Each strategic business unit has a functional level, where groups of specialists actually create value for the organization. The term department generally refers to these specialized functions such as marketing, finance, information systems, research & development, manufacturing, human resources. At the functional level, the organization's strategic direction becomes its most specific and focused. Just as there is a hierarchy of levels within an organization, there is a hierarchy of strategic directions set by managers at each level.
A key role of the marketing department is to look outward, keeping the organization focused on creating value both for it and for customers. This is accomplished by listening to customers, developing and producing offerings, and implementing marketing program activities.
An organization's core values are the fundamental, passionate, and enduring principles that guide its conduct over time. A firm's founders or senior management develop these core values, which are consistent with their essential beliefs and character. They capture the firm's heart and soul and serve to inspire and motivate its stakeholders—employees, shareholders, board of directors, suppliers, distributors, creditors, unions, government, local communities, and customers. Core values also are timeless and should not change due to short-term financial, operational, or marketing concerns. Finally, core values guide the organization's conduct. To be effective, an organization's core values must be communicated to and supported by its top management and employees; if not, they are just hollow words. By understanding its core values, an organization can take steps to define its mission, a statement of the organization's function in society that often identifies its customers, markets, products, and technologies. Often used interchangeably with vision, a mission statement should be clear, concise, meaningful, inspirational, and long-term. Goals or objectives (terms used interchangeably in this book) are statements of an accomplishment of a task to be achieved, often by a specific time. For example, Netflix might set a goal of being the top provider of online movies by 2012. Goals convert an organization's mission and business into long- and short-term performance targets. Business firms can pursue several different types of goals: profit, sales, market share, quality, customer satisfaction, employee welfare, social responsibility
S.M.A.R.T. Specific, Measurable, Attainable, Relevant, Time-Based
Nonprofit organizations (such as museums and hospitals) also have goals, such as to serve consumers as efficiently as possible. Similarly, government agencies set goals that seek to serve the public good.
The Boston Consulting Group (BCG), a nationally known management consulting firm, has developed business portfolio analysis. It is a technique that managers use to quantify performance measures and growth targets to analyze their firms' strategic business units (SBUs) as though they were a collection of separate investments. The purpose of the tool is to determine the appeal of each SBU or offering and then determine the amount of cash each should receive. More than 75 percent of the largest U.S. firms have used this analytical tool. More than 75 percent of the largest U.S. firms have used this analytical tool.
The BCG business portfolio analysis requires an organization to locate the position of each of its SBUs on a growth-share matrix. The vertical axis is the market growth rate, The horizontal axis is the relative market share
The BCG has given specific names and descriptions to the four resulting quadrants in its growth-share matrix based on the amount of cash they generate for or require from the organization: Cash cows, stars, question marks, dogs.
An organization's SBUs often start as question marks and go counterclockwise around to become stars, then cash cows, and finally dogs.
Because an organization has limited influence on the market growth rate, its main alternative is to try to change its relative market share. To do this, management decides what future role each SBU should have and either injects or removes cash from it.
Organizations exist to accomplish something for someone. To give organizations direction and focus, they continuously assess their core values, mission, organizational culture, business, and goals. Today's organizations specify their foundation, set a direction, and formulate strategies—the "why," "what," and "how" factors, respectively. Core values are the organization's fundamental, passionate, and enduring principles that guide its conduct over time—what Enron forgot when it lost sight of its responsibilities to its stakeholders. The organization's mission is a statement of its function in society, often identifying its customers, markets, products, and technologies. Organizational culture is a set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization. To answer the question, "What business are we in?" an organization defines its "business"—the clear, broad, underlying industry category or market sector of its offering. Finally, the organization's goals (or objectives) are statements of an accomplishment of a task to be achieved, often by a specific time. Four elements in a marketing program designed to satisfy customer needs are product, price, promotion, and place. Theseelements are called the marketing mix, the four Ps, or the controllable variables because they are under the general control of the marketing department. Environmental forces, also called uncontrollable variables, are largely beyond the organization's control. These include social, economic, technological, competitive, and regulatory forces. Goods, services, and ideas are marketed. Goods are physical objects, such as toothpaste, cameras, or computers, that satisfy consumer needs. Services are intangible items such as airline trips, financial advice, or art museums. Ideas are thoughts about concepts, actions, or causes. In our free-enterprise society there are three specific groups that benefit from effective marketing: consumers who buy, organizations that sell, and society as a whole. True competition between products and services in the marketplace ensures that consumers can find value from the best products, the lowest prices, or exceptional service. Providing choices leads to the consumer satisfaction and quality of life that we have come to expect from our economic system.
Organizations that provide need-satisfying products with effective marketing programs—for example, Target, IBM, and Avon—have blossomed. But competition creates problems for ineffective competitors, such as eToys and hundreds of other dot-com businesses that failed a decade ago.
Finally, effective marketing benefits society. It enhances competition, which both improves the quality of products and services and lowers their prices. This makes countries more competitive in world markets and provides jobs and a higher standard of living for their citizens.
