Marketing fundamentals, an international perspective
This summary is for the course Online Marketing & Communication 2, in the second year. The summary is based on the book 'Marketing Fundamentals', written by Verhage. The summary is from chapters 2, 3, 6, 7, 8 & 11.
CHAPTER 2 – STRATEGY DEVELOPMENT AND MARKETING
PLANNING
2.1 MARKETING PLANNING
Managers are concerned with four things: the ANALYSIS, PLANNING, IMPLEMENTATION
and CONTROL of the company’s activities. These tasks are essential for effective
MARKETING MANAGEMENT. Having completed various ANALYSES, a manager then makes
PLANS and implements them. To maintain the necessary CONTROL, work is constantly
monitored during and after the implementation to ensure that it is being carried out as
planned.
2.1.1 DIFFERENCES BETWEEN STRATEGIC AND TACTICAL PLANNING
Strategy and tactics combined form the company’s POLICY. The long-term plan sets out the
strategy. A strategic marketing plan defines the marketing goals for a period of two to five
years and indicated HOW (in which market and with what products) those goals can be
realized. This long-term plan is based on certain assumptions, estimates and scenarios. The
marketing strategy must be carefully aligned with the previously formulated CORPORATE
strategy.
A short-term plan is more OPERATIONAL in that it describes the tactics the company will
implement to achieve its short-term objectives. An operational MARKETING PLAN for a
period of one year is quite common. While a company sets out its main objectives and the
methods it will use to achieve them in its strategic marketing plan, the company’s tactics
explain in detail how it intends to implement the strategy.
2.1.2 THREE LEVELS OF STRATEGY DEVELOPMENT
CORPORATE STRATEGY: is developed at the uppermost levels of the organization. A concern
or parent company is usually comprised of various STRATEGIC BUSINESS UNITS (SBU’s).
Each of these SBU’s is a division of the organization that operates more or less
independently; it sells a range of products to a certain group of customers and – among
clearly defined competitors – is responsible for the development and implementation of the
strategy.
An organization can be divided into Strategic Business Units in different ways. A good
starting point is to determine how the corporate activities fundamentally differ. By
determining resources to which the SBU’s have access (the so-called ALLOCATION OF
RESOURCES), management also influences the SBU’s investments.
BUSINESS STRATEGY: the divisions, subsidiaries or SBU’s of the corporation conduct the
second level of planning. The business strategy involves more than the marketing strategy.
The CEO also distributes the resources made available to the SBU among its various
activities in a way that will achieve the best results. The steps in this planning process are
about the same as those at the corporate level, even though they deal with different issues.
Strategy development starts with the strategic profile. This can be established in a brief
description of the company, its products and the markets in which it operates.
MARKETING STRATEGY: the third level at which strategy development occurs, is the level of
a product, brand or product line. This is usually called MARKETING PLANNING. This is the
marketing managers’ or product managers’ responsibility. They develop a strategy in order
,to achieve the objectives of their product-market combination. Marketing and product
managers are concerned with both strategic and operational management tasks.
2.1.3 BUILDING BLOCKS OF SUCCESS
Research has shown that several components of a MARKETING STRATEGY contribute to an
effective business strategy. The more the various business units or divisions succeed in
achieving their marketing objectives, the greater the chance that the CORPORATION– or the
organization as a whole – will be able to compete successfully.
The four cornerstones of a marketing strategy are:
1. BRAND IMAGE, to make products and services recognizable and attractive in the
customers’ eyes
2. QUALITY, which must meet customers’ expectations about the products’
performance
3. INNOVATION, to create new and unique benefits in using the product
4. ONGOING CUSTOMER RELATIONSHIP, to be able to meet customers’ need as well as
possible
2.1.4 A MARKETING PLANNING AND MANAGEMENT MODEL
Strategy development is usually considered at BUSINESS UNIT level. The cornerstone of this
business unit strategy is the marketing strategy, which in turn often serves as the basis for
the strategies of other departments or functional areas.
In a marketing-oriented company marketing planning begins with the CUSTOMERS. Their
needs and wants should be carefully analyzed in order to satisfy them successfully.
Customers are positioned at the top in the process of MARKETING PLANNING and
MARKETING MANAGEMENT. This process is divided up into three phases: ANALYSIS,
MARKETING STRATEGIZING and IMPLEMENTATION of the strategy.
ANALYSIS: a company striving to satisfy its customers has to make choices. It has to
focus on a certain target market. The most effective strategy is largely dependent on
the main steps in the analysis part of the marketing planning process: the so-called
SWOT ANALYSIS (Strengths, Weaknesses, Opportunities, Threats). INTERNAL
ANALYSIS is based on the analysis of the company’s strengths and weaknesses.
EXTERNAL ANALYSIS is based on the opportunities and threats.
PLANNING AND IMPLEMENTATION: in the marketing planning process the strategy
development phase begins with the formulation of MARKETING OBJECTIVES in light
of the results of the analysis. The next step in developing an effective strategy is to
define and evaluate STRATEGIC OPTIONS.
