Transcript CHAPTER 2: Strategic marketing planning

GRAHAM HOOLEY • NIGEL F. PIERCY • BRIGETTE
NICOULAUD
2
Strategic marketing
planning
Strategy is the matching of the activities of an
organisation to the environment in which it
operates and to its own resource capabilities
Johnson and scholes (1988)
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Introduction
• Company’s capabilities are matched to the
market environment in which it operates not
for today but in foreseeable future
• Strategic planning attempts to answer three
basic questions
– What is the business doing now?
– What is happening in the environment?
– What should the business be doing?
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Figure 2.1
Strategic fit
Market needs &
conditions
Strategy adapted to
the needs and
requirements of the
market
Organizational
resources suited to
the markets in which
it operates
Marketing
strategy
Organizational
resources
Organizational resources
needed for implementation of
the strategy
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Defining the business purpose or
mission
• Requires asking fundamental questions:
– What business are we in?
– What businesses do we want to be in?
– Who is our major competitor?
– What markets are we in?
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Mission formulation and statement
• The strategic intent or vision of where
organization want to be in foreseeable future
• The values of the organization should be
spelled out to guide operations
• Articulate distinctive competencies
• Market definition, in terms of customer targets
• Finally, it should spell out where organization
intends to be positioned in marketplace
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Figure 2.2
Components of mission
Strategic intent
Vision of what you want to be
Market definition
Customer targets
Competitive positioning
Differential advantage
Company values
Guiding principles
Mission
Objectives and strategy
Distinctive
competencies
Core skills
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The marketing strategy process
• Three main levels:
– Establishment of a core strategy
• Assessment of companies capabilities (strengths and
weaknesses relative to competition – opportunities and
threats posed by the environment)
– The creation of the company’s competitive
positioning
• competitive edge in serving customers better than
competition is defines
– The implementation of the strategy
• Department putting strategy into action is created
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Figure 2.3
The marketing strategy process
Business
purpose
Environment
analysis
Core strategy
Company
analysis
Market target
Competitive
positioning
Competitive
advantage
Control
Implementation
Organization
Marketing mix
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ESTABLISHING THE CORE STRATEGY
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Analysis of organizational
resources
• Creation of long list of resources and many
weaknesses that an organization has at its
disposal
• They may stem from;
– Skills of the workforce in assembling products
– Skills of management in planning
– R&D department in new product ideas
– Distinctive competencies may lie in image, market
presence or its after sales services (exploitable)
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Product portfolio
DRUKER’S SEVEN TYPES OF
BUSINESSES
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Druker’s seven types of businesses
• Today’s breadwinners
– products earning healthy profits now
• Tomorrow’s breadwinners
– Expected to take breadwinning role in the future
• Yesterday’s breadwinners
– Supported the company in the past
• Developments
– Recently developed that may have some future
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Druker’s seven types of businesses
• Sleepers
– Have been around for sometime but failed to
establish themselves in their markets
• Investments in managerial ego
– Have strong product champions among influential
managers
• Failures
– Failed to play a significant role in the company’s
portfolio
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Figure 2.4
Product types in the portfolio
Tomorrow's
breadwinners
Developments
Sleepers
Ego trips
Market attractiveness
High
Life
Cycle
Death
Cycle
Low
Failures
Yesterday’s
breadwinners
Today’s
breadwinners
High
Business strength
Low
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Portfolio planning
• Diversified organizations need to find methods
for assessing the balance of business in its
portfolio
– Development of business strategies and allocation
of resources (both managerial and financial)
– Analyzing portfolio balance
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Figure 2.5
Balancing the business portfolio
Long-run corporate health requires a balance of:
Products that
generates cash
NOW
Other that use
cash now but
promise to
generate cash in
the FUTURE
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Figure 2.6
Unbalanced, present-focused
business portfolio
A great present
but what about
the future?
Other that use
cash now but
promise to
generate cash in
the FUTURE
Products that
generates cash
NOW
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Figure 2.7
Unbalanced, future-focused business
portfolio
Products that
generates cash
NOW
Future prospects good
but who pays today’s
bills?
