Companywide Strategic Planning for Long-Term Growth

1. Chapter Two Company and Marketing Strategy Partnering to Build Customer Relationships

2. Company and Marketing Strategy Companywide Strategic Planning: Defining Marketing’s Role Designing the Business Portfolio Planning Marketing: Partnering to Build Customer Relationships Marketing Strategy and the Marketing Mix Managing the Marketing Effort Measuring and Managing Return on Marketing Investment Topic Outline

3. Companywide Strategic Planning The overall company strategy for long-run survival and growth is called strategic planning. Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities Companywide strategic planning guides marketing strategy and planning. Like marketing strategy, the company’s broad strategy must also be customer focused. Strategic Planning

4. Strategic Planning include, • Defining the company mission • Setting company objectives and goals • Deciding what portfolio of businesses and products is best for the company • Developing detailed marketing plans for each product

5. Step in strategic planning

6. Companywide Strategic Planning The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment Mission statements guide the development of objectives and goals. • Objectives are developed at each level in the organization hierarchy. • Strategies are developed to accomplish these objectives. Defining a Market-Oriented Mission

8. Companywide Strategic Planning Setting Company Objectives and Goals

9. Companywide Strategic Planning The business portfolio is the collection of businesses and products that make up the company Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company Designing the Business Portfolio

10. Companywide Strategic Planning Strategic business unit (SBU) is a unit of the company that has a separate mission and objectives that can be planned separately from other company businesses Company division Product line within a division Single product or brand Analyzing the Current Business Portfolio

11. Companywide Strategic Planning Analyzing the Current Business Portfolio

12. BCG • It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a measure for industry attractiveness, and relative market share serves as a measure a • of company strength in the

13. Analyzing Current SBU’s:Boston Consulting Group Approach“Growth-Share Matrix” Relative Market Share High Low SBU Life-Cycle ?, Star, Cash Cow, Dog • Stars • High mkt. growth & share • Profit potential • Heavy investment needed • to finance rapid growth • Question Marks • High mkt. growth, low share • Build into Stars or phase out • Very heavy investment • needed if to build share ? Market Growth Rate Low High • Dogs • Low mkt. growth & share • Low profit potential • Cash Cows • Low growth, high share • Established, successful • Produce cash $ )

14. The Boston Consulting Group Approach (BCG) • In BCG approach, the company classifies all its SBUs according to the growth-share matrix which can distinguish four types of SBUs. • DOGS • ? • STARS • CASHCOW

15. BCG • Dogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.

16. BCG • Question marks - Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash comsumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

17. BCG • Stars- Stars generate large amounts of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation.

18. BCG • Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders.

19. Companywide Strategic Planning Difficulty in defining SBUs and measuring market share and growth Time consuming Expensive Focus on current businesses, not future planning Problems with Matrix Approaches

20. 2. Step: Developing Growth Strategies • Besides evaluating current businesses (SBUs), the business portfolio involves finding businesses and products that the company should consider in the future. In order to identify growth opportunities, product/market expansion grid is used. • The product/market expansion grid is a portfolio-planning tool through market penetration, market development, product development or diversification.

21. Companywide Strategic Planning Developing Strategies for Growth and Downsizing Product/market expansion grid strategies

22. Companywide Strategic Planning Market penetration is a growth strategy increasing sales to current market segments without changing the product Market development is a growth strategy that identifies and develops new market segments for current products Developing Strategies for Growth and Downsizing

23. Companywide Strategic Planning Product development is a growth strategy that offers new or modified products to existing market segments Diversification is a growth strategy through starting up or acquiring businesses outside the company’s current products and markets Developing Strategies for Growth and Downsizing

24. Companywide Strategic Planning Downsizing is the reduction of the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy Developing Strategies for Growth and Downsizing

25. Value chain is a series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products Planning Marketing Partnering to Build Customer Relationships

26. Value delivery network is made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve performance of the entire system Planning Marketing Partnering to Build Customer Relationships

27. Marketing Strategy and the Marketing Mix

28. Marketing Strategy and the Marketing Mix Marketing strategy is the marketing logic by which the business unit hopes to achieve its marketing objectives Market segmentation is the division of a market into distinct groups of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing mixes Market segment is a group of consumers who respond in a similar way to a given set of marketing efforts Customer-Driven Marketing Strategy

29. Marketing Strategy and the Marketing Mix Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter Customer-Centered Marketing Strategy

30. Market positioning After a company has decided which market segments to enter, it must decide what positions it wants to occupy in those segments. A product’s position is the place that the product occupies in consumer’s minds relative to competitors. If a product is seen exactly the same as other products on the market, consumers have no reason to buy it. That is way, companies differentiate their products through positioning to offer more value to the consumers. E.g. Mercedes “engineered like no other car in the world” Marketing Strategy and the Marketing Mix Customer-Centered Marketing Strategy

31. Developing The Marketing Mix • Once the company has decided on its overall marketing strategy, it should plan its activities by using the controllable marketing tools, in other words, the marketing mix. • Marketing mix is the controllable marketing tools (known as the 4Ps) - product, price, place, and promotion - that the company use to achieve its objectives.

