Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

4. Evaluating Opportunities
   in the Changing Marketing
   Environment

Text © The McGraw−Hill

Companies, 2002

Evaluating Opportunities in the Changing Marketing Environment 119

Some top managements handle strategic planning for a multiproduct firm with

an approach called portfolio management—which treats alternative products, divi-

sions, or strategic business units (SBUs) as though they were stock investments, to

be bought and sold using financial criteria. Such managers make trade-offs among

very different opportunities. They treat the various alternatives as investments that

should be supported, milked, or sold off—depending on profitability and return on

investment (ROI). In effect, they evaluate each alternative just like a stock market

trader evaluates a stock.^31

This approach makes some sense if alternatives are really quite different. Top man-

agers feel they can’t become very familiar with the prospects for all of their

alternatives. So they fall back on the easy-to-compare quantitative criteria. And

because the short run is much clearer than the long run, they place heavy emphasis

on currentprofitability and return on investment. This puts great pressure on the

operating managers to deliver in the short run—perhaps even neglecting the long run.

Neglecting the long run is risky—and this is the main weakness of the portfolio

approach. This weakness can be overcome by enhancing the portfolio management

approach with market-oriented strategic plans. They make it possible for managers

to more accurately evaluate the alternatives’ short-run and long-run prospects.

Large multiproduct firms, like Honda, evaluate and pursue a varied portfolio of strategic opportunities all around the world.

Some firms use

portfolio management

Evaluating Opportunities in International Markets

The approaches we’ve discussed so far apply to international markets just as they

do to domestic ones. But in international markets it is often harder to fully under-

stand the marketing environment variables. This may make it harder to see the risks

involved in particular opportunities. Some countries are politically unstable; their

governments and constitutions come and go. An investment safe under one gov-

ernment might become a takeover target under another. Further, the possibility of

foreign exchange controls—and tax rate changes—can reduce the chance of get-

ting profits and capital back to the home country.

Evaluate the risks