critically examine the nature of strategic analysis & decision making

critically examine the nature of strategic analysis & decision making

strategic analysis & decision making?to critically examine the nature of strategic analysis & decision making?to understand the importance of analysing an org.s external environment?appreciate the role of an org.s resources and capabilities as a basis for formulating strategy2Global Business ProblemsJohn WallaceCalifornia State Polytechnic University-PomonaFall 2015Global Business ProblemsIBM 480California State Poly Univ-PomonaTHIS PRINT COURSEPACK AND ITS ELECTRONIC COUNTERPART (IF ANY) ARE INTENDED SOLELY FOR THE PERSONAL USEOF PURCHASER. ALL OTHER USE IS STRICTLY PROHIBITED.ISBN 1323094571XanEdu publications may contain copyrighted materials of XanEdu Inc. and/or its licensors.The original copyright holders retain sole ownership of their materials. Copyright permissionsfrom third parties have been granted for materials for this publication only. Further reproductionand distribution of the materials contained herein is prohibited.WARNING: COPYRIGHT INFRINGEMENT IS AGAINST THE LAW AND WILL RESULT INPROSECUTION TO THE FULLEST EXTENT OF THE LAW.THIS COURSE PACK CANNOT BE RESOLD COPIEDOR OTHERWISE REPRODUCED.XanEdu Publishing Inc. does not exert editorial control over materials that are included in thiscourse pack. The user hereby releases XanEdu Publishing Inc. from any and all liability for anyclaims or damages which result from any use or exposure to the materials of this course pack.In print copy only Online onlyUnmarked items are available both in print and onlineGlobal Business ProblemsTable of ContentsChapter 1: Foundations of Strategic Marketing Management by Kerin RogerA; Peterson Robert A1Chapter 2: Financial Aspects of Marketing Management by Kerin Roger A;Peterson Robert A33Chapter 3: Marketing Decision Making and Case Analysis by Kerin Roger A;Peterson Robert A53Rediscovering Market Niches in a Traditional Industry by Tse David; HoMary65Coca-Colas New Vending Machine (A): Pricing to Capture Value or Not?by King Charles; Narayandas Das75Nin Jiom: Selling Traditional Chinese Medicine in Modern Hong Kong byBennett Yim; Vincent Mak85Heineken N.V.: Global Branding and Advertising by Quelch John A.XanEdu ExtraAn Excel-formatted spreadsheet containing the exhibits for the case above is available athttp://content.xanedu.com/hs/596015p2.xls93Pepsi Blue by Quelch John A. 107Bibliography 117iiiC H A P T E R 1Foundations of StrategicMarketing ManagementThe primary purpose of marketing is to create long-term and mutuallybeneficial exchange relationships between an entity and the publics(individuals and organizations) with which it interacts. Though this fundamentalpurpose of marketing is timeless the manner in which organizationsundertake it continues to evolve. No longer do marketing managers functionsolely to direct day-to-day operations; they must make strategic decisions as well. Thiselevation of marketing perspectives to a strategic position in organizations hasresulted in expanded responsibilities for marketing managers. Increasingly they findthemselves involved in charting the direction of the organization and contributing todecisions that will create and sustain a competitive advantage and affect long-termorganizational performance.The transition of the marketing manager from being only an implementer tobeing a maker of organization strategy has resulted in (1) the creation of the chiefmarketing officer (CMO) position in many organizations and (2) the popularity ofstrategic marketing management as a course of study and practice. Today almost onehalfof Fortune 1000 companies have a CMO. Although responsibilities vary acrosscompanies a common expectation is that a CMO will assume a leadership role indefining the mission of the business; analysis of environmental competitive and businesssituations;developing business objectives and goals;and defining customer valuepropositions and the marketing strategies that deliver on these propositions. The skillset required of CMOs includes an analytical ability to interpret extensive market andoperational information an intuitive sense of customer and competitor motivationsand creativity in framing strategic marketing initiatives in light of implementationconsiderations and financial targets and results.1 Strategic marketing managementconsists of five complex and interrelated processes.1. Defining the organizations business mission and goals2. Identifying and framing organizational growth opportunities3. Formulating product-market strategies4. Budgeting marketing financial and production resources5. Developing reformulation and recovery strategiesThe remainder of this chapter discusses each of these processes and their relationshipsto one another.112 CHAPTER 1 FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENTDEFINING THE ORGANIZATIONS BUSINESS MISSION AND GOALSThe practice of strategic marketing management begins with a clearly stated businessdefinition mission and set of goals or objectives. A business definition outlines thescope of a particular organizations operations. Its mission is a written statement oforganizational purpose. Goals or objectives specify what an organization intends