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

96 Chapter 4

A firm should set need-satisfying objectives rather than production-oriented

objectives. Because customer needs change, too narrow a view may lead the com-

pany into a product-market in which the product itself will soon be obsolete.^3

A firm must make a profit to survive. But just saying that a firm should try to

make a profit isn’t enough. Management must specify the time period involved since

many plans that maximize profit in the long run lose money during the first few

years. Thousands of new dot.com firms went belly-up after a year or two of losses

because they could not even cover their expenses in the short run.

On the other hand, seeking only short-term profits may steer the firm from oppor-

tunities that would offer larger long-run profits. For example, Fruit of the Loom

struggled to maximize profits with its men’s underwear and other clothing lines, but

in those intensely competitive markets the maximum possible profit margins were

so thin that it ultimately had to reorganize under the bankruptcy law. In a situation

like this, it might be better to set a targetrate of profit that will lead the firm into

areas with more promising possibilities.

Our three general objectives provide guidelines, but a firm should develop its own

objectives. This is important, but top executives often don’t state their objectives

clearly. Too often, they say what their objectives were after the fact. If objectives

aren’t clear from the start, different managers may hold unspoken and conflicting

objectives—a common problem in large companies and in nonprofit organizations.

Many firms try to avoid this problem by developing a mission statement,which

sets out the organization’s basic purpose for being. For example, the mission of the

Fort Smith Public Library (www.fspl.lib.ar.us) is “to serve the minds of the citizens

in our community by providing easy access to resources that meet their informa-

tional and recreational needs.” As illustrated by this example, a good mission

statement should focus on a few key goals rather than embracing everything. It

should also supply guidelines when managers face difficult decisions. For example,

if an employee of the library is trying to decide whether or not to write a proposal

for the funding of a Spanish language story time or new computers that provide

Internet access, it should be clear that these services are within the scope of the

library’s stated mission. On the other hand, if another possible opportunity was to

use extra space in the library for exercise equipment, it would appear to be beyond

the stated mission. Of course, a mission statement may need to be revised as new

market needs arise or as the marketing environment changes, but this would be a

fundamental change and not one that is made casually.^4

A mission statement is important, but it is not a substitute for more specific objec-

tives that provide guidance in screening possible opportunities. For example, top

management might set objectives such as “earn 25 percent annual return on invest-

ment,” “become the market-share leader in each of our product-markets,” and

“introduce at least three innovative and successful products in the next two years.”

Of course, when there are a number of specific objectives stated by top manage-

ment, it is critical that they be compatible. If they’re not, frustration and even

failure may result. For example, a top-management objective of 25 percent annual

return on investment may seem reasonable taken by itself. And the objective

of introducing new products is reasonable. However, if the costs of developing and

introducing the new products cannot be recouped within one year, the return on

investment objective is impossible.^5

We are assuming that it is the marketing manager’s job to work within the frame-

work of objectives provided by top management. But some of these objectives may limit

marketing strategies and perhaps damage the whole business. This is another reason

why it is desirable for the marketing manager to help shape the company’s objectives.

Should earn some
profit

A mission statement
helps set the course

The whole firm must
work toward the same
objectives

Top-management
myopia may
straitjacket marketing