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 strategy
2
Global Business Problems
John Wallace
California State Polytechnic University-Pomona
Fall 2015
Global Business Problems
IBM 480
California State Poly Univ-Pomona
THIS PRINT COURSEPACK AND ITS ELECTRONIC COUNTERPART (IF ANY) ARE INTENDED SOLELY FOR THE PERSONAL USE
OF PURCHASER. ALL OTHER USE IS STRICTLY PROHIBITED.
ISBN 1323094571
XanEdu publications may contain copyrighted materials of XanEdu Inc. and/or its licensors.
The original copyright holders retain sole ownership of their materials. Copyright permissions
from third parties have been granted for materials for this publication only. Further reproduction
and distribution of the materials contained herein is prohibited.
WARNING: COPYRIGHT INFRINGEMENT IS AGAINST THE LAW AND WILL RESULT IN
PROSECUTION TO THE FULLEST EXTENT OF THE LAW.
THIS COURSE PACK CANNOT BE RESOLD COPIED
OR OTHERWISE REPRODUCED.
XanEdu Publishing Inc. does not exert editorial control over materials that are included in this
course pack. The user hereby releases XanEdu Publishing Inc. from any and all liability for any
claims or damages which result from any use or exposure to the materials of this course pack.
In print copy only Online only
Unmarked items are available both in print and online
Global Business Problems
Table of Contents
Chapter 1: Foundations of Strategic Marketing Management by Kerin Roger
A; Peterson Robert A
1
Chapter 2: Financial Aspects of Marketing Management by Kerin Roger A;
Peterson Robert A
33
Chapter 3: Marketing Decision Making and Case Analysis by Kerin Roger A;
Peterson Robert A
53
Rediscovering Market Niches in a Traditional Industry by Tse David; Ho
Mary
65
Coca-Colas New Vending Machine (A): Pricing to Capture Value or Not?
by King Charles; Narayandas Das
75
Nin Jiom: Selling Traditional Chinese Medicine in Modern Hong Kong by
Bennett Yim; Vincent Mak
85
Heineken N.V.: Global Branding and Advertising by Quelch John A.
XanEdu Extra
An Excel-formatted spreadsheet containing the exhibits for the case above is available at
http://content.xanedu.com/hs/596015p2.xls
93
Pepsi Blue by Quelch John A. 107
Bibliography 117
i
ii
C H A P T E R 1
Foundations of Strategic
Marketing Management
The primary purpose of marketing is to create long-term and mutually
beneficial exchange relationships between an entity and the publics
(individuals and organizations) with which it interacts. Though this fundamental
purpose of marketing is timeless the manner in which organizations
undertake it continues to evolve. No longer do marketing managers function
solely to direct day-to-day operations; they must make strategic decisions as well. This
elevation of marketing perspectives to a strategic position in organizations has
resulted in expanded responsibilities for marketing managers. Increasingly they find
themselves involved in charting the direction of the organization and contributing to
decisions that will create and sustain a competitive advantage and affect long-term
organizational performance.
The transition of the marketing manager from being only an implementer to
being a maker of organization strategy has resulted in (1) the creation of the chief
marketing officer (CMO) position in many organizations and (2) the popularity of
strategic marketing management as a course of study and practice. Today almost onehalf
of Fortune 1000 companies have a CMO. Although responsibilities vary across
companies a common expectation is that a CMO will assume a leadership role in
defining the mission of the business; analysis of environmental competitive and business
situations;developing business objectives and goals;and defining customer value
propositions and the marketing strategies that deliver on these propositions. The skill
set required of CMOs includes an analytical ability to interpret extensive market and
operational information an intuitive sense of customer and competitor motivations
and creativity in framing strategic marketing initiatives in light of implementation
considerations and financial targets and results.1 Strategic marketing management
consists of five complex and interrelated processes.