toachieve. Each plays an important role in describing the character of an organizationand what it seeks to accomplish.Business DefinitionDetermining what business an organization is in is neither obvious nor easy. In manyinstances a single organization may operate several businesses as is the case withlarge Fortune 500 companies. Defining each of these businesses is a necessary firststep in strategic marketing management.Contemporary strategic marketing perspectives indicate that an organizationshould define a business by the type of customers it wishes to serve the particularneeds of those customer groups it wishes to satisfy and the means or technology bywhich the organization will satisfy these customer needs.2 By defining a businessfrom a customer or market perspective an organization is appropriately viewed as acustomer-satisfying endeavor not a product-producing or service-delivery enterprise.Products and services are transient as is often the technology or means used to produceor deliver them. Basic customer needs and customer groups are more enduring.For example the means for delivering prerecorded music has undergone significantchange over the past 30 years. During this period the dominant prerecorded musictechnologies and products evolved from plastic records to eight-track tapes to cassettesto compact discs. Today digital downloading of music is growing. By comparisonthe principal consumer buying segment(s) and needs satisfied have varied little.Much of the recent corporate restructuring and refocusing has resulted fromsenior company executives asking the questionWhat business are we in? The experienceof Encyclopaedia Britannica is a case in point.3 The venerable publishing companyis best known for its comprehensive and authoritative 32-volume leather-boundbook reference series first printed in 1768. In the late 1990s however the companyfound itself in a precarious competitive environment. CD-ROMs and the Internet hadbecome the study tools of choice for students and Microsofts Encarta CD-ROM andIBMs CD-ROM joint venture with World Book were attracting Britannicas corecustomers. The result? Book sales fell 83 percent between 1990 and 1997. Britannicassenior management was confident that the need for dependable and trustworthy informationamong curious and intelligent customers remained. However the technologyfor satisfying these needs had changed. This realization prompted Britannica to redefineits business. According to a company official:Were reinventing our business.Were not in the book business.Were in the information business. By early 2006 thecompany had become a premier information site on the Internet. Britannicas subscriptionservice (eb.com) markets archival information to schools and public andbusiness libraries. Its consumer Web site (britannica.com) is a source of information forabout 200000 subscribers and its search engine provides some 150000 Web sitesselected by expert Britannica staffers for information quality and accuracy.Business MissionAn organizations business mission complements its business definition. As a writtenstatement a mission underscores the scope of an organizations operations apparentin its business definition and reflects managements vision of what the organization2DEFINING THE ORGANIZATIONS BUSINESS MISSION AND GOALS 3seeks to do. Although there is no overall definition for all mission statements moststatements describe an organizations purpose with reference to its customers productsor services markets philosophy and technology. Some mission statements aregenerally stated such as that for Xerox Corporation:Our strategic intent is to help people find better ways to do great workby constantlyleading in document technologies products and services that improve our customersworkprocesses and business results.Others are more specifically written like that for Hendison Electronics Corporation.Hendison Electronics Corporation aspiresto serve the discriminating purchasers of home entertainment products whoapproach their purchase in a deliberate manner with heavy consideration of longtermbenefits.We will emphasize home entertainment products with superior performancestyle reliability and value that require representative display professionalselling trained service and brand acceptanceretailed through reputable electronicspecialists to those consumers whom the company can most effectively service.Mission statements also apply to not-for-profit organizations. For instance themission of the American Red Cross isto 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.A carefully crafted mission statement that succinctly conveys organizational purposecan provide numerous benefits to an organization including focus to its marketingeffort. It can (1) crystallize managements vision of the organizations long-termdirection and character; (2) provide guidance in identifying pursuing and evaluatingmarket and product opportunities; and (3) inspire and challenge employees to dothose things that are valued by the organization and its customers. It also providesdirection for setting business goals or objectives.Business GoalsGoals or objectives convert the organizations mission into tangible actions andresults that are to be achieved often within a specific time