Company and Marketing Strategy “The company without a strategy is willing to try anything.” Michael Porter Strategic (Marketing) Planning Companies should look ahead and develop long-term strategies to meet changing conditions in their industries and ensure longterm survival The task of selecting an overall company strategy for long-run survival and growth “strategic planning” Marketing’s key role in strategic planning What is Strategic Planning? Strategic Planning defined: The process of developing and maintaining a strategic fit between the organization’s resources, goals and capabilities and its changing market opportunities. Strategic Planning It sets the the stage for the rest of the planning in the firm The aim to shape and reshape company’s businesses and products in order to reach to targeted profits and growth. Top-management job! Part of a broader process: strategic management Strategic Planning, Implementation, and Control Process Planning Corporate planning Implementation Organizing Division planning Business planning Product planning Control Measuring results Diagnosing results Implementing Taking corrective action Steps in Strategic Planning Corporate Level Defining the Company Mission Setting Company Objectives and Goals Designing the Business Portfolio Business unit, product, and market level Planning marketing and other functional strategies Strategic Planning Defining a Market-Oriented Mission The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment Market-oriented mission statement defines the business in terms of satisfying basic customer needs We help you organize the world’s information and make it universally accessible and useful. Strategic Planning Defining a Market-Oriented Mission The mission statement is clear at the beginning Fundamental questions: What is our business? Who is the customer? What do consumers value? What should our business be? Strategic Planning Defining a Market-Oriented Mission “Market-oriented definition” of a business better than product or technological definition A market-oriented mission statement defines the business in terms of satisfying basic customer needs Mission statement must avoid being too narrow or too broad Mission statement to be guided by a “vision” an almost “impossible dream” that provides a direction for the company for the next 10 to 20 years Market Oriented Characteristics of a Good Mission Statement: Realistic Specific Fit Market Environment Distinctive Competencies Motivating Strategic Planning Company Product-Oriented Definition Market-Oriented Definition Amazon.com We sell books, videos, CDs, toys, consumer electronics and other products online We make the Internet buying experience fast, easy, and enjoyable— we’re the place where you can find and discover anything you want to buy online Disney We run theme parks We create fantasies—a place where dreams come true and America still works the way it’s supposed to Nike We sell athletic shoes and apparel We bring inspiration and innovation to every athlete* in the world (* if you have a body, you are an athlete) Strategic Planning Examples of Market-Oriented Missions “We will provide branded products and services of superior quality and value that improve the lives of the world's consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.” Strategic Planning Examples of Market-Oriented Missions “We help people trade anything on earth. We will continue to enhance the online trading experiences of all– collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.” Strategic Planning Examples of Market-Oriented Missions “Arçelik, with all its employees, aspires to ensure customer satisfaction and sound growth by providing products and services of universal high quality and standards. We are committed to being a symbol of trust, continuity and esteem for all our stakeholders; i.e., society, customers, shareholders, dealers and suppliers.” Strategic Planning Examples of Market-Oriented Missions Mission “As a higher education and research institution dedicated to the advancement of basic and applied sciences, our mission is to educate the technological leaders and entrepreneurs of the future in a rich intellectual environment sensitive to both local and global issues.” Vision “ITU’s vision is to become a national and international focal point of pioneering studies in the fields of science, technology, social sciences, and the arts.” Strategic Planning Setting Company Objectives and Goals Company’s mission needs to be turned into detailed, supporting objectives for each level of management Mission hierarchy of objectives As specific as possible Marketing strategies must be developed to support these marketing objectives Strategic Planning Setting Company Objectives and Goals Business objectives • Build profitable customer relationships • Invest in research • Improve profits Marketing objectives • Increase market share • Create local partnerships • Increase promotion Hierarchy of Objectives Mission Statement Marketing Objective # 1 Marketing Strategy Marketing Objective # 2 Marketing Strategy Marketing Objective # 3 Strategic Planning Designing the Business Portfolio The business portfolio collection of businesses and products that make up the company Designing the business portfolio involves 2 main steps: 1. Analyzing the current business portfolio and decide which business should receive more, less or no investment 2. Shaping the future portfolio by developing growth strategies to add new products/businesses to the current portfolio Strategic Planning Analyzing the Current Business Portfolio Portfolio Analysis to identify and evaluate the various businesses that make up the company key businesses Strategic Business Units - SBU Identifying SBU: unit of the company that has a separate mission and objectives; that can be planned independently from other company businesses Company division Product line within a division Single product or brand Strategic Planning Analyzing the Current Business Portfolio Identify key businesses (SBUs) that make up the company Assess the attractiveness of its various SBUs Decide how much support each SBU deserves Market Growth Rate Portfolio Analysis: Boston Consulting Group’s Growth-Share Matrix 20%18%16%14%12%10%8%6%4%2%0 Stars Question marks 4 3 5 ?2 ? 