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BA343
Week#4
Strategic Planning
2 weeks ago started the Situation
Analysis—
…w/ the Environmental Scan
Environmental Scanning=
The process of identifying
the nature & magnitude
of Uncontrollable forces
in the external (macro)
environment exerting
significant influence on
our strategies…
So far…determined
Consumer
Competitors
Conditions



How to segment the consumer market,
measure demand & relevant factors that
influence consumers’ purchasing
decisions
Your competitors relative market
positions, competencies & advantages
Macro-E political-legal, economic, sociocultural & technological trends relevant
to your organization
Final Component
of
Strategic
Situation Analysis
Marketing Strategy
Planning
Situation Analysis P’s
The Marketing Mix:
•Company
G
Growth,
Competitive
Service
&
Positioning
Strategies
N
C
•Consumers
Product Place
Target
Market
TGT
•Competitors
•Conditions
• PEST
E
D
Price Promotion
WM
F
Company Considerations
History / Culture
 Resources
 Existing portfolio
 Existing customer
base
– characteristics
– loyalty
 Experience
– w/markets
– w/ marketing

Company Portfolio Analysis
Analyze company’s products
w/ respect to:


How good your
product is….
How good the
market you sell it in
is…
G.E Strategic Planning Model
Business Strength
Strong
Average
Weak
High
Industry
Attractiveness
Low
Business Strength Index
Industry Attractiveness Index
* Market Share
* Price Competitiveness
* Product Quality
* Customer Knowledge
* Sales Force and Effectiveness
* Geographic Advantage
* Market size
* Market Growth
* Industry Profit Margin
* Amount of Competition
* Seasonality
* Cost Structure
Boston Consulting Group’s
Growth-Share Matrix
High
Product-Market
Growth (%)
STARS
Low
PROBLEM
CHILD
CASH COWS
10x
4x
High
DOGS
2x 1.5x 1x
Relative
Market Share
.5x
Low
.2x .1x
BCG Portfolio Matrix
MARKET SHARE DOMINANCE
High growth
Market leaders
Require cash
Large profits
HIGH
LOW
MARKET GROWTH RATE
HIGH
LOW
High growth
Low market share
Need cash
Poor profit margins
$
Low growth
High market share
High cash flow
Low growth
Low market share
Minimal cash flow
Strategic
Planning
Situation Analysis
Marketing Strategy
P’s
The Marketing Mix:
•Company
G
Growth,
Competitive
Service
&
Positioning
Strategies
N
C
•Consumers
Product Place
Target
Market
TGT
•Competitors
•Conditions
• PEST
E
D
Price Promotion
WM
F
SWOT Analysis
S
W
O
T
Things the company does well.
Things the company does not do well.
Conditions in the external environment
that favor strengths.
Conditions in the external environment
that do not relate to existing strengths
or favor areas of current weakness.
SWOT Analysis
Strengths
and
Weaknesses
(INTERNAL)
●
Production Costs
●
Marketing Skills
●
Employee Capabilities
●
Financial Resources
●
Available Technology
●
Company/Brand Image
SWOT Analysis
Opportunities
And
Threats
EXTERNAL
●Social
●Demographic
●Economic
●Technological
●Political/Legal
●Competitive
Situation Analysis
1st Step
Marketing Strategy
P’s
The Marketing Mix:
•Company
Growth &
Competitive
•Consumers
Product Place
Target
Market
Strategies
•Competitors
•Conditions nd
• PEST 2
Strategic
Planning
G
Price Promotion
N
C
Service
Step
TGT
Positioning
Strategy
D
E
WM
F
Definition: Strategic Planning=
A series of goaldirected decisions &
actions
matching your skills &
resources (strengths
& weaknesses)
w/ market threats &
opportunities
Strategic Planning
EVOLVING
MARKET
OPPORTUNITIES
and/or threats
RESOURCES
&
OBJECTIVES
LONG RUN
PROFITABILITY
AND GROWTH
Strategic Planning answers
the 3 Big Questions:
1.Where are
we now?
2.Where do we
want to go?
3.How do we
get there?
Company
Consumer
Competitors
Conditions
Org. goals & objectives
encapsulated in Mission & Vision
Statement answers 2nd Question:
2. Where do we
want to go?
–
–
–
–
What business(es) should be
in
Market positions to stake out?
Consumer needs & segments
serve?
Outcomes to achieve?
Mission or Purpose is a precise
description of what an organization does.
It should describe the business the
organization is in. It is a definition of
