Company and Marketing Strategy

Preview Case: Disney – What are its challenges? Originally known for films, animation, theme parks. Satisfying the customer is everyone’s job. Mission: “make people happy” & “make a dream come true!” Disney has grown via diversification. Discussion Questions Has Disney grown too large? Will consumers accept new Disney businesses?

Strategic Marketing Planning Companies should look ahead and develop long-term strategies ğ to meet changing conditions in their industries and ensure long-term survival The task of selecting an overall company strategy for long-run survival and growth ğ “strategic planning” Marketing’s key role in strategic planning

Formal Planning Benefits of formal plans: Encouraging management to think ahead systematically. Forcing managers to clarify objectives and policies. Better coordination of company efforts. Clearer performance standards for control. Helping the company to anticipate and respond quickly to environmental changes and sudden developments.

What is Strategic Planning? Strategic Planning defined: The process of developing and maintaining a strategic fit between the organization’s resources, goals and capabilities and its changing market opportunities.

Strategic Planning It sets the the stage for the rest of the planning in the firm The aim ğ to shape and reshape company’s businesses and products in order to reach to targeted profits and growth. Top-management job! Part of a broader process: strategic management

Strategic Planning Organizational levels subject to strategic planning: Corporate level Division level Business unit level Product level

Strategic Planning, Implementation, and Control Process Corporate planning Division Business Product Organizing Implementing Measuring results Diagnosing Taking corrective action

Steps in Strategic Planning Business unit, product, and market level Corporate Level Planning marketing and other functional strategies Setting Company Objectives and Goals Defining the Company Mission Designing the Business Portfolio

Market-Oriented Mission Fundamental questions: What is our business? Who is the customer? What do consumers value? What should our business be? A clear mission statement: A statement of the organization’s purpose --- what it wants to accomplish in the larger environment Acts as “invisible hand” that guides employees to work toward realizing the organization’s goals.

Company Mission Each company’s mission is shaped by five elements: History Current preferences of the owners and management The market environment Resources Distinctive competences

Company Mission (cont.) Limited number of goals Stress major policies & values Define competitive scopes

Company Mission (cont.) “Market-oriented definitions” of a business ğ better than product or technological definitions (see page 38) A market-oriented mission statement ğ defines the business in terms of satisfying basic customer needs Mission statement ğ must avoid being too narrow or too broad Mission statement ğ to be guided by a “vision” - an almost “impossible dream” that provides a direction for the company for the next 10 to 20 years

Characteristics of a Good Mission Statement: Company Mission (cont.) Characteristics of a Good Mission Statement: Market Oriented Realistic Fit Market Environment Distinctive Competencies Motivating Specific

Company Goals and Objectives Company’s mission ğ needs to be turned into detailed, supporting objectives for each level of management Mission ğ hierarchy of objectives As specific as possible Marketing strategies ğ must be developed to support these marketing objectives

Hierarchy of Objectives

The Business Portfolio Business portfolio ğ collection of businesses and products that make up the company Business portfolio planning involves 2 main steps: Analyzing the current business portfolio and decide which business should receive more, less or no investment Shaping the future portfolio by developing growth strategies to add new products/businesses to the current portfolio

Analyzing the Current Business Portfolio Portfolio Analysis ğ to identify and evaluate the various businesses that make up the company To identify key businesses ğ Strategic Business Units - SBU SBU: unit of the company (separate mission and objectives / can be planned independently from other company businesses) To assess the attractiveness of its various SBUs and decide how much support each deserves

Boston Consulting Group’s Growth-Share Matrix 20%- 18%- 16%- 14%- 12%- 10%- 8%- 6%- 4%- 2%- Market Growth Rate Stars 5 4 3 ? Question marks 2 1 Cash cow 6 Dogs 8 7 10x 4x 2x 1.5x 1x Relative Market Share .5x .4x .3x .2x .1x

