Chapter 1

Foundations of
Strategic Marketing
Management
1-2
In this chapter, you will
learn about
1. Defining the Organizations Business, Mission, and
Goals
Business Definition
Business Mission
Business Goals
2. Identifying and Framing Organizational Growth
Opportunities
Converting Environmental Opportunities into
Organizational Opportunities
SWOT Analysis
1-3
In this chapter, you will
learn about
3. Formulating Product-Market Strategies
Market-Penetration Strategy
Market-Development Strategy
Product-Development Strategy
Diversification
Strategy Selection
The Marketing Mix
4. Budgeting Marketing, Financial, and Production
Resources
5. Developing Reformulation and Recovery Strategies
6. Drafting a Marketing Plan
7. Marketing Ethics and Social Responsibility
1-4
The Primary Purpose of
Marketing
To create long-term and mutually
beneficial exchange relationships
between an entity and the publics
(individuals and organizations)
with which it interacts.
1-5
Expanding Responsibilities
of Marketing Managers
Expanded responsibilities include:
Charting the direction of the
organization
Contributing to decisions that will
create and sustain a competitive
advantage and affect long-term
organizational performance
They no longer function solely to direct
day-to-day operations. They must make
strategic decisions as well.
1-6
Evolution of the
Marketing Manager
This has prompted the emergence of
strategic marketing management as
a course of study and practice.
From being only an
implementer.
to being a maker of
organization strategy.

1-7
Processes in Strategic
Marketing Management
1. Defining the organizations business,
mission, and goals
2. Identifying and framing
organizational growth opportunities
3. Formulating product-market
strategies
4. Budgeting marketing, financial, and
production resources
5. Developing reformulation and
recovery strategies
1-8
Defining the
Organizations Business,
Mission, and Goals
Process One
1-9
Business Definition
By defining a business from a
customer or market perspective

an organization is appropriately
viewed as:
a customer - satisfying endeavor
a product-producing or service
delivery enterprise.
not
1-10
An organization should define a
business by:

The type of customers it wishes to
serve
The particular needs of those customer
groups it wishes to satisfy
The means or technology by which the
organization will satisfy the customer
needs
What business are we in?
1-11
Most statements describe:

the organizations purpose
customers, products/services,
markets, philosophy, and technology
Business Mission
Underscores the scope of an
organizations operations apparent in
its business definition
Reflects managements vision of
what the organization seeks to do
1-12
Benefits of Mission
Statements
1. Crystallizes managements vision of the
organizations long-term direction and
character
2. Provides guidance in identifying, pursuing,
and evaluating market and product
opportunities
3. Inspires and challenges employees to do
those things that are valued by the
organization and its customers
4. Provides direction for setting business goals
or objectives
1-13
Business Goals
Goals or objectives convert the organizations
mission into tangible actions and results that
are to be achieved, often within a specified
time frame.
Three major categories of goals:
1. Production
2. Financial
3. Marketing
1-14
Production Goals
Apply to the use of
manufacturing and service
capacity and to product
and service quality.

Financial Goals
Focus on return on
investment, return on
sales, profit, cash flow,
and shareholder wealth.

Marketing Goals
market share
marketing productivity
sales volume
profit
customer satisfaction
customer value creation
1-15
Identifying and Framing
Organizational Growth
Opportunities
Process Two
1-16
Sources of environmental opportunity:

Unmet or changing customer needs
Unsatisfied buyer groups
New means or technology for delivering
value to prospective buyers
What might we do?
Converting Environmental
Opportunities into
Organizational Opportunities
1-17
What do we do best?
Distinctive Competency describes an
organizations unique strengths or qualities
including:
Skills
Technologies
Resources
that distinguish it from other organizations.
Converting Environmental
Opportunities into
Organizational Opportunities
1-18
What must we do?
Success Requirements are basic tasks
that an organization must perform in a
market or industry to compete
successfully.

If what must be done is inconsistent with
what can be done to capitalize on an
environmental opportunity, an organizational
growth opportunity will fail to materialize.

