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Marketing Strategy for Yoplait Yogurt

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               2                                                DEVELOPING
                                                       MARKETING AND

LEARNING OBJECTIVES                                        WHERE CAN AN “A” IN ICE CREAM
                                                           MAKING LEAD?
After reading this chapter you should be                   These two entrepreneurs aren’t just your typical Tom,
able to:                                                   Dick, or Harry! Consider some facts about the company
                                                           they founded:
1 Describe the three organizational levels of strategy.
                                                           •   It launched a program letting customers send “Ice
2 Describe why business, mission, organizational               Cream by Mail” via its website.
  culture, and goals are important in organizations.
                                                           •   It contributes a minimum of $1.1 million annually to
3 Explain how organizations set strategic directions           charities.
  by assessing where they are now and seek to be in        •   Its PartnerShops help not-for-profit organizations pro-
  the future.                                                  vide training and job opportunities for people such as
4 Describe the strategic marketing process and its three       at-risk youth.1
  key phases: planning, implementation, and control.          By now you know the company: Ben & Jerry’s, or
5 Explain how the marketing mix elements are blended       more formally, Ben & Jerry’s Homemade, Inc. Its website
                                                           (opposite page) reflects its creative, funky approach to
  into a cohesive marketing program.
                                                           business—linked to a genuine concern for social causes.
                                                              Ben & Jerry’s is proof that the American dream is still
                                                           alive and well. Ben Cohen and Jerry Greenfield were
                                                           grade school classmates on Long Island. In 1978 they
                                                           headed north to Vermont and started an ice cream parlor
                                                           in a renovated gas station.2 Buoyed with enthusiasm,
                                                           $12,000 they had borrowed and saved, and ideas from
                                                           the $5 they spent on a Penn State correspondence course
                                                           in ice cream making (with perfect scores on their open-
                                                           book tests!) they were off and running.3
                                                              Today, Ben & Jerry’s Homemade, Inc., now owned by
                                                           Unilever, has more than $200 million in annual sales
24                                                                                   Initiating the Marketing Process    PART ONE

                                                                worldwide—mainly from selling its incredibly rich ice
                                                                cream. Ben & Jerry’s has also been a leader with its social
                                                                mission. For example, the company is committed to paying
                                                                its employees a “livable wage” and providing top-quality
                                                                benefits, as well as purchasing supplies from other socially
                                                                responsible companies.4 Customers love Cherry Garcia and
                                                                One Sweet Whirled ice cream flavors, but many also want
                                                                to support Ben & Jerry’s social mission and environmental
                                                                concerns, too. The company has international sales in
                                                                Europe, the Mideast, and Asia.
                                                                    Chapter 2 describes how organizations set their mission
                                                                and overall direction and link these activities to marketing
                                                                strategies. As consumers become more concerned about a
                                      company’s impact on society, marketing strategy may need to be linked to the social
                                      goals of the company’s mission statement.

                                      Large organizations today are extremely complex. All of us deal in some way with
                                      huge organizations every day, so it is useful to understand (1) the two basic kinds of or-
                                      ganizations and (2) the levels that exist in them and their link to marketing.
                                         Today’s organizations can be divided into business firms and not-for-profit organiza-
                                      tions. A business firm is a privately owned organization that serves its customers in order
profit                                to earn a profit. Profit is the reward to a business firm for the risk it undertakes in offer-
Reward to a business firm             ing a product for sale. It’s the money left over after a firm’s total expenses are subtracted
for the risk it undertakes in         from its total sales. In contrast to business firms, a nonprofit organization is a nongovern-
offering a product for sale           mental organization that serves its customers but does not have profit as an organizational
                                      goal. For simplicity in the rest of the book, however, the terms firm, company, corporation,
                                      and organization are used to cover both business and not-for-profit operations.

                                      Levels in Organizations and How Marketing Links to Them
                                      All organizations have a strategic direction. That is, they have an idea of what they
FIGURE 2–1                            hope to achieve and how they plan to achieve it. Marketing not only helps set this di-
The three levels of strategy in       rection but must also help the organization move there. Figure 2–1 summarizes the
organizations: corporate,             three levels of strategy in an organization.
business unit, and functional

                                                      Corporate-level strategy
                                                                                                 • Organizational
                         • Business
                         • Mission
                                                                                                 • Goals
                                                    Business unit-level strategy

                                                       Functional-level strategy

           Information                              Research &                                                    Human
                                  Finance                                Marketing         Manufacturing
           systems                                  development                                                   resources
CHAPTER 2         Developing Successful Marketing and Corporate Strategies                                                 25

                                     The corporate level is where top management directs overall strategy for the entire
                                  organization. Multimarket, multiproduct firms such as General Electric or Johnson &
                                  Johnson really manage a group of different businesses, variously termed strategic business
                                  units (SBUs), strategic business segments, or product-market units (PMUs).5 Each of
                                  these units markets a set of related products to a clearly defined group of customers.
                                  While the corporate level creates value for the shareholders of the firm, as measured by
                                  stock performance and profitability, the business unit level is where business unit man-
                                  agers set the direction for individual products and markets. Strategic direction is more
                                  specific at the business unit level of an organization. For less complex firms with a single
                                  business focus, such as Ben & Jerry’s, the corporate and business unit levels may merge.
                                     Each business unit has marketing and other specialized activities (such as finance,
                                  research and development, or human resources) at the functional level. This is where
                                  groups of specialists actually create value for the organization. The name of a depart-
                                  ment generally refers to its specialized function, such as the marketing department or
                                  information systems department. At the functional level, the strategic direction be-
                                  comes more specific and focused. In a large corporation with multiple business units,
                                  marketing may be called on to assess consumer trends as an aid to corporate planning.
                                  At the business unit level, marketing may be asked to provide leadership in developing
                                  a new, integrated customer service program across all business units.

                                  Strategy Issues in Organizations
                                  Organizations need a reason for their existence—and a direction. This is where their
                                  business, mission, organizational culture, and goals converge. We’ll discuss each below.
                                  As shown in Figure 2–1, business and mission apply to the corporate and business unit
                                  levels, while goals relate to all three levels.

                                  The Business Organizations like Ben & Jerry’s, the Red Cross, and your college
                                  exist for a purpose—to accomplish something for someone. At birth, most organiza-
                                  tions have clear ideas about what “something” and “someone” mean. But as the orga-
                                  nization grows over time, often its purpose gets fuzzy, unclear.
                                      This is where the organization repeatedly asks some of the most difficult questions
                                  it ever faces: What is our business? Who are our customers? What offerings should we
                                  provide to give these customers value? One guideline in defining the company’s busi-
                                  ness: Try to understand the people served by the organization and the value they
                                  receive, which emphasizes the critical customer-driven focus that successful organiza-
                                  tions have.
                                      In a now-famous article, Harvard professor Theodore Levitt cited American rail-
                                  roads as organizations that had a narrow, production-oriented statement of their busi-
                                  ness: “We are in the railroad business!” This narrow definition of their business lost
                                  sight of who their customers were and what their needs were. Railroads saw only other
                                  railroads as competitors and failed to design strategies to compete with airlines, barges,
                                  pipelines, trucks, bus lines, and cars. Railroads would probably have fared better over
                                  the past century by recognizing they are in “the transportation business.”6
                                      With this focus on the customer, Disney is not in the movie and theme park busi-
                                  ness, but rather it is in the business of creating fun and fantasy for customers. Similarly,
                                  as we’ll see shortly, Medtronic is the world leader in developing, producing, and mar-
                                  keting heart pacemakers and other implantable medical devices. Yet Medtronic is not
                                  in the medical device business. It is in the business of alleviating pain, restoring health,
                                  and extending life. In this respect Medtronic’s business somewhat overlaps its mission,
                                  the next topic.

