LINKING MARKETING AND CORPORATE STRATEGIES

CHAPTER OPENING EXAMPLE

WHERE DOES A CORRESPONDENCE SCHOOL "A" IN ICE CREAM MAKING LEAD? PLEASE STAY TUNED!

Ben Cohen and Jerry Greenfield were grade school classmates on Long Island. In 1978 they headed to Vermont and eventually started Ben & Jerry's–a company that produces dozens of flavors of ice cream, ice milk, and yogurt. Some of their early products and flavors: Rainforest Crunch, Peace Pops, and Chocolate Cookie Dough ice cream.

They and their website have a creative, funky approach to business–linked to a genuine concern for social causes. In fact, Ben & Jerry's contributes 7.5 percent of its pretax profits to charity.

But by the late 1990s Ben and Jerry concluded the company’s sales were flattening and it needed additional financial resources to grow. So in 2000, Ben & Jerry’s agreed to be acquired by Unilever, a huge multinational. Ben & Jerry’s would operate separately from Unilever’s current ice cream business to preserve the company’s legendary concern for the environment and social responsibility, and both cofounders would continue their involvement.

Because of intense competition, firms must continuously revisit both marketing and corporate strategies, as Ben and Jerry have had to do.

I. LEVELS OF STRATEGY IN ORGANIZATIONS
A. Today’s Organizations: Kinds, Levels and Teams
1. Kinds of Organizations	business firm	Privately owned organization Serves its customers in order to earn a profit. Must earn profits to survive. Profit is the reward to a business firm for the risk.
	nonprofit organization	Nongovernmental organization Serves its customers but does not have profit as an organizational goal. Museums, private hospitals, and research institutes.

2. Levels in Organizations
Corporate level	Business unit level	functional level
where top management directs overall strategy for the entire organization.	Organization (or a part of an organization) that markets a set of related products to a clearly defined group of customers. Business unit managers set the direction for their products and markets to exploit value-creating opportunities.	groups of specialists actually create value for the organization. "department" refers to these specialized functions. Finance, human resources, marketing, research and development, etc.
Where things Happen
Functional Areas		Cross-Functional Teams
At the lowest level of management marketing, finance, manufacturing all serve as parts of a team of functional specialists.		A small number of people from different departments in an organization who are mutually accountable to a common set of performance goals. Cross-functional conflict can arise because in marketing’s drive to implement the marketing concept and increase customer value, other departments may see difficulties. It is marketing’s job to make these departments understand that without happy, satisfied customers who buy the organization’s product, there is no company and there are no jobs.

B. Strategy Issues in Organizations

Organizations need a reason for being and a direction.
Business, mission, values and culture, and goals
Business and mission apply to the corporate and business unit levels;
values and culture, goals relate to all three levels.

1. The Business

Applies to the corporate and business unit levels
Organizations exist for a purpose.
Over time, often the purpose becomes fuzzy.
One guideline in defining the company’s business is:
- Try to understand the people served by the organization and
- the value they receive,
- which emphasizes the critical customer-driven focus that successful organizations have.
With this focus on the customer, Medtronic is not in the medical device business but is in the business of alleviating pain, restoring health, and extending life.

2. The Mission

Applies to the corporate and business unit levels
By understanding its business, an organization can take steps to define its mission,
A statement of the organization’s scope,
Often identifying its customers
- markets,
- products,
- technology
- values.
In the early 1960s, when Medtronic was struggling and near bankruptcy
The CEO went to the blackboard and sketched out Medtronic’s mission statement, which remains almost identical today. Its six ordered priorities are

Medtronic mission statement

3. Values

Relate to all three levels of an organization
The "rising figure" wall painting at Medtronic’s corporate headquarters clearly communicates the mission to all stakeholders.
At Medtronic, a corporate officer presents each new employee with a medallion with the "rising figure" on one side and the mission on the other.
When corporations merge or are acquired, corporate cultures can collide, often as a result of conflicts in missions and goals.
Potential for this is illustrated by Ben & Jerry’s becoming a small business unit of Unilever, which has $45 billion in annual sales and dozens of well-known brands.
Organizations must connect with all their stakeholders

Internal stakeholders	External stakeholders
employees officers board members stockholders	customers suppliers distributors governments unions local communities the general public.

4. Culture

Relate to all three levels of an organization
Culture exists in each unit
A distinguishing system of shared
- values
- attitudes
- behaviors .

4. Goals

Goals convert the mission into
- targeted levels of performance to be achieved
- by a specific time.
Goals measure how well a mission is being accomplished.
Many organizations that do not seek profits also exist.

