Topic 2 (Part 1) - Company Planning And Strategy

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This article is a topic within the subject Marketing Fundamentals.

Contents

Required Reading

Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 42-71.

Company Wide Strategic Planning: Defining Marketing’s Role

[1] [2] Strategic Planning is the process of developing & maintaining a strategic fit between the organisations goals & capabilities & its changing market opportunities. Each firm must select a game plan that makes most sense to its specific situation, opportunities, objectives & resources (e.g. P&G has advertising $$$’s) it is essential for long run survival & growth. Strategic Planning guides Marketing Strategy & needs to be customer focused; it sets the stage for all planning within the firm.

  • Strategic Plan - Adapting the firm to take advantage of opportunities in its constantly changing environment.
  • Annual/Long-Range Plans - Deals with the firms current businesses & how to keep them going
  • Marketing Strategy - How marketers choose the target market, position their market offerings, develop a marketing mix & manage their marketing programs

Company Mission

  • What is our business? What should it be? Who is the customer? What do they value?
  • Mission Statement - The organisations purpose – what it wants to accomplish in the larger environment
    • Market Orientated – Defined in terms of satisfying customer needs (can be perpetual) instead of products/technologies that don’t last forever. E.g. “We Sell Drugs” Vs. “Bring the world healthcare products that improve lives & deliver outstanding value to customers”

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Set Organisational Or Strategic Business Unit (SBU) Objectives

This usually related to setting objectives based on Sales, Profitability, Market Standing, Return On Investment, Customer Satisfaction or some other measure. The goals need to be:

  • Specific, Measurable, Achievable, Realistic, Timely

The firm & SBU’s must have their own objectives & goals must be supported by marketing strategies at both organisational levels.

Design A Business Portfolio By Evaluating Internal And External Environments And Analysing The Current Business Portfolio

The Business Portfolio is the collection of businesses & products that make up the company. Both the corporation & its SBU’s have missions & objectives. An SBU can be an industry or geographic division. The best business portfolio is the one that best fits the firm’s strengths & weaknesses & with the opportunities in the environment. Portfolio Analysis comprises of 2 steps:

  1. Analyse current business portfolio (fund profitable SBU’s, divest weaker) – support core competencies
    • BCG Growth – Share Matrix analysis tool
  2. Shape future business portfolio by developing strategies for growth & downsizing

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Stars require heavy investment to fund growth but will turn into Cash Cows which are established low growth businesses that need little investment & produce a lot of cash to support other SBU’s. Question Marks require heavy investment to maintain market share, can be built into stars or phased out. Dogs won’t generate much cash & are poor businesses. QM – S – CC – D (life cycle) SBU’s need to be classified & their futures must be determined. The company then can choose whether to:

  • Invest to build its share
  • Invest just enough to hold its share
  • Harvest by milking short term cash flow regardless of long term effects.
  • Divest by selling it or phasing it out

BCG Matrix & other centralised approaches can be costly, time consuming & difficult to implement. They help classify current SBU’s but provide little advice for future planning. A shift to customised approaches suited to specific situations has occurred.

Develop Growth Strategies

This involves funding businesses & products that the firm should consider in the future. Growth creates enthusiasm & is vital in attracting talent & satisfying stakeholders. A company must manage profitable growth. Marketing has the main responsibility for achieving profitable growth, it is required to identify, evaluate & select market opportunities & lay down strategies for capturing them. Product/Market Expansion Grid (image below) identifies growth opportunities:

  • Market Penetrationseek to increase sales of existing products in existing markets
    • Small adjustments to product design, advertising, pricing & distribution efforts
  • Market Developmentintroduce existing products to new markets Review new demographic markets
  • Product DevelopmentOffering modified or new products to current markets (t –shirts + denims)
  • DiversificationStarting up or buying of businesses outside current products & markets

The firm must also develop downsizing strategies due to growing too fast, changing marketing environment or within markets where the firm lacks experience. A firm must carefully prune, harvest or divest these SBU’s.

MARK101223.jpg

Planning Marketing: Partnering to Build Customer Relationships

[3] The Strategic Plan establishes the business portfolio & each SBU’s objectives. Detailed planning by functional departments (in unison) helps to accomplish strategic objectives. Marketing plays a key role in strategic planning:

  • Marketing provides a guiding philosophy – marketing concept,
  • Provides inputs to strategic planners, helping them to identify attractive market opportunities (& take advantage?)
  • It designs strategies within each SBU to reach their individual objectives ‘profitably’.

In addition to Customer Relationship Management firms must use Partner Relationship Management to form an effective internal value chain (within departments) to serve the customer e.g. buyers & operational distribution at Coles – harmony is required to deliver value to customer. External value delivery networks can be formed via partnering with other firms in the marketing system e.g. supplier network.

