Chapter 2: Strategic and Marketing Planning
CHAPTER 2
STRATEGIC AND MARKETING PLANNING
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
v 1 Recognize the nature and scope of planning including the five key elements
that are crucial to planning activities.
Planning is essential for good business decisions. Planning includes defining the timing of activities, specifying tasks, assigning responsibility, following-up, and budgeting. Strategic planning focuses on the long-range plans at the corporate and business levels of the firm. Marketing planning is done at the marketing level (the product level or product-line level).
v 2 Understand each of the fundamental steps involved in developing a strategic
plan.
Strategic planning allows a firm to coordinate the efforts of all of its departments and to allocate its resources. Steps involved include defining the firm’s mission, its SBUs, the firm’s objectives, analyzing SBU performance, finding growth opportunities, and writing marketing plans.
v 3 Appreciate the fundamentals of marketing planning
Marketing planning occurs at the product level and needs to be consistent with the firm’s strategic plan. A marketing plan can be written for a product or a product line. It includes an executive summary, an analysis of the firm’s situation, assessment of opportunities and threats, specifying objectives, forming marketing strategies, preparing actions programs and budgets, and developing control procedures.
MATCHING
Directions: Select the term that best identifies the statement listed below. Place the letter of the correct term in the space provided.
A. Market development / I. Corporate strategyB. Tactical planning / J. Backward integration
C. Marketing planning / K. Product development
D. Problem children / L. Opportunities and threats
E. Strengths and weaknesses / M. Strategy
F. BCG matrix / N. Build
G. Strategic planning / O. Product diversification
H. Market penetration
____ 1. Marketing plans developed at the product or product line level.
____ 2. Attempting to sell more existing products to existing markets of the firm.
____ 3. Attempting to sell new products to new markets of the firm.
____ 4. Developed the Product-Portfolio analysis procedure for resource allocation.
____ 5. The “fit” between the organization and its environment.
____ 6. Attempting to sell more existing products to new markets for the firm.
____ 7. Occurs when a business buys out a firm upstream.
____ 8. Specifying planning details for a definite period of time.
____ 9. Internal assessments of a firm using a SWOT analysis.
____ 10. A strategy used to improve an SBU’s performance by investing additional
resources in the SBU.
____ 11. Designing the firm’s overall “game plan.”
____ 12. External assessments of a firm’s environment using a SWOT analysis.
____ 13. SBUs that are growing fast but have low market shares and low profits in a BCG
analysis.
____ 14. Attempting to sell new products of the firm to the firm’s existing markets.
____ 15. Attempts to answer the question: “What businesses should we be in?”
TRUE OR FALSE
Directions: Write T (true) or F (false) in the space provided.
____ 1. Strategic planning involves designing ways for a firm to adapt to its changing
environment.
____ 2. Budgeting attempts to ensure that a firm can afford to do what it plans to do.
____ 3. Strategic planning and marketing planning are essentially the same thing.
____ 4. The “game plan” for a firm is called a marketing plan.
____ 5. Mission statements should be the driving force behind strategic planning decisions.
____ 6. Each SBU should develop its own objectives and strategic plan, but not its own
mission statement.
____ 7. When an SBU has the objective: “We need to do a better job this year,” this is an
example of a good objective.
____ 8. The goal of a divest strategy is to use the SBU to generate cash for the other SBUs.
____ 9. The goal of a harvest strategy is to stop investing resources in the SBU.
____ 10. The BCG matrix categories a firm’s products or its SBUs.
____ 11. Ideally in a BCG matrix, a firm should have only stars and cash cows.
____ 12. The BCG matrix does not assume a causal relationship between market share and
profitability.
____ 13. Typically, a marketing channel of wholesalers and retailers is located upstream
from the manufacturer.
____ 14. Typically, suppliers of raw materials are located downstream from a
manufacturer.
____ 15. The executive summary is the first thing that should be written when preparing a
marketing plan.
MULTIPLE CHOICE
Directions: Write the letter of the best answer in the space provided.
