Chapter 2
Strategic Planning for Competitive Advantage
This chapter begins with the learning outcome summaries followed by a set of lesson plans for
instructors to use to deliver the content.
Lecture (for large sections) on page 5
Company Clips (video) on page 7
Group Work (for smaller sections) on page 10
Review and Assignments begin on page 10
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 28
Learning Outcomes
2-1 Understand the importance of strategic planning
Strategic planning is the managerial process of creating and maintaining a fit between the
organization’s objectives and resources and the evolving market opportunities. The goal of
strategic planning is long-run protability and growth. Thus, strategic
decisions require long-term commitments of resources. These decisions affect the
allocation of resources and ultimately the financial success of the company.
2-2 Define strategic business units
Large companies may manage a number of very different businesses, called strategic business
units (SBUs). Each SBU has its own rate of return on investment, growth potential, and
associated risks, and requires its own strategies and funding. When properly created, an SBU
has the following characteristics: a distinct mission and a specific target market, control over its
resources, its own competitors, a single business or a collection of related businesses, and plans
independent of the other SBUs in the total organization.
2-3 Identify strategic alternatives and know a basic outline for a marketing plan
One method for developing alternatives is Ansoff’s strategic opportunity matrix, which matches
products with markets. Firms can explore these four options: market penetration, market
development, product development, and diversification. The layout of the innovation matrix
demonstrates that as a company moves away from its core capabilities (the lower left), it
traverses across a range of change and innovation rather than choosing one of the four sectors in
Ansoff’s matrix. The ranges are broken down into three levels: core innovation, adjacent
innovation, and transformational innovation. 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 General Electric 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 or markets the organization is
attempting to serve rather than on the good or service offered. Business mission statements that
are stated too narrowly suffer from marketing myopia—defining a business in terms of goods
and services rather than in terms of the benefits customers seek
2-5 Describe the components of a situation analysis
A situation analysis is sometimes referred to as a SWOT analysis; that is, the firm should
identify its internal strengths (S) and weaknesses (W) and also examine external opportunities
(O) and threats (T). When examining internal strengths and weaknesses, the marketing
manager should focus on organizational resources such as production costs, marketing skills,
financial resources, company or brand image, employee capabilities, and available
technology. For example, 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.
Costs can be reduced in a variety of ways includingexperience 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 that is unique and valuable to buyers beyond
simply offering lower price than that of the competition. 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
Marketing 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, and provide direction
for lower-level marketing managers so that marketing efforts are integrated and pointed in a
consistent direction, motivate employees, force executives to think clearly, and form a basis for
control.
2-8 Discuss target market strategies
Targeting market strategies 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
Marketing mix refers to a unique blend of product, place (distribution), promotion,
and pricing strategies(often referred to as the four Ps) designed to produce
mutually satisfying exchanges with a target market. The heart of the
marketing mix, the starting point, is the product offering and product
strategy. 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 Ps— the quickest element to change.
2-10 Explain why implementation, evaluation, and control of the marketing plan
are necessary
One of the keys to success overlooked by many businesses is to actively follow up on the
marketing plan. Implementation is the process that turns a marketing plan into action
assignments and ensures that these assignments are executed in a way that accomplishes the
plan’s objective. Evaluation entails gauging the extent to which marketing objectives have
been achieved during the specified time period. Control provides the mechanisms for
evaluating marketing results in light of the plan’s objectives and for correcting actions that
do not help the organization reach those objectives within budget guidelines. A marketing
audit helps management allocate marketing resources efficiently. After the audit has been
completed, three tasks remain. First, the audit should profile existing weaknesses and
inhibiting factors, as well as the firm’s strengths and the new opportunities available to it.
The second task is to ensure that the role of the audit has been clearly communicated. The
final post-audit task is to make someone accountable for implementing recommendations.
2-11 Identify several techniques that help make strategic planning effective
Effective strategic planning requires continual attention, creativity, and management
commitment. . Strategic planning should not be an annual exercise in which managers go
through the motions and forget about strategic planning until the next year. A sound strategic
planning is based on creativity. Managers should challenge assumptions about the firm and the
environment and establish new strategies.The last requirement is top management’s support and
participation.
Key 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
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 theater management company that backs productions
and rents and manages Broadway-style theaters. In this video, major managers discuss the
strategic decisions behind the development of a separate company to manage a loyalty program
for theater-goers. Audience Rewards allows a number of theater 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 or 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 when 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
Preview the Company Clips video
segment for Chapter 2. This exercise
reviews concepts for LO1, LO6, LO9,
and LO10.
Review your lesson plan.
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
website (www.audiencerewards.com)
and Nederlander.com with those
concepts in mind.
Video Review Exercise
Activity Teaching Method
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 website identifies its target
market segment.
Have students break into groups of four students each, 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 students, “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.
Soluons for Viewing Acvies
1. Based on what you heard in the video, what was the Nederlander Organization’s
marketing objective in creating Audience Rewards?
The marketing objective was to offer a more complete Broadway experience by
incentivizing customers to go to the theater more, spend more money, and try out more art
by recognizing and rewarding them across various markets and theaters.
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 theater houses, production companies, and other arts
venues. By being able to have the backing of more than just one set of theaters, more
points can be earned, and more tickets can be redeemed. This also applies to the major
partners such as Delta Airlines, which extends the Audience Rewards market. It is likely
that this is a sustainable competitive advantage, because it would be challenging to find the
same number of major theater management houses to join together in support of a rewards
program.
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 demographic that interests large companies (such as Delta Airlines) to
determine ways they can partner with Nederlander to reach that demographic. The
Nederlander Organization relies on providing its productions companies that rent the
theater great promotion technology through Audience Rewards.
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. For the “Class Activity:
Marketing Strategy Analysis” section, divide the class into small groups of four or five people
each, 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 a
blackboard. Let the students select several high-profile goods and services. Then get the class to
help analyze the marketing strategy by answering the questions given below.
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, and distribution strategy?
6. How is the product packaged? Why?
7. Who is the direct competition and 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 and situational
factors?
10. Is the marketer attempting market penetration, market development, product development,
and/or diversification strategy?
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?