Strategic Planning (mkt oriented) by marketingedu on Blogster

Notes from Kotler's Marketing Management 11th Ed

(Market-oriented)Strategic Planning

Qamar Riaz Mehmood Khel

Action emphasized at three key areas:

1: Managing a company’s business is an investment portfolio

2: Assessing each business’s strength by considering the market’s growth rate and the company’s position and fit in that market.

3: Establishing a strategy

Organizational Levels

Corporate level

Division level

Business Unit level

Product level

Corporate level is responsible for strategic plan which is responsible to guide the whole enterprise or corporation regarding how much resources to be allocated to each division and which business to start or finish.

Division level is responsible for a divisional plan which decides on resource allocations to each business unit within.

Business Unit level is responsible for developing their own strategic plan

Product level (product line or brand etc ) is responsible for developing a marketing plan to achieve its target or objective in its market.

Corporate and division strategic planning

Four planning activities

Corporate Mission

Establishing Strategic Business Unit ( SBU)

Assigning resources to SBU

Planning new businesses, downsizing, or terminating older businesses

Corporate Mission

What is our business? Who is the customer?

What do customers value? What will our business be?

Three key factors need to be considered while developing Mission Statement:

Organization’s History:

Organization’s distinctive competencies:

A business may be able to do many things but what it can do best will matter. Distinctive competencies are things that organization does so well that it gives them advantage over competition.

Organization’s environment:

Opportunities, constraints, and threats (b identified before MS)

A good mission statement will be:

Focused on markets rather than products

Achievable

Motivating

Specific

Objectives

“End points of an org mission .The organization mission is distilled into a finer set of specific and achievable organizational objectives.” ( Marketing Mgmt: J. Paul Peter,J H Donnnelly, Jr. M Hill )

Establishing SBU

Product definition Market definition

“We make movies “ Columbia Picture “ We market entertainment”

“We make copying machine” Xerox “ We help improve office productivity”

Business = customer-satisfying process/activity (not goods-producing proc/activity)

Three characteristics of SBU:

Single business or collection of related business that can be planned separately

Own set of competition

Responsible for its own strategic planning and performance

“A unit of the Company that has a separate mission and objectives and that can be planned independently from other company businesses. As SBU can be a company division, a product line within a division ,or sometimes a single product or brand”

Assigning Resources to each SBU

BCG Growth-Share Matrix(see book)

Relative market share is shown on horizontal axis while the market growth rate is on vertical axis. Market growth above 10 on the vertical axis is considered high. 0.1 x means that our business(SBU) has only 10 % of sales volume of the leader’s. While 10x means that the company business is the leader and has 10 times more share against the next big competitor in the market.

The matrix is divided into four cells:

Question Marks: high growth market but enjoys low relative market share. Requires loads of cash ( in terms of personnel, installation/equipments and plants etc) to keep up with fast-growing market or because it wants to beat the current leader in the market.

Stars: if Question Marks businesses are successful, they become stars. A star is a market leader in high-growth market.But does not necessarily produce a positive cash flow. Company spends on it in order to keep up with the high market growth and contain or fight the competitors.

Cash Cows: When annual market growth falls to less than 10 % the star becomes cash cow if it still holds the largest market share. The company no more has to spend money on its expansion because the market has slowed down and it has also achieved economy of scale and higher profit margin as it is the market leader. The company now uses the positive cash for supporting other businesses. But if the cash cow becomes vulnerable at certain stage against a competitor’s aggression , money need to be invested back so that the leadership slot is reserved/secured for the business/ SBU (or the cash cow). Cash cow are needed at every stage of business or otherwise the whole corporation may be at great risk.

Dogs: These are the SBU/businesses which have weak market share in low-growth markets. A decision about these has to be made. Also one has to see whether any turnaround is expected in market growth rate etc. Sometimes, all the competitors might leave the market in such a case if staying in is profitable, the business may be continued. However, this will entirely depend on the situation at hand in the context of company /corporate objectives.

SBU Strategies

Build: This strategy is suitable for Question Marks to help them gain market share because they should become Stars.

Hold: It is good to hold cash cows

Harvest : To increase short-term cash flow regardless of long-term effect. “ Milk its business”. Eliminate R & D ,reduce adverts,do not replace sales people and plant etc etc.

This strategy is ok for weak cash cow whose future does not look good. This can also be a good strategy for Question Marks and Dogs.

Divest: to sell or liquidate so that resources be better used else where

........................

Planning New Businesses, downsizing older businesses

What management wants VS total sales and profits?

If the company desired growth and the current growth are not matching, then there will be a strategic-planning gap. In other words, the gap is the difference between the expected sales over next five years and the desired sales over the next five years.

Three options:

Intensive growth:

See Ansof’s product-market expansion grid.

