Chapter 2 Company and Marketing Strategy

2 - *Learning GoalsExplain strategic planningDescribe business portfolios and growth strategiesDetail marketings role in strategic planningDescribe elements of customer-driven marketing strategyList the marketing management functionsDescribe the goal of market analysis.Enumerate and classify the different dimensions of market analysis.Discuss the dimensions of market analysis and relate them to an organization.Discuss situational analysis for an organization.

2 - *Part 1: What is Strategic Planning?Strategic Planning Defined:The process of developing and maintaining a strategic fit between the organizations goals and capabilities and its changing marketing opportunities

Goal 1: Explain strategic planning

2 - *Four Critical Elements in Strategic PlanningEstablish the business missionIdentify the business visionDefine the business objectivesDevelop the business portfolio

Goal 1: Explain strategic planning

2 - *Marketing Management

A mission statement asks..What is our business?Who is the customer?What do consumers value?What should our business be?A mission statement should be:An invisible hand Neither too narrow nor too broadFitting of market environmentBased on distinctive competenciesMotivatingMarket-Oriented MissionGoal 1: Explain strategic planning

Strategic Business UnitSBU A unit of the company that has a separate mission and objectives and can be planned independently from other company businesses.

SBU - can be a company division, a product line within a division, or sometimes a single product or brand.

Purpose of the strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment.

Most portfolio analysis methods evaluate SBU on two dimension: - the attractiveness of the SBU market or industry - and the strength of the SBU position in the market or industry.

The best known portfolio planning methods were developed by the two leading consulting firms and are called : 1. The Boston Consulting Group Approach 2. The General Electric Approach

SBU as a Unit/Department 2 - *Company ABCSBUMarketingSBUAccount/FinanceSBUProductionSBUHR

SBU can be PRODUCTS2 - *PRODUCTION DEPARTMENTProductAProductBProductCProductD

2 - *The Business PortfolioA business portfolio is the collection of businesses and products that make up the company.

Goal 2: Describe business portfolios and growth strategies

Business portfolio planning involves two steps:Analyzing the current business portfolio;

Shaping the future portfolio by developing strategies:decide which SBUs should receive more, less, or no investment.

develop growth strategies for adding new products or businesses to the portfolio.

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The Boston Consulting Group Approach

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Analyzing Current SBUs:Boston Consulting Group Approach

Question Marks

High growth, low share Build into Stars/ phase out Requires cash to hold market share

Stars

High growth & share Profit potential May need heavy investment to grow Cash Cows

Low growth, high share Established, successful SBUsProduces cash

Dogs

Low growth & share Low profit potential Relative Market ShareHigh LowMarket Growth Rate Low High

2 - *Marketing Management

BuildIncrease market shareWorks well for question marksHoldPreserve market shareGood for cash cowHarvestIncreases short-term cash flowGood for weak cash cows, question marks and dogsDivestSell or liquidateGood for dogs and question marksAnalyzing the Current Business PortfolioGoal 2: Describe business portfolios and growth strategies

Part 2SWOT ANALYSIS2 - *

2 - *Marketings Role in Strategic PlanningProvide a guiding philosophy

Identify attractive opportunities

Design effective strategies

Build strong value chains

Form superior value delivery networks

Goal 3: Detail marketing's role in strategic planning

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Situational Analysis and Marketing Planning

Situational analysis: An analysis that involves identifying the key factors that will be used as a basis for the development of marketing strategy

Marketing plan: An ongoing process that combines organizational objectives and situational analyses to formulate and maintain a marketing plan that moves the organization from where it currently is to where it wants to be

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Situational Analysis and Marketing Planning

2 - *Situational Analysis(SWOT Analysis)Goal 3: Detail marketing's role in strategic planning

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Goal of Market AnalysisTo determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of the firm.

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Dimensions of Market AnalysisMarket size (current and future)

Market growth rate

Market trends

Competitors analysis

Key success factors

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Competitor Analysis

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Market SizeThe size of the market can be evaluated based on:Present salesPotential sales (if expanded)Some information sources for determining market size:Government dataTrade associationsFinancial data from major playersCustomer survey

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Market Growth RateA simple means of forecasting the market growth rate is to extrapolate (infer or estimate) historical data into the future.

While this method may provide a first-order estimate, it does not predict important turning points.

A better method is to study growth drivers such as demographic information and sales growth in complementary products.

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Market TrendsChanges in the market are important because they often are the source of new opportunities and threats.

The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support.

Regional trends also may be relevant.

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Customers grouped by:GeographicDemographicPsychographicBehavioral

Market segment is a groups of consumers who respond in similar ways to marketing efforts.

Marketing Strategy

Market SegmentationTarget marketingMarket Positioning

StrategyGoal 4: Describe elements of customer-driven strategy

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Evaluation of each segments attractiveness

Selection of segments with greatest long-term profitability

A company can choose one or several segments to target

Marketing Strategy

StrategyGoal 4: Describe elements of customer-driven strategyMarket SegmentationTarget marketingMarket Positioning

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The place the product occupies in the consumers mind

Products are positioned relative to competing products

Marketers look for clear, distinctive and desirable place in positioning

Marketing Strategy

StrategyGoal 4: Describe elements of customer-driven strategyMarket SegmentationTarget marketingMarket Positioning

2 - *Marketing PlanningGoal 3: Detail marketing's role in strategic planning

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Finding opportunities

Avoiding threats

Understanding strengths

Analyzing weaknesses

Goal 5: List the marketing management functions

AnalysisPlanningImplementationControl

Managing the Marketing EffortMarketing Functions

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Marketing plans include: Executive summaryAnalysis of current situationObjectivesTargets and positioningMarketing mixBudgetControls

Managing the Marketing EffortGoal 5: List the marketing management functions

Marketing FunctionsAnalysisPlanningImplementationControl

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Plans are turned into action with day-to-day activities

Good implementation is a challenge



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Evaluation of the results of marketing strategies

Checks for differences between goals and performance



2 - *Marketing MixThe marketing mix includes controllable and tactical marketing tools knows as the 4Ps

The 4Ps includeProductPlacePromotionPriceGoal 4: Describe elements of customer-driven strategy

2 - *Measuring EffectivenessReturn on marketing (marketing ROI)The net return from a marketing investment divided by the costs of the investmentsGoal 5: List the marketing management functions

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Key Success FactorsElements that are necessary in order for the firm to achieve its marketing objectives.

Few examples are:Access to essential unique resourcesAbility to achieve economies of scaleAccess to distribution channelsTechnological progress

It is important to consider that key success factors may change over time, especially as the product progresses through its life cycle.

2 - *The End

*Analyzing Current SBUs: Boston Consulting Group ApproachThis CTR corresponds to Figure 2-2 on p. 39 and relates to the discussion on pp. 38-39.Designing the Business PortfolioThe business portfolio is the collection of businesses and products that make up the company. In portfolio analysis, management evaluates the businesses for their strategic fit in meeting company objectives. Strategic Business Units (SBUs) consist of separate units of the company that can be planned independently from other company businesses.The BCG Matrix

Stars. High growth, high share businesses. Stars often require heavy investment to build/maintain share in rapidly expanding markets. You may wish to discuss the importance of market share to product profitability at this point.Cash Cows. Low growth, high share businesses. Cows generate profits for investment in other businesses.Question Marks. High growth, low share businesses. Strategy must decide between further investment to move question marks to star status or phasing the product out.Dogs. Low growth, low share. Dogs are often targets for divestment, but may still be profitable and/or contribute to other organizational goals.

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Chapter 2 Company and Marketing Strategy