s 2015 2 Marketing Strategy and Environment

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Marketing EnvironmentCompany and Business Strategy

Veronica Mak- Lecture 2

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Reminder:Jan 23 – Group List and Self-Introduction

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Today’s Lecture

Lect. 2 Lect. 4

Lect. 4

Lect. 4

Lect. 5

Lect. 5

Lect. 6

Lect. 7

Lect. 8

Lect.5-8

Lect.5-8

Lect.5-8

Lect. 3

Lect. 3

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What does a Marketing Director do?

Managing the marketing process requires the four marketing management functions of analysis, planning, implementation, and control.

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Marketing Strategic Management

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Today’s Objectives

1. What are the environmental forces that affect the company’s ability to serve its customers?

2. What is companywide strategic planning and its four steps?

3. How to design business portfolios and develop growth strategies?

4. How marketing works with its partners to create and deliver customer value? What are the elements of a customer-driven marketing strategy and mix? What are the marketing management functions, including the elements of a marketing plan?

5. How to measure return on marketing investment?

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The microenvironment consists of the actors close to the company that affect its ability to service its customers. Including: The company, suppliers, marketing

intermediaries, competitors, publics The macroenvironment consists of larger

societal forces that affect the microenvironment.

1. Marketing Environment Environmental Forces

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TargetConsumers

Product

Place

Price

Promotion

Mar

ketin

g

Impl

emen

tatio

n

Marketing

Planning

Marketing

Control

Mar

ketin

g

Analys

is

Competitors

MarketingIntermediaries

PublicsSuppliers

Demographic-Economic

Environment

Technological-Natural

Environment

Political-Legal

Environment

Social-Cultural

Environment

1. Marketing Environment

Macro and Micro-environments

Company

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1. Major Forces in the Macroenvironment

- Demographic Environment

Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics

Most important Trend: Changing age structure The Wealthy Baby Boomers: 1946 – 1964 Generation X 1965 – 1976 Millennial (Generation Y): 1977 – 2000

China: one-child policy ‘Me-generation’[Starbuck & post-80s]

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Generational MarketingDo marketers need to create separate

products and marketing programs for different generations?

Age-specific segments (Millennials: teens and young adults)

Lifestyle

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- Demographic Environment Better Educated, more White Collars, More

Professional 84% completed high school; 27% completed college Increase demand in quality products, books, magazines, travel,

personal computers, Internet service The Changing Family

Increase single families, working women [baby care, career-oriented women’s clothing, financial services, convenience foods and services]

Geographic Shifts in Population Telecommuting [WebEx]

Increasing Diversity Ethnic groups: HK - Chinese 95%, Filipino 1.6%, Indonesian

1.3%, other 2.1% (2006 census) Gay & Lesbian consumers [American Airlines]

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Source: Euromonitor International

FIGURE 3-4FIGURE 3-4 Household data of selected Asian Countries in 2006

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Factors affecting consumer purchasing power and spending patterns

Key trends: Change in Income and Spending after financial crisisSkewed income distribution; Gini Index ‘back-to-basics’ spending [Stella McCartney at

H&M; Infiniti: “make luxury affordable”, [UNIQLO],


- Economic Environment

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Value Marketing Just the right combinations of product quality and service at a

fair price


- Economic Environment

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- Cultural Environment

Forces that affect society’s basic values, perceptions, preferences and behaviors

Persistence of Cultural Values Core value of USA: Getting married, working, charity, honesty Secondary belief: change over time, expressed in

Views of themselves, product as self-expression, e.g. Nike Views of Others: new wave of ‘cocooning” or“nesting” =>

home-cooking, high-end coffee makers, big-screen TV,. - Views of Organizations: Work hard for money to play hard- Views of Society: 97 Handover, 9/11, Patriotic products and

promotion- Views of Nature: “LOHAS”, “Organic”, “Green”, “Natural”- Views of Universe: Seek more permanent value: family,

community, earth, faith

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Forces that create new technologies creating new product and market opportunities

New information and technology landscape -Most dramatic forces affecting marketing strategies Internet RFID : re-shape FMCG, retailing and market research - every

product contains a transmitter loaded with information Mobile technology

Rapid Globalization[Starbuck FaceBook], Customer-managed relationships

1.Major Forces in the Macroenvironment

- Technological Environment

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Natural Environment

Natural resources needed as inputs or are affected by marketing activities

3 key trends: Shortages of raw materials. Increased pollution. Increased government intervention.

