chapter 2 Flashcards
In studying today’s organizations, it’s important to recognize _________
(1) the kinds of organizations that exist
(2) what strategy is
(3) how this strategy relates to the three levels of structure found in many large organizations
Organization
a legal entity that consists of people who share a common mission. This motivates them to develop offerings (goods, servs, or ideas) that create value for both the organization & its customers by satisfying their needs/wants
Three Types of Organizations
- for-profit
- nonprofit
- government agency
For-Profit Organization
(often called business firm)
a privately owned organization that serves its customers to earn a profit so that it can survive
Ex: Target, Nike, Keurig
Profit
the money left after a for-profit org subtracts its total expenses from its total revenues & is the reward for the risk it undertakes in marketing its offerings
Nonprofit Organization
a nongovernmental organization that serves its customers but does not have profit as an organizational goal
› Goals may be operational efficiency/client satisfaction
› Must receive sufficient funds above its expenses to
continue operations
Ex: Teach For America, solves practical needs of society
Government Agency
a federal, state, county, or city unit that provides a specific service to its constituents
Ex: Census Bureau, U.S. Department of Commerce
Industry
organizations that develop similar offerings
Ex: Computer Industry,
Automobile industry
Strategy
an organization’s long-term course of action designed to deliver a unique customer experience while achieving its goals
Three Levels of Strategy
- Corporate Level
- Strategic Business-Unit Level
- Functional Level
Corporate Level
top management directs overall strategy for the entire organization
Strategic Business Unit (SBU)
a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined target market
Strategic Business-Unit Level
managers set a more specific strategic direction for their businesses to exploit value-creating opportunities
› Used for more complex firms
Functional Level
groups of specialists actually create value for the organization
› The org’s strategic direction becomes its most specific & focused
Department
specialized functions such as marketing & finance
Cross-Functional Teams
small number of people from different departments who are mutually accountable to accomplish a task or a common set of performance goals
A visionary organization ______
A visionary organization must specify its foundation (why does it exist?), set a direction (what will it do?), & formulate strategies (how will it do it?)
Organizational Foundation
philosophical reason for being- why it exists
Ex: Microsoft: “To empower every person & org on the planet to achieve more”
› At the most basic level orgs exist to create value for someone
Four Elements of the Organizational Foundation (WHY):
- Organizational Purpose
- Core Values
- Mission
- Organizational Culture
Organizational Purpose
describes why an organization exists, what problems it wishes to solve, and who it wants to be to every person it touches through its work
› Helps org’s create deeper connections w/consumers & suppliers, do more for the communities, attract/retain talent who ascribe to the purpose, & achieve greater social impact and profitability
Ex: Apple, we believe our technology should lift humanity & enrich people’s lives in all the ways people want to experience it
Core Values
the fundamental, passionate, and enduring principles of an organization that guide its conduct over time
› A firm’s founders/senior management develop & nurture these core values & serve to inspire and motivate its stakeholders
Ex: IKEA, (1) humbleness & willpower, (2) leadership, (3) daring to be different, (4) togetherness & enthusiasm, (5) cost-consciousness, (6) constant desire for renewal, (7) accept & delegate responsibility
Stakeholders
employees, shareholders, board of directors, suppliers, distributors, creditors, unions, government, local communities, & customers
Mission
(also called vision)
a statement of the organization’s function in society that often identifies its customers, markets, products, and technologies
› Mission statement should be clear, concise, meaningful, inspirational, and long term
› Many orgs have added a social element to their mission statement to reflect an ideal that’s morally right & worthwhile
Ex: Southwest Airlines: “Dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit”
Corporate Mission
a clear statement of the markets in which the firm competes and seeks to deliver customer value
-Things the comp really wants to accomplish
-What it’s aiming to do/big picture
Organizational Culture
the values, ideas, attitudes, and norms of behavior that are learned and shared among the members of an organization
Organizational Direction
what will it do?