                                  The Mission By understanding its business, an organization can take steps to de-
mission                           fine its mission, a statement of the organization’s scope, often identifying its cus-
Statement of the
                                  tomers, markets, products, technology, and values. Today, often used interchangeably
organization’s scope
                                  with vision, the mission statement frequently has an inspirational theme—something
26                                                                              Initiating the Marketing Process     PART ONE

People see this “rising figure”
mural in the headquarters of a    that can ignite the loyalty of employees and others with whom the organization comes
world-class corporation. What     in contact. This is probably the best-known mission statement in America:
does it tell about its mission?
                                    To explore strange new worlds, to seek out new life and new civilizations, to boldly go where
For some insights and why it is     no one has gone before.
important, see the text.
                                  This continuing mission for the starship Enterprise, as Gene Roddenberry wrote it for
                                  the Star Trek adventure series, is inspirational and focuses the advanced technology,
                                  strong leadership, and skilled crew of the Enterprise on what is to be accomplished.
                                     This inspiration and focus appears in the mission of many organizations, like the
                                  American Red Cross:
                                    To improve the quality of human life; to enhance self-reliance and concern for others; and to
                                    help people avoid, prepare for, and cope with emergencies.
                                  Or like this first sentence from Medtronic’s mission statement:
                                    To contribute to human welfare by application of biomedical engineering in the research, de-
                                    sign, manufacture, and sale of instruments or appliances that alleviate pain, restore health,
                                    and extend life.

                                  Organizational Culture Organizations must connect not just with their cus-
                                  tomers but with all their stakeholders, who are the people who are affected by what the
                                  company does and how well it performs. This group includes employees, owners, and
                                  board members, as well as suppliers, distributors, unions, local communities, and, of
                                  course, customers. Communicating the mission statement is an important corporate-
                                  level marketing function. The “rising figure” wall painting at Medtronic’s corporate
                                  headquarters powerfully communicates the inspiration and focus of its mission to em-
                                  ployees, doctors, and patients alike.7
                                      Whether at the corporate, business, or functional level, every unit has an organi-
organizational culture            zational culture, which is a set of values, ideas, and attitudes that is learned and
Set of values, ideas, and         shared among the members of an organization. At Medtronic, a corporate officer pre-
attitudes that is learned and     sents each new employee with a medallion with the “rising figure” on one side and the
shared among the members of       mission on the other. Each December five or six patients, accompanied by their
an organization                   physicians, describe to a large employee holiday celebration how Medtronic products
                                  have changed their lives. These activities send clear messages to employees and other
                                  stakeholders about Medtronic’s cohesive organizational culture.
                                      When corporations merge or are acquired, organizational cultures can collide, often
                                  resulting from conflicts in missions and goals. Ben & Jerry’s is an example. When
                                  Unilever acquired Ben & Jerry’s in April 2000, it had 180 times the annual sales of Ben
                                  & Jerry’s and dozens of well-known brands (Wisk, Dove, Lipton). This really makes
                                  Ben & Jerry’s only a small business unit in Unilever. How would Ben & Jerry’s fare in
                                  its new corporate setting? The Going Online exercise at the end of the chapter asks you
                                  to compare the mission statements for both Ben & Jerry’s and Unilever.
CHAPTER 2           Developing Successful Marketing and Corporate Strategies                                                27

goals (objectives)                  Goals Goals or objectives (terms used interchangeably in this textbook) con-
Targets of performance to be        vert the mission into targeted levels of performance to be achieved, often by a specific
achieved, often by a specific       time. These goals measure how well the mission is being accomplished. As shown in
time                                Figure 2–1, goals exist at the corporate, business unit, and functional levels. All lower-
                                    level goals must contribute to achieving goals at the next, higher level.
                                       Business firms can pursue several different types of goals:
                                       •   Profit. Classic economic theory assumes a firm seeks to get as high a financial re-
                                           turn on its investment—profit—as possible.
                                       •   Sales. If profits are acceptable, a firm may elect to maintain or increase its sales
                                           level even though profitability may not be maximized.
                                       •   Market share. A firm may choose to maintain or increase its market share, some-
                                           times at the expense of greater profits if industry status or prestige is at stake.
market share                               Market share is the ratio of sales revenue of the firm to the total sales revenue
Ratio of a firm’s sales to the             of all firms in the industry, including the firm itself.
total sales of all firms in the        •   Quality. A firm may target the highest quality as Medtronic does with its im-
industry                                   plantable medical devices.
                                       •   Customer satisfaction. Customers are the reason the organization exists, so their
                                           perceptions and actions are of vital importance. Their satisfaction can be mea-
                                           sured directly with surveys or tracked with proxy measures like number of cus-
                                           tomer complaints or percentage of orders shipped within 24 hours of receipt.
                                       •   Employee welfare. A firm may recognize the critical importance of its employees
                                           by having an explicit goal stating its commitment to good employment opportu-
                                           nities and working conditions for them.
                                       •   Social responsibility. A firm may seek to balance conflicting goals of consumers,
                                           employees, and stockholders to promote overall welfare of all these groups, even
                                           at the expense of profits. U.S. firms manufacturing products abroad increasingly
                                           seek to be “good global citizens” by paying reasonable wages and reducing pol-
                                           lution from their manufacturing plants.
                                       Many private organizations that do not seek profits also exist. Examples are muse-
                                    ums, symphony orchestras, and private hospitals. These organizations strive to serve
                                    consumers as efficiently as possible. Government agencies also perform marketing
                                    activities in trying to achieve their goal of serving the public good.

                                    1. What are the three levels in today’s large organizations?
       Concept Check
                                    2. What is the meaning of an organization’s mission?
                                    3. How do an organization’s goals relate to its mission?

                                    Setting strategic directions involves answering two other difficult questions: (1) Where
                                    are we now? and (2) Where do we want to go?

                                    A Look Around: Where Are We Now?
                                    Asking an organization where it is at the present time involves identifying its customers,
                                    competencies, and competitors. More detailed approaches of assessing “where are we
                                    now?” include SWOT analysis, discussed later in this chapter, and environmental scan-
                                    ning (Chapter 3). Both may be done at each of the three levels in the organization.

                                    Customers Ben & Jerry’s customers are ice cream and frozen yogurt eaters. But
                                    they are not all the same, because they have different flavor preferences, fat preferences,
28                                                                        Initiating the Marketing Process   PART ONE

Lands’ End’s unconditional
guarantee for its products
highlights its focus on its

                              convenience preferences, and so on. Medtronic’s “customers” are cardiologists and
                              heart surgeons who serve patients.
                                 Lands’ End provides an example of a clear focus on customers. Its stores and web-
                              site give a remarkable statement about its commitments to customer relationships and
                              quality of its products with these unconditional words:
                                GUARANTEED. PERIOD.®
                              Its website points out the Lands’ End guarantee has always been an unconditional one
                              and it has read: “If you are not completely satisfied with any item you buy from us, at
                              any time during your use of it, return it and we will refund your full purchase price.”
                              But to get the message across more clearly to its customers, it put it in the two-word
                              guarantee above.
                                  The crucial point: Strategic directions must be customer-focused and provide gen-
                              uine value and benefits to present and prospective customers. This Lands’ End cus-
                              tomer focus was apparent to Sears, Roebuck & Co., which bought Lands’ End in 2002.
                              By early 2004. Sears had handed over much of its retail apparel operations to execu-
                              tives of Lands’ End.8

