Strategic
planning consists of 3 actions broadly –
Managing a
companies’ portfolios
Assessing each
business’ strength by considering the market’s growth rate and the company’s
position fit in that market.
Formulating a
game plan for each of it’s businesses to achieve long-term objectives.
Strategic Planning is done in 4 levels –
Corporate
Strategic Plan – It decides what resources to allocate to which business
and what businesses to diversify into
Division
Plan – It decides how much funds to allocate to the SBUs.
SBU Plan –
It decides the business functioning.
Product
Plan – It describes the product policy, pricing structure, etc.
Corporate
and Division Strategic Planning
This basically
subsumes 4 activities –
Defining
corporate mission
Establishing
SBU
Assigning
resources to each SBU
Planning new
businesses, downsizing older ones
A good mission
statement provides employees with a shared sense of purpose, direction and
opportunity.
A good mission
statement has 3 characteristics –
They focus on
a limited number of goals
They stress on
major policies and values the company wants to honor
They define
the major competitive scope within which the company will operate. Some of such
scopes are : industry scope, products scope, geographical scope, etc
Companies
should define business units in terms of needs, not products.
A business can
de defined in terms of three dimensions –
Customer
groups, Customer needs and Technology.
Characteristics
of an SBU are –
It is
independent in terms of the policies it needs
It has its own
set of competitors
The BCG
Approach (Growth-share matrix) –
Plots the
Market growth rate (%, Y-axis, 0 – 20%) against Relative market share
(fraction, X-axis, 10 – 0.1). The area of the circle denotes the volume of the
business. Based upon the position in the chart, the businesses are classified
as –
After plotting
the matrix, the company can judge the health of it’s portfolio and can take one
of the following 4 actions to determine the budget to assign to each SBU–
Build – to
increase market share, at the expense of short-term earnings, if necessary.
Done on dogs
Hold – to
preserve market share. Done on cash cows
Harvest – to
increase short term flow, regardless of long-term effect. This generally
diminishes the value of the SBU. Done so that the costs are reduced at a faster
rate than the fall in sales. Done on losing cash cows, dogs and question marks
Divest – to
liquidate the business. Done on question marks and dogs
The General
Electric Model –
Plots the
Market Attractiveness (Y-axis, 1 – 5) against the Business Strength (X-axis, 5
–1). For each business the two dimensions are calculated after setting the
values for the parameters under each of the two, and then using their weightages.
The area of the circle is the size of the market, shaded part being the
business’s share.
The 9 cells
are divided into 3 zones –
3 cells on top
left – strong SBUs in which the company should invest and grow
3 diagonal
cells – medium in overall effectiveness
3 cells in
bottom left – weak SBUs. Divest or harvest these.
The company
can try one the following 3 strategies to increase it’s business –
Intensive
growth – a review of whether any opportunities exist for improving the existing
business performance. This can be achieved in 4 ways (Ansoff’s Model) –
Integrative
growth – By backward Integration, Forward Integration, or Horizontal
integration.
Diversification
growth – Exploiting opportunities in new businesses.
Business Strategic planning
The unit
strategic planning for a business
consists of the following steps-
Business Mission
Each business
unit needs to come up with a mission within the broader company mission.
SWOT
analysis
This is
further carried out into parts
In general
companies need to identify the major macroeconomic forces (demographic,
economic, technological, socio-cultural, etc.) and the major microeconomic
forces (customers, competitors, suppliers, distributors, etc) that have an
effect on its profitability. Further, they need to trace trends in these
factors then identify which can be their opportunities and weaknesses.
A marketing
opportunity is an area of buyer need in which a company can perform profitably.
A threat is a
challenge posed by an unfavorable trend which, in absence of marketing action
would lead to fall in profitability. A company needs to chalk out a strategy
for dealing with these threats.
After the opportunity
and threat analysis is done, a business’s overall attractiveness can be
identified.
Strengths
and Weaknesses analysis(Internal Environment Analysis)
A company’s
internal strengths and weaknesses in various departments need to be identified
periodically.
Goal
Formulation
Goals are
developed to facilitate the management in planning, implementation and control
of achieving the targets.
Most
businesses pursue a variety of objectives, which should ideally meet the
following criteria
the objectives
must be placed hierarchically, in decreasing order of priorities
they should be
stated quantitatively
the goals
should be realistic
the goals
should be consistent with each other
Strategic
formulation
Strategy is
the roadmap for achieving the envisaged goals. Porter defined strategy as “creation
of a unique and valuable position involving different set of activities”
Strategy can
be formulated into 3 generic types –
Overall
cost leadership – here a business aims at delivering it’s products at the
lowest prices in the market and win a large market share. Such businesses
require to be good at engineering, purchasing, manufacturing and distribution.