frame. For example the 3MCompany emphasizes research and development and innovation in its business mission.This view is made tangible in one of the companys goals: 30 percent of 3Msannual revenues must come from company products that are less than four years old.4Goals or objectives divide into three major categories: production financial andmarketing. Production goals or objectives apply to the use of manufacturing andservice capacity and to product and service quality. Financial goals or objectives focuson return on investment return on sales profit cash flow and shareholder wealth.Marketing goals or objectives emphasize market share marketing productivity salesvolume profit customer satisfaction customer value creation and customer lifetimevalue. When production financial and marketing goals or objectives are combinedthey represent a composite picture of organizational purpose within a specific timeframe;accordingly they must complement one another.Goal or objective setting should be problem-centered and future-oriented.Because goals or objectives represent statements of what the organization wishes toachieve in a specific time frame they implicitly arise from an understanding of thecurrent situation. Therefore managers need an appraisal of operations or a situationanalysis to determine reasons for the gap between what was or is expected and whathas happened or will happen. If performance has met expectations the questionarises as to future directions. If performance has not met expectations managers mustdiagnose the reasons for this difference and enact a remedial program. Chapter 3 providesan expanded discussion on performing a situation analysis.34 CHAPTER 1 FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENTIDENTIFYING AND FRAMING ORGANIZATIONAL GROWTH OPPORTUNITIESOnce the character and direction of the organization have been outlined in itsbusiness definition mission and goals or objectives the practice of strategic marketingmanagement enters an entrepreneurial phase. Using business definition missionand goals as a guide the search for and evaluation of organizational growth opportunitiescan begin.Converting Environmental Opportunitiesinto Organizational OpportunitiesThree questions help marketing managers decide whether certain environmentalopportunities represent viable organizational growth opportunities:What might we do?What do we do best?What must we do?Each of these questions assists in identifying and framing organizational growthopportunities. They also highlight major concepts in strategic marketing management.The what might we do question introduces the concept of environmentalopportunity. Unmet or changing consumer needs unsatisfied buyer groups and newmeans or technology for delivering value to prospective buyers represent sources ofenvironmental opportunities for organizations. In this regard environmental opportunitiesare boundless. However the mere presence of an environmental opportunitydoes not mean that an organizational growth opportunity exists. Two additional questionsmust be asked.The what do we do best question introduces the concept of organizational capabilityor distinctive competency. Distinctive competency describes an organizationsunique strengths or qualities including skills technologies or resources that distinguishit from other organizations.5 In order for any of an organizations strengths orqualities to be considered truly distinctive and a source of competitive advantage twocriteria must be satisfied. First the strength must be imperfectly imitable by competitors.That is competitors cannot replicate a skill (such as the direct-marketing competencyof Dell Inc.) easily or without a sizable investment of time effort and money.Second the strength should make a significant contribution to the benefits perceivedby customers and by doing so provide superior value to them. For example the abilityto engage in technological innovation that is wanted and provides value to customersis a distinctive competency. Consider the Safety Razor Division of the Gillette Company.6 Its distinctive competencies lie in three areas: (1) shaving technology and development(2) high-volume manufacturing of precision metal and plastic products and(3) marketing of mass-distributed consumer package goods. These competencies wereresponsible for the Gillete Fusion and Venus razor which have sustained Gillettes dominanceof the mens and womens wet-shaving market.Finally the what must we do question introduces the concept of success requirementsin an industry or market. Success requirements (also called key success factors)are basic tasks that an organization must perform in a market or industry tocompete successfully. These requirements are subtle in nature and often overlooked.For example distribution and inventory control are critical success factors in the cosmeticsindustry. Firms competing in the personal computer industry recognize thatthe requirements for success include low-cost production capabilities access to distributionchannels and continuous innovation.The linkage among environmental opportunity distinctive competency andsuccess requirements will determine whether an organizational opportunity exists.4

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