                              Competencies “What do we do best?” asks about our organization’s capabilities
                              or competencies. Competencies are an organization’s special capabilities, including
                              skills, technologies, and resources that distinguish it from other organizations. Ex-
                              ploiting these competencies can lead to success.9 In Medtronic’s case its competencies
                              include world-class technology plus training, service, and marketing activities that re-
                              spond to life-threatening medical needs. Business Week magazine calls Medtronic “the
                              standard setter for quality.”10 Competencies should be distinctive enough to provide a
                              competitive advantage, a unique strength relative to competitors, often based on qual-
                              ity, time, cost, or innovation.11 In 2005, Dell’s low-cost, direct-sales model has made it
                              not only no. 1 in personal computer sales but enabled it to move into the servers, print-
                              ers, and peripherals markets as well.12

                              Competitors In today’s global competition the lines among competitive sectors are
                              increasingly blurred. Lands’ End started as a catalog retailer. But defining its competi-
                              tors simply as other catalog retailers is a huge oversimplification. Lands’ End now
                              competes not only with other catalog retailers of clothing but with traditional department
CHAPTER 2         Developing Successful Marketing and Corporate Strategies                                                  29

                                  stores, mass merchandisers, and specialty shops. Even well-known clothing brands like
                                  Liz Claiborne now have their own chain stores. Although only some of the clothing in
                                  any of these store types competes directly with Lands’ End products, all the stores have
                                  websites for Internet selling. Which means there’s a lot of competition out there!
                                      Now part of the merged Sears-Kmart operations, Lands’ End operates not only its
                                  separate retail stores but also departments within Sears, both of which complement
                                  its catalog and Internet operations. Like all Internet retailers, it has a goal of increasing
                                  its “conversion rate,” the percentage of browsers who actually buy something on visits
                                  to the website.
                                      Compared to other big name e-tailers—or Internet retailers—Lands’ End’s conver-
                                  sion rate is among the best. This is because it has invested heavily in technology to
                                  make its site more consumer friendly, such as having a “virtual model” of a customer
                                  to let him or her “try things on” online. So successful firms like Lands’ End continuously
                                  assess both who the competitors are and how they are changing in order to respond
                                  with their own strategies.

                                  Growth Strategies: Where Do We Want to Go?
                                  Knowing where the organization is at the present time enables managers to set a direction
                                  for the firm and start to allocate resources to move toward that direction. Two techniques
                                  to aid in these decisions are (1) business portfolio and (2) market-product analyses.

                                  Business Portfolio Analysis The Boston Consulting Group’s (BCG) business
                                  portfolio analysis uses quantified performance measures and growth targets to analyze
                                  a firm’s business units (called strategic business units, or SBUs, in the BCG analysis) as
                                  though they were a collection of separate investments.13 While used at the strategic
                                  business unit level here, this BCG analysis has also been applied at the product line or
                                  individual product or brand level. More than 75 percent of the largest U.S. firms have
                                  used it in some form. BCG, a nationally known management consulting firm, advises
                                  its clients to locate the position of each of its SBUs on a portfolia analysis matrix
                                  (Figure 2–2 on the next page).

Kodak today must make a
series of difficult marketing
decisions. From what you
know about cameras and
photos, assess Kodak’s sales
opportunities for the four
products shown here. For
some possible answers
and a way to show these
opportunities graphically,
see the text and Figure 2–2.                                                                    Kodak printers (to print
                                                  Kodak digital cameras                         digital photos at home)

                                           Kodak film sold in the U.S.,                    Kodak self-service kiosks
                                          Canada, and Western Europe                           in retail outlets
30                                                                                                                  Initiating the Marketing Process        PART ONE

                                                                   40                                                                      3
  2                                                                          Stars                                       Question
                                                                                                       2                 marks

                                Market growth rate (% per year)
                                                                  High                                                 3

      Kodak digital cameras
                                                                   10                                                                       Kodak printers (to print
                                                                                                                                            digital photos at home)
                                                                     0                                                                     4
                                                                  Low                              1
                                                                                 Cash                           Dogs
                                                                         10x            High               1x      Low              0.1x
      Kodak film sales in the
       U.S., Canada, and                                                                     Relative market share                         Kodak self-service kiosks
        Western Europe                                                               (share relative to largest competitor)                    in retail outlets

Boston Consulting Group                                                The vertical axis is the market growth rate, which is the annual rate of growth of the
business portfolio analysis                                         specific market or industry in which a given SBU is competing. The horizontal axis is
for Kodak, as it might appear                                       the relative market share, defined as the sales of the SBU divided by the sales of the
in 2006                                                             largest firm in the industry. A relative market share of 10 (at the left end of the scale)
                                                                    means that the SBU has 10 times the share of its largest competitor, whereas a share of
                                                                    0.1 (at the right end of the scale) means it has only 10 percent of the sales of its
                                                                    largest competitor.
                                                                       BCG has given specific names and descriptions to the four resulting quadrants in its
                                                                    business portfolio analysis matrix based on the amount of cash they generate for or re-
                                                                    quire from the firm:
                                                                         • Cash cows are SBUs that typically generate large amounts of cash, far more than
                                                                           they can invest profitably in their own product line. They have a dominant share
                                                                           of a slow-growth market and provide cash to pay large amounts of company over-
                                                                           head and to invest in other SBUs.
                                                                         • Stars are SBUs with a high share of high-growth markets that may need extra
                                                                           cash to finance their own rapid future growth. When their growth slows, they are
                                                                           likely to become cash cows.
                                                                         • Question marks or problem children are SBUs with a low share of high-growth
                                                                           markets. They require large injections of cash just to maintain their market share,
                                                                           much less increase it. Their name implies management’s dilemma for these
                                                                           SBUs: choosing the right ones to invest in and phasing out the rest.
                                                                         • Dogs are SBUs with a low share of low-growth markets. Although they may gen-
                                                                           erate enough cash to sustain themselves, they do not hold the promise of ever be-
                                                                           coming real winners for the firm. Dropping SBUs that are dogs may be required,
                                                                           except when relationships with other SBUs, competitive considerations, or poten-
                                                                           tial strategic alliances exist.14
                                                                       A firm’s SBUs often start as question marks and go counterclockwise around Fig-
                                                                    ure 2–2 to become stars, then cash cows, and finally dogs. Because most firms have
                                                                    limited influence on the market growth rate, their main alternative in a business port-
                                                                    folio analysis framework is to try to change the relative market share. To accomplish
                                                                    this, management makes conscious decisions on what role each SBU should have in
                                                                    the future and either injects or removes cash from it.
                                                                       Four Kodak SBUs are shown as they appeared in 2006 and can serve as an example
                                                                    of BCG analysis. The area of each circle in Figure 2–2 is roughly proportional to the
CHAPTER 2   Developing Successful Marketing and Corporate Strategies                                                  31

