Chapter 02 – Developing Successful Organizational and Marketing Strategies
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CHAPTER CONTENTS PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ……………………………………. 2-2
LEARNING OBJECTIVES (LO) …………………………………………………………………………….. 2-4
KEY TERMS …………………………………………………………………………………………………………… 2-4
LECTURE NOTES
• Chapter Opener: Ben & Jerry on a Mission ………………………………………………………… 2-5
• Today’s Organizations (LO 2-1) ………………………………………………………………………. 2-5
• Strategy in Visionary Organizations (LO 2-2; LO 2-3) ………………………………………. 2-10
• Setting Strategic Directions (LO 2-4) ……………………………………………………………….. 2-18
• The Strategic Marketing Process (LO 2-5; LO 2-6; LO 2-7)………………………………. 2-25
APPLYING MARKETING KNOWLEDGE ……………………………………………………………. 2-33
BUILDING YOUR MARKETING PLAN ……………………………………………………………….. 2-37
VIDEO CASE (VC)
• VC-2: IBM: Using Strategy to Build a “Smarter Planet” …………………………………….. 2-38
APPENDIX D CASE (D)
• D-2: Daktronics, Inc.: Global Displays in 68 Billion Colors ………………………………… 2-43
IN-CLASS ACTIVITIES (ICA)
• ICA 2-1: Calculating a “Fog Index” for Your Own Writing ………………………………… 2-47
• ICA 2-2: Marketing Yourself…………………………………………………………………………… 2-51
CONNECT APPLICATION EXERCISES ……………………………………………… 2-58
• Growth Opportunities at Nike Click and Drag*
• The Strategic Marketing Process Click and Drag*
• The Strategic Marketing Process at Kodak Click and Drag*
• Setting Strategic Directions, Growth Strategies Click and Drag*
• IBM: Using Strategy to Build a “Smarter Planet” Video Case
• iSeeit! Video Case: Marketing Strategy & the Marketing Plan Video Case
• Marketing Analytics: The Profit Equation Analytics Exercise
*Note: An alternate version of each Click and Drag exercise is available in Connect for students
with accessibility needs.
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 2-1 The board of directors oversees the three levels of strategy in organizations:
corporate, business unit, and functional ………………………………………………………………. 2-7
Figure 2-2 Visionary organizations use key elements to (1) establish a foundation and (2) set a
direction using (3) strategies that enable them to develop and market their products
successfully.. …………………………………………………………………………………………………… 2-10
Figure 2-4 Boston Consulting Group business portfolio analysis for Apple’s consumer
SBUs …………………………..…………………………………………………………………………………. 2-19
Figure 2-5 Four market-product strategies: alternative ways to expand sales
revenues for Ben & Jerry’s using diversification analysis ……………………………………. 2-21
Figure 2-6 The strategic marketing process has three phases: planning, implementation,
and evaluation …………………………………………………………………………………………………. 2-23
Figure 2-7 Ben & Jerry’s SWOT analysis that serves as the basis for management actions
regarding growth ……………………………………………………………………………………………. 2-26
Figure 2-8 The four Ps elements of the marketing mix must be blended to produce a cohesive
marketing program …………………………………………………………………………………………. 2-30
Figure 2-9 Organization of a typical manufacturing firm, showing a breakdown of the
marketing department ……………………………………………………….…………………………….. 2-32
Figure 2-10 Gantt chart for scheduling a term project that distinguishes sequential and
concurrent tasks ……………………………………………………….…………………………………….. 2-34
Figure 2-11 The evaluation phase requires that Apple compare actual results with goals to
identify and act on deviations to fill in the “planning gap” ……………………………………. 2-36
Applying Marketing Metrics
How Well is Ben & Jerry’s Doing?: Dollar Sales and Dollar Market Share
[See UMD02SalesMktShare.xls] …………………………………………………………………………………………. 2-16
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Marketing Matters Slide
Making Responsible Decisions—Social Entrepreneurs are Creating New Types of Organizations to
Pursue Social Goals …………………………………………………………………………………………………………… 2-6
Videos
2-1: Ben & Jerry’s ………………………………………………………………………………………………………………. 2-5
2-2: Southwest Airlines Video ……………………………………………………………………………………………. 2-11
2-3: Uber Video ……………………………………………………………………………………………………………….. 2-12
2-4: B&J’s Ad …………………………..………………………………………………………………………………………. 2-20
2-5: IBM Video Case ………………………………………………………………………………………………………… 2-37
In-Class Activities (ICA)
ICA 2-1: Calculating a “Fog Index” for Your Own Writing ……………………………………………………. 2-44
ICA 2-2: ICA 2-2: Marketing Yourself ………………………………………………………………………………… 2-46
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 2-1: Describe three kinds of organizations and the three levels of strategy in them.
