Comprehensive

Exam
 Marketing Management.
Marketing Mix and the Customer
Four Ps Four Cs
• Product • Customer solution
• Price • Customer cost
• Place • Convenience
• Promotion • Communication

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 Levels of a Marketing
Plan
• Strategic • Tactical
o Target marketing decisions o Product features
o Value proposition o Promotion
o Analysis of marketing o Merchandising
opportunities o Pricing
o Sales channels
o Service

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 Strategic Planning
• Planning activities occur at the business
unit, product, and market levels, and
include:
o Defining the purpose and mission
o Setting objectives and goals
o Designing the business portfolio
o Developing detailed marketing and
departmental plans
2- 4
 Strategic Planning
• Mission statements should . . .
o serve as a guide for what the
organization wants to accomplish.
o be “market-oriented” rather than
“product-oriented”.
o be neither too narrow, nor too broad.
o fit with the market environment.
o be motivating.
2- 5
 Strategic Planning
• Mission statements guide the development of objectives
and goals.
o Objectives are developed at each level in the organization hierarchy.
o Strategies are developed to accomplish these objectives.

2- 6
 Strategic Planning
• Business portfolio:
“the collection of businesses and products that make up the
company.”

• Designing the business portfolio is a key element of the

strategic planning process.

2- 7
 Strategic Planning
• Identify strategic
Portfolio Design business units (SBUs)
• Assess each SBU:
• Step 1: o The BCG growth-share matrix
classifies SBUs into one of four
Analyze the current categories using the:
• Market growth rate
business portfolio
• SBU’s relative market
• Step 2: share within the
market.
Shape the future
business portfolio

2- 8
 Strategic Planning
BCG Growth-Share Matrix
High Question
Market Stars
Marks
Growth

Low Cash
Dogs
Market Cows
Growth

High Relative Low Relative

Market Share Market Share

2- 9
 Strategic Planning
• Determine the future role of
Portfolio Design each SBU and choose the
appropriate resource
allocation strategy:
• Step 1: o Build
o
Analyze the current o
Hold
Harvest
business portfolio o Divest
• SBUs change positions over
• Step 2: time
Shape the future
business portfolio

2- 10
 Strategic Planning
• Designing the business portfolio also
involves:
o Developing strategies for growth by
identifying, evaluating, and selecting
promising new market opportunities.
• Product/market expansion grid

o Developing strategies for downsizing

the business portfolio.

2- 11
 Strategic Planning
Product/Market Expansion Grid
Existing Products New Products

Existing Market Product Development

Markets Penetration

New Market Development

Diversification
Markets

2- 12
 Planning Marketing
• Marketing plays a key role in the
strategic planning process.
• Marketers must practice CRM and
Partner Relationship Management.
o Partnering with other departments in
the company as well as other firms in
the marketing system helps to build a
superior value delivery-network.
2- 13
 The Marketing Process
• The strategic planning
Key Elements and business portfolio
analysis processes help to
• Analyzing marketing identify and evaluate
opportunities marketing opportunities.
• Selecting target • The purpose of the
markets marketing process is to
• Developing the help the firm plan how to
capitalize on these
marketing mix
opportunities.
• Managing the
marketing effort

2- 14
 The Marketing Process
• The segmentation process
Key Elements divides the total market
into market segments.
• Analyzing marketing • Target marketing
opportunities determines which
• Selecting target segment(s) are pursued.
markets • The market positioning
• Developing the for the product is then
marketing mix determined.
• Managing the
marketing effort

2- 15
 The Marketing Process
Key Elements • Competitor analysis guides
competitive marketing strategy
development.
• Analyzing marketing • Strategy leads to tactics by
opportunities way of the marketing mix:
• Selecting target o The “Four Ps” – product,
price, place, promotion (seller
markets viewpoint)
• Developing the o The “Four Cs” – customer
marketing mix solution, cost, convenience,
and communication (customer
• Managing the viewpoint)
marketing effort

2- 16
 The Marketing Process
Key Elements • Marketing analysis
o Provides information helpful
in planning, implementation,
• Analyzing marketing and control
opportunities • Marketing planning
o Strategies and tactics
• Selecting target
• Marketing implementation
markets o Turns plans into action
• Developing the • Marketing control
marketing mix o Operating control
• Managing the o Strategic control
marketing effort • Marketing audit

2- 17
 Environmental Forces
• Demographic
• Economic
• Socio-cultural
• Natural
o Shortage of raw materials
o Increased energy costs
o Anti-pollution pressures
o Governmental protections
• Technological
o Pace of change
o Opportunities for innovation
o Varying R&D budgets
o Increased regulation of change

• Political-legal
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 Political Environment
Includes
Includes Laws,
Laws, Government
Government Agencies,
Agencies, Etc.
Etc. that
that Influence
Influence
&& Limit
Limit Organizations/Individuals
Organizations/Individuals in
in aa Given
Given Society
Society

Increased
Increased
Changing
Changing Emphasis
Emphasis on on
Increasing
Increasing Government
Government Ethics
Ethics &&
Legislation
Legislation Agency
Agency Socially
Socially
Enforcement
Enforcement Responsible
Responsible
Actions
Actions

4-20
 Steps in Market Segmentation,
Targeting, and Positioning (Fig. 7-1)

4-21
 Step 2. Market Targeting
Evaluating Market Segments
• Segment Size and Growth
o Analyze current segment sales, growth rates, and expected
profitability for various segments.
• Segment Structural Attractiveness
o Consider effects of: competitors, availability of substitute
products, and the power of buyers & suppliers.
• Company Objectives and Resources
o Examine company skills & resources needed to succeed in that
segment(s).
o Offer superior value & gain advantages over competitors.
4-22
 Step 3. Positioning for
Competitive Advantage
• Product’s Position - the way the product is defined by
consumers on important attributes.
• Product is compared with competing products.
• Simplifies the buying process by helping consumers
organize products into categories.
• Marketers must:
o Plan positions to give their products the greatest advantage in
selected target markets,
o Design marketing mixes to create these planned positions.

4-23
 Identifying Possible
Competitive Advantages
• Key to winning and keeping customers is to understand their
needs and buying processes better than competitors do and
deliver more value.
• Competitive advantage – extent that a company can position
itself as providing superior value to selected target markets.

