Chapter 2 Strategic Planning for Competitive Advantage

Strategic Business Units (SBUs)  Large companies may manage a number of very different businesses i.e., Strategic Business Units  SBUs have distinct characteristics  A distinct mission and a specific target market  Control over its resources  Its own competitors  A single business or a collection of related businesses  Plans independent of the other SBUs in the total organization

Strategic Alternatives  There are several tools available to businesses or SBUs to use to manage the strategic direction of its portfolio of businesses  Ansoff’s Grid/Strategic Opportunity Matrix  Boston Consulting Group (BCG) Model  The General Electric Model

Strategic Planning Ansoff’s Grid Product/ Market Expansion Grid

Innovation Matrix  As a company moves away from its core competencies it traverses a range of change and innovation  Core Innovation  Change that use existing assets to provide added convenience to existing customers and entice customers from other brands  Packaging changes – Tide Pods, 100 cal snacks  Adjacent Innovation – take company strengths into new markets i.e., Rogaine  Transformational Innovations – brand new products, markets and/or businesses i.e., GoPro video camera

BCG Matrix  Determines future cash contributions and cash requirements  Portfolio Matrix Classifies each SBU by present or forecast growth and market share  Relative Market Share  Ratio between the company’s share and the share of the largest competitor

Strategic Planning BCG Matrix SBUs or Product Classifications

Allocation of Future Resources  Build  Taking a problem child and working towards being a star  Hold  Preserve the market share of a cash cow and fund ? NCIS to NCIS LA to NCIS New Orleans  Harvest  Used for all classifications but stars  Lifebuoy, Lavoris  No promotional investment, stable customer base (small )

General Electric Model Cautiously InvestInvest/Grow Harvest/DivestCautiously InvestInvest/Grow Harvest/Divest Cautiously Invest LowMediumHigh Business Position

Preparing a Marketing Plan Situation Analysis Marketing Problems and Opportunities Marketing Objectives Control Plans Marketing Strategies Marketing Action Plans Implementation Plans Contingency Plans Business Mission Statement

Strategic Planning: Define the Business Mission What customers should we serve? How should we develop the firm’s capabilities? What business are we in? What products & benefits can we create for our customers? A Mission Statement Describes the Organization's Overall Purpose

Mission Statement for AT&T “We aspire to be the most admired and valuable company in the world. Our goal is to enrich our customers’ personal lives and to make their businesses more successful by bringing to market exciting and useful communications services, building shareowner value in the process.” (

Evaluating the Marketing Environment and Setting Objectives Evaluating the Marketing Environment Setting Marketing Objectives Sales Objectives Product-Oriented Objectives Market Objectives

Evaluate the Environment: SWOT Analysis SWOT Analysis Assessment of Organization’s Internal & External Environments SWOT Analysis Assessment of Organization’s Internal & External Environments External Environment Identify Opportunities & Threats to a Firm From Consumers, Competitors, the Economy, etc. Internal Environment Identify Strengths & Weaknesses in Firm’s Employees, Technologies, Facilities, Finances, etc. Internal Environment Identify Strengths & Weaknesses in Firm’s Employees, Technologies, Facilities, Finances, etc.

Creating a Competitive Advantage  A competitive advantage is the ability of a firm to outperform the competition, providing customers with a benefit the competition can’t. How?  Step 1. Identify distinctive competency (firm’s capability superior to that of its direct competition).  Cost Competitive Advantage, Product/Service Differentiation, Niche Competitive Advantage, Sustainable Competitive Advantage  Step 2. Turn a distinctive competency into a differential benefit (one that is important to customers).

Cost Competitive Advantage Low Cost  Experience Curves  Learning by doing, economies of scale  Efficient Labor  No Frills Goods and Services – SW Airlines  Government Subsidies – grants/loans Less Options?  Product Design  Reverse engineering less R&D  Reengineering  Rethinking and redesign (P&G Brand Management)  Production Innovations  CAD/CAM  New Method of Service Delivery  Online Newspapers

Competitive Advantages Product/Service Competitive Advantage  Providing something unique and valuable to the consumer  Brand  Strong dealer network  Image  Product Reliability Niche Competitive Advantage  Target and serve one segment  Smaller companies  Limited resources  Limited geographic coverage i.e., Blue Bell Ice Cream  Rare items offered by no other competitor

Sustainable Competitive Advantage Cannot be CopiedUnique Position

Set Organizational Goals and Objectives  Objectives (Goals) are specific accomplishments or outcomes that an organization hopes to achieve by a specific time.  Direct outgrowth of the mission statement.  May relate to:  revenue/sales, profitability, ROI, or  innovation, customer relations, etc.

Marketing Objectives  Realistic – if no chance to meet does not motivate employees or investors  Measurable – quantifiable  Time Specific – Jan 1 – Dec 31, 2014  Compared to a Benchmark – last year’s sales? A certain product line vs. total sales?

Developing Marketing Strategies Selecting a Target Market Selecting a Target Market Marketing Strategies- Activities to Achieve the Marketing Objectives Marketing Strategies- Activities to Achieve the Marketing Objectives Developing the Marketing Mix

Target Market Strategy  While many segments exist in most markets, target market strategy allows you to best match your firm’s capabilities and strengths to one or more segments  Undifferentiated marketing  Differentiated marketing  Focused or Niche marketing

Developing Marketing Mix Programs Product Strategies Pricing Strategies Promotion Strategies How Marketers Communicate Product Benefits and Features to Target Market. Distribution Strategies Outlines How, When, and Where the Firm Makes the Product Available to Customers. Determines What Specific Price a Firm Charges for a Product. Decisions about Product Design, Packaging, Branding, Positioning, and Features.

Implementing the Marketing Plan Organizing the Marketing Function Organizing the Marketing Function Marketing Budgets Total amount of money spent on marketing, and Allocation of money for each activity under the marketer’s control, such as for: – product development – promotional activities Marketing Budgets Total amount of money spent on marketing, and Allocation of money for each activity under the marketer’s control, such as for: – product development – promotional activities Strategies are Put Into Action on a Day-to-Day Basis Through: Strategies are Put Into Action on a Day-to-Day Basis Through: Functional Structure Geographic Structure Product Structure

Controlling the Marketing Plan Measuring Actual Performance, Comparing it to Planned Performance, and Making Necessary Changes in Plans and Implementation. Trend Analysis Marketing Research Marketing Audit