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Marketing Management Essentials You Always Wanted To Know Self Learning Management Vibrant Publishers et al. Published by Vibrant Publishers, 2023. OceanofPDF.com While every precaution has been taken in the preparation of this book, the publisher assumes no responsibility for errors or omissions, or for damages resulting from the use of the information contained herein. MARKETING MANAGEMENT ESSENTIALS YOU ALWAYS WANTED TO KNOW First edition. November 14, 2023. Copyright © 2023 Vibrant Publishers et al.. ISBN: 978-1636511795 Written by Vibrant Publishers et al.. OceanofPDF.com Exciting New Resources Thank you for an overwhelming response to Marketing Management Essentials You Always Wanted To Know. We are committed to publishing books that are content-rich, concise, and approachable, enabling more readers to read and make the fullest use of them. We are excited to announce a major update for this book: The 3rd edition has been updated and includes three new chapters to provide a more holistic understanding of the subject matter. New additions include three chapters which primarily touch upon the topics of essential marketing skills, forming a well-rounded marketing budget, and market return on investment (mROI). The book also comes with online resources like downloadable templates (marketing budget) and a presentation for instructors, which summarizes the learnings of all the chapters. Should you have any questions or suggestions, feel free to email us at [email protected] We hope this book provides you with the most enriching learning experience. THIS BOOK IS AVAILABLE IN E-BOOK, PAPERBACK(B/W) AND HARDBACK(COLOR) FORMAT. OceanofPDF.com Online Resources Congratulations! You now have access to practical templates of the marketing management concepts that you will learn in this book. These downloadable templates will help you implement your learnings in the real world and give you an in-depth understanding of the concepts. The templates include: 1. Monthly Marketing Budget 2. Marketing Budget Sample (For E-Commerce and Sales) 3. Marketing Skills Self-Assessment Sheet 4. How To Build A Budget (Guide) 5. Budget Plans (Questionnaire) 6. Marketing Metric Definitions 7. Marketing Management Competencies Self-Assessment Sheet To access the templates, follow the steps below: 1. Go to www.vibrantpublishers.com 2. Click on the ‘Online Resources’ option on the Home Page 3. Login by entering your account details (or create an account if you don’t have one) 4. Go to the Self-Learning Management series section on the Online Resources page 5. Click the ‘Marketing Management Essentials You Always Wanted To Know’ link and access the templates. Happy self-learning! OceanofPDF.com OceanofPDF.com Marketing Management Essentials You Always Wanted To Know Third Edition © 2023, By Vibrant Publishers, USA. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior permission of the publisher. Paperback ISBN 10: 1-63651-178-3 Paperback ISBN 13: 978-1-63651-178-8 Ebook ISBN 10: 1-63651-179-1 Ebook ISBN 13: 978-1-63651-179-5 Hardback ISBN 10: 1-63651-180-5 Hardback ISBN 13: 978-1-63651-180-1 Library of Congress Control Number: 2018907781 This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. The Author has made every effort in the preparation of this book to ensure the accuracy of the information. However, information in this book is sold without warranty either expressed or implied. The Author or the Publisher will not be liable for any damages caused or alleged to be caused either directly or indirectly by this book. Vibrant Publishers books are available at special quantity discount for sales promotions, or for use in corporate training programs. For more information please write to [email protected] Please email feedback / corrections (technical, grammatical or spelling) to [email protected] To access the complete catalogue of Vibrant Publishers, visit www.vibrantpublishers.com OceanofPDF.com SELF-LEARNING MANAGEMENT SERIES TITLE PAPERBACK* ISBN AGILE ESSENTIALS 9781636510057 BUSINESS LAW ESSENTIALS 9781636511702 BUSINESS PLAN ESSENTIALS 9781636511214 BUSINESS STRATEGY ESSENTIALS 9781949395778 COST ACCOUNTING & MANAGEMENT ESSENTIALS 9781949395358 DATA ANALYTICS ESSENTIALS 9781636511184 DECISION MAKING ESSENTIALS 9781636510026 DIGITAL MARKETING ESSENTIALS 9781949395747 DIVERSITY IN THE WORKPLACE ESSENTIALS 9781636511122 ENTREPRENEURSHIP ESSENTIALS 9781636511603 FINANCIAL ACCOUNTING ESSENTIALS 9781949395327 FINANCIAL MANAGEMENT ESSENTIALS 9781949395372 HR ANALYTICS ESSENTIALS 9781636510347 HUMAN RESOURCE MANAGEMENT ESSENTIALS 9781949395839 LEADERSHIP ESSENTIALS 9781636510316 MARKETING MANAGEMENT ESSENTIALS 9781636511788 MACROECONOMICS ESSENTIALS 9781636511818 MICROECONOMICS ESSENTIALS 9781636511153 OPERATIONS & SUPPLY CHAIN MANAGEMENT ESSENTIALS 9781949395242 ORGANIZATIONAL BEHAVIOR ESSENTIALS 9781636510378 ORGANIZATIONAL DEVELOPMENT ESSENTIALS 9781636511481 PERSONAL FINANCE ESSENTIALS 9781636511849 PRINCIPLES OF MANAGEMENT ESSENTIALS 9781949395662 PROJECT MANAGEMENT ESSENTIALS 9781636510712 SALES MANAGEMENT ESSENTIALS 9781636510743 SERVICES MARKETING ESSENTIALS 9781636511733 STAKEHOLDER ENGAGEMENT ESSENTIALS 9781636511511 TIME MANAGEMENT ESSENTIALS 9781636511665 *Also available in Hardback & Ebook formats OceanofPDF.com About the Author Callie Daum has worked in the healthcare industry for over 20 years gaining experience in managing teams, project management, strategic development and implementation, business marketing to increase revenues, and many more lessons learned on how to thrive in a business industry. As a seasoned Senior Project Manager and Leader, her goals include adding value, working efficiently and effectively, and sharing best practices to achieve overall success. Callie started her career as an Application Analyst at Computer Sciences Corporation, before moving on to project management and leadership at Cerner Corporation, Atrium Health, and Novant Health. Callie is a certified Project Management Professional, Professional Scrum Master, Certified Health Coach, and received a certificate in Master Level Six Sigma at Villanova University. OceanofPDF.com About the Co-Author Michelle is an experienced, solution-driven marketer, strategist, and project manager with more than a decade of experience in higher education and in marketing agencies serving clients in a breadth of industry verticals from healthcare to manufacturing. She is a certified Project Management Professional (PMP), PROSCI Certified Change Practitioner, Six Sigma Yellow Belt, and has completed the Google Project Management Career Certificate program. Michelle also earned a Search Engine Optimization specialization from UC Davis Continuing and Professional Education. Michelle has built and developed teams throughout her career, served in an executive leadership role, led enterprise-wide initiatives, and is the author of Stakeholder Engagement Essentials You’ve Always Wanted To Know. Michelle joined Trinity University (an institution with a $1.7B endowment) in 2013 where she held several roles within the organization from marketing strategist to Assistant Vice President for Strategic Communications and Marketing to Senior Strategist and Project Manager. Achieving historic results, Michelle’s team was a Top 3 finalist for the 2018 AMA Higher Education Marketing Team of the Year Award. During her tenure at Trinity University, Michelle led the strategic marketing planning that resulted in six consecutive years of historic first-year admissions numbers along with academic quality reaching all-time highs. In partnership with the Office of Development, marketing campaigns and strategic initiatives were created and implemented - resulting in historic 10-year highs for alumni giving and fundraising goals. Michelle was also a lead project manager and strategist to the executive leadership team that successfully petitioned for Carnegie reclassification - moving Trinity from Regional Liberal Arts to the National Liberal Arts category for U.S. News and World Report rankings. In 2023, Michelle successfully led the effort to create Trinity’s first Enterprise Project Portfolio Management Office – Center of Excellence and continues to advise executive leadership in the areas of project management, strategy, and communications. OceanofPDF.com What experts say about this book! Marketing Management Essentials You Always Wanted to Know serves as an excellent primer for future marketing managers hoping to break into the field and become assets to their organizations. The book offers timely, relevant information necessary to have a fundamental understanding of marketing management. It also serves as a concise and effective refresher for current marketing managers who could benefit from re-learning the fundamentals or implementing new approaches and philosophies to their marketing work. Not only does this text cover a multitude of concepts critical to the health and success of a marketing team, it also offers helpful tips and guidance for career success on an individual level. – Diana Amaya, Division Marketing Content Creator, Alamo Colleges Marketing Management Essentials You Always Wanted to Know is a must- read for anyone wanting to master the art and science of marketing. The authors cover a wide range of marketing-related topics with clarity and depth and use case studies and real-world examples to help readers understand and apply the concepts presented. Whether you're a seasoned marketer looking to refresh your knowledge or a newcomer to the field, this book offers valuable insights and practical strategies to excel in today's competitive market. One of the authors, Michelle Bartonico, has extensive marketing and project management experience. Her insights into successful strategic marketing planning and stakeholder engagement set this guide apart from other "how-to" guides on the market and ensure marketing success in organizations of all sizes. – Jennifer Dempsey, Technical Product Marketing Manager, Appfire This is a great resource to have under your belt, especially for new and rising marketing managers. It truly covers the essentials any marketing professional needs and would want to know. – Tara Salazar, Communications Specialist, Caterpillar, Inc. Daum and Bartonico have written an invaluable resource for managers, offering straightforward and pragmatic insights suitable for all expertise levels. Their work transcends industry boundaries, ensuring that individuals in any field can adeptly apply effective marketing management strategies within their department, division, or organization. This book expertly demystifies marketing complexities for professionals of all backgrounds in a practical and accessible way. – Katie Ramirez, M.S., Director for the Center for Experiential Learning and Career Success Trinity University "Principles of Management Essentials You Always Wanted to Know" OceanofPDF.com Table of Contents 1 Introduction to Marketing Management 1.1 Stages of Marketing 1.2 Marketing Capacity 1.3 Marketing Management Quiz Chapter Summary 2 Strategic Planning and Marketing 2.1 The Process of Planning 2.2 The Strategic Plan 2.3 The Marketing Plan 2.4 Implementation Quiz Chapter Summary 3 Marketing Budgets 3.1 What is a Marketing Budget 3.2 Develop a Marketing Budget 3.3 Budget approaches 3.4 Marketing Spend Trends 3.5 Build A Budget 3.6 Case Study: Lessons Learned Quiz Chapter Summary 4 Marketing Return-on-Investment 4.1 What is Marketing Return-on-Investment 4.2 Determine What To Measure 4.3 Performance Benchmarks Quiz Chapter Summary 5 Research in Marketing 5.1 Information Systems 5.2 Constructing Information 5.3 Marketing Definitions 5.4 What is the Current Market Demand? 5.5 What Could the Demand Be for the Future? 