Market Oriented Strategic Planning Lecture 3

Learning Objectives How is Strategic Planning Carried out at Corporate and Division Levels How is Planning Carried out at the Business Unit Level What are the steps of the Marketing Process How is Planning Carried out at the Product Level What does a Marketing Plan include

Organizational Hierarchy Deutsche Bank Corporate Banking & Securities Global Transaction Banking Capital Markets Asset Financing and Leasing Commercial Real Estate Corporate Financing Trade Finance Cash Management Trust Funds and Securities Division IDivision II Business Units Corporate Level

Hierarchical Levels of Strategy Strategy can be formulated at four different levels: Corporate level – corporate strategic plan Division level - division plan Business Unit Level – strategic plan Functional or Departmental Level – marketing plan (operates at two levels – strategic and tactical)

Strategy Level I & II – Corporate & Division Level All Corporate Headquarters undertake four planning activities: 1. Defining the Corporate Mission 2. Establishing the SBU’s 3. Assigning resources to each SBU 4. Planning new businesses, downsizing or terminating older businesses Together these combine to form a framework within which the divisions and business units prepare their plans

Corporate Mission Peter Drucker’s 3 Questions: What is our business? Who is our customer? What is of value to our customer?

Examples of Mission Statements The Walt Disney Company - to be one of the world's leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world

Examples of Mission Statements NIKE Inc - To Bring Inspiration and innovation to every athlete in the world. Microsoft - At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible. Levi Strauss & Co - People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world.

Strategic Business Units A SBU: 1. Is a single business or collection of related businesses that can be planned separately from the rest of the company 2. Has its own set of competitors 3. Has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit

Portfolio Evaluation Models 1. BCG Matrix 2. GE Model

Boston Consulting Group Approach

BCG Matrix Market growth serves as a proxy for industry attractiveness and relative market share serves as a proxy for competitive advantage. The growth share matrix thus maps the business unit positions within these two important determinants of profitability

BCG Matrix – The Next Step The next step is to determine what objective, strategy, and budget to assign to each SBU Strategy options – Build Hold Harvest Divest

The General Electric Model Business Strength Market Attractiveness

The General Electric Model

GE Model Each business is rated in terms of two major dimensions – market attractiveness and business strength To measure these two dimensions, strategic planners must identify the factors underlying each dimension and find a way of measuring them and combining them into an index

GE Model Market Attractiveness Overall Market Size Ann. Market Growth Rate Historical Profit Margin Competitive Intensity Tech. Req Business Strength Market Share Share Growth Product Quality Brand Reputation Unit Costs

Cons of the Portfolio Models 1. They may put too much emphasis on market share growth and entry into high growth businesses or to neglect its current business. The ratings are subjective and can be manipulated 2. Since they use the average process, two or more businesses may end up in the same cell 3. They fail to show the synergies between two or more businesses

Countering the Cons of the Portfolio Models Planning New Businesses or downsizing older businesses Interactive Growth Intensive Growth Diversification Growth Current Portfolio Strategic Planning Gap Desired Sales Sales Time (years)

Intensive Growth Strategies Market Penetration StrategyProduct Development Strategy Market Development StrategyDiversification Strategy Current ProductsNew Products Current Markets New Markets

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

Diversification Strategies 1. Concentric Diversification – Appeal to a different group of customers/ technologically or marketing synergies with existing products 2. Horizontal Diversification – Appeal to current customers / technologically different from existing products 3. Conglomerate Diversification – New businesses

Business Unit Strategic Planning Define specific business mission SWOT Analysis Goal Formulation – Specific in terms of time and magnitude Strategic Formulation Porters Generic Strategies 1. Overall Cost Leadership 2. Differentiation 3. Focus

Business Unit Strategic Planning Strategic Formulation Operational Effectiveness and Strategy Strategic Alliances Marketing Alliances 1. Product or Service Alliance 2. Promotional Alliances 3. Logistics Alliances 4. Pricing Collaborations

Marketing Process Choose the Value Provide the Value Communicate the Value Strategic MarketingTactical Marketing

Marketing Plans Executive summary and table of contents: The marketing plan should open with a brief summary of the plan’s main goals and recommendations. The executive summary permits senior management to grasp the plan’s major thrust. A table of contents should follow the executive summary.

Marketing Plans Current marketing situation: This section presents relevant background data on sales, costs, profits, the market, competitors, distribution, and the macro-environment. The data are drawn from a product fact book maintained by the product manager. (For your report you need to draw on secondary data. This is where the internet will be very useful in gathering the data.)

Marketing Plans Opportunity and issue analysis: After summarizing the current marketing situation, the product manager proceeds to identify the major opportunities/threats, strengths/ weaknesses, and issues facing the product line.

Marketing Plans Goals and Objectives and issues: Once the product manager has summarized the issues, he or she must decide on the plan’s financial and marketing objectives.

Marketing Plans Target Market: Provide an explanation of segmentation, targeting and positioning decisions. A quantifiable analysis of the market and the segments to be targeted for the marketing strategy proposed is necessary to support you customer base for the strategy.

Marketing Plans Marketing Strategy: This section can be divided several ways. It should at least have a target Market Section and a Marketing program section including discussion on Price, Place, Product, and Promotion (Marketing Mix),

Marketing Plans Action programs or Marketing Programs: The Marketing plan must specify the broad marketing program for achieving the business objectives. Each marketing strategy element must be elaborated to answer these questions: What will be done? When will it be done? Who will do it? How much will it cost?

Marketing Plans Projects profit and loss statement or Financial Plans: Action plans allow the product manager to build a supporting budget. On the revenue side, this budget shows the forecasted sales volume in units and the average price. On the expense side, it shows the cost of producing the marketing plan.

Final Project Delineate the marketing strategy for a brand/ service/ store and provide an alternate marketing strategy. Your goal is to demonstrate knowledge of marketing terms, principles and practices. The more information (not a raw data dump, but focused, thoughtful discussion) presented increases your grade. 1. Select a brand of product / service / retail chain to research and gather as much information as possible on its marketing strategy. Also, be prepared to discuss your selection in class about its current practices, tactics or news. 2. Provide the specifics on: Situation Analysis S.W.O.T. strengths and weaknesses (within company) Threats and opportunities (external to company) Include these types of topics: industry sales, company sales, brand sales, sales trends, profits geographic markets uncontrollable variables.. competition, technology, social trends, political, etc. 3. Describe the Target Market segment(s) demographics, psychographics benefits received, purchase process, why do they buy? 4. Product / Service Strategy product life cycle; product classification market structure fit into overall product line, any cannibalization? branding; trademarks.. include a perceptual map differentiation and positioning packaging

Final Project 5. Logistics/ physical distribution/ place channel(s) of distribution 6. Promotion Strategy integrated marketing communication; how the promotional activities blended together? advertising, publicity/pr, personal selling, sales promotion sales force management message to deliver media used; budget; how is budget established? promotional tactics: coupons, contests, etc. evaluation of promotional effectiveness? *** provide examples of ads, webpages, etc. 7. Price Strategy profit objectives pricing tactics table of prices and competitors’ prices on a typical purchase 8. From the given situation, recommend an alternate marketing strategy with your suggestions for product, place, promotion and price tactics.

Assignment New channels of marketing have recently taken the scene by storm. We have studied this as part of ‘Marketing in the New Economy’. Find out the new ways in which marketers are sending their messages out to the consumers and discuss their success rates. Minimum 2, Maximum 4 Due before the mid-term begins