Chapter 6

GRAHAM HOOLEY NIGEL F. PIERCY BRIGETTE NICOULAUD2Strategic marketing planning

Strategy is the matching of the activities of an organisation to the environment in which it operates and to its own resource capabilitiesJohnson and scholes (1988)

6-2IntroductionCompanys capabilities are matched to the market environment in which it operates not for today but in foreseeable futureStrategic planning attempts to answer three basic questionsWhat is the business doing now?What is happening in the environment?What should the business be doing?6-36-4Figure 2.1Strategic fitOrganizational resources needed for implementation of the strategyMarket needs & conditionsStrategy adapted to the needs and requirements of the marketOrganizational resources suited to the markets in which it operatesMarketing strategyOrganizational resourcesDefining the business purpose or missionRequires asking fundamental questions:What business are we in?What businesses do we want to be in?Who is our major competitor?What markets are we in?6-5Mission formulation and statementThe strategic intent or vision of where organization want to be in foreseeable futureThe values of the organization should be spelled out to guide operationsArticulate distinctive competenciesMarket definition, in terms of customer targetsFinally, it should spell out where organization intends to be positioned in marketplace6-66-7Figure 2.2Components of missionMarket definitionCustomer targetsStrategic intentVision of what you want to beCompany valuesGuiding principlesCompetitive positioningDifferential advantageDistinctive competenciesCore skillsMissionObjectives and strategyThe marketing strategy processThree main levels:Establishment of a core strategy Assessment of companies capabilities (strengths and weaknesses relative to competition opportunities and threats posed by the environment)The creation of the companys competitive positioning competitive edge in serving customers better than competition is definesThe implementation of the strategyDepartment putting strategy into action is created6-86-9Figure 2.3The marketing strategy processBusiness purposeCore strategyCompetitive positioningMarketing mixImplementationEnvironment analysisMarket targetControlCompany analysisCompetitive advantageOrganizationEstablishing the core strategy6-10Analysis of organizational resourcesCreation of long list of resources and many weaknesses that an organization has at its disposalThey may stem from;Skills of the workforce in assembling productsSkills of management in planningR&D department in new product ideasDistinctive competencies may lie in image, market presence or its after sales services (exploitable)6-11Drukers seven types of businessesProduct portfolio6-12Drukers seven types of businessesTodays breadwinnersproducts earning healthy profits nowTomorrows breadwinnersExpected to take breadwinning role in the futureYesterdays breadwinnersSupported the company in the pastDevelopmentsRecently developed that may have some future6-13Drukers seven types of businessesSleepersHave been around for sometime but failed to establish themselves in their marketsInvestments in managerial egoHave strong product champions among influential managersFailuresFailed to play a significant role in the companys portfolio6-146-15Figure 2.4Product types in the portfolioMarket attractivenessTomorrow's breadwinnersDevelopmentsSleepersEgo tripsFailuresYesterdays breadwinnersTodays breadwinnersLifeCycleDeathCycleHighLowLowHighBusiness strengthPortfolio planningDiversified organizations need to find methods for assessing the balance of business in its portfolioDevelopment of business strategies and allocation of resources (both managerial and financial)Analyzing portfolio balance

6-166-17Figure 2.5Balancing the business portfolioProducts that generates cash nowOther that use cash now but promise to generate cash in the futureLong-run corporate health requires a balance of:6-18Figure 2.6Unbalanced, present-focused business portfolioProducts that generates cash nowOther that use cash now but promise to generate cash in the futureA great present but what about the future?6-19Figure 2.7Unbalanced, future-focused business portfolioProducts that generates cash nowOther that use cash now but promise to generate cash in the futureFuture prospects good but who pays todays bills?Analysis of the markets servedOpportunities and threats facing the companyStem from two main areas;The customers (both current and potential) and competitors ( again both current and potential)Most markets consist of heterogeneous customers (varying needs and demands)6-206-21Figure 2.8SWOT AnalysisStrengths

What are we good at relative to competitors?Threats

What emerging dangers must we avoid or counter?Opportunities

What changes are creating new options for us?Weaknesses

What are we bad at relative to competitors?InternalExternalGood pointsDanger points6-22Figure 2.9SWOT strategic implicationsExploit existing strengths in areas of opportunityBuild new strengths to counter threatsUse existing strengths to counter threatsBuild new strengths first to take advantage of opportunitiesOpportunitiesThreatsStrengthsweaknessesCore strategyDefine the key factors of successCompany sets its marketing objectivesObjectives should be both long and short termCore strategy varies at different stages of product life cycleExpand the market (achieved in early growth stages of lifecycle) or to increase share of existing market (pursued during late growth/maturity stages6-23Expand the marketMarket expansion can be achieved through attraction of new users to the product or serviceThrough geographic expansion of the companys operations (both domestically and internationally)6-246-25Figure 2.10Strategic focusImprove performanceIncrease salesImprove productivityExpand marketIncrease share.Expand marketIncrease share.New uses

New users

Increasing use frequently

New productsWin share

Acquire share

Create alliancesIncrease price

Add value

Change product mixCapital costs

Fixed costs

Variable costsIncrease shareMain routes to increasing share include;Winning competitors, customersMerging with (or acquiring) the competitorsEntering into strategic alliances with competitors, suppliers and/or distributorsIncreasing usage rate may be viable approach to expanding the market for some products6-26Improving profitabilityThrough improving marginsIncreasing price, reducing cost or bothRemoving poorly performing products and concentrating on more financially viable6-27Creating the competitive positioningStatement of companys market targetsWhere the company will compete and differential advantageHow the company will competeMarket targetsSelect those targets most suited to utilizing companys strengths and minimizing vulnerability due to weaknesses

6-28Market targetsMarket will generally be more attractive if the following hold;It is largeIt is growingContribution margins are highCompetitive intensity and rivalry are lowThere are high entry and low exit barriersThe market is not vulnerable to uncontrollable events6-29Differential advantage6-30Cost leadershipCompany seek to obtain a cost structure significantly below than that of competitorThrough construction of efficient scale economies, cost minimization in R&D, service, sales force, advertising etc6-316-32Figure 2.11Routes to competitive advantageCompetitivedisadvantageValueduniquenessHighLowLowHighRelative delivered costCompetitiveadvantageStuck in the middleDifferentiationSomething that is seen as a unique in the marketCompanys strengths and skills are used to differentiate the companys offerings than competitorsDifferentiation can be achieved through design, style, product or service features, price, image etc6-33Differentiation and cost leadershipBoth could be pursued simultaneously (Fulmer and Goodwin, 1988)Cost leadership may be impossible to sustain due to competitor imitationCost leadership requires minimal spending on R&D, product improvement and image creation6-34ImplementationTask of marketing management is to implement those decisions through marketing effortThree basic elements of implementation;Marketing mix, organization and control6-35Marketing mixEach of the element of the mix should be designed to add up to the positioning requiredWhere elements of the mix do not pull in the same direction but contradict each other, the positioning achieved will be confused and confusing to customers6-36OrganizationHow the marketing effort and the marketing department are organized will have effect on how well the strategy can be can be carried throughRequired manpower and financial resources to be made available6-37ControlMonitor and control the effortPerformance can be monitored in two ways;Market performance (sales, market share, customer attitude and loyalty and changes in them over time)Financial performance ( monitoring of product contribution relative to the resources employed to achieve it)6-38Amber reports the most important marketing metrics used by companies6-39Marketing metricsRelative perceived qualityLoyalty/retentionTotal no of customersCustomer satisfactionRelative price (market share/volume)Perceived quality/esteemComplaints (level of dissatisfaction)Awareness and distribution/availability

6-40