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Lecture 2

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					     Lecture 2
                      Strategic Planning
              and the Marketing Process




BSAD 110
                                           1
Winter 2005
Agenda

 l StrategicPlanning and the Marketing Process
   (textbook ch. 2)
             planning process at corporate level
   ¡ Strategic

   ¡ Marketing management process



 l Video   case


                                                   2
Strategic Planning and Marketing
Process
l   Strategic planning
    ¡   The process of developing and maintaining a strategic fit
        between the organization’s goal and capabilities and its
        changing marketing opportunities
l   Why strategic planning?
    ¡ Clarify objectives and policies
    ¡ Better coordination of efforts

    ¡ Help companies respond quickly to changes

l   “If you fail to plan, you are planning to fail.”

                                                                    3
Levels of Strategic Planning
l   Corporate Level
    ¡ Company Mission
    ¡ Company Goals
    ¡ Business Portfolio


l   Strategic business unit (SBU) level
    ¡   A strategic business unit is a unit of the company that
        has a separate mission and objectives and that can be
        planned independently from other company businesses.

    ¡   A SBU can be a company division, a product line within
        a division, or a single product or brand.
         l   Sony: TVs, video game consoles, DVD players, Hi-Fi
             speakers.                                            4
 Corporate Strategic Planning

Corporate
level strategy
                 1. Defining the Company Mission




                     2. Setting Corporate goals




                 3. Designing the Business Portfolio
                                                       5
Corporate Strategic Planning
•   Defining the company mission
    ¡   Mission statement
        l   A statement of the organization’s long-term vision
        l   Mission statements should . . .
            •   serve as a guide for what the organization wants to accomplish.
            •   be motivating.
                 Ÿ EX: Coca-Cola “to put Coke with arm’s reach of every
                      consumer in the world”
            •   be neither too narrow, nor too broad.
            •   fit with the market environment.
            •   be “market-oriented” rather than “product-oriented”.




                                                                                  6
Market-oriented mission statements


           Product-oriented Market-oriented


Wal-mart We run discount         We deliver low prices,
           stores                every day

Internet   We provide lists of   We help users find
search     web addresses         what they require as
                                 quickly as possible
engine

                                                          7
Market-oriented mission statements


          Product-oriented Market-oriented


America   We provide online   We create customer
Online    services            connectivity, anytime,
                              anywhere
Disney    We run theme parks We create fantasies




                                                       8
Corporate Mission Change

l Company   mission may change over time
  ¡ To explore new opportunities
  ¡ To respond to market change



l Amazon.com  changes its mission from
 “become the world’s largest online bookstore”
 to “become the world’s largest online store”.


                                                 9
Corporate Strategic Planning

2. Setting corporate goals
   •       Goals covert the mission into targeted level of
           performance to be achieved
   •       More specific, actionable than mission statement
   •       Examples of corporate goals
       •     Profit, sales revenue, market share, unit sales, employee
             welfare, social responsibilities, survival




                                                                         10
Setting Corporate Goals
l   Goals should be SMART                 “We   will achieve sales of
    ¡   Specific                              $125,000 in the first year of
         l   “To achieve sales of             operations”
             $125,000” rather than “We
             want to be leaders”
    ¡   Measurable                        l   Specific
         l   Goals should have                 ¡   it measures sales
             quantifiable dimensions      l   Measurable
    ¡   Achievable                             ¡   $125,000 target
         l   Goals should be feasible     l   Achievable
    ¡   Realistic                              ¡   ?
         l   Goals should be meaningful   l   Realistic
    ¡   Time-based                             ¡   sales are important
         l Goals should have time         l   Time-based
           frames                              ¡   one-year time frame


                                                                          11
3. Designing Business Portfolio
                     l   Business portfolio is the
                         collection of businesses
                         and products that make
                         up the company.

                     l   GE Applicances, GE
                         Aircraft Engines, GE
                         Captial, GE
                         Lighting,GE Medical
                         Systems, GE Plastics,
                         etc.
                                                 12
Portfolio Analysis
 l   A tool by which management identifies and evaluates
     SBU’s.
 l   Two steps:
 l   1. analyze its current business portfolio or Strategic Business Units
     (SBU’s), and decide which SBU’s should receive more, less, or no
     investment: BCG Matrix

 l   2. develop growth strategies for adding new products or businesses to
     the portfolio: product/market expansion grid




                                                                             13
Boston Consulting Group (BCG) matrix

l   Developed by Boston Consulting Group (BCG), a
    leading management consulting firm.
l   Analyze a firm’s strategic business units and advise a
    firm to locate the positions of each SBUs.
l   Used by more than 75% of the largest U.S. firms
l   Step 1: Analyze the Current Business Portfolio
    ¡ Identifies Strategic Business Units
    ¡ Each SBU is classified according to

                 market share
        l Relative

        l Growth Rate of the industry                    14
Boston Consulting Group (BCG) matrix

l Step   1: Analyze the Current Business Portfolio
            Strategic Business Units
  ¡ Identifies

  ¡ Each SBU is classified according to
     l Relative market share
     l Growth Rate of the industry




                                                 15
Market Share and Relative Market Share




                                         16
Market share vs. Relative market share




        A Co.    B Co.    C Co.    Market   Relative
                                   Share    MS
Sedan   50 units 40 units 10 units ?        ?

SUV     30 units 40 units 30 units ?        ?


