Principles Of Marketing _ MGT 301
Lesson – 7
Lesson overview and learning objectives:
All companies must look ahead and develop long-term strategies to meet the
changing
conditions in their industries. Each company must find the game plan that makes the most
sense given its specific situation, opportunities, objectives, and resources. Keeping in view
this fact the last Lesson was dedicated for the discussion to explore several growth
alternatives within the context of strategic planning and portfolio analysis. The
product/market expansion grid shows four avenues for growth: market penetration, market
development, product development, and diversification.
PORTFOLIO ANALYSIS
A. MARKETING PROCESS
Analyzing the Current Business Portfolio
We have discussed in last Lesson that in order to analyze the current business portfolio, the
company must conduct portfolio analysis (a tool by which management identifies and
evaluates the various businesses that make up the company). Two steps are important in this
analysis:
1). The first step is to identify the key businesses (SBUs). The strategic business unit
(SBU) is a unit of the company that has a separate mission and objectives and which can be
planned independently from other company businesses.
2). The SBU can be a company division, a product line within a division, or even a
single product or brand.
3). The second step is to assess the attractiveness of its various SBUs and decide how
much support each deserves.
d. The best-known portfolio planning method is the Boston Consulting Group (BCG)
matrix:
1). Using the BCG approach, where a company classifies all its SBUs according to the
growth-share matrix.
a). The vertical axis, market growth rate, provides a measure of market
attractiveness.
b). The horizontal axis, relative market share, serves as a measure of company
strength in the market.
2). Using the matrix, four types of SBUs can be identified (Discussed in detail in last
Lesson)
a). Stars
b). Cash Cows
c). Question Marks
d). Dogs
Once it has classified its SBUs, a company must determine what role each will play in the
future. The four strategies that can be pursued for each SBU are:
1). The company can invest more in the business unit in order to build its share.
2). The company can invest enough just to hold at the current level.
Principles Of Marketing _ MGT 301
3). The company can harvest the SBU.
4). The company can divest the SBU.
As time passes, SBUs change their positions in the growth-share matrix. Each has its own
life cycle. The growth-share matrix has done much to help strategic planning study; however,
there are problems and limitations with the method.
1). They can be difficult, time-consuming, and costly to implement.
2). Management may find it difficult to define SBUs and measure market share and
growth.
3). They focus on classifying current businesses but provide little advice for future
planning.
4). They can lead the company to place too much emphasis on market-share growth
or growth through entry into attractive new markets. This can cause unwise expansion into
hot, new, risky ventures or giving up on established units too quickly. In spite of the
drawbacks, most firms are still committed to strategic planning. Based upon this analysis
company designs the growth strategies:
Developing Growth Strategies
Companies should always be looking to the future. One useful device for identifying growth
opportunities for the future is the product/market expansion grid. The product/market
expansion grid is a portfolio-planning tool for identifying company growth opportunities
through:
1). Market Penetration—making more sales to present customers without changing
products in any way. Market penetration means trying to increase sales of a firm’s present
products in its present markets probably through a more aggressive marketing mix. The firm
may try to strengthen its relationship with customers to increase their rate of use or repeat
purchases, or try to attract competitors’
customers or current nonusers. New
promotion appeals alone may not be
Current
New
effective. A firm may need to add a home
products
products
page on the Internet to make it easier and
faster for customers to place an order. Or,
MarketProductCurrent
penetration
development
it may need to add more stores in present
markets
strategy
strategy
areas for greater convenience.
MarketNew
(Diversification
2). Market Development—a strategy
development
markets
strategy)
strategy
for company growth by identifying and
developing new markets for current
company products (example, demographic
markets). Market development means trying to increase sales by selling present products in
new markets. Firms may try advertising in different media to reach new target customers. Or
they may add channels of distribution or new stores in new areas, including overseas.
3). Product Development—a strategy for company growth by offering modified or
new products to current markets. Product development means offering new or improved
products for present markets. By knowing the present market’s needs, a firm may see new
ways to satisfy customers. Computer software firms like Microsoft boost sales by
introducing new versions of popular programs.
