1. 1 Lecture 2 Strategic Planning and the Marketing Process BSAD 110 Winter 2005

2. 2 Agenda Strategic Planning and the Marketing Process (textbook ch. 2)  Strategic planning process at corporate level  Marketing management process Video case

3. 3 Strategic Planning and Marketing Process Strategic planning  The process of developing and maintaining a strategic fit between the organization’s goal and capabilities and its changing marketing opportunities Why strategic planning?  Clarify objectives and policies  Better coordination of efforts  Help companies respond quickly to changes “If you fail to plan, you are planning to fail.”

4. 4 Levels of Strategic Planning Corporate Level  Company Mission  Company Goals  Business Portfolio Strategic business unit (SBU) level  A strategic business unit is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses.  A SBU can be a company division, a product line within a division, or a single product or brand. Sony: TVs, video game consoles, DVD players, Hi-Fi speakers.

5. 5 Corporate Strategic Planning 2. Setting Corporate goals 1. Defining the Company Mission 3. Designing the Business Portfolio Corporate level strategy

6. 6 Corporate Strategic Planning 1.Defining the company mission  Mission statement A statement of the organization’s long-term vision Mission statements should... serve as a guide for what the organization wants to accomplish. be motivating.  EX: Coca-Cola “to put Coke with arm’s reach of every consumer in the world” be neither too narrow, nor too broad. fit with the market environment. be “market-oriented” rather than “product-oriented”.

7. 7 Market-oriented mission statements Product-orientedMarket-oriented Wal-mart We run discount stores We deliver low prices, every day Internet search engine We provide lists of web addresses We help users find what they require as quickly as possible

8. 8 Market-oriented mission statements Product-orientedMarket-oriented America Online We provide online services We create customer connectivity, anytime, anywhere Disney We run theme parksWe create fantasies

9. 9 Corporate Mission Change Company mission may change over time  To explore new opportunities  To respond to market change Amazon.com changes its mission from “becom e the world’s largest online bookstore” to “bec ome the world’s largest online store”.

10. 10 Corporate Strategic Planning 2. Setting corporate goals Goals covert the mission into targeted level of performance to be achieved More specific, actionable than mission statement Examples of corporate goals Profit, sales revenue, market share, unit sales, employee welfare, social responsibilities, survival

11. 11 Setting Corporate Goals SMART Goals should be SMART  S  Specific “To achieve sales of $125,000” rather than “We want to be leaders”  M  Measurable Goals should have quantifiable dimensions  A  Achievable Goals should be feasible  R  Realistic Goals should be meaningful  T  Time-based Goals should have time frames “ We will achieve sales of $125,000 in the first year of operations ” Specific  it measures sales Measurable  $125,000 target Achievable  ? Realistic  sales are important Time-based  one-year time frame

12. 12 3. Designing Business Portfolio Business portfolio is the collection of businesses and products that make up the company. GE Applicances, GE Ai rcraft Engines, GE Capt ial, GE Lighting,GE Me dical Systems, GE Plasti cs, etc.

13. 13 Portfolio Analysis A tool by which management identifies and evaluates SBU’s. Two steps: 1. analyze its current business portfolio or Strategic Business Units (SBU’s), and decide which SBU’s should receive more, less, or no investment: BCG Matrix 2. develop growth strategies for adding new products or businesses to the portfolio: product/market expansion grid

14. 14 Developed by Boston Consulting Group (BCG), a leading management consulting firm. Analyze a firm’s strategic business units and advise a firm to locate the positions of each SBUs. Used by more than 75% of the largest U.S. firms Step 1: Analyze the Current Business Portfolio  Identifies Strategic Business Units  Each SBU is classified according to Relative market share Growth Rate of the industry Boston Consulting Group (BCG) matrix

15. 15 Step 1: Analyze the Current Business Portfolio  Identifies Strategic Business Units  Each SBU is classified according to Relative market share Growth Rate of the industry Boston Consulting Group (BCG) matrix

16. 16 Market Share and Relative Market Share

17. 17 Market share vs. Relative market share A Co. B Co.C Co. Market Share Relative MS Sedan 50 units40 units10 units?? SUV 30 units40 units30 units??