Examples: PepsiCo [- reduce environmental footprint ] [solar-energy for Frito-Lay

production]; half-liter bottles for Tropicana juice] Starbuck: Ethical Sourcing (C.A.F.E. Practices)

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- Political & Social Environment

Increased Emphasis on Ethics and Socially Responsible actions

Key Trends [Societal Marketing Concept] Sustainable Marketing [timberland? McDonald?]

Growth of Nonprofit Marketing [ASPCA]

Socially Responsible Behavior Internet and Ethic & Privacy issues [Facebook, Octopus

Cause-related Marketing TOMS Shoes pledges

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- Political & Social Environment Consists of laws, government

agencies and pressure group Increasing Legislation

Regulating Business New food label laws- “One-

plus-seven scheme Advertising Industry Code of

practice [“the best”, “the most successful”]

Satellite TV Code of Practice of Advertising Stands

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TargetConsumers

Product

Place

Price

Promotion

Mar

ketin

g

Impl

emen

tatio

n

Marketing

Planning

Marketing

Control

Mar

ketin

g

Analys

is

Competitors

MarketingIntermediaries

PublicsSuppliers

Demographic-Economic

Environment

Technological-Natural

Environment

Political-Legal

Environment

Social-Cultural

Environment

1. Major Forces in the MicroenvironmentActors in the Microenvironment

Company

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1. Major Forces in the Microenvironment

- Marketing Intermediaries Help the company to promote, sell and distribute

its products to final buyers Resellers Physical distribution firms Marketing services agencies Financial intermediaries

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- Publics A public is any group that has an actual or

potential interest in or impact on an organization’s ability to achieve its objectives Financial publics Media publics Government publics Citizen-action publics Local publics General publics Internal publics

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- Competitors Marketers must gain

strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers.

No single competitive marketing strategy is best for all companies.

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Marketing Analysis – SWOT analysis

The goal with a SWOT analysis is to match the company’s strengths to attractive opportunities and to eliminate weakness and minimize the threats.

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Case Study: McDonald's 'I'm Amazing‘

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- Demographic Environment affecting McDonlad

Threat: The Wealthy Baby Boomers,

Generation X, professionals : Not attracted by unhealthy fast food

Millennials (Generation Y): many choices in causal dining out

Opportunity: Low fertility, huge investment in 1 to 2

children Increase single families, working women

looking for convenient dining services

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Opportunity: Skewed income

distribution; room for affordable partying and dining experience [value marketing]


- Economic and Technoglical Environment of McDonald

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- Cultural Environment affecting McDonald

Threat: Views of Self : Fast food as fatty food and challenge to slim

and healthy body Opportunity:

Views of Self: Trend of Intensive Parenting- Views of Organizations: Work hard for money to

play hard- Views of Universe: Seek more permanent value:

family, community, faith

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2. Steps in Strategic Planning

Purpose: find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment.

Steps:

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2. Strategic Planning

Step 1: (re-)Define Market-Oriented Mission

A Market-oriented Mission Statement defines the business in terms of satisfying basic customer needs.

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Product-Oriented Mission

Facebook: “we are an online social network.”

Nike:“we sell athletic shoes and apparel.”

Walmart:“we run discount stores”

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Market-Oriented Mission

Facebook: “we give power to people and make the world

more open and connected.” Nilke:

“we bring inspiration and innovation to every athlete in the world”

Walmart:“Save money. Live Better”

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2. Strategic PlanningStep 1: (re-)Define Market-Oriented Mission

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Step 2: Setting Company Objectives and Goals Developing company objectives and goals based on its

mission. Develop Customer-Driven Marketing Strategy and

programs to support these objectives. Marketing requires a deep understanding of customers.

Companies cannot profitably serve them all. Companies must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments.

This process involves market segmentation, market targeting, differentiation, and positioning

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Step 3: Designing the Business Portfolio

a. The company must analyze its current business portfolio and decide which businesses should receive more, less, or no investment.

b. It must shape the future portfolio by developing strategies for growth and downsizing.

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Strategic Planning


Portfolio analysis is where management evaluates the products and businesses making up the company.

The steps in portfolio analysis are: To identify the strategic business units (SBU). The

SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses.

