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26 Part 1 Designing Customer-Oriented Marketing Strategies
CHAPTER 2
STRATEGIC PLANNING IN CONTEMPORARY MARKETING
CHAPTER OVERVIEW
Today’s marketers face strategic questions every day. Planning strategy is a critical part of their jobs. The
marketplace changes continually in response to changes in consumer tastes and expectations,
technological developments, competitors’ actions, economic trends, and political and legal events, as
well as product innovations and pressures from suppliers and distributors.
Although the causes of these changes often lie outside a marketer’s control, effective planning can
anticipate many of them. For example when the price of gas and jet fuel soared recently, travelers opted
to stay close to home instead of enjoying vacations to exotic, faraway places. This represented an
opportunity for places like Ocean City, Maryland, and Branson, Missouri. Any destinations that promoted
itself to potential vacationers within a short drive could find itself adding up the profits.
Changes in the Updated Edition
The chapter has been updated and revised, with new features in several areas:
• The Opening Vignette and Evolution of a Brand discuss Yahoo and its CEO, Marissa Mayer.
Mayer, the first female engineer hired at Google, took the Yahoo CEO position with the daunting
challenge of turning around the company after several unprofitable years. One of her first
initiatives at Yahoo outlined a plan to make employees more productive. She has continued to
• Solving an Ethical Controversy analyzes the case of the New England Patriots and one of its
players, Aaron Hernandez, who was charged with murder. During his three years with the team,
Hernandez gained many fans, who purchased his Patriots jersey in support of the team. Once he
Chapter 2 Strategic Planning in Contemporary Marketing 27
LECTURE OUTLINE
Opening Vignette and Evolution of a Brand— Marissa Mayer, Yahoo’s CEO has big plans for the company
in an effort to get it back in the forefront of digital and mobile marketing.
Chapter Objective 1: Distinguish between strategic planning and tactical planning.
Key Terms: planning, marketing planning, strategic planning, tactical planning
PowerPoint Basic: 5, 6
PowerPoint Expanded: 5, 6, 7
1. Marketing planning: the basis for strategy and tactics
a. Definition of planning: the process of anticipating future events and
conditions and determining the best way to achieve organizational
objectives
2. Strategic planning versus tactical planning
a. Strategic planning is defined as the process of determining an
organization’s primary objectives and adopting courses of action
that will achieve these objectives
28 Part 1 Designing Customer-Oriented Marketing Strategies
Assessment check questions
1.2. Give an example of strategic planning and tactical planning. To survive in a
challenging environment of soaring fuel costs, several airlines have decided to
merge as part of their strategic planning. Tactical plans include cutting the number
of flights and charging passengers extra for checked baggage and other services.
Chapter Objective 2: Explain how marketing plans differ at various levels in an organization.
Key Terms: none
PowerPoint Basic: 7, 8
PowerPoint Expanded: 8, 9
Table 2.1 Planning at
Different Managerial
Levels. Which
managers focus most
on broad goals and
long-term planning?
Which managers focus
gaming consoles,
GameCube and Xbox
respectively?
1. Planning at different organizational levels
a. Managers at all organizational levels devote some of their
attention to planning activities
b. The amount of time spent on planning activities and the types of
planning vary by organizational level
c. Top management (CEOs, COOs, and functional vice-presidents)
i. Spend more of their time planning than middle-level and
supervisor-level managers
Assessment check questions
2.1. How do marketing plans vary at different levels of the organization? Top
2.2. Why is it important to get input from others when planning? Input from a
variety of sources—other employees, suppliers, or customers—helps ensure that
Chapter Objective 3: Identify the six steps in the marketing planning process.
Key Terms: mission, marketing strategy
PowerPoint Basic: 9
PowerPoint Expanded: 10, 11
1. Steps in the marketing planning process
Chapter 2 Strategic Planning in Contemporary Marketing 29
Process. Which step
might be more difficult
than it seems? Which
step do you think can
be easily overlooked?
statements as class
examples
advertising will provide
a competitive edge?
a. Define the firm’s mission
b. Determine organizational objectives
2. Defining the organization’s mission and objectives
a. The organizational mission
i. The mission is the essential purpose that differentiates the
organization from others
ii. The mission statement specifies the organization’s overall
goals and operational scope and provides general
3. Assessing organizational resources and evaluating environmental risks
and opportunities
a. This consists of an assessment of an organization’s strengths,
weaknesses, and available opportunities
4. Formulating, implementing and monitoring a marketing strategy
a. A good marketing plan revolves around an efficient, flexible, and
adaptable marketing strategy
5. In the two final steps of the planning process, marketers put the marketing
strategy into action; then they monitor performance to ensure that
6. Sometimes strategies need to be modified if the product’s or company’s
Assessment check questions
3.1. Distinguish between an organization’s mission and its objectives. The firm’s
mission is the essential purpose that differentiates the company from others. Its
objectives guide development of supporting marketing objectives and plans.