1. Defining the organizations business mission and goals
2. Identifying and framing organizational growth opportunities
3. Formulating product-market strategies
4. Budgeting marketing financial and production resources
5. Developing reformulation and recovery strategies
The remainder of this chapter discusses each of these processes and their relationships
to one another.
1
1
2 CHAPTER 1 FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT
DEFINING THE ORGANIZATIONS BUSINESS MISSION AND GOALS
The practice of strategic marketing management begins with a clearly stated business
definition mission and set of goals or objectives. A business definition outlines the
scope of a particular organizations operations. Its mission is a written statement of
organizational purpose. Goals or objectives specify what an organization intends to
achieve. Each plays an important role in describing the character of an organization
and what it seeks to accomplish.
Business Definition
Determining what business an organization is in is neither obvious nor easy. In many
instances a single organization may operate several businesses as is the case with
large Fortune 500 companies. Defining each of these businesses is a necessary first
step in strategic marketing management.
Contemporary strategic marketing perspectives indicate that an organization
should define a business by the type of customers it wishes to serve the particular
needs of those customer groups it wishes to satisfy and the means or technology by
which the organization will satisfy these customer needs.2 By defining a business
from a customer or market perspective an organization is appropriately viewed as a
customer-satisfying endeavor not a product-producing or service-delivery enterprise.
Products and services are transient as is often the technology or means used to produce
or deliver them. Basic customer needs and customer groups are more enduring.
For example the means for delivering prerecorded music has undergone significant
change over the past 30 years. During this period the dominant prerecorded music
technologies and products evolved from plastic records to eight-track tapes to cassettes
to compact discs. Today digital downloading of music is growing. By comparison
the principal consumer buying segment(s) and needs satisfied have varied little.
Much of the recent corporate restructuring and refocusing has resulted from
senior company executives asking the questionWhat business are we in? The experience
of Encyclopaedia Britannica is a case in point.3 The venerable publishing company
is best known for its comprehensive and authoritative 32-volume leather-bound
book reference series first printed in 1768. In the late 1990s however the company
found itself in a precarious competitive environment. CD-ROMs and the Internet had
become the study tools of choice for students and Microsofts Encarta CD-ROM and
IBMs CD-ROM joint venture with World Book were attracting Britannicas core
customers. The result? Book sales fell 83 percent between 1990 and 1997. Britannicas
senior management was confident that the need for dependable and trustworthy information
among curious and intelligent customers remained. However the technology
for satisfying these needs had changed. This realization prompted Britannica to redefine
its business. According to a company official:Were reinventing our business.
Were not in the book business.Were in the information business. By early 2006 the
company had become a premier information site on the Internet. Britannicas subscription
service (eb.com) markets archival information to schools and public and
business libraries. Its consumer Web site (britannica.com) is a source of information for
about 200000 subscribers and its search engine provides some 150000 Web sites
selected by expert Britannica staffers for information quality and accuracy.
Business Mission
An organizations business mission complements its business definition. As a written
statement a mission underscores the scope of an organizations operations apparent
in its business definition and reflects managements vision of what the organization
2
DEFINING THE ORGANIZATIONS BUSINESS MISSION AND GOALS 3
seeks to do. Although there is no overall definition for all mission statements most
statements describe an organizations purpose with reference to its customers products
or services markets philosophy and technology. Some mission statements are
generally stated such as that for Xerox Corporation:
Our strategic intent is to help people find better ways to do great workby constantly
leading in document technologies products and services that improve our customerswork
processes and business results.
Others are more specifically written like that for Hendison Electronics Corporation.
Hendison Electronics Corporation aspires
to serve the discriminating purchasers of home entertainment products who
approach their purchase in a deliberate manner with heavy consideration of longterm
benefits.We will emphasize home entertainment products with superior performance
style reliability and value that require representative display professional
selling trained service and brand acceptanceretailed through reputable electronic
specialists to those consumers whom the company can most effectively service.
Mission statements also apply to not-for-profit organizations. For instance the
mission of the American Red Cross is
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.
