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LESSON
5
STRATEGIC MARKETING PLANNING
CONTENTS
5.0 Aims and Objectives
5.1 Introduction
5.2 An Overview of Strategic Planning
5.2.1 Need for Strategic Planning
5.2.2 The Framework
5.2.3 Dimensions of Strategic Decisions
5.3 Strategic Planning Control and Implementation Process
5.3.1 Steps in Strategic Planning
5.4 Defining the Company's Business and Mission
5.4.1 Some Mission Statements
5.5 Setting Company Objectives and Goals
5.5.1 Role of Objectives
5.5.2 Characteristics of objectives
5.5.3 Designing the Business Portfolio
5.6 Analysing the Current Business Portfolio
5.7 Developing Growth Strategies
5.7.1 Planning Marketing and Other Functional Strategies
5.8 Let us Sum up
5.9 Lesson-end Activities
5.10 Keywords
5.11 Questions for Discussion
5.12 Suggested Readings
5.0 AIMS AND OBJECTIVES
In this lesson, we will discuss about–Strategic Marketing Planning. After going through
this lesson you will be able to:
(i)
Understand strategic planning control and implementation process.
(ii)
Discuss company’s business, mission, objectives and goals.
(iii) Understand developing growth strategies.
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Marketing Management
5.1 INTRODUCTION
The aim of strategic market planning is to adopt, adjust or reshape on an ongoing basis
the corporation’s different businesses to accomplish the target growth and profit objectives.
The whole process involves keeping in focus the changing market opportunities and
developing a viable fit between the corporation’s objectives, resources and competencies.
5.2 AN OVERVIEW OF STRATEGIC PLANNING
"Without a strategy, the organisation is like a ship without a rudder"
- Joel Ross and Michael Kami
In a hyper competitive marketplace, companies can operate successfully by creating
and delivering superior value to target customers and also learning how to adapt to a
continuously changing market place. So to meet changing conditions in their industries,
companies need to be farsighted and visionary, and must develop long-term strategies.
Strategic planning involves developing a strategy to meet competition and ensure longterm survival and growth. The marketing function plays an important role in this process
and it provides information and other inputs to help in the preparation of the organisation's
strategic plan.
The overall objective of strategic planning is two fold :
l
To guide the company successfully through all changes in the environment.
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To create competitive advantage, so that the company can outperform the
competitors in order to have dominance over the market.
Strategic planning consists of developing a company mission (to give it direction), objectives
and goals (to give it means and methods for accomplishing its mission), business portfolio
(to allow management to utilise all facets of the organisation), and functional plans
(plans to carry out daily operations from the different functional disciplines).
No matter how well the strategic planning process has been designed and implemented,
success depends on how well each department performs its customer-value-adding
activities and how well the departments work together to serve the customer.
Value chains and value delivery networks have become popular with organizations that
are sensitive to the wants and needs of consumers. The marketing department (because
of its ability to stress the customer's view) has become central in the implementation of
most strategic plans.
Ultimately, the aim of strategic planning is to serve the company's business products,
services and communications so that they achieve targeted profits and growth.
Marketing Philosophy :
It is more important to do what is strategically right than what is
immediately profitable.
5.2.1 Need for Strategic Planning
Many companies operate without formal plans. However, formal planning can provide
many benefits:
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It encourages management to think ahead systematically.
l
It forces managers to clarify objectives and policies.
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It leads to better coordination of company efforts.
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It provides clearer performance standards for control.
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It is useful for a fast-changing environment since sound planning helps the company
anticipate and respond quickly to environmental changes and sudden developments.
Strategic Marketing Planning
There are three different types of plans that companies might use:
l
Annual plans (deal with the company's current businesses and determine how to
keep them going).
l
Long-range plans (also deal with company's current businesses and determine
how to keep them prosperous).
l
Strategic plans involve adapting the firm to take advantage of opportunities in its
constantly changing environment.
5.2.2 The Framework
The basic framework of strategic planning process can be described as shown in the
picture below. Stage One is a situational analysis and is the starting point of strategic
planning. Stage Two is a process of goal setting for the organisation after it has finalised
its vision and mission. Stage Three deals with the various strategic alternatives an
organisation has. Stage Four and Five are the final process of selection, implementation
and control of a suitable strategy.
Stage Five
How Can we Ensure Arrival?
(Control)
Stage Four
Which Way is Best?
(Evaluation)
Stage Three
How Might we Get There?
(Means)
Introduction
Stage One
Where are we Now?
(Beginning)
Stage Two
Where do we Want to Be?