4-24
 Identifying Possible
Competitive Advantages
Product Services
Differentiation Differentiation
i.e. Features, Performance, i.e. Delivery, Installation,
Style & Design, Attributes Repair Services, Customer
Training Services
Channel
Differentiation
Image People
Differentiation Differentiation
i.e. Symbols, Characters i.e. Hiring, Training
Better People Than
Competitors Do

4-25
 4-26
Communicable
Communicable Preemptive
Preemptive
Affordable
Affordable
Superior
Superior
To Promote
Which Differences
For Determining
Distinctive
Distinctive Criteria Profitable
Profitable
Important
Important
Advantages
Competitive
 What is a Product?
Types of Consumer
Products • Frequent purchases bought
with minimal buying effort
and little comparison
shopping
• Convenience • Low price
• Shopping • Widespread distribution
• Mass promotion by
• Specialty
producer
• Unsought

9 - 27
 What is a Product?
Types of Consumer
Products • Less frequent purchases
requiring more shopping
effort and price, quality,
and style comparisons.
• Convenience • Higher than convenience
• Shopping good pricing
• Selective distribution in
• Specialty fewer outlets
• Unsought • Advertising and personal
selling by producer and
reseller
9 - 28
 What is a Product?
Types of Consumer
Products • Strong brand preference
and loyalty, requires special
purchase effort, little brand
comparisons, and low price
• Convenience sensitivity
• Shopping • High price
• Exclusive distribution
• Specialty • Carefully targeted
• Unsought promotion by producers
and resellers

9 - 29
 What is a Product?
Types of Consumer
Products • Little product awareness
and knowledge (or if aware,
sometimes negative
interest)
• Convenience • Pricing varies
• Shopping • Distribution varies
• Aggressive advertising
• Specialty
and personal selling by
• Unsought producers and resellers

9 - 30
 Product and Service
Decisions

Key Decisions • Product line width:

o number of different product lines
carried by company

• Individual Product • Product line depth:

o Number of different versions of each
• Product Line product in the line
• Product line consistency
• Product Mix

9 - 31
 Product and Service
Decisions

Key Decisions • Product attributes

o Quality, features, style and design
• Branding
• Individual Product • Packaging
• Product Line • Labeling
• Product support services
• Product Mix

9 - 32
 Product and Service
Decisions

Key Decisions • Product line length

o Line stretching: adding products that
are higher or lower priced than the
• Individual Product existing line
o Line filling: adding more items

• Product Line within the present price range

• Product Mix

9 - 33
 Product Differentiation
• Product form (Color, coating, action time…)
• Features
• Customization
• Performance
• Conformance
• Durability
• Reliability
• Repairability
• Style

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 Service Differentiation
• Ordering ease ( Computer based ordering..Extranet)
• Delivery (Cemex delivers with 20% off Guarantee if delivery is 10
min belated)
• Installation
• Customer training
• Customer consulting
• Maintenance and repair
• Returns

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12-35
Product Development
(Fig. 9-1)

4-36
Factors to Consider When Setting
Price
Internal
• Market positioning
Factors influences pricing strategy
• Other pricing objectives:
• Marketing – Survival
objectives – Current profit maximization
– Market share leadership
• Marketing mix – Product quality leadership
strategies • Not-for-profit objectives:
– Partial or full cost recovery
• Costs – Social pricing
• Organizational
considerations 11 - 37
Factors to Consider When Setting
Price
Internal
Factors • Pricing must be carefully
coordinated with the other
marketing mix elements
• Marketing
• Target costing is often used
objectives to support product
• Marketing mix positioning strategies
based on price
strategies • Nonprice positioning can
• Costs also be used
• Organizational 11 - 38
Factors to Consider When Setting
Price
Internal • Types of costs:
Factors – Variable
– Fixed
• Marketing – Total costs

objectives • How costs vary at different

production levels will
• Marketing mix influence price setting
strategies • Experience (learning) curve
effects on price
• Costs
• Organizational 11 - 39

considerations
Factors to Consider When Setting
Price
Internal • Who sets the price?
Factors – Small companies: CEO or top
management
• Marketing – Large companies: Divisional
objectives or product line managers
• Price negotiation is
• Marketing mix common in industrial
strategies settings
• Some industries have
• Costs
pricing departments
• Organizational
11 - 40
considerations
Factors to Consider When Setting
Price
External
Factors • Types of markets
– Pure competition
– Monopolistic competition
• Nature of market – Oligopolistic competition
– Pure monopoly
and demand
• Consumer perceptions of
• Competitors’ costs, price and value
prices, and offers • Price-demand relationship
– Demand curve
• Other – Price elasticity of demand
environmental
elements 11 - 41
Factors to Consider When Setting
Price
External • Consider competitors’ costs,
Factors prices, and possible reactions
when developing a pricing
strategy
• Nature of market • Pricing strategy influences the
nature of competition
and demand – Low-price low-margin strategies
• Competitors’ costs, inhibit competition
– High-price high-margin
prices, and offers strategies attract competition
• Benchmarking costs against the
• Other competition is recommended
environmental
11 - 42
Factors to Consider When Setting
Price
External
Factors • Economic conditions
– Affect production costs
– Affect buyer perceptions of
• Nature of market price and value
and demand • Reseller reactions to prices
must be considered
• Competitors’ costs,
• Government may restrict or
prices, and offers limit pricing options
• Other • Social considerations may be
taken into account
environmental
11 - 43
elements
 General Pricing Approaches
• Cost-Based Pricing: Cost-Plus Pricing
– Adding a standard markup to cost
– Ignores demand and competition
– Popular pricing technique because:
• It simplifies the pricing process
• Price competition may be minimized
• It is perceived as more fair to both buyers and
sellers

11 - 44
General Pricing Approaches
Cost-Based Pricing Example
Variable costs: $20 Fixed costs: $ 500,000
Expected sales: 100,000 units Desired Sales Markup: 20%

Variable Cost + Fixed Costs/Unit Sales = Unit Cost

$20 + $500,000/100,000 = $25 per unit

Unit Cost/(1 – Desired Return on Sales) = Markup Price

$25 / (1 - .20) = $31.25

11 - 45
 General Pricing
Approaches
• Competition-Based Pricing:
o Also called going-rate pricing
o May price at the same level, above, or below the competition
o Bidding for jobs is another variation of competition-based pricing
• Sealed bid pricing

