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STRATEGY

FORMULATION
Prof. Snehal Chincholkar

STRATEGIC PLANNING
is the managerial process of developing and
maintaining a strategic fit between the organization's
objectives and resources and its changing market
opportunities.

Org Objectives

Strategic Fit

Resources

Changing Environment

THE ROLE OF STRATEGY

Corporate
Mission &
Objectives

Strategy:
Corporate
Business
Functional

Operating
Plans

SUN TZE ON STRATEGY


Know your enemy, know yourself, and your
victory will not be threatened. Know the terrain,
know the weather, and your victory will be
complete.

STRATEGIC MARKETING
Marketing Strategy is a series of integrated
actions leading to a sustainable competitive
advantage.
John Scully

Strategy Formulation
Vision & Mission
Opportunities & Threats
Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Fred R. David
Prentice Hall

Processes in Strategic Marketing


Management
1. Defining the organizations
business ,vision, mission, goals and
objectives
2. Identifying and framing
organizational growth opportunities
3. Formulating product-market
strategies
4. Budgeting marketing, financial, and
production resources
5. Developing reformulation and
recovery strategies

3C
Corporate
Competitor
Customer
Strategic Marketing Decisions

Where to compete
How to compete
When to compete

CORPORATE

Business Definition
By defining a business from a
customer or market perspective
an organization is appropriately
viewed as:

a customer - satisfying endeavor

not
a product-producing or service delivery
enterprise.

VISION
It guides the business towards the intention of its future.
The Vision should be
Informed
Shared
Competitive
Enabling

VISION
Nike: To be the number one athletic company in the world
in the 1960s it was Crush Adidas
Alzheimers Association: Our vision is a world without
Alzheimers
San Diego Zoo: To become a world leader at connecting
people to wildlife and conservation

CORPORATE MISSION
Broad purposes of the organization
General criteria for assessing the long-term organizational
effectiveness
Driven by heritage & environment
Mission statements are increasingly being developed at the SBU
level as well

Business Mission
Underscores the scope of an organizations operations apparent in its
business definition
Reflects managements vision of what the organization seeks to do
Most statements describe:
the organizations purpose
customers, products/services, markets, philosophy, and
technology

Benefits of Mission Statements


1. Crystallizes managements vision of the organizations long-term
direction and character.
2. Provides guidance in identifying, pursuing, and evaluating market and
product opportunities.
3. Inspires and challenges employees to do those things that are valued by
the organization and its customers.
4. Provides direction for setting business goals or objectives.

"Singapore Airlines is a global company dedicated to providing air


transportation services of the highest quality and to maximising returns for
the benefit of its shareholders and employees."
Singapore Airlines' Mission Statement

EXAMPLES OF CORPORATE
MISSION (CONTD)
MARRIOTTS Mission Statement:
We are committed to being the best lodging and food service
company in the world, by treating employees in ways that create
extraordinary customer service and shareholder value.
Facebook: Facebooks mission is to give people the power to
share and make the world more open and connected

CORPORATE CULTURE

The most abstract level of managerial thinking


How do you define culture?
What is the significance of culture to an organization?
How does marketing affect culture in the organization?

CORPORATE OBJECTIVES & GOALS


An objective is a long-range purpose
Not quantified and not limited to a time period
E.g. increasing the return on shareholders equity
A goal is a measurable objective of the business
Attainable at some specific future date through planned actions
E.g. 10% growth in the next two years

Business Goals
Goals or objectives convert the organizations mission into tangible actions
and results that are to be achieved, often within a specified time frame.

Three
major categories of goals:
1. Production

2. Financial
3. Marketing

Production Goals
Apply to the use of
manufacturing and service
capacity and to product and
service quality.
Financial Goals
Focus on return on
investment, return on sales,
profit, cash flow, and
shareholder wealth.

Marketing Goals
market share
marketing productivity
sales volume
profit
customer satisfaction
customer value creation

COHERENCE IN STRATEGIC DIRECTION


Company vision
Massively inspiring
Overarching
Long-term
Driven by and evokes passion
Fundamental statement of the
organizations
Values
Aspiration
Goals

Company vision

Hierarchy of Goals

COHERENCE IN STRATEGIC DIRECTION


Mission statements

Purpose of the company


Basis of competition and
competitive advantages
More specific than vision
Focused on the means by
which the firm will compete

Company vision
Mission statements

Hierarchy of Goals

COHERENCE IN STRATEGIC DIRECTION


Strategic objectives

Operationalize the mission


statement
Provide guidance on how the
organization can fulfill or
move toward the higher
goals
More specific
Cover a more well-defined
time frame

Company vision
Mission statements
Strategic objectives

Hierarchy of Goals

COHERENCE IN STRATEGIC DIRECTION


Strategic objectives

Measurable
Specific
Appropriate
Realistic
Timely
Challenging
Resolve conflicts that arise
Yardstick for rewards and
incentives

Company vision
Mission statements
Strategic objectives

Hierarchy of Goals

WHAT IS A STRATEGIC BUSINESS UNIT? (SBU)


A set of products or product lines
With clear independence from other products or
product lines
For which a business or marketing strategy should be
designed

CHARACTERISTICS OF A VIABLE SBU


Unique business mission
Definable set of competitors
Integrative planning done independently
Responsible for resource management in all areas
Large enough but not so large as to become bureaucratic

(Source: Subhash Jain, Marketing Planning & Strategy, 6th Ed.)

