Page 140 -

106 PART 2 • STRATEGY FORMULATION

according to economic, control, and adaptive criteria. Organizations should consider the
costs and benefits of various wholesaling and retailing options. They must consider
the need to motivate and control channel members and the need to adapt to changes in the
future. Once a marketing channel is chosen, an organization usually must adhere to it for
an extended period of time.
Marketing Research
Marketing research is the systematic gathering, recording, and analyzing of data about
problems relating to the marketing of goods and services. Marketing research can uncover
critical strengths and weaknesses, and marketing researchers employ numerous scales,
instruments, procedures, concepts, and techniques to gather information. Marketing
research activities support all of the major business functions of an organization.
Organizations that possess excellent marketing research skills have a definite strength in
pursuing generic strategies.
The President of PepsiCo said, “Looking at the competition is the company’s best
form of market research. The majority of our strategic successes are ideas that we
borrow from the marketplace, usually from a small regional or local competitor. In
each case, we spot a promising new idea, improve on it, and then out-execute our
competitor.” 19

Cost/Benefit Analysis
The seventh function of marketing is cost/benefit analysis, which involves assessing the
costs, benefits, and risks associated with marketing decisions. Three steps are required
to perform a cost/benefit analysis: (1) compute the total costs associated with a decision,
(2) estimate the total benefits from the decision, and (3) compare the total costs with the
total benefits. When expected benefits exceed total costs, an opportunity becomes more
attractive. Sometimes the variables included in a cost/benefit analysis cannot be quanti-
fied or even measured, but usually reasonable estimates can be made to allow the analysis
to be performed. One key factor to be considered is risk. Cost/benefit analysis should also
be performed when a company is evaluating alternative ways to be socially responsible.

Marketing Audit Checklist of Questions
The following questions about marketing must be examined in strategic planning:
1. Are markets segmented effectively?
2. Is the organization positioned well among competitors?
3. Has the firm’s market share been increasing?
4. Are present channels of distribution reliable and cost effective?
5. Does the firm have an effective sales organization?
6. Does the firm conduct market research?
7. Are product quality and customer service good?
8. Are the firm’s products and services priced appropriately?
9. Does the firm have an effective promotion, advertising, and publicity strategy?
10. Are marketing, planning, and budgeting effective?
11. Do the firm’s marketing managers have adequate experience and training?
12. Is the firm’s Internet presence excellent as compared to rivals?

Finance/Accounting

Financial condition is often considered the single best measure of a firm’s competitive
position and overall attractiveness to investors. Determining an organization’s financial
strengths and weaknesses is essential to effectively formulating strategies. A firm’s liquid-
ity, leverage, working capital, profitability, asset utilization, cash flow, and equity can
eliminate some strategies as being feasible alternatives. Financial factors often alter exist-
ing strategies and change implementation plans.