11 - 46
 General Pricing
Approaches
• Competition-Based Pricing:
o Also called going-rate pricing
o May price at the same level, above, or below the competition
o Bidding for jobs is another variation of competition-based pricing
• Sealed bid pricing

11 - 47
New-Product Pricing Strategies
• Use Under These Conditions:
o Product’s Quality and Image
Market-Skimming
Must Support Its Higher
Price.
 Setting a High Price for a
o Costs Can’t be so High that
New Product to “Skim”
They Cancel the Advantage of
Maximum Revenues from
Charging More.
the Target Market. o Competitors Shouldn’t be
 Results in Fewer, But Able to Enter Market Easily
More Profitable Sales. and Undercut the High Price.
 I.e. Intel

4-48
 New-Product Pricing
Strategies
• Use Under These Conditions: Market Penetration
o Market Must be Highly Price-
Sensitive so a Low Price  Setting a Low Price for a New
Produces More Market Product in Order to “Penetrate”
Growth. the Market Quickly and Deeply.
o Production/Distribution Costs  Attract a Large Number of
Must Fall as Sales Volume Buyers and Win a Larger
Increases. Market Share.
o Must Keep Out Competition
& Maintain Its Low Price  I.e. Dell
Position or Benefits May
Only be Temporary.

4-49
Product Mix-Pricing
Strategies:
Product Line Pricing
• Involves setting price steps
between various products
in a product line based on:
o Cost differences between
products,
o Customer evaluations of
different features, and
o Competitors’ prices.

4-50
Product Mix-Pricing
Strategies
• Optional-Product
o Pricing optional or
accessory products sold
with the main product. i.e
camera bag.
• Captive-Product
o Pricing products that must
be used with the main
product. i.e. film.

4-51
Number of Marketing
Intermediaries
Intensive
Intensive Selective
Selective
Distribution
Distribution Distribution
Distribution

Exclusive
Exclusive
Distribution
Distribution
4-52
 Modes of Marketing Communications
• Advertising • Direct marketing
• Sales promotion • Interactive marketing
• Events and experiences • Word-of-mouth marketing
• Public relations and • Personal selling
publicity

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 Table 17.1 Communication Platforms
Advertising Sales Promotion
• Print and broadcast ads • Contests, games,
• Packaging inserts sweepstakes
• Motion pictures • Premiums
• Brochures and booklets • Sampling
• Posters • Trade shows, exhibits
• Billboards • Coupons
• POP displays • Rebates
• Logos • Entertainment
• Videotapes • Continuity programs

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 Table 17.1 Communication Platforms
Events/ Experiences Public Relations
• Sports • Press kits
• Entertainment • Speeches
• Festivals • Seminars
• Art • Annual reports
• Causes • Charitable donations
• Publications
• Factory tours
• Community relations
• Company museums
• Lobbying
• Street activities
• Identity media
• Company magazine
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 Characteristics of
the Marketing Communications Mix

Direct Marketing Personal Selling

• Customized • Personal interaction
• Up-to-date • Cultivation
• Interactive • Response

Word-of-Mouth Marketing
• Credible
• Personal
• Timely
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 Sales Promotion
Objectives
• Consumer Promotions: increase short-term sales or
help build long-term market share.
• Trade Promotions: get retailers to:
o carry new items and more inventory,
o advertise products,
o give products more shelf space, and
o buy product ahead.
• Sales Force: getting more sales support.
• In general, sales promotion should focus on consumer
relationship building.
4-57
 Economics
Winners, Losers, and the Net
Gain from Trade
oInternational trade lowers the price of an imported good and raises the price of an exported
good.
oBuyers of imported goods benefit from lower prices and sellers of exported goods benefit from
higher prices.
oBut some people complain about international competition: not everyone gains.
oWho wins and who loses from free international trade?
 Winners, Losers, and the Net
Gain from Trade
Gains and Losses from
Imports

Figure 7.3(a) shows the

market in the United
States with no
international trade.
Total surplus from T-shirts
is the sum of the consumer
surplus and the producer
surplus.
 Winners, Losers, and the Net
Gain from Trade

Figure 7.3(b) shows the

market in the United
States with international
trade.
The world price is $5 a
T-shirt.
Consumer surplus
expands from area A to
the area A + B + D.
Producer surplus
shrinks to the area C.
International Trade Restrictions
oGovernments restrict international trade to protect domestic producers from
competition.
oGovernments use four sets of tools:
 Tariffs
 Import quotas
 Other import barriers
 Export subsidies
The Case Against Protection
oDespite the fact that free trade promotes prosperity for all countries, trade is restricted.
oTwo classical arguments for restricting international trade are
The infant-industry argument
The dumping argument
The Case Against Protection
oThe Infant-Industry Argument
oThe infant-industry argument is that it is necessary to protect a new
industry from import competition to enable it to grow into a mature industry that can
compete in world markets.
oThis argument is based on the concept of dynamic competitive advantage, which can
arise from learning-by-doing.
oLearning-by-doing is a powerful engine of productivity growth, but this fact does not
justify protection.
 The Case Against Protection
oThe Dumping Argument
oDumping occurs when foreign a firm sells its exports at a lower price than its cost of
production.
oThis argument does not justify protection because
o1. It is virtually impossible to determine a firm’s costs.
o2. Hard to think of a global monopoly, so even if all domestic firms are driven out,
alternatives would still exist.
o3. If the market is truly a global monopoly, better to regulate it rather than restrict trade.
The Case Against Protection

oOutsourcing occurs when a firm in the United States buys finished goods, components
or services from firms in the United States or buys finished goods, components, or
services from firms in other countries.
oOffshoring occurs when a firm in the United States hires foreign labor and produces in
other countries or buys finished goods, components, or services from firms in other
countries.
oOffshore outsourcing occurs when a firm in the United States buys finished goods,
components, or services from firms in other countries.
Human Resources Management
Porter’s 3 Generic Strategies for
Competitive Advantage
• Cost Leadership: The strategy is designed to achieve
competitive advantage through large scale production and
operating as a low cost producer.