ORGANIZATIONAL MARKETING LEVELS


Hofer and Schendel suggested that organizations develop
strategies at three structural levels:
Corporate level(corporate marketing)
SBU level(Strategic Marketing)
Product/Market level(Functional Marketing)

MARKETING AT THE SBU LEVEL


STRATEGIC MARKETING

Strategic Marketing requires


Detailed understanding of market needs, and
Proactive use of competitive intelligence at the corporate as well as
SBUs levels
Strategic Marketing
Focuses on what the firm do best at the SBU level
To secure and maintain a sustainable competitive advantage

COMPETITION

WHAT IS COMPETITIVE ADVANTAGE?


Competitive advantage is a companys ability to perform in
one or more ways that competitors cannot or will not match.
Philip Kotler
If you dont have a competitive advantage, dont compete.
Jack Welch, GE

OTHER CHARACTERISTICS OF
COMPETITIVE ADVANTAGE
Substantiality
Is it substantial enough to make a difference?
Sustainability
Can it be neutralized by competitors quickly?
Ability to be leveraged into visible business attributes that will influence
customers
(Source: Strategic Marketing Management, Aakers)

PORTERS FIVE FORCE MODEL

EXAMPLE
The following is a Five Forces analysis of The Coca-Cola Company in relationship to its Coca-Cola brand.
Threat of New Entrants/Potential Competitors : Medium Pressure
Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and zero capital requirement. There is an increasing
amount of new brands appearing in the market with similar prices than Coke products
Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market share for a long time and loyal customers are not very
likely to try a new brand.
Threat of Substitute Products : Medium to High pressure
There are many kinds of energy drink s/soda/juice products in the market. Coca-cola doesnt really have an entirely unique flavor. In a blind taste test,
people cant tell the difference between Coca-Cola and Pepsi.
The Bargaining Power of Buyers : Low pressure
The individual buyer no pressure on Coca-Cola
Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end
consumer brand loyalty.
The Bargaining Power of Suppliers : Low pressure
The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers are not concentrated or
differentiated.
Coca-Cola is likely a large, or the largest customer of any of these suppliers.
Rivalry Among Existing Firms: High Pressure
Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand. Both Coca-Cola and Pepsi are the predominant
carbonated beverages and committed heavily to sponsoring outdoor events and activities.
There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors. These other brands have failed to reach
the success that Pepsi or Coke have enjoyed.

SEEKING COMPETITIVE ADVANTAGES


Positions of advantage
Superior customer value
Lower relative total cost
Performance advantages
Customer satisfaction, Loyalty, Market Share, Profit
Sources of advantages
Superior skills & knowledge, Superior resources,
Superior business process

CUSTOMER

IDENTIFY THE MARKET TO SERVE


Customer Need
Market Emergence ( Market Potential- Market Size, Market Growth,
Profitability, Type of buying Decision, Customer Market Structure)
Market Boundary Definition ( Technology ,Customer Function,
Customer Group )
Serve Market
Customer Segment

MARKETING AUDIT
Marketing audit is a comprehensive, systematic, independent, and periodic
examination of a companysor business unitsmarketing environment, objectives,
strategies, and activities with a view to determining problem areas and opportunities
and recommending a plan of action to improve the companys marketing
performance
Philip Kotler

SITUATION ANALYSIS
Internal Analysiscompany; capability etc.
External Analysiscustomers, market definition, industry structure
SWOT Analysis

Strengths, Weaknesses, Opportunities &


Threats
Identify & prioritize major problems and opportunities: selection of key
issues

Based on the firms core competencies, decide on future options

CHARACTERISTICS OF MARKETING AUDIT


Comprehensive
Must cover all marketing areas

Systematic
Sequential diagnostic steps

Independent
Internal & external auditors

Periodic
Performed at regular intervals

MARKETING AUDIT PROCEDURE


Marketing environment audit
Marketing strategy audit
Marketing organization audit
Marketing system audit
Marketing productivity audit
Marketing function audit
Marketing excellence review
Ethical and social responsibility review

A VIABLE MARKETING STRATEGY


Must have a clearly defined market
Must have a good match between corporate
strengths and market needs
Must have significant positive differentiation in
the key success factors of the business