Chapter 2

PRINCIPLES OF MARKETING
Philip Kotler and Gary Armstrong
Chapter 2
Company and Marketing

Strategy
Strategy is the matching of the activities of an
organisation to the environment in which it operates
and to its own resource capabilities
Johnson and scholes (1988)
6-2
Vision Statement
• A vision statement should answer the basic question, “What do we want to

become?”
• The vision statement should be short, preferably one sentence, and as many
managers as possible should have input into developing the statement.
• Examples
• “To create a better every-day life for the many people.”
• “Bring inspiration and innovation to every athlete”
• “To help people and businesses throughout the world realize their full potential”
• “To provide access to worlds information in one click”
• “We want to entrain the world”
• “To give everyone a voice and show them the world”
2-3
Strategic Planning Process
• Strategic Planning involves developing an overall

company strategy for long-run survival and growth.
• This process involves:

• Defining a Mission: Statement of an organization’s purpose; should
be market oriented.
• Setting Company Objectives: Supporting goals and objectives to
guide the entire company.
• Designing a Business Portfolio: Collection of businesses and products
that make up the company.
• Planning Functional Strategies: Detailed planning for each
department designed to accomplish strategic objectives.
Defining the business purpose or mission
• Requires asking fundamental questions:

• What business are we in?
• What businesses do we want to be in?
• Who is our major competitor?
• What markets are we in?
6-5
Mission formulation and statement
• The strategic intent or vision of where organization want to be in
foreseeable future
• The values of the organization should be spelled out to guide operations
• Articulate distinctive competencies
• Market definition,
definition in terms of customer targets
• Finally, it should spell out where organization intends to be positioned in
marketplace
6-6
Components of mission
Strategic intent
Vision of what you want to be
Market definition Mission Company values

Customer targets Objectives and strategy Guiding principles
Competitive positioning Distinctive competencies

Differential advantage Core skills
6-7
Designing the Business Portfolio
• The collection of businesses and products/services that make up
the company.
• Meta: Facebook, Instagram and whatsapp
• Apple: iphone, iPad, ipod, MAC and iWatch
• The best portfolio is the one that best fits the company’s strengths
and weaknesses to the opportunities in the environment.
• Analyzing the current business portfolio:
• analyze its current business portfolio or Strategic Business Units (SBU’s)
• decide which SBU’s should receive more, less, or no investment
• develop growth strategies for adding new products or businesses to the portfolio
Strategic Business Units
 A strategic business unit, popularly known as SBU, is a
fully-functional unit of a business that has its own vision
and direction.
 Typically, a strategic business unit operates as a separate
unit, but it is also an important part of the company. It
reports to the headquarters about its operational status.
 The purpose of identifying the company's strategic
business units is to develop separate strategies and assign
appropriate funding.
1-9
SBU has four characteristics:
 A distinct mission and specific target
market
 Control over its resources
 It has its own set of competitors.
 It has a manager who is responsible for
strategic planning and profit performance.
1-10
Analyzing Current SBU’s:
Boston Consulting Group Approach
Relative Market Share

High Low
Stars Question Marks
Market Growth Rate
High
• High growth & share • High growth, low share

• Profit potential • Build into Stars/ phase out
• May need heavy • Requires cash to hold
investment to grow market share
Cash Cows Dogs

• Low growth, high share • Low growth & share
Low
• Established, successful • Low profit potential

SBU’s
•Produces cash
Developing Growth Strategies
Product/ Market Expansion Grid
Existing New
Products Products
Existing 1. Market 3. Product
Markets Penetration Development
New 2. Market
4. Diversification
Markets Development
Product/ Market Expansion Grid
• Market Penetration:
Penetration increase sales to present customers with
current products. How? Cut prices, increase advertising, get
products into more stores.
• Market Development:
Development develop new markets with current
products. How? Identify new demographic or geographic
markets.
• Product Development:
Development offering modified or new products to
current customers. How? New styles, flavors, colors, or
modified products.
• Diversification:
Diversification new products for new markets. How? Start up
or buy new businesses.
Marketing Strategy and Marketing Mix
Marketing Strategy and Marketing Mix
•Customer driven marketing strategy

• Market Segmentation:
Segmentation determining distinct groups of buyers (segments)
with different needs.
• Market Targeting:
Targeting evaluating and selecting which target segments to
enter.
• Market Differentiation: Actually differentiating the market offerings to
create superior customer value.
• Market Positioning:
Positioning products distinctive and desirable place in the minds
of target segments compared to competing products.
• Marketing Strategies for Differentiation/Competitive Advantage
• Market-Leader
• Market Challenger
• Market-Follower
• Market-Niche
Marketing Mix- The Four P’s
Product Price
“
Goods-and-service” Amount of money
combination that a that consumers
company offers a have to pay to obtain
target market the product
Target
Customers
Intended
Positioning
Activities that Company activities

persuade target that make the
customers to buy product available
the product
Promotion Place
The four C’s
• 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.
•
Product---> Customer Solution
Price---> Customer cost
Place---> Convenience
Promotion---> Communication
`1qqqqqqqqqqq4
SWOT analysis
A study undertaken by an organization to identify its
internal strengths and weaknesses, as well as its external
opportunities and threats.
Elements of a Marketing Plan
Executive Summary
Current Marketing Situation
Threats and Opportunities
Objectives and Issues
Marketing Strategy
Action Programs
Budgets
Controls
Marketing Implementation
The process that turns marketing strategies and plans into marketing actions in order to
accomplish strategic marketing objectives
Marketing Strategy
Decision
and
Reward Human
Organizational
Resources
Structure
Action Climate and

Programs Culture
Implementation
Marketing Performance
Marketing Control
Set Marketing Goals
Measure
Performance
Evaluate
Performance
Take Corrective
Action

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PRINCIPLES OF MARKETING

Philip Kotler and Gary Armstrong

Company and Marketing

• A vision statement should answer the basic question, “What do we want to

• Strategic Planning involves developing an overall

• This process involves:

• Requires asking fundamental questions:

Market definition Mission Company values

Competitive positioning Distinctive competencies

Relative Market Share

• High growth & share • High growth, low share

Cash Cows Dogs

• Established, successful • Low profit potential

Product/ Market Expansion Grid

•Customer driven marketing strategy

Activities that Company activities

Action Climate and

Set Marketing Goals

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