Organizational Direction Sets A Direction In Terms Of
- The Business It’s In
- Its Specific Goals
Business
the clear, broad, underlying industry or market sector of an organization’s offering
› To help define its business, an organization looks at the set of organizations that sell similar offerings (competitors)
Business Model
the strategies an org develops to provide value to the customers it serves
Goals
(also called Objectives)
statements of an accomplishment of a task to be achieved, often by a specific time
› Goals convert an org’s mission & business into long- & short-term performance targets
Corporate Goals
specific, measurable objectives the organization seeks to achieve and by which it can measure its performance
-Small goals that leads to the big picture
Types of Goals
profit
sales
market share
quality
customer satisfaction
employee welfare social responsibility
Profit Goals
most firms seek to maximize profits- to get as high a financial return on investment (ROI) as possible
Sales Goals
if profits are acceptable, a firm may elect to maintain or increase its sales even though profits may not be maximized
Market Share
the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself
Quality Goals
a firm may seek to offer a level of quality that meets or exceeds the cost & performance expectations of its customers
Customer Satisfaction Goals
customers are the reason the org exists, so their perceptions/actions are of vital importance. Satisfaction can be measured with surveys or by the number of customer complaints.
Employee Welfare Goals
a firm may recognize the critical importance of its employees by stating its goal of providing them with good employment opportunities & working conditions
Social Responsibility Goals
firms may seek to balance the conflicting goals of stakeholders to promote their overall welfare, even at the expense of profits
Organizational Strategies
how will it do it?
Two Way Organizational Strategies Vary
- Strategy’s Level in the Organization
- The Offerings an Organization Provides To Its Customers
Variation By Level
moving down the levels in an organization involves creating increasingly specific, detailed strategies & plans
Corporate Level
top managers create a portfolio of market-product businesses (SBUs) that is consistent with the mission statement
Strategic Business Unit Level
managers focus on specific value creation activities such as improving quality, lowering cost, or adding services
Functional Level
the issue is who makes tomorrow’s sales call
Variation by Product
organizational strategies vary by the organization’s products. The strategy will be far different when marketing a physical good, a service, or an idea
Marketing Plan
a road map for the marketing actions of an organization for a specified future time period, such as one year or five years
Marketing Dashboard
the visual display of the essential information related to achieving a marketing objective
› A marketing manager glances at a graph or table to monitor key metrics & makes a decision to take action or analyze the problem further
› The dashboard shows graphic displays of key performance indicators of a product category
› Each display in marketing dashboard shows a marketing metric
Marketing Metric
a measure of the quantitative value or trend of a marketing action or result
Data Visualization
presents information about an organization’s marketing metrics graphically so marketers can quickly (1) spot deviations from plans during the evaluation phase & (2) take corrective actions
Two Questions Orgs Need To Answer To Set a Strategic Direction
- A Look Around: Where are we now?
- Growth Strategies: Where do we want to go?
A Look Around (Where are we now?)
asking an org where it is at the present time involves identifying its competencies, customers, & competitors
Competencies
its special capabilities- the skills, technologies, & resources- that distinguish it from other orgs & provide customer value
› Org should assess its core competencies to understand how its special capabilities provide a competitive advantage
Competitive Advantage
a unique strength relative to competitors that provides superior returns, often based on quality, time, cost, or innovation
Customers
org should identify its customers & how they receive genuine value and have a satisfying experience
Competitors
org should analyze its competitors from a global perspective to determine the distinctions among them
Growth Strategies
(Where do we want to go?)
knowing where the org is at the present time enables managers to set a direction for the firm & allocate resources to move in that direction
Two Techniques to Help With Growth Strategies
- Business Portfolio Analysis
- Diversification Analysis
Product Portfolio Analysis
a technique that managers use to quantify performance measures and growth targets to analyze their firms’ strategic business units (SBUs) as though they were a collection of separate investments
› Purpose is to determine which SBU or offering generates cash & which one requires cash to fund the org’s growth opportunities
› Requires an org to locate the position of each of its SBUs on a growth-share matrix
Growth Share Matrix
based on the amount of cash they generate for or require from the organization
Market Growth Rate
(The Vertical Axis)
the annual rate of the SBU’s industry
> 10%: growing at a faster rate than what the avg industry would be
<10%: more mature/not exciting, growing at a lower rate than the avg industry
Why focus on market growth rate instead of market size?
-Dynamic rather than static (It’s evolving/differs over time)
-Future Oriented/Predictive
Relative Market Share
(The Horizontal Axis)
sales of the SBU divided by the sales of the largest firm in the industry
> 1 : relative market share is higher than competitors
<1 : relative market share is lower than competitors
Why is market share so important?
Market power increases (creates entry barriers)
-The bigger you are, the more power you have
Production costs decrease
-since volume goes up production costs decrease
Experience Curve
Every time unit production doubles, the cost of production falls by some fixed percentage.