LO 2-2: Describe core values, mission, organizational culture, business, and goals.
LO 2-3: Explain why managers use marketing dashboards and marketing metrics.
LO 2-4: Discuss how an organization assesses where it is now and where it seeks to be.
LO 2-5: Explain the three steps of the planning phase of the strategic marketing process.
LO 2-6: Describe the four components of the implementation phase of the strategic marketing
process.
LO 2-7: Discuss how managers identify and act on deviations from plans.
KEY TERMS
business
marketing tactics
business portfolio analysis
mission
core values
objectives (goals)
diversification analysis
organizational culture
goals (objectives)
points of difference
market segmentation
profit
market share
situation analysis
marketing dashboard
strategic marketing process
marketing metric
strategy
marketing plan
SWOT analysis
marketing strategy
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LECTURE NOTES
BEN AND JERRY ARE ON A MISSION: TO MAKE FANTASTIC,
SUSTAINABLE, WORLD-CHANGING ICE CREAM
• Ben & Jerry’s started in 1978 when friends Ben Cohen and Jerry Greenfield:
a. Had “aced” their $5 college correspondence course in ice cream making.
b. Invested $12,000 in a renovated Vermont gas station from borrowed/saved funds.
c. Concocted the universally best selling flavor—vanilla premium ice cream!
• Ben & Jerry’s embraced a concept called “linked prosperity” which encouraged the
success of all: employees, suppliers, customers, and neighbors.
• Three part mission statement: Product – finest quality; Economic – sustainable
financial growth; Social – make the world a better place.
• Highly creative organizational and marketing strategies including:
a. Free Cone Day. One day a year, give away free ice cream to more than a
million fans around the world.
b. Fairtrade. Farmers receive a fair price and agree to use sustainable farming
practices, fair working standards, and invest in local communities.
• Ben & Jerry’s is now owed by Unilever, the market leader in the global premium ice
cream industry, which is expected to reach $89 billion in sales by 2022.
• Customers love the product and the social mission. Ben & Jerry’s has over 8.3 million
Facebook fans, the most of any premium ice cream maker.
[Video 2-1: Ben & Jerry’s]
I. TODAY’S ORGANIZATIONS [LO 2-1]
In studying today’s organizations, one must understand:
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• The kinds of organizations that exist.
• What strategy is.
• How strategy relates to the three levels of structure found in many large
organizations.
A. Kinds of Organizations
• An organization is a legal entity of people who share a common mission.
• This mission motivates organizations to:
a. Develop offerings, which are goods, services, or ideas that…
b. Create value for both the organization and its customers.
• Organizations consist of three types:
a. For-profit organization.
• Is often called a business firm.
• Is a privately owned organization that…
• Serves its customers in order to earn a profit, which is the:
• Must earn a profit to survive.
[Web Links 2-1: Brita Ad]
b. Nonprofit organization.
• Is a nongovernmental organization that…
– Serves its customers but…
– Does not have profit as an organizational goal.
• Goals include operational efficiency or client satisfaction.
• Examples: Charities and cooperatives.
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MAKING RESPONSIBLE DECISIONS
Social Entrepreneurs Are Creating New Types of Organizations
to Pursue Social Goals
• Social entrepreneurs start new ventures that address important social needs and
issues.
• Often organized as nonprofits that combine revenue generation with the pursuit of
social goals. Issues include healthcare delivery, access to education, improving
agriculture.
c. Government agency.
• Is a federal, state, county, or city unit that…
• Provides a specific service to its constituents.
• Example: Census Bureau.
• The terms firm, company, and organization are used interchangeably to cover
both for-profit and nonprofit organizations.
• Organizations that develop similar offerings, when grouped together, create an
industry, such as the automobile industry or the ice cream industry.
a. The dynamics of an industry and how it is structured impact the strategic
decisions organizations make.
b. These strategic decisions create a compelling and sustainable competitive
advantage to achieve superior performance for an organization’s offerings.
c. Organizations must understand the industry within which they compete.
