Unit 2Unit 2

Strategic Marketing Strategic Marketing PlanningPlanning

What is Strategic Planning?What is Strategic Planning?

It is the managerial process that It is the managerial process that helps to develop a strategic and helps to develop a strategic and viable fit between the firm’s viable fit between the firm’s objectives, skills, resources with the objectives, skills, resources with the market opportunities available. It market opportunities available. It helps the firm deliver its targeted helps the firm deliver its targeted profits and growth through its profits and growth through its businesses and products.businesses and products.

Steps in Strategic PlanningSteps in Strategic Planning

..Business unit, productand market level

Defining theCompanyMission

Setting company objectives and goals

Designing theBusinessPortfolio

Planning Marketing &Other functionalstrategies

Organization Values, Mission, Vision and Organization Values, Mission, Vision and EthicsEthics

Values :Values :comes from our upbinging (Sanskara).comes from our upbinging (Sanskara).

There are Intrinsic & Extrinsic values.There are Intrinsic & Extrinsic values.

We better know good n bad values.We better know good n bad values.

What is good in India may be bad in UK.What is good in India may be bad in UK.

So values are subjective in nature.So values are subjective in nature.

Corporate visionCorporate vision: is a short, succinct, and inspiring statement : is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. some point in the future, often stated in competitive terms.

Vision refers to the category of intentions that are broad, all-Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a business inclusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the describes aspirations for the future, without specifying the means that will be used to achieve those desired ends. means that will be used to achieve those desired ends.

Vision & Mission- Infosys Vision & Mission- Infosys Infosys' Vision: Infosys' Vision:

"To be a globally respected corporation "To be a globally respected corporation that provides best-of-breed business that provides best-of-breed business solutions, leveraging technology, delivered solutions, leveraging technology, delivered by best-in-class people." by best-in-class people."

Infosys' Mission Statement : Infosys' Mission Statement : "To achieve our objectives in an "To achieve our objectives in an environment of fairness, honesty, and environment of fairness, honesty, and courtesy towards our clients, employees, courtesy towards our clients, employees, vendors and society at large." vendors and society at large."

Vision and Mission of Infosys Vision and Mission of Infosys (China)(China)

VisionVision

Infosys Technologies (China) Company Infosys Technologies (China) Company Limited will be the best in class provider of Limited will be the best in class provider of business solutions to Global 2000 business solutions to Global 2000 companies and large North Asian companies and large North Asian corporations by leveraging technology and corporations by leveraging technology and talent base of China. talent base of China.

MissionMissionSource of pride for our employees and a Source of pride for our employees and a partner of choice for our clients. partner of choice for our clients.

Vision & Mission of WiproVision & Mission of Wipro

Having already achieved the pinnacles of process and Having already achieved the pinnacles of process and quality credentials (through ISO 9000, SEI CMM, PCMM and quality credentials (through ISO 9000, SEI CMM, PCMM and Six Sigma), Wipro's Vision is focused on attaining leadership Six Sigma), Wipro's Vision is focused on attaining leadership in the areas of business, customer and people. in the areas of business, customer and people.

Business Leadership: Among the top 10 Information Business Leadership: Among the top 10 Information Technology Services companies globally and the No.1 Technology Services companies globally and the No.1 Information Technology company in India. Information Technology company in India.

Customer Leadership : The No.1 choice of customers Customer Leadership : The No.1 choice of customers through innovative solutions and Six Sigma processes. through innovative solutions and Six Sigma processes.

People Leadership : Among the top 10 most preferred People Leadership : Among the top 10 most preferred employers globally by creating an environment of employers globally by creating an environment of empowerment, intellectual challenge and wealth sharing. empowerment, intellectual challenge and wealth sharing.

Brand Leadership : Wipro to be among the 5 most admired Brand Leadership : Wipro to be among the 5 most admired brand in India. brand in India.

Tata Steel - MissionTata Steel - Mission

Consistent with the vision and values of the founder Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India s Jamsetji Tata, Tata Steel strives to strengthen India s industrial base through the effective utilisation of staff and industrial base through the effective utilisation of staff and materials. The means envisaged to achieve this are high materials. The means envisaged to achieve this are high technology and productivity, consistent with modern technology and productivity, consistent with modern management practices.management practices.