5.6 Ethics in Marketing Research Quiz Chapter Summary 6 Relationships with Customers and Marketing Management 6.1 Customer Value 6.2 Customer Satisfaction 6.3 Providing Satisfaction 6.4 How Much is a Customer Worth? 6.5 Retaining Customers 6.6 Relationship Marketing 6.7 When Do I Use Relationship Marketing? 6.8 Relationship Management 6.9 Defining Customer Relationship 6.10 Types of Customers 6.11 Customer Orientation 6.12 Ensuring Quality Customer Relationships 6.13 Measuring Customer Relationships Quiz Chapter Summary 7 Digital Marketing 7.1 Hard Skills in Digital Marketing 7.2 Soft Skills in Digital Marketing Quiz Chapter Summary 8 Essential Marketing Skills 8.1 A History of Marketing Skills 8.2 Marketing Skills and Competencies 8.3 Case Study 8.4 Building Essential Marketing Skills Quiz Chapter Summary OceanofPDF.com Preface In our careers, we’ve seen marketing skills evolve through the years - from new takes on “old” skills to specializations that previously didn’t exist. This third edition was written with the goal to package the latest best practices with foundational principles and terminology to help marketing managers add value to their organization and thrive in their careers. This reading consists of core elements of marketing management that will support day-to-day activities from budgeting and planning to demonstrating return-on-marketing investment. New marketing managers may also be faced with challenges such as conducting an external audit, forecasting demand, developing a plan to gain new customers, and ensuring other departments are playing their part in providing customer value. These topics are included in this reading along with the resources marketing managers and professionals will need to understand and function in their role within any organization. Using real-life experiences and detailed study, this handbook will give you the tools to get started, and thrive, in your marketing management role. After reading Marketing Management Essentials You Always Wanted To Know, you’ll have working knowledge of everything you need to know to springboard your career as a marketing professional. OceanofPDF.com Introduction to the book We are all affected by marketing every day. We can see it, touch it, and feel it. But, what we don’t see is the precision, creativity, and strategy behind the marketing. What we experience on a daily basis is a result of efforts by marketing professionals. As you will learn in Marketing Management Essentials, an effective marketing manager demonstrates a blend of analytical, creative, and strategic thinking skills. It takes more than simply studying or reading about marketing. To be successful and add value to your organization, you need a combination of practice, examples of case studies, and real-world experience. With this in mind, Marketing Management Essentials is intentionally crafted to cover essential concepts and terminology while providing activities, quizzes, and exercises that allow you to practice and apply what you learn. In industries around the world, marketing principles and skills are a means to achieve business goals. Marketing Management Essentials will give you the foundational knowledge – from budgeting techniques to marketing strategic planning to an introduction of career specialization areas – that will help ensure you are equipped for success as a marketing professional. Key learning objectives also include: how to build a marketing plan, an understanding of the various marketing specialization areas, approaches and resources to demonstrate marketing return on investment, and how to self-evaluate your skills and competencies After reading Marketing Management Essentials You Always Wanted To Know, you’ll have working knowledge of everything you need to know to springboard your career as a marketing professional. OceanofPDF.com How to use this book? This book was written using real-life experiences and detailed study, that will equip marketing managers with the tools to get started, and thrive, in their role within any organization. This second edition articulates the latest skills and challenges that marketing managers face. 1. Engage with each of the practice activities and discussions. 2. Refer back to this handbook for budget templates, use cases, and foundational terminology 3. Read the chapters in order. However, these chapters are able to stand alone if you are interested in diving into specific topics. 4. Approach the book knowing that you will need to take the information and apply the information in a way that works best for your organizational goals and point in your career. OceanofPDF.com Who can benefit from this book? In industries around the world, marketing principles and skills are a means to achieve business goals. Marketing Management Essentials You Always Wanted To Know will give you the foundational knowledge to ensure you are equipped for success as a marketing professional and are able to create a revenue-generating department for your organization. People who will benefit from this book include: 1. Students who are seeking a well-rounded introduction to marketing management. 2. Professionals — primarily entry-level or new to the marketing management role — who are looking to learn essential principles, terminology, and techniques to apply in the workplace.. 3. Any employee who collaborates with a marketing manager or marketing department to help ensure they “speak the same language” when working on projects or campaigns. OceanofPDF.com Chapter 1 Introduction to Marketing Management M arketing is a function of an organization that provides the framework for developing, connecting, and providing value to consumers. In this chapter, you will learn about the processes that enable successful marketing - fulfilling those wants, needs, and desires from the consumer, both present and anticipated in future. You will also explore the various ways marketing contributes to an organization - keeping companies afloat in a struggling economy, building awareness and brand loyalty, and increasing demand for products and services. Let’s get started. Key learning objectives should include the reader’s understanding of the following: The group of processes or procedures for developing, connecting, and providing value to consumers How marketing is an organizational function What the stages and types of marketing are Marketing affects everyone, every day. We all engage in marketing on a daily basis, so it is important that we understand what marketing is. A market can be defined by Philip Kotler as, “…all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. ”Marketing is a function of an organization. It is a group of processes or procedures for developing, connecting, and providing value to consumers. It is also for dealing with customer relations in ways that profit the organization and its stakeholders. Marketing is achieved by social and managerial processes. These processes consist of consumers and groups of consumers acquiring their needs and wants by developing and swapping products and values with one another. With the cutthroat competitive conditions and the advancement of production, distribution, stocking and pricing as well as digitalization, marketing has become managing relationships with customers, distributors, facilitators (banks, advertising, and PR people,) partners, and the public at large. Marketing seeks to fulfill the wants, needs, and desires of the consumer both present and anticipated in the future. Marketing is important because in the 21st century, with the struggling economy, organizations use marketing to help keep their companies afloat. Marketing helps to tackle the challenges faced in a failing environment. In a broader sense, marketing has brought awareness of products and services to the public that have made their lives better. When marketing is successful, demand increases for an organization’s products and services. It also helps to establish a brand in the public eye and build brand loyalty. Indirectly, successful marketing creates jobs for individuals because demand is increased and more assistance to produce and distribute the products and services is needed. In its simplest form, marketing puts products and services in the hands of its targeted consumers. Marketing is an organizational function covering almost all areas of business. The following list shows the many functions in an organization that can be categorized as a marketing function. Customer Relationship Management (CRM) Display Stockholding Servicing Risk Taking Transporting Market Research Merchandising Publicity Pricing Forecasting Buying Financing Selling Public Relations Advertising Sales Promotion Marketing is a management function. Management must ensure that the operations of the organization are running smoothly to ensure that the customer’s needs are met effectively and efficiently. Manager conduct analysis, plan, allocate resources, control current processes, and work to anticipate customer needs in an effort to ensure customers are satisfied. Additionally, it tries to anticipate the needs and wants of customers/ consumers in the future by evaluating social, economic, cultural, political, and technological developments. Marketing is a business concept (illustrated in Figure 1.1). Here is where the exchange process that is associated with obtaining goods and services comes into play. This is where supply and demand come in. If I have the supply and you have a demand for the product, we can negotiate a deal. It is considered an exchange when: Two groups or more are involved Both groups have something of value that the other group desires Both groups effectively communicate and deliver Both groups have the option to turn down each other’s offers Both groups want to negotiate with the other party Figure 1.1 Core marketing concepts Marketing is a business philosophy. It sees the importance of the customer and that all business exists to serve customers rather than manufacturing products. Marketing takes the customer as the core of its activities. In the remainder of this reading we will explore these concepts and dive deeper into marketing and marketing management, so we can better understand its inner workings. 1.1 Stages of Marketing Not all marketing is greatly expensive, involving extensive research from a reputable firm and spending inordinate amounts of money on advertising and keeping up large marketing departments. Some organizations work with what they have. They stretch their current resources, maintain close relationships with customers, and use information gathered to meet the customer’s needs. These organizations focus on building their brand and customer loyalty and less on advertising and PR. Not all marketing is the same. There are three phases of marketing, shown in Figure 1.2, that can occur. Examine the illustration below that describes the phases and their definitions. Figure 1.2 Three phases of marketing 1.2 Marketing Capacity In the following section, let’s answer the questions of who, what, when, where, and why in relation to marketing. First, what is marketed? Figure 1.3 Examples of what is marketed Goods are the most commonly marketed item, as shown in Figure 1.3. They are physical in nature. Examples of goods would be cars, food, clothing, and furniture. Next are services that carry a 70-30 service-to-goods ratio. Examples of services would be airlines, banking, and doctors. Sometimes you see a mix of goods and services such as in construction. Events can also be marketed or promoted. Examples of events would be concerts, sports events, and performances. Experience is another item that is commonly marketed. Experiences include the coordination of several activities to provide a specific type of experience. A great example of this is Disneyworld; they orchestrate a lot of elements to provide a magical experience. It is strange to say that marketing helps to sell people. It is, however, true if you think about it in the context of an image of a person or a brand. For example, high-profile plastic surgeons sell themselves through marketing to lure in new clients. A more recent marketing effort has gone into marketing places. Doing this is promoting tourism in a specific city or state. For example, there are several commercials on TV advertising California and all it has to offer. Property marketing really falls within the realm of real estate. In order to sell a house or commercial property, an agent advertises the property on local websites or papers. Organizations often advertise for themselves to help build their brand. For example, Patagonia advertises its social consciousness and volunteer efforts to help really show its brand to the public. Information is also marketed. For example, advertisements you see for colleges and universities sell the education and information you would get from that college or university. Finally, ideas are marketed. For example, two famous ones are “Just Say No” and “No Means No”. 