Chapter 2 : Company and Marketing Strategy Designing the Business Portfolio

Partnering to Build Customer Relationships

The business portfolio is the collection of businesses
Companywide Strategic Planning: Defining and products that make up the company.
Marketing’s Role
Business portfolio planning involves two steps:
Strategic planning is the process of developing and
maintaining a strategic fit between the organization’s
goals and capabilities and its changing marketing the company shape the
must analyze future
opportunities. its current portfolio by
business developing
Companies usually prepare annual plans, long-range portfolio and strategies for
plans, and strategic plans. determine the growth and
The annual and long-range plans deal with the investment downsizing
company’s current businesses and how to keep them
going.
Analyzing the Current Business Portfolio
In contrast, the strategic plan involves adapting the
firm to take advantage of opportunities in its Portfolio analysis is a major activity in strategic
constantly changing environment. planning whereby management evaluates the
products and businesses that make up the company
Like the marketing strategy, the broader company
strategy must be customer focused. Management’s first step is to identify the key
Company-wide strategic planning guides marketing businesses that make up the company, called strategic
strategy and planning. business units (SBUs).

Defining a Market-Oriented Mission

The mission statement is the organization’s purpose,

The company next assesses the
what it wants to accomplish in the larger environment. attractiveness of its various SBUs and
Market-oriented mission statement defines the decides how much support each
business in terms of satisfying basic customer needs. deserves.

Setting Company Objectives and Goals

The attractiveness of the SBU’s
market or industry and the strength of
Business objectives the SBU’s position in that market or
• Build profitable customer relationships industry.
• Invest in research
• Improve profits
The best-known portfolio-planning
method was developed by the Boston
Marketing objectives Consulting Group, a leading
• Increase market share management consulting firm.
• Create local partnerships
• Increase promotion
 The Boston Consulting Group Approach Problems with Matrix Approaches

• A company classifies all its SBUs according to the It have some limitations:
growth-share matrix. The growth-share matrix
defines four types of SBU's: - Difficulty in defining SBUs and measuring market
share and growth
- Time consuming
- Expensive
- Focus on current businesses, not future planning

Methods to improve:

- Dropped formal matrix methods in favor of more

customized approaches that better suit their specific
situations
- Today’s strategic planning has been decentralized

Developing Strategies for Growth and Downsizing

Product/market expansion grid is a portfolio-

planning tool for identifying company growth
opportunities through market penetration, market
development, product development, or diversification.

• It can pursue one of four strategies for each SBU.

Market development ─ Companies can grow by
developing new markets for existing products. For
example, Starbucks is expanding rapidly in China,
which by 2015 will be its second-largest market,
behind only the United States.

Diversification ─ Through diversification,

companies can grow by starting or buying businesses
outside their current product/markets. For example,
Starbucks is entering the “health and wellness”
market with stores called Evolution By Starbucks.

Developing Strategies for Growth and Downsizing

Market penetration
Company growth by increasing sales of current ultimately, its customers who partner with each other
products to current market segments without to improve the performance of the entire system.
changing the product Toyota’s performance against Ford depends on the
quality of Toyota’s overall value delivery network
Market development versus Ford’s.
The company growth by identifying and developing
new market segments for current company products. Marketing Strategy and the Marketing Mix

Product development
Company growth by offering modified or new
products to current market segments.

Diversification
Company growth through starting up or acquiring
businesses outside the company’s current products
and markets.

Planning Marketing: Partnering to Build

Customer Relationships

Marketing plays a key role in the company’s strategic

planning in several ways:

First, marketing provides a guiding philosophy—the

marketing concept—that suggests the company
strategy should revolve around building profitable
relationships with important consumer groups.

Second, marketing provides inputs to strategic

planners by helping to identify attractive market
opportunities and assessing the firm’s potential to
take advantage of them.

Finally, within individual business units, marketing

designs strategies for reaching the unit’s objectives.
Once the unit’s objectives are set, marketing’s task is
to help carry them out profitably.

Partnering with Other Company Departments

Value chain is a series of departments that carry out

value-creating activities to design, produce, market, Customer-Driven Marketing Strategy
deliver, and support a firm’s products.
Most companies are in a position to serve some
That is, each department carries out value-creating segments better than others.
activities to design, produce, market, deliver, and
support the firm’s products. Thus, each company must divide up the total market,
choose the best segments, and design strategies for
Partnering with Others in the Marketing System profitably serving chosen segments.

