Chapter 2 Strategic Planning for Competitive Advantage Strategic planning the managerial process of creating and maintaining a fit between the organization s objectives and resources and the evolving market opportunities 2 2 Strategic Business Units Strategic business unit SBU a subgroup of a single business or collection of related businesses within the larger organization characteristics include a distinct mission and a specific target market control over its resources its own competitors a single business or a collection of related businesses plans independent of the other SBUs in the total organization 2 3 Strategic Alternatives Three of the most commonly used tools Ansoff s strategic opportunity matrix the Boston Consulting Group model General Electric model Ansoff s opportunity matrix matches products with markets o Market Penetration a marketing strategy that tries to increase market share among existing customers o Market Development a marketing strategy that entails attracting new customers to existing products o Product Development a marketing strategy that entails the creation of new products for present markets o Diversification a strategy of increasing sales by introducing new products into new markets o Criticisms matrix doesn t reflect the reality of how businesses grow the innovation matrix is suppose to address this criticism by demonstrating that as a company moves away from its core capabilities it traverses a range of change and innovation rather than choosing 1 of the 4 sectors in Ansoff s matrix these ranges are broken down into 3 categories o Innovation matrix Core innovation use existing products to serve existing Adjacent innovation add related products to enter adjacent Transformational innovation develop new products to create markets better markets new markets The Boston Consulting Group Model o Portfolio matrix a tool for allocating resources among products or strategic business units on the basis of relative market share and market growth rate underlying assumption is that market share and profitability are strongly linked o Portfolio matrix breaks SBUs into 4 categories Stars a business unit that is a fast growing market leader usually have large profits but need lots of cash to finance growth Cash cows a business unit that generates more cash than it needs to maintain its market share Problem children aka question mark a business unit that shows rapid growth but poor profit margin has low market share in a high growth industry need a great deal of cash Dogs a business unit that has low growth potential and a small o After classifying the SBU into 1 of these 4 categories we must allocate future resources for each 4 basic strategies are to Build do this if the organization believes the SBU has potential Hold SBU is a successful cash cow so just hold or preserve the market share to be a star market share Harvest appropriate for everything besides stars increase short term cash return without too much concern for the long run impact Divest get rid of SBU with low growth and low shares The General Electric Model dimensions used are market attractiveness and company strength 2 4 The Marketing Planning Process Planning the process of anticipating future events and determining strategies to achieve organizational objectives in the future Marketing planning designing activities relating to marketing objectives and the changing marketing environment Marketing plan a written document that acts ass a guidebook of marketing activities for the marketing manager 2 5 Defining the Business Mission Mission statement a statement of the firm s business based on a careful analysis of benefits sough by present and potential customers and an analysis of existing and anticipating environmental conditions answers the question what business are we in Marketing myopia defining a business in terms of goods and services rather than in terms of the benefits customers seek 2 6 Conducting a Situation Analysis SWOT analysis identifying internal strengths weaknesses and external opportunities and threats Environmental scanning collection and interpretation of information about forces events and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan 2 7 Competitive Advantage Competitive advantage a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition 3 types cost product service differentiation niche Cost competitive advantage being the low cost competitor in an industry while maintaining satisfactory profit margins costs can be reduced by o Experience curves curves that show costs declining at a predictable rate as experience with a product increases o Efficient labor o No frills goods and services less options o Government subsidies o Product design o Reengineering o Product innovations o New methods of service delivery Product service differentiation competitive advantage the provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition Niche competitive advantage the advantage achieved when a firm seeks to target and effectively serve a small segment of the market Sustainable competitive advantage an advantage that cannot be copied by the competition 2 8 Setting Marketing Plan Objectives Before the details of a marketing plan can be developed objectives for Marketing objective a statement of what is to be accomplished through Objectives should be realistic measureable time specific compared to a the plan must be stated marketing activities benchmark 2 9 Describing the Target Market Marketing strategy the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets Market opportunity analysis MOA the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments Target markets can be selected by appealing to the entire market with one marketing mix concentrating on one segment or appealing to multiple market segments using multiple marketing mixes 2 10 The Marketing Mix Marketing mix a unique blend of product place promotion and pricing strategies designed to produce mutually satisfying exchanges with a target market
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