Marketing Management

Part : 01
Understanding
Chapter-02
Marketing
Management
Developing
Marketing Strategies
and Plans

Marketing
Management 1
 The Value Chain

 Michael Porter of Harvard has proposed the “Value Chain” as a

tool for identifying ways to create more customer value.
 The value chain identifies 9 strategically relevant activities that
create value and cost in a specific business. These nine value-
creating activities consist of 5 primary activities and 4 support
activities.

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Management 2
 The Value Chain

 The Primary Activities include the sequence of bringing materials

into the business (inbound logistics), converting them into final
products (operations), shipping out final products (outbound
logistics), marketing them (marketing and sales) and servicing
them (service).
 The Support Activities include procurement, technology
development, human resource management, and firm
infrastructure (covers the cost of general management,
planning, finance, accounting, legal and government affairs).

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Management 3
 The Value Chain

Michael Porter’s Value Chain Model

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Management 4
 The Value Chain

 Note : To be successful, a firm also needs to look for

competitive advantages beyond its own operations, into the
value chains of suppliers, distributors, and customers. Many
companies today have partnered with specific suppliers and
distributors to create a superior Value Delivery Network also
called a Supply Chain.

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Management 5
 Core Competencies

 A Core Competency has three characteristics.

i. It is a source of competitive advantage.

ii. It has applications in a wide variety of markets.

iii. It is difficult for competitors to imitate.

 Nike, for example, does not manufacture its own shoes,

because certain Asian manufacturers are more competent in
this task; Nike nurtures its superiority in shoe design and
shoe merchandising, its two core competencies.

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Management 6
 Core Competencies

Nike nurtures its superiority in shoe design and

shoe merchandising, its two core competencies

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Management 7
 Strategic Planning

 Most large companies consist of four organizational levels.

i. The Corporate Level

ii. The Division Level
iii. The Business Unit Level
iv. The Product Level

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 Strategic Planning

The Corporate Level

The Division Level

The Business Unit Level

The Product Level

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Management 9
 Strategic Planning
i) Corporate and Division Strategic Planning
 By preparing statements of mission, policy, strategy, and
goals, headquarters establishes the framework within which
the divisions and business units prepare their plans.
 Some corporations give their business units a lot of freedom
to set their own sales and profit goals and strategies.
 Others set goals for their business units but let them develop
their own strategies.
 Still others set the goals and participate in developing
individual business unit strategies.

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Management 10
 Strategic Planning
i) Corporate and Division Strategic Planning
 All Corporate headquarters undertake four planning activities.

a. Defining the Corporate Mission (Mission Statement)

b. Establishing Strategic Business Units (SBUs)

c. Assigning resources to each SBU

d. Assessing growth opportunities (Intensive Growth, Integrative

Growth, Diversification Growth, Downsizing and Divesting
Older Business)
 Corporate Culture (the shared experiences, stories beliefs and
norms that characterize an organization)

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Management 11
 Strategic Planning
i) Corporate and Division Strategic Planning
a) Mission Statement
 Mission Statement : Describes a firm’s reason for existence.
 Good Mission Statements have three major characteristics.

i. They focus on a limited number of goals.

ii. They stress the company’s major policies and values.
iii. They define the major competitive spheres within which the
company will operate.

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Management 12
 Strategic Planning
i) Corporate and Division Strategic Planning
a) Mission Statement
 “We help people trade
practically anything on
earth. We will
continue to enhance
the online trading
experiences of all-
collectors, dealers,
small businesses,
unique item seekers,
bargain hunters,
opportunity sellers,
and browsers.”
e-Bay
Mission Statement
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Management 13
 Strategic Planning
i) Corporate and Division Strategic Planning
b) & c) Strategic Business Units (SBUs)

 An SBU has three characteristics.

i. It is a single business or collection of related businesses that

can be planned separately from the rest of the company.

ii. It has its own set of competitors.

iii. It has a manager who is responsible for strategic planning

and profit performance.

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Management 14
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies
a. Intensive Growth Strategies (Market Penetration, Market
Development, Product Development, Diversification)

b. Integrative Growth Strategies (Vertical Integration (Backward

Integration, Forward Integration) and Horizontal Integration)

c. Downsizing and Divesting Older Businesses

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Management 15
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies-Intensive Growth Strategies

As per Ansoff’s product-market expansion grid, there are four

Intensive Growth Strategies.
 Market Penetration : When a company gains more market
share with its current products in their current markets.
 Market Development : When a company develops new
markets for its current products.
 Product Development : When a company develops new
products for its current markets.
 Diversification : When a company develops new products for
new markets.
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Management 16
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies-Intensive Growth Strategies

Ansoff’s Product-Market Expansion Grid

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Management 17
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies-Integrative Growth Strategies

 Integrative Growth Strategies : A business’s sales and profits

may be increased through Vertical Integration (Backward,
and Forward) and Horizontal Integration within its industry.
 Backward Vertical Integration occurs when a company
acquires one or more its suppliers.
 Forward Vertical Integration occurs when a company acquires
some wholesalers or retailers.
 Horizontal Integration occurs when a company acquires one
or more competitors, provided the government does not bar
this move.