Tata Steel recognises that while honesty and integrity are Tata Steel recognises that while honesty and integrity are the essential ingredients of a strong and stable enterprise, the essential ingredients of a strong and stable enterprise, profitability provides the main spark for economic activity.profitability provides the main spark for economic activity.

Overall, the Company seeks to scale the heights of Overall, the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from excellence in all that it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.fear, and thereby reaffirms its faith in democratic values.

Tata Steel – Vision -2007Tata Steel – Vision -2007

To seize the opportunities of tomorrow and create a To seize the opportunities of tomorrow and create a

future that will make us an EVA positive companyfuture that will make us an EVA positive company    EVA = (RONA – WACC) X Invested CapitalEVA = (RONA – WACC) X Invested Capital

To continue to improve the quality of life of our To continue to improve the quality of life of our employees and the communities we serve.employees and the communities we serve.

Revitalize the core business for a sustainable future:Revitalize the core business for a sustainable future:

Venture into new businesses that will own a share of Venture into new businesses that will own a share of our futureour future

Uphold the spirit and values of TATAs towards nation Uphold the spirit and values of TATAs towards nation buildingbuilding

Corporate MissionCorporate Mission

This seeks to embody the entire This seeks to embody the entire goals of the organization and the goals of the organization and the objective of its existence.objective of its existence.

It seeks to provide a sense of It seeks to provide a sense of purpose, direction and opportunitypurpose, direction and opportunity

Market Oriented Business DefinitionsMarket Oriented Business Definitions

Company Product Oriented Market OrientedCompany Product Oriented Market Oriented

RevlonRevlon We make cosmetics We make cosmetics We sell lifestyle & self We sell lifestyle & self expression, expression,

success and status, success and status, memories,memories,

hopes and dreams.hopes and dreams.

Disney We run theme parks Disney We run theme parks We provide fantasies &We provide fantasies & entertainment- a place entertainment- a place

where where America still works the way America still works the way

it’sit’s supposed tosupposed to

Wal-Mart We run discount stores Wal-Mart We run discount stores We offer products and We offer products and servicesservices

that deliver value to Middlethat deliver value to Middle AmericansAmericans

Good mission statements Good mission statements have three characteristicshave three characteristics

They focus on a limited number of They focus on a limited number of goalsgoals

It stresses the major values and It stresses the major values and policies the firm desirespolicies the firm desires

It defines the major competitive It defines the major competitive scope of operation scope of operation

Setting the Company Setting the Company objectivesobjectives

5 questions that the firm must ask 5 questions that the firm must ask itselfitself

What is our business?What is our business? Who is our customer?Who is our customer? What does our customer need?What does our customer need? What will our business be?What will our business be? What should our business be?What should our business be?

Marketing MyopiaMarketing Myopia

Industry is a customer satisfying Industry is a customer satisfying process not a goods producing process not a goods producing process.process.

It is important therefore how you It is important therefore how you redefine your business.redefine your business.

Designing the Business Designing the Business PortfolioPortfolio

Analyzing the Current PortfolioAnalyzing the Current PortfolioSBUSBU It is a company within a companyIt is a company within a company The business is differentiated from The business is differentiated from

the rest of the companythe rest of the company It has its own set of competitorsIt has its own set of competitors It is a separate profit centreIt is a separate profit centre

Brings all your PLCs togetherBrings all your PLCs together

Helps set Helps set broadbroad strategic objectives (Build, strategic objectives (Build,

Hold, Harvest or Divest)Hold, Harvest or Divest)

Checks for balanced portfolioChecks for balanced portfolio

Allows comparison of ‘strengths’ v. Allows comparison of ‘strengths’ v.

competitorscompetitors

Guides flow of resourcesGuides flow of resources

A simple and effective presentational methodA simple and effective presentational method

Product portfolio analysisProduct portfolio analysis

The The Boston Consultancy Group Boston Consultancy Group MatrixMatrix

Mar

ket G

row

th R

ate

Relative Market Share

QuestionMarks

DogsCash Cows

Stars

?A 50%

B 25%

C 15%

D10%

High

Low

High Low

Cash Flows Across Businesses Cash Flows Across Businesses in the in the

BCG Portfolio ModelBCG Portfolio ModelG

row

th r

ate

(cas

h u

se)