1.3 Marketing Management Marketing management is the discipline of selecting goal markets and attaining, possessing, and increasing customers through generating, distributing, and communicating higher customer value. The description above is extensive and requires resources in order to properly market each of them. A marketer is responsible for developing this marketing. They are essentially looking for some sort of response from the consumer, also referred to as a prospect. If both the marketer and the prospect are wanting to sell one another something, they can both be termed as marketers. 1.3.1 Demand Management A marketer’s largest responsibility is to create demand for the item they are marketing. Essentially, marketers are demand orchestrators or demand managers. They control demand, timing, and logistics. Demand managers can create demand, diminish demand, and increase or decrease demand. When they are managing this demand, they must be cognizant of the different states of demand. See the list in Figure 1.4 to understand these different states. Demands management includes customer management. Organizations need to determine if they want to create new customers or maintain repeat customers, or both. Creating a group of new customers is a costly endeavor and hard to come by due to the ever-changing environment, economy, and competition. Due to these challenges, you will find more organizations shifting their focus to retaining their loyal customers. Figure 1.4 States of demand If we are looking at marketing from a high level, and the industries that make up the economy as a whole, there are five different markets where demand occurs. These markets can really be thought of as different groupings of consumers. The exchange of goods, services, and information occurs between all of these markets. Look at the diagram in Figure 1.5 to see the relationships that occur during this exchange process. Figure 1.5 Exchange process This picture demonstrates how goods and services flow through the different markets and how government is at the center of it all. Money flows through all markets while taxes come into the government from all the markets. The government provides services to the consumer with the taxes that the consumers pay. The government gives services and money to all of the markets in exchange for their taxes and goods. Goods and services flow between manufacturers, intermediaries, and consumer markets. Resources come from the consumer market into the resource market and are put back into the manufacturer market. This is a rather complicated big picture. Let’s take a look at how a simple exchange process works in Figure 1.6. Figure 1.6 Simple exchange process There are different types of markets these exchanges can happen in, reflected in Figure 1.7. First, the consumer market is what everyone participates in to meet their daily needs. This market consists of organizations that create and distribute consumer goods and services such as groceries and clothing. Next, there is a business market where organizations employ skilled negotiators to purchase goods and services for their organizations. They also determine their competitive advantage and find different ways to demonstrate their product’s value. In the global marketplace, organizations that participate have to make a lot of decisions to ensure that they are entering the right market at the right time. They must ensure that they understand the culture and the needs of each of the different countries to determine which is right to enter. Organizations participating in the nonprofit and governmental markets are selling to customers who have limited resources for purchases such as churches, public schools, and charities. In the government market, sellers typically place bids to become the exclusive provider. Figure 1.7 Types of markets where exchange happens As we continue on in the reading, it is important to understand the meaning of a few terms. Marketplaces are physical places or brick- and-mortar locations. Marketspaces are a digital footprint. Metamarkets are products that are complementary to each other, but they are spread across markets. Metamediaries are vehicles of navigation for consumers through metamarkets. 1.3.2 Philosophies When we are in the middle of marketing management, we are completing specific activities with the goal of driving desired effects and exchanges with our target customers. The driving factor behind those marketing activities is called a philosophy. In Figure 1.8, we begin to look at several of these philosophies including production, product, selling, marketing, and societal marketing. Figure 1.8 Philosophies In the production concept, companies try to satisfy the demand in the market with new products, because there is a big demand in the market that is not satisfied with the current products. In the early years of industrialization, all efforts were directed toward production. Customers were not demanding high-quality stuff but basic goods to satisfy their basic needs. Henry Ford, the founder of the US company Ford, introduced a car into the US market called T- Model. He said, “You can choose any color you want as long as it is black.” On the other side General Motors produced colorful cars thus giving the customers a choice. Since then Ford was not able to close the gap in sales with GM cars. In the product concept, the idea is that consumers look for products that offer high-quality performance and features. Therefore, continually improving upon the current version of the product is critical to success. This concept is based on the idea that if I build a bigger and better bug swatter, consumers will come running to buy it. This is not necessarily always true, the consumer may be looking for better and more innovative ways to get rid of bugs such as sprays, candles, etc. Don’t fall into the trap that bigger and better equals success. Also, this concept is related to marketing myopia. Marketing myopia is where a company focuses on its needs rather than the needs and desires of the customer. In the selling concept, the philosophy is that you will never sell enough of a product unless you undergo a big selling effort. Consumers may not be willing voluntarily to buy a product, or perhaps they are not in need of that product. So they need to be encouraged and convinced to buy the products. Companies need to hire salesmen who can explain the special attributes of the products to the buyers. Typically, this philosophy is associated with goods that consumers don’t necessarily think of buying. This is also associated with not-for-profit organizations. You don’t typically think of “buying” a mayor, so lots of marketing happens to keep specific candidates at the forefront of your mind. Another instance where this may be used is when an organization has produced too much of a specific good, so they are looking to sell their inventory regardless of what the market is asking for. There is a high risk involved with this marketing because it assumes that all you have to do is tell the consumer how much they need the product and they’ll buy it. They may buy the product and not like it, but the assumption is they will forget they didn’t like it and buy it again later. These assumptions are not necessarily grounded in factual data. In fact, research suggests that if a consumer does not like a product, they will not buy it again and they will tell their friends not to buy it either. However, after a certain period of the sales era, companies faced a dilemma because the customers did not want to buy products that are produced without consultation with them. They wanted to be consulted about their needs and wants. This is called the marketing concept. With the marketing concept, the organization needs to determine the needs, wants, and desires of the target market and they must deliver effectively and efficiently. They must deliver better than their competitors. In order for this to work, everyone in the organization must be on board – from top down to bottom up. Everyone must be invested in retaining customers. For this reason, organizations spend a lot of time investing their time on how to motivate and inspire all of their team members to provide excellent customer service. Organizations must hone in on the customers’ needs and competitors’ strategies. To be successful, organizations must go so far as to break down their customer population and determine each individual group’s desires, so they can meet their satisfaction requirements. In some cases, customers themselves do not know what they want, so customer-driving marketing comes into play. This is where the organization learns so much about the customer that they end up knowing more about what the customer wants than the customer does. With this concept, it is important for organizations not to get caught up with meeting customer satisfaction that they forget that it should not be met at the expense of profitability. Figure 1.9 Selling and Marketing concepts side-by-side Figure 1.9 shows a side-by-side between the Selling and Marketing concepts. All these philosophies reflect the historical developments in any economy, as the economic progression competition becomes more and more stiff. New companies enter the market with similar or new products, thus forcing the old ones to change the way they compete. The only solution is to go to the customer to understand what type of needs, wants, and desires they have before they start to produce. As time goes by, companies will feel the pinch of social reactions in terms of their contribution to air, sea, river, and lake pollution. People start accusing the companies of how they negatively impact nature. This brings to marketing a new dimension: social responsibility. We call this philosophy societal marketing. Societal marketing is similar to the marketing concept in that they both believe that the organization should have a clear understanding of the customer’s wants, needs, desires, and interests. Societal is different in that it adds an extra layer where we not only want to do it better than our competitors, but we want to make sure that we are doing it in a way that sustains and/or improves both the consumer’s and society’s welfare. This philosophy is the newest emerging philosophy today. It really looks at the question: Does the strict marketing concept take into account the environment of today? For example, is using coal as an energy source socially responsible and healthy for the consumer? Are genetically modified products socially responsible and healthy for the consumer? Societal marketing suggests that pure marketing does not address these questions adequately. Applying this concept forces organizations to look at meeting all