Marketing Concepts Chapter Two

value delivery process
1. choose the value of offering
2. provide value
3. communicate the value
-segment target positioning
-the essence of strategic marketing
the value chain
-tool for identifying ways to create more customer value
-Every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product
five (primary) strategically relevant activities
(1) inbound logistics, or bringing materials into the business
(2) operations, or converting materials into final products
(3) outbound logistics, or shipping out final products
(4) marketing, which includes sales
(5) service.
strategically relevant activities
-create value and cost in a specific business
-five primary and four support
four (support) strategically relevant activities
(2) technology development
(3) human resource management
(4) firm infrastructure. (Infrastructure covers the costs of general management, planning, finance, accounting, legal, and government
core business process
-Market-sensing process
-New-offering realization process
-Customer acquisition process
-Customer relationship management process
-Fulfillment management process
market-sensing process
gathering and acting upon information about the market
new-offering realization process
researching, developing, and launching new high-quality offerings quickly and within budget
customer acquisition process
defining target markets and prospecting for new customers
customer relationship management process
building deeper understanding, relationships, and offerings to individual customers
fulfillment management process
receiving and approving orders, shipping goods on time, and collecting payment
market-driven organizations are excelling in three distinctive capabilities:
customer linking
channel bonding
core competencies
-A source of competitive advantage and makes a significant contribution to perceived customer benefits
-Applications in a wide variety of markets
-Difficult for competitors to imitate
how to maximize core competencies
(Re)define the business concept
(Re)shaping the business scope
(Re)positioning the company’s brand identity
what is the central role of strategic planning?
-Managing the businesses as an investment portfolio
-Assessing the market’s growth rate and the company’s position in that market
-Establishing a strategy
four organizational levels of a company
(1) corporate, (2) division, (3) business unit (4)
-responsible for designing a corporate strategic plan to guide the whole enterprise
-makes decisions on the amount of resources to allocate to each division as well as on which businesses to start or eliminate
establishes a plan covering the allocation of funds to each business unit within the division
business unit
develops a strategic plan to carry that business unit into a profitable future
(product line, brand) develops a marketing plan for achieving its objectives
marketing plan
central instrument for directing and coordinating the marketing effort
strategic marketing plan
lays out the target markets and the firm’s value proposition, based on an analysis of the best market opportunities
tactical marketing plan
specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service
planning process
corporate planning > division planning > business planning > product planning
implementing process
organizing > implementing
controlling process
measuring results > diagnosing results > taking corrective action
corporate/division strategic planning steps
-Define the corporate mission
-Establish strategic business units
-Assign resources to each strategic business unit
-assess growth opportunities
5 questions to ask when defining the corporate mission:
What is our business?
Who is the customer?
What is of value to the customer?
What will our business be?
What should our business be?
target market definition
tends to focus on selling a product or service to a current market
strategic market definition
focuses on selling product/service to current market but also focuses on potential market
strategic business units
-A single business or collection of related businesses
-Has its own set of competitors
-Has a leader responsible for strategic planning and profitability
what is the purpose of identifying a company’s strategic business units?
to develop separate strategies and assign appropriate funding
how does management decide how to allocate corporate resources to each SBU?
-Portfolio-planning models
-Shareholder/market value analysis
assessing growth opportunities includes:
planning new businesses, downsizing, and terminating older businesses
how can a company fill the strategic planning gap/assess growth opportunities?
-identify opportunities for growth within current businesses (intensive opportunities)
-identify opportunities to build or acquire businesses related to current businesses (integrative opportunities).
-identify opportunities to add attractive unrelated businesses (diversification opportunities).
intensive opportunities for growth
identify opportunities for growth within current businesses
integrative opportunities
identify opportunities to build/acquire businesses related to current businesses
diversification opportunities
identify opportunities to add attractive unrelated businesses
intensive growth
Corporate management should first review opportunities for improving existing businesses
product-market expansion grid
considers the strategic growth opportunities for a firm in terms of current and new products and markets.
steps of product-market expansion grid
1. company considers whether it could gain more market share with its current products in their current markets, using a market-penetration strategy.
2. considers whether it can find or develop new markets for its current products, in a market-development strategy.
3. considers whether it can develop new products for its current markets with a product-development strategy.
4. firm will also review opportunities to develop new products for new markets in a diversification strategy.
integrative growth
A business can increase sales and profits through backward, forward, or horizontal integration within its industry
diversification growth
-The industry is highly attractive and the company has the right mix of business strengths to succeed
-makes sense when opportunities exist outside the present business
downsizing/divesting older businesses
Companies must carefully prune, harvest, or divest tired old businesses to release needed resources for other uses and reduce costs
company organization
consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment
corporate culture
The shared experiences, stories, beliefs, and norms that characterize an organization
marketing innovation
-Employees can challenge company orthodoxy and stimulate new ideas
-scenario analysis – Firms develop strategy by choosing their view of the future
Senior management should identify and encourage fresh ideas from three generally underrepresented groups:
-employees with youthful or diverse perspectives
-employees far removed from company headquarters
-employees new to the industry
scenario analysis
develops plausible representations of a firm’s possible future using assumptions about forces driving the market and different uncertainties
SWOT Analysis
way of monitoring the external and internal marketing environment


