Remember, the summary needs to be complete, but concise. It can use text, bullets, and quotes from the article. I recommend that you write it as to use as part of your final exam study guide. Also, remember to cite as needed and per the APA style guide.
Article: Marketing Objectives andStrategy Formulation (Wong, et al. 2011) . This can be found on the HBR site and is listed with th ID:BEP119
Building a Marketing Plan: Chapter Five: Marketing Objectives and Strategy Formulation BEP119 January 31, 2011 CHAPTER FIVE Marketing Objectives and Strategy Formulation From Building a Marketing Plan By Ho Yin Wong, Kylie Radel, and Roshnee Ramsaran-Fowdar © 2011 by Business Expert Press. All rights reserved. Harvard Business Publishing distributes in digital form the individual chapters from a wide selection of books on business from publishers including Harvard Business Press and numerous other companies. To order copies or request permission to reproduce materials, call 1-800-545-7685 or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of Harvard Business Publishing, which is an affiliate of Harvard Business School. For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. http://www.hbsp.harvard.edu/ ibe-wong-book.indb xvi 5/31/11 12:22 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. CHAPTER 5 Marketing Objectives and Strategy Formulation Now that we have completed the situation analysis, we’ll develop the marking plan itself. A marketing plan by defi nition means developing ways and means of achieving the corporate goals through utilization of the available resources and satisfying our target markets. Th is chapter discusses setting marketing objectives in the market planning process. Th e objectives developed for the marketing plan need to be consistent with the business plan, the overall corporate strategic plans, or both. First, this chapter provides an overview of the nature of marketing objectives. Second, it discusses formulating marketing objec- tives, then introduces the diff erent types of marketing objectives. Finally, the chapter covers the stating of marketing objectives. The Nature of Marketing Objectives Many authors agree that few steps are as critical in marketing planning as setting objectives. Objectives are designed to ensure the organization Learning Objectives After reading this chapter, you should be able to • understand why it is crucial to set marketing objectives, • develop and understand the Boston Consulting Group product- portfolio matrix, • develop and understand the Ansoff product- market matrix, • develop specifi c, measurable, achievable, realistic, and time- bound (SMART) marketing objectives. ibe-wong-book.indb 59 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. 60 BUILDING A MARKETING PLAN knows what its strategies are expected to achieve and when a strategy has achieved its purpose.1 Corporate objectives set the overall direction for the organization, while marketing objectives provide direction for the organization’s marketing eff orts. As the corporate objectives provide direction for the organization, these objectives need to be considered or adhered to when formulating the marketing objectives. Th e relationships between corporate objectives and strategies and departmental objectives and strategies are represented in Figure 5.1. In simpler terms, corporate objectives are what the business wants to achieve, and they describe a destination or a result. Corporate objectives are often expressed in terms of profi t. Profi t satisfi es shareholders and owners and is an accepted measure of effi ciency. Corporate- level objec- tives, however, are essentially meaningless unless all departments work together to achieve these goals. Marketing objectives are concerned with what products are to be sold to which markets. Marketing objectives may address desired growth, market share, or profi ts for products in specifi c markets. While there are no universally accepted standards or procedures for setting or measuring marketing objectives, as a guide, marketing objectives should2 Figure 5.1. Relationships between corporate- and marketing- level objectives and strategies. ibe-wong-book.indb 60 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. MARKETING OBJECTIVES AND STRATEGY FORMULATION 61 • provide a tangible guide for action; • provide specifi c actions to follow; • suggest tools to measure and control eff ectiveness; • be ambitious enough to be challenging; • take account of the company’s strengths and weaknesses, capitalize on opportunities, and avoid or minimize potential threats; • be well matched with corporate objectives and individual prod- uct line objectives. Th erefore, marketing objectives should provide specifi c, quantita- tive guides to what you will achieve and how it will be done. It is good practice to set short- term (up to one- year) and longer- term (two- to three- year) marketing objectives. Even if you do not have long- term planning, developing long- term objectives forces you to think about the future and consider the long- term implications of your short- term mar- keting objectives. Formulating Marketing Objectives When formulating marketing objectives, start with broad objectives and then concentrate on setting narrow and more specifi c strategies and tasks. Organizations may start with three sets of broad objectives: 1. Th ose that are easily attainable 2. Th ose that are most desirable 3. Th ose that are optimistic3 Th e easily attainable objectives will almost certainly be achieved; how- ever, the organization should strive for those that are most desirable or even optimistic. The Boston Consulting Group (BCG) Product Portfolio Matrix A useful tool when developing marketing objectives is the Boston Con- sulting Group (BCG) product portfolio matrix. While profi ts do not ibe-wong-book.indb 61 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. 