of society's expectations, as shown in Figure 1.10. Figure 1.10 Societal marketing concept 1.3.3 Market Types In order to satisfy customers, organizations must have an understanding of the market they are competing in. Understanding the market allows organizations to analyze and understand customer needs and wants. Customer The customer market refers to customers who buy goods and services for their own use and not for resale. Customer markets are complex because each customer has different likes and dislikes, wants, and needs. Buying habits can differ from customer to customer. There are characteristics that are typically used to distinguish customers from one another, as shown in Figure 1.11. Figure 1.11 Customer characteristics Typically, organizations that are participating in consumer markets spend a lot of time studying consumer behavior. Although we are very interested in what makes a consumer desire and ultimately purchase an item, we should not stop investigating there. It is important that organizations also understand what satisfies and dissatisfies customers. Business to Business (B2B) The bulk of marketing and sales are from business-to-business markets. There are more business-to-business markets because there are several stages that a product goes through starting from the raw material to its end product. Take a textbook for example. First, logs are sold to a business to make the paper. The paper producer sells their paper to a printer. The printer sells its printing services to a publisher. The publisher sells the textbook to a wholesaler. The wholesaler sells the textbook to retail outlets. How do business-to-business markets and customer markets differ? Take a look at Figure 1.12 to answer that question. Figure 1.12 Side-by-side of B2B and Customer markets Quiz 1. In this chapter, a “market” is defined by ______. a. Kotter b. Kotler c. Bartonico d. Daum 2. Which of the following is an example of a a business area that can be categorized as a marketing function? a. Customer Relationship Management (CRM) b. Merchandising c. Market Research d. All of the above 3. Marketing is an organizational function that covers how many areas of the business? a. Two b. Four c. Almost all d. Almost none 4. Putting products and services in the hands of a company’s targeted consumers is referred to as ______? a. customer relations b. project management c. markets analysis d. marketing 5. Organizations used marketing to help keep their companies afloat. a. True b. False 6. Marketing is achieved by ______ and ______ processes. a. monitoring, controlling b. monitoring, understanding c. social and managerial d. controlling and monitoring 7. Marketing is a ______ of an organization. a. responsibility b. function c. obligation d. both a and b 8. Which of the following is NOT an area of an organization that can be categorized as a marketing function? a. buying b. merchandising c. pricing d. none of the above 9. Marketing is a ______ concept. a. social b. political c. business d. sales 10. Which of the following is NOT considered an exchange? a. two groups or more are involved b. one group has something of value c. both groups have the option to turn down each other’s offers d. both groups effectively communicate and deliver 1–b 2–d 3–c 4–d 5–a Answers 6–c 7–b 8–d 9–c 10 – b Chapter Summary Market is explained as a group of potential consumers who have a particular need or want in common that are looking for ways to satisfy that need or want through an exchange. Marketing is defined by the author as a group of processes or procedures for developing, connecting, and providing value to consumers. The main goal of marketing is to fulfill potential consumers’ wants, needs, and desires. Marketing is a critical function completed by an organization to bring greater awareness of the products and services they offer to entice the customers to purchase them to meet their wants and needs. Functions of marketing include Customer Relationship Management (CRM), Display, Stockholding, Servicing Risk Taking, Transporting, Market Research, Merchandising, Publicity, Pricing, Forecasting, Buying, Financing, Selling, Public Relations, and Sales Promotion. Stages Of Marketing are Entrepreneurial Marketing, Formulated Marketing, and Intrapreneurial Marketing. Marketing Capacity: What is marketed? Goods, Services, Events, Experiences, Persons, Places, Properties, Organizations, Information, and Ideas. Marketing Management is the discipline of selecting goal markets and attaining, possessing, and increasing customers through generating, distributing, and communicating higher customer value. A marketer’s largest responsibility is demand management. Demand Management includes customer management. Types of Markets include Consumer markets, Manufacturer markets, Business Markets, Intermediary Markets, and Government Markets. Production Concept: The idea is that consumers will go for products that are available and affordable. Product Concept: The idea is that consumers look for high performance, quality, and features. Selling Concept: The idea is that you will never sell enough of a product unless you go for a full- on selling effort. Marketing Concept: The idea is to determine the needs, wants demands of the target market and they must deliver effectively and efficiently. Societal Concept: Same as marketing concept but done in a sustainable way that is beneficial to the consumer’s and society’s welfare. Market Types include Business to Consumer & Business to Business. Customer Segregation is done on the basis of these parameters: Demographic, Psychographic, Behavioristic, and Geographical. OceanofPDF.com Chapter 2 Strategic Planning and Marketing I magine you are preparing for a road trip with friends. One of the first questions you ask is, “where are we going?” Strategic planning is no different. Organizations, like people, need a roadmap. Let’s set the stage for this chapter by defining the three types of strategic plans that require much research and development to ensure these “roadmaps” are effective and actionable. These are: Annual Plan - Short term plan describing current state including objectives, strategies, and budgets for the year ahead Long-Range Plan - Overall long-term plan detailing the reasons and factors that the annual plans are structured as they are. This includes forecast for next several years, long term objectives, and main marketing strategies Strategic Plan - Overall strategy of how an organization will use its competitive advantages to maintain or attain a successful position in the market. This includes how it fits with overall goals and objectives and the ever-changing environment in the market. In this chapter, you’ll dive into how strategic planning and marketing are intertwined. The formation of cogent marketing plans can be your organization’s North Star, helping employees see where they are headed. Key learning objectives should include the reader’s understanding of the following: The types of strategic plans and the planning process How to find and leverage your organization’s competitive advantage How to apply value chain analysis to your strategic planning What a marketing plan is and what it includes 2.1 The Process of Planning When you are working with either the marketing concept or the societal marketing concept, you have to be able to figure out what needs, wants, and desires your customer has that are unfulfilled. In order to fulfill this, a series of steps in Figure 2.1, should be followed called the marketing process. Figure 2.1 Planning process steps 2.2 The Strategic Plan Next, the organization focuses on a statement of its strategy. This statement includes the following elements: strategic intent, mission, vision, and objectives. An organization’s strategy statement shapes the organization’s long- term strategic path and overall policy directions. With this statement, the organization can outline its map for long-term activities. Strategic intent is part of the strategy statement. This is the reason that the organization is in place today and why it will continue to function in years to come. The strategic intent gives the big picture about an organization that motivates and inspires employees. 2.2.1 Mission Another piece of the strategy statement is the mission statement. The mission statement is formulated to detail how the organization expects to serve its stakeholders. It gives the “why”, “what” and “who” behind an organization. Why is this organization in existence? What does it do or produce? Who does it serve? Mission statements are created to set apart one organization from another. For example, you could say that Walmart and Target are similar stores and therefore have similar answers to the questions above. However, the heart behind what they do and why they do it are completely different. A good mission statement is achievable, clearly stated, motivating, precise, original, investigative, and credible. In order to create an adequate mission statement, we must be able to answer the following questions shown in Figure 2.2. Figure 2.2 Questions to create a mission statement First ask, “What business are we in?” Define this in terms of basic market needs and not of product or technology. That way, you are setting up a statement that will withstand the ever-changing technological environment. When you are creating a market-oriented business statement, you describe what conditions need to exist in your business to meet the customer’s basic needs. Next, who is our customer? When defining this question, you can come to several different levels of answers. For example, if we consider an aero-engine company such as Rolls Royce, at one level, we are looking at the airframers. These are the people who launch new aircraft with the Rolls Royce aero-engine. But, who is likely to actually buy the engine? Is it airlines or leasing companies? Who will put pressure on those purchasing to utilize what the aero-engine offers? Pilots, crew, or passengers? One of the more difficult questions to answer is, “Why are we in business?” This is really difficult for nonprofit organizations to answer, such as charities, schools, hospitals, etc. Are they there to educate, train, support, or make people healthy? Is the pursuit of knowledge the overarching reason? Really getting down to this answer will definitely drive how you strategize for your organization. A more strategic directing question is, “What sort of business are we?” Companies may answer this question with things like cost leadership, differentiator, or focused differentiator. Vision helps to guide the mission, so it is a critical component. This statement is different from the mission statement in that it focuses on where the organization plans to be in the future. Essentially, the vision statement is what the organization wants to be when it grows up. The mission statement goes hand in hand. The vision statement describes what the organization will be like if it is successful in achieving its mission. A good vision statement is explicit, clear, in line with the organization’s cultures and values, realistic, and less lengthy than the mission statement so it can be memorized. 2.2.2 Strategic Objectives The final component of the strategic statement includes the objectives and goals. A goal is something that an organization is trying to achieve. An objective is a goal we wish to reach over a specified period of time. Goals and objectives break down the mission and vision into more digestible elements. Goals are what we want to reach in order to achieve our mission and vision. Ideals, goals, and objectives should be exact and measurable, realistic, have defined time frames, address significant issues, and include both financial and non-financial components. Objectives help us to plan how we will meet our goals. Organizations typically have several objectives that can be long-term or short-term. Objectives are more agile and can change the environment. Finally, objectives are realistic and operational. 