Introduction to accounting

Dr. Dima Abdul hay

Global Edition

Company and Marketing

Strategy - Partnering to Build
Customer Relationships
Chapter 2
 Rest Stop: Previewing the Concepts

Explain companywide strategic planning and

its four steps
Discuss how to design business portfolios and
growth strategies
Explain marketings role in strategic planning
and how marketing works with its partners to
create and deliver customer value

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 Rest Stop: Previewing the Concepts

Describe the elements of a customer-driven

marketing strategy and mix, and the forces
that influence it
List the marketing management functions,
including the elements of a marketing plan,
and discuss the importance of measuring and
managing return on marketing investment

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 McDonalds
In the mid-1990s, McDonalds was
struggling to find its identity amid a flurry of
new competitors and changing consumer
tastes. It experimented with its menu and
expanded into non-burger products, all the
while opening new restaurants. Customer
service and cleanliness declined because
the company couldnt hire and train good
cccworkers fast enough.

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 McDonalds increasingly became a target
for nutritionists and social activists, who
accused the chain of contributing to the
nations obesity epidemic. Sales growth
slumped, and its market share fell by more
than 3 percent between 1997 and 2003.
To turn the company around, the
companys mission was changed from
being the worlds best quick service
restaurant to being our customers
favourite place and way to eat.

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 The company halted rapid expansion and
instead poured money back into
improving the food, the service, the
atmosphere, and marketing at existing
outlets. A reworked menu provides more
choice and variety, including healthier
options. McDonalds rediscovered
dedication to customer value sparked a
remarkable turnaround.

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 First Stop - McDonalds: A Customer-
Focused Plan to Win Strategy
Loss of identity
Rapid expansion causes McDonalds to lose
product focus
Faces criticism for nutritional quality and service
standards
The turnaround
From being the worlds best quickservice
restaurant to being our customers favorite
place and way to eat
Increase in share price, sales, and profits
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Strategic planning
The process of developing
and maintaining a strategic fit
between the organizations
goals and capabilities and its
changing marketing
opportunities

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 Strategic planning sets the stage for the
rest of planning in the firm. Companies
usually prepare annual plans, long-range
plans, and strategic plans. The annual and
long-range plans deal with the companys
current businesses and how to keep them
going.

In contrast, the strategic plan involves

adapting the firm to take advantage of
opportunities in its constantly
changing environment.
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Figure 2.1 - Steps in Strategic Planning

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Mission statement

A statement of the
organizations purpose
what it wants to accomplish
in the larger environment

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Practice :
Use any of the company mission
statements and analyse how you can
answer each of the questions given below

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 The Mission Statement
Questions the mission statement should
answer
What is our business?
Who is our customer?
What do consumers value?
What should our business be?
Mission statements should be market-
oriented, not product-oriented

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 Fuel for Thought
Evaluate the following mission statement for a
real estate agency against the criteria
previously discussed:

We sell houses and commercial property.

Rewrite the mission statement.

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Setting Company Objectives and Goals
The mission should
be translated into
supporting
objectives for each
level of management
Marketing strategies
and programs must Heinz ties its diverse product portfolio
together under the mission: As the
be developed to trusted leader in nutrition and wellness,
Heinzthe original Pure Food Company
support these is dedicated to the sustainable health of
people, the planet, and our company
objectives
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Business portfolio

The collection of businesses

and products that make up
the company

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 Designing the Business Portfolio
The company must
Analyze its current business portfolio or strategic
business units (SBUs) and decide which SBUs
should receive more, less, or no investment
Develop strategies for growth and downsizing that
will shape the future business portfolio

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Portfolio analysis
The process by which
management evaluates the
products and businesses that
make up the company

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 Portfolio Analysis
Purpose of portfolio analysis
To direct resources toward more profitable
businesses while phasing out or dropping weaker
ones
Basis of evaluation
Attractiveness of SBUs market or industry
Strength of SBUs position within that market or
industry

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Figure 2.2 - The BCG(Boston Consulting
Group) Growth-Share Matrix

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 Explanation of figure 2.2:
On the vertical axis, market growth rate provides a measure
of market attractiveness. On the horizontal axis, relative
market share serves as a measure of company strength in
the market.
Under the classic BCG portfolio planning approach, the
company invests funds from mature, successful products
and businesses (cash cows) to support promising products
and businesses in faster-growing markets (stars and
question marks), hoping to turn them into future cash cows.
The company must decide how much it will invest in each
product or business (SBU).
For each SBU, it must decide whether to build, hold,
harvest, or divest.
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 BCG Growth-Share Matrix
Strategies for categories of the BCG Matrix
Stars need heavy investments to finance their
rapid growth
Cash cows need less investment to hold their
market share
Question marks require a lot of cash to hold their
share, let alone increase it
Dogs do not promise to be large sources of cash