High

Low

Stars

Cash cows Dogs

Questionmarks

High LowRelative market share

Desired direction of business development

CashFlows

SBU Strategy SBU Profile Regd Investment Net SBU Strategy SBU Profile Regd Investment Net Cash inflowCash inflow

STAR

CASH COW

QUESTION MARK

DOG

HOLD/INCREASEHIGH HIGH -- or +

HOLD HIGH LOWHIGH +

Increase/Divest 0 or -- Very high or Divest

High – or +

Harvest/Divest Low or -- Disinvest +

The case of anThe case of anunbalanced portfoliounbalanced portfolio

High

Low

LowHigh

Mar

ket

gro

wth

rat

e

Market share

Plotting BCG MatrixPlotting BCG Matrix SBU Sales this yearSBU Sales this year

Relative Market share =------------------------------------Relative Market share =------------------------------------

Leading Rival sales this yearLeading Rival sales this year

Ind. sales this yr – Ind. Sales last yrInd. sales this yr – Ind. Sales last yr

Market Growth Rate = -------------------------------------Market Growth Rate = -------------------------------------

Industry sales last yearIndustry sales last year

SBU Relative Contribution = Circumference = SBU Relative Contribution = Circumference = ∏∏dd

SBU’s Total sales SBU’s Total sales in which d = -------------------------------- in which d = --------------------------------

Corporation Total SalesCorporation Total Sales

The GE Nine-Cell MatrixThe GE Nine-Cell MatrixB

usi

nes

s’s

com

pet

itiv

e p

osi

tio

n

High

Low

Medium

Industry attractivenessHigh Medium Low

1 1 2

1 2 3

2 3 3

1 Invest/grow2 Selective investment/ maintain position3 Harvest/divest

Market AttractivenessMarket Attractiveness (External)(External)

Market sizeMarket size- Market growth rate- Market growth rate- Market profitability - Market profitability - Pricing trends - Pricing trends - Competitive intensity / rivalry - Competitive intensity / rivalry - Overall risk of returns in the industry- Overall risk of returns in the industry

- Entry barriers - Entry barriers - Opportunity to differentiate products and - Opportunity to differentiate products and servicesservices

- Demand variability- Demand variability- Segmentation - Segmentation - Distribution structure- Distribution structure

- Technology development- Technology development

Competitive Strength Competitive Strength (Internal)(Internal)

- Strength of assets and competencies- Strength of assets and competencies- Relative brand strength (marketing)- Relative brand strength (marketing)- Market share- Market share

- Market share growth- Market share growth- Customer loyalty- Customer loyalty- Relative cost position (cost structure compared - Relative cost position (cost structure compared with competitors)with competitors)

- Relative profit margins (compared to competitors)- Relative profit margins (compared to competitors)- Distribution strength and production capacity- Distribution strength and production capacity- Record of technological or other innovation- Record of technological or other innovation

- Quality- Quality- Access to financial and other investment - Access to financial and other investment resourcesresources

- Management strength- Management strength

Factors underlying Market Attractiveness and Competitive Factors underlying Market Attractiveness and Competitive Position in GE Multifactor Portfolio Model: Hydraulic-Pumps Position in GE Multifactor Portfolio Model: Hydraulic-Pumps

MarketMarket

Market Market AttractivenessAttractiveness

Overall market sizeOverall market size

Annual market growth rateAnnual market growth rate

Historical profit marginHistorical profit margin

Competitive intensityCompetitive intensity

Technological requirementsTechnological requirements

Inflationary vulnerabilityInflationary vulnerability

Energy requirementsEnergy requirements

Environmental impactEnvironmental impact

Social-political-legalSocial-political-legal

WeightWeight

0.200.20

0.200.20

0.150.15

0.150.15

0.150.15

0.050.05

0.050.05

0.050.05

Must be Must be acceptableacceptable

1.01.0

Rating =Rating =

(1-5)(1-5)

44

55

44

22

44

33

22

33

ValueValue

0.800.80

1.1.

