Principles of Marketing by Jeff Tanner and Mary Anne Raymond

Chapter 2 Strategic Planning ©2010 Flat World Knowledge, Inc.

Developing plans and strategies for products and their pricing promotion delivery ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. The Value Proposition A 30-second “elevator speech”* Here are the benefits of our product This is why it is superior to other ones *Getting your point across to someone before the elevator reaches the bottom . ©2010 Flat World Knowledge, Inc.

Supporting The Value Proposition What is the strategy that enables the value? How do businesses develop and document this strategy? Who develops this strategy? This is planning ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Plans and Planning Levels of planning Long term corporate SBU/Business plans Functional plans ©2010 Flat World Knowledge, Inc.

The Marketing Plan It describes: This is the revenue producing element in the corporate or strategic plan Which products will be created How the products will be exchanged for revenue How the products will be communicated How the products will be delivered Supporting research and forecasts It describes: where we are going with products, and how we will get there! ©2010 Flat World Knowledge, Inc.

The Planning Process The mission statement is the leading planning phrase. It answers the question—“why does this company exist?” A situation analysis is conducted to assess the current business environment. Internal factors such as the company’s strengths and weaknesses relative to this environment are explored. External factors such as opportunities and threats are identified. SWOT A analysis ©2010 Flat World Knowledge, Inc.

The SWOT Analysis—Internal Internal factors are strengths and/or weaknesses (companies can control these factors) Strengths could be: 1. financial 2. market position 3. patents 4. management 5. costs Weaknesses could be: 1. competitive position 2. organization structure 3. supplier dependency 4. product line 5. brand awareness Key actions: Capitalize on a strength Address a weakness ©2010 Flat World Knowledge, Inc.

The SWOT Analysis—External External factors are opportunities and threats (companies can’t control these factors) Opportunities can be: 1. global markets 2. enabling technologies 3. growing consumer wealth 4. currency exchange rates 5. government spending Threats can be: 1. economic contraction 2. government regulations 3. social and political changes 4. trade barriers 5. taxes and mandated expenses Actions required stay informed on global markets and issues anticipate and prepare for government actions monitor technology advances ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Objectives An objective is something you want to have or some place you want to be. At a specific time in the future It must be measureable and achievable Examples of a marketing objective: ABC, Inc. will increase its sales by 5% by the end of the next plan year. PepsiCo will increase the market share of Gatorade by 4% during the next year. Marketing objectives must be consistent with other company’s objectives. ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Strategies Strategies are the means for accomplishing objectives. they are the activities that the plans detail Companies often employ several strategies to reach objectives. Example: Wal-Mart has a pricing strategy of everyday low pricing (EDLP). Wal-Mart also has a strategy for opening new stores rapidly—globally. ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Strategic Choices There are different types of product and market-entry strategies that a firm can pursue in order to meet objectives. Market Penetration Product Development Market Development Other choices include: licensing franchising contract manufacturing joint ventures direct investment diversification strategies ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Key Takeaways planning Strategic planning includes a mission statement Each SBU may have its own mission statement and plans There are various levels of planning—corporate, functional, operational objectives Objectives must have a specific time for performance Objectives must be achievable and measureable Short term objectives may be identified as goals or milestones strategies Market penetration and development Product development and diversification Strategies should capitalize on strengths and address weaknesses ©2010 Flat World Knowledge, Inc.

Strategic Portfolio Planning Two popular approaches Boston Consulting Group BCG Matrix General Electric business and industry planning model ©2010 Flat World Knowledge, Inc.

Boston Consulting Group low market share high Stars Question Mark low market growth high Harvest or cease production Use cash cow funds to invest in high growth products Dog Cash Cow ©2010 Flat World Knowledge, Inc.

GE Market Attractiveness Model high med low Business strength (fit) Market attractiveness invest maintain dump Evaluate SBU’s on the following factors: Market share Growth of the SBU Size of the opportunity Potential for profit Environmental factors Competitive conditions Green—invest for growth Yellow—status quo Red —divest R.L. Sharman Lone Star College

©2010 Flat World Knowledge, Inc. Key Takeaways The strategic planning process includes: 1. the company’s mission (why it exists) 2. the desired objectives for the plan period -- must be measureable and achievable 3. description of strategies for reaching objectives a. market penetration b. market development c. product development d. diversification Note: strategies should capitalize on a strength, or address a weakness ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. More Key Takeaways 4. A group of businesses (SBUs) is called a portfolio. 5. Portfolio planning -- organizations with multiple SBUs must allocate limited resources -- two planning tools that can be used are BCG and GE 6. BCG—Boston Consulting group -- a four quadrant matrix for market share and market growth -- positioning products in the matrix establishes importance -- helps make decisions regarding resource allocation 7. GE—General Electric industry attractiveness -- nine cell matrix using stop light concept for investing, harvesting ©2010 Flat World Knowledge, Inc.

©2010 Flat World Knowledge, Inc. Planning Epilogue “Plans are nothing, planning is everything!” D.D. Eisenhower, General of the Army Many times “plans” are not an accurate precursor to events encountered. -- changes are required in order to reach objectives Through the process of “planning the plan,” knowledge is acquired that allows the timely altering of strategies and tactics for effect. -- the planning process itself can identify contingency actions -- enacting changes to meet the contingencies requires plan flexibility ©2010 Flat World Knowledge, Inc.