Converting Environmental
Opportunities into
Organizational Opportunities
1-19
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
internal
external
A formal framework for identifying and
framing organizational growth opportunities
1-20
SWOT Analysis
Framework for focusing attention on the
fact that an organizational growth
opportunity results from
a good fit between an organizations
INTERNAL CAPABILITIES
(Strengths & Weaknesses)
and
its EXTERNAL ENVIRONMENT
(Opportunities & Threats)
1-21
Pose dangers to the welfare of
the organization
Threats
Developments or conditions in
the environment that have
favorable implications for the
organization
Opportunities
What an organization lacks or
does poorly relative to
competitors
Weakness
What the organization is good
at doing or a characteristic that
gives it an important capability
Strength
SWOT Analysis
1-22
Questions to be asked once
SWOT has been identified
1. Which internal strengths represent
distinctive competencies? Do these
strengths compare favorably with what are
believed to be market or industry success
requirements?
2. Which internal weaknesses disqualify the
organization from pursuing certain
opportunities?
3. Does a pattern emerge from the SWOT?
1-23
Formulating
Product-Market Strategies
Process Three
1-24
Diversification
Market
Development
Market
Penetration
Product
Development
Existing
products
New
products
Existing
markets
New
markets
Product-Market Strategies
1-25
Seeking a larger market share in a market in
which organization already has an offering
This strategy involves:
Attempts to increase present buyers
usage or consumption rates of the
offering
Attracting buyers of competing offerings
Stimulating product trial among potential
consumers
Market Penetration
Strategy
1-26
Introducing its existing offerings to markets
other than those that the organization is
currently serving.
Reaching new markets requires:
Carefully considering competitor strengths
and weaknesses and competitor retaliation
potential
Modification of the basic offering
Different distribution outlets
Change in sales effort and advertising
Market Development
Strategy
1-27
Licensing Exporting
Joint Venture
or Strategic
Alliance
Direct
Investment
Market Development in
the International Arena
1-28
Creating new offerings for existing markets.
This approach may be taken for:
Product Innovation develop totally new
offerings
Product Augmentation enhance the
value to customers of existing offerings
Product line extension broaden the
existing line of offerings by adding different
sizes, forms, flavors, etc.
Product Development
Strategy
1-29
Development or acquisition of offerings
new to the organization and introducing
those offerings to publics not previously
served by the organization.
Growing trend in recent years
High-risk strategy because both the
offering and market served are new to
the organization
Diversification Strategy
Market-penetration
strategy
Market-development
strategy
Estimated profit of
$1 million
Estimated profit of
$4 million
Action Response Outcome
Aggressive
competition
Passive
competition
Aggressive
competition
Passive
competition
Strategy Selection Sample Decision Tree
Estimated profit of
$2 million
Estimated profit of
$3 million
1-31
The Marketing Mix
Customer
Channel
Strategy
Product
Strategy
Price
Strategy
Communications
Strategy
1-32
Budgeting Marketing,
Financial, and Production
Resources
Process Four
1-33
A formal, quantitative expression of an
organizations planning and strategy
initiatives expressed in financial terms

A well-prepared budget meshes and
balances an organizations
Financial,
Production, and
Marketing Resources
so that overall organizational goals or
objectives are attained.
The Budget
1-34
1. Operating Budget
Also referred to as a pro forma
Income Statement
Focuses on an organizations income
statement
2. Financial Budget
Focuses on the effect that the
operating budget and other initiatives
will have on the organizations cash
position
Components of a Budget
1-35
Developing Reformulation
and Recovery Strategies
Process Five
1-36
Comprehensive, systematic, independent, and
periodic examination of a companys marketing
environment, objectives, strategies, and
activities to recommend a plan of action to
improve the companys marketing performance.
The Marketing Audit
Helps answer the questions:
Are we doing the right things?
Are we doing things right?
1-37
Focus can be on a business, product, or
brand
Time Dimension can be short-run
(typically one year) or long-run (multi-
year)
A formal written document that describes the
context and scope of an organizations
marketing effort to achieve defined goals or
objectives within a specified future time period.
The Marketing Plan
1-38
Marketing Ethics and
Social Responsibility
Marketing decisions reflect an
organizations orientation toward the
publics with which it interacts
The marketplace is populated by
individuals with diverse value systems
Their actions will be judged publicly
by others with different values