Chap 1 strategic marketing management

STRATEGIC MARKETING MANAGEMENTABE Advance Course

Daw Myat Thu Zar

Former Associate Professor

Institute Of Economics, Myanmar

M.B.A, Ritsumeikan APU, Japan,

B.Com, Hons, M.Com (Y.I.E)

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the process of deciding what to do in the future. involves laying down courses of action for a specified time

period which will utilize resources in the most effective manner which will work towards the achievement of a specified

goal.

• We can consider the process as being split into five stages. Where are we now? Where do we want to be? How can we get there? Which way is best? How can we ensure arrival?

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a) Where are we now?

•Imagine you are a student living in London and have four months' break from University.

•don't want to stay in London and want to go somewhere

•b) Where do we want to be?

•Where? wanted to go to New York!

c) How can we get there?

•How many different ways can you get there? By air or sea.

d) Which way is best?

•Which would be the best option in your circumstances?

•Air is quicker but more expensive.

• decide on sea and think about the different methods, by sea –

• Queen Mary 2, a passenger liner from another company,

•a berth on a cargo liner.

•Do you have the resources to cope with this?

•cash is limited and cannot afford to travel on the Queen Mary 2

•so check the prices for other options but still too expensive.

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• At this stage you have to reconsider your target.

• Is New York realistic?

• consider Paris, Brussels, Berlin – all be within price range

• but still want to go to New York as an long-term goal.

• So look the alternatives for travel.

• air is quicker than sea. But out of your price range,

• What other options are there?

• get a job on a ship that is going to New York.

• sign on for both outward and inward journeys so not be able to stay in New York.

• The situation seems impossible.

The next day see an advert recruiting airline couriers.

apply and are offered a job carrying documents around the world

from one airport to another.

can stay as long as you like at each delivery point until ready to

carry on to another place.

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Unfortunately, can only go where you have no choice in your destination.

eventually you are bound to be sent to New York.

You decide to take a risk and accept the job setting a maximum period of three months to achieve your goal of New York.

This give s a month to get back to London in time for University.

(e) How can we ensure arrival?

• At the end of a month you still haven't got to New York,

• but you have been to several other big cities in the world and have enjoyed the experience.

• After two months finally given an assignment which will take you to New York.

• This is a bonus for you as you are reaching your target ahead of the time you had allowed but you still can't believe you are finally going there.

• (f) How do we know we have arrived?

• The day you are standing on the balcony at the top of the Empire State Building looking down on New York,

your objective has been achieved!

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Where are we now? London Current situation Where do we want to be? New York Objective

How can we get there? Air or sea Strategies available

Which way is best? Air Strategy assessment

Can we do it? No Resource assessment Is there an alternative? No Outcome of research Do we still want to go? Yes Objective still valid

Are there other methods? Yes Outcome of research

Is the method acceptable? Possibly Risk assessed/accepted

Are we on target for time? Yes Monitoring progress Have we arrived? Yes Objective achieved

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• describes the difference between the desired future and the likely future.

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•If an organization continues on its current path,

• the likely outcomes can be forecast,

•based on what has happened in the past and what is happening in the present.

•The objectives can be plotted to show what is being aimed for at a certain time.

•The planning gap is where the aimed for outcome differs from the likely outcome.

•The planners must find a way of "closing the gap" and

•this is where strategy choice is important.

•Strategies chosen must be aimed at narrowing, if not closing completely, the gap between what is being aimed for and what is likely to be achieved.

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•in today's fast moving business world, organizational planning is very sophisticated – even if it is very logical.

•seen as the life-blood of the organization. NO PLANNING – NO FUTURE!

•changes in the business world, a dynamic, complex and fast changing environment the market is highly competitive and global brands have become highly significant innovation is becoming increasingly important technology is driving change

a strong move ->acquisitions, strategic alliances, partnerships and joint ventures

the growth of economic trading blocks

the need for better knowledge and learning the demand for marketers to be accountable and the increased drive for shareholder value

the need to work closer with other function.

the most significant Changes ->the dynamic environment, increased competition, technological developments, the drive for improved shareholder value.

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Risk reductionThe better the plan is, the more secure the future is likely to be. A good plan takes into account a wide variety of factors which could influence the future for the organization, e.g. possible new regulations introduced by a government.

