.

9. Finally, give students specific heading areas to look for in their analysis of the firm’s

Chapter 2: Strategic Planning for Competitive Advantage

strategy, including the following: pricing and margin, concept differentiation and clarity,

positioning and repositioning, branding, trade dress, customer profile, location strategy,

distribution, turnover, and strategic alliances. Presentation of findings, along with graph

support, will spur class discussion.

P.J. Forrest, Mississippi College

Marketing Mix Reports

One of the most helpful projects I’ve ever assigned in Principles of Marketing is Marketing Mix

Reports. The students pick a good or a service at the beginning of class, and throughout the

semester, they use that good or service as a reference and an example for each topic we cover. In

addition, they prepare a report on the marketing mix actually used for that product.

At the beginning of the semester, the students are required to choose a product by brand name.

Many popular brands such as Tommy Hilfiger, Nike, and Coca-Cola are chosen, but also some

lesser-known brands such as Louisville Slugger, Peavey, or Furby are chosen. Some students

choose familiar products such as soft drinks, automobiles, backpacks, sports equipment, and

computers; others choose a special-interest item that is less familiar to most of us such as deer

stands, paintball equipment, or a musical group. I must approve the choice, and my criterion is

whether there is enough marketing information readily available on the good or service. I put the

brand names of the products the students have chosen on the seating chart next to their respective

names, which allows me to use their products as examples during lectures.

In the past, I’ve had them hand in a single report after we had covered product, place, promotion,

and price, but at present, I break it down into four separate reports. These one- or two-page

reports are easy to prepare, but it forces the students to apply and properly use marketing terms

and concepts. As we cover each of the four Ps, the students have to prepare a report, which is

handled in or presented at the last class meeting before the exam on that topic. Every semester, I

get numerous comments on my teaching evaluation from students about how much doing the

report helped in preparing for the exam and in learning the course material.