                            corresponding SBU’s 2006 sales revenue. In a more complete analysis, its other SBUs
                            would be included. This Kodak example also shows the agonizing strategic decisions
                            Kodak faces in the camera and film business with the arrival of digital technology.
                                More than a century ago, Kodak virtually invented the photography industry. Nick-
                            named “Big Yellow” for its film packages, until about 2000 Kodak relied not on its cam-
                            eras for the bulk of its revenues and profits but on its film for the billions of photographs
                            taken every year. Two factors changed that: (1) more competition from film manufactur-
                            ers like Fuji and (2) the popularization of digital cameras that need no conventional film.
                                So in late 2003, Kodak announced a shift in its strategic priorities from film to dig-
                            ital technology. We’ll briefly compare Kodak’s position in 2003 when it commited to
                            digital technology with that in early 2006. One thing, however, is eminently clear. The
                            success of Kodak’s strategy and its product lines shown in Figure 2–2 depends on how
                            millions of consumers like you take pictures and convert your pictures into useful im-
                            ages over the next decade. Here is a snapshot of the sales opportunities of the four
                            product lines reflected in the comments of analysts:
                               1. Kodak film sales in the United States, Canada, and Western Europe. An $8 bil-
                                  lion per year “cash cow” in 2003, Kodak film sales are still its biggest single
                                  source of revenue. In its “death throes,” Kodak worldwide film sales were pro-
                                  jected to decline 10 to 12 percent per year through 2006.
                               2. Kodak digital cameras. A $1 billion business in 2003, Kodak expects its “film-
                                  less imaging market” to grow from 30 percent of its 2003 revenues to 60 percent
                                  in 2006.16 By 2006, Kodak had become a serious player in the digital camera
                                  market, ranking no. 1 in the United States with a 22 percent market share and
                                  ranking no. 3 in the world.17 Kodak clearly expects its digital cameras to be a
                                  “star” soon. The challenge: New rivals are emerging, like Nokia, which is putting
                                  advanced cameras in its cell phones.
                               3. Kodak printers (to print digital photos at home). With 82 percent of digital prints
                                  made this way in 2003, this might look like a clear BCG star with Kodak’s ex-
                                  pected new line of home printers. But with Kodak competing with established
                                  printer manufacturers like Hewlett-Packard, Canon, and now Dell, the future of
                                  this “question mark” could range from being a “dog” to a “star.”18
                               4. Kodak self-service kiosks in retail outlets. With only about 1 percent of the mar-
                                  ket in printed pictures in 2003, these self-service machines used to take up to four
                                  minutes to make an 8 10 photo from film. But by 2006 consumers are increas-
                                  ingly turning to kiosks in retail shops to make prints from their digital cameras.19
                                  As shown in Figure 2–2, an innovative technology (the kiosks) faces big un-
                                  knowns, also because Japanese copiers are well entrenched in these outlets.20
                            Are these BCG projections valid? How you use digital cameras and make their prints
                            hold the answer. Recent Kodak strategies are discussed later in the chapter.
                               The primary strength of business portfolio analysis lies in forcing a firm to place
                            each of its SBUs in the growth-share matrix, which in turn suggests which SBUs will
                            be cash producers and cash users in the future. Weaknesses are that it is often difficult
                            (1) to get the needed information and (2) to incorporate competitive information into
                            business portfolio analysis.21

                            Market-Product Analysis Firms can also view growth opportunities in terms
                            of markets and products. Let’s think of it this way: For any product there is both a cur-
                            rent market (consisting of existing customers) and a new market (consisting of poten-
                            tial customers). And for any market, there is a current product (what they’re now using)
                            and a new product (something they might use if it were developed). These four market-
                            product strategies are shown in Figure 2–3 on the next page.22
                                As Unilever attempts to increase sales revenues of its Ben & Jerry’s business, it
                            must consider all four of the alternative market-product strategies shown in Figure 2–3.
                            For example, it can try to use market penetration—a marketing strategy of increasing
32                                                                              Initiating the Marketing Process    PART ONE

Four market-product strategies:                                                 PRODUCTS
alternative ways to expand
                                     Markets                  Current                                    New
sales revenues for Ben &
Jerry’s                                          Market penetration                     Product development
                                                 Selling more Ben & Jerry’s super       Selling a new product such as
                                                 premium ice cream to Americans         children’s clothing under the Ben
                                                                                        & Jerry’s brand to Americans

                                                 Market development                     Diversification
                                      New        Selling more Ben & Jerry’s super       Selling a new product such as
                                                 premium ice cream in South             children’s clothing in South
                                                 American markets for the first time    American markets for the first time

                                  sales of present products in existing markets, in this case by increasing sales of Ben &
                                  Jerry’s present ice cream products to U.S. consumers. There is no change in either the
                                  basic product line or the market served, but increased sales are possible—either by
                                  selling more ice cream (through better promotion or distribution) or by selling the
                                  same amount of ice cream at a higher price to its existing customers.
                                     Market development, a marketing strategy of selling existing products to new mar-
                                  kets, is a reasonable alternative for Ben & Jerry’s. South America, for example, is a
                                  good possible new market. There is good news and bad news for this marketing strat-
                                  egy: As the income of South American households increases, consumers may be able
                                  to buy more ice cream, but the Ben & Jerry’s brand is relatively unknown.
                                     Product development is a marketing strategy of selling new products to existing mar-
                                  kets. Figure 2–3 shows that the firm could try leveraging the Ben & Jerry’s brand, as men-
                                  tioned earlier, by selling its own Ben & Jerry’s brand of children’s clothing in the United
                                  States. This, of course, has dangers because Americans may not be able to see a clear con-
                                  nection between the company’s expertise in ice cream and, say, children’s clothing.
                                     Diversification is a marketing strategy of developing new products and selling them
                                  in new markets. This is a potentially high-risk strategy for Ben & Jerry’s, and for most
                                  firms, because the company has neither previous production experience nor marketing
                                  experience on which to draw. For example, in trying to sell a Ben & Jerry’s brand of
                                  children’s clothing in South America, the company has expertise neither in producing
                                  children’s clothing nor in marketing to South American consumers.
                                     Which strategies will Ben and Jerry’s follow? Keep your eyes, ears, and taste buds
                                  working to discover the marketing answers.

                                  1. What are competencies and why are they important?
      Concept Check
                                  2. What is business portfolio analysis?
                                  3. What are the four market-product strategies?

                                  After the organization assesses where it’s at and where it wants to go, other questions
                                     1. How do we allocate our resources to get where we want to go?
                                     2. How do we convert our plans to actions?
                                     3. How do our results compare with our plans, and do deviations require new plans?
CHAPTER 2          Developing Successful Marketing and Corporate Strategies                                                  33

How can Ben & Jerry’s identify
new ice cream flavors and
social responsibility programs
that contribute to its mission?
The text describes how the
strategic marketing process
and its SWOT analysis can

strategic marketing                This same approach is used in the strategic marketing process, whereby
process                            an organization allocates its marketing mix resources to reach its target markets. Fig-
Approach whereby an                ure 2–4 on the next page shows this process is divided into three phases—planning,
organization allocates its         implementation, and control, and it identifies the chapters covering each topic.
marketing mix resources to            The strategic marketing process is so central to the activities of most organizations
reach its target markets
                                   that they formalize it as a marketing plan, which is a road map for the marketing
marketing plan
                                   activities of an organization for a specified future period of time, such as one year or
Road map for the marketing         five years.
activities of an organization         The following section gives an overview of the strategic marketing process that
for a specified future period      places Chapters 3 through 18 in perspective.
of time
                                   Strategic Marketing Process: The Planning Phase
                                   As shown in Figure 2–4, the planning phase of the strategic marketing process
                                   consists of the three steps shown at the top of the figure: (1) situation analysis,
                                   (2) market-product focus and goal setting, and (3) the marketing program. Let’s use
                                   the recent marketing planning experiences of several companies to look at each of
                                   these steps.

