CHAPTER 3CHAPTER 3

WINNING MARKETS: MARKET-WINNING MARKETS: MARKET-ORIENTED STRATEGIC ORIENTED STRATEGIC

PLANNINGPLANNING

Important Topics of This ChapterImportant Topics of This Chapter

Characteristics of Corporate Planning:Characteristics of Corporate Planning:» VisionVision» MissionMission» SBUSBU» Product Portfolio Models:Product Portfolio Models:

BCG ModelBCG Model GE ModelGE Model

Strategies for Planning A New BusinessStrategies for Planning A New Business Business Strategic PlanningBusiness Strategic Planning The Marketing ProcessThe Marketing Process Contents of A Marketing PlanContents of A Marketing Plan

CORPORATE AND DIVISION CORPORATE AND DIVISION STRATEGIC PLANNINGSTRATEGIC PLANNING

Defining the Mission: Defining the Mission: » HistoryHistory

» PreferencesPreferences

» EnvironmentEnvironment

» ResourcesResources

» Distinctive Competencies.Distinctive Competencies.

Characteristics of Mission Statements:Characteristics of Mission Statements:» GoalsGoals

» Company policies with suppliers, customers. etc.Company policies with suppliers, customers. etc.

CORPORATE AND DIVISION CORPORATE AND DIVISION STRATEGIC PLANNINGSTRATEGIC PLANNING

Characteristics of Mission Statement (cont.):Characteristics of Mission Statement (cont.):» Competitive scope:Competitive scope:

Industry, product, competence, market-segment, vertical, Industry, product, competence, market-segment, vertical, geographicalgeographical

Establishing Strategic Business Units (SBU):Establishing Strategic Business Units (SBU):» Single business:Single business:

customer groupcustomer group

» Satisfies its own set of competitors:Satisfies its own set of competitors: customer needscustomer needs

» Single managers responsible for planning and technology Single managers responsible for planning and technology improvementsimprovements

DIVISION STRATEGIC DIVISION STRATEGIC PLANNING (CONT.)PLANNING (CONT.)

Assigning Resources to Each SBU: Assigning Resources to Each SBU: » Boston Consulting Group Model(BCG):Boston Consulting Group Model(BCG):

Market share and market growthMarket share and market growth

» Strategies: Strategies: Build-increase market shareBuild-increase market share Hold-maintain market shareHold-maintain market share Harvest-increasing short-term cash flowHarvest-increasing short-term cash flow Divest-liquidation. Divest-liquidation.

» Mistakes:Mistakes: expect all SBU will have same growth pattern,expect all SBU will have same growth pattern, very little cash retained for cash cows.very little cash retained for cash cows.

Analyzing Current SBU’s: Analyzing Current SBU’s: Boston Consulting Group ModelBoston Consulting Group Model

Analyzing Current SBU’s: Analyzing Current SBU’s: Boston Consulting Group ModelBoston Consulting Group Model

Question Marks

• High growth, low share • Build into Stars/ phase out • Requires cash to hold market share

Question Marks

• High growth, low share • Build into Stars/ phase out • Requires cash to hold market share

Stars

• High growth & share• Profit potential • May need heavy investment to grow

Cash Cows

• Low growth, high share• Established, successful SBU’s•Produces cash

Cash Cows

• Low growth, high share• Established, successful SBU’s•Produces cash

Dogs

• Low growth & share • Low profit potential

Dogs

• Low growth & share • Low profit potential

Relative Market ShareHigh Low

Mar

ket

Gro

wth

Rat

e L

ow

Hig

h

DIVISION STRATEGIC DIVISION STRATEGIC PLANNING (CONT.)PLANNING (CONT.)

The General Electric Model(GE):The General Electric Model(GE):» Market Attractiveness and Business Strengths. Market Attractiveness and Business Strengths.

Critiques of Portfolio Models:Critiques of Portfolio Models:» Positives:Positives:

help to understand economies of business betterhelp to understand economies of business better quality of plans may be improvedquality of plans may be improved communication with top management may be improved.communication with top management may be improved. pinpoint information gabpinpoint information gab help to eliminate weaker businesseshelp to eliminate weaker businesses open opportunities to invest to more profitable businesses. open opportunities to invest to more profitable businesses.

» Negatives: Negatives: too mach emphasis to market share,too mach emphasis to market share, Can be manipulated to produce desired locationCan be manipulated to produce desired location fail to delineate synergy between two or more business. fail to delineate synergy between two or more business.

Analyzing Current SBU’s:Analyzing Current SBU’s: GE Strategic Business-Planning Grid GE Strategic Business-Planning Grid

Analyzing Current SBU’s:Analyzing Current SBU’s: GE Strategic Business-Planning Grid GE Strategic Business-Planning Grid

Business Strength

High

Medium

Low

Strong Average Weak

A

B

C

D

Ind

ust

ry A

ttra

ctiv

enes

s

PLANNING NEW PLANNING NEW BUSINESSESBUSINESSES

Intensive Growth:Intensive Growth:» Product/market expansion gritProduct/market expansion grit

Market PenetrationMarket Penetration Market Development\Product DevelopmentMarket Development\Product Development

Integrative Growth:Integrative Growth:» Backward IntegrationBackward Integration

» Forward Integration Forward Integration

» Horizontal IntegrationHorizontal Integration

Developing Growth Developing Growth StrategiesStrategies

Developing Growth Developing Growth StrategiesStrategies

1. Market Penetration

2. Market Development

3. Product Development

4. Diversification

ExistingMarkets

NewMarkets

ExistingProducts

NewProducts

Product/ Market Expansion Grid

PLANNING NEW PLANNING NEW BUSINESSESBUSINESSES

Diversification Growth:Diversification Growth:» Related industriesRelated industries

concentric diversificationconcentric diversification horizontal diversificationhorizontal diversification

» Unrelated IndustriesUnrelated Industries Conglomerate diversificationConglomerate diversification

Downsizing Older Businesses:Downsizing Older Businesses:» Pruning.Pruning.

