IntroductionIntroduction

What exactly is strategic What exactly is strategic planning?planning?

Historical Progression of Historical Progression of Business PlanningBusiness Planning

1900s, budgeting and controls; focus was on 1900s, budgeting and controls; focus was on deviation from the budget. It assumed that the deviation from the budget. It assumed that the past would repeat itself.past would repeat itself.

1950s, long-range planning; it also assumed that 1950s, long-range planning; it also assumed that the past would repea itself but the future could the past would repea itself but the future could be forecasted based on an analysis of trendsbe forecasted based on an analysis of trends

1960s, strategic planning, assumed that simple 1960s, strategic planning, assumed that simple trend analyses based on past occurances were trend analyses based on past occurances were inadequate. It considered forecasts of future inadequate. It considered forecasts of future changes in the marketing environment changes in the marketing environment (customers and competitors). Its foundation is (customers and competitors). Its foundation is continuous scanning of the environment and continuous scanning of the environment and internal abilities to develop quick responses to internal abilities to develop quick responses to sudden changes. sudden changes.

What exactly is strategic What exactly is strategic planning?planning?

Strategic planning involves decisions that are Strategic planning involves decisions that are made by the management of an organization made by the management of an organization as it pursue its mission and objectives. These as it pursue its mission and objectives. These decisions include the types of products to decisions include the types of products to offer and in what markets to sell them, the offer and in what markets to sell them, the allocation of resources to that end, the allocation of resources to that end, the establishment of policies and procedures, and establishment of policies and procedures, and the appropriate distribution of employee the appropriate distribution of employee responsibilities. This decision-making process responsibilities. This decision-making process is influenced by events occurring in the is influenced by events occurring in the internal and external environments of the internal and external environments of the firm. firm.

A strategic marketing plan is the joint A strategic marketing plan is the joint preparation of a strategic (long-term) preparation of a strategic (long-term) plan with supportive functional plans, to plan with supportive functional plans, to assure assure a compatible and continuous fit a compatible and continuous fit bewteen the organization’s goals and bewteen the organization’s goals and capabilities and its competitive capabilities and its competitive environment. environment.

It is a long-term plan to enchance the It is a long-term plan to enchance the firm’s competitive position or a plan firm’s competitive position or a plan that encloses the firm’s primary that encloses the firm’s primary strategies, especially those related to its strategies, especially those related to its product or services and market.product or services and market.

Important parts of the definition:Important parts of the definition:

jjointoint preparation of a strategic marketing preparation of a strategic marketing plan with supportive functional plansplan with supportive functional plans; the ; the annual functional plans must flow directly annual functional plans must flow directly from strategic plans. Strategic decisions from strategic plans. Strategic decisions provide general guidelines for the planning provide general guidelines for the planning needs of the functional departments needs of the functional departments (marketing, management - operations, (marketing, management - operations, finance) finance)

assurance of a compatible and continuous assurance of a compatible and continuous fitfit; long-term profit is determined by a ; long-term profit is determined by a series of short-term profitsseries of short-term profits

compatible and continuous fit between the compatible and continuous fit between the organization’s goals and capabilities and organization’s goals and capabilities and its competitive environmentits competitive environment; strengths ; strengths and weaknesses of the business, and the and weaknesses of the business, and the opportunities and threats in the opportunities and threats in the environment should be analyzed. Strategic environment should be analyzed. Strategic controls must go on about (1) changes in controls must go on about (1) changes in the capabilities of the business, (2) critical the capabilities of the business, (2) critical events taking place in the environment – events taking place in the environment – primarily the customers and competitors. primarily the customers and competitors. Controls consist of determining whether Controls consist of determining whether the firm is achieving its objectives: if not, the firm is achieving its objectives: if not, why? why?

Strategic ManagementStrategic Management

The goal in strategic management is The goal in strategic management is to match the resources of the firm to to match the resources of the firm to the threats and opportunities that the threats and opportunities that exist in the environment in order to exist in the environment in order to achieve long-term survival of the achieve long-term survival of the firm.firm.

Strategic Marketing Strategic Marketing ConceptConcept

Marketing conceptMarketing concept; determining the needs of ; determining the needs of customers and then satisfying those needs customers and then satisfying those needs better than competitorsbetter than competitors

Strategic marketing conceptStrategic marketing concept; focusing all ; focusing all planning and implementational activities on planning and implementational activities on the primary goal of long-term customer the primary goal of long-term customer satisfaction at a profit. Satisfaction of the satisfaction at a profit. Satisfaction of the customer over the long term requires customer over the long term requires continuous monitoring of the environment, continuous monitoring of the environment, incorporating findings into long- and short-incorporating findings into long- and short-term plans, achieving a sustainable term plans, achieving a sustainable competitive advantage, and enlisting the competitive advantage, and enlisting the cooperation of employeescooperation of employees to support the firm’s to support the firm’s mission.mission.

