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Marketing Chapter 2
Terms in this set (54)
The managerial process of creating and maintaining a fit between the organization's objectives and resources and the evolving market opportunities.
Goal: Long run profitability and growth
Strategic Marketing Questions
1. What is the organization's main activity at a particular time?
2. How will it reach its goals?
strategic business units (SBUs)
A subgroup of a single business or collection of related businesses within the larger organization.
Characteristics of an SBU
1. A distinct mission and a specific target market
2. Control over its resources
3. Its own competitors
4. A single business or a collection of related businesses
5. Plans independent of the other SBUs in the total organization
Tools (strategic alternatives) to manage the strategic direction of the business/SBU
1. Ansoff's strategic opportunity matrix
2. Boston Consulting Group Model
3. General Electric Model
Ansoff's Strategic Opportunity Matrix
This strategic alternative matches products with markets. Firms can explore these four options
1. Market penetration
2. Market development
3. Product development
One of the options for Ansoff's Strategic Opportunity Matrix. A firm using this alternative would try to increase market share among existing customers.
Eg. Starbucks sells more coffee to customers who register their reloadable Starbucks cards.
One of the options for Ansoff's Strategic Opportunity Matrix. This means attracting new customers to existing products. Ideally, new uses for old products stimulate additional sales among existing customers while also bringing in new buyers.
Eg. Starbucks opens stores in Brazil and Chile
One of the options for Ansoff's Strategic Opportunity Matrix. This entails the creation of new products for present markets.
Eg. Starbuck develops powdered instant coffee called via
One of the options for Ansoff's Strategic Opportunity Matrix. This is increasing sales by introducing new produts into new markets. It can be very risky when a firm is entering unfamiliar markets. However, it can be very profitable when a firm is entering markets with little or no competition.
Eg. Starbucks launches Hear Music and buys Ethos Water
The Innovation Matrix
A system that enables a company to see exactly what types of assets need to be developed and what types of markets are possible to grow into (or create) based on the company's core capabilities.
The layout of the innovation matrix demonstrates that as a company moves away from its core capabilities, it traverses a range of change and innovation rather than choosing one of the four sectors in Ansoff's matrix. These ranges are:
1. Core Innovation
2. Adjacent Innovation
3. Transformational Innovation
One of the ranges in the innovation matrix. These decisions implement changes that use existing assets to provide added convenience to existing customers and potentially entice customers from other brands.
Eg. Packaging changes, such as Tide's laundry detergent pods.
One of the ranges in the innovation matrix. These decisions are designed to take company strengths into new markets. This space uses existing abilities in new ways.
Eg. Botox was originally developed to treat intestinal problems. It was leveraged in the cosmetic market.
One of the ranges in the innovation matrix. These decisions result in brand new markets, products, and often new businesses. The company must rely on new, unfamiliar assets to develop the type of breakthrough decisions that fall in this category.
Eg. GoPro video camera
Boston Consulting Group Portfolio Matrix
A tool for allocating resources among products or strategic business units on the basis of relative market share and market growth rate.
2. Cash Cow
3. Problem Child (Question Mark)
One of the categories of the portfolio matrix. It is a fast growing market leader. ____ SBUs usually have large profits buy need lots of cash to finance rapid growth. The best marketing strategy is to protect existing market share by reinvesting earnings in product improvement, better distribution, more promotion, and production efficiency. Management must capture new users as they enter the market.
High growth market, high market share dominance
Eg. Apple iPad
One of the categories of the portfolio matrix. An SBU that generates more cash than it needs to maintain its market share. Basic strategy is to maintain market dominance by being the price leader and making technological improvements in the product. Managers should allocate excess cash to the product categories where growth prospects are the greatest.
Eg. Heinz has two of these, Ketchup and Weigh Watchers frozen dinners
Low growth Market, High market share dominance
Problem Child (Question Mark)
One of the categories of the portfolio matrix. Shows rapid growth but poor profit margins. It has a low market share in a high-growth industry. These need a large amount of cash and without it, they will eventually become dogs. Strategy options are to invest heavily to gain better market share, acquire competitors to get the necessary market share, or drop the SBU. Sometimes a firm can reposition the products of the SBU to move them into the star category.
High growth market, low market share dominance
One of the categories of the portfolio matrix. Low growth potential and a small market share. Most ____ eventually leave the marketplace.
Eg. Blackberry's smartphone line
Basic strategies for portfolio matrix categories
One of the basic strategies for portfolio matrix categories. If an organization has an SBU that it believes has the potential to be a star (probably currently a problem child), then this would be the right goal.