Market Penetration Strategy, Market development Strategy

& Product Development Strategy

Market Penetration:

Persuading current customers to buy more

Attracting competitor’s customer

Turning non-user into users

Market Development

Considering Business market (Lotion Inspire to offices, factory etc)

Additional distribution channels (mass-merchandizing channel)

New Location (BH starts selling in Lahore, Islamabad)

Product Development

New features, variety in quality, or entirely different technology (camera becomes digital, cassette replaced by CD)

Integrative growth:

Backward integration: acquiring suppliers to gain more control or generate more profit.

Forward integration: acquiring channel members (ex retailer, wholesalers

Horizontal integration: acquiring competitors

Diversification:

Concentric (new products that are technologically related-marketing/technological synergy—the customer might be different)

Horizontal (New product for current customer though the product is technologically unrelated- TV Trolley)

Conglomerate (new product or business that has nothing to do with the current market and technology)

(see also lecture from Fall)

Business Unit Strategic Planning:

Business Mission

SWOT Analysis (External and Internal Environment)

Goal Formulation

Strategy Formulation

Program Formulation

Implementation

Feedback and Control

SWOT

External Environment analysis (opportunity and threats)

Opportunity

Product or service cheaper/faster etc

Internet: more convenient or efficient buying process

Professional help can be obtained from variety of sources

Marketing opportunity analysis

Attractiveness Vs Success probability

Five questions to be asked

1: Benefits involved in the opportunity be articulated (linked/clearly expressed etc) to a defined target markets?

2: Target market location? How to reach them (which media/trade channel)?

3: Critical capability and resources to deliver

4: Can the delivery of service or benefit be done in superior fashion?

5: Financial Soundness /viability

Threats

“an environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit.”

Seriousness VS Probability of occurrence

After opportunity and Threats analysis, it can be decided whether the business is attractive.

Ideal Business: High in major opportunity & low in major threats

Speculative Business: High n both major opportunity and threats

Mature Business: Low in opportunities and low in threats

Troubled Business: Low in opportunity and high in threats

Internal Environment( Strength / Weaknesses Analysis)

Apart from other things , sometimes the company may lack in strength only because its departments don’t work together.

Strength / Weaknesses:

Marketing

Company reputation Market share

Customer satisfaction Customer retention

Product quality Service quality

Distribution effectiveness Promotion effectiveness

Sales force effectiveness innovation effectiveness

Finance

Cost or availability of capital and financial stability etc

Manufacturing

Facilities , ability to produce on time , technical skills, economies of scale etc

Organization

Visionary, capable leadership, dedicated employees, entrepreneurial orientation, flexible or responsive.

Goal Formulation

After SWOT analysis comes goal formulation. The terms goal and objectives are used interchangeably. But “managers use the term goals to describe objectives that are specific with respect to magnitude and time. Objectives include profitability , sales growth, market-share improvement, risk containment, innovation, reputation. Objectives be realistic and be stated quantatively if possible.

Long-term goals vs short-term goals. Deep penetration in current market vs developing new markets.

Strategic Formulation

A strategy needs to be designed in order to reach business goals.

Porter’s Generic Model

Overall cost leadership

Keeping production and distribution cost lowest so that lower price is given against competitors and achieve large market share. This strategy suits those firms which are good at engineering, manufacturing, and distribution etc.

Differentiation:

Business concentrates on achieving superior performance. In other words, creating a product or service that is considered unique by the target market. If the firm is seeking quality leadership, it should use quality material , inspect carefully,put components together expertly and communicate the quality effectively. Ex: Intel

Focus:

Focusing on one or more narrow segments.

Operational effectiveness and strategy:

“Perform different activities from rivals or performs similar activities in different ways.” The competitors should find it hard to copy.

Strategic alliances:

Product or service alliance

One company gives license to another one to produce its product

Promotional alliance:

McdDonald’s and Desny films

Logistics alliance:

Abbot Warehouses and delivers 3M’s medical and surgical products to hospitals

Pricing collaboration:

Hotel and rental car companies.

Program Formulation and Implementation

After the principles strategies, detailed supporting programs must be made. For example , if the business unit has decided to be a leader in technology , then it should improve and strengthen R & D, gather Tech intelligence, develop cutting-edge products, prepare sales force and develop advertising campaign to communicate its Technological leadership.

Bad implementation can render all the good efforts and ideas fruitless. some people have ideas but less execution ...... while others have execution and less imagination and ideas..

Feedback and Control

Complaint: You folk don't visit the blog regulary ........ and I register my formal protest. Come on people , it is a very interactive way to share and learn knowledge . Why are you people lagging behind in cyber world. See you folk with lots of smiles , good health and inspiring ideas.

to be modified and edited........

Qamar Mehmood Khel

Lecturer

Management Science

Bahria University

Islamabad