Marketing Strategy And the Marketing Mix

The Marketing Strategy is the marketing logic by which the company hopes to create customer value & achieve profitable relationships to capture value in return. It must decide:

  • Who it will serve (segmentation & targeting) &
  • How (differentiation & positioning).

Guided by a marketing strategy, a marketing mix can be created – product, price, promotion, place, people, physical evidence & process. To determine the best marketing mix, marketing analysis, planning, implementation & control is used.

Marketing Segmentation

Market Segmentation is the process of dividing a market up into distinct groups of buyers who have different needs, characteristics or behaviours, and who might require separate products or marketing programs. A Segment is a group of consumers who respond in similar way to a given set of marketing efforts.

  • Demographic, Psychographic (Attitudes), Behavioural Factors

Market Targeting - Who

Market Targeting is the process of evaluating each market segment’s attractiveness & selecting one or more segments to enter (where is can generate the greatest customer value & sustain it over time). Niche‘s may be targeted – specialise in serving a segment if a company has limited resources &/or larger competitors overlook the segment. After entering a single segment (e.g. Nike Running), successful companies seek full market coverage via offering a range of products to meet the needs of each segment.

Market Differentiation And Positioning – How To Create Customer Value

After entering a segment, it must differentiate its product. Positioning is arranging for a product to occupy a clear, distinctive & desirable place relative to competing products in the minds of consumers. ‘Why a shopper will pay more for your brand’. E.g. ‘The Burgers are better at Hungry Jacks’ or ‘Lowest Prices are Just the Beginning’.

In positioning a product, the firm must identify customer value differences. It can create customer value by offering lower prices or offering more benefits to justify higher prices. Differentiation is actually differentiating the firm’s market offerings to create more value for consumers & is essential for Positioning.

Developing An Integrated Marketing Mix

A Marketing Mixis the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market.

  • ProductThe good/service combination offered by the company + optional
  • PriceHow much is charged
  • Placement LogisticsCompany activities that make the product available to target customers
  • PromotionActivities that communicate the merits of the product in order to persuade target customers to buy it.
  • People – Additional training for staff (internal marketing for service based firms)
  • Process – Experience of buying & the servicing of any product
  • Physical Evidence – What we can see

Managing the Marketing Effort: Analysis, Planning, Implementation And Control

[4] Management of the marketing process requires 4 functions – analysis, planning, implementation & control. Strategic plans are developed 1st which guide SBU marketing plans for each product. Implementation turns these plans into actions. Control consists of measuring & evaluating the results of marketing activities & taking corrective action when needed. Analysis provides inputs to all other functions.

  • Marketing Analysis – of the marketing organisation’s situation - SWOT & PESTLE + Competitor/Customer Review
  • Marketing Planning – Deciding on marketing strategies to attain overall strategic objectives. Brand/product focused
    • Marketing Plan - Executive Summary, Situational Analysis, SWOT, Brand Objectives, Marketing Strategy, Action Programs, Budgeting & Control.
  • Marketing Implementation – Process of converting marketing strategies in to market actions to accomplish strategic marketing objectives (who, where, when & how). Marketing Departments (see below)
  • Marketing Control – The process of (2) measuring & evaluating results (3) of marketing strategies & plans & taking corrective action (4) to ensure that objectives (1) are achieved.
    • Operating Control – check ongoing performance against an annual plan & take corrective action if necessary
    • Strategic Control – checking if strategies are well matched to opportunities, may need to reassess approach

Marketing Departments can be organised in various ways:

  • Functionally, marketing activities are headed by a functional specialist – sales manager, advertising manager
  • Geographically, sales & marketing teams assigned to regions.
  • Product, the product manager implements a strategy & marketing program for the specific product
  • Customer Management or Market, one product sold to many markets that have different needs (segments)
  • Combination, for large companies

Measuring And Managing Return on Marketing Investment: Marketing ROI – Accountability

[5] Marketing ROI - The net return from a marketing investment divided by the costs of the marketing investment. It is difficult to work out the benefits/gains from marketing. Other performance measures (Marketing Dashboard) include:

  • Brand Awareness
  • Sales
  • Market Share
  • Customer Acquisition, Retention, Life Time Value & Equity - Capture future performance (based on strong r/ships)

End

This is the end of this topic. Click Marketing Fundamentals to go back to the main subject page for Marketing Fundamentals

References

Textbook refers to Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.

  1. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 43-51
  2. Mohammed Razzaque, UNSW
  3. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 52-59
  4. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 60-63
  5. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 64
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