WINNING MARKETS: MARKET-ORIENTED STRATEGIC PLANNING CHAPTER 3 WINNING MARKETS: MARKET-ORIENTED STRATEGIC PLANNING

Important Topics of This Chapter Characteristics of Corporate Planning: Vision Mission SBU Product Portfolio Models: BCG Model GE Model Strategies for Planning A New Business Business Strategic Planning The Marketing Process Contents of A Marketing Plan

CORPORATE AND DIVISION STRATEGIC PLANNING Defining the Mission: History Preferences Environment Resources Distinctive Competencies. Characteristics of Mission Statements: Goals Company policies with suppliers, customers. etc.

CORPORATE AND DIVISION STRATEGIC PLANNING Characteristics of Mission Statement (cont.): Competitive scope: Industry, product, competence, market-segment, vertical, geographical Establishing Strategic Business Units (SBU): Single business: customer group Satisfies its own set of competitors: customer needs Single managers responsible for planning and technology improvements

DIVISION STRATEGIC PLANNING (CONT.) Assigning Resources to Each SBU: Boston Consulting Group Model(BCG): Market share and market growth Strategies: Build-increase market share Hold-maintain market share Harvest-increasing short-term cash flow Divest-liquidation. Mistakes: expect all SBU will have same growth pattern, very little cash retained for cash cows.

Analyzing Current SBU’s: Boston Consulting Group Model Analyzing Current SBU’s: Boston Consulting Group Approach This CTR corresponds to Figure 2-2 on p. 39 and relates to the discussion on pp. 38-39. Relative Market Share High Low Stars High growth & share Profit potential May need heavy investment to grow Question Marks High growth, low share Build into Stars/ phase out Requires cash to hold market share Designing the Business Portfolio The 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. Market Growth Rate Low High Cash Cows Low growth, high share Established, successful SBU’s Produces cash Dogs Low growth & share Low profit potential

DIVISION STRATEGIC PLANNING (CONT.) The General Electric Model(GE): Market Attractiveness and Business Strengths. Critiques of Portfolio Models: Positives: help to understand economies of business better quality of plans may be improved communication with top management may be improved. pinpoint information gab help to eliminate weaker businesses open opportunities to invest to more profitable businesses. Negatives: too mach emphasis to market share, Can be manipulated to produce desired location fail to delineate synergy between two or more business.

Analyzing Current SBU’s: GE Strategic Business-Planning Grid The GE Planning Grid This CTR corresponds to Figure 2-3 on p. 40 and relates to the material on pp. 39-40. Business Strength High Medium Low Strong Average Weak A B C D The General Electric Approach This matrix uses two dimensions of three zones each: Industry attractiveness is an index made up of such factors as market size, market growth, industry profit margin, amount of competition, seasonality & cyclicality of demand, and industry cost structure. Business strength is an index of factors like relative market share, price, competitiveness, product quality, customer & market knowledge, sales effectiveness, and geographic advantages. Which elements within these categories are utilized may vary from product to product and market to market. Strategies appropriate for each group of zones: Invest/Grow. This zone consists of the three green cells in the upper left corner and indicate strong SBUs. Selectivity/Earnings. This zone consists of the three yellow diagonal cells from the lower left to the upper right and represent SBUs of medium overall attractiveness. Sell or Reposition. This zone consists of the three red cells in the lower right corner and indicated SBUs with low overall attractiveness. Industry Attractiveness

PLANNING NEW BUSINESSES Intensive Growth: Product/market expansion grit Market Penetration Market Development\Product Development Integrative Growth: Backward Integration Forward Integration Horizontal Integration

Developing Growth Strategies Product/Market Expansion Grid This CTR corresponds to Figure 2-4 on p. 41 and relates to the material on pp. 41-42. Developing Growth Strategies Product/ Market Expansion Grid 1. Market Penetration 3. Product Development Existing Products New Products Developing Growth Strategies Market Penetration. A penetration strategy involves increasing sales to present target customers. The product itself remains unchanged although there may be a substantial change in how the product is promoted. You may wish to link market penetration with other company-wide strategies such as market leader if appropriate to course progress at this time. Market Development. A market development strategy involves identifying new segments for the current products offered by the company. Market development can be successful for old products like Arm & Hammer Baking Soda (used as a refrigerator deodorant). You may wish to link market development to emerging technologies such as geodemographics for identifying new market segments. Product Development. A product development seeks growth by modifying existing products or introducing new products to serve an existing market. Line extensions in snack foods are often useful for illustrating this strategy to students. You may ask your class how many flavors of Doritos they can name as an example. Diversification. This strategy involves taking profits from existing products or businesses to acquire or enter new markets, usually in different industries from previous company efforts. RJR buying Nabisco is an example. Existing Markets 2. Market Development 4. Diversification New Markets

PLANNING NEW BUSINESSES Diversification Growth: Related industries concentric diversification horizontal diversification Unrelated Industries Conglomerate diversification Downsizing Older Businesses: Pruning.

BUSINESS STRATEGIC PLANNING Business Vision/Mission SWOT ANALYSIS: External Environmental Analysis: Opportunity and Treat Analysis Marketing Opportunity-success probability: Environmental Treat-probability of occurrence: Ideal business-opportunities are high and treat is low Speculative business-high on both opportunities and treat Mature business-low in opportunities and low in treat Troubled business-low in opportunities and high in treats Internal Environmental Analysis: Strength and Weaknesses:

BUSINESS STRATEGIC PLANNING (CONT.) Goal Formulation: MBO Profit (short-term profit or long-term growth) vs. nonprofit goals, or high growth Vs low risk. ROI Realistic goals Strategy Formulation: Cost Leadership: learning curve Differentiation: service, quality, technology Focus: target market

BUSINESS STRATEGIC PLANNING (CONT.) Strategic Alliances: product/service alliances promotional alliances logistic alliances pricing collaborations: airlines,hotels and car rental Program Formulation: supporting programs-R&D Implementation Feedback and Control

THE MARKETING PROCESS Value Delivery Process: Production process: Strategic Marketing: Marketing is at the top segmentation targeting positioning Tactical Marketing Provide and communicate the value-Japanese approach: zero Customer feedback zero product-improvement time zero purchasing time(JIT) zero set-up time zero defects.

THE MARKETING PROCESS (CONT.) Analyzing Marketing Opportunities: Marketing research : Macro/Micro environment Consumer and business markets. Developing Marketing Strategies: Differentiation and positioning Planning Marketing Programs: Marketing mix: Product, Price, Promotion and Place Managing Marketing Effort: Implementation of marketing programs

CONTENTS OF MARKETING PLAN Executive Summary Current Marketing Situation: Market Product Competition Distribution Macro-environment

CONTENTS OF MARKETING PLAN (CONT.) Opportunity and Issue Analysis: Opportunities/Treats Analysis. Strengths/Weaknesses Analysis. Issue Analysis. Objectives/Goals: Financial. Marketing.

CONTENTS OF MARKETING PLAN (CONT.) Marketing Strategy: Targeting, positioning: product price promotion distribution, service, R&D and marketing research. Action Programs Projected Profit-and-Loss Statement Controls

MARKETING PLANNING IN THE 2000s Customer and Competitor Oriented More Realistic Team Approach Top Management Involvement Continuing Process Cover shorter term (one year and so) Some Take Seriously, others use as a guideline