Chapter 2 Monday 07/10/07 Mission Statement

Vision

Broadband

Objective

MARKETING (PRODUCT)

MANAGEMENT (BUSINESS)

STRATEGY IS TO MAKE THIS VISION HAPPEN What is strategic planning? The process of developing and maintaining a strategic fit between the organisations goals and capabilities and its changing market opportunities. Why? It involves long term planning and defines the companys general directions and strategies over a period of time which is usually more than 3 years. Strategic planning involves a number of steps. 1. Defining the companys mission. 2. Getting objectives and goals. 3. Designing a business portfolio. 4. Planning marketing and other functional strategies .all strategic planning is done at corporate level but how?

 Companies propose different types of plans. Annual/ Long range plans companys current business and how to keep operations going. Strategic plans adapting the firm to take advantage of the opportunities in its constantly changing environment. Step 1 Mission statement is turned into detailed supporting objectives that guide the whole company. Step 2 The organisation decided what business portfolios and products are the best for the company and how much support to give each one. Step 3 Each business and product develops detailed marketing and departmental plans that support the companys wide plan. Marketing planning occurs at these levels: A. Business Unit B. Product C. Market Levels What is a business unit? An SBU or strategic business unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses; examples of SBUs are a company division, a product line within the division or a single product or brand..(General Electric; plastic or medical supplies) Defining the companys mission statement The mission statement defines the company or organisation. What business are we in? What are our target customers? What are we in business for? This gives the companys vision. The mission statement is done for the employees, for the public and also for the clients ( those which are now and those which are likely to be in the future) Designing a business portfolio.

 The companys mission statement needs to be turned into detailed supporting objectives for each level of management: each manager should have objectives and be responsible for reaching them. There is hierarchy of objectives marketing objectives and business objectives. Business Portfolio consists of business and products that make up the company. It is important to analyse the portfolio because not all the products are the same. Portfolio Analysis (1) A tool by which management identifies and evaluates the various businesses making up the company. The company will want to put strong resources into more profitable businesses and phase down the others. The way of doing this is through the S.W.O.T analysis. These four letters are the abbreviation for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal to the organisation, while opportunities and threats are external to the organisation. Portfolio Analysis (2) Tool 1 General Electric Model/ Mckinsey Method. Identification of the business making up the money (the right SBU s to invest into). Ex- G.E shed many low performing SBU (air condition) and kept only those in which it excelled. At a later stage it acquired new profitable ones. Portfolio Analysis (3) Tool 2 The BCG growth share matrix, (Boston consulting group approach) Companies must find ways in which they can use their strengths to take advantage of attractive opportunities in the environment. The most popular one is the BCG which analyzes the attractiveness of the SBU by measuring market industry and the strength of SBU position in the market. The Boston Consulting Group

HIGH (Market Growth rate)

STARS

QUESTION MARKS

LOW

CASH COWS

DOGS

HIGH

LOW

RELATIVE MARKET SHARE QUESTION MARKS Question Marks are low share business units in high growth markets. They require a lot of cash to hold their share. Management has to think hard about which question marks it should try to build into stars and which ones should be phased out. STARS These are high growth share businesses or products. They often need heavy investment to finance their rapid growth. Eventually they will show down and become cash cows. Examples of stars. High definition DVD Recorder Known products still a little expensive on market high Potential if prices go down many people will buy them hence increased growth rate. CASH COWS Cash Cows are low growth, high share businesses or products. These established and successful SBUs need less investment to hold their

market share. They produce a lot of cash that the company uses to pay its bills and to support other SBUs that require investment. DOGS Dogs are low market share and low growth businesses and products. They may generate enough cash to maintain themselves but do not promise to be a large source of income. Point to Remember.. Such SBU has a cycle; in question marks turn into stars, then change into cash cow and finally into dogs. The BCG has its limitations as well: 1. It is difficult to administer 2. Time consuming 3. Costly 4. Management find it difficult to define SBU. 5. Measuring market share and growth. 6. These methods provide assistance for classification purposes but little advice for future. Portfolio Analysis (4) Tool 3 Ansoffs Matrix. The identification of growth opportunities is done thanks to the Expansion Grid which is a planning tool used for the identification of growth opportunities through market penetration, market development, product development or diversification.

Existing Product

New Product

Existing Marketing penetration- we Product Dev instead of looking Markets are looking for growth by for new markets we introduce Keeping the same products new products.

New Market

Market Dev keeping the

Diversification

Same product but introducing It to a new market.