The baby boom cohort is followed by Generation X, which includes the 15 percent of the population born between 1965 and 1976. This period is also known as the baby bust, because the number of children born each year was declining. This is a generation of consumers who are self-reliant, supportive of racial and ethnic diversity, and better educated than any previous generation. They are not prone to extravagance and are likely to pursue lifestyles that are a blend of caution, pragmatism, and traditionalism. In addition, they are collaborative decision makers. In terms of net worth, Generation X is the first generation to have less than the previous generation. As baby boomers move toward retirement, however, Generation X is becoming a dominant force in many markets. Generation X, for example, is replacing baby boomers as the largest segment of business travelers. In response, hotel companies are creating new concepts that appeal to the younger market. Surveys of Generation X travelers indicate they want casual, tech-friendly lodging with 24-hour access to food and drinks, so Hyatt Corporation is building 400 new Hyatt Place all-suite hotels featuring free wireless Internet, flat-panel high-definition televisions, a 24-hour guest kitchen, a fitness center, and remote printing The generational cohort labeled Generation Y includes the 72 million Americans born between 1977 and 1994. This was a period of increasing births, which resulted from baby boomers having children, and it is often referred to as the echo-boom or baby boomlet. Generation Y exerts influence on music, sports, computers, video games, and all forms of communication and networking. Generation Y members are interested in distinctive, memorable, and personal experiences and are very adept at managing their lives to create a work-life balance. They are strong-willed, passionate about the environment, and optimistic. This is also a group that is attracted to purposeful work where they have control. The Making Responsible Decisions box
describes how millennials' interest in sustainability is influencing colleges, graduate schools, and employers. The term millennials is used, with inconsistent definitions, to refer to younger members of Generation Y and sometimes to Americans born since 1994.
Culture also includes values that may differ over time and between countries. During the 1970s, a list of values in the United States included achievement, work, efficiency, and material comfort. Today, commonly held values include personal control, continuous change, equality, individualism, self-help, competition, future orientation, and action. These values are useful in understanding most current behaviors of U.S. consumers, particularly when they are compared to values in other countries. Contrasting values outside the United States, for example, include belief in fate, the importance of tradition, a focus on group welfare, and acceptance of birthright. Of particular concern at the macroeconomic level is the performance of the economy based on indicators such as GDP (gross domestic product), unemployment, and price changes (inflation or deflation). In an inflationary economy, the cost to produce and buy products and services escalates as prices increase. From a marketing standpoint, if prices rise faster than consumer incomes, the number of items consumers can buy decreases. Periods of declining economic activity are referred to as recessions. During recessions, businesses decrease production, unemployment rises, and many consumers have less money to spend. Consumer expectations about the economy are an important element of environmental scanning. Consumer spending, which accounts for two-thirds of U.S. economic activity, is affected by expectations of the future. (the second income component) the money a consumer has left after paying taxes to use for necessities such as food, housing, clothing, and transportation. Thus, if taxes rise or fall faster than income, consumers are likely to have more or less disposable income. Similarly, dramatic changes in prices of products can require spending adjustments. In recent years, for example, as the price of gasoline increased, consumers found themselves adjusting their spending in other categories. In addition, the decline in home prices has had a psychological impact on consumers, who tend to spend more when they feel their net worth is rising and postpone purchases when it declines. During a recessionary period, spending, debt, and use of credit all decline. The recent downturn has led many consumers to switch from premium brands to lower-priced brands. Technological change is the result of research, so it is difficult to predict. Some of the most dramatic technological changes occurring now, however, include the following:
● Social networks will become social platforms that provide functionality, community, and identity well beyond the value provided by traditional corporate websites.
● "Natural user interfaces" will utilize gesture, touch, and voice to change the way we interact with and control computers and complicated machines.
● Green technologies such as SmartGrid infrastructure, online energy management, and consumer-generated energy (e.g., home wind turbines) will gain widespread acceptance among American consumers.
● Biotechnology will be used to develop genetically modified crops to create enough food for a growing world population.
a common industry structure, occurs when a few companies control the majority of industry sales. The wireless telephone industry, for example, is dominated by AT&T, Verizon, and Sprint-Nextel, which have 123, 92, and 48 million subscribers, respectively. Similarly, the entertainment industry in the United States is dominated by Viacom, Disney, and Time Warner, and the major firms in the U.S. defense contractor industry are Boeing, Northrup Grumman, and Lockheed Martin.
Critics of oligopolies suggest that because there are few sellers, price competition among firms is not desirable because it leads to reduced profits for all producers.
The federal copyright law is another way for a company to protect its competitive position in a product. The copyright law gives the author of a literary, dramatic, musical, or artistic work the exclusive right to print, perform, or otherwise copy that work. Copyright is secured automatically when the work is created. However, the published work should bear an appropriate copyright notice, including the copyright symbol, the first year of publication, and the name of the copyright owner, and it must be registered under the federal copyright law. There are many consumer-oriented federal laws regarding products. The various laws include more than 30 amendments and separate laws relating to food, drugs, and cosmetics, such as the Infant Formula Act (1980), the Nutritional Labeling and
Education Act (1990), new labeling requirements for dietary supplements (1997), and proposed labeling guidelines for trans fats (2006). broader scope, such as the Fair Packaging and Labeling Act (1966), the Child Protection Act (1966), and the Consumer Product Safety Act (1972), which established the Consumer Product Safety Commission to monitor product safety and establish uniform product safety standards.
Consumers, like marketers, have an obligation to act ethically and responsibly in the exchange process and in the use and disposition of products. Unfortunately, consumer behavior is spotty on both counts. Unethical consumer behavior includes
filing warranty claims after the claim period; misredeeming coupons; pirating music, movies, and software from the Internet; and submitting phony insurance claims, among other behaviors. Unethical behavior is rarely motivated by economic need. Rather, research indicates that this behavior is influenced by (a) a belief that a consumer can get away with the act and it is worth doing and (b) the rationalization that such acts are justified or driven by forces outside the individual—"everybody does it." Consumer purchase, use, and disposition of environ-
mentally sensitive products relate to consumer social responsibility. Even though consumers are sensitive to ecological issues they (a) may be unwilling to sacrifice convenience and pay potentially higher prices to protect the environment and (b) lack the knowledge to make informed decisions dealing with the purchase, use, and disposition of products.