Strategic Marketing Planning: How Do We Get There From Here?

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StrategicMarketing Planning:

How Do We Get ThereFrom Here?

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Where are you now?Where do you want to

go?How will you get there?

If You Can Plan a Trip, You Can Plan A Marketing Strategy

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Where are you on the map?

Gainesville Drive or fly Alone or with others What to pack Etc., etc.

Make a list of the things you need to dobefore leaving

Where Are You Now?

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Why do you want to go there? Business? Personal? Beach? Shopping? How will it look when you arrive? Big buildings? A river? Expressways? What are your expectations ? Productive? Fun? Exciting? Relaxing?

Where do you want to go?

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Fastest route?Shortest route?Most scenicroute?Best route to the beaches?

What is thebest route?

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Highest average

speed Fewest delays Least traffic

Most EfficientRoute

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Identify your waypoints

before starting your trip

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Anticipate Potential Hazards!

Be Prepared For Detours,But Avoid Side Roads

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STRATEGIC PLANNING

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

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MARKETING PLAN

Central instrument for directing and coordinating the marketing effort.

STRATEGIC MARKETING PLAN

Lays out the target markets and the value proposition that will be offered, based on analysis of the best market opportunities.

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IMPORTANCE / BENEFITS OF STRATEGIC MARKETING PLAN

Melville Branch lists the planning benefits as follows:

i. Planning encourages systematic thinking ahead

ii. It leads to a better coordination of company efforts

iii. It leads to the development of performance standards for control

iv. It causes the company to sharpen its guiding objectives and policies

v. Its result in better preparedness for sudden developments

vi. It bring about a more vivid sense in the participating executives of their interacting responsibilities

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Steps in Strategic Planning

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How to go about it?Defining the corporate mission

Establishing SBUs

Allocating resources for SBUs

Planning for new business

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Corporate MissionThis seeks to embody the entire goals of

the organization and the objective of its existence.

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

Define the business domain in which the organizational will operate.

Business domain can be defined in terms of products, technologies, customer group, customer needs or some combinations.

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5 questions that the firm must ask itself What is our business? Who is our customer? What does our customer need? What will our business be? What should our business be?

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Good mission statements have three characteristicsThey focus on a limited number of goals It stresses the major values and policies

the firm desires It defines the major competitive scope

of operation

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Major Competitive Industry

Products and application

Competence

Market-segment

Vertical

Geographic

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Major Competitive Industry

• the range of industries in which a company will operate.• some companies will operate in only one industry; some only in

a set of related industries; some only in industrial goods, consumer goods or services and some in any industry.

• Example; Siam Cement prefers to operate in the industrial market, Jollibee concentrates on the consumer market and Matsushita operates in both industrial and consumer market.

Products and application

• the range of products and applications a company will supply.• Sony, Panasonic and Samsung sell electronics from home

entertainment devices like television and DVD players to cell phones; while Sharp concentrates only on household items like washing machine and entertainment products but not cell phones.

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Major Competitive Competence

• the range of technological and other core competencies that a company will master and leverage.

• Japan’s NEC has built its core competencies in computing, communications and components to support production of laptop computers, television receivers and handheld telephones.

Market-segment

• the type of market or customers a company will serve.• example; Porsche markets only expensive cars.

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Major Competitive Vertical

• the number of channel levels from raw material to find product and distribution in which a company will participate.

• at one extreme are companies with a large vertical scope.• example; Japanese production keiretsus, for instance comprise

large automakers such as Toyota and their suppliers. Geographic

• the range of regions, countries or country groups in which a company will operate.

• at one extreme are companies that operate in a specific city or state.

• at the other are multinationals such as P&G and Sony, which operate in many countries.

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Setting Company Objectives and Goals

The company’s mission needs to be turned into a detailed set of supporting objective for each level of management – management by objectives

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Hierarchy of objectives for the International Minerals and Chemicals Corporation, Fertilizer Division

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Defining The Business Industry is a customer satisfying process not

a goods producing process. It is important therefore how you redefine

your business. Example: Levitt encouraged companies to

redefine their business in terms of needs, not product.

Example: IBM redefined itself from a hardware and software manufacturer to a “builder of networks.”

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Defining The Business Target market definition: focus on selling

a product/service.

Strategic market definition: everyone who might drink something to quench his/her thirst.

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SBU It is a company within a companyThe business is differentiated from the

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

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Designing The Business Portfolio

Guided by company’s mission statement and objectives, management must now decide what collection of business and products (business portfolio) will best fit the company’s strengths and weaknesses to opportunities in its environment. It must:i. Analyze the current business portfolio and decide which business

should receive more or less emphasize and resources.ii. Develop growth strategies for adding new products or businesses to

the portfolio

Business Portfolio Analysis

The major tool in strategic planning to evaluates the business making up the company

Identify the key businesses making up the company (the Strategic Business Units – SBUs)

a) Boston Consultant Group (BCG) approachb) General Electric (GE) approach

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The Boston Consultant Group (BCG) Growth-Share Matrix

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The Boston Matrix The Boston Matrix:

A means of analysing the product portfolio and informing decision making about possible marketing strategies

Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968

Links growth rate, market share and cash flow

What do these terms mean?

