Key Concepts & Terms-Chapter 2 1.

The Value Delivery Process The traditional view of marketing is that the firm makes something and then sells it. In this view, marketing takes place in the second half of the process. The company knows what to make and the market will buy enough units to produce profits. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or stylefor example, with basic staple goods in developing markets. The traditional view of the business process, however, will not work in economies where people face abundant choices. There, the "mass market" is actually splintering into numerous micromarkets, each with its own wants, perceptions, preferences, and buying criteria. The smart competitor must design and deliver offerings for well-defined target markets. This belief is at the core of the new view of business processes, which places marketing at the beginning of planning. You can see this in action at your local mall. In the struggle to grow, retail chains are creating spinoffs that appeal to ever-smaller micromarkets

The Value Chain According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities. The primary activities cover the sequence of bringing materials into the business inbound logistics), converting them into final products (operations), shipping out final products (outbound logistics), marketing them (marketing and sales), and servicing them (service). The support activitiesprocurement, technology development, human resource management, and firm infrastructureare handled in certain specialized departments, as well as elsewhere. Several departments, for example, may do procurement and hiring. The firm's infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs. The firm's task is to examine its costs and performance in each value-creating activity and to look for ways to improve it. The firm should estimate its competitors' costs and performances as benchmarks against which to compare its own costs and performance. It should go further and study the "best of class" practices of the world's best companies. The firm's success depends not only on how well each department performs its work, but also on how well the various departmental activities are coordinated to conduct core business processes. These core business processes include: The market sensing process. All the activities involved in gathering market intelligence, disseminating it within the organization, and acting on the information. The new offering realization process. All the activities involved in researching, developing, and launching new high-quality offerings quickly and within budget. a The customer acquisition process. All the activities involved in defining target markets and prospecting for new customers. The customer relationship management process. All the activities involved in building deeper understanding, relationships, and offerings to individual customers. The fulfillment management process. All the activities involved in receiving and approving orders, shipping the goods on time, and collecting payment.
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2.Core Competencies To carry out its core business processes, a company needs resourceslabor power, materials, machines, information, and energy. Traditionally, companies owned and controlled most of the resources that entered their businesses, but this situation is changing. Many companies today outsource less critical resources if they can be obtained at better quality or lower cost. Frequently, outsourced resources include cleaning services, landscaping, and auto fleet management. Kodak even turned over the management of its data processing department to IBM. The key, then, is to own and nurture the resources and competencies that make up the essence of the business. Nike, for example, does not manufacture its own shoes, because certain Asian manufacturers are more competent in this task; Nike nurtures its superiority in shoe design and shoe merchandising, its two core competencies. We can say that a core competency has three characteristics: (1) It is a source of competitive advantage in that it makes a significant contribution to perceived customer benefits, (2) it has applications in a wide variety of markets, and (3) it is difficult for competitors to imitate.

3.VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change. The company's competency space can be described in terms of breadthbroad versus focused scope of business; and depthphysical versus knowledge-based capabilities. The collaborator's resource space involves horizontal partnerships, where companies choose partners based on their ability to exploit related market opportunities, and vertical partnerships, where companies choose partners based on their ability to serve their value creation. VALUE CREATION To exploit a value opportunity, the company needs value-creation skills. Marketers need to: identify new customer benefits from the customer's view; utilize core competencies from its business domain; and select and manage business partners from its collaborative networks. To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. Marketers must also observe who customers admire, who they interact with, and who influences them. VALUE DELIVERY Delivering value often means substantial investment in infrastructure and capabilities. The company must become proficient at customer relationship management, internal resource management, and business partnership management. Customer relationship managemen fallows the company to discover who its customers are, how they behave, and what they need or want. It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities. To respond effectively, the company requires internal resource management to integrate major business processes (e.g., order processing, general ledger, payroll, and production) within a single family of software modules. Finally, business partnership