CONTROL: the chosen marketing strategy results in a MARKETING ACTION PLAN for
the year ahead. The plan explains how the company will use the available resources
and marketing mix instruments to approach the market as effectively as possible and
to achieve its objectives in the short term. Implementation of the plan requires
continuous CONTROL, which involves monitoring results to determine if any
adjustments in the strategy need to be made.
,2.2 BUSINESS DEFINITION AND MISSION STATEMENT
A strategic plan outlines the DIRECTION for the company. The essence of STRATEGIC
PLANNING: the development of a long-term plan to use the resources of an organization in
an optimal way, within the constraints of the business definition and the mission of the
organization.
2.2.1 FORMULATING THE BUSINESS DEFINITION
Companies used to define their business in terms of the PRODUCT and the materials or
TECHNOLOGY used. Nowadays, companies tend to define what they do in relation to a
target market, focusing on the NEEDS of the customers.
The BUSINESS DEFINITION specifies the company’s activities. At the core of the business
definition is the BUSINESS DOMAIN or BUSINESS SCOPE: the
extent of the firm’s current activities. Three dimensions,
which also form the basis of the Abell model:
- CUSTOMERS: what type of customer?
- NEEDS: what customer functions should we fulfil?
- TECHNOLOGIES: with which products and services?
2.2.2 DEFINING THE COMPANY’S MISSION
The MISSION STATEMENT spells out the company’s strategic vision, the overall goals, top
management’s values and priorities, and the strategies it pursues. It is the formal
description of an organization’s mission. It describes the company’s strengths (CORE
COMPETENCIES) and the technologies is should master in order to successfully compete in
meeting customer needs. Core competencies are capabilities that customers value and
competitors find hard to duplicate.
A mission statement has both an external and internal function. The EXTERNAL function is
to emphasize the distinctive features of the company. It describes the nature of the
company, what it does and what it stands for. INTERNALLY the mission statement’s function
is to motivate the employees and to get them to reflect on the strategy.
The mission statement’s key function is to DIRECT the growth of the company or of the
SBU’s using the corporate mission statement as a point of departure.
2.3 SWOT ANALYSIS
A feasible plan must be based both on an analysis of the company’s strengths and
weaknesses (INTERNAL ANALYSIS) and of the opportunities and threats in the environment
(EXTERNAL ANALYSIS). Together these two analyses are known as the SITUATION
ANALYSIS.
2.3.1 INTERNAL ANALYSIS
This addresses factors that the company itself can influence. The INTERNAL ANALYSIS
should provide insight into the company’s STRENGTHS and WEAKNESSES.
2.3.2 EXTERNAL ANALYSIS
The marketing environment consists of external variables that the company is unable to
influence: the NON-CONTROLLABLE FACTORS. External analysis will help to determine the
extent to which these trends represent OPPORTUNITIES or THREATS, and to identify those
, which are irrelevant for the company. An OPPORTUNITY is a trend or incident that may lead
to an increase in sales or profit. A THREAT is a trend or incident that may result in a sales or
profit reduction.
Strategy development is influenced by four categories of external factors. These are
MARKET trends, COMPETITORS’ strategies, developments in the INDUSTRY or broader
environment and trends and shift in power in DISTRIBUTION CHANNELS.
2.3.3 SITUATION ANALYSIS
The internal analysis gives us an overview of the company’s STRENGTHS and WEAKNESSES.
Strengths are the capabilities that may help a firm to achieve its goals, whereas weaknesses
are constraints that could obstruct a firm’s ability to reach its goals. The external analysis
provides us with a list of the OPPORTUNITIES and THREATS in the environment.
Opportunities are circumstances that a firm could possibly exploit to its advantage, whereas
threats are either current or developing circumstances that could negatively affect the firm’s
performance. We can now link these two sets of results by combining them in a situation
analysis or SWOT ANALYSIS, which is a widely used tool for conducting or presenting a
situation analysis.
Matching an internal strength with an external opportunity, results in LEVERAGE for the
organization. Companies face a PROBLEM when threats in the environment attack their own
weaknesses. Managers may anticipate CONSTRAINTS when internal weaknesses or
limitations make it difficult for the company to take advantage of opportunities. Internal
weaknesses can create VULNERABILITIES for the company if particular threats affect the
company’s strengths.
2.3.4 CONFRONTATION MATRIX
A helpful tool to identify possible strategies, based on the SWOT analysis, is the
CONFRONTATION MATRIX. The matrix combines strengths and weaknesses with
opportunities and threats and suggests several preferred strategies for each quadrant.
2.4 DETERMINING MARKETING OBJECTIVES
In any event, we need to make a distinction between the main issues and secondary issues
and between the core problem and its SYMPTOMS. A well-defined mission statement and a
clear description of the core problem create the best possible starting point for plotting a
marketing strategy. Marketing development begins with formulating MARKETING
OBJECTIVES.
2.4.1 HOW TO FORMULATE OBJECTIVES
Objectives must be AMBITIOUS but REALISTIC. They need to be SPECIFIC in terms of
numbers or percentages and in determining the time periods for the intended
achievements, so that they direct future strategy and are also MEASURABLE. It must be
clear which of the strategy objectives receive PRIORITY. A company can clarity its priorities
by ranking objectives in order of importance. This clear HIERARCHY of objectives makes it
easier to decide where the most time or money should be allocated to achieve certain goals.
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