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The Boston Matrix - STARS

Products in markets experiencing high growth rates with a high or increasing share of the market.

They are typically cash using SBUs cause cash is necessary to finance their rapid growth.

Eventually their growth will slow down, and they will turn into cash cows and become major cash generators supporting other SBUs.

Potential for high revenue growth

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The Boston Matrix – Cash Cows

Cash Cows:◦ High market share◦ Low growth markets

– maturity stage of PLC

◦ Low cost support◦ High cash revenue –

positive cash flows◦ Uses to pay its bills

and support other SBUs that are cash using

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The Boston Matrix - Dogs Dogs:

◦Products in a low growth market

◦Have low or declining market share (decline stage of PLC)

◦Associated with negative cash flow

◦May require large sums of money to support

Is your product starting to embarrass your company?

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The Boston Matrix - ? Problem child Question mark ??? Or Problem Child:- Products having a

low market share in a high growth market

- Need money spent to develop them

- May produce negative cash flow

- Potential for the future?

Problem children – worth spending good money on?

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Stars – high growth, high share SBUs. They are typically cash using SBUs cause cash is necessary to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows and become major cash generators supporting other SBUs

Cash cows – low growth, high share SBUs. They produce a lot of cash that the company uses to pay its bills and support other SBUs that are cash using

Question marks – low share SBUs in high growth market. They require a lot of cash to maintain their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased down or out

Dogs – low growth, low share SBUs. They may generate enough cash to maintain themselves but not promise to be large source of cash

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What stage of the Boston Matrix are these at?

Put these onto a grid

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Boston Matrix Grid

Problem Children Stars

Dogs Cash Cows

Market Growth

High

LowMarket Share

High

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Boston Matrix Grid

Problem Children Stars

Dogs Cash Cows

Market Growth

High

LowMarket Share

High

Video

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FOUR ALTERNATIVES OBJECTIVES

Build – the objectives is to increase the SBUs market share, even forgoing short-term earnings to achieve this objectives. Building is appropriate for question marks whose share has to grow if they are to become stars

Hold – the objective is to preserve the SBUs market share. This objective is appropriate for strong cash cows if they are to continue to yield a large positive cash flow

Harvest – the objective is to increase the SBUs short-term cash flow regardless of the long-term effect. This strategy is appropriate for weak cash cows whose future is dim and from whom more cash flow is needed. It can also be used with question marks and dogs

Divest – the objective is to sell or liquidate the business because resources can be better used elsewhere. This is appropriate for dogs and for question marks that the company cannot finance

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GE’s Strategic business-Planning Grid

The best businesses are those businesses located in a very attractive industry in which the company has a high business strength.

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The diagram below illustrates some of the elements that determine industry attractiveness and business strength / competitive on the UK market.

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Industry Attractiveness Index Factors

Market size – large market are more attractive than small market

Market growth rate – high growth market are more attractive than low growth market

Profit margin – high profit margin industries are more attractive than low profit margin industries

Competitive intensity – industries with many strong competitor are less attractive than industries with few weak competitors

Cyclicality – industries are less effected by the business cycle are more attractive than highly cyclical industries

Seasonality – industries with less seasonal movement are more attractive than highly seasonal industries

Scale economies – industries where unit costs fall with large plan size and distribution are more attractive than constants cost industries

Learning curve - industries where unit costs fall as management accumulates experience in production and distribution are more attractive than industries where management has reached the limits of its learning

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The business strengths index factors

Relative market share – the higher the company’s market share, the greater its business strengths

Price competitiveness – the higher the company’s price competitiveness, the greater its business strengths

Product quality - the higher the company’s product quality’s competitiveness, the greater its business strengths

Knowledge of customer/ market - the deeper the company’s knowledge of customer, the greater its business strengths

Sales effectiveness - the greater the company’s sales effectiveness, the greater its business strengths

Geography - the greater the company’s geographic advantages, the greater its business strengths

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Assessing Growth Opportunities 1. planning new businesses, 2. downsizing, or 3. terminating older businesses.

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Assessing Growth Opportunities

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Assessing Growth Opportunities

1. INTENSIVE GROWTH2. Integrative Growth3. Diversification Growth4. Downsizing and Divesting

Older Business

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Assessing Growth Opportunities 1. market-penetration strategy The

company first considers whether it could gain more market share with its current products in their current markets .

2. market-development strategy the company considers whether it can find or develop new markets for its current products.

3. product-development strategy the company considers whether it can develop new products of potential interest to its current markets

4. diversification strategy the company will also review opportunities to develop new products for new markets.