Central questions to be answered;Central questions to be answered;

What is the firm’s current strategy and position in What is the firm’s current strategy and position in the market? How does the firm’s current abilities the market? How does the firm’s current abilities match up to future strategic requirements? Are match up to future strategic requirements? Are there minor or major problems?there minor or major problems?

What is happening in the environment now and What is happening in the environment now and how might that be expected to change in the how might that be expected to change in the future (primarily customers and competitors)?future (primarily customers and competitors)?

What should the firm’s short- and long-term What should the firm’s short- and long-term strategy be in light of the analysis? Are radical or strategy be in light of the analysis? Are radical or moderate changes in existing strategies required moderate changes in existing strategies required to meet current and future customer needs? to meet current and future customer needs?

Strategic Marketing Strategic Marketing ModelModel

Mission statementMission statement; basically the firm’s ; basically the firm’s overall purposeoverall purpose

Internal analysisInternal analysis; in-depth analysis of ; in-depth analysis of the performance of each key functional the performance of each key functional area of the company to expose the area of the company to expose the company’s strengths and weaknesses company’s strengths and weaknesses

Environmental analysisEnvironmental analysis; covers the ; covers the analysis of (1) the remote environment – analysis of (1) the remote environment – PEST and (2) the operating environment PEST and (2) the operating environment – PECCS. Together they are referred to – PECCS. Together they are referred to as the situational analysis as the situational analysis PEST: political regulations, the economy, societal trends, and PEST: political regulations, the economy, societal trends, and technologytechnologyPECCS: personnel, ecology, customers, competitors and PECCS: personnel, ecology, customers, competitors and supplierssuppliers

Strategic MarketingStrategic Marketing; concerns the long-; concerns the long-term or broad focus of the firm related to term or broad focus of the firm related to grand strategies, the chosen product and grand strategies, the chosen product and market segments (portfolio analysis, market segments (portfolio analysis, expansion strategies etc.)expansion strategies etc.)

Long-term ObjectivesLong-term Objectives; objectives for ; objectives for multiyear period – three to five years.multiyear period – three to five years.

Annual ObjectivesAnnual Objectives; objectives of the firm ; objectives of the firm for the first year. They flow from the long-for the first year. They flow from the long-term objectives but they are more specific term objectives but they are more specific (daily, weekly, monthly, quarterly)(daily, weekly, monthly, quarterly)

Functional StrategiesFunctional Strategies; express how the ; express how the marketing mix variables will be used to marketing mix variables will be used to achieve the firm’s grand strategies. Other achieve the firm’s grand strategies. Other strategies for the operations, human strategies for the operations, human resources and finance departments should resources and finance departments should also be addressed. (what?)also be addressed. (what?)

Action Plans and PoliciesAction Plans and Policies; they are temporary ; they are temporary actions (referred to as tactics) necessary to actions (referred to as tactics) necessary to carry out strategies. (how, when, by who, carry out strategies. (how, when, by who, how much?)how much?)

ControlsControls; consist of ongoing monitoring and ; consist of ongoing monitoring and measuring of the actual performance of the measuring of the actual performance of the firm compared with its proposed objectives. firm compared with its proposed objectives. General abilities of the firm and the General abilities of the firm and the environment must also be monitored.environment must also be monitored.

Key TermsKey Terms

StrategyStrategy; refers to the plan for achieving a ; refers to the plan for achieving a goal or objective. “It reflects a pattern in a goal or objective. “It reflects a pattern in a sream of conscious managerial decisions, sream of conscious managerial decisions, aimed at ensuring organizational adaptation”. aimed at ensuring organizational adaptation”.

TacticTactic; a term closely related to strategy – a ; a term closely related to strategy – a specific action or means for accomplishing a specific action or means for accomplishing a strategy. The most common usage is for strategy. The most common usage is for short-term actions of a firm. (Depending on short-term actions of a firm. (Depending on the context, actions on the five-year plans the context, actions on the five-year plans may be referred as strategy, actions on yearly may be referred as strategy, actions on yearly plans may be referred as tactics.)plans may be referred as tactics.)

StrategicStrategic; in business, the term strategic ; in business, the term strategic generally refers “something important” generally refers “something important” and is utilized in many different contexts and is utilized in many different contexts such as strategic marketing plan, such as strategic marketing plan, strategic assets and resources, strategic strategic assets and resources, strategic issues or concerns, strategic thinking issues or concerns, strategic thinking (seeing the big picture).(seeing the big picture).