2.2.3. Strategic Audit The strategic audit includes the internal audit and the external audit. In the external audit, we are looking at the macro environment of a company. The internal audit analyzes all areas of the company and focuses on the value chain as described in Michael Porter’s many writings. The sections below seek to detail these two functions to provide you a better understanding. Internal Audit Internal audit of the organizational environment allows you to determine the organization’s strengths and weaknesses. By understanding the resources and abilities of your organization, you can identify and capitalize on competitive advantages. By exploiting the strengths and minimizing exposure of the weaknesses, an organization gains an edge over the competition. The organization has found a way to create value for its consumers. Value is what the consumer is willing to pay for in terms of performance characteristics and attributes. Value is the key to above-average returns for an organization. Figure 2.3 is an illustration of how resources, capabilities, core competencies, competitive advantage, and strategic competitiveness are interrelated. Figure 2.3 Relationship between organization aspects Internal audit is very challenging for managers because the decisions that have to be made are not routine decisions, must be examined ethically, and affect the organization’s profitability potential. Before strategic decisions can be made, managers must know what the organization’s core competencies are. At the least, the manager should understand the core competencies that are related to going into or leaving new industries, financing new technologies, adding additional manufacturing capacity, and forming strategic relationships. The challenge in making strategic decisions is that there is a high risk that the company’s plans may fail due to interpretation errors. The upside to this is that bad decisions can be corrected if you act quickly and gather the appropriate information to implement the right corrective action. Making these mistakes, can in a sense, be a competitive advantage itself because organizations learn what not to do. It is helpful to identify the more challenging strategic decisions that need to be made before implementing a plan. Doing this allows the organization to be very deliberate in data gathering and information interpretation before developing a strategic plan. Typically, the more challenging strategic decisions have a level of: Uncertainty; unsure of the quality of the general and/or industry environments, how competitors may act, and what the consumer prefers Complexity causes shaping of the environment and its viewpoint; both are complexly interrelated Interorganizational conflicts; managers making the decisions and those affected by these decisions happen to not be in agreement Decision makers make strategic decisions through learning. They determine if the probability of a certain mistake happening is worth the impact. When a mistake is acknowledged, it is adjusted rapidly, and the identification of new possibilities and capabilities occurs. Good judgment goes hand in hand with good outcomes in strategic planning. Decision makers may choose to take an educated risk based on the gathered information in the decision itself: possible outcomes, possible risks, and possible impacts. When good judgment is used, strategic competitiveness is accomplished. Resources Resources are one of the key components of competitive advantage. When we bundle resources, we can create a competitive advantage. Resources alone do not generate a competitive advantage. At the center of an organization’s abilities are resources and they are widespread in scope. This scope can include individual, social, and organizational resources. Resources contribute to an organization’s production process with two types of resources: tangible and intangible. Tangible resources can be processed by any of the five senses. Examples of tangible resources can be people, money, or computer hardware. The types of tangible resources you find in an organization are financial, organizational, physical, and technological, shown in Figure 2.4. Figure 2.4 Types of tangible resources in an organization There are some constraints to tangible resources. When considering that financial resources can be identified from financial statements, we have to remember that the value of all of the organization’s assets is not necessarily reflected in a financial statement. The statement does not take into consideration the intangible resources. Another constraint is that it is challenging to leverage these resources because developing additional business or value from a tangible resource is difficult. For example, you can utilize one team in five different places at the same time. It is also important to remember that some of the processes utilized with tangible assets are intangible. Therefore, it is important to look at resources from both a tangible and intangible viewpoint to ensure you have captured all of your resources. Intangible resources are typically accumulated over time and are a part of the organization’s history. These resources cannot be seen or touched. Examples of intangible resources are knowledge, capabilities of management, trust between leadership and employees, and reputation. There are three types of intangible resources: human, innovation, and reputation, shown in Figure 2.5. Figure 2.5 Types of intangible resources Organizations depend on intangible resources as core competencies because they are not easily discernable and more difficult to replicate or substitute for. The more “invisible” a resource is, the better the competitive edge based on it. Intangible resources can be leveraged, unlike tangible resources. Take knowledge for example. People can share knowledge without reducing the value of the resource and in fact, could make the resource even more valuable. Reputation is also an excellent intangible resource. Reputation indicates the level of brand awareness an organization has been able to build amongst its consumers and how highly the consumers think of the organization. It is generally believed that intangible resources are much more valuable as core competencies than tangible resources because they are typically what makes an organization unique. Capabilities Integrating resources for a specific task or tasks produces capabilities. Building capabilities usually happens over a period of time through complicated activities between intangible and tangible resources. Capabilities frequently come from employee skills and knowledge that are unique to them. Capabilities are also actions that an organization performs remarkably better than its competitors. Unique value is added to an organization’s products and services through capabilities as well. Typically, you can find capabilities in the following functional areas: Distribution Human resources Information systems Marketing Management Manufacturing Research and development Table 2.1 demonstrates some examples of what unique capabilities can emerge from these functional areas. Table 2.1 Examples of unique capabilities Functional Area Capability Distribution Effectively utilizing logistics management policies and procedures Human Effectively motivating and retaining employees resources Information Use of point of purchase data collection methods to effectively systems and efficiently control inventories Marketing Innovative merchandising and advertising Management Ability to successfully envision the future of the industry Manufacturing Exception product and design quality Research and Ability to quickly transform technology into new products development and processes Core Competencies Core competencies are the source capabilities of the competitive edge an organization has over its competitors. They typically emerge over time and help to differentiate an organization and demonstrate its nature. If we look at all of an organization’s resources and capabilities, we will find that only a few of them are strategic assets. Strategic assets are assets that are potential sources of competitive advantage and have some sort of competitive value. Some of the assets could prove to be a detriment to the organization because they shine a light on areas that the organization is weaker in. There isn’t a magic number of core competencies that an organization is required to have in order to have a competitive advantage. However, most effective strategic plans can be built around three to four competencies. There is caution in having too many core competencies because organizations tend to lose their focus on the core competencies that can really give them the upper hand over competitors. When recognizing and developing core competencies, organizations usually use the standards for a supportable advantage and/or value chain analysis, shown in Figure 2.6. When we are determining our competitive advantage, we want to make sure that it is something that can be maintained and lost easily. Using the criteria of usefulness, uniqueness, expensive replication, and no viable alternatives helps us decide if we can afford to maintain this advantage. Does it make sense? The value chain analysis allows organizations to determine which core competencies should be invested in to be maintained since they are creating value for consumers. The value chain also helps us to map out the process, so we can understand what areas might benefit from being outsourced. Figure 2.6 Determine core competencies Standards for a Supportable Advantage Core competencies should meet these four criteria: Usefulness; how useful is it and does it have real value? Can it be used to reduce threats and create opportunities? Uniqueness specific to an organization itself, no other organization owns it Expensive replication; is the cost of replicating the product too high to make it worth it? No viable alternatives; there are no alternatives out there that can take its place Capabilities that do not meet the four criteria are not core competencies. Table 2.2 gives you an idea of what happens when all criteria are not met. Table 2.2 Core competency analysis Is it useful Is it unique Is the cost Are there Is there a Is there a What does enough to enough to of any other competitive competitive performance present a give us a replicating alternative advantage? disadvantage? look like? threat to competitive the solutions competitors? advantage? product out there? too high to be worth it? No No No No Less than average Yes No No Yes/no Competitive Average parity Yes Yes No Yes/no Average and But possibly temporary slightly above average Yes Yes Yes Yes Above average Value Chain The ability to be able to identify areas of operation that do and do not add value is referred to as the value chain analysis. This is an important piece to understand because an organization’s profit potential increases when the value they create is more than the costs they incur. The value chain is a template that is used by organizations to clarify their cost position and direct the implementation of a specific business-level strategy through primary and support activities which you can see in Figure 2.7. Primary activities in the value chain bring the product to the consumer. These activities would include creating the product itself, selling and shipping it to buyers, and providing customer service after the sale. Support activities are assistance activities that occur to make sure that the primary activities happen. These supporting activities are illustrated in Figure 2.9. The most valuable piece in the value chain as a whole is the people who have the