Market-Oriented Strategic Planning

Market-Oriented Strategic Planning

““The company without a strategy is willing to try The company without a strategy is willing to try anything.” anything.”

Michael PorterMichael Porter

““If you know the enemy and know yourself you need If you know the enemy and know yourself you need not fear the results of a hundred battles.not fear the results of a hundred battles.””

Sun TzuSun Tzu

Strategic Marketing Planning

Companies should look ahead and develop long-term strategies ğ to meet changing conditions in their industries and ensure long-term survival

The task of selecting an overall company strategy for long-run survival and growth ğ “strategic planning”

Marketing’s key role in strategic planning

Strategic Planning

Strategic Planning ğ Managerial process of developing and maintaining a match between the organization’s resources, goals and capabilities and the changing market opportunities.

The aim ğ to shape and reshape company’s businesses and products in order to reach to targeted profits and growth.

Top-management job Part of a broader process: strategic

management

Strategic Planning, Implementation, and Control Process

Measuringresults

Diagnosingresults

Takingcorrective

action

ImplementationImplementationPlanningPlanning

Corporateplanning

Divisionplanning

Businessplanning

Productplanning

Organizing

Implementing

ControlControl

Steps in Strategic Planning

Defining theCompanyMission

Defining theCompanyMission

Setting CompanyObjectivesand Goals

Setting CompanyObjectivesand Goals

Designingthe Business

Portfolio

Designingthe Business

Portfolio

Planning marketingand other functionalstrategies

Planning marketingand other functionalstrategies

C o r p o r a t e L e v e l Business unit, product, and market level

Corporate and Division Strategic Planning

All corporate headquarters undertake four planning activities:

1) Defining the corporate mission2) Establishing the strategic business units

(SBUs)3) Assigning resources to each SBU4) Planning new businesses, downsizing or

terminating older businesses.

Steps in Strategic Planning: Company Mission Statement

A mission statement ğ a statement of the organization’s purpose --- what it wants to accomplish in the larger environment

A clear mission statement ğ acts as “invisible hand” that guides employees to work toward realizing the organization’s goals.

Company Mission

Fundamental questions: What is our

business? Who is the

customer? What do

consumers value?

What should our business be?

A mission statement should be: Neither too narrow nor

too broad Fitting of market

environment Based on distinctive

competencies An “invisible hand” Motivating

Company Mission (cont.)

Limited number of goals

Stress major policies & values

Define competitive scopes

Company Mission (cont.)

“Market-oriented definitions” of a business ğ better than product or technological definitions

A market-oriented mission statement ğ defines the business in terms of satisfying basic customer needs (see examples)

Mission statement ğ to be guided by a “vision” - an almost “impossible dream” that provides a direction for the company for the next 10 to 20 years

Market OrientedMarket Oriented

RealisticRealistic

Fit Market EnvironmentFit Market Environment

Distinctive CompetenciesDistinctive Competencies

MotivatingMotivating

Specific

Company Mission

Characteristics of a Good Mission

Statement:

Characteristics of a Good Mission

Statement:

Company Product-Oriented Definition

Market-Oriented Definition

Amazon.com We sell books, videos, CDs, toys, consumer electronics and other products online

We make the Internet buying experience fast, easy, and enjoyable— we’re the place where you can find and discover anything you want to buy online

Disney We run theme parks We create fantasies—a place where dreams come true and America still works the way it’s supposed to

Nike We sell athletic shoes and apparel

We bring inspiration and innovation to every athlete* in the world (* if you have a body, you are an athlete)

Steps in Strategic Planning: Company Goals and Objectives

Company’s mission ğ needs to be turned into detailed, supporting objectives for each level of management

Mission ğ hierarchy of objectives As specific as possible Marketing strategies ğ must be developed

to support these marketing objectives

Hierarchy of Objectives

Mission Statement

Marketing Objective # 1



Marketing Strategy

Marketing Strategy

Steps in Strategic Planning: Business Portfolio

Business portfolio ğ collection of businesses and products that make up the company

1)Analyzing its current business portfolio and decide which business should receive more, less or no investment

2)Developing growth strategies to add new products/businesses to the current portfolio

Business Portfolio (cont.)