62 BUILDING A MARKETING PLAN always indicate product portfolio performance well— since they only refl ect changes in the liquid assets of the organization, such as capital equipment, stocks, and receivables— cash fl ow is a more appropriate indicator of a organization’s ability to develop its product portfolio.4 Th e BCG matrix provides a graphic representation for diversifi ed organiza- tions to make decisions about their use of resources to support specifi c business units. Th e BCG matrix classifi es an organization’s business units according to its cash usage and its cash generation using market growth and relative market share.5 You can decide to plot business units, product lines, brands, or indi- vidual products. In our case, we will use the BCG matrix to examine brands or product lines, but the principles are the same for the other areas. Remember, though, the BCG matrix has limitations. It is not par- ticularly relevant for public sector organizations, as market share and growth are not useful measures in these industries.6 Th e BCG matrix may be drawn as shown in Figure 5.2. An organization may have several products or product lines across a number of the matrix quadrants and would benefi t from understanding the impact of their positions: Figure 5.2. Boston Consulting Group product portfolio matrix. ibe-wong-book.indb 62 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. MARKETING OBJECTIVES AND STRATEGY FORMULATION 63 • Brands or product lines classifi ed as stars have great potential to generate cash; however, they are often expensive to maintain in this position. Stars often require a great deal of investment in promotion, research and development, and fi xed and operating costs to maintain their market leadership. • Cash cow brands or product lines have an established market and good cash generation. Th ey are typically market lead- ers where there is little additional growth and do not require signifi cant cash to maintain that position. • Question marks have not yet achieved a dominant market position and may use a great deal of cash to push them into a star category, but they have high growth potential. Question marks are often referred to as “wildcats” or “problem children,” as these brands or lines may be unpredictable in the market. • Dogs often have little future. Th ey have low relative market share with low growth potential. Th ey represent a drain on cash reserves. If positioned closer to the cash cow quadrant, these brands or lines may be known as “cash dogs” and can usually be harvested— that is, they are allowed to generate as much profi t as possible for no investment. If they are a “true dog,” these brands or lines should be divested7— deleted from the product portfolio. Relative Market Share Decisions Diff erent products and brands have to be managed diff erently. Like com- panies, products have strengths and weaknesses, and these strengths and weaknesses need to be balanced carefully to ensure that companies main- tain market leadership, profi tability, cash fl ow, and growth. Th e BCG matrix provides a powerful tool to visually assess the company’s prod- uct portfolio position, which then provides indicators of the policies and objectives for each product or brand. An example of the BCG matrix as it may be used is provided in Figure 5.3. In terms of market share, when plotted on the matrix, the relative size of the circle indicates the relative size of your company’s sales volume in relation to your largest competitor’s sales. You can also indicate the profi t contribution of the product by including a segment in the circle.8 ibe-wong-book.indb 63 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. 64 BUILDING A MARKETING PLAN As you can see in Figure 5.3, the cash cow products’ profi t contributions are much higher than the star product. Determining the relative market share— the position on the matrix for each product or brand— is a critical decision. For a simple calculation of the relative market share, divide your share by your largest competitor’s share (volume of sales). A ratio greater than one indicates your product is the market leader.9 Greater market share often (but not always) indicates a greater return on investment (ROI). For example, see Table 5.1. Market Growth Decisions Market growth decisions may refl ect the stage of the product life cycle (PLC).10 For example, star products are often in the growth stage of the Figure 5.3. BCG product portfolio matrix example. Table 5.1. Calculation for Market Share Decisions Product Your market share (volume of sales) Largest competitor’s market share (volume of sales) Ratio Product A 20 10 20 ÷ 10 = 2.00 Product B 40 60 40 ÷ 60 = 0.67 ibe-wong-book.indb 64 5/31/11 12:23 PM For the exclusive use of L. Machuca, 2023. This document is authorized for use only by Liliana Machuca in BUS 5614 taught by CHARLES BRYANT, Florida Institute of Technology from Jan 2023 to Jul 2023. MARKETING OBJECTIVES AND STRATEGY FORMULATION 65 PLC, while cash cow products are usually in the maturity stage. Dogs are often in the decline stage, and question marks may be in the introductory or early growth stages (the stage of signifi cant competitive turbulence). A further consideration here is the relative cash fl ow generated by each product or brand.11 Stars have high cash generation but also have high cash usage. Question marks have low cash generation but high cash usage. Cash cows have high cash generation and low cash usage, and dogs generally have low cash generation and low cash usage. To position your products or brands along the horizontal axis, you usually consider up to four criteria: (a) the size of the market, (b) the growth rate of the market, (c) the ease of entry into the market, and the (d) life- cycle position. Estimate which of these is the most to least important to your organization, awarding each a percentage value (out of 100%), and rate each of your products according to these criteria. For example, assume you have assigned weightings to each criterion as rep- resented in the following table. For each product, the weightings don’t change, but now assign a rating out of four against each criterion for each product. So for product A, the calculation of the