“why” the organization exists
A vision is a statement about what your
organization wants to become …
A compelling description of the state and
function of the organization once it has
implemented and achieved the strategic
plan…
Valuable
Build a
Strategic
Framework:
Mission
Statement
Vision
>Part 1: Strategy &
Vision Statements
>Part 2: Mission
Statements
Mission Statement
We will produce outstanding
financial returns by providing
totally reliable, competitively
superior, global, air-ground
transportation of high-priority
goods and documents that
require rapid, time-certain
delivery."
“PepsiCo’s overall mission is to increase the
value of our shareholders’ investment. We do
this through sales growth, cost controls and wise
investment of resources. We believe our
commercial success depends upon offering
quality and value to our consumers and
customers; providing products that are safe,
wholesome, economically efficient and
environmentally sound; and providing a fair
return to our investors while adhering to the
highest standards of integrity.”
Avoid Corporate
Myopia
Short
sightedness by
firms that
define their
business too
narrowly
Marketing Myopia Examples
Myopic Description:
 Railroad company
 Electricity company
 Television network
Broad Description:
 Transportation Co.
 Power company
 Entertainment
provider
Market Oriented Vision / Missions
COMPANY
PRODUCT-ORIENTED
MARKET-ORIENTED
VISION/MISSION STATEMENTS
VISION/MISSION
STATEMENTS
Revlon
We make cosmetics.
We sell hope…we accent a
lifestyle & self expression;
Disney
We run theme parks.
We make people happy..
by providing fantastic
experiences & entertainment
Philip Morris We Sell Cigarettes
We provide “Life's Simple
Pleasures.
Final Question answered by
Strategic Planning:
1.Where are we now?
2.Where do we want
to go?
3.How do we
get there?
*Growth, Competitive &
Functional Strategies
“If you don’t know
where you are going
any route will get you
there.”
Chris Bartlett,
Harvard Business School
3rd Q- Encompasses
3 Levels of Strategy
Corporate-Level : In what business should we compete?
Corporation
Business-Level : How should we compete?
Sensors Unit
Nano-Tech Unit
Cons.Elec. Unit
Functional-Level : How do we coordinate?
Finance
HR / R&D
Production
Marketing
Level 1
Corporate Strategy
In which businesses should we compete?
Corporation
Corporation
STRATEGIC
BUSINESS
UNIT #1
MARKET
COMPETITOR
A
COMPETITOR
B
STRATEGIC
BUSINESS
UNIT #3
STRATEGIC
BUSINESS
UNIT #2
COMPETITOR
C
COMPETITOR
D
COMPETITOR
E
?
MARKET
MARKET
COMPETITOR
F
COMPETITOR
G
COMPETITOR
H
COMPETITOR
I
Once decided what
businesses to
compete in –need to
decide -
what Products &
Markets to
compete w/& in=
Growth
Strategy
Situation Analysis
•Company
•Consumers
•Competitors
Strategic
Planning
Marketing Strategy
P’s
The Marketing Mix:
Growth &
Competitive
Product Place
Target
Market
Strategies
G
Price Promotion
N
•Conditions
C
Service
TGT
• PEST
Positioning
Strategy
D
E
WM
F
Growth Strategies
PRODUCT
Present
Present
Market
Penetration
New
Product
Development
MARKET
New
Market
Development
Diversification
To
Concentrate
or
Diversify…
that is the
question…
Concentrate on your primary line of
business
look for ways to meet growth objectives thru
increasing your level of operation in your
primary business
Market
Penetration
Increase market share among
existing customers.
Market
Development
Attract new customers
to existing products
Product
Development
Create new products
for present markets
Or Diversify…
Diversification
new products…
new markets… new alliances
Or Diversify…
P R O D U C TS
Present
Present
New
Market
Penetration
Product
Development
Market
Development
Diversification
M A R K E TS
New
Related Diversification
if opportunities exist to:
Transfer expertise/ capabilities/ technology
Combine related activities into single operation & reduce costs
Leverage use of firm’s brand name reputation
Product
Similarities
Operational
Skills-Capabilities
Related
Diversification
Similar
Technology
Customer
Profile
Distribution
Channels
Examples of Related Diversification

