Strategic Planning and the Marketing Process

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CHAPTER 2

• Strategic Planning and the Marketing Process
• Objective Selecting the company strategy for
  long-run survival and explaining the marketing
  management process.

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Strategic Planning

• The overall company strategy for long-run
  survival and growth is called strategic planning.
• Strategic planning is the process of developing
  and following a strategic fit between the
  organizations goals and capabilities and its
  changing marketing opportunities.

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• Strategic Planning include,
• Defining the company mission
• Setting company objectives and goals
• Deciding what portfolio of businesses and
  products is best for the company
• Developing detailed marketing plans for each
  product

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1. Defining The Company Mission

• A mission statement is a statement of the
  organizations purpose - what it wants to achieve
  in the larger environment.
• It is an invisible hand that guides people in
  the organization.
• E.g. Walt Disney Company making people happy
  Microsoft information at your fingertips

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2. Setting Company Objectives and Goals

• The companys mission needs to be turned into
  detailed supporting objectives for each level of
  management.
• E.g. increasing sales or reducing cost to
  increase profit sales can be increased by
  improving the companys share in the home country
  or entering a new foreign market market share
  can be increased by increasing productivity,
  promotion or cutting prices.
• The objectives should be specific. E.g.
  increasing the market share to 15 percent by the
  end of the second year.

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3. Designing the Business Portfolio

• Management must plan its business portfolio -
  the collection of businesses and products that
  make up the company.
• The best business portfolio is the one that best
  fits the companys strengths and weaknesses and
  to the opportunities in the environment.
• The company must (1) analyze its current business
  portfolio and decide which businesses should
  receive more, less, no investment, and (2)
  develop growth strategies for adding new products
  or businesses to the portfolio.

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1. Step Analyzing the Current Business
Portfolio

• The major activity in strategic planning is
  business portfolio analysis, where management
  evaluates the businesses making up the company.
• The reason for this analysis is that to put
  strong resources into the companys more
  profitable businesses and phase down or drop its
  weaker ones.

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Strategic Business Unit (SBU)

• The first step in the business portfolio analysis
  is to identify the key businesses making up the
  company. The companys key businesses (a company
  division, a product line, or a single product or
  brand) are called strategic business units (SBU).
  
• The next step in business portfolio analysis is
  to evaluate each strategic business unit, in
  order to understand how much support they need.

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• In portfolio analysis, SBUs are evaluated from
  two ways (a) The attractiveness of the SBUs
  market (market growth) and (b) the strength of
  the SBUs position in that market (market share).
• Star ? ? Question
• Market High ? Mark ? growth shar
  e Low
• Cash Cow Dog
• High Low
• The BCG growth-share matrix Relative market
  share

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The Boston Consulting Group Approach (BCG)

• In BCG approach, the company classifies all its
  SBUs according to the growth-share matrix which
  can distinguish four types of SBUs.
• Stars are high-growth, high-share businesses or
  products. They often need heavy investment to
  finance their rapid growth. Eventually, their
  growth will slow, and they will turn into cash
  cows.

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• Cash cows are low-growth, high-share businesses
  or products. These established and successful
  SBUs need less investment to keep their market
  share. They produce a lot of cash to the
  company.
• Question marks are low-share business units in
  high-growth markets. They need a lot of cash to
  keep and increase their share. Management must
  decide which question mark it should build into
  stars and which should be phased out.
• Dogs are low-growth, low-share businesses and
  products. They can only generate enough cash for
  themselves.

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• Once the company classifies its SBUs, it must
  determine what to do with them. There are four
  strategies. The company can
• 1. invest more in the business unit in order to
  build (increase) its share.
• 2. invest just enough to hold (keep) the SBUs
  share at the current level.
• 3. it can harvest the SBU, milking its short-term
  cash flow regardless of the long-term effect .
• 4. divest (kill) the SBU by selling it or phasing
  it out and using the resources elsewhere.

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2. Step Developing Growth Strategies

• Besides evaluating current businesses (SBUs), the
  business portfolio involves finding businesses
  and products that the company should consider in
  the future. In order to identify growth
  opportunities, product/market expansion grid is
  used.
• The product/market expansion grid is a
  portfolio-planning tool through market
  penetration, market development, product
  development or diversification.

