MGT301 - Principles of Marketing - Lecture Handout 06

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In last Lesson the focus of discussion was marketing challenges in the 21st century. Today we will discuss strategic planning, describe marketing management and planning process, identify sections of a marketing plan and specify the contents of each section. So today we will be covering following topics:

STRATEGIC PLANNING AND MARKETING PROCESS

1. Strategic planning

The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities is called Strategic planning. Planning is basically concerned with what are we going to do and how are we going to do it? Organizations, which are not able to perform the effective planning, are actually planning for failures. 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 long-term survival and growth. The marketing function plays an important role in this process in that it provides information and other inputs to help in the preparation of the organization’s strategic plan. Planning is performed to:

  • Address changing environment and consumers
  • Develop shared goals within organization
  • Address competitive threat
  • To anticipate the future
  • Determine actions that are needed to achieve objectives

Strategic Planning

Operational Planning

Strategic planning is mainly of three types:

  1. Strategic Planning: Major activities in strategic planning process include developing the company's goals and
    plans. Typically strategic planning focus on long-term issues and emphasize the survival, growth, and overall effectiveness of the organization.
  2. Tactical Planning: Tactical planning is concerned with translating the general goals and plans developed by strategic managers into objectives that are more specific and activities. These decisions, or tactics, involve both a shorter time horizon and the coordination of resources.
  3. Operational Planning: Operational planning is used to supervise the operations of the organization. It is directly involved with non-management employees, implementing the specific plans developed with tactical managers. This role is critical in the organization, because operational managers are the link between management and nonmanagement personnel. Your first management position probably will fit into this category.

2. Characteristics of a Strategic Plan

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 utilize all facets of the organization), and functional plans (plans to carry out daily operations from the different functional disciplines). Since most companies are interested in growth, this chapter explores 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. Many companies operate without formal plans. However, formal planning can provide many benefits:

  1. It encourages management to think ahead systematically.
  2. It forces managers to clarify objectives and policies.
  3. It leads to better coordination of company efforts.
  4. It provides clearer performance standards for control.
  5. It is useful for a fast-changing environment since sound planning helps the company anticipate and respond quickly to environmental changes and sudden developments.

3. Strategic planning Process:

It is defined as the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

  1. Strategic planning sets the stage for the rest of the planning in the firm.
  2. There are four steps to the strategic planning process:
    • stating a clear company mission.
    • Setting supporting company objectives.
    • Designing a sound business portfolio.
    • Planning and coordinating marketing and other functional strategies.

Corporate Level

a. Defining the Company’s Business and Mission

An organization exists to accomplish something. When management senses that the organization is drifting, it is time to renew its search for purpose by asking:

  1. What is our business?
  2. Who is our customer?
  3. What do customers value?
  4. What should our business be?

The first step in the strategic planning process is defining the company mission.

  1. A mission statement is a statement of the organization’s purpose—what it wants to accomplish in the larger environment.
  2. A clear mission statement acts as an “invisible hand” that guides people in the organization.
  3. 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.
  4. 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:

Organization’s Purpose

  1. Be realistic.
  2. Be specific.
  3. Fit the market environment.
  4. Indicate distinctive competencies.
  5. Be motivating.

b. 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.

  1. The mission leads to a hierarchy of objectives including business and marketing objectives.
  2. Objectives should be as specific as possible.

c. Designing the Business Portfolio

Designing the Business Portfolio

The third step in the strategic planning process is designing the business portfolio.

  1. The business portfolio is a collection of businesses and products that make up the company.
  2. 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:

  1. Analyze its current business portfolio and decide which business should receive more, less, or no investment.
  2. Develop growth strategies for adding new products or businesses to the portfolio.

Analyzing the Current Business Portfolio

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. 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.
    • The vertical axis, market growth rate, provides a measure of market attractiveness.
    • 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:
    • Stars
    • Cash Cows
    • Question Marks
    • Dogs

 

  1. Stars are high-growth, high-share businesses or products (they need heavy investment to finance their rapid growth potential).
  2. Cash Cows are low-growth, high-share businesses or products (they are established, successful, and need less investment to hold share).
  3. Question Marks are low-share business units in high-growth markets (they require a lot of cash to hold their share).
  4. Dogs are low-growth, low-share businesses and products (they may generate enough cash to maintain themselves, but do not have much future). 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:
    • The company can invest more in the business unit in order to build its share.
    • The company can invest enough just to hold at the current level.
    • The company can harvest the SBU.
    • 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 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. In spite of the drawbacks, most firms are still committed to strategic planning.

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