situation analysis                 Step 1: Situation (SWOT) Analysis The essence of situation analysis
Taking stock of where a firm       is taking stock of where the firm or product has been recently, where it is now, and
or product has been recently,      where it is headed in terms of the organization’s plans and the external factors and
where it is now, and where it      trends affecting it. The situation analysis box in Figure 2–4 is the first of the three steps
is headed                          in the planning phase.
                                       An effective shorthand summary of the situation analysis is a SWOT analysis,
SWOT analysis
Organization’s appraisal of
                                   an acronym describing an organization’s appraisal of its internal Strengths and Weak-
its internal strengths and         nesses and its external Opportunities and Threats. Both the situation and SWOT analy-
weaknesses and its external        ses can be done at the level of the entire organization, the business unit, the product
opportunities and threats          line, or the specific product. As an analysis moves from the level of the entire organi-
                                   zation to the specific product, it, of course, gets far more detailed. For small firms
                                   or those with basically a single product line, an analysis at the firm or product level is
                                   really the same thing.
34                                                                                 Initiating the Marketing Process   PART ONE

                                                     Planning phase

                   Step 1                                 Step 2                               Step 3

             Situation (SWOT)                     Market-product focus                 Marketing program
                 analysis                           and goal setting                    Chapters 10 – 18
               Chapters 2–8                        Chapters 9 and 10
          • Identify industry trends             • Set market and product            • Develop the program’s
          • Analyze competitors                    goals                               marketing mix
          • Assess own company                   • Select target markets             • Develop the budget, by
          • Research customer                    • Find points of difference           estimating revenues
                                                 • Position the product                expenses, and profits

                                                      Marketing plan

                                                  Implementation phase

                                                                                                                       Corrective Actions
                                                       Chapter 2

                                              • Obtain resources
                                              • Design marketing organization
                                              • Develop schedules
                                              • Execute marketing program


                                                      Control phase
                                                       Chapter 2

                                             • Compare results with plans to
                                               identify deviations

                                             • Act to correct negative
                                               deviations; exploit positive ones

The strategic marketing
process                             The SWOT analysis is based on an exhaustive study of the four areas shown in step 1
                                 of the planning phase of the strategic marketing process (Figure 2–4). Knowledge of
                                 these areas forms the foundation on which the firm builds its marketing program:
                                       •   Identifying trends in the firm’s industry.
                                       •   Analyzing the firm’s competitors.
                                       •   Assessing the firm itself.
                                       •   Researching the firm’s present and prospective customers.
                                    Let’s assume you are the Unilever vice president responsible for integrating Ben &
                                 Jerry’s into Unilever’s business. You might do the SWOT analysis shown in Figure 2–5.
                                 Note that your SWOT table has four cells formed by the combination of internal versus
                                 external factors (the rows) and favorable versus unfavorable factors (the columns) that
                                 summarize Ben & Jerry’s strengths, weaknesses, opportunities, and threats.
                                    A SWOT analysis helps a firm identify the strategy-related factors in these four cells
                                 that can have a major effect on the firm. The goal is not simply to develop the SWOT
                                 analysis but to translate the results of the analysis into specific actions to help the firm
                                 grow and succeed. The ultimate goal is to identify the critical factors affecting the firm
                                 and then build on vital strengths, correct glaring weaknesses, exploit significant
                                 opportunities, and avoid disaster-laden threats. That is a big order.
CHAPTER 2         Developing Successful Marketing and Corporate Strategies                                                    35

Ben & Jerry’s: a SWOT                                                        TYPE OF FACTOR
analysis to get it growing            Location
                                      of Factor                Favorable                           Unfavorable
                                                    Strengths                            Weaknesses
                                                    • Prestigious, well-known brand      • Danger that B&J’s social
                                                      name among U.S. consumers            responsibility actions may
                                                    • 40 percent share of the U.S.         add costs, reduce focus
                                                      super premium ice cream              on core business
                                      Internal        market                             • Need for experienced
                                                    • Can complement Unilever’s            managers to help growth
                                                      existing ice cream brands          • Flat sales and profits in recent
                                                    • Widely recognized for its social     years
                                                      responsibility actions

                                                    Opportunities                        Threats
                                                    • Growing demand for quality         • Consumer concern with fatty
                                                      ice cream in overseas markets        desserts; B&J customers are
                                                    • Increasing U.S. demand for           the type who read new
                                                      frozen yogurt and other low-fat      government-ordered
                                         External     desserts                             nutritional labels
                                                    • Success of many U.S. firms in      • Competes with giant Pillsbury
                                                      extending successful brand in        and its Häagen-Dazs brand
                                                      one product category to others     • International downturns
                                                                                           increase the risks for B&J in
                                                                                           European and Asian markets

                                     The Ben and Jerry’s SWOT analysis in Figure 2–5 can be the basis for these kinds
                                  of specific actions. An action in each of the four cells might be:
                                     • Build on a strength. Find specific efficiencies in distribution with Unilever’s ex-
                                       isting ice cream brands.
                                     • Correct a weakness. Recruit experienced managers from other consumer product
                                       firms to help stimulate growth.
                                     • Exploit an opportunity. Develop a new line of low-fat frozen yogurts to respond
                                       to consumer health concerns.
                                     • Avoid a disaster-laden threat. Focus on less risky international markets, such as
                                       Canada and Mexico.
                                     Examples of more in-depth study in these four areas appear in the SWOT analysis
                                  in Figure A–1 in the marketing plan in Appendix A and the chapters in this textbook
                                  cited in that plan.

                                  Step 2: Market-Product Focus and Goal Setting Determining which
                                  products will be directed toward which customers (step 2 of the planning phase in
                                  Figure 2–4) is essential for developing an effective marketing program (step 3). This
market segmentation               decision is often based on market segmentation, which involves aggregating
Sorting potential buyers into     prospective buyers into groups, or segments, that (1) have common needs and (2) will
groups that have common           respond similarly to a marketing action. Ideally, a firm can use market segmentation to
needs and will respond            identify the segments on which it will focus its efforts—its target market segments—
similarly to a marketing action   and develop one or more marketing programs to reach them.
                                     As always, understanding the customer is essential. In the case of Medtronic, exec-
                                  utives researched a potential new market in Asia by talking extensively with doctors in
                                  India and China. They learned that these doctors saw some of the current state-of-the-
                                  art features of heart pacemakers as unnecessary and too expensive. Instead, they
                                  wanted an affordable pacemaker that was reliable and easy to implant. This informa-
                                  tion led Medtronic to develop and market a new product, the Champion heart pace-
                                  maker, directed at the needs of this Asian market segment.
36                                                                              Initiating the Marketing Process    PART ONE

