Chapter 2

Company and Marketing Strategy: Partnering to Build Customer Relationship

Chapter Objectives
Company wide strategic planning: defining

companys role. Planning marketing: parenting to build customer relationships. Marketing strategy & the Marketing Mix Managing the marketing effort. Measuring & managing return on marketing.

Nike

Just Do It!

Highlights

1972- Nike named after Greek goddess of victory. Swoosh designed by a graduate student for $35. 1979- Nike owned 50% of the US shoe market. 1980s- Nike revolutionized sports marketing by brand building activities- endorsements, promotional events, Just Do It ads. Initial success- technical superiority in running & basketball shoes Leader in Research & development . The Nike Experience Be a rebel attitude- genuine passion for sports, maverick disregard for convention . 1980s- 1990s: Nikes revenues grew at annual rate of 21%. New product categories- sunglasses, soccer balls, baseball, golf, ice hockey, hiking.

Problems
Late 1990s:

- decline in creativity - Fighting off allegations of over commercialization & child labor. Biggest Obstacle- Nikes own success becoming too common to be cool. Sales moved past $10 billion mark. Worked on hunches & instincts. Difficulty going global.

Strategies
Toned down its mainstream attitude. Created right balance between creative &

business side. Focused on innovation, new market opportunities, developing new product lines. Overhauled computer systems. Overhauled supply chain systems. Spent $500 million in building new systemscutting down lead time from 9 months to 6 months. Global Expansion- 50% sales coming from International markets.

New Nike
Phenomenal growth- Sales grew more than

50% to $15 billion, profits doubled. Nike captures 35% of the US athletic shoe market. An investment of $1000 in Nike in 1980 would be worth more than $64,000 today. Phil Knights 23% stake in Nike is worth $6 billion, making him ONE OF THE WORLDS RICHEST PEOPLE! Now that weve grown so large, theres a fine line being a rebel & being a bully. We have to be beautiful as well as big.

What is strategic planning?

It is the process of developing and

maintaining a strategic fit between the organizations goals & capabilities and its changing marketing opportunities.
The strategic plan establishes what kind of

businesses the company will operate in & its objectives for each.

Steps in Strategic Planning

Defining the company mission. 2. Setting company objectives & goals. 3. Designing the business portfolio. 4. Planning , marketing & other functional strategies.
1.

 What is our business?

Who is the customer?

What do consumers value? What should our business be?

HOW TO ANSWER ALL THESE QUESTIONS??

Mission Statement
A statement of the organizations purpose-

what it wants to accomplish in the larger environment. Should act as an invisible hand guiding people in the organization. Should be market oriented & defined in terms of customer needs.

Examples of Mission Statements

Nike: to bring inspiration and innovation to every athlete in the world. Ebay: to provide a global trading platform where practically anyone can trade practically anything- you can get it on Ebay. Microsoft: realize their potential- your potential, our passion Walmart: Give ordinary folk the chance to buy the same things as rich people.

Characteristics of Mission Statements

A mission statement should be market

oriented & defined in terms of customer needs. It should neither be too narrow or broad. It should be realistic. It should be specific. It should fit the marketing environment. It should be motivating.

Designing the Business Portfolio

Management must plan its Business Portfolio

the collection of businesses & products that make up the company. A Strategic business unit (SBU) is a unit of the company that has a separate mission & objectives & that can be planned independently from other company businesses. It can be a company division, a product line within a division, or sometime a single product or brand.

Analyzing the current business portfolio

Business Portfolio Analysis:

Management evaluates the products & businesses making up the company.

Company will want to put strong resources

into its more profitable businesses & phase down weaker ones.

Purpose of Strategic Planning

To find ways in which the company can best

use its strengths to take advantage of attractive opportunities in the market. Standard portfolio Analysis methods evaluate SBUs on two important dimensions: - attractiveness of the SBUs market /industry. - strength of the SBU

BCG Growth Matrix

Star
High Market Growth Rate Market Attractiveness Low Cash Cow High Dog Low Question Mark

Relative Market Share Company Strength

BCG Matrix
Stars: High-growth, High-share businesses/products.

Need heavy investment to finance their rapid growth. Cash Cows: Low-growth, High-share businesses/products. Produce lots of cash that company uses to pay bills. Question Marks: High-growth, Low-share businesses/products. Require lots of cash to hold their shares. Dogs: Low-growth, Low-share businesses/products. Do not promise to be large sources of cash.

SBU Strategies
Build: Appropriate for question marks whose market

shares must grow if they are to become stars.

Hold: Appropriate for strong cash cows if they are to

continue yielding large positive cash flows.

Harvest: To increase short term cash flow regardless

of long-term effect. Appropriate for weak cash cows whose future is dim & from which more cash flow is needed. Can be used with question marks & dogs.
Divest: To sell or liquidate the business. Appropriate

for dogs & question marks that are acting as a drag on companys profits.

Developing Strategies for Growth & Downsizing

Product/ Market Expansion Grid

A portfolio planning tool for identifying company growth opportunities through: - Market Penetration - Market Development - Product Development - Diversification

Product/market Expansion Grid

PRODUCTS

EXISTING PRODUCTS

NEW PRODUCTS

MARKETS

EXISITING MARKETS

MARKET PENETRATION

PRODUCT DEVELOPMENT

NEW MARKETS

MARKET DEVELOPMENT

DIVERSIFICATION

 Market Penetration: A strategy for company

growth by increasing sales of current products to current market segments without changing the product.
Market Development: A strategy for company

growth by identifying & developing new market segments for current company products.
Product Development: A strategy for company

growth by offering modified or new products to current market segments.

