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Lecture 2

Lecture 2. Strategic Planning and the Marketing Process. BSAD 110 Winter 2005. Agenda. Strategic Planning and the Marketing Process (textbook ch. 2) Strategic planning process at corporate level Marketing management process Video case. Strategic Planning and Marketing Process.

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Lecture 2

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

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

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

  6. Corporate Strategic Planning • 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. Market-oriented mission statements

  8. Market-oriented mission statements

  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 “become the world’s largest online bookstore” to “become the world’s largest online store”.

  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. Goals should be SMART Specific “To achieve sales of $125,000” rather than “We want to be leaders” Measurable Goals should have quantifiable dimensions Achievable Goals should be feasible Realistic Goals should be meaningful 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 Setting Corporate Goals

  12. 3. Designing Business Portfolio • Business portfolio is the collection of businesses and products that make up the company. • GE Applicances, GE Aircraft Engines, GE Captial, GE Lighting,GE Medical Systems, GE Plastics, etc.

  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. Boston Consulting Group (BCG) matrix • 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

  15. Boston Consulting Group (BCG) matrix • 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

  16. Market Share and Relative Market Share

  17. Market share vs. Relative market share

  18. Boston Consulting Group matrix Relative Market Share High Low 10 1.0 .1 ? Market Growth Rate Low High

  19. Boston Consulting Group matrix Relative Market Share High Low 10 1.0 .1 ? ? ? Market Growth Rate Low High

  20. Boston Consulting Group (BCG) matrix • 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

  21. Boston Consulting Group matrix Hold Build Build Hold Harvest Divest

  22. SBU Market Share Relative market share Market growth rate Market Size Sony Largest competitor TV’s 30 % 20 % ? 6 % 100 units Video Game Consoles 60 % 30 % ? 15 % 25 units DVD Players 25 % 30 % ? 20 % 50 units Hi-Fi Speakers 5 % 20 % ? 3 % 20 units SONY’s BCG Matrix

  23. SONY’s SBUs RELATIVE MARKET SHARE High Low 10 1.0 0.1 20% DVD player Play Station High Stars Question marks 10% MARKET GROWTH RATE TV Low Hi-Fi speaker Cash cows Dogs 0%

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

  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. Marketing Management Process

  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. Marketing Goals Goals must be SMART!! • Poorly Stated Goals • Our objective is to maximize profits. • Our objective is to better serve the customers. • 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.

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

  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. Marketing Mix (= 4P’s)

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

  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 relationships with customers? • Assignment #1 is due on 1/14.

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