• Differentiation: The strategy adopts developing high

quality products that lead to brand recognition and
customer loyalty

• Focus: this strategy is deigned to achieve penetration

into a particular market using whether differentiation or
cost leadership
 Components of the Strategic
Management Process
• Strategy Formulation
Reaching a Strategic direction by defining the
company’s mission and goals, its external
opportunities and threats, and its internal strengths
and weaknesses.
• Strategy Implementation:
• Structuring the organization, allocating resources,
ensuring that the firm has skilled employees in
place, and developing reward systems that align
employee behavior with the strategic goals.
 Model of the Strategic
Management Process
Forecasts of Strategy Formulation Strategy Implementation
Labor Demand HR Practices
External Recruiting,
Analysis Training,
Opportunities Performance management,
Labor relations,
Threats Employee relations, Firm
Job analysis Performance
Job design, Productivity,
Human Selection,
Resource Development, Quality,
Strategic Needs Pay structure, Profitability
Mission Goals Skills Incentives,
Choice Benefits
Behavior
Culture
Human Human
Internal Resource Resource
Analysis Capability
Skills, Actions
Strengths Behaviors,
Weaknesses Abilities,
Knowledge Results
 Strategy Formulation
External
analysis
Opportunities
Threats

Strategic
Mission Goals
Choice

Internal
analysis
Strengths
Weaknesses
 Strategy Formulation
• Five components of the strategic management process:
o A mission is a statement of the organization's reasons for
being.
o Goals are what the organization hopes to achieve in the
medium-to long-term future
o External analysis consists of examining the
organization's operating environment to identify strategic
opportunities and threats.
o Internal analysis attempts to identify the organization's
strengths and weaknesses.
o Strategic choice is the organization's strategy, which
describes the ways the organization will attempt to fulfill
its mission and achieve its long term goals.
 Strategies for Reducing an Expected
Labor Deficit

Option Speed Human Suffering

1. Overtime Fast High
2. Temporary Employees Fast High
3. Outsourcing Fast High
4. Retrained transfers Fast High
5. Turnover reductions Slow Moderate
6. New external hires Slow Low
7. Technological innovation Slow Low
 Structural Configuration
Functional Divisional
• Functional • Workflow
Departmentalization Departmentalization
• High level of • Low level of Centralization
centralization • Semi-autonomous
• High efficiency • Flexible and innovative
• Inflexible • Sensitive to subtle
• Insensitive to subtle differences across products,
regions, and clients
differences across
products, regions, and • low efficiency
clients
 Advertising & promotion
THE PROMOTIONAL MIX
• Advertising
• Sales Promotion
• Publicity / PR
• Personal Selling
• Interactive & Indirect Marketing
 Consumer Behavior
Figure 4-1 A basic model of consumer decision making
A. Stages in the Consumer Decision-Making Process

Problem Information Alternative Purchase Postpurchase

Recognition Search Evaluation Decision Evaluation

B. Relevant Internal Psychological Processes

Attitude
Motivation Perception Integration Learning
Formation
Figure 4-2 CONSUMER MOTIVATION
Maslow's hierarchy of needs
 THEORY:
{ SIGMUND FREUD }
 Consumers Motivations are complex , unclear to both observers & consumers .
 Probing the sub conscious; Motivation Research :
- In-depth interviews.
- Projective techniques
- Association tests.
Seminar in Marketing Management.
Strategy
Is a plan that integrates an
organization’s major goals,
policies, and actions
synchronized into a cohesive
whole.
 Stage One
Where Are We Now?
Strategic Analysis

Stage Two
Where Do We Want To Be?
Strategic Direction and Strategy
formulation

Stage Three
How Might We Get There?
Strategic Choice

Stage Four
Which Way Is Best?
Strategic Evaluation

Stage Five
How Can We Ensure Arrival?
Strategic Implementation and Control
 Strategic Planning Process
Ide ntify Strate gic
Fram e w ork

Ass es s Enterprise
Environm e nt and Inte rnal
Capabilities

Form ulate Strategic Plan

Update Perform ance

M e as ure Score Cards

Im ple m e t Strategic Plan

Monitor and Evaluate

Perform ance
 Stage One
Where Are We Now?
Strategic and Marketing Analysis

Marketing Segmental, Approaches Approaches

Productivity to to
Auditing
& Competitor Customer
&
SWOT Ratio Analysis Analysis

Analysis Analysis
 Stage Two
Where Do We Want To Be?
Strategic Direction and Strategy
formulation

Missions Market The

Segmentation,
and Formulation
Targeting
Objectives of
and Strategy
Positioning
 Stage Three
How Might We Get There?
Strategic Choice

Product and Pricing The The

Distribution
Service Policies Promotional
Plan
Strategies and Plan
Strategies
 Stage Four
Which Way Is Best?
Strategic Evaluation

Criteria Modeling
of Approaches
Choice
 Stage Five
How Can We Ensure Arrival?
Strategic Implementation and
Control

Problems Management Measurement

to Control System
Overcome
 The TOWS framework
Step 1. Prepare a profile of the enterprise which embraces (a) the type of
business: (b) its geographic domain: (c) the competitive situation; and (d) the
preoccupations and culture of the senior management team

Step 2 : Identify and evaluate the economic, social, political, demographic,

products and technology, and market/competitive environments.

Step 3 : Prepare a forecast, make predictions and assess the future

Step 4 : Prepare a detailed strengths and weaknesses audit of (a) the

management and organization; (b) operations; (c) finance, (d) marketing; and
(e) the other parts of the organization.
Step 5 : Identify the strategic choices facing the organization.

Step 6 : Make the strategic choices.

Step 7 : Prepare the contingency plans.

 The Strategic
Marketing Audit
• The Environment Audit
• The Strategy Audit
• The Organization Audit
• The Systems Audit
• The Productivity Audit
• The Functions Audit
 The Strategic
Marketing Audit
• The Environment Audit
• The Strategy Audit
• The Organization Audit
• The Systems Audit
• The Productivity Audit
• The Functions Audit
• The Environment Audit
o The Macro Environment
• Political/Legal/Fiscal
• Economic/Demographic
• Social/Cultural
• Technological
• Ecological
o The Task Environment
• Markets
• Competitors
• Distributors/Dealers
• Suppliers
• Advertising/PR Agencies
• The Strategy Audit
o The business Mission
o Corporate & Marketing Objectives
o Marketing Strategy

• The Organization Audit

o Organization
o Functional Efficiency
• The Systems Audit
o Information Systems
o Planning Systems
o Control Systems
o New Product Systems
• The Productivity Audit
o Profitability Analysis
o Cost-effectiveness Analysis
• The Functions Audit
o Products
o Price
o Distribution
o Sales Force
o Advertising & Promotion
Stage Two

Where Do We Want to Be?