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Product/Market Expansion Grid

• Existing New
• products products
• Existing 1. Market 3. Product
• markets penetration development
• New 2. Market 4. Diversification
• markets development
• Product/Market expansion grid is used to
  identify growth opportunities for the company.

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• Market penetration is the idea to make more
  sales to present customers without changing the
  products. To increase sales, the company can cut
  prices, increase advertising or use more
  distributors.
• Market development is the idea of identifying
  and developing new markets for its current
  products. To increase the market share, the
  company may try to attract some other people or
  some other places.
• Product development is the idea of offering
  modified or new products to current markets. The
  company may offer new lines or brands of its
  products.
• Diversification is the idea of staring up or
  buying businesses outside of its current products
  and markets.

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4. The Marketing Process

• Marketing process is the process of
• analyzing marketing opportunities
• selecting target markets
• developing the marketing mix
• managing the marketing effort (marketing mix).

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• Target consumers stand in the center of this
  process. The company
• identifies the total market
• divides it into smaller segments
• selects the most promising segments
• focuses on serving and satisfying these segments
  by designing marketing mix factors under the
  control of the company - product, price, place,
  and promotion
• analyzes, plans, implements, and controls to put
  the marketing mix into action which are required
  to adapt to the marketing environment

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Target Consumers

• In order to be successful, the companies must
  understand the needs and wants of the consumers
  to satisfy them. But it is impossible to satisfy
  all consumers in a given market. Because, there
  are too many different types of consumers with
  too many different types of needs. That is why,
  companies must (1) divide up the total market,
  (2) choose the best segments, and (3) design
  strategies to attract and keep these segments
  better than the competitors. This process
  involves three steps market segmentation, market
  targeting, and market positioning.

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Market Segmentation

• Dividing a market into distinct groups of buyers
  with different needs, characteristics, or
  behavior (e.g. sex, age, income level) who might
  require separate products or marketing mixes is
  called market segmentation.
• After segmenting the market, the company must
  determine which segments offer the best
  opportunity for achieving company objectives
  (making profit).

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Market Targeting

• Evaluating each market segments attractiveness
  and then selecting one or more segments to enter
  is called market targeting.
• A company should target segments in which it can
  generate the greatest customer value and keep it
  in the long-run.
• There are three alternatives in market targeting.
  A company may decide to serve ? only one segment
  (because of its limited resources), ? several
  related segments or ? all market segments.

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Market Positioning

• After a company has decided which market segments
  to enter, it must decide what positions it wants
  to occupy in those segments. A products
  position is the place that the product occupies
  in consumers minds relative to competitors.
• If a product is seen exactly the same as other
  products on the market, consumers have no reason
  to buy it. That is way, companies differentiate
  their products through positioning to offer more
  value to the consumers. E.g. Mercedes engineered
  like no other car in the world

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Developing The Marketing Mix

• Once the company has decided on its overall
  marketing strategy, it should plan its activities
  by using the controllable marketing tools, in
  other words, the marketing mix.
• Marketing mix is the controllable marketing tools
  (known as the 4Ps) - product, price, place, and
  promotion - that the company use to achieve its
  objectives.

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• Product means the goods-and-service
  combination the company offers to the target
  market.
• Price is the amount of money that consumers have
  to pay to obtain the product.
• Place includes company activities with the
  intermediaries that make the product available to
  target consumers. The intermediaries keep an
  inventory of the products, shows them to
  potential buyers, negotiate prices, close sales
  and give service after sales.
• Promotion means activities that communicate the
  product and persuade target customers to buy it.

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Managing the Marketing Effort

• In order to put the marketing mix into action,
  four marketing management functions are used
• Analysis
• Planning
• Implementation
• Control

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• The company, first, makes the necessary analysis
  (analysis) to develop its strategic and marketing
  plans (planning), then put them into action
  (implementation) and last measure and evaluate
  results and if necessary take corrective action
  (controlling).
• All these functions are done under the marketing
  planning.