knowledge of their consumers. Let’s have a closer look at the primary activities in the value chain. Below are the primary activities defined: Inbound logistics: Actions that are utilized to receive, store, and distribute inputs to a product Operations: Actions that convert the inputs into the final product Outbound logistics: Actions that include gathering, storing, and shipping out the product to consumers Marketing and sales: Actions to entice consumers to purchase the product and providing outlets for the consumers to purchase from Service: Actions that boost or preserve the value of the product Figure 2.7 Value chain activities Figure 2.8 Value chain primary activities Using the Value Chain The first step in using the value chain is to identify the primary activities of the value chain for your organization, shown in Figure 2.8. The next step is to identify sub-activities for each primary activity that helps in creating value. There are different types of sub-activities: Direct: Creates value by itself Indirect: Assists direct activities in running easily Quality assurance: Helps to make sure that both direct and indirect activities are meeting standards of quality Next, ask the question, what are the activities that fall under support activities? Out of all of the primary activity sub-activities, which ones generate the most value? Essentially, you are following the lower-level activities through the value chain and detailing what the value added is and if it is significant. After these steps, determine if the sub-activities are direct, indirect, or apply to quality assurance. Are there other activities that are value-adding that are part of your organization’s infrastructure? If so, capture those as well. They may not be related directly to a primary activity and you also want to determine if they are direct, indirect, or related to quality assurance. Fourth, ask the question, “How are all of these activities related?” Once you begin to answer this question, you begin to piece together your organization’s competitive advantage from a value-chain viewpoint. For example, there is a link between sales force training and sales volumes. Finally, ask yourself the question, “How can I improve or maximize the value my organization gives to the consumer with our products and services?” Figure 2.9 Value chain supporting activities A few important things to remember when identifying your organization’s value chain: Align proposed changes with your organization’s overall business strategies Determine a process and prioritize your list This process only gives you a big-picture perspective. For a more in-depth look, conduct a value chain analysis Value Chain Analysis A value chain analysis includes three steps: Activity analysis: What activities do you complete to provide your service? Value analysis: What can your organization add to these activities to provide the highest value to the consumer? Evaluation and planning: Examine the list of things you developed from point b) above and determine if completing the change would add enough value to be worth the work. The activity analysis step includes brainstorming with your team or organization to list all the actions you take that add value or enhance your consumer’s experience. Taking this from a top-down approach, you can first consider what this looks like from an organizational level. An example of an action that the organization takes that adds value is defining the business processes that are used to provide service to the consumer. These actions can include marketing, operations procedures, distribution, and customer support. If you look at this from an individual or team level, the actions would be the ones you do on a day-to-day basis that help you carry out the work you do. Also, be sure to include everything that adds value, not just the obvious daily activities, to provide the product. For example, activities like motivating the team members, recruiting a skilled workforce, or research and development on the latest technologies. An important thing to remember about this brainstorming activity is that you will get more ideas and better answers if you brainstorm with a team rather than just brainstorming by yourself. Also, going through the exercise and coming up with ideas will encourage better buy-ins from team members regarding the proposed changes you come up with during the exercise. After you have generated your list of activities from brainstorming, identify correlating “Value Factors” with each item. Value factors are things that your consumers place value on due to the method using which each activity is completed. Let’s look at a doctor’s office for example. One of the things on your list may be the nurse call process. Your consumer probably puts a high value on how quickly the nurse answers the phone or calls them back, how polite they are, and how knowledgeable they are. After you have identified the value of each activity in your list, examine what could be modified to give an even greater value to the consumer. The last step is to look at the modifications you have listed and develop a plan for the next steps to be taken. The previous step will result in a long list of activities that would be great if you could complete all of them. It is important to take a moment and think through how you will complete the changes you have listed and accomplish what you set out for in a timely manner. Instead of going down the list in the order in which you listed them, take time to prioritize. Pick the low-hanging fruit first. These activities are ones that are easy and quick to complete. Look through the remainder of the list and ask, “Is this change worth it?” and “What is the real value added at the end of the day?” Remove items from the list that require a large work effort and add little value. Then, prioritize the rest of your list in a way that will allow a steady pace of achievement and add value to keep both team members and consumers excited about your organization’s products and solutions. Another option for assistance in prioritizing the list is to consult with a customer you work closely with to get their input on the list. Outsourcing When an organization purchases a value-adding activity from a supplier that is external, they are outsourcing. Outsourcing allows organizations to be more flexible, alleviate risks, and decrease their investments in capital. More organizations are turning to outsourcing because they cannot obtain the resources and capabilities necessary to reach a competitive advantage in every primary and support activity. Outsourcing allows organizations to focus on the core competencies they really excel at. If you intend to get involved in outsourcing at your organization, it is critical that you have the following skillsets: tactical thinking, negotiating, partnership authority, and change management. You need to be a strategic thinker because you must understand your organization’s core competencies and how an outsourcing partner could help you in gaining a competitive edge. You must be able to make deals or negotiate with outsourcers, so they can be used by organization management. You should be empowered to oversee and manage the relationship with the outsourcer. Finally, utilizing outsourcing can require a large amount of change so it is very important that you are able to manage change. The biggest downfall of outsourcing is the growing concerns from communities regarding the loss of jobs for local workers to outsourced companies. There is also a possible risk of loss of capability to effectively innovate. When considering outsourcing at your organization, you should be sure to plan for these concerns from consumers and employees and be ready to discuss them. There are also advantages to outsourcing. It can possibly decrease costs and improve the quality of the actions that have been outsourced. By doing this, you add value to the products and services you provide to the customer. Therefore, outsourcing can result in a competitive advantage for an organization and allow value to be created for its stakeholders. Case Study Let’s look at Apple as a case study to determine its strengths and weaknesses. Apple is a household name. Most consumers have heard of Apple and are aware of some of the items they produce such as the iPhone. This awareness is called brand awareness and it is probably one of the biggest strengths of Apple. They also have a strong brand identity. Consumers may describe their products as aesthetically pleasing and creative. The Apple brand can also be described as a status symbol. iPhones are coveted by consumers because they associate them with an extravagant or wealthy lifestyle. They are willing to wait for hours on end just to obtain the newest version of the phone. What are Apple’s weaknesses? First, their products are costly which definitely eliminates some consumers. The population who can afford their products is narrowed by their price point. The high price of their product is part of the prestige that is a strength, but it does affect them negatively by limiting the number of consumers that can purchase their product. Business Portfolio When we refer to the business portfolio, we are describing all of the businesses and products that are a part of our company. This is the key to the relationship between strategy and individual parts of the business. Your goal in creating your business portfolio is to create one that fits the organization’s strengths and weaknesses as well as takes into consideration the opportunities that are readily available in the environment. When “working” on the business portfolio, the organization is examining or analyzing which areas deserve the most attention and investment and determining how to create strategies where developing new products or businesses grows the organization. The first step is to analyze the business portfolio. In analysis, leadership takes a close look at all of the businesses in the organization and evaluates them to determine where resources should and should not go. What are the key items that make up the company? Perhaps you want to invest the most resources in those items. These key units are also referred to as strategic business units (SBUs). SBUs are defined as separate entities in an organization that have their own mission and objectives. They can be treated as an independent unit from the other organization businesses. Examples of SBU are an organization division, product line, or brand. The next step after analysis is to look at the SBUs and determine which ones deserve more attention and resources. A great way to do this is to use the Boston Consulting Group box shown in Figure 2.10. Figure 2.10 Growth Share Matrix Source: “What Is the Growth Share Matrix?,” BCG Global, n.d., https://www.bcg.com/about/overview/our-history/growth-share-matrix. The diagram in Figure 2.10 is referred to as a growth-share matrix. When you are looking at the axes, you see that the vertical axis refers to market share while the horizontal axis refers to the growth rate. In essence, this diagram uses market attractiveness and the company strength to classify strategic business units. When you do this, you can break down the SBUs into four different categories. Stars: Populating the high growth rate and high relative market share section of this diagram are stars. Stars usually require significant investment to keep them growing quickly. After a while, these SBUs will slowdown in growth rate and become cash cows. Cash cows: The growth rate is low, but the market share is high for cash cows. Since they are not growing as rapidly as other SBUs, they do not require as significant an investment. Cash cows keep the lights on and the bills paid from the revenue they generate on a consistent basis. Question marks: High growth rates with