                                                                    Goal setting involves setting measurable marketing ob-
                                                                 jectives to be achieved. Such objectives would be differ-
                                                                 ent depending on the level of marketing involved. For a
                                                                 specific market, the goal may be to introduce a new prod-
                                                                 uct, such as Medtronic’s Champion pacemaker in Asia or
                                                                 Toyota’s launch of its hybrid car, the Prius. For a specific
                                                                 brand or product, the goal may be to create a promotional
                                                                 campaign or pricing strategy that will get more con-
                                                                 sumers to purchase. For an entire marketing program, the
                                                                 objective is often a series of actions to be implemented
                                                                 over several years.
                                                                    Using the strategic marketing process shown in Fig-
                                                                 ure 2–4, let’s examine Medtronic’s five-year plan to reach
                                                                 the “affordable and reliable” segment of the pacemaker
The Champion: Medtronic’s
high-quality, long-life, low-cost     • Set marketing and product goals. The chances of new-product success are increased
heart pacemaker for an Asian            by specifying both market and product goals. Based on their market research show-
market segment.                         ing the need for a reliable yet affordable pacemaker, Medtronic executives set the fol-
                                        lowing as their goal: Design and market such a pacemaker in the next three years that
                                        could be manufactured in China for the Asian market.
                                      • Select target markets. The Champion pacemaker will be targeted at cardiologists
                                        and medical clinics performing heart surgery in India, China, and other Asian
points of difference                  • Find points of difference. Points of difference are those characteristics of a
Those characteristics of a              product that make it superior to competitive substitutes. Just as a competitive ad-
product or service that make it         vantage is a unique strength of an entire organization compared to its competitors,
superior to competitive                 points of difference are unique characteristics of one of its products that make it
                                        superior to competitive products it faces in the marketplace. For the Champion
                                        pacemaker, the key points of difference are not the state-of-the-art features that
                                        drive up production costs and are important to only a minority of patients. Instead,
                                        they are high quality, long life, reliability, ease of use, and low cost.
                                      • Position the product. The pacemaker will be “positioned” in cardiologists’ and pa-
                                        tients’ minds as a medical device that is high quality and reliable with a long,
                                        nine-year life. The name Champion is selected after testing acceptable names
                                        among doctors in India, China, Pakistan, Singapore, and Malaysia.
                                       Details in these four elements of step 2 provide a solid foundation to use in devel-
                                    oping the marketing program, the next step in the planning phase of the strategic mar-
                                    keting process.

                                    Step 3: Marketing Program Activities in step 2 tell the marketing manager which
                                    customers to target and which customer needs the firm’s product offerings can satisfy—
                                    the who and what aspects of the strategic marketing process. The how aspect—step 3 in
                                    the planning phase—involves developing the program’s marketing mix and its budget.
                                       Figure 2–6 shows components of each marketing mix element that are combined to
                                    provide a cohesive marketing program. For the five-year marketing plan of Medtronic,
                                    these marketing mix activities include the following:
                                      • Product strategy. Offer a Champion brand heart pacemaker with features needed
                                        by Asian patients at an affordable price.
                                      • Price strategy. Manufacture Champion to control costs so that it can be priced be-
                                        low $1,000 (in U.S. dollars)—a fraction of the price of the state-of-the-art pace-
                                        makers offered in Western markets.
                                      • Promotion strategy. Feature demonstrations at cardiologist and medical conven-
                                        tions across Asia to introduce the Champion and highlight the device’s features
                                        and application.
CHAPTER 2        Developing Successful Marketing and Corporate Strategies                                                   37

Elements of the marketing                                                   Marketing
mix that comprise a cohesive
marketing program

                                        Product             Price                 Promotion                Place
                                        Features            List price            Advertising              Outlets
                                        Brand name          Discounts             Personal selling         Channels
                                        Packaging           Allowances            Sales promotion          Coverage
                                        Service             Credit terms          Public relations         Transportation
                                        Warranty            Payment period        Direct marketing         Stock level

                                                                                            Cohesive marketing program


                                                                                        Product               Place


                                    •   Place (distribution) strategy. Search out, utilize, and train reputable medical dis-
                                        tributors across Asia to call on cardiologists and medical clinics.
                                   Putting this marketing program into effect requires that the firm commit time and
                                 money to it in the form of a sales forecast and budget that must be approved by top

                                 1. What is the difference between a strength and an opportunity in a SWOT analysis?
      Concept Check
                                 2. What is market segmentation?
                                 3. What are points of difference and why are they important?

                                 Strategic Marketing Process: The Implementation Phase
                                 As shown in Figure 2–4, the result of the tens or hundreds of hours spent in the plan-
                                 ning phase of the strategic marketing process is the firm’s marketing plan. Implemen-
                                 tation, the second phase of the strategic marketing process, involves carrying out the
                                 marketing plan that emerges from the planning phase. If the firm cannot put the mar-
                                 keting plan into effect—in the implementation phase—the planning phase was a waste
                                 of time. Figure 2–4 also shows the four components of the implementation phase:
                                 (1) obtaining resources, (2) designing the marketing organization, (3) developing
                                 schedules, and (4) actually executing the marketing program designed in the planning
                                 phase. Eastman Kodak provides a case example.

                                 Obtaining Resources In late 2003, Kodak announced a bold plan (discussed
                                 earlier) to reenergize the filmmaker for the new age of digital cameras and prints.
                                 Kodak needed money to implement the plan, so it cut shareholder dividends by 72 per-
                                 cent to invest the $3 billion saved in Kodak’s digital technologies.24 And in early 2004,
38                                                                               Initiating the Marketing Process    PART ONE


       Vice                Vice              Vice                   Vice                 Vice                   Vice
       President           President         President              President*           President              President
       Information         Research and      Manufacturing          Marketing            Accounting             Human
       Systems             Development       Department             Department           and Finance            Resources
                           Department                                                    Department             Department

                     Manager              Manager                    Manager                 Manager
                     Product              Marketing                  Sales                   Advertising
                     Planning             Research                                           and Promotion

                                                                  Sales Regions

     *Called chief marketing officer (CMO) in some corporations

Organization of a typical
                                  Kodak announced a painful cut of up to 15,000 jobs over the next three years to add
manufacturing firm, showing a
                                  more money to invest in Kodak’s digital future.25
breakdown of the marketing
                                  Designing the Marketing Organization A marketing program needs a mar-
                                  keting organization to implement it. Figure 2–7 shows the organization chart of a typ-
                                  ical manufacturing firm, giving some details of the marketing department’s structure.
                                  Four managers of marketing activities are shown to report to the vice president of mar-
                                  keting. Regional sales managers and an international sales manager may report to the
                                  manager of sales. This marketing organization is responsible for converting marketing
                                  plans to reality as a part of the corporate team.
                                     In the 1990s a number of large consumer products firms changed the title of the
                                  head of the marketing department from “vice president of marketing” to “chief mar-
                                  keting officer” (CMO), but the responsibilities have stayed largely the same.26

                                  Developing Schedules Effective implementation requires goals, deadlines, and
                                  schedules. To implement Kodak’s plan to focus on its digital business opportunities,
                                  Kodak set some key goals:27
                                     • Boost sales from $13 billion in 2003 to $16 billion in 2006 and $20 billion
                                       in 2010.
                                     • Increase the share of Kodak’s revenues from its digital businesses from 30 percent
                                       in 2003 to 60 percent in 2006.
                                     To achieve these goals, Kodak acquired and partnered with firms having digital ex-
                                  pertise, and launched new lines of digital cameras.

                                  Executing the Marketing Program Marketing plans are meaningless pieces of
                                  paper without effective execution of those plans. This effective execution requires atten-
marketing strategy                tion to detail for both marketing strategies and marketing tactics. A marketing strat-
Means by which a marketing        egy is the means by which a marketing goal is to be achieved, usually characterized by
goal is to be achieved            a specified target market and a marketing program to reach it. Although the term mar-
                                  keting strategy is often used loosely, it implies both the end sought (target market) and
CHAPTER 2          Developing Successful Marketing and Corporate Strategies                                                                        39

                                                                        the means to achieve it (marketing program). At this marketing strategy
                                                                        level, Kodak will seek to increase sales not only of digital cameras but also
                                                                        of film cameras and film in emerging markets like India, China, and East-
                                                                        ern Europe where low prices, simplicity, and convenience are important.28
                                                                           To implement a marketing program successfully, hundreds of detailed de-
                                                                        cisions are often required. These decisions, called marketing tactics,
                                                                        are detailed day-to-day operational decisions essential to the overall success
                                                                        of marketing strategies. At Kodak, writing ads and setting prices for its new
                                                                        lines of digital cameras are examples of marketing tactics.
                                                                           Marketing strategies and marketing tactics shade into each other. Ef-
                                                                        fective marketing program implementation requires excruciating concern
                                                                        for both.