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Marketing Planning

• After the company decides what to do with each
  business unit (SBU) in its strategic plan, it
  must decide what actions (activities) to take to
  achieve the company objectives.
• The companys marketing plan involves the
  following sections (1) executive summary, (2)
  market picture analysis (PEST), (3) business
  situation analysis (SWOT), (4) objectives and
  issues, (5) marketing strategies, (6) action
  programs, (7) budgets, (8) control.

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• Executive Summary presents a brief overview of
  the plan for quick management review.
• Marketing Picture Analysis (PEST) Marketing
  function starts with the analysis of the market
  picture which is called PEST analysis.
• PEST analysis is an examination of the
  uncontrollable factors Political (e.g. taxation,
  tourism policy), Economic (e.g. inflation,
  unemployment, fuel costs), Social (e.g. workforce
  change, lifestyle, values, education) and
  Technological (e.g. new systems like
  reservations, home technology) changes which may
  affect the company and the market.

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• PEST analysis also includes analysis of the
  total market (e.g. size, growth, extent of under-
  or overcapacity of supply, barriers), companies
  (e.g. level of investment, takeovers, promotion
  expenditure, profits), product development (e.g.
  trends, new product types), price (e.g. levels,
  range), distribution (e.g. patterns, policies),
  promotion (e.g. expenditure, types, messages)
• The above information should be gathered on the
  basis of how it affects the company.
• Business Situation Analysis (SWOT) Under the
  SWOT analysis, the major Strengths, Weaknesses,
  Opportunities, and Threats facing the company
  must be identified.

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• Threats and Opportunities identifies the major
  threats (negative impacts from the external
  environment that could decrease the companys
  sales and profits) and opportunities (positive
  impacts from the external environment that a
  company could use to increase its sales and
  profits).
• The company should try to eliminate the negative
  impacts of the threats and use the opportunities
  in the best way. But the development of
  opportunities involve risk, that is why, managers
  must decide whether the expected returns justify
  the risks or not.

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• Strengths and Weaknesses is the analysis of the
  companys internal environment which identifies
  the strengths (strong areas of the company
  relative to its competitors) and weaknesses (weak
  areas of the company relative to its
  competitors).
• The company should try to emphasize its
  strengths and correct weaknesses to use the
  opportunities.
• Objectives After the business unit has defined
  its mission and examined its strengths/weaknesses/
  opportunities/threats (called SWOT analysis), it
  can proceed to develop specific objectives for
  the planning period.

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• Objectives should be stated quantitatively. For
  example, increasing the return on investment to
  15 within 2 years. Objectives should be
  specific with respect to amount and time.
  Quantitatively measurable objectives facilitates
  planning, implementation and control.
• Marketing Strategies Objectives indicate what a
  business unit wants to achieve, on the other
  hand, strategy answers what to do to achieve
  those objectives (e.g. what should be done to
  increase the return on investment to 15 within 2
  years). It consists of specific strategies for
  target markets (which segments the company will
  target), positioning and the marketing mix
  (specific strategies for each P).

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• Action Programs turns the marketing strategies
  into specific action programs that answer how to
  do. The action program also identifies when to
  do and who will be responsible.
• Budgets projects the profit-and-loss statement.
  It shows both the forecasted revenues (number
  units to be sold ? average net price) and
  expenses (cost of production, distribution,
  etc.). The difference between revenues and
  expenses gives the projected profit. The budget
  is the basis for materials buying, personnel
  planning etc.

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• Controls outlines the controls that will be used
  to monitor progress. The management review the
  results each period and compare them with the
  goals and budgets. If the businesses or products
  do not meet with the goals, corrective actions
  must be taken.

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Marketing Department Organization

• The company must design a marketing department to
  carry out marketing strategies and plans.
• Common forms of marketing organization are
• Functional organization in which different
  activities are headed by a specialist e.g. sales
  manager, advertising manager, marketing research
  manager

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• Geographic organization in which sales and
  marketing people are assigned to specific
  countries and regions to reach their customers in
  a more cost effective way, if the company is
  international.
• Product management organization is used in
  companies with very different products or brands.
• Market management organization is valid for
  companies that sell one product line to many
  different types of markets that have different
  needs and preferences.
• combination of the functional, geographic,
  product and market organization forms is used by
  the large companies that produce many different
  products in many different geographic and
  consumer markets.