 Vision

Vision is the art of seeing things invisible

Jonathan Swift

The Best Way to Predict the Future is

to Invent it
Dennis Gabor
 Vision Mission
1-Market segment scope
2-Industry scope
Goals 3-Technology scope
4-Vertical scope
5-Geographical scope

How to Objectives
achieve
(sub-goals)

Strategies
Porter’s three generic strategies

Focus

Middle
of
The
road

Cost Differentiation
Leadership

Possible problems
Vulnerability to even lower
cost operators
Possible price wars
The difficulty of sustaining it
in the long term
Limited opportunities for
sector growth
The possibility of outgrowing
the market
The decline of the sector
A reputation for specialization
which ultimately inhibits
growth and development into
other sectors
The difficulties of sustaining
the bases for differentiation
Possibly higher costs
The difficulty of achieving true
and meaningful differentiation
Porter’s three generic strategies
Benefits
The ability to:
outperform rivals
erect barriers to entry
resist the five forces
A more detailed
understanding of particular
segments
The creation of barriers to
entry
A reputation for
specialization
The ability to concentrate
efforts
A distancing from others in
the market
The creation of a major
competitive advantage
Flexibility
Ways to achieve the Type of
strategy strategies
Size and economies of scale Cost
Globalization Leadership
Relocating to low-cost parts of
the world
Modification/simplification of
designs
Greater labour effectiveness
Greater operating effectiveness
Strategic alliances
New source of supply
Concentration upon on or a Focus
small number of a strong and
specialist reputation
The creation of strong brand Differentiation
identities
The consistent pursuit of pursuit
of those factors which
customers perceive to be
important
High performance in one or
more of a spectrum of activities
 Different Strategies
Market
targeting

Exit New product

M&A Marketing
Mix positioning

Special Production
Advantage Improvement
Organization
Design
 PRINCIPLES OF DEFENSIVE MARKETING WARFARE

1. ONLY THE MARKET LEADER SHOULD CONSIDER PLAYING DEFENSE.

2. THE BEST DEFENSIVE STRATEGY IS THE COURAGE TO ATTACK.
3. STRONG COMPETITIVE MOVES SHOULD ALWAYS BE BLOCKED.
 PRINCIPLES OF OFFENSIVE MARKETING WARFARE

1. THE MAIN CONSIDERATION IS THE STRENGTH OF THE LEADER’SPOSITION

2. FIND WEAKNESS IN THE LEADER’S STRENGTH AND ATTACK AT THAT POINT.
3. LAUNCH THE ATTACK ON AS NARROW A FRONT AS POSSIBLE.
 PRINCIPLES OF FLANKING MARKETING WARFARE

1. A GOOD FLANKING MOVE MUST BE MADE INTO AN UNCONTESTED AREA.

2. TACTICAL SURPRISE OUGHT TO BE AN IMPORTANT ELEMNT OF THE PLAN.
3. THE PURSUIT IS AS CRITICAL AS THE ATTACK ITSELF.
 PRINCIPLES OF GUERRILLA MARKETING WARFARE

1. FIND A SEGMENT OF THE MARKET SMALL ENOUGH TO DEFEND.

2. NO MATTER HOW SUCCESSFUL YOU BECOME, NEVER ACT LIKE THE LEADER.
3. BE PREPARED TO BUGOUT AT A MOMENT’S NOTICE.
 Choosing a Specific Positioning
•Best quality
•Best performance
•Most reliable
•Most durable
•Safest
•Fastest
•Best value for the money
•Least expensive
•Most prestigious
•Best designed or styled
•Easiest to use
•Most convenient
 EXAMPLES OF COMPANY MISSION & VISION STATEMENTS

 OTIS ELEVATOR
Our mission is to provide any customer a means of
moving people and things up, down and sideways over
short distances with reliability more than any similar
enterprise in the world.

 THE SATURN DIVISION OF GENERAL MOTORS

To market vehicles developed and manufactured in
the United States that are world leaders in quality, cost,
and customer satisfaction through the integration of
people, technology, and business systems and to transfer
knowledge, technology, and experience throughout
General Motors.
 Choosing a Value Positioning

• More for More.

Example : Mont Blanc, Gucci apparel, Haagen-Dazs
• More for the Same.
Example: Lexus automobile
• The Same for Less.
Example: Arrow shirts, Goodyear tires, Panasonic TV
• Less for Much Less.
Example: VCRs offering fewer features
• More for Less
Example: Toys ‘R’ Us, Wal-Mart store
 VALUE DISCIPLINES
OPERATIONAL PRODUCT CUSTOMER
EXCELLENCE LEADERSHIP INTIMANCY
Core Business Sharpen Nurture ideas, Provide
Processes distribution translate them solutions and
that…. systems and into products, help customers
provide no and market them run their
hassle service skillfully businesses
Structure that…. Has strong, Acts in an ad Pushes
central hoc, organic, empowerment
authority and a Loosely knit, and close to
finite level of ever-changing customer
empowerment way contact
Management Maintain Reward Measure the
System that…. standard individuals’ cost of providing
operating innovative service and of
procedures capacity and maintaining
new product customer loyalty
success
Culture that… Acts predictably Experiments and Is flexible and
and believes thinks “out-of- thinks “have it
“one size fits the-box” your way”
all”
Stage Three

How might We Get There?

Nine Ways to Build Demand
Products
Existing Modified New
Existing Sell more of our Modify our current Design new
existing products to products and sell products that will
our existing types of more of them to our appeal to our
customers. (Market existing customers. existing customers.
penetration) (Product (New product
modification) development)
Markets Enter and sell our Offer and sell Design new
Modified products in other modified products products for
geographical areas. to new geographical prospects in new
(Geographical markets. geographic areas.
expansion)
New Sell our existing Offer and sell Design new
products to new modified products products to sell to
types of customers. to new types of new types of
(Segment invasion) customers. customers.
(Diversification)
Using the Consumption Chain to Find New Opportunities

