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CHAPTER 4

CHAPTER 4. Market-Oriented Strategic Planning. PERSPECTIVES OF THE FIRM. Objective of the firm is to: Maximize profits - Economist Maximize shareholder value – Financial type Create customer-satisfying value at a profit - Marketing

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CHAPTER 4

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  1. CHAPTER 4 Market-Oriented Strategic Planning

  2. PERSPECTIVES OF THE FIRM • Objective of the firm is to: • Maximize profits - Economist • Maximize shareholder value – Financial type • Create customer-satisfying value at a profit - Marketing • Balance the interest of shareholders, customers, employees, suppliers, and the community – Management type. • These perspectives shape the strategic planning process within the firm.

  3. THE FIRM AS A SYSTEM • The following are performed: • Coordination, integration, Mutual Purpose, An Objective • Objective of superior customer value at reduced cost provides guidance and direction • Market realities drive the firm

  4. MARKET ORIENTATION • There are three behavioral components: • Customer Orientation • Competitor Orientation • Inter-functional Coordination • There are two Decision Criteria: • Long-Term Focus • Profitability

  5. STRATEGIC PLANNING • Developing a game plan for achieving long-run objectives based upon existing opportunities and resources. • Strategy should ensure long-run survival and growth • The aim of strategic planning is to develop a Sustainable Competitive Advantage (Low Cost, Focus, Differentiation, Preemptive Move, Synergy).

  6. Porter’s Generic Competitive Strategies

  7. Porter’s Competitive Strategies Cost Leadership: • Low-cost competitive strategy • Aimed at broad mass market • Aggressive construction of efficient-scale facilities • Cost reductions • Cost minimization

  8. Porter’s Competitive Strategies Differentiation: • Broad mass market • Unique product or service • Charge premiums • Lower customer sensitivity to price

  9. Porter’s Competitive Strategies Cost focus: • Low cost competitive strategy • Focus on particular buyer group or market • Niche focused • Seek cost advantage in target market

  10. Porter’s Competitive Strategies Differentiation focus: • Focus on particular group or geographic market • Seek differentiation in targeted market segment • Serve special needs of narrow target market Stuck in the middle: • No competitive advantage • Below-average performance

  11. STRATEGIC MARKET PLANNING • With Strategic Planning There Are THREE Key Questions: • 1.) Where is the firm now? • 2.) Where does the firm want to be in a specified time-frame? • 3.) What is the best way to get there (what actions should we take and what are the risks and rewards? • This process provides ideas, enable managers to evaluate opportunities, develop and implement plans, and monitor results.

  12. Basic Model of Strategic Management • FOUR BASIC ELEMENTS

  13. STRATEGIC PLANNING PROCESS • Plan (Corporate, Business, Product) • Implement (Organize, Implement) • Control (Measure results Analyze, Take Corrective Actions). • Mission >>> Objectives & Goals >>> Portfolio Plan >>> Business Plan

  14. STRATEGIC PLANNING PROCESS • Mission – clear statement providing a sense of opportunity and direction in terms of customer needs, groups and technologies • Objectives & Goals – Actionable quantitative and realistic restatement of the mission • Portfolio Plan – Analysis of each business unit of analysis in terms of profitability, market share, attractiveness or other relevant measures (BCG Growth/Share Matrix, GE Multifactor Matrix).

  15. STRATEGIC PLANNING GAP • Kotler identifies the firm’s Strategic Planning Gap as the difference between the actual and desired or expect sales. • For change to occur, the gap must be large enough to move the firm to strategic action. • Once the gap is recognized management can move to fill the gap (Intensive Growth – action within present product-market scope, Integrative Growth opportunities within firm’s market system, Diversification opportunities outside firm’s marketing system)

  16. GROWTH STRATEGIES • Market Penetration (Present markets & Products) • Product Development - (Present Markets, New Products) • Market Development - (Present Products, New Markets) • Diversification (New Products, New Markets) • Vertical Integration

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