Reduction of uncertaintyPersonnel need to be aware of what is expected of them and when they have to do it.

Setting targets and standardsthe targets and objectives agreed will be realistic and achievable.

GuidanceHaving a plan to follow gives clear instructions to the personnel involved.

Gains commitmentPeople who accept a plan as being valid will work better towards its success. Very often a good plan will help to overcome resistance to change – providing the benefits of the plan demonstrated to those who have to implement it.

Improves decision makingIf a plan is laid down, managers can check progress and make reasoned decisions on activities, etc. that need to be carried out.

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• A plan is the outcome of the planning process. • It can be a formal plan which is very detailed, or • an outline plan which just gives the skeleton of

what is proposed.• At any level in the organization, every plan should

have: Objectives Strategies Tactics/programmes Controls.

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• statements about how it wants to operate.• reflect choices the organization has made • provide an umbrella under which the company makes all other decisions.• ensure consistency of decision making across the organization in line with

policy".• relates directly to how the business is conducted. • as reflected in mission statements and the concept of vision, both • or may relate to quite tactical issues. • closely related to the culture of the organization.

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•Examples of policy statements include: •General statements of business operations:•It is company policy to donate 10% of all net profits to local charity.•It is policy not to promote our products to x, y, z segments of the population• (for example, drink and cigarettes to young people).• Detailed operational practices:•Personnel procedures – equal opportunities policy.•Customer care procedures – policy of refunds with no questions asked.•Security procedures – always to prosecute shoplifters.

• Objectives should be "SMART".

• "To increase market share by 8% within the next two years". Specific – S• The objective states quite clearly what the intention is – to increase by 8%. • can see what the difference is between the current position and how much

they have to gain within the next two years (the planning gap). • The stated objective allows targets to be set and • operating plans to be scheduled in the most effective way.

Measurable – M• An objective must be quantified to measure against an expected standard.• The sample objective gives two measurement points – 8% and two years. The benefits Planners can set targets over timed periods; they can monitor progress to see if everything is going according to the

plan and, if not, they can take corrective action.

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Achievable – A• If an objective is not achievable,

• it will act as a total demotivator and people will not try.

• For example, an organization is currently at fourth position in the marketplace,

• They have no investment capital available, and

• they are fully utilizing their current production capacity.

• It would therefore be pointless to have an objective that they wanted to become number one in the next year.

• They would not have the resources to do it and

• the personnel would simply give up saying that it was hopeless! 16

Realistic – R• This fits in with achievable

• For example, imagine a small business in Germany with only one outlet, one product and limited production capability,

• stating an objective of "opening up outlets in Rome, Delhi and Cape Town within the next six months and serving them from the base in Germany".

• such an objective would be totally unrealistic

• unless they were able to do other things, such as franchising the product and manufacturing processes.

Timed – T• The example we are using is timed – two years.

• a definite date has been set for achievement.

• Setting the time limit also helps in the setting of periodic targets

• gives measurement points

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The functions of a plan are -to minimize conflict and

-to get the maximum from resources, by ensuring the coordination not just of purpose but of approach – i.e.

strategy. The strategy is the statement of method(s) that will be used to achieve the

objective. can be complex or simple, depending on the circumstances /the level or

complexity of the plan itself. Multiple strategies be considered and compared for effectiveness. Taking into account all the possible outcomes and implications of adopting a

strategy, the best method needs to be selected. For example, the objective of increasing profit by 5% over the next year could

be achieved in a number of ways – including reducing costs and holding sales, or increasing sales and holding costs. to achieve the objective – i.e. the course of action, or strategy, which best fits

the resources and position of the company and help it achieve the agreed objectives.

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• described as action plans – the who is going to do what, by when, in order to put our strategy into operation

• The tactics/programmes are the details of the plan. Responsibilities• Who has to do what?• for example, personnel department to recruit new people, marketing

department to design advertising, purchasing department to obtain materials,

Time• When something has to be done – • for example, Quarter 1/Year 1, or first week. • The time is important and it must fit in with the overall time of the

objectives. • Every plan should have a timetable so that people can see how it is

progressing. Money• The allocation of the allowed budget –• for example, 10% to personnel, 15% to marketing, 25% to production, etc.• Depending on the level, the plan may be very specific on what has to be

done with the money.