Levels of Strategy Levels of Strategy DecisionsDecisions

There are three levels of organizational There are three levels of organizational strategies (decisions) – (1) corporate, (2) strategies (decisions) – (1) corporate, (2) business, and (3) functional levels. business, and (3) functional levels. Decisions made at each level vary in Decisions made at each level vary in importance, specificity and degree of importance, specificity and degree of centralization. centralization.

Corporate-level strategiesCorporate-level strategies; are made by ; are made by the top management of a company (by the top management of a company (by CEO, CFO). Such decisions are normally CEO, CFO). Such decisions are normally associated with multi-business associated with multi-business corporations.corporations.

These decisions generally concern; the These decisions generally concern; the corporation’s public and internal image, the corporation’s public and internal image, the degree of social responsibility desired, major degree of social responsibility desired, major resource allocations (invest, hold or milk, resource allocations (invest, hold or milk, harvest, divest), with what businesses the harvest, divest), with what businesses the corporation should be involved, financing of corporation should be involved, financing of possible expansion internally through existing possible expansion internally through existing businesses or through dept or equity funding.businesses or through dept or equity funding.

Business-level strategiesBusiness-level strategies; are concerned with ; are concerned with how the business will compete in its how the business will compete in its particular industry. They focus on the firm’s particular industry. They focus on the firm’s product mix, customer and geographic product mix, customer and geographic markets served, exploitation of the firm’s markets served, exploitation of the firm’s specific competencies, and achievement of specific competencies, and achievement of one or more sustainable competitive one or more sustainable competitive advantages. Business and corporate-level advantages. Business and corporate-level strategies are the long-term portion of the strategies are the long-term portion of the strategic marketing plan. strategic marketing plan.

Functional-level strategiesFunctional-level strategies; made by the ; made by the managers and the employees of various managers and the employees of various functional departments. They are functional departments. They are primarily concerned with the preparation primarily concerned with the preparation and implementation of policies and action and implementation of policies and action plans that support the objectives and plans that support the objectives and strategies set by the corporate- and strategies set by the corporate- and business-level managers. (bottobusiness-level managers. (bottomm-up)-up)

Strategy levelStrategy level FocusFocus Those Those Time FrameTime Frame SpecificitySpecificity responsibleresponsible

Level 1:Level 1: What set of busi- Top What set of busi- Top 5-10 years 5-10 years BroadBroadCorporate nesses should managementCorporate nesses should managementStrategyStrategy we be in? we be in?

Level 2:Level 2: How do we com- President of How do we com- President of 1-5 years 1-5 yearsSomewhatSomewhat

Business pete within this SBUsBusiness pete within this SBUs specificspecificStrategy particular Strategy particular

industry?industry?

Level 3:Level 3: Details the cour- Details the cour- VP of Marketing VP of Marketing Less than 1 yearLess than 1 yearDetailed planDetailed plan

Functional ses of action inFunctional ses of action in VP of Operations VP of Operations Strategy the functionalStrategy the functional

areas of mana-areas of mana- gementgement

Strategic AggressionStrategic Aggression

There are five basic divisions of organizational There are five basic divisions of organizational characteristic or strategic aggression: characteristic or strategic aggression:

ProactiveProactive; being a leader rather than the ; being a leader rather than the follower, constantly assess the environment - follower, constantly assess the environment - opportunities and threatsopportunities and threats

ReactiveReactive; having risk to be known as a “copy-; having risk to be known as a “copy-cat” rather than “innovative”, mostly followedcat” rather than “innovative”, mostly followed

PassivePassive; focusing simply on what have been ; focusing simply on what have been done, focused on standardization and cost done, focused on standardization and cost minimization, does not monitor the environment minimization, does not monitor the environment

AdaptiveAdaptive; being flexible to adopt to the ; being flexible to adopt to the relatively stable environment, the relatively stable environment, the company wants to continue with its company wants to continue with its current highly or reasonable successful current highly or reasonable successful strategies, but remain open to changes if strategies, but remain open to changes if the right opportunity presents itself.the right opportunity presents itself.

DiscordantDiscordant; poorly positioned firms, ; poorly positioned firms, unsure about how to deal with its current unsure about how to deal with its current position and the best opportunities. This position and the best opportunities. This strategy is not selected but acquired strategy is not selected but acquired through poor performance.through poor performance.

Time HorizonTime Horizon

The strategic marketing plan has two time The strategic marketing plan has two time horizons: one is the long-term or strategic horizons: one is the long-term or strategic portion, normally about three to five years portion, normally about three to five years for the hospitality industry; the other is for the hospitality industry; the other is the short-term (one year or less) or the short-term (one year or less) or functional portion. Although the strategic functional portion. Although the strategic portion is for longer than one year, it is portion is for longer than one year, it is generally updated each year. The reason generally updated each year. The reason for the annual update is that internal and for the annual update is that internal and environmental factors change. environmental factors change.