A disadvantage of this strategy is that some other company will eventually
emerge with still lower costs.
Differentiation
– here a business aims at achieving superior performance in an important customer
area valued by a large chunk of the market. It could strive to be the service
leader, the quality leader, the style leader or technology leader.
Focus –
Here a firm concentrates on one or more narrow market segments. It first
identifies such a segment and then pursues either cost leadership or
differentiation in them.
Companies are
discovering that to achieve leadership they need to form strategic alliances
with domestic or multinational companies that complement or leverage their
capabilities and resources.
The strategic
alliances could be in the form of marketing alliances in the following ways –
Product or
service alliance – one company licenses the other to produce its product, or
two companies jointly market their complementary product or a new product.
Promotional
alliance – one company agrees to carry the promotion for another company’s
product or service
Logistics
alliance – one company offers logistic services to another company’s product.
Pricing
collaboration – one more companies join in a special pricing collaboration.
Program
formulation
After
developing the principal strategies, companies must work out detailed
supporting programs for them. After formulating the marketing programs, the
costs and benefit scenario is calculated. Activity Based Costing should be
applied to each program to determine whether the benefits form it outdo the
costs.
Implementation
For the
implementation of strategy, McKinsey has come up with a 7-S framework. The
implementation part of this framework consists of
Style:
employees should share a common way of thinking and behaving
Skills: these
should be in consonance with the strategy
Staff:
includes hiring able people, training them and then assigning them to the right
jobs
Shared values:
employees should share the same guiding values.
Feedback
and Control
A firm needs
to constantly track and monitor new developments in the internal and external
environment. For when the marketplace changes, the company will have to rethink
the implementations, programs, strategies, or even objectives.
A company’s
strategic fir with the environment will definitely erode, because the market
environment changes faster than the 7-S s.
Drucker says
it is important to “do the right thing” than “doing things right”.
The
Marketing Process
The
traditional physical process sequence assumes the company knows what to make
and that the market will buy enough units to produce profits for the company.
But such a sequence could only exist where the supplier calls the shots.
In the value delivery sequence there are 3
parts
“Choose the
value” – the marketing staff does segmentation, targeting and positioning
of the market.
“Provide
the value” – after the STP process has chose the value, the product’s
specifications and services should be detailed, the price decided and then the
product should be manufactured and distributed.
“Communicate
the value” – the customers are communicated about the value of the product
through the sales force, promotion and advertisement.
The
marketing process consists of analyzing markets, researching and selecting
markets, designing marketing strategies, planning marketing programs and
organizing, implementing and controlling the marketing effort.
Analyzing
market opportunities – A company should identify long term opportunities
given its core competences and market experience. This needs reliable market
research and information systems. Both the Macro environment, consisting of
demographic, socio-cultural, economic, technological, etc forces; and the
Microenvironment, consisting of suppliers, marketing intermediaries, customers
and competitors should be considered.
A way to do it
is to divide the market into many segments and evaluate the segments to find
which segment serves the company best.
Developing
marketing strategies – After deciding upon the product the company shall
have to decide upon the product positioning, then initiate the product
development, testing and launching. Also the strategy for the different life stages
of the product: introduction, growth, maturity and decline have to be decided.
Planning
marketing programs – It consists of deciding upon the following
Marketing
expenditure – allotting the budget to meeting the marketing objectives, and
amongst the products, channels, promotion media and sales areas, and in the
marketing mix.
Marketing
mix-
Product –
Price – the
company has to decide upon the wholesale, retail pricing, discounts to be
offered, allowances, etc.
Place –
identify, recruit marketing facilitators to supply the products and service to
the target market.
Promotion –
This final
step includes organizing the marketing resources and then implementing and
controlling the marketing plan.
Three types of
controls may be deployed –
Annual plan
control – ensures whether the company is meeting the projections of current
sales and profits.
Profitability
control – manages the task of measuring the actual profitability of
products, customer groups, trade channels and order sizes; and that of
different marketing activities.
Strategic
control – evaluates whether the company’s strategy is appropriate to the
market conditions.
Contents of
a marketing plan
Executive
summary and table of contents – presents a brief overview of the proposal
Current
marketing situation – presents relevant data on sales, costs, profits, market, competitors,
distribution, and macro environment.
Objectives –
defines the plan’s financial and marketing goals in terms of sales volume,
market share and profit
Marketing
strategy – presents broad approach to be used to meet the objectives
Action
programs – presents the marketing programs to be used to meet business
objectives.
Projected
profit and loss statement – forecasts the plans expected financial outcomes
Control –
indicates how the plan will be monitored
The Value Delivery Sequence
Factors
Influencing Company Marketing Strategy
Quote : Marketing Management by Philip Kotler 10th Edition
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