2 Reviewing and Extending the Concepts

Objectives Review and Key Terms

Objectives Review

In Chapter 1, we defined marketing and outlined the steps in the marketing process. In this chapter, we examined company-wide strategic planning and marketing’s role in the organization. Then we looked more deeply into marketing strategy and the marketing mix and reviewed the major marketing management functions. So you’ve now had a pretty good overview of the fundamentals of modern marketing.

Objective 2-1 Explain company-wide strategic planning and its four steps. (pp 4042)

Strategic planning sets the stage for the rest of the company’s planning. Marketing contributes to strategic planning, and the overall plan defines marketing’s role in the company.

Strategic planning involves developing a strategy for long-run survival and growth. It consists of four steps: (1) defining the company’s mission, (2) setting objectives and goals, (3) designing a business portfolio, and (4) developing functional plans. The company’s mission should be market oriented, realistic, specific, motivating, and consistent with the market environment. The mission is then transformed into detailed supporting goals and objectives, which in turn guide decisions about the business portfolio. Then each business and product unit must develop detailed marketing plans in line with the company-wide plan.

Objective 2-2 Discuss how to design business portfolios and develop growth strategies. (pp 4248)

Guided by the company’s mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company. The firm wants to produce a business portfolio that best fits its strengths and weaknesses to opportunities in the environment. To do this, it must analyze and adjust its current business portfolio and develop growth and downsizing strategies for adjusting the future portfolio. The company might use a formal portfolio-planning method. But many companies are now designing more-customized portfolio-planning approaches that better suit their unique situations.

Objective 2-3 Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value. (pp 4849)

Under the strategic plan, the major functional departments—marketing, finance, accounting, purchasing, operations, information systems, human resources, and others—must work together to accomplish strategic objectives. Marketing plays a key role in the company’s strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities. Within individual business units, marketing designs strategies for reaching the unit’s objectives and helps to carry them out profitably.

Marketers alone cannot produce superior value for customers. Marketers must practice partner relationship management, working closely with partners in other departments to form an effective value chain that serves the customer. And they must also partner effectively with other companies in the marketing system to form a competitively superior value delivery network.

Objective 2-4 Describe the elements of a customer value–driven marketing strategy and mix and the forces that influence them. (pp 5055)

Customer engagement, value, and relationships are at the center of marketing strategy and programs. Through market segmentation, targeting, differentiation, and positioning, the company divides the total market into smaller segments, selects segments it can best serve, and decides how it wants to bring value to target consumers in the selected segments. It then designs an integrated marketing mix to produce the response it wants in the target market. The marketing mix consists of product, price, place, and promotion decisions (the four Ps).

Objective 2-5 List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment. (pp 5560)

To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control. The main components of a marketing plan are the executive summary, the current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programs, budgets, and controls. Planning good strategies is often easier than carrying them out. To be successful, companies must also be effective at implementation—turning marketing strategies into marketing actions.

Marketing departments can be organized in one way or a combination of ways: functional marketing organization, geographic organization, product management organization, or market management organization. In this age of customer relationships, more and more companies are now changing their organizational focus from product or territory management to customer relationship management. Marketing organizations carry out marketing control, both operating control and strategic control.

More than ever, marketing accountability is the top marketing concern. Marketing managers must ensure that their marketing dollars are being well spent. In a tighter economy, today’s marketers face growing pressures to show that they are adding value in line with their costs. In response, marketers are developing better measures of marketing return on investment. Increasingly, they are using customer-centered measures of marketing impact as a key input into their strategic decision making.

Key Terms

Objective 2-1

Objective 2-2

Objective 2-3

Objective 2-4

Objective 2-5

Discussion and Critical Thinking

MyMarketingLab

Go to mymktlab.com to complete the problems marked with this icon A blue star icon..

Discussion Questions

  1. 2-1 Define strategic planning and briefly describe the four steps that lead managers and the firm through the strategic planning process. Discuss the role marketing plays in this process. (AASCB: Communication)

  2. A blue star icon. 2-2 Name and define the four product/market growth strategies in the product/market expansion grid. Provide an example of a company implementing each strategy. (AACSB: Communication; Reflective Thinking)

  3. 2-3 Describe the differences between a value chain and a value delivery network. (AACSB: Communication, Reflective Thinking)

  4. A blue star icon. 2-4 Discuss the elements of the integrated marketing mix. Explain how marketers use these tools to position products and services. (AACSB: Communication; Reflective Thinking)

  5. 2-5 Why must marketers practice marketing control, and how is it done? (AACSB: Communication)

