Transcript CHAPTER 2

CHAPTER 2
Strategic Planning and the
Marketing Process
Objective: Selecting the company strategy
for long-run survival and explaining the
marketing management process.
Strategic Planning
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The overall company strategy for long-run
survival and growth is called strategic
planning.
Strategic planning is the process of
developing and following a strategic fit
between the organization’s goals and
capabilities and its changing marketing
opportunities.
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Strategic Planning include,
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2.
3.
4.
Defining the company mission
Setting company objectives and goals
Deciding what portfolio of businesses and
products is best for the company
Developing detailed marketing plans for each
product
1. Defining The Company
Mission
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A mission statement is a statement of the
organization’s purpose - what it wants to achieve
in the larger environment.
It is an “invisible hand” that guides people in the
organization.
E.g. Walt Disney Company “making people
happy”; Microsoft “information at your
fingertips”
2. Setting Company Objectives
and Goals
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The company’s mission needs to be turned into
detailed supporting objectives for each level of
management.
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E.g. increasing sales or reducing cost to increase profit; sales
can be increased by improving the company’s share in the
home country or entering a new foreign market; market
share can be increased by increasing productivity, promotion
or cutting prices.
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The objectives should be specific. E.g. “increasing
the market share to 15 percent by the end of the
second year.”
3. Designing the Business
Portfolio
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Management must plan its business portfolio - the
collection of businesses and products that make up
the company.
The best business portfolio is the one that best fits
the company’s strengths and weaknesses and to the
opportunities in the environment.
The company must (1) analyze its current business
portfolio and decide which businesses should
receive more, less, no investment, and (2) develop
growth strategies for adding new products or
businesses to the portfolio.
1. Step: Analyzing the Current Business
Portfolio
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The major activity in strategic planning is
business portfolio analysis, where management
evaluates the businesses making up the
company.
The reason for this analysis is that to put strong
resources into the company’s more profitable
businesses and phase down or drop its weaker
ones.
Strategic Business Unit (SBU):
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The first step in the business portfolio analysis is to
identify the key businesses making up the
company. The company’s key businesses (a
company division, a product line, or a single product
or brand) are called strategic business units (SBU).
The next step in business portfolio analysis is to
evaluate each strategic business unit, in order to
understand how much support they need.
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In portfolio analysis, SBUs are evaluated from two
ways; (a) The attractiveness of the SBU’s market
(market growth) and (b) the strength of the SBU’s
position in that market (market share).
Star 
Market High
growth
share
 Question

Mark
Cash Cow
Dog
High
Low
Low
The BCG growth-share matrix
Relative market share
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The Boston Consulting Group Approach (BCG)
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In BCG approach, the company classifies all its
SBUs according to the growth-share matrix
which can distinguish four types of SBUs.
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Stars; are high-growth, high-share businesses or
products. They often need heavy investment to
finance their rapid growth. Eventually, their growth
will slow, and they will turn into cash cows.
Cash cows; are low-growth, high-share
businesses or products. These established and
successful SBUs need less investment to keep
their market share. They produce a lot of cash to
the company.
 Question marks; are low-share business units in
high-growth markets. They need a lot of cash to
keep and increase their share. Management must
decide which question mark it should build into
stars and which should be phased out.
 Dogs; are low-growth, low-share businesses and
products. They can only generate enough cash
for themselves.
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Once the company classifies its SBUs, it must
determine what to do with them. There are
four strategies. The company can;
1. invest more in the business unit in order to build
(increase) its share.
2. invest just enough to hold (keep) the SBU’s share
at the current level.
3. it can harvest the SBU, milking its short-term cash
flow regardless of the long-term effect .
4. divest (kill) the SBU by selling it or phasing it out
and using the resources elsewhere.
2. Step: Developing Growth Strategies
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Besides evaluating current businesses (SBUs),
the business portfolio involves finding
businesses and products that the company
should consider in the future. In order to
identify growth opportunities, product/market
expansion grid is used.