Darden Restaurants
–
–
–

Johnson & Johnson
–
–
–
–

Olive Garden
Red Lobster
Bahamas Breeze
Prescription drugs
Non-prescription drugs
(Tylenol, pepcid AC)
Band-aids
Baby products
PEPSICO
–
–
–
Soft drinks
Fruit Juices
Snack foods (Fritos, Lays,
Cracker Jacks)
Unrelated Diversification
Involves diversifying into businesses with
– No strategic fit
– No meaningful value chain relationships
– No unifying strategic theme


Approach is to venture into “any business
in which we think we can make a profit”
Firms pursuing unrelated diversification are often
referred to as conglomerates
Diversification viaMerger & Acquisition
A popular approach to diversification- altho
only ~20% succeed --M&A activity in 2004 was worth
more than $1 trillion
Advantages


Quicker entry into target market
Easier to hurdle certain entry barriers
–
–
–
–
Technological inexperience
Gaining access to reliable suppliers
Being of a size to match rivals in
terms of efficiency and costs
Getting adequate distribution access
Diversification via-
Joint Ventures & Strategic Alliances
Good way to diversify when:



Uneconomical/ risky to go it alone
Pooling competencies for more
competitive strength
Foreign partners needed to
surmount
–
–
–
–
Import quotas and Tariffs
Nationalistic political interests
Cultural roadblocks
Lack of knowledge about markets in
particular countries
nd
2
Level of Strategy
Corporate Level
Business unit Level
Functional strategy
Information
systems
Research &
development
Finance
Manufacturing
Marketing
Human
resources
Level 2: Business Unit Strategy
How do we compete?
STRATEGIC
BUSINESS
UNIT
Quality?
Focus?
Cost?
MARKET
COMPETITOR
A
COMPETITOR
B
COMPETITOR
C
Situation Analysis
•Company
•Consumers
•Competitors
Strategic
Planning
Marketing Strategy
P’s
The Marketing Mix:
Growth &
Competitive
Product Place
Target
Market
Strategies
G
Price Promotion
N
•Conditions
C
Service
TGT
• PEST
Positioning
Strategy
D
E
WM
F
 Competitive
Strategy is the
creation of a unique
& valuable position-
The position is based on– Performing
the
same activities as
competitors, but
differently
--or performing a
different set of
activities
Generic Competitive Strategies
Cost: Design,
produce, market
more efficiently
than competitors
Differentiation:
Deliver unique &
superior value in terms
of product quality,
features, service
Focus
= Competitive
Scope/ Breadth
of company’s
target market
5-50
Cost Leadership
Strategic Choices
A cost leader does not
try to be industry
innovator
 A cost leader positions
products to appeal to
mainstream customers
 The overriding goal isincreased efficiency &
lower costs relative to
rivals

Generic Business-Level
Strategy:Cost Leadership
 Advantages
If rivals charge
similar prices, a cost
leader achieves
superior profitability
– A cost leader is able
to charge a lower
price than
competitors
–
Cost Leadership
Disadvantages
 Competitors may
lower their
cost structures
 Competitors may imitate the
cost leader’s methods
 Cost reductions can impact
demand- product-service performance
drop below threshold acceptability…
Generic Business-Level
Strategy: Differentiation
 Create a
product that
customers perceive as
different or distinct in an
important way

Advantages
– Premium price
– Increased revenues =
superior profitability
Competitive Strategies;
Focused Differentiation:
 Focus
on particular
group or geographic
market
–
–
Seek differentiation
in targeted market
segment
Serve special needs
of narrow target
market
Differentiation Advantages
 Customers develop brand
loyalty: The greater the
loyalty.. The less the price
sensitivity…
Differentiators can pass price
increases on to customers
 Differentiation and brand
loyalty are barriers to entry

Differentiation:
Disadvantages
Difficulty in maintaining long-term
distinction in customers’ eyes
– Agile competitors can quickly
imitate
– Patents & first-mover advantages
are limited
 Difficulty/expense of maintaining
premium pricing– requires
greater marketing costs

Best-Cost Provider Strategies
 Combine
a strategic emphasis on low-cost with a
strategic emphasis on differentiation