Critical Thinking Exercises

  1. 2-6 As a student you have individual experiences with your college or university. These may include managing the application process, enrolling, orientation, choosing a major, setting schedules, and many more. Conduct a SWOT analysis for your school from your perspective. Discuss how your SWOT analysis would provide strategic insight for future decisions at your college or university. (AACSB: Communication; Reflective Thinking)

  2. A blue star icon. 2-7 Examine Starbucks and determine how its marketers have positioned the company relative to the competition. How has Starbucks used differentiation to create customer value? (AACSB: Communication)

  3. 2-8 Create a mission statement for a nonprofit organization you would be interested in starting. Have another student evaluate your mission statement while you evaluate the other student’s statement, suggesting areas of improvement. (AACSB: Communication; Reflective Thinking)

Applications and Cases

Online, Mobile, and Social Media Marketing Google’s (Alphabet’s) Mission

Founded in 1998 as an internet search engine, Google’s mission statement remains the same to this day: to “organize the world’s information and make it universally accessible and useful.” Google is certainly successful, with revenues growing from $3.2 billion in 2002 to $74.5 billion in 2015, 90 percent of which comes from advertisers. Google is expanding rapidly into other areas well beyond its search engine, such as self-driving cars, smart contact lenses that measure a person’s blood sugar levels, internet-bearing balloons to create internet hotspots anywhere on earth, and even magnetic nanoparticles to search for disease within the human bloodstream. In fact, Google has innovated into so many diverse new ventures that it recently created a broader organization—a parent holding company called Alphabet—to contain them all. Google/Alphabet has been on a buying frenzy recently, purchasing security, biotech, and robotic companies in a quest to capitalize on the Internet of Things (IoT) phenomenon. Experts predict there will be 25 million connected devices in our homes and workplaces by 2020. Google recently announced its new IoT operating system, dubbed Brillo (after the Brillo scrubbing pad because it is a scrubbed-down version of its Android operating system), targeted to developers of smart products connected to the internet, such as ovens, thermostats, and even toothbrushes. It’s also developed Weave, the corresponding IoT language that will allow smart products to speak to each other. Perhaps one day you will be sitting in your Google/Alphabet self-driving car, streaming the news, checking your blood sugar, and cooling your home by turning down your thermostat on the way home from work.

  1. 2-9 Conduct research on Google/Alphabet to learn more about its products and services. Some say the time has come for Google to create a new mission statement. Do you agree? Explain. (AACSB: Communication; Reflective Thinking)

  2. 2-10 Create a new mission statement for Google/Alphabet that will take it through the rest of this century. (AACSB: Communication; Reflective Thinking)

Marketing Ethics Creating Value or Distracting Consumers?

In early 2014, Chipotle Mexican Grill announced that it would stop using genetically modified ingredients (GMOs) in its restaurants. Many observers applauded this move. However, critics of the fast-food chain cited a lack of evidence to support its anti-GMO stance. They suspected that Chipotle’s anti-GMO claim was simply a ploy to distract consumers from a larger issue: the company’s risky sanitation practices. Chipotle’s anti-GMO policies may have won the burrito chain some health-conscious customers, but at the same time customers were becoming sick after eating at some Chipotle locations, calling into question the firm’s food handling and safety practices.

Steve Ells, founder and co-CEO of Chipotle, said the GMO decision was “another step toward the visions we have of changing the way people think about and eat fast food. Just because food is served fast doesn’t mean it has to be made with cheap raw ingredients, highly processed with preservatives and fillers and stabilizers and artificial colors and flavors.” However, ridding Chipotle’s supply chain of genetically altered components proved difficult. The chain discovered GMOs in basic ingredients such as baking powder, cornstarch, canola and soy oils, corn meal, and sugar. And many non-GMO ingredients were in short supply. For example, at one point, Chipotle found that it could not supply all its locations with enough non-GMO pork to make carnitas. Given the supply chain challenges, Chipotle decided to use non-GMO products in its food preparation but to continue to serve some soft drinks with sweeteners derived from genetically engineered corn.