Avon’s mission is to be “the company for women.” One of its objectives might be
30 Part 1 Designing Customer-Oriented Marketing Strategies
convert all its packaging to recycled materials.
Chapter Objective 4: Describe successful planning tools and techniques, including Porter’s Five
Forces model, first and second mover strategies, SWOT analysis, and the strategic window.
Key Terms: Porter’s Five Forces, first mover strategy, second mover strategy, SWOT analysis, strategic
window
PowerPoint Basic: 10-15
PowerPoint Expanded: 13-19
Solving an Ethical
Its Fans?
Ask students what
responsibilities do
professional sports
teams and athletes
have when it comes to
behaving ethically and
promoting a brand.
situation.
1. Successful strategies: tools and techniques
a. Four tools for marketing planning include Porter’s Five Forces
model, first and second mover strategies, SWOT analysis, and the
strategic window
2. Porter’s Five Forces
a. Porter’s Five Forces is a model which identifies five competitive
forces that influence planning strategies
b. Porter later updated his model to include the impact of the Internet
on the strategies that businesses use
c. They are:
i. The threat of new entrants—is influenced by the cost and
difficulty of entering a market. The Internet has reduced
d. Issues such as cost and differentiation or lack of differentiation of
products—along with the Internet—influence the strategies that
companies use to stand out from their competitors
3. First mover and second mover strategies
a. A first mover strategy advocates that a company that is first to
offer a product will be the long-term market winner. Being first may
4. SWOT analysis
a. SWOT analysis helps planners compare internal organizational
strengths and weaknesses with external opportunities and threats
b. “SWOT” is an acronym for strengths, weaknesses, opportunities,
Chapter 2 Strategic Planning in Contemporary Marketing 31
Figure 2.3 SWOT
Analysis. Think of a
well-known product
and its possible
Note: An example of a
strategic window:
Compaq’s large
corporate customers
trying to leverage
Dell’s strengths and
take advantage of the
and threats
c. This is an important strategic planning tool
d. SWOT – strengths
i. A set of core competencies—what the organization does
well
ii. Core competencies are capabilities that customers value
5. Strategic window
a. The strategic window refers to the limited periods when key
requirements of a market and the particular competencies of a firm
best fit together
b. The view through a strategic window shows planners a way to
relate potential opportunities to a firm’s capabilities
c. It requires a thorough analysis of three elements:
Assessment check questions
4.1. Briefly explain each of Porter’s Five Forces. Porter’s Five Forces are the
threats of potential new entrants, which increases competition in a market;
4.2. What are the benefits and drawbacks of a first mover strategy? The benefits of
4.3. What are the four components of the SWOT analysis? What is a strategic
window? SWOT analysis helps planners compare internal organizational strengths
Chapter Objective 5: Identify the two basic elements of a marketing strategy.
Key Terms: marketing mix, product, product strategy, distribution strategy, promotion strategy, pricing
32 Part 1 Designing Customer-Oriented Marketing Strategies
strategy
PowerPoint Basic: 16, 17
PowerPoint Expanded: 20-23
Note: Ask students to
consider automobiles,
computers, and smart
phones as examples.
Marketing Success—
Layaway Programs a
Big Hit with Shoppers
Framework. Discuss
how each strategy
reaches, persuades,
and develops a
relationship with
buyers.
1. Elements of a marketing strategy
a. An effective marketing strategy does several things:
i. It reaches the right buyers at the right time
ii. It persuades them to buy the product
needs of the target market
2. The target market
a. The target market is a group of consumers toward whom the firm
3. Marketing mix variables
a. Marketing decisions can be divided into four variables or strategies
which form the total package, called the marketing mix
4. Product strategy
a. The term product means more than a good, service, or idea—it
refers to a broad concept that also encompasses the satisfaction
5. Distribution strategy
a. The concept of distribution strategy refers to the ways marketers
ensure that consumers find products in proper quantities at the
right time and right place
b. Distribution decisions involve:
i. Modes of transportation
Note: Ask students for
6. Promotion strategy
a. Promotion strategy refers to the communications link between
sellers and buyers
7. Pricing strategy
a. Pricing strategy deals with the methods of setting profitable and
justifiable prices
b. It is closely regulated and subject to considerable public scrutiny
Assessment check questions
5.1. What are the two components of every marketing strategy? The basic
5.2. Identify the four strategic elements of the marketing mix. The marketing mix
consists of product, distribution, promotion, and price strategies.
Chapter Objective 6: Describe the environmental characteristics that influence strategic decisions.
Key Term: rule of three
PowerPoint Basic: 18
PowerPoint Expanded: 24-28
1. The marketing environment
a. Marketing decisions are not made in a vacuum
2. Marketers make decisions about target markets and marketing mix
variables by taking into account the dynamic nature of these five
dimensions of the marketing environment:
a. Competitive factors
3. Some recent trends in the marketing environment:
a. Expanding into foreign markets
b. Technology—especially the Internet
c. Marketers are now increasing efforts to get their messages to
34 Part 1 Designing Customer-Oriented Marketing Strategies
Assessment check questions
6.1. What are the five dimensions of the marketing environment? The five
6.2. How is concern over the natural environment affecting the other dimensions?
Concerns over the natural environment have led to new and tighter regulations on
Chapter Objective 7: Describe the methods for marketing planning, including business portfolio
analysis and the BCG matrix.