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B. What Is Strategy?
• An organization has limited human, financial, technological, and other resources
available to produce and market its offerings—it can’t be all things to all people!
• Strategy is an organization’s long-term course of action designed to deliver a
unique customer experience while achieving its goals.
C. The Structure of Today’s Organizations
[Figure 2-1] Large organizations are very complex and consist of three levels:
1. Corporate Level. Is the level in an organization where top management directs
overall strategy for the entire organization. Consists of:
a. Board of directors, individuals both inside and outside the organization.
b. Chief executive officer (CEO), the highest ranking officer in the organization.
• CEOs must possess leadership skills.
• CEOs must have the expertise to:
c. Chief marketing officer (CMO), who:
• Develops and implements the organization’s strategy to achieve its goals.
• Must think strategically to deliver value to the organization.
• Must have:
• Is often called upon to be their organization’s visionary.
2. Strategic Business Unit Level. Is the level in multimarket, multiproduct firms
where managers manage a portfolio or groups of businesses.
a. A strategic business unit (SBU) is a subsidiary, division, or unit of an
organization that markets a set of related offerings to a clearly defined target
market.
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b. At the strategic business unit level, managers set a more specific strategic
direction for their businesses to exploit value-creating opportunities.
c. For firms with a single business focus like Ben & Jerry’s, the corporate and
business unit levels may merge.
3. Functional Level. Is the level in an organization where groups of specialists
actually create value for the organization.
a. A department refers to those specialized functions, such as marketing.
b. At this level, the strategic direction becomes more specific and focused.
c. A key role of the marketing department is to:
• Listen to customers.
d. Cross-functional teams:
• Are formed by senior management to develop new or improve existing
offerings.
• Consist of a small number of people from different departments…
LEARNING REVIEW
2-1. What is the difference between a for-profit and a nonprofit organization?
2-2. What are examples of a functional level in an organization?
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II. STRATEGY IN VISIONARY ORGANIZATIONS [LO 2–2]
• Successful organizations must be forward-looking—anticipating and responding
quickly and effectively to future events.
• [Figure 2-2] A visionary organization:
a. Specifies its foundation (why does it exist?).
b. Sets a direction (what will it do?).
c. Formulates strategies (how will it do it?).
A. Organizational Foundation: Why Does It Exist?
• An organization’s foundation is its philosophical reason for being—why it exists.
1. Core Values.
a. Are the fundamental, passionate, and enduring principles of an organization
that guide its conduct over time.
b. Are developed by an organization’s founders or senior management.
c. Are consistent with their essential beliefs and character.
d. Capture the collective heart and soul of the organization.
e. Serve to inspire and motivate its stakeholders to take productive action.
f. Motivates stakeholders of an organization, which consist of its:
• Employees. • Creditors.
g. Are timeless.
h. Guide the organization’s conduct.
i. Must be communicated and supported by top management and employees.
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[Video 2-2: Southwest Airlines]
2. Mission.
a. Is a statement of the organization’s function in society that often identifies its
customers, markets, products, and technologies.
b. Is shaped by an organization’s core values.
c. Is often used interchangeably with vision.
d. A mission statement should be clear, concise, meaningful, inspirational,
focused, and long-term.
e. Inspiration and focus appear in mission statements of for-profit and
nonprofits.
• Example: Southwest Airlines – “Dedication to the highest quality
of Customer Service delivered with a sense of warmth,
friendliness, individual pride, and Company Spirit.”
f. Some organizations, such as Ben & Jerry’s, have added a social element to
their mission statements to reflect their moral ideals.
g. Stakeholders are asking organizations to be exceptional citizens by providing
long-term value while solving society’s problems.
3. Organizational Culture.
a. An important corporate-level marketing function is communicating its core
values and mission to its stakeholders.
B. Organizational Direction: What Will It Do?
Figure 2-2 shows that the organization’s foundation enables it to set a direction, in
terms of (1) the “business” it is in and (2) its specific goals.
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1. Business.
a. A business describes the clear, broad, underlying industry or market sector of
an organization’s offering.
b. An organization defines its business by looking at the set of organizations that
sell similar offerings—those that are in direct competition with each other.
c. Example: The ice cream business—for Ben & Jerry’s.
d. The organization answers these questions:
• “What do we do?”