Goals For Profit Makers	Goals For Private nonprofit & Government
profit sales revenue, market share (the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry). unit sales, quality customer satisfaction, welfare, social responsibility.	serve consumers with the greatest efficiency and the least cost.
	Goals For Government
	serving the public good

II. SETTING STRATEGIC DIRECTIONS
A. A Look Around: Where Are We Now?
Asking an organization where it is at the present time involves identifying its
1. Customers. .	Strategic directions must be customer-focused and provide genuine value and benefits to present and prospective customers
2. Competencies	An organization’s special capabilities that distinguish it from other organizations including skills, technologies resources total quality management (TQM) Should be distinctive enough to provide a competitive advantage	Quality : those features and characteristics of a product that influence its ability to satisfy customer needs. Competitive advantage: a unique strength relative to competitors, often based on quality, time, cost, or innovation.
3. Competitors	Lines among global competitive sectors are increasingly blurred, Successful firms continuously assess Who the competitors are How they are changing in order to respond with their own strategies. Lands’ End started as a catalog retailer. Defining its competitors as other catalog retailers would oversimplify. "intertype competition," Lands’ Competition includes other catalog retailers of clothing Traditional department stores, mass merchandisers, specialty shops, Well-known brands of clothing sold in all these kinds of retailers. All these competitors have websites for Internet sales.	benchmarking the competition discovering how others do something better than your own firm so you can imitate or leapfrog competition. often involves studying operations in completely different businesses.

B. 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 in that direction. Two techniques to aid in these decisions are (1) portfolio analysis and (2) market-product analysis.

The Portfolio of Businesses - BCG Analysis

Strategic Business Unit (SBU)	A subgroup of a business.
Characteristics of SBU's	Distinct mission Specific target market Control their resources Their own competitors Single business OR a collection of related businesses Plans independent of the other businesses in the organization Require a separate mission statement
Business Portfolio Analysis uses quantified performance measures and growth targets to analyze a firm’s business units (called or (SBUs by BCG) as though they were a collection of separate investments. This analysis has also been applied at the product line or brand level. The SBUs are positioned on a growth-share matrix.

The vertical axis:
- market growth rate
- the annual rate of growth of the specific market or industry of the SBU
The horizontal axis
- is the relative market share
- Sales of the SBU divided by the sales of the largest firm in the industry.

Stars	Question marks or problem children
high share of high-growth market but may not generate enough cash to support the star’s own demanding needs for future growth.	Low share of high-growth markets Requires a lot of cash to maintain market share. Management must choose which to invest in and phase out the rest
Cash cows	Dogs
Dominant share of slow-growth market Enables SBU to generate large amounts of cash to pay company overhead and to invest in other SBUs.	low share of low-growth markets. Do not hold promise of becoming winners for the firm.

After business portfolio analysis is complete,
the firm must identify the objectives for each SBU.
Four alternative strategies are available for each SBU, ranked from most to least cash required:

Build	Increase market share through cash injection. Make stars out of question marks.	Hold	Maintain market share. Often used for cash cows that are already generating large amounts of cash and are fairly stable.
Harvest	Increase short-term cash output of the SBU, May result in a loss of market share and causes it to become a dog in the longer run.	Divest	Phase out or sell the SBU. This generates cash for more promising SBUs. Question marks and dogs are ideal candidates to divest.

Strengths and weaknesses of business portfolio analysis:

Strengths:	Weaknesses:
Forces firm to assess each of its SBUs in terms of relative market share and industry market growth rate. Requires firm to forecast which SBUs will be cash producers and which will be cash users in the future.	Hard to get the information needed to locate SBU on growth-share matrix. Other important factors are missing from this analysis, such as possible synergies among the SBUs when they use the same salesforce or research and development facilities. Hard to motivate people in an SBU labeled a dog or cash cow that is unlikely to get new resources or provide opportunities for promotion.

2. Market-Product Analysis - Develop Strategic Alternatives

Strategic Opportunity Matrix

Existing Products

New Products

Current Markets

Market Penetration

Product development

New Markets

Market development

Diversification

Consider company philosophy re short run conflict between immediate profit and Market Share in selecting the strategic alternative
As Unilever attempts to increase sales revenues of its Ben & Jerry’s business, it must consider all four of the alternative market-product strategies:

Apply Market-Product Analysis to Ben & Jerry's
market penetration	Increase sales of present products in existing markets Increasing sales of Ben & Jerry’s present ice cream products to U.S. consumers. No change in the basic product line or the market served Increased sales are possible through finding efficiencies by hooking onto Unilever’s Breyers and Good Humor ice cream brands or through developing new flavors.
Market development	Sell existing Ben & Jerry’s products to new markets. South American consumers are good candidates as possible new markets. Incomes are increasing in South American markets, but Ben & Jerry’s brand is relatively unknown.
Product development	Sell a new product to existing markets. Try selling Ben & Jerry’s brand of children’s clothing in the U.S. Risky. Consumers may not see a clear connection between ice cream and children’s clothing. •
Diversification	Develop new products and sell them in new markets. High-risk strategy No production or marketing experience on which to draw. Ben & Jerry’s brand of children’s clothing in South America.