To assess the attractiveness of its various SBUs and decide how much support each deserves on 2 dimensions: (1) The attractiveness of the market or industry, (2) The strength of the position in that market or industry.

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The growth‑share matrix defines four types of SBUs: Stars. High‑growth, high‑share businesses or

products. They will turn into cash cows. Cash cows. Low‑growth, high‑share businesses or

products. They produce a lot of cash that the company.

Question marks. Low‑share business units in high‑growth markets. They require a lot of cash to hold their position.

Dogs. Low‑growth, low‑share businesses and products.

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Strategic Planning

Step 3: Designing the Business Portfolio for McDonald

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One of four strategies can be pursued for each SBU.

The company can invest to build its share. It can invest just enough to hold its share. It can milk its short-term cash flow, or harvest. It can divest by selling it or phasing out.

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Strategic Planning


Problems with Matrix Approaches. Difficult, time consuming, and costly to

implement. These approaches focus on classifying current

businesses but provide little advice for future planning.

Many companies have dropped matrix methods in favor of customized approaches better suited to their specific situations.

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Developing Strategies for Growth and Downsizing Marketing has the main responsibility to achieve “profitable growth.”

3. Business Portfolio and Growth Strategy

　 Products

Markets Current New

Current Market Penetration Product Development

New Market Development Diversification

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Product/Market Expansion Grid:Product/Market Expansion Grid:Market Penetration:Market Penetration: - making more sales to current customers without changing products. - making more sales to current customers without changing products.

How? Cut prices, increase advertising, get products into more stores.How? Cut prices, increase advertising, get products into more stores.Market DevelopmentMarket Development: : - identifying and developing new markets for its current products. How? - identifying and developing new markets for its current products. How?

Identify new demographic or geographic markets.Identify new demographic or geographic markets.Product DevelopmentProduct Development: : - offering modified or new products to current markets. How? New styles, - offering modified or new products to current markets. How? New styles,

sizes, colors, or other modified products.sizes, colors, or other modified products.Diversification:Diversification: - start up or buy new businesses outside of its current products and - start up or buy new businesses outside of its current products and

markets.markets.

3. Business Portfolio and Growth Strategy

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3. Business Portfolio and Growth Strategy for McDonald

　 Products

Markets Current New

Current Market Penetration Product Development

　 Selling more hamburgers to customers in HK

Selling McCafe to middle-class young adults

New Market Development Diversification

　Selling more hamburgers to people in Vatican City, Nepal, etc.

Selling Event management service to other corporations

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Strategic Planning

4: Marketing Strategies to deliver value

Develop Customer-Driven Marketing Strategy and programs to support these objectives. Marketing requires a deep understanding of

customers. Companies cannot profitably serve them all. Companies must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments.

This process involves market segmentation, market targeting, differentiation, and positioning

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Strategic Planning

4: Marketing Strategies of McDonlad to deliver value

Customer-Driven Marketing Strategy New market segmentation, market

targeting, differentiation, and positioning : Generation X, young parents with kids

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Strategic Planning

4: Marketing Strategies of McDonald to deliver value

New Positioning

-McDonald’s of your Dream-

-Facilitating amazing kids

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Strategic Planning


Marketing Mix

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Developing an Integrated Marketing Mix

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Strategic Planning


1. Partnering to build Customer Relationship 1.1 Partnering with Other Company

Departments,e.g. Wal-Mart marketing with logistics

1.2 Partnering with Other in Marketing System (value delivery network), e.g. L’Oreal with raw material suppliers, BEA & HSBC with pizza hut

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Control of Marketing Activities- by Return on Marketing Investment (ROI)

A company can assess return on marketing in terms of standard marketing performance measures, such as brand awareness, sales,

or market share.

Review

Describe the environmental forces that affect the company’s ability to serve its customers.

Explain how changes in the demographic and economic environments affect marketing decisions.

Identify the major trends in the firm’s natural and technological environments.

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Review

Explain the key changes in the political and cultural environments.

Discuss how companies can react to the marketing environment.

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Review

Explain company-wide strategic planning and its four steps.

Discuss how to design business portfolios and develop growth strategies.

Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value.

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ReviewDescribe the elements of a customer-

driven marketing strategy and mix and the forces that influence it.

List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing investment.

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s 2015 2 Marketing Strategy and Environment