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Management 18
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies-Diversification Growth Strategies

 Diversification Growth makes sense when good opportunities

can be found outside the present businesses.
 A good opportunity is one in which the industry attractive and
the company has the right mix of business strengths to be
successful.
 Example : From its origin as an animated film producer, Walt
Disney Company has moved into licensing characters for
merchandised goods, entering the broadcast industry with its
own Disney Channel as well as ABC and ESPN acquisitions,
and developed theme parks and vacation and resort
properties.

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Management 19
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies

Starbucks follows Market Penetration, Market Development,

Product Development and Diversification Strategies

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Management 20
 Strategic Planning
i) Corporate and Division Strategic Planning
d) Growth Strategies-Downsizing and Divesting Strategies

 Companies must not only develop new businesses; they must

also carefully prune, harvest, or divest tired old businesses in
order to release needed resources and reduce costs.
 Weak businesses require a disproportionate amount of
managerial attention. Managers should focus on growth
opportunities, and not fritter away energy and resources
trying to salvage hemorrhaging businesses.

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Management 21
 Strategic Planning
i) Corporate and Division Strategic Planning
Organizational/Corporate Culture
 “The shared experiences, stories, beliefs and norms that
characterize an organization”.
 Like the way employees of an organization are dressed, how
they talk to one another and the way they greet customers.

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Management 22
 Strategic Planning
ii) Business Unit Strategic Planning
 The Business Unit Strategic Planning process consists of the
following steps.

a. The Business Mission

b. SWOT Analysis
c. Goal Formulation
d. Strategic Formulation
e. Program Formulation and Implementation
f. Feedback and Control

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Management 23
 Strategic Planning
ii) Business Unit Strategic Planning
a) The Business Mission : Each business unit needs to define its
specific mission within the broader company mission.

b) SWOT Analysis : The overall evaluation of a company’s

strengths, weaknesses, opportunities, and threats is called
SWOT Analysis. It involves monitoring the external (strengths
and weaknesses) and internal (opportunities and threats)
marketing environment.

c) Goal Formulation : Once the company has performed a SWOT

analysis, it can proceed to develop specific goals for the
planning period. This stage of the process is called Goal
Formulation. Managers use the term goals to describe
objectives that are specific with respect to magnitude and
time.
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Management 24
 Strategic Planning
ii) Business Unit Strategic Planning

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 Strategic Planning
ii) Business Unit Strategic Planning
d) Strategic Formulation : Strategy is game plan for getting
goals or objectives.
 Porter’s Generic Strategies : Michael Porter has proposed
three generic strategies that provide a good starting point for
strategic thinking.
 Overall Cost Leadership
 Differentiation
 Focus
 Middle of the Road

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Management 26
 Strategic Planning
ii) Business Unit Strategic Planning
 Overall Cost Leadership : The business works hard to achieve
the lowest production and distribution costs so that it can
price lower than its competitors and win a large market
share.
 Differentiation : The business concentrates on achieving
superior performance in an important customer benefit area
valued by a large part of the market.
 Focus : The business focuses on one or more narrow
segments. The firm gets to know these segments intimately
and pursues either cost leadership or differentiation within
the target segment.
 Middle of the Road : If a business fails to follow any of the
above mentioned strategies.
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Management 27
 Strategic Planning
ii) Business Unit Strategic Planning
 Strategic Group : According to Porter, firms pursuing the
same strategy directed to the same target market, constitute
a Strategic Group.

 Strategic Alliance : The alliance of firms either nationally or

globally to complement their capabilities and resources.

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 Strategic Planning
ii) Business Unit Strategic Planning

The ‘Star Alliance’ beings together 16 airlines

that cover most of the globe

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Management 29
 Strategic Planning
ii) Business Unit Strategic Planning
e) Program Formulation and Implementation : Once the
business unit has developed its principal strategies, it must
work out detailed support programs.
 A great marketing strategy can be sabotaged by poor
implementation.

f) Feedback and Control : As it implements its strategy, a firm

needs to track the results and monitor new developments.
The marketplace will change; and when it does, the company
will need to review and revise its implementation programs,
strategies, or even objectives.

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 Strategic Planning
iii) Product Planning
The Nature and Contents of Marketing Plan
 Working within the plans set by the levels above them,
product managers come up with a Marketing Plan for
individual products, lines, brands, channels or customer
groups.
 Each product level (product line, brand) must develop a
Marketing Plan for achieving its goals.

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Management 31
 Strategic Planning
iii) Product Planning
The Nature and Contents of Marketing Plan
 A “Marketing Plan” is written document that summarizes
what the marketer has learned about the marketplace and
indicates how the firm plans to reach its marketing
objectives.

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 Strategic Planning
iii) Product Planning
The Nature and Contents of Marketing Plan
 Contents of the Marketing Plan

1. Executive Summary
2. Table of Contents
3. Situational Analysis (Market Summary, SWOT Analysis,
Competition)
4. Marketing Strategy (Mission, Marketing Objectives, Target
Markets, Positioning, Marketing Mix, Marketing Research)
5. Financial Projections (Break-Even Analysis, Sales Forecast,
Expense Forecast)
6. Implementation and Controls
 Note : See sample Marketing Plan at the end of chapter in the
book.
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 Strategic Planning
iii) Product Planning
The Nature and Contents of Marketing Plan

Executive
Summary

Implementation Table
and of
Controls Contents

Marketing
Plan

Financial Situational
Projections Analysis

Marketing
Strategy

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 Activity

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Management 35