1.
PRINCIPLES OF
MARKETING
Chapter 2
Company and
Marketing
Strategy

2.
Strategic Planning Process
Strategic planning is the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing Opportunities. 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.

3.
Strategic Planning Process
FIGURE |Steps in Strategic Planning

4.
Companywide Strategic Planning
Defining a Market-Oriented Mission
– The mission statement is the organization’s
purpose, what it wants to accomplish in the larger
environment
– Market-oriented mission statement defines
the business in terms of satisfying basic
customer needs

5.
Defining a Market-Oriented
Mission
A sound mission begins with the following questions:
– What is our business?
– Who is the customer?
– What do consumers value?
– What should our business be?

6.
 Copyright 1998 Prentice Hall
2-3
2-3
Market
Oriented
Market
Oriented
Fit Market
Environment
Fit Market
Environment
Motivating
Motivating Realistic
Realistic
Distinctive
Competencies
Distinctive
Competencies
Specific
Specific
Characteristics
of Good Mission
Statements
Characteristics
of Good Mission
Statements
Mission Statements
Mission Statements

7.
Defining a Market-Oriented Mission
– Google’s mission statement isn’t
something namby-pamby like “To
be the world’s best search engine.”
– It’s “To organize the world’s
information and make it
universally accessible and
useful.” That’s simultaneously
inspirational, achievable, and
completely graspable.
– Ritz-Carlton Hotels & Resort’s
statement is not We rent rooms.
– BUT, We create the Ritz-Carlton
experience—one that cheer up
the senses, encourages well-
being, and fulfills even the
unexpressed wishes and needs of
our guests.

8.
Setting Company Objectives and
Goals
– The company needs to turn its mission into detailed
supporting objectives for each level of management.
Each manager should have objectives and
be responsible for reaching them.
–Example: Ritz-Carlton

9.
Designing the Business Portfolio
– The business portfolio is the collection of businesses and
products that make up the company.
– The best portfolio is the one that best fits the
company’s strengths and weaknesses to the
opportunities in the environment.
– Portfolio analysis is a major activity in strategic planning
whereby management evaluates the products and
businesses that make up the company.

10.
Designing the Business Portfolio
Business portfolio planning involves two steps.
– First, the company must analyze its current business
portfolio and determine which businesses should
receive more, less, or no investment.
– Second, it must shape the future portfolio by
developing strategies for growth and downsizing.

11.
Designing the Business Portfolio
Analyzing the Current Business Portfolio
– The major activity in strategic planning is business portfolio analysis,
whereby management evaluates the products and businesses that make
up the company.
– Management’s first step is to identify the key businesses that make up the
company, called strategic business units (SBUs). An SBU can be a
company division, a product line within a division, or sometimes a single
product or brand.
– Strategic business unit (SBU) is a unit of the company that has a separate
mission and objectives that can be planned separately from other
company businesses

12.
Designing the Business Portfolio
The Boston Consulting Group Approach
– Using the now-classic Boston Consulting Group
(BCG) approach, a company classifies all its SBUs
according to the growth-share matrix.
– On the vertical axis, market growth rate provides a
measure of market attractiveness.
– On the horizontal axis, relative market share
serves as a measure of company strength in the market.

13.
Analyzing the Current SBUs:
Boston Consulting Approach

14.
Analyzing the Current SBUs:
Boston Consulting Approach (BCG)
Question Marks
• High growth, low share
• Build into Stars/ phase out
• Requires cash to hold
market share
Stars
• High growth & share
• Profit potential
• May need heavy
investment to grow
Cash Cows
• Low growth, high share
• Established, successful
SBU’s
•Produces cash
Dogs
• Low growth & share
• Low profit potential
Relative Market Share
High Low
Market
Growth
Rate
Low
High

15.
Analyzing the Current SBUs:
Boston Consulting Approach (BCG)

16.
Analyzing the Current SBUs:
Boston Consulting Approach (BCG)
– The 10 circles in the growth-share matrix represent the company’s 10 current
SBUs.
– The company has two stars, two cash cows, three question marks, and three
dogs.
– The areas of the circles are proportional to the SBU’s dollar sales.
– It wants to invest in the more promising question marks to make them stars and
maintain the stars so that they will become cash cows as their markets mature.
Fortunately, it has two good-sized cash cows. Income from these cash cows will
help finance the company’s question marks, stars, and dogs.