low market share result in question marks. You need investment for these SBUs to be maintained much less grow them. Question marks require managers to question whether to put in the investment for these items to grow or if they should be discontinued. Dogs: Low growth and low market share SBUs are referred to as dogs. These SBUs can sustain themselves but do not generate any additional revenue for the company. After an organization determines what their SBUs can be classified as, they must determine how they will be utilized in the future. Is the question mark worth the investment? Is the star still growing or is it time for it to be phased into a cash cow? Strategic decision making depending upon these classifications is crucial to maintain and grow market share. This classification can also be used to forecast the life cycle of an SBU. Many of the SBUs start out as question marks and, with significant investment, become stars. As the growth rate begins to decrease, the SBU becomes a cash cow. Since cash cows generate income and require a lesser investment, it is critical to always be looking for SBUs that can be turned into cash cows from stars. Organizations want to continuously be developing SBUs to go through this cycle to sustain operations. Another way to plan your business portfolio is to use the General Electric grid, shown in Figure 2.11. They refer to it as a strategic planning grid. In this grid, business strength is on the horizontal axis while industry attractiveness resides on the vertical axis. Figure 2.11 Strategic planning grid Source adapted from Cuofano, Who Is Gennaro. “What Is The GE McKinsey Matrix And Why It Matters In Business.” FourWeekMBA, October 7, 2023. https://fourweekmba.com/ge-mckinsey-matrix/. This grid looks at several things as a part of industry attractiveness including market size, growth rate, profit margin in the industry, level of competition, demand cycle, and structure of cost in the industry. All of these items are considered as a part of industry attractiveness. In the diagram example above, we are rating attractiveness as high medium or low. Instead of simply using market share, the GE grid uses an index for business strength just like it does with industry attractiveness. Items that factor into business strength can include organization market share, competitiveness of price, quality of the good or service, customer and market familiarity, sales success and advantages in the geography. Usually these factors are all taken into consideration and then categorized into strong, average or weak. The grid is further divided into three areas. The blue area represents strong SBUs that should be invested in, so they can grow and flourish. The orange area shows SBUs that come in at a medium level of attractiveness and therefore should be maintained with investment. The purple area includes SBUs that are overall week and low in attractiveness. Careful consideration should be given to whether to discontinue or harvest these SBUs. The circles in the diagram represent the SBUs and the size relates to the size of the industries they are in. You can take these circles a step further and divide them into pie slices to represent market share of the SBU. The same idea of strategic planning with the previous diagram also applies to this diagram. The idea is to look at the SBUs in the diagram, make strategic decisions about their future which will help to grow and sustain the organization, and determine where new growth needs to occur when forecasting how an SBU will cycle through the grid. With this grid, managers can plot current state and future state to help them decided where some issues may arise and where the opportunities are. Both of the tools mentioned above, although are very helpful with strategic planning, have their flaws. Developing the grids themselves is time consuming. Implementing the changes determined from the grid can be costly. Definition of SBUS, their market share, and growth can sometimes be challenging to define. These approaches also place a lot of emphasis on current state with no advice for planning for the future. Also, using these approaches can cause organizations to place greater emphasis on the items that categorize the SBUs, which can lead to loss of awareness of other elements that may affect overall strategic planning. External Audit The external analysis of the organizational environment allows you to determine the organization’s opportunities and threats. Opportunities are described as an opportunity to exploit an external condition that will improve the organization’s strategic competitiveness. A threat is just the opposite. A threat is a condition in the general environment that could detrimentally affect an organization’s strategic competitiveness. When you are completing an external analysis, you are collecting and analyzing data on the industry, national environment, and the socio-economic environment. During this analysis, we are concerned about the competitors in the industry and their position as well as our position in the industry. We are also looking at how the environment as a whole could affect us and our long- term planning including economic, social, governmental, legal, technological, national and international factors. Let’s continue with the Apple case study and look at their external factors. An opportunity externally that Apple has demonstrated time and time again is their unique ability to be able to effectively and efficiently collaborate with other companies. They have collaborated with companies that produce popular headphones to create a wireless Airpod product. They have also worked with gaming companies to have games specially created for the iPhone. On the flip side of opportunities, are threats. A huge threat that Apple faces is the large amount of imitation that occurs in the marketplace. Companies produce products that are similar to Apple products and a lower price point. Competition is also a big threat for Apple. Companies like Samsung advertise that their products have just as much functionality, if not more, at a lower price point, with less hassle and cost of future upgrades. Environments - General When completing an external analysis, you should consider three environments: General Industry Competitor The general environment is described as broader societal dimensions that influence an industry and its organizations. These dimensions are divided into seven segments including: Demographic Economic Political/Legal Sociocultural Technological Global Physical Please refer to the table below for more details on the elements included in these dimensions. In order to create a successful strategic plan, organizations should have knowledge of these dimensions. Demographic ⬥ Population size ⬥ Age structure ⬥ Geographic distribution ⬥ Ethnic mix ⬥ Income distribution Economic ⬥ Inflation ⬥ Interest rates ⬥ Trade deficits or surpluses ⬥ Personal savings rate ⬥ Business savings rates ⬥ Gross domestic product (GDP) Political/Legal Antitrust laws ⬥ Taxation laws ⬥ Deregulation philosophies ⬥ Labor training laws ⬥ Educational philosophies and policies Sociocultural Women in the workforce ⬥ Women in the workforce ⬥ Attitudes about quality ⬥ Concerns about the environment ⬥ Shifts in work and career preferences ⬥ Shifts in preferences regarding product and service characteristics Technological ⬥ Product innovations ⬥ Applications of knowledge ⬥ Focus of private and government-supported R&D expenditures ⬥ New communication technologies Global ⬥ Important political events ⬥ Critical global markets ⬥ Newly industrialized countries ⬥ Different cultural and institutional attributes Physical ⬥ Energy consumption ⬥ Practices used to develop energy sources ⬥ Renewable energy efforts ⬥ Minimizing an organization’s environmental footprint ⬥ Availability of water as a resource ⬥ Producing environmentally friendly products ⬥ Reacting to natural or man-made disasters It is important to note that the general environment cannot be controlled by organizations. Therefore, companies that are successful in this environment have a deep understanding of the segments, gather the appropriate data and analyze it, and then account for what they find in their strategies. Organizations are influenced by the current states of the segments. When organizations study the demographic segments, they try to consider the global climate due to possible effects in different countries since organizations may compete in global markets. When analyzing the economic segment, we are considering the where the economy is now and where it is going. Examining this segment helps to plan to meet a general goal of most organizations which is to compete in an industry that is relatively stable with potential for growth. The political/legal segment learn about the relationships between organizations and the government. We look at how they impact each other in the current state and how future state might be impacted so we can plan accordingly. Society’s values, attitudes, and cultural views are considered in the sociocultural segment. These things can actually affect how the demographic, economic, political/legal, and technological segments behave and evolve. Innovation with new products, processes, and resources is the focal point of the technological segment. This segment includes developing new learnings and converting that knowledge into products, services, resources, and processes. The global segment looks at new and current markets, how they are changing, pertinent international events, and critical cultural qualities. Finally, the physical segment is focusing on supporting the environment. Organizations have begun to gain a clearer understanding of how the physical environment can influence business practices, so they include this segment to plan accordingly. The industry environment that organizations refer to can consist of things like demographics, shifts in lifestyle and economic cycles per businessdictionary.com. It includes Porter’s Five Forces: risk of new competitors, power of suppliers and buyers, risk of duplication, and intensity of competitor rivalry. The key to this environment is to find a position in the market where your organization can positively influence the forces or successfully protect themselves against their influence. This is particularly helpful in volatile industries like the airline industry where there is intense rivalry amongst competitors and getting pushed out of the industry is relatively common even for the industry’s leaders. Gathering information about other competitors in the industry and analyzing that data is referred to as competitor analysis and is used to understand the competitive environment. Competitor analysis couple with the information from industry and general environment analysis give organizations a great big picture of what they are dealing with. General environment analysis focuses on forecasting the future. Industry environment analysis is pinpoints the influences on an organization’s profitability potential within its industry. Looking at analysis on competitors helps us understand how competitors may act in the future so that your organization can respond appropriately. In an effort to better manage and comprehend the current environment, organizations conduct an external environment analysis. This analysis, shown in Figure 2.12, is comprised of four segments: scanning, monitoring, forecasting, and assessing. Figure 2.12 External environment analysis There are many sources that can be referenced when you are collecting data on the general environment. Those sources include: Trade publications Newspapers Business publications Academic research Public polls Trade shows Suppliers Customers Employees Scanning The first step in the external environmental analysis process is scanning. Scanning