A carefully crafted mission statement that succinctly conveys organizational purpose
can provide numerous benefits to an organization including focus to its marketing
effort. It can (1) crystallize managements vision of the organizations long-term
direction and character; (2) provide guidance in identifying pursuing and evaluating
market and product opportunities; and (3) inspire and challenge employees to do
those things that are valued by the organization and its customers. It also provides
direction for setting business goals or objectives.
Business Goals
Goals or objectives convert the organizations mission into tangible actions and
results that are to be achieved often within a specific time frame. For example the 3M
Company emphasizes research and development and innovation in its business mission.
This view is made tangible in one of the companys goals: 30 percent of 3Ms
annual revenues must come from company products that are less than four years old.4
Goals or objectives divide into three major categories: production financial and
marketing. Production goals or objectives apply to the use of manufacturing and
service capacity and to product and service quality. Financial goals or objectives focus
on return on investment return on sales profit cash flow and shareholder wealth.
Marketing goals or objectives emphasize market share marketing productivity sales
volume profit customer satisfaction customer value creation and customer lifetime
value. When production financial and marketing goals or objectives are combined
they represent a composite picture of organizational purpose within a specific time
frame;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 to
achieve in a specific time frame they implicitly arise from an understanding of the
current situation. Therefore managers need an appraisal of operations or a situation
analysis to determine reasons for the gap between what was or is expected and what
has happened or will happen. If performance has met expectations the question
arises as to future directions. If performance has not met expectations managers must
diagnose the reasons for this difference and enact a remedial program. Chapter 3 provides
an expanded discussion on performing a situation analysis.
3
4 CHAPTER 1 FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT
IDENTIFYING AND FRAMING ORGANIZATIONAL GROWTH OPPORTUNITIES
Once the character and direction of the organization have been outlined in its
business definition mission and goals or objectives the practice of strategic marketing
management enters an entrepreneurial phase. Using business definition mission
and goals as a guide the search for and evaluation of organizational growth opportunities
can begin.
Converting Environmental Opportunities
into Organizational Opportunities
Three questions help marketing managers decide whether certain environmental
opportunities 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 growth
opportunities. They also highlight major concepts in strategic marketing management.
The what might we do question introduces the concept of environmental
opportunity. Unmet or changing consumer needs unsatisfied buyer groups and new
means or technology for delivering value to prospective buyers represent sources of
environmental opportunities for organizations. In this regard environmental opportunities
are boundless. However the mere presence of an environmental opportunity
does not mean that an organizational growth opportunity exists. Two additional questions
must be asked.
The what do we do best question introduces the concept of organizational capability
or distinctive competency. Distinctive competency describes an organizations
unique strengths or qualities including skills technologies or resources that distinguish
it from other organizations.5 In order for any of an organizations strengths or
qualities to be considered truly distinctive and a source of competitive advantage two
criteria must be satisfied. First the strength must be imperfectly imitable by competitors.
That is competitors cannot replicate a skill (such as the direct-marketing competency
of Dell Inc.) easily or without a sizable investment of time effort and money.
Second the strength should make a significant contribution to the benefits perceived
by customers and by doing so provide superior value to them. For example the ability
to engage in technological innovation that is wanted and provides value to customers
is 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 were
responsible for the Gillete Fusion and Venus razor which have sustained Gillettes dominance
of the mens and womens wet-shaving market.
Finally the what must we do question introduces the concept of success requirements
in an industry or market. Success requirements (also called key success factors)
are basic tasks that an organization must perform in a market or industry to
compete successfully. These requirements are subtle in nature and often overlooked.
For example distribution and inventory control are critical success factors in the cosmetics
industry. Firms competing in the personal computer industry recognize that
the requirements for success include low-cost production capabilities access to distribution
channels and continuous innovation.
The linkage among environmental opportunity distinctive competency and
success requirements will determine whether an organizational opportunity exists.
4
Get answer