Make an upscale product at a lower cost

Give customers more value for the money
Objectives
 Deliver superior value by meeting or exceeding buyer
expectations on product attributes and beating their
price expectations
 Be
the low-cost provider of a product with good-toexcellent product attributes, then use cost advantage
to underprice comparable brands
5-58
rd
3
Level of Strategy
Corporate Level
Business unit Level
Functional Strategy
Information
systems
Research &
development
Finance
Manufacturing
Marketing
Human
resources
Level 3
Functional Strategy
STRATEGIC BUSINESS UNIT
FINANCE
R&D
PRODUCTION
INVENTORY
MARKETING
/SALES
PURCHASING
How do we coordinate?
Getting In-Sync w/
Functional
Planning
Finance
Production
Marketing
R&D
HR
The goal of functional planning
is to achieve a state of
Internal Strategic
Alignment
INTERNAL STRATEGIC
ALIGNMENT
Achieved when :
1.
2.
All functional areas in
sync w/ one another,
As well as with the overall
strategic direction of the
firm.
For INTERNAL
STRATEGIC ALIGNMENT
to occur:
 Marketing/R&D
must be
operating in a manner that is
complementary to Production
 Which is complementary to
Human Resources
 Which is complementary to
Finance.
Even after divining & aligning strategy
still have problem of
implementation & performance
Marketing Strategy
Organizational
Structure
Training & Reward
Programs
Human
Resources
Communicate
Implementation
Motivate
Coordinate
Marketing Performance
Climate and
Culture
The Only Problem…





Only 5% of workforce gets the
strategy
Only 25% of managers have
incentives linked to strategy
60% of organizations don't link
budgets & strategy
85% of executive teams spend
<1 hour/ month discussing
strategy
90% fail to execute strategy
successfully
Robert S. Kaplan and David P. Norton
The Strategy-Focused Organization, 2000
The Marketing Implementation Process
Problem: Separation of Strategic
Planning & Marketing Implementation
Very Much
Strategic Planning
Time Spent
Marketing
Implementation
Very Little
Chief
Executive
Officer
Mid-level
Marketing
Managers
•Commitment
•Understanding
•Responsibility
Customer
Contact
Managers
Even after divining & aligning strategy
still have problem of
implementation & performance
Marketing Strategy
Human
Resources
Organizational
Structure
Training & Reward
Programs
Climate and
Culture
Implementation
Marketing Performance
Corporate Culture
Shared Beliefs & Values How employees behave w/
each other
 How employees behave w/
customers/clients
 How employees view their
relationship w/ stakeholders
 How employees view their
relationship w/ community
 How the organisation treats
its employees –

Benefits of
“Strategic Planning”
1.
2.
3.
4.
Makes managers more alert to
“winds of change, new opportunities, as
well as threatening developments”
Guides entire firm regarding “what
it is we are trying to do and to
achieve
Unifies numerous strategy-related
decisions and organizational
efforts
Provides basis for evaluating
competing budget requests
objectives
Strategy
Operations
Forces you to make choices on what you will do &not do
Strategy
Involves:
Strategic
thinking
planning &
management
within &
across all
levels of the
organization
Specifically-thinking about the
way things have been & are
now… AND- the way things
could/should be
NEW
CULTURE
OLD
Circus Traditional animal acts, painted clowns, and
high-wire stunts make for a very tired form of
entertainment.
NEW
Cirque du Soleil dramatic rethinking
of what a circus can
be, with amazing
costumes, music &
gymnastics
OLD
Grocery stores are big, messy places where you go
to buy plastic-wrapped and hot-house grown
fruits and vegetables.
NEW
Whole Foods where food shopping is a full on
aesthetic experience-this is their wall of
cheese!
OLD
Cotton Mop P&G studied the art of
cleaning in search of something
better than a wet mop, which
spreads as much dirt as it picks up
NEW
Swiffer P&G came up with a
whole new way to clean--using
electrostatic attraction. A
revolutionary dry mop is born
NEW
Sirius-Subscriber
model brings a
rich variety of
content via
satellite to your
car and your
handheld.
OLD
Radio Same old,
same old adchoked, preprogrammed
music and talk,
from big national
chains.
“At Sony we assume that all
products of our competitors have
basically the same technology,
price, performance and features.
Design is the only thing
that differentiates one
product from another in
the marketplace.” Norio Ohga
OLD
Best Buy has crowded
shelves, overwhelming
choice, and standard
sales pitches.
NEW
The Apple Store is spare,
elegant, and appealingly
interactive—a hip place to
be on a Sat. night.
OLD
Golden Nugget
Casino: Las
Vegas' early
emphasis on
gambling
overshadowed
amenities,
entertainment,
and atmosphere.
NEW
Luxor Hotel and
Casino: Exotically
themed hotels
with elaborate
décor and highend restaurants
have given Vegas
added allure.