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Controls – Measurements

considered as part of the Programmes. because they are a natural outcome of the programme setting to make sure that everything goes according to the plan. needs to be monitored for effectiveness a standard, a target or an expectation. Our sample objective has two controls (8% and two years) which allow us to measure outcome. Control can be based on anything that is appropriate to the

circumstances of the plan, e.g. return on investment; number of orders per salesman; number of

items manufactured, etc. 21

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Criteria for Effectiveness

To be effective a plan must: be concise and yet full enough to be clearly understood have a clear purpose consider more than one course of action include justification of its proposals indicate expected results allocate resources and responsibilities be achievable be timed.

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Without an objective, we have nothing to aim for – we can have no strategy Without a strategy we cannot achieve the objective Without programmes we cannot put the strategy into effect which means we

cannot achieve the objective Without controls we cannot see how we are doing, and will never know if our

programmes and strategy are keeping us on course to achieve the objective.

(a) Corporate plan relatively loosely defined to allow operational adaptations for day-to-day activities. longer term than operational plans, as it is more concerned with the future than with the immediate present. more flexible than plans at the lower levels.must state the corporate objectives

(b) Strategic planA company with its headquarters in America but relatively large subsidiary companies spread around the world may have two distinct levels: Corporate – USA * Strategic – England, Australia, India, Africa, Brazil.Strategic" and "corporate" can therefore mean the same thingdefine the overview and lay down the overall objectives and strategy for the organization as a whole.

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(c) Functional plan•Each division of the company (such as marketing, purchasing, finance, etc.,) must have its own set of plans to cover the necessary activities.•The plans will be more detailed than the higher level plans •but, depending on the size of the organization, •may still be relatively flexible and long term.•relate to specific sections of the organization, •but must reflect the higher level direction and •always fit with plans for other functional areas or departments.

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Types of Plans (cont’d)

(d) Contingency planthe plans -> turn to if anything goes wrong + the main plan is not working. simple matter of obtaining supplies from another distributor, or finding another advertising agency or /a major decision to drop a new product if it proves ineffective in the marketplace.really plans which cover the "What if?" situations prefer to present total confidence in the plan they are following not think even the slightest possibility of failure"If Plan A fails we will revert to Plan B". Plan B is a contingency plan!

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(e) Short, medium and long term plans Short-term plan• is very detailed simply•precise in activities and responsibilities, as well as in the time scale.to cover a situation which has arisen unexpectedly – for example, a sudden world shortage of raw materials, some competitive activity, or the outbreak of hostilities in one of the markets

Medium-term plans

are still relatively detailed but not so much as a short term plan. It will set medium-term objectives in relation to the longer-term objectives given at higher level, and it allows operations to be set in motion and monitored for effectiveness.

Long-term plan is quite broad in its approachNot so detailed and relatively flexible. Long-term plans cannot be too detailedbecause of the time scales imposed.

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• A number of approaches -highlight two alternatives here.• The first is the linear/formal approach. • results from a controlled conscious process of formal planning• incorporates a sequence of distinctive steps in the decision-making

process.• Responsibility for the whole process usually rests with the top

management• but responsibility for implementation rests with the operational

managers. • This strategy is essentially "top down" and• contains detailed operational plans specifying objectives, action plans,

budgets and control measures. • Traditionally large companies have tended to adopt this approach.

Examples , government departments and large nationalized industries31

The second approach comes from the emergent school of strategy development.

strategies are formed and not necessarily formulated. are built from a number of little actions and decisions

made by different managers in an organization. Taken together these small changes produce a major shift

in direction. Thus these strategies emerge and tend to be "bottom

up". today in the current dynamic business environment, many

larger firms are adopting a more emergent approach 32

• covers the entire organization and

• begins with the very highest level of decision making.

• several aspects to the process:

developing the company's mission statement identifying the company's Strategic Business Units establishing corporate objectives and strategies individual Strategic Business Unit planning.

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• its reason for being in existence and

• tells any stakeholder (customer, employee, shareholder, etc.)

• what the company is doing and why.

• It is a way of saying "what business we are in" or "why we exist".