environmental threat
-challenge posed by an unfavorable trend or development that, in the absence of defensive marketing action, would lead to lower sales or profit
-company needs contingency plan to deal with this
marketing opportunity
an area of buyer need and interest that a company has a high probability of profitably satisfying.
3 sources of marketing opportunities
1. offer something that is in short supply (requires little marketing talent)
2. supply an existing product or service in a new or superior way.
3. can often lead to a totally new product or service
market opportunity analysis (MOA)
-Can we articulate the benefits convincingly to a defined target market(s)?
-Can we locate the target market(s) and reach them with cost-effective media and trade channels?
-Does our company possess or have access to the critical capabilities and resources we need to deliver the customer benefits?
-Can we deliver the benefits better than any actual or potential competitors?
-Will the financial rate of return meet or exceed our required threshold for investment?
business must evaluate internal environment:
strengths and weaknesses
goal formulation
-Unit’s objectives must be arranged hierarchically
-Objectives should be quantitative
-Goals should be realistic
-Objectives must be consistent
Porter’s 3 Generic Strategies
-overall cost leadership
overal cost leadership
firms work to achieve the lowest production and distribution costs so they can underprice competitors and win market share
business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market
business focuses on one or more narrow market segments, gets to know them intimately, and pursues either cost leadership or differentiation within the target segment
categories of marketing alliances
-Product or service alliance
-Promotional alliance
-Logistics alliances
-Pricing collaborations
product/service alliance
One company licenses another to produce its product, or two companies jointly market their complementary products or a new product.
promotional alliance
One company agrees to carry a promotion for another company’s product or service.
logistics alliance
One company offers logistical services for another company’s product.
pricing collaborations
One or more companies join in a special pricing collaboration.
McKinsey’s elements of success
– first three—strategy, structure, and systems—are considered the “hardware” of success. The next four—style, skills, staff, and shared values—are the “software.”
-“soft” element, style, means company employees share a common way of thinking and behaving.
-The second, skills, means employees have the skills needed to carry out the company’s strategy.
-Staffing means the company has hired able people, trained them well, and assigned them to the right jobs.
-shared values – means employees share the same guiding values.
-When these elements are present, companies are usually more successful at strategy implementation
key to organizational health
willingness to examine the changing environment and adopt new goals and behaviors
marketing plan contents
Executive summary
Table of contents
Situation analysis
Marketing strategy
Marketing tactics
Financial projections
Implementation controls
questions to ask when evaluating a marketing plan
Is the plan simple/succinct?
Is the plan complete?
Is the plan specific?
Is the plan realistic?
marketing plan contents
-Marketing research
-Specifications for internal and external relationships
-Action plans and schedules
-outlines budgets, schedules, and marketing metrics for monitoring and evaluating results.

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