LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. How does marketing affect customer value?
2. How is strategic planning carried out at different levels of the organization?
3. What does a marketing plan include?
CHAPTER SUMMARY
1. The value delivery process includes choosing (or identifying), providing (or
2. Strong companies develop superior capabilities in managing core business processes
such as new-product realization, inventory management, and customer acquisition and
3. According to one view, holistic marketing maximizes value exploration by
understanding the relationships between the customer’s cognitive space, the company’s
4. Market-oriented strategic planning is the managerial process of developing and
maintaining a viable fit between the organization’s objectives, skills, and resources and
5. The corporate strategy establishes the framework within which the divisions and
C H A P T E R
2
DEVELOPING
MARKETING STRATEGIES
AND PLANS
6. Strategic planning for individual businesses includes defining the business mission,
7. Each product level within a business unit must develop a marketing plan for achieving
OPENING THOUGHT
For most students, one of the most challenging concepts in this chapter is the definition of
strategy. The second area of concern presented in this chapter, is the understanding of strategic
versus tactical decisions. Definitions can be confusing and are often taken for granted, so the
instructor is encouraged to spend sufficient class time covering the distinctions between these
two.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. For the semester–long project, with this chapter, we continue the formation of groups; first
2. As a group presentation project, have each group present their Pegasus Sports
International marketing plan to the class. Non-presenting groups should be ready to
3. Students should be encouraged to review selected company’s annual reports to collect
4. Sonic PDA Marketing Plan. Every marketing plan must include the company mission,
analysis of strengths, weaknesses, opportunities, and threats and state the marketing and
financial objectives for the plan period. Sonic is a start-up company that will soon
introduce a new multi-function personal digital assistant (PDA) to compete with
ASSIGNMENTS
Each student is in effect a “product.” Like all products you (they) must be marketed for
success. Have each of your students’ write their own “mission statement” about their career
and a “goal statement” of where they see themselves in 5 years, 10 years, and after 20 years.
As a group presentation project, have the students read: Peter Lorange and Johan Roos,
Strategic Alliances: Formation, Implementation and Evolution (Cambridge, MA: Blackwell,
1992); Jordan D. Lewis, Partnerships for Profit: Structuring and Managing Strategic
Alliances (New York: The Free Press, 1990); John R. Harbison and Peter Pekar, Smart
Alliances: A Practical Guide to Repeatable Success, (San Francisco, CA: Jossey-Bass, 1998)
and have each group present their findings.
END–OF–CHAPTER SUPPORT
MARKETING DEBATE—What Good Is a Mission Statement?
Mission statements are often the product of much deliberation and discussion. At the
same time, critics claim they sometimes lack “teeth” and specificity, or do not vary much
from firm to firm and make the same empty promises.
consumption and are written to placate the corporate stakeholders, employees, and consumers.
Although most mission statements are written with good intentions, the real direction of the
firm must be found in the application of its business practices. Marketing should not make the
mistake of deriving its goals, objectives, and strategies from these platitudes.
MARKETING DISCUSSION
Consider Porter’s value chain and the holistic marketing orientation model. What implications
do they have for marketing planning? How would you structure a marketing plan to
incorporate some of their concepts?
Answer: Michael Porter’s value chain is a tool for identifying ways to create more customer
value. This value chain identifies nine strategically relevant activities that create value and cost
Marketing Excellence: CISCO
1. How is building a brand in a business–to–business context different from doing so in the
consumer market?
Suggested answer: Building a brand in a business-to–business market involves different
consumers/customers than the consumer market. In the B2B market, you have deciders,
2. Is Cisco’s plan to reach out to consumers a viable one? Why or why not?
Suggested answer: Student’s answers will vary but most may offer that since Cisco is trying to
Marketing Excellence: INTEL
1. Discuss how Intel changed ingredient-marketing history. What did it do so well in those
initial campaigns?
Suggested answer: Intel created a “brand” identity for their microprocessor and created a
2. Evaluate Intel’s more recent marketing efforts. Did they lose something by dropping the
“Intel Inside” tagline or not?
Suggested answer: Student answers will vary but most might say that Intel has lost brand
resonance and positioning with their dropping the “Intel inside” marketing campaign. One
DETAILED CHAPTER OUTLINE
Key ingredients of the marketing management process are insightful, creative strategies
MARKETING AND CUSTOMER VALUE
The task of any business is to deliver customer value at a profit. In a hypercompetitive
The Value Delivery Process
The traditional view of marketing is that the firm makes something and then sells it.