  1. 2-11 Has Chipotle’s focus on eliminating GMOs created value for its customers? Defend this market strategy. (AACSB: Communication; Ethical Reasoning)

  2. 2-12 From an ethics standpoint, discuss Chipotle’s focus on sourcing non-GMO food products versus attention to food safety. The company’s oversights in food safety resulted in numerous customers becoming ill (E. coli, norovirus, and salmonella). Discuss the challenges Chipotle faces in overcoming the negative image that resulted. (AACSB: Communication; Reflective Thinking; Ethical Reasoning)

Marketing by the Numbers Apple vs. Microsoft

In 2014, Apple reported profits of more than $50 billion on sales of $182 billion. For that same period, Microsoft posted a profit of almost $30 billion on sales of $88 billion. So Apple is a better marketer, right? Sales and profits provide information to compare the profitability of these two competitors, but between these numbers is information regarding the efficiency of marketing efforts in creating those sales and profits. Appendix 2, Marketing by the Numbers, discusses other marketing profitability measures beyond the return on marketing investment (marketing ROI) measure described in this chapter. Review the Appendix to answer the questions using the following information from the two companies’ incomes statements (all numbers are in thousands):

Apple Microsoft
Sales $182,795,000 $86,833,000
Gross Profit $ 70,537,000 $59,899,000
Marketing Expenses $  8,994,750 $15,474,000
Net Income (Profit) $ 52,503,000 $27,759,000
  1. 2-13 Calculate profit margin, net marketing contribution, marketing return on sales (or marketing ROS), and marketing return on investment (or marketing ROI) for each company. Which company is performing better? (AACSB: Communication; Use of IT; Analytic Thinking)

  2. 2-14 Go to Yahoo! Finance (http://finance.yahoo.com/) and find the income statements for two other competing companies. Perform the same analyses for these companies that you performed for the previous question. Which company is doing better overall and with respect to marketing? For marketing expenses, use 75 percent of the company’s reported “Selling General and Administrative” expenses, as not all of the expenses in that category are marketing expenses. (AACSB: Communication; Analytic Reasoning; Reflective Thinking)

Video Case Konica

Konica Minolta has been in business since 1873. For decades, it was a successful photo company selling cameras, equipment, and supplies primarily to final consumers. But dramatic changes in the marketing environment forced the company to reevaluate its marketing strategy and ultimately to abandon what had been its primary industry.

Today, Konica Minolta has a successful business-to-business strategy centered on office equipment and print products for commercial printers. The company has also developed a health-care and medical group, an optics group, and a division that produces components for mobile phones and televisions. With the advent and growth of social media, Konica Minolta’s marketing strategy continues to evolve.

After viewing the video featuring Konica Minolta, answer the following questions:

  1. 2-15 What is Konica Minolta’s mission?

  2. 2-16 What market conditions led Konica Minolta to reevaluate its marketing strategy?

  3. 2-17 How has Konica Minolta modified its marketing mix? Are these changes in line with its mission?

Company Case Facebook: Making the World More Open and Connected

The world has rapidly gone online, social, and mobile. And no company is more online, social, and mobile than Facebook. In spite of the growing number of social media options, Facebook continues to dominate. In little more than a decade, it has accumulated more than 1.6 billion active monthly users—more than 20 percent of the world’s total population—and some 1.5 billion people now access the network on a mobile device. More than a billion Facebook members already log on daily, and five new Facebook profiles are created every second. In the United States, more collective time is spent on Facebook than on any other website. Together, the Facebook community uploads 350 million photos, “Likes” 4.5 billion items, and shares 4.75 billion pieces of content daily.

Having achieved such phenomenal impact in such a short period of time, Facebook’s success can be attributed to tenacious focus on its mission—“to give people the power to share and make the world more open and connected.” It’s a place where friends and family meet, share their stories, display their photos, pass along information, and chronicle their lives. Hordes of people have made Facebook their digital home 24/7.

From Simple Things

Initially, carrying out this mission was relatively simple. When CEO Mark Zuckerberg and friends launched “thefacebook.com” in 2004, it was for Harvard students only. Still, with its clean design (“No Disneyland, no ‘Live nude girls.’”), the fledgling site attracted a lot of attention when it racked up more than 1,200 registered users by the end of the first day. Within the first month, more than half of Harvard’s undergraduate student body had joined. The massive response demonstrated tremendous untapped demand. At first, the social network grew one university campus at a time. But it wasn’t long before Facebook was open to the public and people everywhere were registering by the millions.

As it grew, Facebook’s interface was a work in progress. Features were added and modified in order to appeal to everyone. The network’s growth and development also gave it the ability to target specific kinds of content to well-defined user segments. However, Facebook’s “all things to all people” approach left many users, especially younger ones, visiting Facebook less and shifting time to more specialized competing social networks. To meet that growing threat, Facebook shifted gears from a “one site for all” approach to a multi-app strategy of providing “something for any and every individual.” According to Zuckerberg, “Our vision for Facebook is to create a set of products that help you share any kind of content you want with any audience you want.”