Building Blocks to Success

III. THE STRATEGIC MARKETING PROCESS.
After the organization assesses where it’s at and where it wants to go, other questions emerge:	How do we allocate our resources to get to where we want to go? How do we convert our plans into action? How do our results compare with our plans? Do deviations require new plans and actions?
the strategic marketing process	Allocates its marketing mix resources to reach its target markets. This process is so central to activities that it is usually formalized in a marketing plan, The marketing plan is a road map for the marketing activities of an organization for a specified future period of time, such as one year or five years.
Steps in the strategic marketing process	planning, implementation, control.

A. Strategic Marketing Process: The Planning Phase
Planning Phase - Step 1: Situation (SWOT) Analysis
The situation analysis	Involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in light of the organization’s plans the external factors and trends affecting it. An exhaustive study of the four areas in Step 1 of the planning phase: Identifying trends in the firm’s industry. Analyzing the firm’s competitors. Assessing the firm itself. Researching the firm’s present and prospective customers.
SWOT analysis	A short-hand summary of the situation analysis An organization’s appraisal of its Internal Strengths Weaknesses External Opportunities Threats. SWOT analysis helps a firm identify the critical factors affecting the firm build on vital strengths, correct glaring weaknesses, exploit significant opportunities, avoid disaster-laden threats.
Planning Phase - Step 2: Market-Product Focus and Goal Setting
Focus of the marketing plan	what product offerings will be directed toward which customers. This focus often comes from using market segmentation
Market segmentation	Aggregating prospective buyers into groups, or segments, that have common needs and will respond similarly to a marketing action.
Goal setting involves setting measurable marketing objectives to be achieved. For example:
Set marketing and product goals.	Talks with cardiologists in India and China showed that some state-of-the-art features in Medtronic’s "Champion" brand heart pacemakers were less important than an affordable pacemaker that featured reliability and ease of use. Medtronic’s goal: Design and market such a pacemaker in three years for the Asian market.
Select target markets.	The Champion pacemaker will be targeted at cardiologists and medical clinics in India, China, and other Asian countries performing heart surgery.
Find points of difference.	Points of difference are those characteristics of a product that make it superior to competitive substitutes. 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 only to 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 patients’ 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 in India, China, Pakistan, Singapore, and Malaysia.
Planning Phase - Step 3: Marketing Program
The target markets tells the marketing manager the who and what aspects of the strategic marketing process– which consumers to focus on what needs the product can satisfy. The how aspect involves:
Developing the marketing mix.	This consists of product, price, promotion, and place
Developing the budget.	The budgeting process starts with a sales forecast estimating units to be sold by month, quarter, and year. Estimated expenses for the marketing mix activities are balanced against expected revenues to estimate the program’s profitability.

B. Strategic Marketing Process: The Implementation Phase
Implementation involves executing the marketing plan.
Obtaining Resources.	Get the people Get the money.
Designing the Marketing Organization.	The responsibilities of all individuals within the marketing organization need to be specified The roles they will play in the strategic marketing process Individual marketing goals.
Developing Schedules.	Effective implementation requires deadlines scheduling important milestones meeting them.
Executing the Marketing Program.	Effective execution requires attention to detail for both marketing strategies marketing tactics.
Marketing strategy	The means by which a goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it.
Marketing tactics	Detailed day-to-day operational decisions essential to the overall success of marketing strategies.

C. 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. It has two key elements.
Comparing Results with Plans to Identify Deviations	Compare the results of the marketing program with goals in the written plans to identify deviations from the plan. Often identifies a planning gap, the difference between the projection of the path to reach a new goal and the projection of the path of the results of a plan already in place.
Acting on Deviations	Evaluation may show actual performance to be different from that expected.
Exploiting a positive deviation	If performance is greater than expected, the marketing manager will attempt to uncover the reasons and act to exploit them.
Correcting a negative deviation	If performance fails to meet expectations, managers need to take corrective actions so the program can achieve the planned objectives.