A) Will not work in economies where people each with individual wants, perceptions,
preferences, and buying criteria.
B) New belief: marketing begins with the planning process.
The Value Chain
Michael Porter’s Value Chain identifies nine strategically relevant activities that create value
and costs in a specific business (five primary and four support activities).
A) Primary activities:
1) Inbound logistics (material procurement).
2) Operations (turn into final product).
The firm’s task is to examine its costs and performance in each value-creating activity and to
look for ways to improve performance.
C) Core business processes:
1) The market sensing process (marketing intelligence).
2) The new offering realization process (research and development).
Core Competencies
The key, then, is to own or nurture the resources and competencies that make up the essence
of the business—outsource if competency is cheaper and available.
A core competency has three characteristics
a. Makes a significant contribution to perceived customer benefits
competencies and distinctive capabilities into tightly interlocking “activity systems.”
Business realignment may be necessary to maximize core competencies. It has three steps:
1) (re) defining the business concept or “big idea”
A Holistic Marketing Orientation and Customer Value
Holistic marketers succeed by managing a superior value chain that delivers a high level of
product quality, service, and speed.
Holistic marketers address three key management questions:
1) Value exploration—identify new value opportunities.
2) Value creation—efficiently creates more promising new value offerings.
A) Marketer’s need to:
1) Identify new customer benefits from the customer’s view.
2) Utilize core competencies.
3) Select and manage business partners from its collaborative networks.
Value Delivery—What Companies Must Become?
Often requires an investment in infrastructure and capabilities.
A) Proficient at customer relationship management.
The Central Role of Strategic Planning
Successful marketing thus requires companies to have capabilities such as: understanding
customer value, creating customer value, delivering customer value, capturing customer value,
and sustaining customer value.
A) Calls for action in three areas:
1) Managing a company’s businesses as an investment portfolio.
CORPORATE AND DIVISION STRATEGIC PLANNING
A) All corporate headquarters undertake four planning activities:
1) Defining the corporate mission.
4) Assessing growth opportunities.
Defining the Corporate Mission
A) Key questions to ask:
1) What is our business?
Mission statements are best when they reflect a vision that provides direction for the company.
B) Good mission statements have five major characteristics:
1) Focused on a limited number of goals.
2) Stresses the company’s major policies and values.
3) Defines the major competitive spheres within which the company will operate by
defining the:
a. Industry.
4) Take a long-term view.
5) Are short, memorable and meaningful.
The Central Role of Strategic Planning
Successful marketing requires capabilities such as understanding, creating, delivering,
capturing, and sustaining customer value.
To ensure they select and execute the right activities, marketers must give priority to strategic
planning in three areas:
Most large companies consist of four organizational levels:
1) corporate,
2) division,
3) business unit,
4) product.
The marketing plan is the central instrument for directing and coordinating the marketing
effort. It operates at two levels: strategic and tactical.
CORPORATE AND DIVISION STRATEGIC PLANNING
Some corporations give their business units freedom to set their own sales and profit
goals and strategies. Others set goals for their business units but let them develop their
own strategies. Still others set the goals and participate in developing individual business
unit strategies.
All corporate headquarters undertake four planning activities:
1. Defining the corporate mission
Defining the Corporate Mission
An organization exists to accomplish something: to make cars, lend money, provide a night’s
lodging. Over time, the mission may change, to take advantage of new opportunities or
respond to new market conditions.
Mission statements are at their best when they reflect a vision, an almost “impossible dream”
that provides direction for the next 10 to 20 years.
Good mission statements have five major characteristics.
1. They focus on a limited number of goals. The statement “We want to produce the
2. They stress the company’s major policies and values. They narrow the range of
individual discretion so employees act consistently on important issues.
DEFINING COMPETITIVE TERRITORY AND BOUNDARIES IN MISSION
STATEMENTS
Industry: Some companies operate in only one industry; some only in a set of related
industries; some only in industrial goods, consumer goods, or services; and some in any
industry.
Vertical: The vertical sphere is the number of channel levels, from raw material to final
product and distribution, in which a company will participate.
Establishing Strategic Business Units
Companies often define themselves in terms of products: They are in the “auto business”
or the “clothing business.”
Assigning Resources to Each SBU
A business can define itself in terms of three dimensions: customer groups, customer needs,
and technology.
An SBU has three characteristics:
1. It is a single business, or a collection of related businesses, that can be planned
separately from the rest of the company.