As the first move under its multi-app strategy, Facebook paid a then-stunning $1 billion to acquire Instagram, the surging photo-sharing app. Although Facebook already had its own photo-sharing features, the Instagram acquisition brought a younger, 27-million-strong user base into the Facebook fold. And rather than incorporating Instagram as just another Facebook feature, Facebook maintained Instagram as an independent brand with its own personality and user base. Instagram and Facebook customers can choose their desired level of integration, including Instagram membership without a Facebook account. “The fact that Instagram is connected to other services beyond Facebook is an important part of the experience,” says Zuckerberg.

Not long after the Instagram acquisition, in its quest to add unique new products and user segments, Facebook announced the creation of Creative Labs, a Facebook division charged with developing single-purpose mobile apps. It also unveiled the new division’s first product—Paper, a mobile app that provides easy and personalized access to Facebook’s News Feed. Although the core Facebook mobile app already provided access to this content, Paper let users organize the feed by themes, interests, and sources, serving it all up in a full-screen, distraction-free layout.

On the heels of Paper came another stunning Facebook mega-acquisition. Dwarfing its Instagram deal, Facebook paid a shocking $19 billion for standalone messaging app WhatsApp. Facebook’s own Messenger had already grown quickly to 200 million users. But similar to Instagram, WhatsApp immediately gave Facebook something it could not easily build on its own—an independent brand with more than 450 million registered international users, many of whom were not on Facebook.

By developing and acquiring such new products and apps, Facebook is doing what it does best—growing its membership and giving its diverse users more ways and reasons to connect and engage. Facebook’s fuller portfolio lets users meet their individual needs within the broadening Facebook family.

To the Stratosphere

As Facebook develops more reasons for more users to connect and engage, it also pursues technologies that might leave some observers scratching their heads. For example, a few years ago, the social media giant paid $2 billion to acquire Oculus VR, the virtual reality start-up. In the past year, Facebook has also developed its own 360-degree stereoscopic 3D video camera with 17 lenses—a device it calls Facebook Surround360. Why these acquisitions and developments? According to Zuckerberg, it has to do with “first steps.”

When Zuckerberg took his first steps, his parents noted the event in his baby book. When one of his cousins first walked some time later, Mom and Dad captured the moment with a photo. When his niece learned to walk, the video camera was rolling. But for his own daughter, Zuckerberg wanted to take it to the next level. “When Max takes her first step, we’ll be able to capture the whole scene, not just write down the date or take a photo or take a little 2D video,” Zuckerber says. “The people we want to share this with . . . can go there. They can experience that moment.”

Zuckerberg’s wanting to broadcast his daughter’s first steps as though others were there is just one more example of how Facebook constantly focuses on its central mission—to connect the world. “Over time, people get richer and richer tools to communicate and express what they care about,” says Zuckerberg. Facebook anticipates that this kind of video could lead to an entirely new mode of communication, one that could extend to Facebook’s own Oculus virtual reality headset.

As much as 3D virtual reality video sounds like a long shot, it’s easy pickings compared to Facebook’s biggest current initiative. Zuckerberg has been spanning the globe, addressing everyone from global leaders to fellow entrepreneurs and making a case for what he sees as the most critical social endeavor of our time—making the internet a basic human right, like health care or clean water. As he tells it, lack of free and open access to information is the greatest barrier to prosperity for the world’s impoverished. Yet almost 5 billion people are not yet connected to the internet. Zuckerberg and the Facebook team aim to eliminate that barrier by making the internet accessible to all.

To this end, Facebook has created its own innovation think tank called the Connectivity Lab. This group will have a satellite orbiting above sub-Saharan Africa within a year. But satellites are expensive, so the group is also working on other options. The most promising option is known internally as Aquila—a sleek, boomerang-shaped drone that has the wingspan of a Boeing 737, weighs less than 1,000 pounds, and can to stay aloft at 65,000 feet for months at a time. Soon to be tested, Aquila will receive radio signals from a ground station, relay those signals via lasers to transponders on the ground, and convert the signals to Wi-Fi or 4G networks. Facebook’s vision is to eventually have 10,000 Aquilas flying the friendly skies around planet earth.

Giving It All Away

Although Facebook spent more than five years building its user base and paying almost no attention to generating income, it is now making up for lost time. In the past five years, Facebook’s revenues have gone viral—from $2 billion to $18 billion, a ninefold increase to its top line. With a 20 percent margin, its bottom line isn’t doing too badly either. And although Facebook has experimented with various ways to generate income, the vast majority of its income comes via tried-and-true online advertising.