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 Figure 2.3 - The Product/Market
Expansion Grid

Companies can grow by better penetrating current markets with current

products. Through diversification, companies can
grow by starting up or buying businesses outside their current
product/markets. Copyright 2013, Pearson Education 2 - 24
Market penetration
Increasing sales of current products
to current market segments without
changing the product

Market development
Identifying and developing new
market segments for current
company products

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Product development
Offering modified or new products to
current market segments

Diversification
Starting up or acquiring businesses
outside the companys current products
and markets

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 When a firm finds brands or businesses that are
unprofitable or that no longer fit its overall strategy, it
must carefully prune, harvest, or divest them.

For example, in recent years, GM has pruned several

underperforming brands from its portfolio, including the
Oldsmobile, Pontiac, Saturn, and Hummer car brands
and the Goodwrench parts line.
Similarly, Ford recently shed its Mercury brand and
sold off Jaguar, Land Rover, and Volvo.
Weak businesses usually require a disproportionate
amount of management attention. Managers should
focus on promising growth opportunities, not
fritter away energy trying to salvage fading ones.

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 Downsizing
Reduces the business portfolio by eliminating
products of business units that are not
profitable or that no longer fit the companys
overall strategy
Reasons for downsizing
Rapid growth of the company
Lack of experience in a market
Change in market environment
Decline of a particular product
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 Planning Marketing
Marketing plays a key role in strategic
planning by
Providing a guiding philosophy for the company
strategy
Providing inputs to strategic planners
Designing strategies to help individual business
units reach their objectives

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 Creating Customer Value
Marketers must practice partner relationship
management
Working with partners internally within the
company can create an effective value chain
Working with external partners in the marketing
system helps to form a superior value delivery
network

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 Value chain
The series of internal
departments that carry out
value-creating activities to
design, produce, market, deliver,
and support a firms products

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 Walmarts ability to help you Save Money. Live
Better. depends on the purchasing departments skill
in developing the needed suppliers and buying from
them at low cost.
Walmarts information technology department
must provide fast and accurate information about
which products are selling in each store. And its
operations people must provide effective, low-cost
merchandise handling.
At Walmart, if purchasing cant obtain the lowest
prices from suppliers, or if operations cant distribute
merchandise at the lowest costs, then marketing cant
deliver on its promise of unbeatable low prices.
Ideally, then, a companys different functions should
work in harmony to produce value for consumers.

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 Partnering with Other Company
Departments
Wal-Marts ability to
help buyers Save
money. Live better
depends on the
contributions of its
value chain people
in all of the
companys
departments

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 Value delivery network

The network made up of the

company, its suppliers, its
distributors, and, ultimately, its
customers who partner with
each other to improve the
performance of the entire
system

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 Marketing strategy
The marketing logic by which the
company hopes to create
customer value and achieve
profitable customer relationships

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Figure 2.4 - Managing Marketing Strategies
and the Marketing Mix

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Figure summary
This figure summarizes the major activities
involved in managing a customer-driven
marketing strategy and the marketing mix.
Consumers are in the center. The goal is
to create value for customers and build
profitable customer relationships. Next
comes marketing strategy the
marketing logic by which the company
hopes to create this customer value and
achieve these profitable relationships.
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 The company decides which customers it will serve
(segmentation and targeting) and how (differentiation
and positioning).
It identifies the total market and then divides it into
smaller segments, selects the most promising
segments, and focuses on serving and satisfying the
customers in these segments.
Guided by marketing strategy, the company designs
an integrated marketing mix made up of factors under
its controlproduct, price, place, and promotion (the
four Ps).
To find the best marketing strategy and mix, the
company engages in marketing analysis, planning,
implementation, and control. Through these activities,
the company watches and adapts to the actors and
forces in the marketing environment.
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Market segmentation

Dividing a market into distinct groups of

buyers who have different needs,
. characteristics, or behaviors, and who might
require separate products or marketing
programs

Market segment

A group of consumers who respond in a

similar way to a given set of marketing efforts
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Market targeting
The process of evaluating each market
segments attractiveness and selecting
one or more segments to enter

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Positioning

Arranging for a product to occupy a clear,

distinctive, and desirable place relative to
competing products in the minds of target
consumers

Differentiation

Actually differentiating the market offering to

create superior customer value

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Market Differentiation and Positioning
Burts Bees offers
Earth friendly
natural personal care
products for The
Greater Good, a
deceptively simple
statement that forms
the backbone of its
marketing strategy