Boston Consulting Group’s Growth-Share Matrix Stars High growth & share Profit potential May need heavy investment to grow Question Marks High growth, low share Build into Stars or phase out Require cash to hold market share ? Market Growth Rate Low High Cash Cows Low growth, high share Established, successful SBU’s Produce cash Dogs Low growth & share Low profit potential Relative Market Share High Low

Analyzing the Current Business Portfolio After the classification of its SBUs ğ to determine what role each will play in the future 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

Problems With Matrix Approaches Can be Difficult, Time-Consuming, & Costly to Implement Difficult to Define SBU’s & Measure Market Share/ Growth Problems With Matrix Approaches Focus on Current Businesses; provide little advice for future planning Can Lead to Unwise Expansion or Diversification

Growth Strategies - Ansoff’s Product / Market Expansion Grid penetration Existing markets products 3. Product development New products 2. Market development New markets 4. Diversification

Growth Strategies Making more sales to current customers without changing its products. Add new stores in current market areas, improve advertising, prices, service or store design. Existing products New products Market penetration Product development Existing markets Market development Diversifica-tion New markets

Growth Strategies Develop new markets for current products Identify new demographic or geographic markets Domestic or international Existing products New products Market penetration Product development Existing markets Market development Diversifica-tion New markets

Growth Strategies Offering modified or new products to current markets. New styles, flavors, colors, or modified products Existing products New products Market penetration Product development Existing markets Market development Diversifica-tion New markets

Growth Strategies New products for new markets. Existing products New products New products for new markets. Start up or buy new businesses Market penetration Product development Existing markets Market development Diversifica-tion New markets

Downsizing Some reasons that a company might want to abandon products or markets: The market environment might change (making some of the company’s product or markets less profitable – e.g. economic recession) The company may have grown too fast or entered areas where it lacks experience Some of the company’s products or business units age and die.

Functional Planning The company’s overall strategic plan ğ establishes what kind of businesses the company will be in future & its objectives for each business. More detailed planning must take place within each business unit The major functional departments in each unit ğ must work together to accomplish strategic objectives Marketing plays a key role

Marketing’s Key Role in Strategic Planning Provide a guiding philosophy Identify attractive opportunities Design effective strategies Build strong value chains Form superior value delivery networks

Marketing’s Key Role: Partner Relationship Management working closely with partners in other departments (to form an effective “value chain” that serves the customer), and partnering effectively with other companies in the marketing system for a superior “value delivery network” to jointly bring greater value to customers

Marketing’s Key Role: Partner Relationship Management Each department in the company ğ as a link in the company’s value chain; Each dept.carries out value-creating activities The company’s overall success ğ depends also on how well the activities of various dept. are coordinated Departmental relations are full of conflicts Marketers must find ways to get all dept. to “think consumer” and to develop a smoothly functioning value chain

Marketing’s Key Role: Partner Relationship Management The company needs to look beyond its own value chain in order to create customer value: Value-delivery network ğ network made up of the company, suppliers, distributors, and customers who partner with each other to improve the performance of the entire sytem Competition today takes place between the entire value delivery networks!

Business Unit Strategic Planning

Business Unit Strategic Planning Business Mission ğ each SBU needs to define its specific mission within the broader company mission External Environment Analysis ğ to build a MIS to monitor: Key external macroenvironment forces Significant microenvironment actors Trends and important developments ğ to identify the associated opportunities and threats

Business Unit Strategic Planning Internal Environment Analysis ğ Each business needs to evaluate its internal strengths and weaknesses periodically “Checklist for Performing Strengths/Weaknesses Analysis” Management or an outside consultant ğ reviews the business’s marketing, financial, manufacturing and organizational competencies and rates each factor as strength or weakness SWOT ANALYSIS

Business Unit Strategic Planning / Example of a Checklist

Business Unit Strategic Planning Goal Formulation (Goals ğ objectives that are specific with respect to magnitude and time) Turning objectives ğ into measurable goals ğ facilitates management planning, implementation and control Most businesses pursue a mix of objectives Objectives must be arranged hieararchically; from the most to the least important should be stated quantitatively whenever possible (e.g .“increase the ROI to 15% within two years”) should be realistic should be consistent