(a) Contents of a mission statement• mission statements should contain details of the following: the company's aims or intentions some history of the company the market or customer that is being served the product or service which is being offered the technology that is being used.

• A good mission statement reflects the benefits to customers and should encompass any key competitive advantage.

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• (i) Hewlett Packard

• Hewlett Packard company designs, manufactures and services electronic products and systems for measurement and computation. HP's business purpose is to provide the capabilities and support needed to help customers world-wide improve their personal and business effectiveness.

• (ii) Tesco

• “Our core purpose is to create value for customers to earn their lifetime loyalty. Our success depends on people. The people who shop with us and the people who work for us. If our customers like what we offer, they are more likely to come back and shop with us again. If the Tesco team find what we do rewarding, they are more likely to go the extra mile to help our customers.”

• This is expressed as two key values:

• “no one tries harder for customers; and

• treat people as we like to be treated.”

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the corporate vision and its senior executives the management style in force and its operating practices the product on offer and the market the company is in the positioning of the company and the competition it faces the intentions the organization has for the future.However, there are no hard and fast rules as to how a mission statement should be written. It is an individual choice for the executives involved.

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•Mission statements can: create a focus for employees give a sense of pride in working for the company reassure on future intentions and stability create confidence in shareholders and

customers send signals of strength to the competition

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increasingly discussed and developed by management many organizations now issue both mission statements and

visions. Whilst the mission determines the dimensions of the business

and the market it is working in, the vision is about the longer-term ambition of the operation

within that. For example, a city football club may have: Mission – We are in the business of providing residents with a

focus for city pride and entertainment in the form of football matches.

Vision – We want to win the league by the year 2015.38

An SBU is a separate operating unit within an organization which is self-contained and can relate to a single product, a product

range, a department or even a subsidiary company within a large multiple organization.

To be an effective SBU, the unit must meet the following criteria a unique purpose in the organization its own "manager" ( at any level ) to make decisions its own plans which fit into the overall corporate plan its own customer base recognized competition. The SBU system is a refinement on the "profit centre" basis However, the SBU will have a lot more powers than a profit centre, because it has its own manager as a decision-maker. 39

Organizations can be structured in a number of ways – on a functional, regional, customer basis.

Any appropriate way of breaking up the personnel and responsibilities in the organization is acceptable, and any division can be an SBU.

For example, if the structure is based on function includes marketing, purchasing, finance, personnel, etc., as an individual operating unit (SBU)

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(a) ObjectivesThe corporate objectives indicate exactly what it is to achieve in the longer term the org's way of saying "where we want to be" in the future.To get somewhere to know where you are coming from, the same principle applies to an organization. Before corporate objectives (where do we want to be?) can be set, the organization needs to investigate the current situation (Where are we now?).

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It Involves Taking Into Account A Number Of Factors.

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Corporate objective defined as to increase total profitability by 30% in the next ten years.

Corporate strategies Taking into account the current economic environment and potential for growth be defined as:

(i) To increase profitability by 5% in Europe in the next ten years

(ii) To increase profitability by 10% in the USA in the next ten years

(iii) To increase profitability by 15% in Australasia in the next ten years. These strategies would be communicated to the regional divisions.

Divisional objective Taking Europe as an example, this would now be stated as to increase profitability

by 5% in the next ten years.

Divisional strategies The senior level of management in the European division must now select

strategies which will achieve this objective. If the division is sub-divided further into countries, the divisional objective may be broken down into a series of strategies in a similar

way to the corporate strategies – for example, 1% UK, 2% Germany, 1% France, etc.

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Individual Strategic Business Unit Planning

• Planning at SBU level can be much more detailed than at the corporate level.

• It can involve the following:• possibly defining a mission statement for the SBU• analyzing the internal and external environments• defining objectives• selecting and developing strategies• preparing schedules and programmes• implementing programmes• feedback and control.

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Criticism of Formal Strategic Planning

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Past Examination Question

• The following question from the June 2010 examination relates to the content of this chapter.

• (a) Define and briefly appraise "strategic marketing planning”. (7 marks)

• (b) Examine the key features that a well-defined strategy should incorporate. Illustrate your answer with contemporary examples from an organization well know to you. (18 marks)

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