The purpose of identifying the company’s strategic business units is to develop separate
strategies and assign appropriate funding.
Assigning Resources to Each SBU
Once it has defined SBUs, management must decide how to allocate corporate resources to
Assessing Growth Opportunities
Assessing growth opportunities includes planning new businesses, downsizing, and
terminating older businesses. If there is a gap between future desired sales and projected
sales, corporate management will need to develop or acquire new businesses to fill it.
INTENSIVE GROWTH Corporate management’s first course of action should be a review
of opportunities for improving existing businesses. One useful framework for detecting new
intensive-growth opportunities is a “product–market expansion grid” (Figure 2.4).
INTEGRATIVE GROWTH A business can increase sales and profits through backward,
forward, or horizontal integration within its industry.
DIVERSIFICATION GROWTH Diversification growth makes sense when good
DOWNSIZING AND DIVESTING OLDER BUSINESSES Companies must carefully
prune, harvest, or divest tired old businesses to release needed resources to other uses and
reduce costs.
Organization and Organizational Culture
Strategic planning happens within the context of the organization. A company’s organization
consists of its structures, policies, and corporate culture, all of which can become
dysfunctional in a rapidly changing business environment. A) Organization consists of:
What exactly is a corporate culture? Some define it as “the shared experiences, stories,
beliefs, and norms that characterize an organization.”
A customer-centric culture can affect all aspects of an organization. Sometimes corporate
Marketing Innovation
Innovation in marketing is critical. Imaginative ideas on strategy exist in many places within a
company.
A) Innovation in marketing is critical.
BUSINESS UNIT STRATEGIC PLANNING
The Business Mission
A) Each business unit needs to define its specific mission within the broader company
mission.
EXTERNAL ENVIRONMENT (OPPORTUNITY AND THREAT) ANALYSIS
A business unit must monitor key macroenvironment forces and significant
microenvironment factors that affect its ability to earn profits. It should set up a
marketing intelligence system to track trends and important developments and any related
opportunities and threats.
Good marketing is the art of finding, developing, and profiting from these opportunities.
ii
To evaluate opportunities, companies can use market opportunity analysis (MOA) to
ask questions like:
1. Can we articulate the benefits convincingly to a defined target market(s)?
2. Can we locate the target market(s) and reach them with cost-effective media and
trade channels?
An environmental threat is a challenge posed by an unfavorable trend or development that,
in the absence of defensive marketing action, would lead to lower sales or profit.
Internal Environment (Strengths/Weaknesses) Analysis
Goal Formulation
Once the company has performed a SWOT analysis, it can proceed to goal formulation,
developing specific goals for the planning period. Goals are objectives that are specific
with respect to magnitude and time.
A) The firm sets objectives, and then manages by objectives (MBO). For MBOs to work
they must meet four criteria:
1) They must be arranged hierarchically, from the most to least important.
Strategic Formulation
Goals indicate what a business unit wants to achieve; strategy is a game plan for getting
Porter’s Generic Strategies
A) Michael Porter has proposed three generic strategies that provide a good starting point
for strategic thinking:
1) Overall cost leadership.
Strategic Alliances
A) Companies are discovering that there is a need for strategic partners if they hope to be
effective.
B) Many strategic alliances take the form of marketing alliances. These fall into four
major categories:
1) Product or service alliances.
C) To keep strategic alliances thriving, corporations have begun to develop organizational
structures for support and have come to view the ability to form and manage
partnerships as core skills (called Partner Relationship Management, PRM).
Program Formulation and Implementation
A) A great marketing strategy can be sabotaged by poor implementation.
B) Marketing must estimate its costs.
b. “Skills” means employees have the skills nedded to carry out the company’s
strategy.
Feedback and Control
A) As it implements its strategy, the firm needs to track the results and monitor new
developments. A company’s strategic fit with the environment will inevitably erode
because the market environment changes faster than the company’s 7 Ss.
Organizations are subject to inertia and are set up as efficient machines and it is
difficult to change one part without adjusting everything else.
PRODUCT PLANNING: THE NATURE AND CONTENTS OF A MARKETING
PLAN
Working within the plans set by the levels above them, product managers come up with a
marketing plan for individual products, lines, brands, channels, or customer groups.
Each product level (product line, brand) must develop a marketing plan for achieving its goals.
A. Marketing plans are becoming more customer and competitor orientated. The plan
draws more input from all the business functions and is team developed.
B. Contents of the marketing plan:
1) Executive summary and table of contents.