Market-Oriented Strategic Planning Chapter 4 Winning Markets: Market-Oriented Strategic Planning Dr. S. Borna MBA 671

Objectives Corporate and division strategic planing Business unit planning The marketing process Product level planning The marketing plan

A BRIEF HISTORY OF MARKETING STRATEGY By: Schnaars The Free Press

Term “Marketing Strategy” Different Usage of the Term “Marketing Strategy”

Marketing Strategy at Macro Level: Identification of target market(s) and designing an appropriate marketing mix for that market(s).

marketing element strategies: For example: skimming vs. There are also marketing element strategies: For example: skimming vs. penetration price strategies Finally, Product-market Entry Strategies

Historical Trends in Marketing Strategy 1950s Budgeting Search for overall Corp. Strategy 1960s Long Range Planning 1970s Formula Planning 1980s Strategic Thinking

Budgeting No explicit strategy Emphasis on control rather than strategy An interest in integrating functions of organization: production, finance, marketing etc.

Key Characteristics of Long-Range Planning Objectives and Goals Long-Range Forecasting

Formula Planning Theoretical but Impractical (1970s) Decline of Formula Planning Theoretical but Impractical

Strategic Thinking From Forecasting to Competitive Advantage From elitism to egalitarianism

From competitors to competitors and consumers From calculation to creativity

What is competitive Advantage? Competitive advantage is some- thing that allows a firm to earn higher-than-average profits

What is Strategy? The art and science of adapting and coordinating resources to the attainment of an objective.

Three Recurring Themes Environmental analysis Firm’s resources Objective and goals

To Attain Adapted To Resources Opportunity Objectives

A company can outperform rivals only if it can establish a difference that it can preserve. The essence of strategy is choosing to perform activities differently than rivals do.

According to Porter (HBR 1996) Strategy is the creation of a unique and valuable position, involving a different set of activities.

Strategic Positions Can Be Based On: 1. Variety-based Positioning ex. Jiffy Lube 2. Needs-based Positioning (segmentation) ex. Ikea 3. Etc.

Porter’s Main Points: 1. Distinguish between Operational efficiency and strategy 2. Identify a unique strategic position 3. Consider trade-offs (do not be Jack of all trades.) 4. Strategic positions should have a horizon of a decade or more.

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

Corporate Headquarters Planning Strategic Planning at the Corporate Level Consists of : Defining Corporate Mission Defining Corporate Objectives

Strategic Planning (Cont.) Corporate Development Strategy (growth strategies) downsize older businesses as well. Allocating Corporate Resources (corp. portfolio evaluation & strategy)

FACTORS THAT INFLUENCE THE CORPORATE MISSION ENVIRONMENTAL FACTORS ORGANIZATIONS PAST HISTORY MANAGEMENT PREFERENCE

DEFINING THE ORGANIZATION’S MISSION WHAT BUSINESS(ES) ARE WE IN? WHAT BUSINESS(ES) SHOULD WE BE IN? HOW TO ALLOCATE OUR RESOURCES AMONG DIFFERENT UNITS?

CRITERIA FOR DEFINING THE CORPORATE MISSION Target customers and Markets Principle Products or Services Geographic Domain

CRITERIA FOR DEFINING THE CORPORATE MISSION Core Technologies Concern for Survival, Growth and profitability Public Image etc.

A MISSION STATEMENT To provide low-cost personal motorized transportation for low- to moderate income consumers through providing small cars designed with most fuel-efficient technology.

What is unique about the above mission statement An Excellent mission statement by Toyota: Beat the Mercedes Benz! What is unique about the above mission statement

COMPANY OBJECTIVES: MEASURES OF PERFORMANCE EXAMPLE: To realize an average return of 15% on investment over the next five years.

Objectives and Strategies Objectives are ends strategies are means of achieving these ends.