The organization may decide to give up short term profits and use its financial resources to achieve this goal.
Eg. Apple postponed further work on the iPad to pursue the iPhone.
One of the basic strategies for portfolio matrix categories. If an SBU is a successful cash cow, a key goal would be to hold or preserve market share so that the organization can take advantage of the very positive cash flow.
Eg. Project Runway is a cash cow. New seasons and spin offs are expected for years to come.
One of the basic strategies for portfolio matrix categories. This strategy is appropriate for all SBUs expect those classified as stars. Basic goal is to increase the short-term cash return without worrying about the long-run impact.
It is especially worthwhile when more cash is needed from a cash cow with long-run prospects that are unfavorable because a low market growth rate.
One of the basic strategies for portfolio matrix categories. Getting rid of SBUs with low shares of low-growth markets is often appropriate. Problem children are dogs are often most suitable.
Eg. Nestle is in the process of selling its PowerBar SBU.
General Electric Model
A model that measures business position (how well positioned the organization is to take advantage of market opportunities) and market attractiveness (high profitability, rapid growth, lack of government regulation, consumer insensitivity to a price increase, lack of competition, availability of technology). The grid is divided into three overall attractiveness zones for each dimension (high, medium, and low).
The process of anticipating future events and determining strategies to achieve organizational objectives in the future.
Involves designing activities related to marketing objectives and the changing marketing environment.
A written document that acts as a guidebook of marketing activities for the marketing manager.
A statement of the firm's business based on a careful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions.
Elements of a marketing plan
1. Business Mission Statement
2. Situation or SWOT analysis
4. Target Market Strategy
5. Marketing Mix (Product, Price, Place, Promotion)
6. Implementation Evaluation Control
Defining a business in terms of goods and services rather than in terms of the benefits customers seek.
SWOT Analysis (Situation Analysis)
The firm should identify its internal strengths (S) and weaknesses (W) and also examine external opportunities (O) and threats (T)
Strengths and weaknesses: focus on organizational resources such as production costs, marketing skills, financial resources, company or brand image, employee capabilities, and available technology
Opportunities and threats: focus on aspects of the marketing environment
The collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan. Helps identify market opportunities and threats and provides guidelines for the design of the marketing strategy.
Performing SWOT analysis allows firms to identify this. It is a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition.
Types of competitive advantage
1. Cost competitive advantage
2. Product/Service Differentiation Competitive Advantage
3. Niche Competitive Advantage
4. Building Sustainable Competitive Advantage
Cost competitive advantage
This means being the low-cost competitor in an industry while maintaining satisfactory profit margins.
Ways that costs can be reduced
1. Experience Curves
2. Efficient Labor
3. No frills goods and services
4. Government subsidies
5. Product design
7. Production innovations
Curves that show costs declining at a predictable rate as experience with a product increases. One of the ways costs can be reduced.
Product/Service Differentiation Competitive Advantage
The provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition.
Eg. Brand names, a strong dealer network, product reliability, image, or service.
Niche competitive advantage
The advantage achieved when a firm seeks to target and effectively serve a small segment of the market.
Eg. Blue Bell Ice Cream
Sustainable Competitive Advantage
An advantage that cannot be copied by the competition. This is the key to having competitive advantage.
Eg. Netflix has a steady hold over the movie rental market.
A statement of what is to be accomplished through marketing activities
Marketing objectives should be:
3. Time specific
4. Compared to a benchmark
Involves the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets.
Market opportunity analysis (MOA)
The description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments.
Refers to a unique blend of product, place, promotion and pricing strategies (often referred to as the four Ps) designed to produce mutually satisfying exchanges with a target market.
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 objectives.
Eg. Detailed job assignments, activity descriptions, time lines, budgets, and lots of communication.
Gauging the extent to which the marketing objectives have been achieved during the specified time period.
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 thorough, systematic, periodic, evaluation of the objectives, strategies, structure and performance of themarketing organization.
Reasons for failing to achieve a marketing objective
1. Unrealistic marketing objectives
2. Inappropriate marketing strategies in the plan
3. Poor implementation
4. Changes in the environment after the objective was specified and strategy was implemented
Post audit tasks
1. The audit should profile existing weaknesses and inhibiting factors, as well as the firm's strengths and new opportunities available to it
2. Ensure that the role of the audit has been clearly communicated
3. Make someone accountable for implementing recommendations
Characteristics of a marketing audit
Characteristics of effective strategic planning
1. Continuous attention
3. Management commitment
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