• “What business are we in?”
e. Harvard professor Theodore Levitt’s Marketing Myopia article states that
organizations must not define their business and customer focus too narrowly.
• Railroads are in the “transportation” business, not the railroad business.
f. Given the increase in global competition and the recent economic crisis, many
organizations are rethinking their business models, which:
[Video 2-3: UPS Ad]
• Uber, known for transportation services, continually redefines its business.
• Started as a limo service called UberCab, business was redefined as a
ridesharing service when it added UberX and UberPool apps.
• The definition expanded when UberRush was added to provide package
delivery and UberEats provided food delivery.
2. Goals.
a. Goals or objectives (used interchangeably) are statements of an
accomplishment of a task to be achieved, often by a specific time.
b. Goals convert the organization’s mission and business into performance
targets to measure how well it is doing.
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c. Business firms pursue several different types of goals:
• Profit. Most firms seek the highest financial return on their investments
(ROI) as possible.
• Market share.
– Is the ratio of sales revenue of the firm to…
– The total sales revenue of all firms in the industry…
– Including the firm itself.
• Quality. A firm may choose to focus on delivering the highest quality.
• Customer satisfaction.
– Customers:
* Are the reason an organization exists.
• Employee welfare.
– Employees play a critical role in the firm’s success.
– Goals state the firm’s commitment to good employment opportunities
and working conditions.
• Social responsibility. A firm may seek to balance the conflicting goals of
its stakeholders to:
– Promote their overall welfare…
– Even at the expense of profits.
d. Nonprofit organizations also set goals:
• Private organizations strive to serve customers efficiently.
C. Organizational Strategies: How Will It Do It?
Figure 2-2 shows that the organization’s strategies are concerned with the “how”—
the actual results. Strategies can vary in two ways:
1. Variation by Level. Moving from the corporate level to the strategic business
unit level to the functional level involves creating increasingly detailed strategies
and plans.
a. Corporate level—Top managers are concerned with writing meaningful
mission statements.
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2. Variation by Product. Organizational strategies also vary by the organization’s
products.
a. The strategy will be far different when marketing a very tangible physical
good, a service, or an idea.
b. Most organizations develop a marketing plan as a part of their strategic
marketing planning efforts.
[ICA 2-1: Calculating a “Fog Index” for Your Own Writing]
LEARNING REVIEW
2-3. What is the meaning of an organization’s mission?
2-4. What is the difference between an organization’s business and its goals?
Answer: An organization’s business describes the clear, broad, underlying industry or
D. Tracking Strategic Performance with Marketing Analytics [LO 2-3]
How do marketing managers know if they are making progress to goals?
1. Car Dashboards and Marketing Dashboards.
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a. A marketing dashboard is the visual computer display of the essential
information related to achieving a marketing objective.
b. Business intelligence tools allow real-time streaming data to provide point-in–
time and trend displays.
c. On a car’s dashboard, we glance at the fuel gauge and take action when our
gas is getting low.
d. With a marketing dashboard, a marketing manager:
• Glances at a graph or table and…
• Makes a decision whether to…
– Take action.
– Analyze the problem further.
2. Dashboards, Metrics, and Plans.
a. [Figure 2-3] Sonatica’s marketing dashboard graphically displays key
performance indicators linked to its product lines.
b. Each performance variable is a marketing metric, which is:
• A measure of the quantitative value or trend of…
• A marketing action or result.
c. Only a few metrics should be shown on a marketing dashboard so that
managers aren’t overwhelmed with too much irrelevant data.
d. Today’s marketers use data visualization, which:
• Presents information about an organization’s marketing metrics
e. This book uses data visualization in many of its figures to highlight in color
key points described in the text.
f. To show how parts of a business are performing, data visualization tools
include:
• Bullet graphs. • Spark line graphs.
g. [Figure 2-3A] Website Traffic Sources.
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• The color-coded perimeter of the pie chart shows the three main sources of
website traffic.
• These three colors link to those of the circles in the column of website
traffic sources.
• Each of eight specific sources represented as one slice in the pie.
– Referral sites at 47%, of which:
* Sonatica’s Facebook visits comprise 15 percent of website traffic
(see the horizontal bullet graphs to the left).
h. [Figure 2-3B] Sales Performance by SBU.
• The spark lines:
– Are the wavy lines in the far left column.
• The trends in electronics and peripherals are generally up, causing their
sales to exceed their YTD (year to date) targets.