Principles Of Marketing _ MGT 301
4). Diversification—a strategy for company growth by starting up or acquiring
businesses outside the company’s current products and markets. Diversification means
moving into totally different lines of business perhaps entirely unfamiliar products, markets,
or even levels in the production-marketing system.
Planning Cross-Functional Strategies
The final step in the strategic planning process is planning functional strategies.
1). Once the strategic plan is in place, more detailed planning must take place within
each business unit.
2). Each department (such as marketing, finance, et cetera) provides information for
strategic planning.
Marketing plays a key role in the company’s strategic planning process by:
1). Providing a guiding philosophy.
2). Providing inputs to strategic planners by helping to identify attractive market
opportunities and by assessing the firm’s potential to take advantage of them.
3). Within individual business units, marketing designs strategies for reaching the
unit’s objectives.
4). Marketers are challenged to find ways to get all departments to “think customer.”
Strategic Planning, Implementation, and Control Process
The process of developing
and maintaining a strategic fit
between the organization’s
goals and capabilities and its
Planning
Im p
lem enta
tio n
C on
P lann ing
plem
en tatio
o n trol
tro l
changing
marketing
C o rp ora te
M e a su ring
opportunities. It relies on
p lan n ing
O rg a n iz in g
results
developing a clear company
Divisio n
mission,
supporting
p lan n ing
D ia g n o s in g
results
objectives, a sound business
B usiness
Im p lem e ntin g
portfolio and coordinated
p lan n ing
Ta kin g
functional strategies. Business
co rrective
Pro d u ct
ac tion
p lan n ing
plans are more customers and
competitor-oriented
and
better reasoned and more
realistic than they were in the
past. The plan is variously called a "business plan," a "marketing plan," and sometimes an
"operating plan." Most marketing plans cover one year, but some cover a few years. The
plans vary in their length from under ten pages to over 50 pages. Some companies take their
plans very seriously, while others see them as only a rough guide to action. The most
frequently cited shortcomings of current marketing plans, according to marketing executives,
are lack of realism, insufficient competitive analysis, and a short-run focus.
IMPLEMENTING THE MARKETING PLAN: Planning good strategy is only the start
- it counts very little if the organization fails to implement it correctly. Main reasons for the
poor implementation are isolated planning, Some organizations employ ‘professional
planners’ while others leave the task of developing strategic plans to top management and
leaving the details of implementation to lower-level managers can spell poor or no
implementation at all.
Principles Of Marketing _ MGT 301
Marketing strategy and marketing performance are linked by an implementation system
consisting of five related
elements. Finally marketing
Narrowing down to focused strategy with quantitative
control involves evaluating the
and qualitative screening criteria
results of marketing strategies
and plans and taking corrective
Customers
Needs and other
action to ensure that objectives
Segmenting
Dimensions
Targeting &
are attained. It then measures its
Segmentation
performance in the marketplace
S.
Company
W.
and evaluates the causes of any
Mission, Objectives,
O.
& Resources
differences between expected
T.
Positioning &
Differentiation
and actual performance. Finally,
Competitors
management takes corrective
Current &
action to close the gaps between
Prospective
its goals and its performance.
External Market Environment
Marketing Strategy Planning
Process
Whenever performing the marketing function company needs courses of the action known
as the strategies. Marketing strategies and the planning process are based on the It is based
on the SWOT analysis. SWOT analysis means to analyze the threats and opportunities that
are part of external environment and strengths and weaknesses of the organization, which
are part of the internal the environment. Based on this environmental analysis company
formulates the strategies to find out the target customers designs objectives and mission
statements to fulfill the needs of the target customers and strategies to respond to the
competitive environment. After conducting SWOT analysis companies decides strategies
about the marketing mix i.e. 4Ps (Product, Price, Place and Promotion) .
Marketing Process
The marketing process is the process of analyzing market opportunities, selecting target
markets, developing the marketing mix, and managing the marketing effort.
This process has following main steps:
1. Analyzing marketing opportunities
2. Selecting target markets
3. Developing the marketing Mix
4. Managing the marketing effort