Winning Markets Through Market-Oriented Strategic Planning by Philip Kotler

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Winning Markets Through Market-Oriented Strategic
Planningby Philip Kotler
Prof. Mundy Gonzalez De La Salle
University Professional Schools, Inc
RCBC Campus July 19, 2006
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Philip Kotler

• S.C. Johnson Son Distinguished Professor of
  International Marketing at the Northwestern
  University Kellogg Graduate School of Management
  in Chicago
• Recipient of the Distinguished Marketing Educator
  of the Year Award of the American Marketing
  Association
• The world's foremost expert on the strategic
  practice of marketing - Mgmt. Centre Europe

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Kotler on Marketing

• It is more important to do what is strategically
  right than what is immediately profitable

• Professional wisdom is contemporary, relevant and
  practical

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3 KEY AREAS OF STRATEGIC PLANNING

1. Managing a companys businesses as an investment
   portfolio.
2. Involves assessing each business strength by
   considering the markets growth rate and the
   companys position and fit in that market.
3. Establishing a strategy.

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STRATEGY as defined

• The words strategy and tactics are derived
  from ancient Greek taktikos meaning fit for
  arranging or maneuvering and is referring to the
  art of moving forges in battle.
• Strategos was the word for general.
• Strategy was the art of the general or the art
  of setting up forces before the battle.

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Same principle applies in business

• The objective of a good sales strategy is to get
  yourself in the right place with the right people
  at the right time so that you can make the right
  tactical presentation

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4 ORGANIZATIONAL LEVELS

1. The Corporate Level responsible in designing a
   corporate strategic plan to guide the whole
   enterprise
2. The Division Level establishes a division plan
   covering the allocation of funds to each business
   unit within the division
3. The Business Unit Level develops a strategic
   plan to carry the business unit into a profitable
   future
4. The Product Level (product line, brand) within
   a business unit develops a marketing plan for
   achieving its objectives in its product market

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Strategic-Planning, Implementation Control
Processes
PLANNING
IMPLEMENTING
CONTROLLING
Corporate Planning Division Planning Busines
s Planning Product planning
Organizing Implementing
Measuring Results Diagnosing
Results Taking Corrective action
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Planning new businesses, downsizing older
businesses
Sales
Diversification Growth
Desired Sales
Strategic-Planning Gap
Integrative growth
Intensive growth
Current Portfolio
Time (years)
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The Growth-Share Matrix
Stars Question Marks ? ? ?
Cash Cow Dogs
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Assigning resources to SBUsFour strategies

1. Build market share must grow if they are to
   become stars.
2. Hold appropriate for strong cash cows if they
   are to continue yielding large positive cash
   flows.
3. Harvest to increase short-term cash flow
   regardless of long-term effect.
4. Divest is likely to produce fairly good bids if
   the business is in relatively good shape and of
   more value to another firm.

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Corporate and Division Strategic Planning

• All corporate headquarters undertake four
  planning activities
• Defining the corporate mission
• Establishing strategic business units (SBUs)
• Assigning resources to each SBU
• Planning new businesses, downsizing, or
  terminating older businesses

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DEFINING THE CORPORATE MISSION

• Mission Statements define which competitive
  scopes the company will operate in
• Industry scope
• Products and applications scope
• Competence scope
• Market-segment scope
• Vertical Scope
• Geographical scope

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• Corporate and Division Strategic Planning
• Competitive company well defined mission
• Mission goals, strategy, policy
• Decentralization empowerment, freedom of
  business units

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• Organizational leader visibility
• Well defined mission statement provides
  connection
• Mission purpose, direction and opportunity
• One goal knits the people together (cohesion)

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Establishing strategic business units
Product-Oriented vs Market-Oriented Definitions
of a Business
Company Product Definition Market Definition
Missouri-Pacific Railroad We run a railroad. We are a people-and-goods mover.
Xerox We make copying equipment. We help improve office productivity.
Standard Oil We sell gasoline. We supply energy.
Columbia Pictures We make movies. We market entertainment.
Encyclopedia Britannica We sell encyclopedias. We distribute information.
Carrier We make air conditioners and furnaces. We provide climate control in the home.
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• Timely marketing strategy
• Receive timely information about market,
  competition
• Act decisively, time does not wait, so does the
  competitor
• Untimely decision obsolete decision

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Kotler says A company must study its
competitors as well as its actual and potential
customers. Companies need to identify
competitors strategies, objectives, strengths,
weaknesses, and reaction patterns. Managers
should be able to receive timely information
about competitors.
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• Market Niche/Product differentiation strategy
• Niche Marketing caters to narrowly defined group
  typically of small market where needs are not
  that well served
• Target specific market and develop product and
  marketing programs best fit for the product
• Instead of scattering their market or
  concentrating on fad items that eventually die
  down, focus on Niche Marketing

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• Sales people motivation
• Pay and fulfillment
• When youre down, go up, when youre up, go
  down.

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Aggressive Strategies
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Market Leader
A market leader has the largest market share in
the relevant product market. To remain dominant,
the leader looks for ways to expand total market
demand, attempts to protect its current market
share, and perhaps tries to increase its market
share.
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Market Challenger
A Market challenger attacks the market leader
and other competitors in an aggressive bid for
more market share. It can attack the market
leader, firms of its own size that are not doing
the job and under financed, and  small local and
regional firms
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• Market challenger strategy
• Benchmarking approach
• Raise the bar, innovate

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• Market challenger strategy
• Which markets to defend, which to leave alone,
  which to drop?
• Defensive strategy (i) reduce (ii) divert
  (iii) lessen intensity
• Defense is as much reaction as it is anticipation
  

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POSITION DEFENSE The basic defense is to
build an impregnable fortification around ones
territory. Although defense is important,
leaders under attack would be foolish to put all
their resources into only building fortifications
around their current product.
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Counteroffensive Defense Most market
leaders, when attacked, will respond with a
counterattack. The leader cannot remain passive
in the face of a competitors price cut,
promotion blitz, product improvement, or
sales-territory invasion. In a counteroffensive,
the leader can meet the attacker frontally or hit
his flank or launch pincer movement.
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PREEMPTIVE DEFENSE- This is to attack before
the enemy starts its offense. It can wage
guerilla action across the market hitting one
competitor here, another there and keep
everyone off balance. Or it can try to achieve a
grand market envelopment or it can send out
market signals to dissuade competitors from
attacking. Market leaders with strong resources
may even choose to entice opponents into costly
attacks.
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Geographical Flank Attack , the challenger
spots areas where the opponent is under
performing. It can also serve uncovered market
needs. A flanking strategy is another name for
identifying shifts in market segments that are
causing gaps to develop, then rushing in to full
the gaps and develop them into strong segments.
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MOBILE DEFENSE the leader stretches its
domain over new territories that can serve as
future centers for defense and offense. It
spreads through market broadening and market
diversification. Market broadening involves the
company in shifting its focus from the current
product to the underlying generic need. The
company gets involved in RD across the whole
range of technology associated with that need.
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GUERILLA WARFARE consists of waging small,
intermittent attacks to harass and demoralize the
opponent and eventually secure permanent
footholds. It uses both conventional and
unconventional means of attack. The smaller firm
launches a barrage of short promotional and price
attacks in random corners of the larger
opponents market in a manner calculated to
weaken the opponents market power gradually
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• Focus of companys marketing attack
• Good versus bad competition
• Support good
• Attack bad

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Market Penetration Strategies
Promotion
High
Low
Rapid- skimming strategy
Slow- skimming strategy
High
Price
Rapid- penetration strategy
Slow- penetration strategy
Low