1 Dogs Cash cow 8 6 10x 7 4x 2x 1.5x 1x .5x .4x .3x .2x .1x Relative Market Share Boston Consulting Group’s Growth-Share Matrix Question Marks High • High growth & share • Profit potential • May need heavy investment to grow Cash Cows Low Market Growth Rate Stars ? • High growth, low share • Build into Stars or phase out • Require cash to hold market share Dogs • Low growth, high share • Low growth & share • Established, successful • Low profit potential SBU’s •Produce cash Relative Market Share High Low Analyzing the Current Business Portfolio After the classification of its SBUs to determine what role each will play in the future Build Increase market share Works well for question marks Hold Preserve market share Good for cash cow Harvest Increases shortterm cash flow Good for weak cash cows, question marks and dogs Divest Sell or liquidate Good for dogs and question marks Strategic Planning Developing Strategies for Growth and Downsizing Product/market expansion grid is a tool for identifying company growth opportunities through market penetration, market development, product development, or diversification Growth Strategies Product / Market Expansion Grid (Ansoff) Existing products New products 3. Product development Existing markets 1. Market penetration New markets 2. Market development 4. Diversification Growth Strategies Existing products New products Making more sales to current customers without changing its products. Existing markets Market penetration Product development New markets Market development Diversification Add new stores in current market areas, improve advertising, prices, service or store design. Growth Strategies Existing products New products Existing markets Market penetration Product development New markets Market development Diversification Develop new markets for current products Identify new demographic or geographic markets Domestic or international Growth Strategies Existing products New products Existing markets Market penetration Product development New markets Market development Diversification Offering modified or new products to current markets. New styles, flavors, colors, or modified products Growth Strategies Existing products New products Existing markets Market penetration Product development New markets Market development Diversification New products for new markets. Start up or buy new businesses Diversification Functional Planning The company’s overall strategic plan establishes what kind of businesses the company will be in future & its objectives for each business. More detailed planning must take place within each business unit The major functional departments in each unit must work together to accomplish strategic objectives Marketing plays a key role Marketing’s Key Role in Strategic Planning Provide a guiding philosophy Identify attractive opportunities Design effective strategies Build strong value chains Form superior value delivery networks Marketing’s Key Role: Partner Relationship Management Partner relationship management working closely with partners in other departments (to form an effective “value the customer), and partnering chain” that serves effectively with other companies in the marketing system for a superior “value delivery network” to jointly bring greater value to customers Marketing’s Key Role: Partner Relationship Management Value chain is a series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products The company’s overall success depends also on how well the activities of various dept. are coordinated Departmental relations are full of conflicts! Marketers must find ways to get all dept. to “think consumer” and to develop a smoothly functioning value chain Marketing’s Key Role: Partner Relationship Management Competition today takes place between the entire value delivery networks! The company needs to look beyond its own value chain in order to create customer value: Value-delivery network network made up of the company, suppliers, distributors, and customers who partner with each other to improve the performance of the entire sytem Strategic Planning at Business Unit Level External Analysis (Opport.&Threat) Mission SWOT Setting Selecting Developing Implemen- Feedback & Statement ANALYSIS Objectives Strategy Program. tation Control Internal Analysis (Streng.&Weakness) Business Unit Strategic Planning Business Mission : each SBU needs to define its specific mission within the broader company mission External Environment Analysis : to build a MIS to monitor: Key external macroenvironment forces Significant microenvironment actors Trends and important developments to identify the associated opportunities and threats Business Unit Strategic Planning Internal Environment Analysis : Each business needs to evaluate its internal strengths and weaknesses periodically “Checklist for Performing Strengths/Weaknesses Analysis” Management or an outside consultant reviews the business’s marketing, financial, manufacturing and organizational competencies and rates each factor as strength or weakness SWOT ANALYSIS Example of an Internal Checklist ı PERFORMANCE Main Strength MARKETING Firm's reputation Market share Product/service quality Pricing Distribution Promotion Sales force R&D / Innovation Geographical location FINANCE High profitability Low cost of capital Cash flow Financial stability PRODUCTION Scale economies Capacity of meeting demand Talented productive power Timely production Technical competence ORGANIZATION Skillful managers Loyal employees Entrepreneurship orientation Flexibility degree Rapid adaptation 2nd Strength Moderate 2nd Main Weakness Weakness IMPORTANCE High Medium Low Marketing Analysis – SWOT Analysis Business Unit Strategic Planning Goal Formulation Goals objectives that are specific with respect to magnitude and time objectives into measurable goals facilitates management planning, implementation and control Most businesses pursue a mix of objectives Objectives must be arranged hieararchically; from the most to the least important should be stated quantitatively whenever possible (e.g .