Portfolio Analysis ğ to identify and evaluate the various businesses that make up the company

To identify key businesses ğ Strategic Business Units (SBUs)

SBU: unit of the company (separate mission and objectives / can be planned independently from other company businesses)

To assess the attractiveness of its various SBUs and decide how much support each deserves

The Boston Consulting Group’s Growth-Share Matrix

20%-20%-18%-18%-16%-16%-14%-14%-12%-12%-10%-10%- 8%-8%- 6%-6%- 4%-4%- 2%-2%- 00

Mar

ket

Gro

wth

Rat

e

3 ?Question marks

? ??2

1

Cash cow

6

Dogs

8

710x10x 4x 2x 1.5x 4x 2x 1.5x 1x1x

Relative Market Share.5x .4x .3x .2x .1x .5x .4x .3x .2x .1x

Stars

5

4

Question Marks

• High growth, low share • Build into Stars or phase out • Require cash to hold market share

Question Marks

• High growth, low share • Build into Stars or phase out • Require cash to hold market share

Stars

• High growth & share• Profit potential • May need heavy investment to grow

Cash Cows

• Low growth, high share• Established, successful SBU’s•Produce cash

Cash Cows

• Low growth, high share• Established, successful SBU’s•Produce cash

Dogs

• Low growth & share • Low profit potential

Dogs

• Low growth & share • Low profit potential

Mar

ket

Gro

wth

Rat

e L

ow

H

igh

Boston Consulting Group (BCG) Approach

?

Relative Market ShareHigh Low

The BCG Growth-Share Matrix and Strategies

Build ğ to invest more in the SBU in order to build its share Increase market

share Works well for

question marks

Hold ğ to invest enough just to hold at the current level Preserve market

share Good for cash cow

Harvest ğ to increase the SBU’s short-term cash flow Good for weak cash

cows, question marks and dogs

Divest ğ to sell or to liquidate the business Good for dogs and

question marks

After the classification of its SBUs ğ to determine what role each will play in the future

Can be Difficult, Time-Consuming, & Costly to ImplementCan be Difficult, Time-Consuming, & Costly to Implement

Difficult to Define SBU’s & Measure Market Share/ GrowthDifficult to Define SBU’s & Measure Market Share/ Growth

Focus on Current Businesses; provide little advice for future planningFocus on Current Businesses; provide little advice for future planning

Can Lead to Unwise Expansion or DiversificationCan Lead to Unwise Expansion or Diversification

Problems With Matrix Approaches

Growth Strategies - Ansoff’s Product / Market Expansion Grid

4. Diversification2. Marketdevelopment

Newmarkets

1. Marketpenetration

Existingmarkets

Existingproducts

3. Productdevelopment

Newproducts

Product / Market Expansion Grid Market Penetration: making more sales to

current customers without changing its products.

Add new stores in current market areas, improve advertising, prices, service or store design.

Market Development: develop new markets for its current products

Identify new demographic or geographic markets. Product Development: offering modified or

new products to current markets. New styles, flavors, colors, or modified products.

Diversification: new products for new markets. Start up or buy new businesses.

Which strategy is this?

Market penetration

Market development

Product development

Diversification2 - 23

Steps in Strategic Planning: Functional Planning

The company’s overall strategic plan ğ establishes what kind of businesses the company will be in future & its objectives for each business.

More detailed planning must take place within each business unit

The major functional departments in each unit ğ must work together to accomplish strategic objectives

Marketing plays a key role

Provide a guiding

philosophy

Inputs to StrategicPlanners

Marketing’s Role in Strategic Planning

Marketing’s Key Role in Strategic Planning

Identify attractive opportu-

nities

Designeffective

strategies

Designeffective

strategies

Build strongvalue chains

Form superior

value delivery networks

Marketing’s Key Role:

Partner Relationship Management

Partner relationship management working closely with partners in other

departments (to form an effective “value chain” that serves the customer) &

partnering effectively with other companies in the marketing system for a superior “value delivery network” to jointly bring greater value to customers

Marketing’s Key Role: Partner Relationship Management

Each department in the company ğ as a link in the company’s value chain;

Each dept.carries out value-creating activities The company’s overall success ğ depends also on how well

the activities of various dept. are coordinated Departmental relations are full of conflicts

Marketers must find ways to get all dept. to “think consumer” and to develop a smoothly functioning value chain

Marketing’s Key Role: Partner Relationship Management

The company needs to look beyond its own value chain in order to create customer value:

Value-delivery network ğ network made up of the company, suppliers, distributors, and customers who partner with each other to improve the performance of the entire sytem

Competition today takes place between the entire value delivery networks!