The product/market expansion grid is a
portfolio-planning tool through market penetration,
market development, product development or
diversification.
Product/Market Expansion Grid
Existing
markets
Existing
products
1. Market
penetration
New
products
3. Product
development
New
markets
2. Market
development
4. Diversification
Product/Market expansion grid is used to identify
growth opportunities for the company.
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Market penetration; is the idea to make more sales to
present customers without changing the products. To
increase sales, the company can cut prices, increase
advertising or use more distributors.
Market development; is the idea of identifying and
developing new markets for its current products. To
increase the market share, the company may try to
attract some other people or some other places.
Product development; is the idea of offering modified
or new products to current markets. The company may
offer new lines or brands of its products.
Diversification; is the idea of staring up or buying
businesses outside of its current products and markets.
4. The Marketing Process
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Marketing process is the process of ;
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2.
3.
4.
analyzing marketing opportunities
selecting target markets
developing the marketing mix
managing the marketing effort (marketing
mix).
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Target consumers stand in the center of this
process. The company;
identifies the total market
 divides it into smaller segments
 selects the most promising segments
 focuses on serving and satisfying these segments
by designing marketing mix factors under the
control of the company - product, price, place,
and promotion
 analyzes, plans, implements, and controls to put
the marketing mix into action which are required
to adapt to the marketing environment
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Target Consumers
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In order to be successful, the companies must
understand the needs and wants of the consumers
to satisfy them. But it is impossible to satisfy all
consumers in a given market. Because, there are too
many different types of consumers with too many
different types of needs. That is why, companies
must; (1) divide up the total market, (2) choose the
best segments, and (3) design strategies to attract
and keep these segments better than the
competitors. This process involves three steps:
market segmentation, market targeting, and market
positioning.
Market Segmentation:
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Dividing a market into distinct groups of buyers
with different needs, characteristics, or behavior
(e.g. sex, age, income level…) who might require
separate products or marketing mixes is called
market segmentation.
After segmenting the market, the company must
determine which segments offer the best
opportunity for achieving company objectives
(making profit).
Market Targeting:
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Evaluating each market segment’s attractiveness and
then selecting one or more segments to enter is
called market targeting.
A company should target segments in which it can
generate the greatest customer value and keep it in
the long-run.
There are three alternatives in market targeting. A
company may decide to serve  only one segment
(because of its limited resources),  several related
segments or  all market segments.
Market Positioning:
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After a company has decided which market
segments to enter, it must decide what positions it
wants to occupy in those segments. A product’s
position is the place that the product occupies in
consumer’s minds relative to competitors.
If a product is seen exactly the same as other
products on the market, consumers have no reason
to buy it. That is way, companies differentiate their
products through positioning to offer more value to
the consumers. E.g. Mercedes “engineered like no
other car in the world”
Developing The Marketing Mix
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Once the company has decided on its overall
marketing strategy, it should plan its activities by
using the controllable marketing tools, in other
words, the marketing mix.
Marketing mix is the controllable marketing tools
(known as the 4Ps) - product, price, place, and
promotion - that the company use to achieve its
objectives.
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Product; means the “goods-and-service” combination
the company offers to the target market.
Price; is the amount of money that consumers have
to pay to obtain the product.
Place; includes company activities with the
intermediaries that make the product available to
target consumers. The intermediaries keep an
inventory of the products, shows them to potential
buyers, negotiate prices, close sales and give service
after sales.
Promotion; means activities that communicate the
product and persuade target customers to buy it.
Managing the Marketing Effort
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In order to put the marketing mix into action,
four marketing management functions are used:
Analysis
 Planning
 Implementation
 Control
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The company, first, makes the necessary
analysis (analysis) to develop its strategic and
marketing plans (planning), then put them into
action (implementation) and last measure and
evaluate results and if necessary take
corrective action (controlling).
All these functions are done under the
“marketing planning”.
Marketing Planning
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After the company decides what to do with each
business unit (SBU) in its strategic plan, it must decide
what actions (activities) to take to achieve the company
objectives.