1. How do people become aware of their need for your products or service?
2. How do consumers find your offering?
3. How do consumers make their final selections?
4. How do consumers order and purchase your product or service?
5. How is your product or service delivered?
6. What happens when your product or service is delivered?
7. How is your product installed?
8. How is your product or service paid for?
9. How is your product stored?
10. How is your product moved around?
11. What is the customer really using your product for?
12. What do customers need help with when they use your product?
13. What about returns or exchanges?
14. How is your product repaired or serviced?
15. What happens when your product is disposed of or no longer used?
VALUE PRICING
 Conjoint Analysis
 Popular marketing research technique.
 Determine features and pricing.
 Less expensive than concept testing.
 Easy to understand; Difficult to master.
Apply to service product development and
pricing.
 Conjoint Analysis
New service offering
 Response time.
 Hours of availability.
 Price.
Response Time Support Price
Hours
Live\Real-time 24*7 12%
1hr. Call-back 12*6 18%
4hr. Call-back 8*5 25%
 Conjoint Analysis
The market’s “ideal” contract would be:

Response time Support hours Price

Live\Real-time 24*7 12%

The provider’s “ideal” contract would be::

Response time Support hours Price

4hr.call-back 8*5 25%

The balanced scorecard is a management
system (not only a measurement system)
 strategic Management
The vision ( What do we want to become)
• It is especially important for managers and executives to agree
upon the basic vision that the firm strives to achieve in the long
term.
• A vision statement should answer the basic question “ what do
we want to become”?.
• A clear vision provides the foundation for developing a
comprehensive mission statement.
• Many organizations have both a vision and mission statement, but
the vision statement should be established first .
• The vision statement should be short, one sentence , and as many
managers as possible should have input into developing the
statement.
 The strategic Management model
Perform Implement strategies-
external marketing, finance,
audit accounting, R&D, and MIS
issues
Develop
vission and Generate , Implement
Establish
mission evaluate, strategies-
long-term
statements and select management
objectives
strategies issues

Perform Measure and

internal evaluate
audit performance
The Mission ( What is our business)?
•An enduring statement of purpose that distinguishes one
organization from other similar enterprises, the mission
statement is a declaration of an organization's “ reason
for being”.
• It answers the pivotal question “ What is our
business”?.
• A clear mission statement is essential for effectively
establishing objectives and formulating strategies.
•A mission statement reveals what an organization wants
to be and whom it wants to serve.
• A business mission is the foundation for priorities,
strategies, plans, and work assignments.
The Mission ( What is our business)?
•It is the starting point for the design of managerial jobs .
• Actually, “what is our business “ is almost always a
difficult question and the right answer is usually anything
but obvious.
• Many organizations develops both a mission statement
and a vision statement, many organizations have both a
mission and vision statement.
Mission statement components
•Customers : who are the firm's customers?
• Products or services : what are the firm's major
products or services .
• Markets: geographically, where does the firm compete?
• Technology: is the firm technologically current?
• Concern for survival growth and profitability : is the
firm committed to growth and financial soundness?
• Philosophy : What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?
•Self-concept : what is the firm's distinctive competence
or major competitive advantage?
Mission statement components
•Customers : who are the firm's customers?
• Products or services : what are the firm's major
products or services .
• Markets: geographically, where does the firm compete?
• Technology: is the firm technologically current?
• Concern for survival growth and profitability : is the
firm committed to growth and financial soundness?
• Philosophy : What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?
•Self-concept : what is the firm's distinctive competence
or major competitive advantage?
Mission statement components
• Concern for public image : is the firm responsive to
social , community and environmental concerns?
• Concern for employees : Are employees a valuable asset
of the firm?
Characteristics of a Mission statement
• Broad in scope.
• less than 250 words in length.
• Inspiring.
• Identify the utility of a firms products.
• Reveal that the firm is socially responsible.
 Characteristics of a Mission statement
• Reveal that the firm is environmentally responsible.
• Include nine components.
• Enduring.
Industry Analysis : the external factor evaluation
( EFE) matrix
• An external factor evaluation (EFE) matrix allows strategists
to summarize and evaluate economic, social, cultural,
demographic, environmental, political, governmental, legal,
technological, and competitive information.
Matrix can developed in five steps:
1. List key external factors . Include a total of 15 to 20 factors,
including both opportunities and threats.
2. Assign to each factor a weight that range from 0.0 ( not
important) to 1.0 ( very important).
• The weight indicates the relative importance of that factor to
being successful in the firm industry. Opportunities often
receive higher weights than threats, but threats can receive
high weights if they are especially serve or threatening.
• The sum off all weights assigned to the factors must equal
1.0.
Industry Analysis : the external factor evaluation
( EFE) matrix
3. Assign a rating between 1 and 4 to each key external factor to
indicate how effectively the firm`s current strategies respond
to the factor, where 4= the response is superior, 3= the
response is above average, 2= the response is average, and 1=
the response is poor.
• Rating are thus company –based , whereas the weight in step
2 are industry- based.
4. Multiply each factor`s weight by its rating to determine a
weighted score.
5. Sum the weighted scores for each variable to determine the
total weighted score for the organization.
• The highest total weighted score for an organization is 4.0 and
the lowest possible total weighted score is 1.0 . The average
total weighted score is 2.5.
Industry Analysis : the external factor evaluation
( EFE) matrix
• A total weighted score of 4.0 indicates that an organization is
responding in an outstanding way to existing opportunities
and threats in its industry.
• It means the firm`s strategies effectively take advantage of
existing opportunities and minimize the potential adverse
effects of external threats.
• A total score of 1.0 indicates that the firm`s strategies are not
capitalizing on opportunities or avoiding external threats.
 SWOT analysis example
In SWOT, opportunities and threats are external factors.
An opportunity could be:
•A developing market such as the Internet.
•Mergers, joint ventures or strategic alliances.
•Moving into new market segments that offer improved
profits.
•A new international market.
•A market vacated by an ineffective competitor.
A threat could be:
•A new competitor in your home market.
•Price wars with competitors.
•A competitor has a new, innovative product or service.
•Competitors have superior access to channels of distribution.
•Taxation is introduced on your product or service.
Issues for review and discussion

1. List the 10 key forces that give rise to

opportunities and threats, give a specific
example of each force for your college ,
university, or your company.