>The more you produce of something the less it costs to produce them
Ex: Odile’s Bakery, if the amount of cakes she has to make increases then she can negotiate w/retailer bc she’s going to buy a lot of eggs
Four Quadrants in the Growth Share Matrix
question marks
stars
cash cows
dogs
Question Mark
SBUs with a low share of high-growth markets. Require large injections of cash just to maintain their market share, much less increase it.
-Industry is exciting/it’s growing but you don’t know how you’re going to do it
>10% & <1
-Introduction Stage
- Dilemma: choosing the right ones to invest in & phasing out the rest
- Ex: Apple Card
Stars
SBUs with a high share of high-growth markets that may need extra cash to finance their own rapid future growth. When their growth slows, they are likely to become cash cows.
-Focuses on differentiation & want to show ppl why they should buy from you.
-Ppl buy from you so you’re the star
-Growth Stage
>10% & >1
Ex: iPhone
Cash Cows
SBUs that generate large amounts of cash, far more than they can use. They have dominant shares of slow-growth markets & provide cash to cover the org’s overhead and to invest in other SBUs.
-Mature/growth slows down & you try to extract as much as possible from loyal customers
-Maturity Stage
<10% & >1
Ex: iPad/iPad mini
Dogs
SBUs with low shares of slow-growth markets. Although they may generate enough cash to sustain themselves, they may no longer be/become real winners for the org.
-Decline/not profitable
-Decline Stage
<10% & <1
Ex: iPod, declining sales/discontinued products
Weaknesses of this analysis arise from the difficulty in
Weaknesses of this analysis arise from the difficulty in
(1) getting the needed information &
(2) incorporating competitive data into business portfolio analysis
Diversification Analysis
a technique that helps a firm search for growth opportunities from among current and new markets as well as current and new products
› For any market, there’s both a current product & a new product
› For any product, there’s both a current market & a new market
Four Market-Product Strategies:
- Market Penetration
- Market Development
- Product Development
- Diversification
Market Penetration
marketing strategy to increase sales of current products in current markets
Ex: Selling more Ben & Jerry’s ice cream to consumers
- Increased sales are generated by selling more ice cream (through better promotion/distribution) or the same amt of ice cream at a higher price to its consumers
Market Development
marketing strategy to sell current products to new markets
Ex: For Ben & Jerry’s Brazil is an attractive new market
Product Development
marketing strategy of selling new products to current markets
Ex: Ben & Jerry’s could sell children’s clothing
Diversification
marketing strategy of developing new products & selling them in new markets
Ex: If Ben & Jerry’s tries to sell Ben & Jerry’s branded clothing in Brazil
Related Diversification
Starbucks introducing refreshers, this is related because it’s still a drink
Unrelated Diversification
Coca Cola selling merch, shirts, posters, etc. This is unrelated because it’s not soda.
Strategic Marketing Program
the approach whereby an organization allocates its marketing mix resources to reach its target markets
Four Guiding Principles of the Strategic Marketing Process
- Customers are different
- Customers change
- Competitors change & react
- Organizational resources are limited
Three Phases of The Strategic Marketing Process
- Planning: put as much detail of how to accomplish all these things
- Implementation: actually do it, put into effect, get it done
- Evaluation: looking to see if you’re on track/met goals
Planning Phase
The part of the strategic marketing planning process when marketing executives, in conjunction with other top managers, (1) define the mission or vision of the business and (2) evaluate the situation by assessing how various players, both in and outside the organization, affect the firm’s potential for success.