(Ends)
Figure 5.1: Basic Framework of Strategic Planning Processes
Some Basic Concepts
A company's strategy consists of the combination of competitive moves and business
approaches that managers employ to please customers, compete successfully, and achieve
organisational objectives.
A company's business model deals with whether the revenue - cost - profit economies
of its strategy demonstrate the viability of the enterprise as a whole.
The term strategic management refers to the managerial process of forming a strategic
vision, setting objectives, crafting a strategy, implementing and executing the strategy,
and then over time initiating whatever corrective adjustments in the vision, objectives,
strategy and execution are deemed appropriate.
5.2.3 Dimensions of Strategic Decisions
l
Strategic issues require top management decision.
l
Strategic issues involve the allocation of large amount of company resources.
l
Strategic issues are likely to have a significant impact on the long term prosperity
of the firm.
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Marketing Management
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Strategic issues are future oriented
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Strategic issues usually have major multifunctional or multibusiness consequences.
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Strategic issues necessitate considering factors in the firm's external environment.
5.3 STRATEGIC PLANNING CONTROL AND
IMPLEMENTATION PROCESS
The organisational planning takes place at several levels of the organisation - the corporate
level, the business level and operational level.
The corporate level consisting of the top management, deals with long term major decisions
making such as allocation of resources, taking major risks for generating high profits.
The operational level decisions are short term and less risky in nature and leads incremental
change in organisational operation.
Corporate planning
Organizing
Measuring results
Division planning
Implementing
Diagnosing results
Taking corrective
action
Business planning
Product planning
Figure 5.2: Strategic Planning, Implementation and Control Process
5.3.1 Steps in Strategic Planning
Strategic planning can be defined as the process of developing and maintaining a strategic
fit between the organisation's goals and capabilities and its changing marketing
opportunities.
l
Strategic planning sets the stage for the rest of the planning in the firm.
l
There are four steps to the strategic planning process, as depicted in Figure 5.3
below:
a.
Defining a clear company mission.
b.
Setting supporting company objectives.
c.
Designing a sound business portfolio.
d.
Planning and coordinating marketing and other functional strategies.
Business unit, product and
market levels level
Corporate level
Defining the
Company
mission
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Setting the
Company
Objectives
and Goals
Designing
the Business
Portfolio
Planning
marketing and
other functional
strategies
Figure 5.3: The Four Steps of the Strategic Planning Process
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5.4 DEFINING THE COMPANY'S BUSINESS AND
MISSION
Strategic Marketing Planning
An organisation exists to accomplish something. When management senses that the
organisation is drifting, it is time to renew its search for purpose by asking:
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What is our business?
l
Who is our customer?
l
What do customers value?
l
What should our business be?
According to Peter Drucker, every organisation must ask an important question "What
business are we in?" and get the correct and meaningful answer. For example, Indian
Railways will make a big mistake if they think they are in the business of moving trains
and wagons; whereas they are actually in the business of transportation and material
handling system.
The first step in the strategic planning process is defining the company mission.
l
Mission statement is a statement of the organisation's purpose - what it wants to
accomplish in the larger environment.
l
A clear mission statement acts as an "invisible hand" that guides people in the
organisation.
l
Market definitions of a business are better than product or technological definitions.
Products and technologies can become outdated, but basic market needs may last
forever.
l
A market-oriented mission statement defines the business in terms of satisfying
basic customer needs.
The mission statement must avoid being too narrow or too broad. Mission statements
must:
l
Be realistic
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Be specific
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Fit the market environment
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Indicate distinctive competencies
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Be motivating
A strategic vision is a road map of the company's future - providing specifics about
technology and customer focus, the geographic and product markets to be pursued, the
capabilities it plans to develop, and the kind of company that management is trying to
create.
An organisation's Mission states what customers it serves, what needs it satisfies, and
what type of product it offers.
A company's mission statement is typically focused on its present business
scope – "who we are and what we do"; mission statements boldly describe an
organisation's present capabilities, customer focus, activities and business makeup.
5.4.1 Some Mission Statements
l
UNILEVER: "The mission of our company, as William Hasketh Lever saw it, is to
make cleanliness commonplace, to lessen work for women, to foster health, and to
contribute to personal attractiveness that life may be more enjoyable for the people
who use our products."
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Marketing Management
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MCKINSEY & CO.: "To help Business Corporations and governments to be more
successful".
l
CADBURY INDIA: "To attain leadership position in the confectionery market and
achieve a strong presence in the food drinks sector."
l
RELIANCE INDUSTRIES: "To become a major player in the global chemicals
business and simultaneously grow in other growth industries like infrastructure."
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RANBAXY: "To become a $1 billion research-based global pharmaceuticals
company."