Value delivery network is the network made up of

the company, its suppliers, its distributors, and,
This process involves:

1.) Market Segmentation

The process of dividing a market into distinct groups

of buyers who have different needs, characteristics,
or behaviors, and who might require separate
products or marketing programs, is called market
segmentation.

Market segment is a group of consumers who

respond in a similar way to a given set of marketing
efforts.

2.) Marketing Targeting

Market targeting is the process of evaluating each

market segment’s attractiveness and selecting one or Product means the goods-and-services combination
more segments to enter. the company offers to the target market.

A company with limited resources might decide to Price is the amount of money customers must pay to
serve only one or a few special segments or market obtain the product.
niches.
Promotion refers to activities that communicate the
Most companies enter a new market by serving a merits of the product and persuade target customers
single segment; if this proves successful, they add to buy it.
more segments.
Place includes company activities that make the
3.) Marketing Differentiation and Positioning product available to target consumers.

Positioning is arranging for a product to occupy a The marketing mix ─ or the four Ps ─ consists of
clear, distinctive, and desirable place relative to tactical marketing tools blended into an integrated
competing products in the minds of the target marketing program that actually delivers the intended
consumer. value to target customers.

Thus, effective positioning begins with An effective marketing program blends the marketing
differentiation—actually differentiating the mix elements into an integrated marketing program
company’s market offering so that it gives consumers designed to achieve the company’s marketing
more value. objectives by delivering value to consumers. The
marketing mix constitutes the company’s tactical tool
Developing an Integrated Marketing Mix kit for establishing strong positioning in target
incentives.
• Marketing mix is the set of controllable tactical
marketing tools product, price, place, and promotion Developing an Integrated Marketing Mix
that the firm blends to produce the response it wants
in the target market.has context menu It holds that the four Ps concept takes the seller’s
view of the market, not the buyer’s view. From the
buyer’s viewpoint, in this age of customer value and
relationships, the four Ps might be better described as
the four Cs:
4Ps Marketing Analysis
Product
Price The marketer should conduct a SWOT analysis ,by
Place which it evaluates the company’s overall strengths
Promotion (S), weaknesses (W), opportunities (O), and threats
(T).
4Cs
Customer solution
Customer cost
Convenience
Communication

Managing the Marketing Effort

Managing the marketing process requires the four

marketing management functions:

Marketing Planning

Through strategic planning, the company decides

what it wants to do with each business unit.
Marketing planning involves choosing marketing
strategies that will help the company attain its overall
strategic objectives.
Marketing Strategy: Market or customer management organization
Useful for companies with one product line sold to
It outlines how the company intends to create value many different markets and customers. Managers are
for target customers in order to capture value in responsible for developing strategies and plans for
return. their specific markets or customers.

Marketing Control

Marketing control is the measuring and evaluating

the results of marketing strategies and plans and
taking corrective action to ensure that the objectives
are achieved.

Four steps of marketing control:

Management first sets specific marketing goals.

Measures its performance in the market place

Evaluates the causes of any differences between

Marketing Implementation expected and actual performance

Marketing implementation is the process that turns Management takes corrective action to close the gaps
marketing plans into marketing actions to accomplish between goals and performance
strategic marketing objectives.
Measuring and Managing Return on Marketing
Whereas marketing planning addresses: Investment
what, why, who, where, whe, how
Return on marketing investment (or marketing ROI)
Many managers think that “doing things right” is the net return from a marketing investment divided
(implementation) is as important as, or even more by the costs of the marketing investment.
important than, “doing the right things”(strategy).
It measures the profits generated by investments in
Marketing Department Organization marketing activities.

Functional organization Many companies are assembling such measures into

This is the most common form of marketing marketing dashboards ─ meaningful sets of
organization with different marketing functions marketing performance measures in a single display
headed by a functional specialist. used to monitor strategic marketing performance.

Geographic organization
Useful for companies that sell across the country or
internationally. Managers are responsible for
developing strategies and plans for a specific region

Product management
Useful for companies with different products or
brands. Managers are responsible for developing
strategies and plans for a specific product or brand.
Measuring and Managing Return on Marketing
Investment