 Diversification: A strategy for company

growth through starting up or acquiring businesses outside the companies current products & markets.
Downsizing: Reducing the business portfolio

by eliminating products of business units that are not profitable or that no longer fit the companys overall strategy.

Starbucks Coffee

Starbucks- Background
Howard Schultz founded a European style

coffee house in America. More than 11,000 stores. More than 35 million customers. Third Place- away from home & away from work. Jaw dropping revenues- growth exceeding 20% each year. We aren't in the coffee business, serving people, we are in the people business, serving coffee.

Starbucks- Strategies for growth

Market Penetration: Making more sales to

current customers without changing its products. - Adding more stores in current market areas. - Improvements in advertising, prices, services, menu selection inviting customers to stay more longer. - Added drive-through windows. - Pre-paid Starbucks card. - Wireless Internet Access

 Market Development: Identifying &

developing new markets for its current products.

- Demographic Markets. - Geographic Markets

 Product Development: Offering modified or

new products to current market segments.

- Introduced new reduced calorie options. - Introduced chocolate beverages for non coffee drinkers. - Co-branded with Kraft. - Introduced coffee liqueurs.

 Diversification: Starting up or acquiring

businesses outside the companies current products & markets.

- Purchased Hear Music- spurred creation of new Starbucks entertainment division. - Partnered with Lions Gate to co-produce movies & then market them in Starbucks coffee houses.

Factors Influencing Company Marketing Strategy

Marketing Strategy
The marketing logic by which the business

unit hopes to achieve its marketing objectives.

Marketing Mix

The set of controllable tactical marketing tools1. Product 2. Price 3. Place 4. Promotion that the firm blends to produce the response it wants in the market

4Ps
Product : The goods & services combination the

company offers to the target market. Price: The amount of money customers have to pay to obtain the product. Place: The company activities that make the product available to target consumers. Promotion: The activities that communicate the merits of the product & persuade target consumers to buy it.

4Ps Vs 4Cs
4Ps
Product Price Place Promotion

4Cs
Customer Solution Customer Cost Convenience Communication

Marketers should therefore think through the 4Cs first & then build the 4Ps.

4Ps of the Marketing Mix

MARKETING MIX

PRODUCT

PRICE

PROMOTION Sales Promotion

PLACE

Product Variety Quality Design Features Brand name

List Price

Discounts
Allowances Payment Period Credit Terms

Advertising
Sales Force Public Relations Direct Marketing

Channels
Coverage Assortments Locations

Packaging
Services Warranties

Inventory
Transport

Customer-Driven Marketing Strategy

Market Segmentation
Target Marketing Differentiation

Market Positioning

 Market Segmentation

Dividing a market into distinct group of buyers who have distinct needs, characteristics or behavior who might require separate products or marketing programs.
Consumers can be grouped according to

geographic, demographic, psychographic & behavioral factors.

 Market Targeting

The process of evaluating each market segments attractiveness & selecting one or more segments to enter.
Differentiation: Actually differentiating the

market offering to create superior customer value.

Positioning
Arranging for a product to occupy a clear, distinctive & desirable place relative to competing products in the mind of target consumers.

In positioning a product the company:

1.

Firstly identifies possible customer value differences that provide competitive advantage to build position. Offers greater customer value either by charging lower prices or offering more benefits.

2.

Effective positioning begins with DIFFERENTIATION

Positioning
Examples: BMW makes the ultimate driving machine Ford is built for the road ahead Kia promises to surprise MasterCard gives you priceless experiences Visa Life takes Visa

Managing the Marketing Effort

Market Analysis 2. Market Planning 3. Market Implementation 4. Marketing Control
1.

Market Analysis
Company must analyze its market &

marketing environment to find attractive opportunities & threats, strengths & weaknesses Goal: Match the strengths with opportunities, overcome/ eliminate weaknesses & minimize threats.

Market Analysis
SWOT Analysis:

An overall evaluation of the Companys

STRENGTHS
WEAKNESSES OPPORTUNITIES

THREATS

(S) (W) (O) (T)

SWOT ANALYSIS
Strengths Internal capabilities that may help a company reach its objectives Weaknesses Internal limitations that may interfere with a companys ability to reach its objectives Threats Current & emerging external factors that may challenge the company's performance Negative

Internal

Opportunities
External External factors that the company maybe able to exploit to its advantage Positive

Market Planning
Involves deciding on marketing strategies that

will help the company in attaining its overall strategic objectives. Addresses the what & why of marketing activities. A detailed marketing plan is needed for each business, product or brand.

Market Planning

1. 2. 3. 4. 5. 6. 7. 8.

CONTENTS OF A MARKETING PLAN

Executive Summary Current Market Situation Threats & Opportunities Analysis Objectives & Issues Marketing Strategy Action Programs Budgets Controls

Read Table 2.2 pg 54.

Market Implementation
The process that turns marketing plans into

marketing actions in order to accomplish strategic marketing objectives. Addresses the who, where, when & how of the marketing activities.

Marketing Control
The process of measuring & evaluating the

results of marketing strategies & plans & taking corrective action to ensure that objectives are achieved.
Marketing Audit: A comprehensive,

systematic, independent & periodic examination of a companys environment, objectives, strategies & activities to determine problem areas & opportunities & to recommend a plan of action to improve the companys marketing performance.