“increase the ROI to 15% within two years”) should be realistic should be consistent Turning Business Unit Strategic Planning Strategy Formulation Strategy A game plan for how to reach goals (while goals indicating what a business unit wants to achieve) 3 general types of strategy: Cost Leadership Differentiation Focus Business Unit Strategic Planning Cost Leadership to achieve the lowest production and distribution costs / to price lower than its competitors and win a large market share to concentrate on achieving performance in an important customer benefit area valued by a large part of the market Differentiation on one or more narrow market segments rather than going after a large market Focus The Marketing Management Process 1. 2. 3. 4. 5. Analyzing marketing opportunities Researching and selecting target markets Designing marketing strategies Planning marketing programs Organizing, implementing, controlling the marketing effort The Marketing Management Process DemographicEconomic Environment TechnologicalNatural Environment Marketing Intermediaries Product Suppliers Place Profitable Customer Relshps. Price Publics Promotion PoliticalLegal Environment Competitors SocialCultural Environment The Marketing Management Process 1. Analyzing marketing opportunities A reliable marketing and information system To evaluate consumer wants and behavior To assess market size To gather information about the marketing environment To understand consumer markets, business markets and their behaviors To monitor competitors The Marketing Management Process 2. Researching and selecting target markets To divide the market into specific segments To evaluate each segment and choose market segments to be served best To develop a clear position relative to competitors in the minds of consumers Strategy 1. Market Segmentation 2. Target marketing 3. Market Positioning Customers grouped Geographic Demographic Psychographic Behavioral Market by: segment is a groups of consumers who respond in similar ways to marketing efforts. Strategy 1. Market Segmentation 2. Target marketing 3. Market Positioning Evaluation of each segment’s attractiveness Selection of segments with greatest long-term profitability A company can choose one or several segments to target Strategy 1. Market Segmentation 2. Target marketing 3. Market Positioning The place the product occupies in the consumer’s mind Products are positioned relative to competing products Marketers look for clear, distinctive and desirable place in positioning The Marketing Management Process 3. Designing marketing strategies for competitive advantage Market leader strategies Market challenger strategies Market follower strategies Market nicher strategies The Marketing Management Process 4. Planning marketing programs Decisions on: Marketing expenditures Marketing mix – 4Ps Marketing budget allocation The marketing mix is the set of controllable tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market The Marketing Mix 2 - 60 The Marketing Management Process 5. Managing the marketing effort Marketing Analysis Marketing Planning Marketing Implementation Marketing Control Managing the Marketing Effort Managing the Marketing Effort Marketing Functions • • • • Analysis Planning Implementation Control Finding opportunities : the company must analyze its market & mktg environment company strengths & weaknesses current and possible mktg actions Avoiding threats Understanding strengths Analyzing weaknesses Managing the Marketing Effort Marketing Functions • • • • Analysis Planning Implementation Control Marketing planning involves deciding on marketing strategies that will help the company reach its strategic objectives Marketing plan 2 levels: Strategic mktg plan develops the broad mktg objectives and strategy based on an analysis of the current market situation and opportunities Tactical mktg plan outlines specific mktg tactics, including advertising, merchandising, pricing, channels, service, etc. Managing the Marketing Effort Market Planning—Parts of a Marketing Plan Executive summary Marketing situation Threats and opportunities Objective and issues Marketing strategy Action programs Budgets Controls Managing the Marketing Effort Marketing Functions • • • • Analysis Planning Implementation Control The process that turns mktg plans into mktg actions to accomplish strategic mktg objectives Successful implementation depends on how well the company blends its people, organizational structure, decision and reward system, and company culture into a cohesive action plan that supports its strategies Managing the Marketing Effort Marketing Department Organization Functional organization Geographic organization Product management organization Market or customer management Managing the Marketing Effort Marketing Functions • • • • Analysis Planning Implementation Control Measurement and evaluation of the results of marketing strategies Checking for differences between goals and performance Taking of corrective action as needed Managing the Marketing Effort Return on Marketing Investment (Marketing ROI) Return on marketing investment (Marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. Marketing ROI provides a measurement of the profits generated by investments in marketing activities.