2. List 10 external trends or facts pertaining

specially to your country that would
impact companies.
Competitive Intelligence programs
•Major competitor's weaknesses can represent external
opportunities, major competitor's strengths may
represent key threats.
The internal assessment
• Some researchers contend that internal resources are
more important for a firm than external factors in
achieving and sustaining competitive advantage.
• The organizational performance will primarily be
determined by internal resources that can be grouped
into three categories:
1. Physical resources,
2. Human resources,
3. And organizational resources.
The internal assessment
• Physical resources include all plant and equipment,
location, technology, raw materials, machines.
• Human resources include all employees, training,
experience, intelligence, knowledge, skills, abilities.
• Organizational resources include firm structure,
planning processes, information systems, patents, trade
marks, copyright, databases.
• The internal assessment asserts that resources are
actually what helps a firm exploit opportunities and
neutralize threats.
• The basic premise of the internal assessment is that the
mix, type, amount and nature of a firm's internal
resources should be considered first and foremost in
devising strategies that can lead to sustainable
competitive advantage.
The strengths-weaknesses- opportunities- threats ( SWOT)
Matrix
• It's an important matching tools that helps managers develop
four types of strategies:
1. SO ( strengths- opportunities) strategies that use a firm's
internal strengths to take an advantage of external
opportunities.
2. WO strategies aim at improving internal weaknesses by taking
advantage of external opportunities. Sometimes key external
opportunities exist, but a firm has internal weaknesses that
prevent it from exploiting those opportunities.
3. ST strategies use a firm's strengths to avoid or reduce the impact
of external threats.
4. WT strategies are defensive tactics directed at reducing internal
weaknesses and avoiding external threats.
 Stages of strategic Management
• The strategic management process consists of three stages
strategy formulation, strategy implementation , and strategy
evaluation.
1. Strategy formulation includes :
• Developing a vision and mission .
• Identifying an organization`s external opportunities and
threats.
• Determining internal strengths and weaknesses.
• Establishing long-term objectives,
• Generating alternative strategies.
• Choosing particular strategies to pursue.
 Stages of strategic Management
2. Strategy formulation issues include deciding:
• what new business to enter,
• what businesses to abandon,
• how to allocate resources,
• Whether to expand operations or diversify,
• Whether to enter international markets,
• whether to merge or form a joint venture,
• And how to avoid hostile takeover.
 Stages of strategic Management
• Strategy formulation decisions decide which alternative
strategies will benefit the firm most :
• Commit an organization to specific products, markets,
resources, and technologies over an extended period of
time.
• Strategies determine long-term competitive advantages.
 Stages of strategic Management
• Strategy implementation requires a firm to:
• Establish annual objectives.
• devise policies,
• Motivate employees, and allocate resources.
• Developing a strategy-supportive culture,
• Creating an effective organizational structure,
• Redirecting marketing efforts.
• Preparing budgets,
• Developing and utilizing information systems,
• Linking employee compensation to organizational
performance
 Stages of strategic Management
• Strategy implementation often is called the “action stage
"of strategic management, it means:
• Mobilizing employees and managers to put formulated
strategies into action.
• Often considered to be the most difficult stage in strategic
management , it requires personal discipline, commitment,
and sacrifice.
• Successful strategy implementation hinges upon managers`
ability to motivate employees, which is more an art than a
science.
• Interpersonal skills are critical for successful strategy
implementation.
 Stages of strategic Management
• Strategy implementation activities affect all employees and
managers in an organization.
• Every division and department must decide on answers to
questions such as “what must we do to implement our part
of the organization`s strategy’?”and “how best can we get
the job done?”.
• The challenge of implementation is to stimulate managers
and employees to work with pride and enthusiasm toward
achieving stated objectives.
 Stages of strategic Management
• Strategy evaluation includes :
• Managers need to know when particular strategies are not
working well , strategy evaluation is the primary means for
obtaining this information.
• All strategies are subject to future modification because
external and internal factors are constantly changing.
• Three fundamental strategy evaluation activities are:
1. Reviewing external and internal factors that are the bases
for current strategies,
2. Measuring performance,
3. Taking corrective actions.
 Stages of strategic Management
• Strategy evaluation is needed because success today is no
guarantee of success tomorrow, success always creates new
and different problems.
• Strategy formulation, implementation , and evaluation
activities occur at three hierarchical levels in a large
organizations:
• Corporate,
• Divisional or strategic business unit,
• And functional.
• Most small businesses and some large businesses do not
have divisions or strategic business units; they have only the
corporate and functional levels
 Key terms in strategic Management
Competitive advantages:
• Strategic management is all about gaining and maintaining competitive
advantage.
• This term can be defined as “ anything that a firm does especially well
compared to rival firms.
• When a firm can do something that rival firms cannot do, or owns something
that rival firms desire , that can represent a competitive advantage..
• Getting and keeping competitive advantage is essential for long- term
success in an organization.
• A firm can sustain a competitive advantage by :
1. Continually adapting to changes in external trends and events and internal
capabilities, competencies, and resources.
2. Effectively formulation, implementing, and evaluating strategies that
capitalize upon those factors
 Key terms in strategic Management
strategists :
• Strategists are the individuals who are most responsible for the
success or failure of an organization.
• Strategists help an organization gather, analyze, and organize
information.
• They track industry and competitive trends, develop forecasting
models and scenario analyses, evaluate corporate and divisional
performance, spot emerging market opportunities , identify business
threats, and develop creative action plans.
• Any manager who has the responsibility for a unit or division ,
responsibility for profit and loss outcomes, or direct authority over a
major piece of the business is a strategic manager ( strategist).
 International Marketing
Stages of International Marketing Expansion

1. Domestic
2. Regional Exporter
3. Exporter
4. International
5. International to Global
6. Global
Framework of International Marketing
Political/Legal Economic
Environment

Product Price
International
Customers

Promotion Place
Socio Cultural Technological
Environment Environment
 Entry Startegies

1 2 3 4 5

1.Exporting 3. Joint Ventures

 Casual
 Active 4. FDI (Foreign Direct Investment)
a. Acquisition
b. Green field operations.