The company’s marketing plan involves the following
sections; (1) executive summary, (2) market picture
analysis (PEST), (3) business situation analysis (SWOT),
(4) objectives and issues, (5) marketing strategies, (6)
action programs, (7) budgets, (8) control.
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Executive Summary; presents a brief overview of the
plan for quick management review.
Marketing Picture Analysis (PEST); Marketing function
starts with the analysis of the market picture which
is called PEST analysis.
PEST analysis is an examination of the uncontrollable
factors; Political (e.g. taxation, tourism policy),
Economic (e.g. inflation, unemployment, fuel costs),
Social (e.g. workforce change, lifestyle, values,
education) and Technological (e.g. new systems like
reservations, home technology) changes which may
affect the company and the market.
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PEST analysis also includes; analysis of the total
market (e.g. size, growth, extent of under- or
overcapacity of supply, barriers), companies (e.g.
level of investment, takeovers, promotion
expenditure, profits), product development (e.g.
trends, new product types), price (e.g. levels, range),
distribution (e.g. patterns, policies), promotion (e.g.
expenditure, types, messages)
The above information should be gathered on the
basis of how it affects the company.
Business Situation Analysis (SWOT); Under the SWOT
analysis, the major Strengths, Weaknesses,
Opportunities, and Threats facing the company
must be identified.
Threats and Opportunities; identifies the major
threats (negative impacts from the external
environment that could decrease the company’s
sales and profits) and opportunities (positive
impacts from the external environment that a
company could use to increase its sales and profits).
The company should try to eliminate the negative
impacts of the threats and use the opportunities in
the best way. But the development of opportunities
involve risk, that is why, managers must decide
whether the expected returns justify the risks or not.
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Strengths and Weaknesses; is the analysis of the
company’s internal environment which identifies the
strengths (strong areas of the company relative to its
competitors) and weaknesses (weak areas of the
company relative to its competitors).
The company should try to emphasize its strengths
and correct weaknesses to use the opportunities.
Objectives; After the business unit has defined its
mission and examined its
strengths/weaknesses/opportunities/threats (called
SWOT analysis), it can proceed to develop specific
objectives for the planning period.
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Objectives should be stated quantitatively. For
example, increasing the return on investment to
15% within 2 years. Objectives should be specific
with respect to amount and time. Quantitatively
measurable objectives facilitates planning,
implementation and control.
Marketing Strategies; Objectives indicate what a
business unit wants to achieve, on the other hand,
strategy answers what to do to achieve those
objectives (e.g. what should be done to increase the
return on investment to 15% within 2 years). It
consists of specific strategies for target markets
(which segments the company will target),
positioning and the marketing mix (specific
strategies for each P).
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Action Programs; turns the marketing strategies into
specific action programs that answer how to do.
The action program also identifies when to do and
who will be responsible.
Budgets; projects the profit-and-loss statement. It
shows both the forecasted revenues (number units
to be sold  average net price) and expenses (cost of
production, distribution, etc.). The difference
between revenues and expenses gives the projected
profit. The budget is the basis for materials buying,
personnel planning etc.
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Controls; outlines the controls that will be used to
monitor progress. The management review the
results each period and compare them with the goals
and budgets. If the businesses or products do not
meet with the goals, corrective actions must be
taken.
Marketing Department Organization
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The company must design a marketing
department to carry out marketing strategies and
plans.
Common forms of marketing organization are;
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Functional organization; in which different activities
are headed by a specialist e.g. sales manager,
advertising manager, marketing research manager…
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Geographic organization; in which sales and
marketing people are assigned to specific countries
and regions to reach their customers in a more cost
effective way, if the company is international.
Product management organization; is used in
companies with very different products or brands.
Market management organization; is valid for
companies that sell one product line to many
different types of markets that have different needs
and preferences.
combination of the functional, geographic, product
and market organization forms is used by the large
companies that produce many different products in
many different geographic and consumer markets.