                                                                        Strategic Marketing Process: The Control Phase
                                                The control phase of the strategic marketing process seeks to keep the
                                                marketing program moving in the direction set for it (see Figure 2–4). Ac-
                                                complishing this requires the marketing manager (1) to compare the re-
                                                sults of the marketing program with the goals in the written plans to
Kodak is pursuing opportunities    identify deviations and (2) to act on these deviations—correcting negative deviations
for sales of digital cameras—      and exploiting positive ones.
along with sales of film
cameras and film in China.         Comparing Results with Plans to Identify Deviations In late 2003, as
                                   Kodak executives looked at the company’s sales revenues from 1998 through 2003,
                                   they didn’t like what they saw: the very flat trend, or AB in Figure 2–8. Extending the
marketing tactics                  1998–2003 trend to 2010 along BC continues the flat sales revenues, a totally unac-
Detailed day-to-day                ceptable, no-growth strategy.
operational decisions                 Kodak set a growth target of 6 percent annually, the line BD in Figure 2–8 that will
essential to the overall success
                                   give sales revenues of $16 billion in 2006 and $20 billion in 2010. This reveals a
of marketing strategies
                                   wedge-shaped shaded gap in the figure. Planners call this the planning gap, the differ-
                                   ence between the projection of the path to reach a new goal (line BD) and the projec-
                                   tion of the path of the results of a plan already in place (line BC).
                                      The ultimate purpose of the firm’s marketing program is to “fill in” this planning
                                   gap—in Kodak’s case, to move its future sales revenue line from the no-growth line
                                   BC up to the challenging target of line BD. But poor performance can result in actual
                                   sales revenues being far less than the targeted levels. This is the essence of evaluation:
                                   comparing actual results with planned objectives.

Evaluation and control of
Kodak’s marketing program,
                                                                                                                     Target sales
                                               Annual sales revenues ($billions)

showing Kodak’s planning gap                                                                                         revenues with          D
                                                                                                                     new plans
                                                                                    18                               and actions
                                                                                               Actual sales
                                                                                    16         revenues
                                                                                    14                                       Planning gap
                                                                                    12                        B                             C
                                                                                                                     Sales revenues
                                                                                                                     without new plans
                                                                                                                     and actions
                                                                                                  Past                       Future
                                                                                        1998   2000   2002        2004   2006     2008      2010
40                                                                                  Initiating the Marketing Process       PART ONE

                                    Acting on Deviations When evaluation shows that actual performance fails to
                                    meet expectations, managers need to take corrective actions. And when actual results
                                    are far better than the plan called for, creative managers find ways to exploit the situa-
                                    tion. Two possible Kodak midcourse corrections for both positive and negative devia-
                                    tions from targets illustrate these management actions:
                                        • Exploiting a positive deviation. If Kodak’s film strategy in India and China shows
                                          promise, it might partner with more local companies to produce cameras and film
                                          and to process film.29
                                        • Correcting a negative deviation. However, if Indian and Chinese consumers
                                          choose to skip film cameras and jump directly to digital ones, Kodak will likely
                                          need to develop a digital camera strategy for these consumers.
                                    The Kodak ad for digital cameras on the previous page directed at Chinese consumers
                                    suggests it is rethinking its Asian strategy that stresses film cameras.

                                    1. What is the control phase of the strategic marketing process?
       Concept Check
                                    2. How do the objectives set for a marketing program in the planning phase relate to
                                       the control phase of the strategic marketing process?

1 Describe the three organizational levels of strategy.              global perspective to determine whether any business defini-
Most large business firms and nonprofit organizations are di-        tion modifications are needed. The second question, Where do
vided into three levels of strategy: (a) the corporate level,        we want to go?, requires an organization to actually set a di-
where top management directs overall strategy for the entire         rection and allocate resources to move it in that direction. Busi-
organization; (b) the business unit level, where business unit       ness portfolio and market-product analyses are two useful
managers set the direction for their products and markets to         techniques to do this.
exploit value-creating opportunities; and (c) the functional         4 Describe the strategic marketing process and its three key
level, where groups of specialists actually create value for the     phases: planning, implementation, and control.
organization.                                                        An organization uses the strategic marketing process to allo-
2 Describe why business, mission, organizational culture,            cate its marketing mix resources to reach its target markets.
and goals are important in organizations.                            This process consists of three phases, which are usually for-
Organizations exist to accomplish something for someone. To          malized in a marketing plan. The planning phase consists of
give organizations direction and focus, they continuously assess     (a) a situation (SWOT) analysis of the organization’s strengths,
their business, mission, organizational culture, and goals. First,   weaknesses, opportunities, and threats; (b) a market-product
an organization defines what its business is—the set of cus-         focus through market segmentation, points of difference analy-
tomer needs, such as transportation, it wants to satisfy. Next, an   sis, and goal setting; and (c) a marketing program that specifies
organization defines its mission, which is a statement that de-      the budget and activities (marketing strategies and tactics) for
scribes its customers, markets, and products and inspires loyalty    each marketing mix element. The implementation phase carries
from its stakeholders. An organization’s culture serves to con-      out the marketing plan that emerges from the planning phase. It
nect it with its stakeholders based on a set of shared values,       has four key elements: obtaining resources, designing the mar-
ideas, and attitudes. Finally, the organization’s goals measure      keting organization, developing schedules, and executing the
how well it accomplishes its mission at each organizational          marketing program. The control phase compares the results
level by providing specific targeted levels of performance to be     from the implemented marketing program with the marketing
achieved, such as sales and profits, by a specific time period.      plan’s goals to identify the “planning gaps” and take actions to
3 Explain how organizations set strategic directions by as-          exploit positive deviations or correct negative ones.
sessing where they are now and seek to be in the future.             5 Explain how the marketing mix elements are blended into a
Managers of an organization ask two key questions to set a           cohesive marketing program.
strategic direction. The first question, Where are we now?, re-      A marketing manager uses information obtained during the
quires an organization to (a) assess its customers to determine      SWOT analysis, market-product focus, and goal-setting steps
whether its direction must be modified based on changes in           in the planning process to develop marketing strategies and
consumer trends; (b) reevaluate its competencies to ensure that      marketing tactics for each marketing mix element for a given
its special capabilities still provide a competitive advantage;      product, which are then implemented, as specified in the mar-
and (c) analyze its current and potential competitors from a         keting plan, as a marketing program.
CHAPTER 2         Developing Successful Marketing and Corporate Strategies                                                   41

goals p. 27                                                       objectives p. 27
marketing plan p. 33                                              organizational culture p. 26
marketing strategy p. 38                                          points of difference p. 36
marketing tactics p. 39                                           profit p. 24
market segmentation p. 35                                         situation analysis p. 33
market share p. 27                                                strategic marketing process p. 33
mission p. 25                                                     SWOT analysis p. 33

1    (a) Explain what a mission statement is. (b) Using           5   Select one strength, one weakness, one opportunity,
Medtronic as an example from the chapter, explain how             and one threat from the SWOT analysis for Ben &
it gives a strategic direction to its organization. (c) Create    Jerry’s shown in Figure 2–5, and suggest a specific pos-
a mission statement for your own career.                          sible action that Unilever might take to exploit or address
2 What competencies best describe (a) your college or             each one.
university, (b) your favorite restaurant, and (c) the com-        6 The goal-setting step in the planning phase of the
pany that manufactures the computer you own or use                strategic marketing process sets quantified objectives for
most often?                                                       use in the control phase. What actions are suggested for
3 Why does a product often start as a question mark               a marketing manager if measured results are below ob-
and then move counterclockwise around BCG’s growth-               jectives? Above objectives?
share matrix shown in Figure 2–2?
4 What is the main result of each of the three phases of
the strategic marketing process? (a) planning, (b) imple-
mentation, and (c) control.