The Strategic-Planning Gap Sales 10 5 Time (years) Desired sales Strategic- planning gap Diversification growth Integrative growth Intensive growth Current portfolio

Intensive Growth Strategies Planning New Business (Growth Strategies) Current Product New Product Product Development Strategy Market Penetration Strategy Markets Markets Current New Market Development Strategy (Diversification Strategy) Intensive Growth Strategies

Corporate Growth Strategies Integrative Growth 1. Backward Integration 2. Forward Integration 3. Horizontal Integration

Corporate Growth Strategies Diversification Strategies 1. Concentric Diversification (technological synergy) 2. Horizontal Diversification 3. Conglomerate Diversification

Resource Deployment Strategies Allocating Resource Among Strategic Business Units

The 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

LIMITATIONS OF BCG METHOD 1. INTERDEPENDENCE AMONG SBU’S; 2. MARKET GROWTH RATE AS A PROXY MEASURE OF INDUSTRY ATTRACTIVENESS IS INADEQUATE; 3. RELATIVE MARKET SHARE AS PROXY MEASURE OF COMPETITIVE STRENGTH IS INADEQUATE.

LIMITATIONS OF BCG METHOD (CONTINUED) CLASSIFICATION IS SENSITIVE TO VARIATIONS IN HOW “GROWTH” & “SHARE” ARE MEASURED.

Market Attractiveness: Competitive- Position Portfolio Classification Strong Medium Weak BUSINESS STRENGTH 1.00 2.33 3.67 5.00 MARKET ATTRACTIVENESS 5.00 3.67 2.33 1.00 Low Medium High Clutches Hydraulic pumps Joints Flexible diaphragms Fuel pumps Aerospace fittings Relief valve Invest/grow Selectivity/earnings Harvest/divest

MARKET ATTRACTIVENESS Note Annual market growth rate Historical profit margin Competitive intensity Technological requirements Inflationary vulnerability Overall market size Energy requirements Environmental impact Social/political/legal

COMPETITIVE POSITIONS Market share Share growth Product quality Brand reputation Distribution network Promotional effectiveness Unit cost Material supplies R&D performance Managerial personnel Note

Strategic Business Unit 1. It is a single business or collection of related businesses 2. It has a distinct mission 3. It has its own competitors

SBU Cont. 4. It has a responsible manager 5. It can benefit from strategic planning 6. It can be planned independently of other businesses

The Business Unit Strategic Process Business Mission Environmental Analysis Goal Formulation Strategy Formulation Program Formulation Implementation Feedback and Control

Opportunity Matrix 1 2 3 4 Success Probability Opportunities High Low 1. Company develops a more powerful lighting system 2. Company develops a device for measuring the energy efficiency of any lighting system 3. Company develops a device for measuring illumination level 4. Company develops a software program to teach lighting fundamentals to TV studio personnel 1 2 High Attractiveness 3 4 Low

Probability of Occurrence Threat Matrix Threats Probability of Occurrence High Low 1. Competitor develops a superior lighting system 2. Major prolonged economic depression 3. Higher costs 4. Legislation to reduce number of TV studio licenses 1 2 High Seriousness 3 4 Low

The Marketing Plan Executive Summary & Table of Contents Current Marketing Situation Opportunity & Issue Analysis Objectives Marketing Strategy Action Programs Projected Profit-and-loss Controls

Factors Influencing Company Marketing Strategy Competitors Marketing intermediaries Publics Suppliers Marketing information system planning organization organization and implementation Demographic/ economic environment Social/ cultural Technical/ physical Political/ legal Product Promotion Place Price Target customers

Steps in the Planning Process: Analyzing Market Opportunities Winning Markets through market-oriented strategic planning (chapter 4) Marketing Information system (chapter 5) Scanning Marketing environment (chapter 6) Understanding consumer and business markets (chapters 7 and 8) Dealing with the competition (chapter 9) Segmentation and selecting target market(s) chapter 10)

Developing Marketing Strategies Developing a positioning strategy (ch. 11) New product development (ch. 12) Impact of global markets on the strategy (chapter 13)

Shaping the Market Offering Product decisions (chapter 14) Designing and Managing Services (15) Price decisions (chapter 16)

Managing Marketing Programs Marketing Channels (chapters 17-18) Promotion decisions (chapters 19-21) Managing the total Marketing effort (Ch. 22)

Review Corporate and division strategic planing Business unit planning The marketing process Product level planning The marketing plan