management allows the company to handle complex relationships with its trading partners to source, process, and deliver products. 4.Strategic Marketing Plan: Target marketing decisions, Value proposition, Analysis of marketing opportunities 5.Tactical Marketing Plan: Product features, Promotion, Merchandising, Pricing, Sales channels, Service The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the value proposition that will be offered, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service. Today, teams develop the marketing plan with inputs and sign-offs from eveiy important function. These plans are then implemented at the appropriate levels of the organization. Results are monitored, and necessary corrective action taken. The complete planning, implementation, and control cycle is shown in Figure 2.4. We next consider planning at each of these four levels of the organization. 6.CORPORATE MISSION Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. The statement guides geographically dispersed employees to work independently and yet collectively toward realizing the organization's goals. 7.SBU: BUSINESS UNIT STRATEGIC PLANNING The Business Mission Each business unit needs to define its specific mission within the broader company mission. Thus, a television studio-lighting-equipment company might define its mission as, "The company aims to target major television studios and become their vendor of choice for lighting technologies that represent the most advanced and reliable studio lighting arrangements." Notice that this mission does not attempt to win business from smaller television studios, win business by being lowest in price, or venture into nonlighting products. 8.GOAL FORMULATION Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. This stage of the process is called goal formulation. Managers use the term goals to describe objectives that are specific with respect to magnitude and time. Most business units pursue a mix of objectives including profitability, sales growth, market share improvement, risk containment, innovation, and reputation. The business unit sets these objectives and then manages by objectives (MBO). For an MBO system to work, the unit's objectives must meet four criteria: 1. They must be arranged hierarchically, from the most to the least important 2. Objectives should be stated quantitatively whenever possible

3. . Goals should be realistic- They should arise from an analysis of the business unit's opportunities and strengths, not from wishful thinking. 4. Objectives must be consistent9.STRATEGY FORMULATION- Porters Generic Strategies- Overall Cost Leadership, Differentiation & Focus Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there. Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a compatible technology strategy and sourcing strategy. Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: overall cost leadership, differentiation, and focus. Overall cost leadership. Differentiation. Focus. 10.STRATEGIC ALLIANCES- Product/Service Alliance, Promotional Alliance, Logistic Alliance, Pricing Collaborations Companies are also discovering that they need strategic partners if they hope to be effective. Even giant companies often cannot achieve leadership, either nationally or globally, without forming alliances with domestic or multinational companies that complement or leverage their capabilities and resources.

Many strategic alliances take the form of marketing alliances. These fall into four major categories. 1. Product or service alliances - One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. For instance, H&R Block and Hyatt Legal Servicestwo service businesseshave also joined together in a marketing alliance. 2. Promotional alliances- One company agrees to carry a promotion for another company's product or service. McDonald's, for example, has often teamed up with Disney to offer products related to current Disney films as part of its meals for children. 3. Logistics alliances- One company offers logistical services for another company's product. For example, Abbott Laboratories warehouses and delivers all of 3M's medical and surgical products to hospitals across the United States. 4. Pricing collaborations - One or more companies join in a special pricing collaboration. Hotel and rental car companies often offer mutual price discounts

11.Contents of a Marketing Plan: Executive summary, Table of contents, Situation analysis, Marketing strategy, Financial projections, Implementation controls To carry out their responsibilities, marketing managers follow a marketing process. Working within the plans set by the levels above them, product managers come up with a marketing plan for individual products, lines, brands, channels, or customer groups. Each product level (product line, brand) must develop a marketing plan for achieving its goals. A marketing plan is a written

document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives. It contains tactical guidelines for the marketing programs and financial allocations over the planning period. It is one of the most important outputs of the marketing process. Marketing plans are becoming more customer- and competitor-oriented and better reasoned and more realistic than in the past. The plans draw more inputs from all the functions and are team-developed. Marketing executives increasingly see themselves as professional managers first, and specialists second. Planning is becoming a continuous process to respond to rapidly changing market conditions.