Business Unit Strategic Planning Strategy Formulation Strategy ğ A game plan for how to reach goals (while goals indicating what a business unit wants to achieve) 3 general type of strategy: Cost Leadership ğ to achieve the lowest production and distribution costs / to price lower than its competitors and win a large market share Differentiation ğ to concentrate on achieving performance in an important customer benefit area valued by a large part of the market Focus ğ on one or more narrow market segments rather than going after a large market

The Marketing Process Planning at the corporate, division and business levels ğ integral part of the marketing process Marketing Process (definition) ğ consists of analyzing mktg opportunities, selecting target markets, developing the mktg mix, and managing the mktg effort

The Marketing Process Demographic- Economic Environment Technological- Natural Environment Marketing Intermediaries Profitable Customer Relshps. Product Place Price Promotion Implementation Marketing Planning Control Analysis Suppliers Publics Political- Legal Environment Social- Cultural Environment Competitors

The Marketing Process (cont.) Analyzing marketing opportunities Researching and selecting target markets Designing marketing strategies Planning marketing programs Organizing, implementing, controlling the marketing effort

The Marketing Process (cont.) Analyzing marketing opportunities A reliable marketing and information system To evaluate consumer wants and behavior To assess market size To gather information about the marketing environment To understand consumer markets, business markets and their behaviors To monitor competitors

The Marketing Process (cont.) Researching and selecting target markets To divide the market into specific segments To evaluate each segment and choose market segments to be served best To develop a clear position relative to competitors in the minds of consumers

Strategy Market Segmentation Target marketing Market Positioning 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

Strategy Market Segmentation Target marketing Market Positioning 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

Strategy Market Segmentation Target marketing Market Positioning 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 (cont.) Designing marketing strategies for competitive advantage Market leader strategies Market challenger strategies Market follower strategies Market nicher strategies

The Marketing Process (cont.) Planning marketing programs Decisions on: Marketing expenditures Marketing mix – 4Ps Marketing budget allocation The marketing mix includes controllable and tactical marketing tools known as the 4P’s The 4P’s include: Product Place Promotion Price

The Marketing Process (cont.) Managing the marketing effort Marketing Analysis Marketing Planning Marketing Implementation Marketing Control

Managing the Marketing Effort Marketing Functions Finding opportunities : the company must analyze its market & mktg environment company strengths & weaknesses current and possible mktg actions Avoiding threats Understanding strengths Analyzing weaknesses Analysis Planning Implementation Control

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

Marketing Planning Through strategic planning ğ the company decides what it wants to do with each business unit Marketing planning ğ involves deciding on marketing strategies that will help the company reach its strategic objectives Marketing plan ğ 2 levels: Strategic mktg plan ğ develops the broad mktg objectives and strategy based on an analysis of the current market situation and opportunities Tactical mktg plan ğ outlines specific mktg tactics, including advertising, merchandising, pricing, channels, service, etc.

Contents of a Marketing Plan Executive Summary & Table of Contents Current Marketing Situation Threats and Opportunity Analysis Objectives and Issues Marketing Strategy Action Programs Budgets Controls

Managing the Marketing Effort Marketing Functions The process that turns mktg plans into mktg actions in order to achieve strategic mktg objectives Deals with “who”, “where”, “when”, “how” (while mktg planning dealing with “what” and “why”) Companies can gain competitive advantages through effective implementation 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

Measuring Effectiveness Return on marketing (marketing ROI) The net return from a marketing investment divided by the costs of the investments

Marketing Implementation Marketing Analysis of Company’s Situation Marketing Implementation Control Marketing Planning Develop Strategic Plans Develop Marketing Implementation Carry Out The Plans Measure Results Evaluate Results Take Corrective Action