Business Unit Strategic Planning

External Analysis

(Opport.&Threat)

Mission SWOT Setting Selecting Developing Implemen- Feedback &

Statement ANALYSIS Objectives Strategy Program. tation Control

Internal Analysis

(Streng.&Weakness)


Business Mission ğ each SBU needs to define its specific mission within the broader company mission

External Environment Analysis ğ to build a MIS to monitor:

Key external macroenvironment forces Significant microenvironment actors Trends and important developments ğ to

identify the associated opportunities and threats


Internal Environment Analysis ğ Each business needs to evaluate its internal strengths and weaknesses periodically

“Checklist for Performing Strengths/Weaknesses Analysis”

Management or an outside consultant ğ reviews the business’s marketing, financial, manufacturing and organizational competencies and rates each factor as strength or weakness

SWOT ANALYSIS

Business Unit Strategic Planning /Example of a Checklist

ı PERFORMANCE IMPORTANCEMain 2nd Moderate 2nd Main High Medium Low

Strength Strength Weakness WeaknessMARKETING

Firm's reputationMarket shareProduct/service qualityPricingDistributionPromotionSales forceR&D / InnovationGeographical location

FINANCEHigh profitabilityLow cost of capitalCash flowFinancial stability

PRODUCTIONScale economiesCapacity of meeting demandTalented productive powerTimely productionTechnical competence

ORGANIZATIONSkillful managersLoyal employeesEntrepreneurship orientationFlexibility degreeRapid adaptation

Marketing Analysis – SWOT Analysis


Goal Formulation (Goals ğ objectives that are specific with respect to magnitude and time)

Turning objectives ğ into measurable goals ğ facilitates management planning, implementation and control

Business Unit Strategic Planning: Strategy Formulation: Porter

Overall Cost Leadership

Differentiation

Focus

The Marketing Process

The task of any business is to deliver customer value at a profit.

There are at least 2 views of the value-delivery process

Two Views of the Value Delivery Process

Traditional Process Sequence

Make product Sell product

Value Creation and Delivery Sequence

Choose the value

Provide the value

Communicate the value

The Value-Delivery Process

The Marketing Process

The Marketing Process: Analyzing marketing opportunities Researching and selecting target markets Designing marketing strategies Planning marketing programs Organizing, implementing, controlling the

marketing effort

The Marketing Process (cont.)

Customers grouped by:

Geographic Demographic Psychographic Behavioral

Market segment is a groups of consumers who respond in similar ways to marketing efforts.

1. Market Segmentation

2. Target marketing

3. Market Positioning

StrategyStrategy


Evaluation of each segment’s attractiveness

Selection of segments with greatest long-term profitability

A company can choose one or several segments to target

StrategyStrategy


2. Target marketing


The place the product occupies in the consumer’s mind

Products are positioned relative to competing products

Marketers look for clear, distinctive and desirable place in positioning

StrategyStrategy


2. Target marketing



Designing marketing strategies for competitive advantage

Market leader strategies Market challenger strategies Market follower strategies Market nicher strategies


Planning marketing programs Decisions on:

Marketing expenditures Marketing mix – 4Ps Marketing budget allocation

The marketing mix includes controllable and tactical marketing tools known as the 4P’s

The Marketing Mix

2 - 47


Managing the marketing effort

Marketing Analysis Marketing Planning Marketing Implementation Marketing Control

Begins with a complete analysis of the company’s situation

Finding opportunities : the company must analyze

its market & mktg environment

company strengths & weaknesses

current and possible mktg actions

Avoiding threats Understanding

strengths Analyzing weaknesses

Analysis

Planning

Implementation

Control

Managing the Marketing Effort

Marketing FunctionsMarketing Functions

Marketing plans include:

Executive summary Analysis of current

situation Objectives Targets and positioning Marketing mix Budget Controls



Analysis

Planning

Implementation

Control

Marketing Planning

Through strategic planning ğ the company decides what it wants to do with each business unit

Marketing planning ğ involves deciding on marketing strategies that will help the company reach its strategic objectives

Marketing plan ğ 2 levels: Strategic mktg plan ğ develops the broad mktg

objectives and strategy based on an analysis of the current market situation and opportunities

Tactical mktg plan ğ outlines specific mktg tactics, including advertising, merchandising, pricing, channels, service, etc.

Contents of a Marketing PlanExecutive Summary & Table of Contents

Current Marketing Situation

Threats and Opportunity Analysis

Objectives and Issues

Marketing Strategy

Action Programs

Budgets

Controls

The process that turns mktg plans into mktg actions in order to achieve strategic mktg objectives

Deals with “who”, “where”, “when”, “how” (while mktg planning dealing with “what” and “why”)

Good implementation is a challenge


MarketingMarketing Functions Functions

Analysis

Planning

Implementation

Control

Evaluation of the results of marketing strategies

Checks for differences between goals and performance



Analysis

Planning

Implementation

Control

Measuring Effectiveness

Return on marketing (marketing ROI) The net return from a marketing

investment divided by the costs of the investments

The Relationship Between Analysis, Planning, Implementation, and Control

2 - 56

Documents

Market-Oriented Strategic Planning