Planning Phase 3 Steps
- Conduct A Situation (SWOT) Analysis
- Develop A Market-Product Focus, Customer Value Proposition, & Goals
- Develop A Marketing Program
- Conduct A Situation (SWOT) Analysis
Situation (SWOT) Analysis
Situation Analysis
taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization’s marketing plans and the external forces and trends affecting it
SWOT Analysis
an acronym describing an organization’s appraisal of its internal strengths and weaknesses and its external opportunities and threats
SWOT (cont)
› Build on a strength: find specific efficiencies in distribution w/parent comp Unilever’s existing ice cream brands
› Correct a weakness: recruit experienced managers from other consumer product firms to help stimulate growth
› Exploit an opportunity: develop new flavors of nondairy frozen desserts to respond to changes in consumer tastes
› Avoid a threat: focus on less risky international markets, such as Brazil & Argentina
- Develop A Market-Product Focus, Customer Value Proposition, & Goals
Market Segmentation
Customer Value Proposition
Goal Setting
Market Segmentation
involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action
- Enables an org to tailor specific marketing programs for its target market segments
Customer Value Proposition
the cluster of benefits that an organization promises customers to satisfy their needs
- Allows an org to specify meaningful & measurable marketing goals to be achieved
Customer Value Proposition Three criteria
It’s Relevant: describes how an org’s products solve a customer (segment) problem or improve their situation
- Details Specific Benefits in clear terms
- Points of Difference: those characteristics of a product that make it superior to competitive substitutes
Goal Setting
an org can pursue a variety of goals that provide the basis for a marketing program
- Develop A Marketing Program
involves designing the marketing program & mix (the four Ps), and its budget
Components of a Marketing Plan
- Executive summary
- SWOT Analysis
- Objectives
- Strategy
- Tactics
- Budget
- Time
- Contingency Plans
Executive summary
a brief overview of the entire marketing plan
SWOT analysis
identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)
Objectives
goals to establish the mission
-can change w/ times & environment
Strategy
how you’re going to deliver on your goals & what you’re going to do to get there
-broad
Tactics
very specific
How you’re going to advertise, type of channels you’re going to use, etc
Budget
how much money you need in order to be successful
Budgeting for Marketing Effort
Affordable
Percentage of sales
Optimization
objective and task
Competitive parity
Affordable
ask for something you know will get approved
-worst way to go
Ex: I know my controller will only approve x amount & I don’t want to argue back and forth
Percent of Sales
budget is some percent of past or projected sales
Optimization
for each dollar spent this is the optimum way to maximize for ROI. Requires lots of tests/experiments. Hard to do.
-Best way
Objective & Task
budgeting all of the things you want to achieve/goals & justifying them
Competitive Parity
takes into account competition
1.5 rule/Share of Voice
Desired market share gain x 1.5 = necessary share of voice gain
Ex: Company wants to increase market share by 10%
10% X 1.5 = 15%
Share of Voice = 15%
Time
need to understand when you want to accomplish things by
Contingency Plans
back up plans
If it’s not working out exactly how you’d plan, let’s think in advance what we could do
Implementation Phase
carrying out the marketing plan, has 4 components
Implementation Phase 4 Components
- Obtaining Resources
- Designing The Marketing Organization
- Defining Precise Tasks, Responsibilities, & Deadlines
- Executing the Marketing Program
- Obtaining Resources
obtaining & assembling sufficient human and financial resources to execute the marketing program successfully
Ex: Small business owners get funds from savings, family, friends, bank loans.
Ex: Marketing managers get top man to assign managerial talent & invest financial resources through approved marketing budgets
- Designing The Marketing Organization
organization chart that assigns roles to perform product management, marketing research, sales, advertising, promotional activities, etc. The entire marketing org is responsible for converting these marketing plans into realistic marketing actions.
- Defining Precise Tasks, Responsibilities, & Deadlines
successful implementation requires that team members know the tasks for which they are responsible & the deadlines for completing them
-Gantt chart
Gantt Chart
graph of a program schedule, used to schedule tasks involved in the strategic marketing process, demonstrating how the concurrent work on several tasks enables team members to deliver an executable marketing program on time
Gantt Chart Includes
(1) the task,
(2) the person/ppl responsible for completing the task, (3) the date to finish the task,
(4) what is to be delivered
- Executing the Marketing Program
requires attention to detail for both marketing strategies & marketing tactics
Marketing Strategy
the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it
- Implies both the end sought (target market) & the means/actions to achieve it (marketing program)
Marketing Tactics
the detailed day-to-day operational marketing actions for each element of the marketing mix that contribute to the overall success of marketing strategies
Ex: Writing ads, setting a temporary price discount for a product, & offering a “two for one” promotion
Evaluation Phase
seeks to keep the marketing program moving in the direction set for it
Evaluation Phase 2 Steps
(1) to compare the results of the marketing program with the goals in the written plans to identify the presence & causes of deviations using marketing metrics
(2) to act on these deviations-exploiting positive deviations & correcting negative ones
- Comparing Results with Plans to Identify Deviations
compare actual results with goals set to identify deviations or planning gaps
Planning Gap
the difference b/w the projection of the path to reach a new sales revenue goal & the projection of the path of a plan already in place
- The ultimate purpose of the firm’s marketing program is to fill in this planning gap
- Acting on Deviations
when evaluation shows that actual performance differs from expectations, managers need to take corrective actions
- exploiting positive deviations & correcting negative ones