____ 1. Which of the following should be included in a marketing plan?
a. A customized marketing mix designed to fit the target market
b. A product positioning strategy
c. Definition of the target market
d. All of the above
____ 2. Which type of plan specifies the details of a plan for a specific period of time?
a. Strategic plan
b. Tactical plan
c. Marketing plan
d. Horizontal plan
____ 3. Which of the following can be an SBU?
a. A product line
b. A product
c. A business
d. All of the above
____ 4. Which of the following is a specific outcome of an objective?
a. A level of brand awareness for a product
b. Sales in dollar amount
c. Number of units to be sold
d. All of the above
____ 5. Which of the following is a good example of an area for a competitive position
objective?
a. The image of the product
b. Customer retention
c. Labor hours
d. Earnings per share
____ 6. Focusing a firm’s efforts on a smaller target market segment in an attempt to satisfy
the needs of this segment better than the needs can be satisfied with a larger segment is an example of a(n) ______strategy.
a. harvest
b. niche
c. divest
d. build
____ 7. The vertical axis in the BCG matrix consists of the ______for the market.
a. profit
b. positioning
c. growth rate
d. niche
____ 8. In the BCG matrix, stars have ______market growth rates and ______market
shares.
a. low; low
b. low; high
c. high; high
d. high; low
____ 9. When a firm tries to stimulate growth within its current businesses, it is engaged in
a(n) ______growth strategy.
a. intensive
b. integrative
c. diversification
d. BCG
____ 10. A market penetration strategy is typically used for ______products in
______markets.
a. mature; new
b. new; mature
c. new; new
d. mature; mature
____ 11. Wholesalers and retailers are typically located ______from the manufacturer in a
marketing channel.
a. upstream
b. diagonally
c. downstream
d. horizontally
____ 12. When a firm buys out competitors at the same stage along its value chain, this is
known as ______integration.
a. horizontal
b. vertical
c. diagonal
d. backward
____ 13. When a firm buys out another firm that has different customers and different
products, this is known as ______diversification.
a. lateral
b. conglomerate
c. backward
d. vertical
____ 14. The detailed marketing strategies related to a product’s marketing mix are known
as a(n):
a. marketing plan.
b. corporate strategy.
c. business strategy.
d. SBU plan.
____ 15. The synopsis of the marketing plan is known as the:
a. budget.
b. mission statement.
c. SBU plan.
d. executive summary.
Application Activity
A firm can choose between four basic growth strategies: (1) market penetration, (2) product development, (3) market development, and (4) diversification. For each of the following examples, code the type of strategy that is being used according to the following codes:
PD – product development
MD – market development
MP – market penetration
D – diversification
_____ 1. A soft drink company buys out a personal computer firm.
_____ 2. McDonald’s opens its restaurants in two new countries.
_____ 3. Harley-Davidson attempts to convince women to purchase its motorcycles.
_____ 4. Pepsi has a “2-for-1 sale” in a local supermarket.
_____ 5. PepsiCo starts selling “Sierra Mist” as a lemon-lime soft drink.
_____ 6. Colgate starts selling a tube of toothpaste that contains 20 percent more
toothpaste for the same price.
Experiential Learning Activity
A firm can attempt to grow by using strategies for market development, product development, market penetration, or diversification. Go to a large supermarket and notice examples of each of these types of strategies among the 30,000 products that you find for sale there:
1. What are some examples of a market penetration strategy?
2. What are some examples of a product development strategy?
3. What are some examples of a market development strategy?
4. What are some examples of a diversification strategy?
Internet Exercise
pepsico.com
PepsiCo has five major brands that it uses as strategic business units (SBUs) in its strategic planning activities.
1. Go to Pepsi’s Web site at: www.pepsico.com
2. Click on “Company” at the top of the screen.
3. Next, click on “Brands and Companies” and list the five major brands that PepsiCo uses as its SBUs and the number of different products that it sells under each brand name:
Brand name Number of products
(a) ______
(b) ______
(c) ______
(d) ______
(e) ______
4. Were you surprised at any of the products that PepsiCo sells under any of these brand names? If so, which brands surprised you?
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