32. Product; means the “goods-and-service” combination the company offers to the target market. • Price; is the amount of money that consumers have to pay to obtain the product. • Place; includes company activities with the intermediaries that make the product available to target consumers. The intermediaries keep an inventory of the products, shows them to potential buyers, negotiate prices, close sales and give service after sales. • Promotion; means activities that communicate the product and persuade target customers to buy it.

33. Managing the Marketing Effort • In order to put the marketing mix into action, four marketing management functions are used: • Analysis • Planning • Implementation • Control

34. Managing the Marketing Effort

35. Managing the Marketing Effort Marketing Analysis Analysis is the complete analysis of the company’s situation in a SWOT analysis that evaluates the company’s: • Strengths • Weaknesses • Opportunities • Threats 2-34

36. Managing the Marketing Effort Marketing Analysis Strengths include internal capabilities, resources, and positive situational factors that may help to serve company customers and achieve company objectives Weaknesses include internal limitations and negative situational factors that may interfere with company performance 2-35

37. Managing the Marketing Effort Marketing Analysis Opportunities are favorable factors or trends in the external environment that the company may be able to exploit to its advantage Threats are unfavorable factors or trends that may present challenges to performance 2-36

38. Managing the Marketing Effort Market Planning Planning is the development of strategic and marketing plans to achieve company objectives Marketing strategy consists of the specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels 2-37

39. Managing the Marketing Effort Market Planning—Parts of a Marketing Plan Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product, or brand

40. Market Planning—Parts of a Marketing Plan • Section Purpose • Executive summary Presents a brief summary of the main goals and recommendations of the plan for management review, helping top management find the plan’s major points quickly. A table of contents should follow the executive summary.

41. Market Planning—Parts of a Marketing Plan • Current marketing situation Describes the target market and a company’s position in it, including information about the market, product performance, competition, and distribution. This section includes the following: • A market description that defines the market and major segments and then reviews customer needs and factors in the marketing environment that may affect customer purchasing.

42. Market Planning—Parts of a Marketing Plan • A product review that shows sales, prices, and gross margins of the major products in the product line. • A review of competition that identifies major competitors and assesses their market positions and strategies for product quality, pricing, distribution, and promotion. • A review of distribution that evaluates recent sales trends and other developments in major distribution channels.

43. Market Planning—Parts of a Marketing Plan • Threats and opportunities analysis • Assesses major threats and opportunities that the product might face, helping management to anticipate important positive or negative developments that might have an impact on the firm and its strategies. • Objectives and issues States the marketing objectives that the company would like to attain during the plan’s term and discusses key issues that will affect their attainment. For example, if the goal is to achieve a 15 percent market share, this section looks at how this goal might be achieved.

44. Market Planning—Parts of a Marketing Plan • Marketing strategy: Outlines the broad marketing logic by which the business unit hopes to create customer value and relationships and the specifics of target markets, positioning, and marketing expenditure levels. How will the company create value for customers in order to capture value from customers in return? This section also outlines specific strategies for each marketing mix element and explains how each responds to the threats, opportunities, and critical issues spelled out earlier in the plan.

45. Market Planning—Parts of a Marketing Plan • Action programs Spells out how marketing strategies will be turned into specific action programs that answer the following questions: • What will be done? When will it be done? Who will do it? How much will it cost? • Budgets Details a supporting marketing budget that is essentially a projected profit-and-loss statement. It shows expected revenues (forecasted number of units sold and the average net price) and expected costs of production, distribution, and marketing. The difference is the projected profit. on marketing investment.

46. Market Planning—Parts of a Marketing Plan • Once approved by higher management, the budget becomes the basis for materials buying, production scheduling, personnel planning, and marketing operations. Market Implementation: Implementing is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives • Successful implementation depends on how well the company blends its people, organizational structure, decision and reward system, and company culture into a cohesive action plan that supports its strategies

47. Managing the Marketing Effort Controls: Outlines the control that will be used to monitor progress and allow higher management to review implementation results and spot products that are not meeting their goals. It includes measures of return on marketing investment Marketing Control

48. Return on marketing investment (Marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. Marketing ROI provides a measurement of the profits generated by investments in marketing activities. Measuring and Managing Return on Marketing Investment Return on Marketing Investment (Marketing ROI)