Key Terms: strategic business unit (SBU), stars, cash cows, question marks, dogs
PowerPoint Basic: 19-20
PowerPoint Expanded: 29-35
Figure 2.5 BCG
Market Share/Market
Growth Matrix. Think
1. Methods for marketing planning
a. Many firms have developed planning methods to help with marketing
2. Business portfolio analysis
a. Top managers at large firms need a method for spotting product
lines that deserve more investment as well as lines that aren’t living
up to expectations
b. Portfolio analysis attempts to evaluate products and determine the
strongest and weakest
c. Strategic business units
i. A strategic business unit (SBU) is a key business element
within a diversified firm
ii. Each SBU has its own managers, resources, objectives, and
3. The BCG matrix
a. The market share/market growth matrix (or BCG matrix) places
SBUs in a four-quadrant chart that plots market share—the
Chapter 2 Strategic Planning in Contemporary Marketing 35
quadrant.
d. Stars:
i. Stars represent units with high market shares in high-growth
markets
f. Question marks:
i. Question marks achieve low market shares in high-growth
markets
ii. Marketers must decide whether to continue supporting these
products or businesses as they require more investment
than the cash they generate
Strategic Implications of Marketing in the 21st Century
a. Planning has become vital to ,marketers as the 21st century speeds
ahead with technological advances
b. Marketers need to plan carefully, accurately, and quickly to gain a
competitive advantage in today’s global marketplace
7.1. What are SBUs? Strategic business units (SBUs) are key business units within
7.2. Identify the four quadrants in the BCG matrix. The BCG matrix labels SBUs
stars, cash cows, question marks, and dogs. Stars are the products with high market
shares in high-growth markets; cash cows command high market shares in low-
growth markets; question marks achieve low market shares in high-growth markets;
and dogs manage only low market shares in low-growth markets.
ANSWERS AND TEACHING NOTES TO CHAPTER EXERCISES
Chapter 2 Assurance of Learning Review
1. State whether each of the following illustrates strategic or tactical planning:
36 Part 1 Designing Customer-Oriented Marketing Strategies
a. Global automakers begin setting up manufacturing plants in China
b. Play N Trade Video Games and Dimensions Games Corporation merge
c. The Cleveland Browns give up draft picks to obtain QB Johnny Manziel (“Johnny Football”)
d. A regional airline looks for ways to expand to other markets
Answer: a. strategic planning
2. Imagine you had a chance to interview Google co-founders Larry Page and Sergey Brin. What
questions might you ask each about strategic planning for his division and the firm overall?
Answer: Student answers will vary. Questions will be focused on strategic planning. The founders may be
3. What is the difference between a firm’s mission and its objectives? Why is it important that both are
conveyed clearly to employees and to customers?
Answer: A firm’s mission is the essential purpose and philosophy that differentiates it from other
companies. Adjustments in this statement reflect changing business environments and management
4. Over which of Porter’s Five Forces do consumers have the greatest influence? Over which do they
have the least? How might these factors affect a firm’s overall marketing strategy?
Chapter 2 Strategic Planning in Contemporary Marketing 37
Answer: Consumers have the greatest influence on the bargaining power of buyers and the threat of
substitutes. Consumers have the least influence on the bargaining power of suppliers. With increased
5. Why is it so important for a firm to identify its core competencies?
Answer: A company’s strengths reflect its core competencies—what it does well. Core competencies are
capabilities that customers value and competitors find difficult to duplicate. Matching an internal strength
6. How might an understanding of diversity help formulate a firm’s marketing strategy?
Answer: The target market is an essential element of any marketing strategy. Diversity plays an ever-
increasing role in targeting markets. Strategies that focus on satisfying the needs of its most prominent
7. Suppose you have been hired as a marketer by an online retailer, like Wayfair or Amazon, to help
develop a new marketing mix. State one thing you would do to improve the retailer’s position through
each of the four strategic elements: product, distribution, promotion, and pricing.
Answer:
Product: Add more variety by including more services
8. What is the rule of three? Suppose you worked for a small firm in a large industry—such as a small
manufacturer of furniture. How might you actually use the rule of three to enhance your firm’s position in
the marketplace?
Answer: The rule of three means that in any industry, the three strongest, most efficient companies
dominate between 70 and 90 percent of the market. Trying to enter that kind of market is difficult,
9. What is a portfolio analysis? What purpose does it serve for marketers?
Answer: The business portfolio analysis evaluates a company’s products and divisions, including
10. How does the BCG matrix help marketers decide which products to offer? According to the matrix,
which types of products are most desirable, and why?
Answer: The market share/market growth matrix places the firm’s market share on one axis and the
market’s growth potential on the other axis. The resulting four quadrants are labeled: stars (high market
