Chapter 2 12 17 2014 The Nature of Strategic Planning Strategic Planning the managerial process of creating and maintaining a fit between the organization s objectives and resources and the evolving market opportunities Strategic marketing management addressed two questions o What is the organization s main activity at a particular time o How will it reach its goals Strategic Business Units SBUs subgroup of a single business or collection of related businesses within the larger organization o Each has its own rate of return on investment growth potential associated risks and requires its own strategies and funding SBUs have the following characteristics o A distinct mission and a specific target market o Control over its resources o Its own competitors o A single business or a collection of related businesses o Plans independent of the other SBUs in the total organization Ansoff s Strategic Opportunity Matrix o Market Penetration increase market share among existing customers products markets o Market Development attract new customers to existing o Product Development create new products for present o Diversification introduce new products into new markets Strategic Alternatives o As a company moves away from its core capabilities it traverses a range of change and innovation broken down in three levels Core Innovation implement changes that use existing assets to provide added convenience to existing customers and potentially entice customers from other brands Adjacent Innovation take company strengths into new markets Use existing abilities in new ways Transformational Innovation result in brand new markets products and often new businesses Company must rely on new unfamiliar assets to develop this type of breakthrough decisions Boston Consulting Group Model o Portfolio Matrix tool for allocating resources among products or strategic business units on the basis of relative market share and market growth o Star fast growing market leader Have large profits but need lots of cash to finance rapid growth o Cash Cow SBU that generates more cash than it needs to maintain its market share In a low growth market but the product has a dominant market share o Problem Child Question Mark shows rapid growth but poor profit margins It has a low market share in a high growth industry o Dog low growth potential and a small market share Most eventually leave the marketplace o After classifying the SBUs allocate future resources using four strategies Build if an org has an SBU that it believes has the potential to be a star probably a problem child at present building would be appropriate Hold if SBU is a very successful cash cow a key goal would surely be to hold or preserve market share so that the org can take advantage of the very positive cash flow Harvest appropriate for all SBUs except stars increase the short term cash return without too much concern for the long run impact Divest getting rid of SBUs with low shares of low growth markets General Electric Model o Uses dimensions of market attractiveness and company o Those SBUs that have low overall attractiveness should be o Org should selectively maintain markets with medium strength harvested or divested attractiveness o Conditions that are highly attractive a thriving market plus a strong position are the best candidates for investment Planning process of anticipating future events and determining strategies to achieve organization objective in the future Marketing Planning designing activities relating to marketing objectives and the changing marketing environment Marketing Plan written document that acts as a guidebook of marketing activities for the marketing Defining the Business Mission Mission Statement statement of the firm s business based on a carful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions The business mission profoundly affects the firm s long run resource allocation profitability and survival Marketing Myopia defining a business in terms of goods and services rather than in terms of the benefits customers seek Conducting a Situational Analysis SWOT Analysis identifying internal strengths and weaknesses and also examining external opportunities and threats o Internal o External Strengths things the company does well Weaknesses things the company does not do well Opportunities conditions in the external environment that favor strengths Threats conditions in the external environment that do not related to existing strengths or favor areas of current weakness Environmental scanning the 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 Competitive Advantage Competitive Advantage set of unique features of a company and its products that are perceived by the target markets as significant and superior to those of the competition Three types o Cost being the low cost competitor in an industry while maintaining satisfactory profit margins Costs can be reduced in a variety of ways Experience curves Efficient labor No frills goods and services Government subsidies Product design Reengineering Product innovations New methods of service delivery o Product Service Differentiation when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than that of competition o Niche seeks to target and effectively serve a single segment of the market Sustainable Competitive Advantage advantage that cannot be Marketing Objective statement of what is to be accomplished copied by the competition Setting Marketing Plan Objectives through marketing activities o Objectives should be Realistic Measurable Time specific Compared to a benchmark 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 Marketing 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 assessments of key competitors in these market segments Target Market Strategy o Segment the market based on groups with similar characteristics segments o Analyze the market based on attractiveness of market o Select one or more target markets o
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