involves looking at all segments in the general environment. Scanning often results in early signals of possible changes and helps to identify any changes that are already happening. This part of the process is a data gathering activity. You collect raw data from several different sources but how the information is related is still unclear and often incomplete. It is important that the scanning activities are in alignment with the environment. For example, the scanning system for a stable environment should be calibrated for stable environments not volatile environments. Today, organizations often utilize software specialized to identify these changes and trends. This software is set up to look for specific pieces of information which can sometimes cause a false alarm. Organizations are willing to take the tradeoff of this software raise false alarms if it increases the probability of early detection of red flags. Another way to detect changes is by using capabilities in internet browsers that allows organizations to collection information about those who click through their sight. Monitoring At this step, researchers are sifting through the data gathered to determine what pieces are meaningful. After determining this, they begin to actively monitor the changes and trends to see if something worthwhile that could affect their strategies is happening in the environment. To be effective in monitoring, organizations must accurately identify their stakeholders and know what their standing is amongst those stakeholders. Understanding this allows organizations to meet the needs of their unique population they serve. Industries with high technological ambiguity find scanning and monitoring particularly critical. It gives them information, develops new knowledgebase items about the environment, and helps them determine the best strategies for marketing their new technologies. Forecasting After monitoring the trends and performance of the current environment, analysts gather the information and use it to help them determine what could happen in the future and when. For example, analysts may forecast how long it will take the government to put a particular regulation in place or how quickly a competitor is bringing new technology to the consumer. Technology is improving at such a rapid rate, that it often expedites the product life cycle which in turn makes accurate forecasting difficult. Therefore, the greatest challenge in forecasting is accuracy. If you are unable to forecast accurately, your potential profitability could be affected. For example, Company A forecasted a 22% increase in sales for 2017 but the increase was actually 32%. Your first reaction may be positive since we sold even more than we had anticipated. But, the supplies for your products were ordered in quantity to support a 22% increase in sales. Company A found itself in a situation where it had more demand than supply due to an incorrect estimation of the increase. This did affect profitability because the company was unable to sell as much as what the customer was demanding. Assessing We have collected the data, pieced it together, and determined which pieces are meaningful, and which are not. Now, understanding the timing and significance of the effects of the changes and trends on strategic management is important. The organization is now postulating the effects of the things they have learned in the organization itself. The key thing to remember here is that how the data is interpreted is paramount. If the interpretation of the information gathered is incorrect, inadequate strategies are developed and the organization’s profitability is affected. Many companies gather the data and organize but they do not assess it to see what it means to them. In these cases, they are increasing their risk of an inaccurate strategy implementation. Assessing ensures that the proposed strategy is correct. Environments – Competitive After completing an industry analysis described in an earlier chapter, the last piece of external analysis is a competitor analysis. In this analysis, we are looking at every company that your organization competes with. This analysis is most interested in the competitor’s objectives, strategies, assumptions, and abilities. In this analysis, we want to know: The competitor’s driving force: What objectives do they want to reach in the long term? The competitor’s current state: What are their current strategic plans? The competitor’s industry beliefs: What do they believe to be true regarding the industry? The competitor’s abilities: Where is the organization strong and where is it weak? Having this information allows an organization to determine how to respond. Figure 2.13 shows the inputs needed to develop a sound response. Figure 2.13 Response inputs When an organization considers future objectives, they are looking at: In comparison to our competitors, what do our goals look like? In the future, where should we place the most importance? How risk averse are we? When an organization considers its current strategy, they are looking at: Currently, how are we competing? Are changes in the competitive structure supported in their strategies? When an organization considers assumptions, they are looking at: Are we assuming a volatile or stable future? What are the assumptions that our competitors hold when they look at the industry and themselves? When an organization looks at capabilities they are looking at: Where are we strong and weak? If we were to rate ourselves and our competitors, where do we fall on the list? Using the answers to these questions we can determine a response that answers the following questions: Our competitors are likely to do (fill in the blank) in the future. What do we have to offer over our competitors? Does this change our relationship with our competitors? How? Case Study Let’s take a case study of a successful environmental scanning example and an unsuccessful environmental scanning example. PepsiCo PepsiCo, a popular soft drink and beverage manufacturer, completed an environmental scan and found that nowadays, health and wellness are becoming a big part of the food and beverage as well as other industries. The CEO took this to heart and began developing a long-term strategy to include healthy snacks and beverage alternatives in their portfolio of products. The CEO set a goal of tripling their healthy products business by the year 2020. The company decided to use an acquisition strategy to get them into the health and wellness market more quickly with already successful products such as those manufactured by Naked. They also increased the research and development budget related to healthier ingredients that can be backward-engineered into their current products. PepsiCo made the right decision at the right time to move with the industry quickly. Other companies have suffered because they did not do appropriate planning to incorporate health and wellness. Borders Borders filed for bankruptcy in 2011 due to poor environmental scanning and not acting on what was returned from environmental scanning analysis. Despite reports of a growing internet presence from other stores in the industry and an increased use of online purchasing outlets, Borders chose to invest in its CD business and its physical book business instead of focusing on beefing up its internet presence. Environmental scanning also indicated that digital downloads were on the rise for CDs as well as eBooks for books. Due to their lack of reaction to these environmental trends, they were forced out of business. This is definitely an example of poor environmental scanning and its analysis. 2.3 The Marketing Plan Each strategy plan has a marketing plan for each business or SBU. Since products can widely differ, it is very important to have different marketing plans for each item. Figure 2.14 shows the elements that make up a marketing plan. Figure 2.14 Elements of a marketing plan Marketing Plan Elements The executive summary is a short summary of what you will find in the detailed marketing plan. This includes what the main goals of the plan are and any important recommendations you wish to include. When developing this summary, ask yourself, “What are the quick points I want chief executives to know if they just glance at this plan?” A template for this summary may be used below to help guide your summary development. Marketing plan name: (include product name in plan name) Goals and objectives: Goal Goal Goal Risks: Risk Risk Risk Recommendations: Recommendation Recommendation Recommendation The current marketing state describes the current situation and background. It may include market, product, competition, and distribution data. The current state includes internal and external audits described in earlier sections of this document. Using this information, you are able to thoroughly examine your organization’s internal and external environments to locate possible problem areas and opportunities. The beginning of the report should describe the focus market and the organization’s current position. The components in Figure 2.15 should be driven from the perspective of the strategic imperatives including objectives, policies, and strategies passed down from other plans. The next area of the report focuses on the current state. In the current state, we look at market information and details (also known as market description), how the product performs, competitors, and dissemination. Next, the product review details the sales, prices, and gross margins of the top products in the line. After that, the competition section describes the top competitors and strategies for quality, pricing, dissemination, and marketing. Lastly, the distribution section maps out recent sales trends in the main distribution channels. Figure 2.15 Marketing report components The SWOT analysis pulls strengths, weaknesses, threats, and opportunities from the current market state. It shows a list of factors that are critical to success as well. SWOT diagrams like you see in Figure 2.16 can help you decide whether a business venture or a new product is worth moving forward with. It also serves as a great picture of how to allocate resources and plan for future marketing efforts. SWOT analysis is completed by going through the following steps: State your objective Develop a grid Label each area, “Strengths”, “Weaknesses”, “Opportunities”, and “Threats” Add appropriate strengths and weaknesses, both qualitative and quantitative Conclude Figure 2.16 SWOT diagram In the marketing strategy section of the marketing plan, we look at the overall strategy or plan of attack for meeting the goals. Basically, this section outlines how you plan to achieve marketing goals. This section segments the market into digestible pieces, so you can easily address how each segment will be handled to meet strategic objectives. The action plans tell you what will happen when “the rubber meets the road.” This plan answers critical questions about the marketing strategy: What will we do? When will we do it? Who will do it? What is the cost? The plan details when actions will be started and finished. It projects profit and loss along with the supporting marketing budget. The budget looks at forecasted sales and average prices for revenues. For expenses, it includes production, dissemination, and marketing. The difference between the two is the projected profit. This budget will assist managers in their purchases and actions moving forward. Control is the final element of the marketing plan, illustrated in Figure 2.17. It essentially details how the process will be controlled and monitored for progress. This section helps us tell upper-level management how we measure up to the goals and objectives we set with the marketing pla

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