17.
Analyzing the Current SBUs:
BCG
– Once it has classified its SBUs, the company must determine what role each
will play in the future. It can pursue one of four strategies for each
SBU.
– It can invest more in the business unit to build its share.
– It can invest just enough to hold the SBU’s share at the current level.
– It can harvest the SBU, milking its short-term cash flow regardless of the
long-term effect.
– Finally, it can divest the SBU by selling it or phasing it out and using the
resources elsewhere.

18.
Analyzing the Current SBUs:
BCG
– As time passes, SBUs change their positions in the growth-
share matrix. Many SBUs start out as question marks and
move into the star category if they succeed.
– They later become cash cows as market growth falls and then
finally die off or turn into dogs toward the end of their life
cycle.
– The company needs to add new products and units
continuously so that some of them will become stars and,
eventually, cash cows that will help finance other SBUs.

19.
DEVELOPING STRATEGIES FOR
GROWTH AND DOWNSIZING
Beyond evaluating current businesses, designing the business
portfolio involves finding businesses and products the
company should consider in the future. Companies need
growth if they are to compete more effectively, satisfy their
stakeholders, and attract top talent. At the same time, a firm
must be careful not to make growth itself an objective. The
company’s objective must be to manage “profitable growth.”
Marketing has the main responsibility for achieving profitable
growth for the company. Marketing needs to identify,
evaluate, and select market opportunities and establish
strategies for capturing them. One useful device for

20.
Product/Market Expansion Grid
A portfolio-planning tool for identifying
company growth opportunities through
market penetration, market development,
product development, or diversification.

21.
Developing Growth Strategies
1. Market
Penetration
2. Market
Development
3. Product
Development
4. Diversification
Existing
Markets
New
Markets
Existing
Products
New
Products
Product/ Market Expansion Grid

22.
Product/ Market Expansion Grid
– Market Penetration: increase sales to present customers with current
products. How? Cut prices, increase advertising, get products into
more stores.
– Market Development: develop new markets with current products.
How? Identify new demographic or geographic markets.
– Product Development: offering modified or new products to current
customers. How? New styles, flavors, colors, or modified products.
– Diversification: new products for new markets. How? Start up or buy
new businesses.

23.
Customer-Driven Marketing
Strategy
–Market Segmentation, Market
Targeting, Differentiation, And
Positioning

24.
Customer-driven Marketing Strategy
Market segmentation: Dividing a market into distinct groups of
buyers who have different needs, characteristics, or behaviors,
and who might require separate products or marketing
programs.
Market targeting: The process of evaluating each market
segment’s attractiveness and selecting one or more segments
to enter. A company with limited resources might decide to
serve only one or a few special segments or market niches.
Such nichers specialize in serving customer segments that
major competitors overlook or ignore. Market Niches: Ferrari
sells only 1,500 of its very high-performance cars in the United
States each year but at very high prices—from an eye-opening

25.
Customer-driven Marketing Strategy
Positioning: Arranging for a product to occupy a clear,
distinctive, and desirable place relative to competing
products in the minds of target consumers.
In positioning its product(s), the company first identifies
possible customer value differences that provide competitive
advantages on which to build the position. The company can
offer greater customer value by either charging lower prices
than competitors or offering more benefits to justify higher
prices. But if the company promises greater value, it must
then deliver that greater value.
Differentiation: Actually differentiating the market offering to

26.
DEVELOPING AN INTEGRATED
MARKETING MIX
Marketing Mix
The set of tactical
marketing tools—
product, price, place,
and promotion—that
the firm blends to
produce the response it
wants in the target
market.

27.
DEVELOPING AN INTEGRATED
MARKETING MIX

28.
Developing An Integrated Marketing
Mix
There is another concern, however, that is valid. 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
Product
Price
Place
Promotion
4Cs
Customer
solution
Customer cost
Convenience
Communicatio
n