2. Contractual Agreements:
a. Licensing agreement. 5. Strategic Alliances.
a. Marketing Based.
b. Franchising agreement.
b. Technological based.
c. Manufacturing agreement.
d. Turnkey contract. c. Production based.
e. Management contract
Global Integration and local adaptation of
corporate functions
 New product  Pricing
development  Packaging
 Raising capital  Promotion
 R&D  Human resources Management
 Production
 Sourcing

Global Integration Local Variation

Balance
Think Global, Act Local
 Brand Piracy
Imitation
Imitation Original
Levis Levi’s
Faking
An identical copy to the original
Preemptation
A person registers in his or her name a large number of
well known brand names and sell them to those
interested.
 distribution system
Manufacturer
Home Country Channel

Export Management Co. Export Agents Direct Internet

M embers

Import Intermediary
Channel M embers
foreign Country

Wholsesaler Industrial
User

Retailers

Consumers
 Constraints on
International Advertising

1.Language
2.Role of advertising Decoded
in society message
3.Government
controls.
International Coded 4.Media availability.
Marketer Message 5.Agency
availability.
6.Competition

International
Customer
 Factors Affecting Organizational
Structure
1. Quality of management
2. Diversity of product lines
3. Size of firm
4. Location of subsidiaries and their characteristics
5. Economic blocks
The International Division
CEO

VP Marketing VP Operations VP Finance VP Human Resources VP International

Product Planning Pricing Promotion Distribution

USA

Australia

France
Matrix Organization

Japan & Europe Latin America North

Far East America
A
Product planning
B
Pricing
C
D
Promotion

Distribution
 Product Organization
CEO

VP HR VP Finance VP Marketing VP operations

Geographic Organization
CEO

VP HR VP Finance VP Marketing VP operations

 Managerial Finance
Ratio Analysis
• Ratios also allow for better comparison through time or
between companies
• As we look at each ratio, ask yourself what the ratio is
trying to measure and why that information is important
• Ratios are used both internally and externally

156
 Categories of Financial
Ratios
• Short-term solvency or liquidity ratios
• Long-term solvency or financial leverage ratios
• Asset management or turnover ratios
• Profitability ratios
• Market value ratios

157
 Computing Liquidity Ratios
• Current Ratio = CA / CL
o 1,869 / 6,000 = 0.3 times (2008- 0.29) Industry 1

• Quick Ratio = (CA – Inventory) / CL

o (1,869 – 124) / 6,000 = 0.29 times
(2008 – 0.26) industry 0.8

158
 Computing Leverage Ratios
• Total Debt Ratio = (TA – TE) / TA
o (14,639 – 3,679) / 14,639 = 0.74 times or 74%
(2008 – 84%) Industry 70%

• Debt/Equity = TD / TE
o (14,639– 3,679) / 3,679 = 2.9 times
(2008 5.2 times) industry 1.9

• Equity Multiplier = TA / TE = 1 + D/E

o 1 + 2.9= 3.9

159
 Coverage Ratios

• Times Interest Earned = EBIT / Interest

o 3270 / 720 = 4.5 times
o 2008 – 5.2) industry 5

160
 Asset Mgt

a) Inventory Ratios

• Inventory Turnover = Cost of Goods Sold / Inventory

o 2,040 / 124 = 16.81 times
o (2008 – 18) industry - 17

• Days’ Sales in Inventory = 365 / Inventory Turnover

o 365 / 16.82 = 21 days
o (2008 – 20.2) industry 20

161
 B)Receivables Ratios
• Receivables Turnover = Sales / Accounts Receivable
o 10,860 / 302 = 36 times
o (2008 – 40) industry 35

• Days’ Sales in Receivables = 365 / Receivables Turnover

o 365 / 36 = 10 days

162
 Computing Total Asset Turnover

• Total Asset Turnover = Sales / Total Assets

o 10,860 / 14,639 = 0.74 times
o (2008 – 0.74) industry 0.60

163
 Computing Profitability Measures
• Profit Margin = Net Income / Sales
o 2040 / 10860 = .187 times or 18.71%
o (2008 – 19.9) industry 14%
• Return on Assets (ROA) = Net Income / Total
Assets
o 2040 / 14,639 = .1390 times or 13.90%
o (2008 – 14%) industry 11.5%
• Return on Equity (ROE) = Net Income / Total
Equity
o 2040 / 3,679= .5534 times or 55.34%

164
165
 Deriving the Du Pont
Identity
• ROE = NI / TE
• Multiply by 1 and then rearrange
o ROE = (NI / TE) (TA / TA)
o ROE = (NI / TA) (TA / TE) = ROA * EM
• Multiply by 1 again and then rearrange
o ROE = (NI / TA) (TA / TE) (Sales / Sales)
o ROE = (NI / Sales) (Sales / TA) (TA / TE)
o ROE = PM * TAT * EM

166
 Using the Du Pont
•
Identity
ROE = PM * TAT * EM
o Profit margin is a measure of the firm’s operating efficiency – how well does it
control costs
o Total asset turnover is a measure of the firm’s asset use efficiency – how well does
it manage its assets
o Equity multiplier is a measure of the firm’s financial leverage

167
 Payout and Retention
Ratios
• Dividend payout ratio (“1 - b”) = Cash dividends / Net income
o 931 / 2040 = 0.46 or 46%
• Retention ratio (“b”) = Addn. to R/E / Net income = (EPS –
DPS) / EPS
o (20.4– 9.31) / 20.4= .54= 54%
• Or: Retention ratio = 1 – Dividend Payout Ratio
o 1 - .46 = .54 = 54%

168
The Internal Growth Rate
• The internal growth rate tells us how much the firm can
grow assets using retained earnings as the only source of
financing.

ROA  b
Internal Growth Rate 
1 - ROA  b
.1290  .6939
  .0983
1  .1290  .6939
 9.83%

169
 The Sustainable Growth
• The sustainable growthRate
rate tells us how much the firm can
grow by using internally generated funds and issuing debt to
maintain a constant debt ratio.

ROE  b
Sustainabl e Growth Rate 
1- ROE  b
.2534  .6939
  .2133
1  .2534  .6939
 21.33%

170
Determinants of Growth
• Profit margin – operating efficiency
• Total asset turnover – asset use efficiency
• Financial leverage – choice of optimal debt ratio
• Dividend policy – choice of how much to pay to
shareholders versus reinvesting in the firm

171
Table 3.7

172
 Why Evaluate Financial
Statements?
• Internal uses
o Performance evaluation – compensation and
comparison between divisions
o Planning for the future – guide in estimating future
cash flows
• External uses
o Creditors
o Suppliers
o Customers
o Stockholders

173
 Benchmarking
• Ratios are not very helpful by themselves; they
need to be compared to something
• Time-Trend Analysis
o Used to see how the firm’s performance is changing
through time
o Internal and external uses
• Peer Group Analysis
o Compare to similar companies or within industries
o SIC and NAICS codes

174
Good Luck