Other that use
cash now but
promise to
generate cash in
the FUTURE
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Analysis of the markets served
• Opportunities and threats facing the company
• Stem from two main areas;
– The customers (both current and potential) and
competitors ( again both current and potential)
• Most markets consist of heterogeneous
customers (varying needs and demands)
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Figure 2.8
SWOT Analysis
Internal
Good
points
Danger
points
External
Strengths
Opportunities
What are we god at relative to
competitors?
What changes are creating
new options for us?
Weaknesses
Threats
What are we bad at relative to
competitors?
What emerging dangers must
we avoid or counter?
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Figure 2.9
SWOT strategic implications
Opportunities
Threats
Strengths
Exploit existing strengths in
areas of opportunity
Use existing strengths to
counter threats
weaknesses
Build new strengths first to
take advantage of
opportunities
Build new strengths to counter
threats
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Core strategy
•
•
•
•
Define the key factors of success
Company sets its marketing objectives
Objectives should be both long and short term
Core strategy varies at different stages of
product life cycle
• Expand the market (achieved in early growth
stages of lifecycle) or to increase share of
existing market (pursued during late
growth/maturity stages
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Expand the market
• Market expansion can be achieved through
attraction of new users to the product or
service
• Through geographic expansion of the
company’s operations (both domestically and
internationally)
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Strategic focus
Figure 2.10
Improve performance
Increase sales
Improve productivity
Expand market
Increase share.
Expand market
Increase share.
New uses
Win share
Increase price
Capital costs
New users
Acquire share
Add value
Fixed costs
Increasing use
frequently
Create
alliances
Change product
mix
Variable costs
New products
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Increase share
• Main routes to increasing share include;
– Winning competitors, customers
– Merging with (or acquiring) the competitors
– Entering into strategic alliances with competitors,
suppliers and/or distributors
• Increasing usage rate may be viable approach
to expanding the market for some products
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Improving profitability
• Through improving margins
• Increasing price, reducing cost or both
• Removing poorly performing products and
concentrating on more financially viable
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Creating the competitive
positioning
• Statement of company’s market targets
– Where the company will compete and differential
advantage
– How the company will compete
• Market targets
– Select those targets most suited to utilizing
company’s strengths and minimizing vulnerability
due to weaknesses
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Market targets
• Market will generally be more attractive if the
following hold;
– It is large
– It is growing
– Contribution margins are high
– Competitive intensity and rivalry are low
– There are high entry and low exit barriers
– The market is not vulnerable to uncontrollable
events
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DIFFERENTIAL ADVANTAGE
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Cost leadership
• Company seek to obtain a cost structure
significantly below than that of competitor
– Through construction of efficient scale economies,
cost minimization in R&D, service, sales force,
advertising etc
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Figure 2.11
Routes to competitive advantage
High
Valued
uniqueness
Competitive
advantage
Competitive
disadvantage
Low
High
Low
Relative delivered cost
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Differentiation
• Something that is seen as a unique in the
market
• Company’s strengths and skills are used to
differentiate the company’s offerings than
competitors
• Differentiation can be achieved through
design, style, product or service features,
price, image etc
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Differentiation and cost leadership
• Both could be pursued simultaneously (Fulmer
and Goodwin, 1988)
• Cost leadership may be impossible to sustain
due to competitor imitation
• Cost leadership requires minimal spending on
R&D, product improvement and image
creation
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Implementation
• Task of marketing management is to
implement those decisions through marketing
effort
• Three basic elements of implementation;
– Marketing mix, organization and control
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Marketing mix
• Each of the element of the mix should be
designed to add up to the positioning required
• Where elements of the mix do not pull in the
same direction but contradict each other, the
positioning achieved will be confused and
confusing to customers
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Organization
• How the marketing effort and the marketing
department are organized will have effect on
how well the strategy can be can be carried
through
• Required manpower and financial resources to
be made available
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Control
• Monitor and control the effort
• Performance can be monitored in two ways;
– Market performance (sales, market share,
customer attitude and loyalty and changes in
them over time)
– Financial performance ( monitoring of product
contribution relative to the resources employed to
achieve it)
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AMBER REPORTS THE MOST
IMPORTANT MARKETING METRICS
USED BY COMPANIES
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Marketing metrics
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Relative perceived quality
Loyalty/retention
Total no of customers
Customer satisfaction
Relative price (market share/volume)
Perceived quality/esteem
Complaints (level of dissatisfaction)
Awareness and distribution/availability
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