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 Marketing at Work
Allegiants Go where
they aint strategy
focuses on serving
niches neglected by
competitors
Targets customers
who might not
otherwise fly

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 Allegiants strategy positions the company
as the un-airline. It differentiates itself
from competitors by flying to regions that
are untouched by major airlines and
attracting customers who would not
usually travel by air. The company has
identified differences that allow it to
provide customer value and give it a
competitive advantage on which to build
its position.
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 Marketing mix
.
The set of tactical marketing tools
product, price, place, and promotion
that the firm blends to produce the
response it wants in the target market

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Figure 2.5 - The Four Ps of the
Marketing Mix

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 The 4 Ps and the 4 Cs of
the Marketing Mix
4 Ps - Sellers view 4 Cs - Buyers view
Product Customer Solution
Price Customer Cost
Place Convenience
Promotion Communication

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 One view of the four Ps of marketing holds that the
four Ps concept takes the sellers view of the market,
not the buyers view. From the buyers viewpoint, in
this age of customer value and relationships, the four
Ps might be better described as the four Cs. Thus,
whereas marketers see themselves as selling
products, customers see themselves as buying value
or solutions to their problems. And customers are
interested in more than just the price; they are
interested in the total costs of obtaining, using, and
disposing of a product. Customers want the product
and service to be as conveniently available as
possible. Finally, they want two-way communication.

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 Figure 2.6 - Managing Marketing: Analysis,
Planning, Implementation, and Control

In addition to being good at the marketing in marketing management, companies

also need to pay attention to the management . Managing the marketing process
requires the four marketing management functions analysis , planning ,
implementation, and control . Copyright 2013, Pearson Education 2 - 49
 Figure 2.7 - SWOT Analysis

The goal of SWOT analysis is to match the companys strengths to attractive

opportunities in the environment, while eliminating or overcoming the weaknesses
and minimizing the threats. Students can be asked to conduct a SWOT analysis
for a particular product or service.
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 Contents of a Marketing Plan
Executive summary
Current marketing situation
Analysis of threats and opportunities
Objectives and issues
Marketing strategy
Action programs
Budgets
Controls
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 Fuel for Thought
External factors including trends stemming
from the economic, technological, social,
legal-political, and competitive environments
may represent threats or opportunities to
many businesses
How have recent technological changes
impacted the marketing of various goods and
services?

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Marketing implementation
Turning marketing strategies and plans
into marketing actions to accomplish
strategic marketing objectives

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 Organizing Marketing Departments
Functional organization
Each marketing activity is headed by a functional
specialist
Geographic organization
Sales and marketing people are assigned to
specific countries, regions, and/or districts

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 Marketing Department Organization
Product management organization
One person is given responsibility for complete
strategy and marketing program for a single
product
Market or customer organization
Manager responsible for particular market or type
of customer (e.g., government buyers)
Combination organization
Uses some combination of the previous four
approaches
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Marketing control
Measuring and evaluating the results of
marketing strategies and plans and
taking corrective action to ensure that
the objectives are achieved

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 Marketing Control
Operating control
Evaluates performance against the
annual plan and takes corrective
action

Strategic control
Evaluates whether strategies match
opportunities
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 Return on Marketing Investment
The net return from a marketing investment
(Marketing ROI) divided by the costs of the
marketing investment
Marketing ROI is assessed using
Standard marketing performance measures
Brand awareness, sales, market share
Customer-centered measures
Customer acquisition, customer retention, customer
lifetime value, customer equity

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Figure 2.8 - Return on Marketing
Investment

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 Marketing expenditures are viewed as
investments that produce returns in the
form of more profitable customer
relationships. Marketing investments result
in improved customer value and
satisfaction, which in turn increases
customer attraction and retention. This
increases individual customer lifetime
values and the firms overall customer
equity. Increased customer equity, in
relation to the cost of the marketing

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 Rest Stop: Reviewing the Concepts

Explain companywide strategic planning and

its four steps
Discuss how to design business portfolios and
growth strategies
Explain marketings role in strategic planning
and how marketing works with its partners to
create and deliver customer value

Copyright 2013, Pearson Education 2 - 61

 Rest Stop: Reviewing the Concepts

Describe the elements of a customer-driven

marketing strategy and mix, and the forces
that influence it
List the marketing management functions,
including the elements of a marketing plan,
and discuss the importance of measuring and
managing return on marketing investment

Copyright 2013, Pearson Education 2 - 62

All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

Copyright 2013 Pearson Education

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