With all the development of fancy technologies such as drones, lasers, virtual reality, and 3D video, you might think that Facebook intends to diversify into new businesses that could generate cash and profits. But nothing could be further from the truth. In fact, as Facebook launches these and other technologies, it is giving away the designs for free. Years ago when Facebook built its own servers and data centers, it promptly open-sourced the designs and let the world have them for nothing. It did the same with big data analytics tools such as Cassandra and Hadoop. Although that might seem like throwing away money, it’s right in line with Facebook’s mission. Whereas most companies define themselves by a craft, such as making the best consumer electronic gadgets or solving companies’ efficiency problems, Facebook has been built around a single-minded goal of connecting everyone in the world and giving them the tools they need “to share anything and everything in a natural way.”

For that reason, Facebook focuses on what it does best—­being the best social network. Rather than becoming distracted by developing multiple business units and trying to make money through diversified means, it remains focused on building its user base and treating its core social media products as works in process. To those who view the projects coming out of the Connectivity Lab as unrelated, Zuckerberg points out, “They’re actually incredibly focused in terms of the mission. The real goal is to build the community. A lot of times, the best way to advance the technology is to work on it as a community.”

With many companies already working on the very technologies that Facebook is trying to advance, it might seem that Facebook isn’t adding much. But Zuckerberg is impatient, and he feels that the tech world is providing too little, too late. For example, Facebook’s laser drones will be able to shower entire rural areas, villages, and cities with extremely high bandwidth at higher speeds with more economical costs than the systems currently being employed and developed by telecom companies. “We need certain technologies to exist in the world, so we will build those,” says Zuckerberg. “We’re not selling [servers] or cameras or connectivity services. But if no one else is building them, we’re going to.”

Whatever its future, Facebook seems to have barely scratched the surface when it comes to fulfilling its mission. Its new multi-app, multi-segment strategy, combined with its massive, closely knit social structure, gives Facebook staggering potential. And moving the world toward internet access for all will help make Facebook’s portfolio of apps and products available to everyone. For years, a popular saying around Facebook has been “We are one percent done with our mission.” These days, those who manage Facebook might concede that they’ve made progress—say, to maybe 2 percent. For skeptics, consider how Facebook got started:

It was a few nights after [Zuckerberg] launched the website. He and his computer science buddy were getting pizza and talking. Zuckerberg told his friend that someone was going to build a social network, because it was too important not to exist. But he didn’t guess, back then, that he’d be the guy to do it. There were older people and bigger companies. So why, then, was Zuckerberg the one to build Facebook? “I think it’s because we cared. A lot of times, caring about something and believing in it trumps,” he says. “I couldn’t connect the dots going forward on Facebook from the beginning. To me, that’s a lot of the story of [Facebook’s future] too.”

Questions for Discussion

  1. 2-18 Is Facebook’s mission statement market oriented? Explain.

  2. 2-19 How is Facebook’s strategy driven by its mission?

  3. 2-20 Is it wise for Facebook to give away it technologies for free? Why or why not?

  4. 2-21 As it moves forward in fulfilling its mission, what challenges does Facebook face in the future?

Sources: Based on information from Cade Metz, “How Will Zuckerberg Rule the World? By Giving Facebook’s Tech Away,” Wired, April 12, 2016, www.wired.com/2016/04/mark-zuckerberg-giving-away-facebooks-tech-free/; Jessi Hempel, “Inside Facebook’s Ambitious Plan to Connect the Whole World,” Wired, January 19, 2016, www.wired.com/2016/01/facebook-zuckerberg-internet-org/; Sarah Kessler, “With Paper, Facebook Stops Trying to Be Everything for Everyone,” Fast Company, January 30, 2014, www.fastcompany.com/3025762/with-paper-facebook-stops-trying-to-be-everything-for-everyone; Josh Constine, “Zuck Says Ads Aren’t the Way to Monetize Messaging,” Techcrunch, February 19, 2014, www.techcrunch.com/2014/02/19/whatsapp-will-monetize-later/; and information from www.facebook.com/facebook/info/?tab=page_info and www.zephoria.com/top-15-valuable-facebook-statistics/, accessed June 2016.

MyMarketingLab

Go to mymktlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:

  1. 2-22 How are marketing departments organized? Which organization is best?

  2. 2-23 Explain the roles of market segmentation, market targeting, differentiation, and positioning in implementing an effective marketing strategy.

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
3.14.246.207