    GOING ONLINE How Mission Statements Compare                                                     

Medtronic is the global leader in developing and market-          1 What stakeholders are specifically mentioned or im-
ing medical technology solutions, generating over $9 bil-         plied in Medtronic’s mission? What values are associated
lion in sales by 2005. Every six seconds, someone in              with each stakeholder?
over 120 countries benefits from a Medtronic product or           2 What is the scope of Medtronic’s mission? Why does
therapy, such as a cardiac pacemaker, a pain management           Medtronic limit its scope?
system, or implantable insulin pump. Go to Medtronic’s            3 Why does Medtronic NOT define itself as being in
website (                the “medical device” business?
and assess its mission.


1   Read Appendix A, “Building an Effective Marketing             2   Using Chapter 2 and Appendix A as guides, give fo-
Plan.” Then write a 600-word executive summary for the            cus to your marketing plan by (a) writing your mission
Paradise Kitchens marketing plan using the numbered               statement in 25 words or less, (b) listing three nonfinan-
headings shown in the plan. When you have completed               cial goals and three financial goals, (c) writing your com-
the draft of your own marketing plan, use what you                petitive advantage in 35 words or less, and (d) doing a
learned in writing an executive summary for Paradise              SWOT analysis table.
Kitchens to write a 600-word executive summary to go in
the front of your own marketing plan.
42                                                                         Initiating the Marketing Process   PART ONE

     VIDEO CASE 2 Yoplait® USA: Portrait of a Turnaround

The year is 1992 and Yoplait® USA is in trouble!              who spoke French fluently, and Los Angeles Dodgers’
   This is a far different situation than early years at      manager Tommy Lasorda, who clearly didn’t.
Yoplait, USA, a subsidiary of General Mills, Inc. But the       Yoplait’s quality and taste appealed to consumers.
problems are serious and some difficult, critical decisions   And Yoplait experienced extraordinary success.
must be made.
                                                              COMPLACENCY VS. CONSTRUCTIVE
RESEARCHING THE IDEA                                          RESTLESSNESS
The idea for Yoplait began a decade earlier when top          As the brand grew, however, its managers became com-
management at General Mills asked Steven M. Rothschild        placent. Although Yoplait was No. 2 nationally, its mar-
to head a team to investigate yogurt as a new business        ket share and profitability began to decline.
opportunity for the company.                                     Fast forward several years to 1992 and Chap Colucci,
   Even though General Mills had never before pro-            Yoplait USA’s newly named vice president of marketing
duced and marketed a refrigerated product, Rothschild         and sales. His job: Turn things around at Yoplait USA...
and the team believed that a yogurt product would be a        and quickly!
good match for the company because it was a product                                   “A little bit of constructive rest-
for which the firm’s skills in posi-                                               lessness is good,” says Colucci, “be-
tioning, advertising, packaging, and                                               cause you can become too satisfied
promotion would provide an advan-                                                  with your own success, with the sta-
tage over competition. Based on the                                                tus quo. You take your foot off the
team’s analysis, General Mills de-                                                 gas and things begin to stall.”
cided to enter the yogurt market!                                                     Colucci conducted a situation
                                                                                   analysis in preparation for develop-
LAUNCHING YOPLAIT                                                                  ing a new marketing strategy for
                                                                                   Yoplait USA. His analysis turned up
IN THE U.S.                                                                        some serious concerns, including:
General Mills saved time by buying                                                 1 High retail prices. Yoplait’s
the rights to market Yoplait yogurt in                                             price for a six-ounce cup was actu-
the United States from Sodima, a                                                   ally higher than competitors’ eight-
large French company. This decision                                                ounce cups. For example, the prices
gave General Mills access to Yoplait’s                                             on Yoplait’s 4 Pack were about
technology and expertise related to                                                20 percent higher per cup than
producing and distributing a refriger-                                             Dannon’s and Kraft’s 6 Pack.
ated product.                                                                      2 Low gross margins. Margins had
   At that time Yoplait was the best-                                              declined, at least partly because of
selling yogurt in France. Marketing                                                high production and overhead costs.
research revealed what consumers perceived as Yoplait’s       3 Unbalanced promotion spending mix. Most promo-
key benefits: (1) 100 percent natural yogurt without arti-    tional expenditures were directed at retailers and whole-
ficial sweeteners or preservatives, (2) real fruit mixed      salers rather than consumers.
throughout, and (3) outstanding taste with a creamy           4 Lack of continued effective advertising. Yoplait had
texture.                                                      been living off the great “The Yogurt of France” series of
   Rothschild and his team at Yoplait USA moved               print ads and TV commercials that launched the product
quickly to gain acceptance for Yoplait as a national brand    without a similar creative follow-up campaign.
among American consumers. In several brilliant market-        5 Few coupons offered. Yoplait had cut back on consumer
ing decisions, they first packaged Yoplait yogurt in a        coupons, while its competitors had heavy couponing.
unique conical shape containing 6 ounces of yogurt—not        6 Few new products. While Yoplait had developed a
the conventional 8 ounces—because marketing research          Lite product line extension, there were very few new
showed consumers really didn’t want the larger amount.        products in development.
The team gained consumer awareness and trial by posi-         7 Geographic marketing organization. Yoplait was or-
tioning it exotically as “The Yogurt of France” that used     ganized geographically with three regions—Eastern,
television ads featuring “typical Americans” eating           Central, and Western. This organization had caused
Yoplait and extolling its virtues in French! The “typical     marketing managers to focus on geography, not basic
Americans” were actor Loretta Swit (from M*A*S*H),            marketing.
CHAPTER 2        Developing Successful Marketing and Corporate Strategies                                                  43

                                                                     •   Yoplait UltraTM, a low carb yogurt
                                                                     •   Yoplait Nouriche®, a yogurt smoothie
                                                                 Some brands in Yoplait’s product line are shown in the
                                                                 photo below.
                                                                    Chap Colucci’s “constructive restlessness” had helped
                                                                 lay the foundation for today’s Yoplait successes.


                                                                 1   Chap Colucci’s analysis suggested that Yoplait brand
                                                                 managers may have relied too long on the early success
                                                                 of the brand. Analyze each of the seven concerns Colucci
These observations became the basis for Colucci and his          faced and (a) identify the implementations for Yoplait
team to develop a strategic marketing program.                   USA of each concern, (b) suggest possible planning and
                                                                 implementation actions, and (c) describe possible control
                                                                 measures that might be used.
YOPLAIT USA TODAY                                                2 In light of your answers to question 1 above, today
Fast forward another dozen years to today. Yoplait USA           what should Yoplait USA’s strategy be for its Yoplait
has an incredible array of product line extensions. Recent       product line in terms of (a) points of difference, (b) target
product line extensions include:                                 markets, and (c) 4 Ps activities?
  •   Go-GURT®, “portable yogurt” for kids
  •   Yoplait Light, a low-calorie yogurt

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