Portfolio Analysis (5) Market Penetration: A strategy for company growth by increasing sale of current products to current segments without changing the product. Market Development: A strategy for company growth which includes the identification and development of new market segments for current company products. Product Development: Another growth strategy is that of product development. This occurs when the company decides to continue operating in existing markets but to achieve growth by introducing new products which may replace others which have been withdrawn from the market. This strategy is common in situations when it is difficult and when the existing product range does not have much scope for growth. Market Development: Marketers may seek to grow by developing new markets. A strategy of marketing development involves in retaining the existing product range but to sell and distribute new products in the market. This strategy involves considerable market research to identify those markets which offer the best prospects for successful penetration. Diversification: A strategy for company growth that starts or acquires businesses outside the companys current products and markets. Downsizing: reducing the business portfolio by eliminating products or business units that are no longer profitable or that no longer fit the companys overall. Tuesday 08/10/07 Partnering to Build Customer Relationships.

Integration of SBU

 The company strategic plan establishes what kinds of businesses the company will be in and its objectives for each business. Within each business unit more detailed planning takes place. The major functional departments are: 1. MARKETING 2. FINANCE 3. ACCOUNTING 4. PURCHASING 5. OPERATIONS 6. INFORMATION SYSTEMS 7. HUMAN RESOURCES 8. OTHERS The guiding philosophy should be the marketing concept. The company strategy should resolve around building profitable relationships with important customer groups. Within each individual business unit, the marketing department designs strategies to reach the units objectives. In addition to CRM (chapter 1) marketers must also practice. RELATIONSHIPS WITH CUSTOMERS. Each company must divide up the total market choose the best segments and design strategies to serve the segments. 1. Market segmentation dividing the market into distinct groups of buyers who have distinct needs, characteristics or behaviour and who might require separate products or marketing mixes. A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts. 2. Target Marketing it is the evaluation of each market segment attractiveness and selecting one or more segments to enter. The company should select target segments in which it can generate the greatest customer value profitably and sustain it overtime. 3. Market Positioning after deciding which segment to enter it must decide what position it wants to occupy. The position is the place the product occupies relative to competitors in consumers minds. Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of target consumers. Ex: Mercedes- in a perfect world everyone would have a Mercedes. Marketing Analysis (1)

 Analysis is normally made on two major factors that are the customers and competitors. Customers: What are the customers needs and wants? This is usually identified by market research, interviews and other surveys. Competitors: Who are our competitors? How can we create a competitive advantage without being copied by the competition? S.W.O.T analysis can be used. Marketing Analysis (2) Planning is one of the most important steps in managing the marketing effort. The marketing manager must plan both long term including for example the selection of markets and the production of certain products or services to target market and also short term planning that is marketing programs ( marketing mix) and other tactics in relation with the 4 Ps (PRODUCT, PRICE,PLACE,PROMOTION). The marketing strategy used is the logic by which the business unit hopes to achieve its marketing objectives. Market Analysis (3) Implementation does not only plan but implement what was previously planned. Both long term strategic and short term tactical must be acted upon and used if they have an effect. This also involves the; who, where, when and how. Market Analysis (4) Control is the last step which involves a no of controls that could be used to monitor progress. This practice allows higher management to review the results. If any department is not meeting its goals corrective action is taken. Strategic control involves looking at whether the companys basic strategies are well matched to its opportunities. The marketing audit is a comprehensive, systematic, independent and periodic examination of a companys environment, objectives, strategies and activities to determine problem areas and opportunities and to recommend a plan of action to improve the companys marketing performance. (Refer to control process / Chapter 2)

Contents of Marketing Plan: 1. Executive Summary 2. Current Market Situation 3. Threat & Opportunity Analysis 1. Executive Summary It is a brief of summary of the main goals and recommendations of the plan aimed for management review. 2. Current market situation It describes the target market and the companys position in it. Including information about the market, product performance, competition and distribution. 3. Threats & Opportunity Analysis It accesses major threats & opportunities that the product might face, helping management to anticipate important positive or negative developments that might have an impact on the firm. 4. Objectives & Issues This section states the marketing objectives that the company would like to attain during the plans term. 5. Marketing Strategy This outlines the broad marketing logic by which the business unit hopes to achieve its marketing objectives and the specifications of target markets positioning and marketing expenditure levels. 6. Action Programs Spells out how marketing strategies will be turned into specific action programs that answer the following questions: what, when, how and who. 7. Budgeting Details a support marketing budget that is similar to profit and loss statement. 8. Controls It outlines the control that will be used to monitor progress and allow higher management to review implementation results and spot products that are not meeting their targets.