Check Your Progress
1.
Explain the need of an organisation mission.
2.
Elaborate some mission statements.
5.5 SETTING COMPANY OBJECTIVES AND GOALS
The company's mission needs to be turned into detailed supporting objectives for each
level of management. This second step in the strategic planning process requires the
manager to set company goals and objectives and be responsible for achieving them.
l
The mission leads to a hierarchy of objectives including business and marketing
objectives.
l
Objectives should be as specific as possible.
Objectives are an organisation's performance targets - the results and outcomes it wants to
achieve. They function as yardsticks for tracking an organisation's performance and progress.
Strategic objectives relate to outcomes that strengthen an organisation's overall business
position and competitive vitality; financial objectives relate to the financial performance
targets management has established for the organisation to achieve.
Objectives are open-ended attributes that denote the future state or outcomes, whereas
goals are close-ended attributes, which are precise and expressed in specific terms.
5.5.1 Role of Objectives
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Objectives define the organisation's relationship with its environment.
l
Objectives help an organisation pursue its mission and purpose.
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Objectives provide the basis for strategic decision making.
l
Objectives provide the standards for performance appraisal.
5.5.2 Characteristics of Objectives
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1.
Objectives should be understandable
2.
Objectives should be concrete and specific
3.
Objectives should be related to a time frame
4.
Objectives should be measurable and controllable
5.
Objectives should be challenging
6.
Different objectives should correlate with each other
7.
Objectives should be set within constraints
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Key questions for an organisation to answer
Strategic Marketing Planning
An organisation seeking success in business must answer important questions dealing
with the concepts of mission, objective, strategy and tactics.
Table 5.1: Key Questions
Concept
Question
Mission
What business are we in?
Objectives
What do we want to accomplish?
Strategies
Tactics
In general terms, how are we going to get the job done?
In specific terms, how are we going to get the job done?
5.5.3 Designing the Business Portfolio
The third step in the strategic planning process is designing the business portfolio.
l
The business portfolio is a collection of businesses and products that make up the
company.
l
The best business portfolio is the one that best fits the company's strengths and
weaknesses to opportunities in the environment.
In order to design the business portfolio, the business must:
l
Analyse its current business portfolio and decide which business should receive
more, less, or no investment.
l
Develop growth strategies for adding new products or businesses to the portfolio.
5.6 ANALYSING THE CURRENT BUSINESS PORTFOLIO
In order to analyse 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:
l
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. The SBU
can be a company division, a product line within a division, or even a single product
or brand.
Three characteristics of an SBU
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Single business or collection of related businesses that can be planned for
separately.
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Has its own set of competitors.
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Has a manager who is responsible for strategic planning and profit.
The Second Step is to assess the attractiveness of its various SBUs and decide
how much support each deserves.
The best-known portfolio planning method is the Boston Consulting Group (BCG) matrix:
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Using the BCG approach, where a company classifies all its SBUs according to
the growth-share matrix.
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The vertical axis, market growth rate, provides a measure of market attractiveness.
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The horizontal axis, relative market share, serves as a measure of company strength
in the market.
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Marketing Management
Using the matrix, four types of SBUs can be identified:
l
Stars are high-growth, high-share businesses or products (they need heavy
investment to finance their rapid growth potential).
l
Cash Cows are low-growth, high-share businesses or products (they are established,
successful, and need less investment to hold share).
l
Question Marks are low-share business units in high-growth markets (they require
a lot of cash to hold their share).
l
Dogs are low-growth, low-share businesses and products (they may generate enough
cash to maintain themselves, but do not have much future).
Generally, a SBU introduces a new product into a high-growth market, which will obviously
have a low market share. The SBU has to do substantial marketing expenditure to
increase the product's market share so that it becomes a "star" product. When the industry
growth rate again declines, the SBU generally stops all marketing expenditure on this
product which gives the SBU lot of cash as the expenditure is substantially reduced
while the revenue is still very high. This surplus fund generated by "cash cows" are
utilised for development of new products and establishing these new products in the
market.
H igh
S ta rs
Q u estio n M a rks
M arket G ro w th R ate
??
?
C a sh C o w s
D ogs
R & D
L ow
10
H igh
1.0
L ow
0 .1
C o m p etitive P o sitio ns (R atio s o f S hare o f L argest C o m p etito r)
Figure 5.4: BCG Growth Share Matrix
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:
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1.
Build: Here the objective is to increase market share, if necessary, even foregoing
short-term earnings to achieve this objective.
2.
Hold: Here the objective is to preserve market share.
3.
Harvest: Here the objective is to increase short-term cash flow regardless of longterm effect.