BUSINESS STRATEGIC BUSINESS STRATEGIC PLANNINGPLANNING

Business Vision/MissionBusiness Vision/Mission SWOT ANALYSIS:SWOT ANALYSIS:

– External Environmental Analysis: External Environmental Analysis: » Opportunity and Treat AnalysisOpportunity and Treat Analysis

Marketing Opportunity-success probability:Marketing Opportunity-success probability:» Environmental Treat-probability of occurrence:Environmental Treat-probability of occurrence:

Ideal business-opportunities are high and treat is lowIdeal business-opportunities are high and treat is low Speculative business-high on both opportunities and treatSpeculative business-high on both opportunities and treat Mature business-low in opportunities and low in treatMature business-low in opportunities and low in treat Troubled business-low in opportunities and high in treatsTroubled business-low in opportunities and high in treats

» Internal Environmental Analysis:Internal Environmental Analysis: Strength and Weaknesses:Strength and Weaknesses:

BUSINESS STRATEGIC BUSINESS STRATEGIC PLANNING (CONT.)PLANNING (CONT.)

Goal Formulation: Goal Formulation: » MBOMBO» Profit (short-term profit or long-term growth) vs. nonprofit Profit (short-term profit or long-term growth) vs. nonprofit

goals, or high growth Vs low risk.goals, or high growth Vs low risk. ROIROI Realistic goalsRealistic goals

Strategy Formulation: Strategy Formulation: » Cost Leadership:Cost Leadership:

learning curve learning curve

» Differentiation:Differentiation: service, quality, technologyservice, quality, technology

» Focus:Focus: target markettarget market

BUSINESS STRATEGIC BUSINESS STRATEGIC PLANNING (CONT.)PLANNING (CONT.)

Strategic Alliances:Strategic Alliances:» product/service alliancesproduct/service alliances» promotional alliancespromotional alliances» logistic allianceslogistic alliances» pricing collaborations:pricing collaborations:

airlines,hotels and car rentalairlines,hotels and car rental

Program Formulation:Program Formulation:» supporting programs-R&Dsupporting programs-R&D

Implementation Implementation Feedback and ControlFeedback and Control

THE MARKETING PROCESSTHE MARKETING PROCESS

Value Delivery Process:Value Delivery Process:– Production process:Production process:

» Strategic Marketing:Strategic Marketing: Marketing is at the topMarketing is at the top

– segmentationsegmentation– targetingtargeting– positioning positioning

» Tactical MarketingTactical Marketing Provide and communicate the value-Japanese approach: Provide and communicate the value-Japanese approach:

– zero Customer feedbackzero Customer feedback– zero product-improvement timezero product-improvement time– zero purchasing time(JIT)zero purchasing time(JIT)– zero set-up timezero set-up time– zero defects.zero defects.

THE MARKETING PROCESS THE MARKETING PROCESS (CONT.)(CONT.)

Analyzing Marketing Opportunities:Analyzing Marketing Opportunities:» Marketing research :Marketing research :

Macro/Micro environmentMacro/Micro environment Consumer and business markets.Consumer and business markets.

Developing Marketing Strategies:Developing Marketing Strategies:» Differentiation and positioningDifferentiation and positioning

Planning Marketing Programs:Planning Marketing Programs:» Marketing mix:Marketing mix:

Product, Price, Promotion and PlaceProduct, Price, Promotion and Place

Managing Marketing Effort:Managing Marketing Effort:» Implementation of marketing programsImplementation of marketing programs

CONTENTS OF MARKETING CONTENTS OF MARKETING PLANPLAN

Executive SummaryExecutive Summary Current Marketing Situation:Current Marketing Situation:

» MarketMarket

» ProductProduct

» CompetitionCompetition

» DistributionDistribution

» Macro-environment Macro-environment

CONTENTS OF MARKETING CONTENTS OF MARKETING PLAN (CONT.)PLAN (CONT.)

Opportunity and Issue Analysis:Opportunity and Issue Analysis:» Opportunities/Treats Analysis.Opportunities/Treats Analysis.

» Strengths/Weaknesses Analysis.Strengths/Weaknesses Analysis.

» Issue Analysis.Issue Analysis.

Objectives/Goals:Objectives/Goals:» Financial.Financial.

» Marketing. Marketing.

CONTENTS OF MARKETING CONTENTS OF MARKETING PLAN (CONT.)PLAN (CONT.)

Marketing Strategy:Marketing Strategy:» Targeting, positioning:Targeting, positioning:

productproduct priceprice promotionpromotion distribution, service, R&D and marketing research.distribution, service, R&D and marketing research.

Action ProgramsAction Programs Projected Profit-and-Loss StatementProjected Profit-and-Loss Statement Controls Controls

MARKETING PLANNING IN MARKETING PLANNING IN THE 2000sTHE 2000s

Customer and Competitor OrientedCustomer and Competitor Oriented More RealisticMore Realistic Team ApproachTeam Approach Top Management InvolvementTop Management Involvement Continuing ProcessContinuing Process Cover shorter term (one year and so)Cover shorter term (one year and so) Some Take Seriously, others use as a guidelineSome Take Seriously, others use as a guideline