0.600.60

0.300.30

0.600.60

0.150.15

0.100.10

0.150.15

3.703.70

Business Business StrengthStrength

Market shareMarket share

Share growthShare growth

Product qualityProduct quality

Brand reputationBrand reputation

Distribution networkDistribution network

0.100.10

0.150.15

0.100.10

0.100.10

0.050.05

44

22

44

55

44

0.400.40

0.300.30

0.400.40

0.500.50

0.200.20

Factors Factors InfluencinInfluencing g Company Company Marketing Marketing StrategyStrategy(PEST)(PEST)

AnsoffAnsoffAnsoff says there are four Ansoff says there are four

strategies for growing a strategies for growing a business. business.

Let’s consider their merits Let’s consider their merits and drawbacks.and drawbacks.

Ansoff Growth Matrix….Ansoff Growth Matrix….

Existing

New

Existing NewProduct

Market

MarketPenetration

New ProductDevelopment

MarketExtension

Diversification

And there is a 5th

Option: Increase

Productivity

Alternative Corporate Growth Alternative Corporate Growth StrategiesStrategies

Market penetration strategiesMarket penetration strategies• Increase market share• Increase product usage

Increase frequency of useIncrease quantity usedNew applications

Product development Product development strategiesstrategies

• Product improvements• Product-line extensions• New products for same

market

Market development Market development strategiesstrategies

• Expand markets for existing productsGeographic expansionTarget new segments

Diversification strategiesDiversification strategies• Vertical integration

Forward/backward integration• Diversification into related bus

(concentric diversification)• Diversification into unrelated

businesses (conglomerate diversification)

Current products New products

Cu

rre

nt

mar

ke

tsN

ew

mar

ke

ts

……helps fill the Strategic Planning helps fill the Strategic Planning GapGap

Targetedsales

Targetedsales

Diversification

New Markets

New Products

Do nothingscenario

Do nothingscenario

Sales

Time (yearsTime (years)

Strategicplanning

gap

210

Market penetration1

2

3

4

Factors Affecting the Creation of Factors Affecting the Creation of Shareholder ValueShareholder Value

Creatingshareholder

value

Shareholder return• Dividends• Capital gains

Corporateobjective

Sales growth• Operating profit margin

• Income tax rate

Discount rate Debt

Operating

Cash flowfrom

operations

Investment Financing

• Working capital investment

• Fixed capital investment

• Cost of capital

• Value growth duration

Valuationcomponents

Valuedrivers

Managementdecisions

2-11

The Generic Value ChainThe Generic Value Chain

SWOT AnalysisSWOT Analysis

StrengthsStrengths WeaknessesWeaknesses OpportunitiesOpportunities ThreatsThreats

Opportunity and Threat MatricesOpportunity and Threat Matrices

The Planning ProcessThe Planning Process

Analysing Market opportunitiesAnalysing Market opportunities Developing Marketing strategiesDeveloping Marketing strategies Planning Marketing ProgramsPlanning Marketing Programs Managing the Marketing EffortManaging the Marketing Effort

Using 5 Forces analysis to scan the “MICRO” environment

IndustryIndustryCompetitorsCompetitors

Intensity ofIntensity ofRivalryRivalry

BuyersSuppliers

NewEntrants

Substitutes

Threat ofThreat ofNew EntrantsNew Entrants

Threat ofThreat ofSubstitutesSubstitutes

BargainingBargainingPower ofPower ofSuppliersSuppliers

BargainingBargainingPower ofPower ofBuyersBuyers

5 Forces example: 5 Forces example: BT Cellnet MM02(phones)BT Cellnet MM02(phones)

StrongVodaphone

OrangeOne-to-one

WeakCost of licence

High barrier to entryHuge cost to 3G New functions?

StrongCustomers have many competing offers, some

including airtime, some not.

Cheap deals throughInternet

WeakNokia

MotorolaEricsson

Competing stronglyFor share of

Mature market

MediumCustomers returning to

land linesConvergence with PDAs

Location technology

Porter’s Generic StrategiesPorter’s Generic Strategies

Overall cost leadershipOverall cost leadership Product DifferentiatorProduct Differentiator FocusFocus

Marketing ControlMarketing Control

Annual Plan controlAnnual Plan control Profitability controlProfitability control Strategic ControlStrategic Control