• Conversely:
– Both software and hardware sales failed to meet YTD targets…
i. [Figure 2-3C] Website Visits by State.
• The U.S. map shows that the darker the state, the greater the number of
website visits for the current month.
• In terms of monthly visits:
– Texas has close to 20,000 visits per month.
j. The Ben & Jerry’s dashboard in the Applying Marketing Metrics box:
• Shows how the two widely used marketing metrics of dollar sales and
dollar market share…
• Helps the company assess its growth performance that…
• Leads to marketing actions.
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APPLYING MARKETING METRICS
How Well Is Ben & Jerry’s Doing?
Dollar Sales and Dollar Market Share
Marketers use the common dollar sales and dollar market share metrics to assess their
organization’s growth performance in the marketplace.
As marketing manager for Ben & Jerry’s, you need to assess how it is doing within
the U.S. in the super-premium ice cream market. For this, you choose two marketing metrics:
dollar sales and dollar market share.
Your Challenge.
Scanner data from checkout counters in grocery stores and other retailers show that
the total industry sales for the super-premium category of ice cream—the segment of the
market within which Ben & Jerry’s competes—for 2017 were $1.25 billion. The Ben &
Jerry’s sales department reports that the firm sold 50 million units at an average price of
$5.00 per unit in 2017, resulting in total dollar sales of $250 million. A unit of super-
premium ice cream is one pint.
Your Findings. Dollar sales and dollar market share metrics for 2017 are calculated as
follows:
Dollar Sales ($) = Average Price × Quantity Sold
[See UMD02SalesMktShare.xls]
Your Action.
These results need to be compared with (1) the goals established for these metrics
and (2) with previous years’ results to see if the trends are increasing, flat, or decreasing.
This will lead to marketing actions. Marketers also calculate unit sales and unit market
share based on units sold, if data are available.
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III. SETTING STRATEGIC DIRECTIONS [LO 2-4]
Setting strategic directions involves answering two questions:
• Where are we now?
• Where do we want to go?
A. A Look Around: Where Are We Now?
Asking an organization where it is at the present time involves identifying its
competencies, customers, and competitors.
1. Competencies. Answers the question, “What do we do best?”
a. Core competencies.
• Are a firm’s special capabilities—skills, technologies, and resources.
2. Customers. Strategy must provide genuine value and benefits to present and
prospective customers to ensure they have a satisfying customer experience.
3. Competitors. Globally, the lines among competitors are increasingly blurred.
a. Lands’ End initially defined other catalog retailers as its competitors.
b. Intertype Competition:
• Means that very dissimilar types of retail outlets compete with each other.
• Today, as part of Sears, Lands’ End competes with:
– Not only other catalog clothing retailers…
B. Growth Strategies: Where Do We Want to Go?
• Knowing where the organization is at the present time enables managers to set a
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1. Business Portfolio Analysis.
a. The Boston Consulting Group’s (BCG) uses business portfolio analysis,
which:
• Is a technique that managers use to quantify performance measures and
growth targets to…
• Analyze its clients’ strategic business units (SBUs) as though they were a
collection of separate investments.
MARKETING MATTERS
Filling the Shoes of Apple CEO Tim Cook: Where Will
Apple’s Projected Future Growth for Its Major SBU’s Come From?
• Every CEO of a for-profit organization faces one problem in common: trying to find
ways to increase future sales and profits to keep it growing!
a. Do a quick SWOT analysis of four SBUs shown (iPod, iPhone, Apple Watch, and
iPad/iPad mini):
.
b. [Figure 2-D] A firm using business portfolio analysis positions each of its SBUs
on a growth-share matrix.
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• The vertical axis is the market growth rate, which is the annual rate of
growth of the SBU’s industry.
• The horizontal axis is the relative market share, defined as the sales of the
SBU divided by the sales of the largest firm in the industry.
c. The BCG has given specific names and descriptions to the four quadrants in
its growth-share matrix based on the amount of cash they generate for or
require from the organization:
1. Question marks (upper right).
– Are SBUs with a low share of high-growth markets.
– Management chooses which of these SBUs to invest in and phase out.
2. Stars (upper left).
– Are SBUs with a high share of high-growth markets.
3. Cash cows (lower left).
– Are SBUs that generate more cash than they can use.
4. Dogs (lower right).
– Are SBUs with a low share of slow-growth markets.
– May generate enough cash to sustain themselves.