Company and Marketing Strategy: Partnering to Build Customer Relationships Chapter 2

Strategic Planning ORGANIZATIONAL CAPABILITIES AND GOALS MARKETING OPPORTUNITIES Strategic planning is the process of developing and maintaining a fit between the organization’s goals and capabilities and its changing marketing opportunities.

Strategic Planning Strategic planning is defined as: “The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.”

Steps in the Strategic Planning Process

Market-Oriented Mission Marketing Management A mission statement should be: An “invisible hand” Neither too narrow nor too broad Fitting of market environment Based on distinctive competencies Motivating A mission statement asks.. What is our business? Who is the customer? What do consumers value? What should our business be?

Sample Mission A mission statement should be meaningful and specific, motivating, and not be stated as making sales or profits. “We help you organize the world’s information and make it universally accessible and useful.”

Disney “We create fantasies— a place where dreams come true and America still works the way it’s supposed to”

Company Objectives must tie to Marketing Objectives Strategic Planning Company Objectives must tie to Marketing Objectives Company Mission Business Objectives Marketing Objectives

Analyze Portfolio Business portfolio: “the collection of businesses and products that make up the company.” Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company. The best portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

Strategic Planning Designing the business portfolio is a key step in the strategic planning process. The best portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

The Business Portfolio Business portfolio planning involves two steps: Analyzing the current business portfolio Shaping the future portfolio by developing strategies

Strategic Planning Portfolio Design Identify strategic business units (SBUs) Assess each SBU: The BCG growth-share matrix classifies SBUs into one of four categories using: Market growth rate The SBU’s relative market share within the market. Portfolio Design Step 1: Analyze the current business portfolio Step 2: Shape the future business portfolio

SBUs A strategic business unit (SBU) is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. Portfolio analysis calls for management to assess the attractiveness of its various SBUs and decide how much support each deserves.

Portfolio - BCG Matrix Market Growth Rate Relative Market Share $ HIGH The Boston Consulting Group (BCG) Approach defines four types of SBUs: Stars are high-growth, high-share businesses or products requiring heavy investment to finance rapid growth. They will eventually turn into cash cows. Cash cows are low-growth, high-share businesses or products that are established and successful SBUs requiring less investment to maintain market share. Question marks are low-share business units in high- growth markets requiring a lot of cash to hold their share. Dogs are low-growth, low-share businesses and products that may generate enough cash to maintain themselves but do not promise to be large sources of cash. LOW HIGH LOW Relative Market Share

Growth-Share Matrix

Analyzing Current SBU’s: GE’s Strategic Business-Planning Grid Business Strength Strong Average Weak C High A Medium Industry Attractiveness D B Low

Analyzing the Current Business Portfolio Marketing Management Analyzing the Current Business Portfolio Build Increase market share Works well for question marks Hold Preserve market share Good for cash cow Harvest Increases short-term cash flow Good for weak cash cows, question marks and dogs Divest Sell or liquidate Good for dogs and question marks

Strategic Planning Portfolio Design Determine the future role of each SBU and choose the appropriate resource allocation strategy: Build Hold Harvest Divest SBUs change positions over time Portfolio Design Step 1: Analyze the current business portfolio Step 2: Shape the future business portfolio

Develop Growth Strategies Strategic Planning Part of strategic planning entails evaluating growth strategies. Marketing must identify, evaluate, and select growth opportunities and lay down strategies for capturing them. Develop Growth Strategies

Product / Market Expansion Grid

The Marketing Process Key Elements Analyzing marketing opportunities The strategic planning and business portfolio analysis processes help to identify and evaluate marketing opportunities. The purpose of the marketing process is to help the firm plan how to capitalize on these opportunities. Key Elements Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort

The Marketing Process Key Elements The segmentation process divides the total market into market segments. Target marketing chooses which segment(s) are pursued. Market positioning for the product is then determined. Key Elements Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort

The Value Delivery Process

Marketing Strategy Strategy Market Segmentation Target marketing Customers grouped by: Geographic Demographic Psychographic Behavioral Market segment is a groups of consumers who respond in similar ways to marketing efforts. Market Segmentation Target marketing Market Positioning

Marketing Strategy Strategy Evaluation of each segment’s attractiveness Selection of segments with greatest long-term profitability A company can choose one or several segments to target Market Segmentation Target marketing Market Positioning

Marketing Strategy Strategy Market Segmentation Target marketing The place the product occupies in the consumer’s mind Products are positioned relative to competing products Marketers look for clear, distinctive and desirable place in positioning Market Segmentation Target marketing Market Positioning

The Marketing Process Key Elements Analyzing marketing opportunities Competitor analysis guides competitive marketing strategy development. Strategy leads to tactics via the marketing mix: The “Four Ps” – product, price, place, promotion (seller viewpoint) The “Four Cs” – customer solution, cost, convenience, and communication (customer viewpoint) Key Elements Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort

Marketing Mix The marketing mix includes controllable and tactical marketing tools knows as the 4P’s The 4P’s include Product Place Promotion Price

The Marketing Mix

The Marketing Process Key Elements Analyzing marketing opportunities Marketing analysis Provides information helpful in planning, implementation, and control Marketing planning Strategies and tactics Marketing implementation Turns plans into action Marketing control Operating control Strategic control Key Elements Analyzing marketing opportunities Selecting target markets Developing the marketing mix Managing the marketing effort

Managing the Marketing Effort Marketing Functions Finding opportunities Avoiding threats Understanding strengths Analyzing weaknesses Analysis Planning Implementation Control

S W O T Marketing Analysis Strengths Weaknesses Opportunities Threats INTERNAL Opportunities O Threats T SWOT analysis: a summary of the ideas developed in the situation analysis, which allows managers to focus clearly on the meaningful strengths (S) and weaknesses (W) in the firm’s internal environment and opportunities (O) and threats (T) coming from outside the firm (the external environment). EXTERNAL POSITIVE NEGATIVE

Managing the Marketing Effort Marketing Functions Marketing plans include: Executive summary Analysis of current situation Objectives Targets and positioning Marketing mix Budget Controls Analysis Planning Implementation Control

Managing the Marketing Effort Marketing Functions Plans are turned into action with day-to-day activities Good implementation is a challenge Analysis Planning Implementation Control

Managing the Marketing Effort Marketing Functions Evaluation of the results of marketing strategies Checks for differences between goals and performance Analysis Planning Implementation Control

Managing the Marketing Effort

The Marketing Process