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Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerry’s

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Success Probability for each of the 4 basic strategies:

Diversification strategy 1 in 20Market-development Strategy is 1 in 4Product-development strategy 50-50Market-penetration is the highest

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Assessing Growth Opportunities/Developing Growth Strategies

Involves determining future businesses and business directions the company should consider.

Major Classes of Growth Opportunities

I. INTENSIVE GROWTH

II. INTEGRATIVE GROWTH

III. DIVERSIFICATION GROWTH

A. Market penetration A. Backward integration A. Concentric diversificationB. Market development B. Forward integration B. Horizontal diversificationC. Product development C. Horizontal integration C. Conglomerate

diversification

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Assessing Growth Opportunities

Intensive growth – company has not fully exploited the opportunities in its current products and market

• Market penetration – the company seeks increased sales for its current products in its current market through more aggressive marketing effort ex: increase purchase quantity, attract competitors’ customer and covert new prospects

• Market development – the company seeks increased sales by taking its current products into new market (new geographical markets, developing appropriate features and new institutional segments)

• Product development – the company seeks increased sales by developing closely related new or improved products for its current market (new and different product, create different regional version or cassette version)

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Assessing Growth Opportunities

Integrative growth – makes sense if the industry is strong or the company can gain by moving backward, forward or horizontally in the industry. Three possibility exist

i. Backward integration – the company seeks ownership or increased control of its supply systems

ii. Forward integration – the company seeks ownership or increased control of its distribution systems

iii. Horizontal integration – the company seeks ownership or increased control of some of its competitors

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Assessing Growth Opportunities

Diversification growth – makes sense if the industry does not present much opportunity for further company growth or if the opportunities outside the industry are superior. The company would identify fields that make use of its distinctive competences of help it overcome particular weaknesses. Three types of diversification strategies

i. Concentric diversification – the company adds new product that have technological or marketing synergies with the existing product line normally appeal to new classes of customer

ii. Horizontal diversification – the company adds new product that could appeal to its current customer though unrelated to its current product line

iii. Conglomerate diversification – the company adds new product that have no relationship to its current technology, products or market and appeal to new classes of customer

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Business Unit Strategic Planning

Strategic planning: Developing a strategic fit between organizational goals and capabilities, and changing marketing opportunities

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Business Unit Strategic Planning

Business Mission

Each business unit needs to define its specific mission within the broader company mission.

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Ben & Jerry’s: a SWOT analysis to get it growing again

Strategic Business Planning

Monitoring key forces for trends

For each trend, conduct an MOA - Marketing Opportunity Analysis

SWOT Analysis Opportunities and threats stemming from the external environment

Internal strengths and weaknesses

Strategic Business Planning

Brand awareness, image, reputation

Distribution, pricing, customer loyalty, product benefits

Finance, R&D, manufacturing

SWOT Analysis Opportunities and threats stemming from the external environment

Internal strengths and weaknesses

Business Strategic PlanningGoal Formulation Develop specific goals for the planning

period. Describe objective that are specific with

respect to magnitude and time. Effective goals should be formulated so that

they are:◦ Arranged hierarchically from broader to more

specific objectives◦ Stated in quantitative terms◦ Realistic◦ Consistent with each other and the company

mission

Business Strategic PlanningStrategic Formulation Strategy dictates the game plan for

achieving goals. Porter’s generic strategies offer a starting point for strategic thinking:◦Overall cost leadership◦Differentiation◦Focus

Business Strategic Planning

Program Formulation and Implementation

Program formulation and implementation involves:◦ Developing supporting programs◦ Estimating implementation costs◦Carefully managing the details so great strategy isn’t ruined by poor implementation

Business Strategic Planning

Feedback and Control

Feedback and control is crucial

Product Planning: The Nature and Contents of a Marketing Plan

Contents of the Marketing Plan Executive Summary & Table of Contents

- brief summary of the main goals and recommendations- table of contents that outlines the rest of

the plan and all supporting rationale and operational detail.

Product Planning: The Nature and Contents of a Marketing Plan

Contents of the Marketing Plan Situation Analysis

- relevant background data on sales, costs, the market, competitors and the

various forces in the macro environment.

- carry out on a SWOT

Marketing strategy- defines the mission, marketing and

financial objectives.

Product Planning: The Nature and Contents of a Marketing Plan

Contents of the Marketing Plan Financial projections

- sales forecast, an expense forecast and a break-even analysis.

Implementation controls- for monitoring and adjusting

implementation of the plan.

Product Planning: The Nature andContents of a Marketing Plan

Sample Marketing Plan: Sonic Personal Digital Assistant: Current Marketing Situation Opportunity and Issue Analysis Objectives Action Programs Financial Projections

Product Planning: The Nature andContents of a Marketing Plan

Implementation Controls Marketing Strategy Positioning Product Management Pricing Distribution Marketing Communications Marketing Research

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You’ve ArrivedSuccessfully!

And you shouldalready have a strategy in place for your next destination!