4.
Divest: Here the objective is to sell or liquidate the business because resources
can be better used elsewhere.
As time passes, SBUs change their positions in the growth-share matrix. Each has its
own life-cycle.
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The growth-share matrix has done much to help strategic planning study; however, there
are problems and limitations with the method.
l
They can be difficult, time-consuming, and costly to implement.
l
Management may find it difficult to define SBUs and measure market share and
growth.
l
They focus on classifying current businesses but provide little advice for future
planning.
l
They can lead the company to placing 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.
Strategic Marketing Planning
In spite of the drawbacks, most firms are still committed to strategic
planning.
Check Your Progress
1.
Discuss the need of having strategic planning.
2.
Explain BCG growth share matrix.
5.7 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 growth matrix (proposed by Igor Ansoff) is a portfolio-planning tool for identifying
company growth opportunities through:
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Market Penetration-making more sales to present customers without changing
products in any way. Supporting tactics might include greater spending on advertising
or personal selling.
l
Market Development-a strategy for company growth by identifying and developing
new markets for current company products.
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Product Development-a strategy for company growth by offering modified or new
products to current markets.
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Diversification-a strategy for company growth by starting up or acquiring businesses
outside the company's current products and markets. This strategy is risky because
it does not rely on either the company's successful product or its position in
established markets.
Existing
Products
Existing
Markets
New
Markets
New
Products
1. Market
Penetration
3. Product
Development
2. Market
Development
4. Diversification
Figure 5.5: Product/Market Growth Matrix
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Marketing Management
As market conditions change over time, a company may shift product-market growth
strategies. For example, when its present market is fully saturated, a company may have
no choice other than to pursue new markets.
5.7.1 Planning Marketing and Other Functional Strategies
The relationship of marketing to the other business functions is often misunderstood.
l
Marketing alone cannot produce superior value for the consumer. All company
departments must work together to accomplish this.
l
Each department is a link in the value chain (a major tool for identifying ways to
create value for the customer).
l
A company's value chain is only as strong as the weakest link.
l
Marketers are challenged to find ways to get all departments to "think customer."
In its search for competitive advantage, the firm needs to look beyond its own value
chain and into the value chains of its suppliers, distributors, and ultimately customers.
This "partnering" will produce a value delivery network.
Company’s
Value Chain
Customers
Suppliers
Distributors
Figure 5.6: Value Delivery Network
5.8 LET US SUM UP
The marketing function plays an important role in this process and it provides information
and other inputs to help in the preparation of the organisation's strategic plan. The aim of
strategic planning is to serve the company's business products, services and
communications so that they achieve targeted profits and growth.
A company's strategy consists of the combination of competitive moves and business
approaches that managers employ to please customers, compete successfully, and achieve
organisational objectives.
Strategic planning can be defined as the process of developing and maintaining a strategic
fit between the organisation's goals and capabilities and its changing marketing
opportunities.
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An organisation's Mission states what customers it serves, what needs it satisfies, and
what type of product it offers. A company's mission statement is typically focused on its
present business scope – "who we are and what we do"; mission statements boldly
describe an organisation's present capabilities, customer focus, activities and business
makeup. The product/market growth matrix (proposed by Igor Ansoff) is a portfolioplanning tool for identifying company growth opportunities.
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5.9 LESSON-END ACTIVITIES
(i)
Select a diversified Indian company, collect information about its businesses and
suggest how many Strategic Business Units it should form. Give your reasons.
(ii)
Assume you have entered manufacture and marketing of medium quality sports
shoe manufacture. Draw up your marketing plans for the company.
Strategic Marketing Planning
5.10 KEYWORDS
Strategic Planning
Implementation
Company Business
Mission
Objectives
Portfolio
5.11 QUESTIONS FOR DISCUSSION
1.
What are the role & characterstics of objectives?
2.
What are the important consideration that company should keep in mind while
meeting changing conditions?
3.
What is the aim of strategic planning?
4.
List the need for strategic planning.
5.
What are the dimensions of strategic decisions?
6.
What are the different steps in strategic planning?
7.
What is market expansion grid?
5.12 SUGGESTED READINGS
Rajan Saxena, Marketing Management, Tata McGraw Hill, 2002.
Ramasamy & Namakumari, Marketing Management, Macmilan India, 2002.
S. Jayachandran, Marketing Management, TMH, 2003.
Ramphal and Gupta, Case and Simulations in Marketing, Galgotia, Delhi.
SHH Kazmi, Marketing Management, Excel Books, New Delhi.
Saroj Dutta, Marketing Sense, Excel Books, New Delhi.
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