18. 18 Relative Market Share High Low Market Growth Rate Low High Boston Consulting Group 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 Requires cash to hold market share Cash Cows Low growth, high share Established, successful SBU Produce cash Dogs Low growth & share Low profit potential ? 1.0 10.1

19. 19 Relative Market Share High Low Market Growth Rate Low High Boston Consulting Group matrix StarsQuestion Marks Cash CowsDogs ? 1.0 10.1 ? ?

20. 20 Step 2: Shape the future Business Portfolio  Determine the future role of each SBU and choose the appropriate resource allocation strategy: Build: Investing more to build its share May be good for question marks Question markets may grow to stars Hold: Defending the share at the current level May be good for cash cows Harvest: Milking its short-term cash flow Eliminating R&D expenditures, reducing advertising expenditures May be good for weak cash cows Can also be used for dogs and question marks. Divest: selling or phasing out the SBU Good for dogs and question marks.  SBUs change positions over time Boston Consulting Group (BCG) matrix

21. 21 Boston Consulting Group matrix SBUsRelative Market share Market growth rate BCG matrixStrategy Sony Playstation 2 High Stars Microsoft Xbox LowHighQuestion Marks Microsoft Windows HighLowCash cow GM Oldsmobile Low Dog Hold Build Hold Harvest Divest

22. 22 SONY’s BCG Matrix SBUMarket ShareRelative market share Market growth rate Market Size SonyLargest competitor TV’s30 %20 % ?6 %100 units Video Game Consoles 60 %30 % ?15 %25 units DVD Players25 %30 % ?20 %50 units Hi-Fi Speakers 5 %20 % ?3 %20 units

23. 23 Stars Cash cowsDogs Question marks HighLow High Low RELATIVE MARKET SHARE MARKET GROWTH RATE Play Station DVD player TV Hi-Fi speaker SONY’s SBUs 1.00.110 10% 20% 0%

24. 24 Portfolio Analysis A tool by which management identifies and evaluates SBU’s. Two steps: 1. analyze its current business portfolio or Strategic Business Units (SBU’s), and decide which SBU’s should receive more, less, or no investment: BCG Matrix 2. develop growth strategies for adding new products or businesses to the portfolio: product/market expansion grid

25. 25 Product/ Market Expansion Grid A portfolio planning tool for identifying company growth opportunities In term of growth opportunities, a company has to consider both its markets and its products.  Focus on existing product and existing market  Focus on existing product and new market  Develop new product on existing market  Develop new product for new market

26. 26 Market Penetration Market Development Product Development Diversification Existing Markets New Markets Existing Products New Products Product/ Market Expansion Grid

27. 27 Product/ Market Expansion Grid Market penetration  Making more sales to current customers without changing its products  (e.g.) Sales promotion, Advertising, Price discount Market development  Identify and develop new markets for its current products  (e.g.) Pet-cola Product Development  Offering modified or new product to current market  (e.g.) Intel Diversification  Develop new products for new markets  (e.g.) Xerox personal computer

28. 28 Marketing Management Process

29. 29 Marketing Management Process Situational Analysis includes the analysis of external and internal marketing environment We can find market opportunities from situational studies for each SBUs

30. 30 Marketing Goals Well-Stated Goals  Our objective is to increase market share from 30 percent to 40 percent in 2003 by increasing promotional expenditures by 11 percent. Poorly Stated Goals  Our objective is to maximize profits.  Our objective is to better serve the customers. SMART!! Goals must be SMART!!

31. 31 Marketing Management Process Market Segmentation Target Market Selection Product Positioning

32. 32 Marketing Management Process Marketing mix strategy involves decisions on 4P’s  Product  Price  Place (= distribution)  Promotion Marketing mix is designed to satisfy the needs of consumers in the target market

33. 33 Marketing Mix (= 4P’s)

34. 34 Understanding and Learning Strategic Marketing Planning  Corporate level Mission Goals Business portfolio  SBU level Marketing management process

35. 35 Assignment #1 Visit a company’s (or a non-profit organization’s/ a product’ s / a service’s) website  Using the information on website, describe the company’s mission (statement)  Evaluate whether the company has adopted the marketing concept  How does the company try to establish relation ships with customers? Assignment #1 is due on 1/14.