                                                  17
       Boston Consulting Group matrix
                                        Relative Market Share
                                      High                        Low
                       10                              1.0                               .1

                        Stars                            Question Marks            ?
                High
Market Growth Rate




                        lHigh  growth & share            lHigh growth, low share
                        lProfit potential                lBuild into Stars or phase out
                        lMay need heavy investment       lRequires cash to hold market
                        to grow                          share
                        Cash Cows                        Dogs
                        lLow growth, high share          lLow growth & share
                Low




                        lEstablished, successful SBU     lLow profit potential
                        lProduce cash
                                                                                    18
       Boston Consulting Group matrix
                                      Relative Market Share
                                    High                    Low
                       10                      1.0                         .1
                High
Market Growth Rate




                        Stars                    Question Marks
                                                        ?             ?
                                                                  ?
                        Cash Cows                Dogs
                Low




                                                                      19
Boston Consulting Group (BCG) matrix

l   Step 2: Shape the future Business Portfolio
    ¡   Determine the future role of each SBU and choose the appropriate
        resource allocation strategy:
         l Build:    Investing more to build its share
             • May be good for question marks
             • Question markets may grow to stars
         l Hold:    Defending the share at the current level
             • May be good for cash cows
         l Harvest:      Milking its short-term cash flow
             • Eliminating R&D expenditures, reducing advertising expenditures
             • May be good for weak cash cows
             • Can also be used for dogs and question marks.
         l Divest:    selling or phasing out the SBU
             • Good for dogs and question marks.                                 20

    ¡   SBUs change positions over time
Boston Consulting Group matrix

SBUs            Relative   Market   BCG matrix   Strategy
                Market     growth
                share      rate
Sony            High       High     Stars         Hold
Playstation 2
                                                  Build
Microsoft       Low        High     Question      Build
Xbox                                Marks
Microsoft       High       Low      Cash cow      Hold
Windows
                                                  Harvest
GM              Low        Low      Dog           Divest
Oldsmobile
                                                            21
SONY’s BCG Matrix


SBU           Market Share                Relative   Market   Market
                                          market     growth   Size
                                          share      rate
              Sony           Largest
                             competitor


TV’s            30 %            20 %       ?            6%     100 units

Video Game      60 %            30 %       ?           15 %    25 units
Consoles


DVD Players     25 %            30 %       ?           20 %    50 units

Hi-Fi            5%             20 %       ?            3%     20 units
Speakers
                                                                     22
SONY’s                    RELATIVE MARKET SHARE
 SBUs
                     10    High        1.0            Low         0.1
              20%                             DVD
                                             player
              High            Play
                             Station
GROWTH RATE
  MARKET




              10%           Stars            Question marks



              Low              TV
                                                         Hi-Fi
                                                        speaker

              0%          Cash cows               Dogs
                                                                        23
Portfolio Analysis
 l   A tool by which management identifies and evaluates
     SBU’s.
 l   Two steps:
 l   1. analyze its current business portfolio or Strategic Business Units
     (SBU’s), and decide which SBU’s should receive more, less, or no
     investment: BCG Matrix

 l   2. develop growth strategies for adding new products or
     businesses to the portfolio: product/market expansion grid




                                                                             24
Product/ Market Expansion Grid
 lA   portfolio planning tool for identifying
   company growth opportunities
 l In term of growth opportunities, a company
   has to consider both its markets and its
   products.
    ¡ Focus on existing product and existing market
    ¡ Focus on existing product and new market
    ¡ Develop new product on existing market
    ¡ Develop new product for new market


                                                      25
Product/ Market Expansion Grid



                Existing               New
                Products             Products

Existing
Markets    Market Penetration   Product Development


 New       Market Development   Diversification
Markets


                                                      26
Product/ Market Expansion Grid

l   Market penetration
    ¡   Making more sales to current customers without changing its
        products
    ¡   (e.g.) Sales promotion, Advertising, Price discount
l   Market development
    ¡   Identify and develop new markets for its current products
    ¡   (e.g.) Pet-cola
l   Product Development
    ¡   Offering modified or new product to current market
    ¡   (e.g.) Intel
l   Diversification
    ¡   Develop new products for new markets
    ¡   (e.g.) Xerox personal computer
                                                                      27
Marketing Management Process




                               28
Marketing Management Process

                   l   Situational Analysis
                       includes the analysis
                       of external and
                       internal marketing
                       environment
                   l   We can find market
                       opportunities from
                       situational studies for
                       each SBUs
                                                 29
Marketing Goals



          Goals must be SMART!!

Poorly Stated Goals            Well-Stated Goals
v Our objective is to          v Our objective is to
  maximize profits.              increase market share
v Our objective is to better     from 30 percent to 40
  serve the customers.           percent in 2003 by
                                 increasing promotional
                                 expenditures by 11
                                 percent.
                                                          30
Marketing Management Process

                   l   Market Segmentation
                   l   Target Market Selection
                   l   Product Positioning




                                             31
Marketing Management Process
                   l   Marketing mix strategy
                       involves decisions on 4P’s
                       ¡ Product

                       ¡ Price

                       ¡ Place  (=
                         distribution)
                       ¡ Promotion
                   l   Marketing mix is designed
                       to satisfy the needs of
                       consumers in the target      32


                       market
Marketing Mix (= 4P’s)




                         33
Understanding and Learning

l   Strategic Marketing Planning
    ¡ Corporate level
       l Mission

       l Goals

       l Business portfolio


    ¡ SBU level
       l Marketing management process




                                        34
Assignment #1
l   Visit a company’s (or a non-profit organization’s/ a
    product’s / a service’s) website
    ¡ Using  the information on website, describe the
      company’s mission (statement)
    ¡ Evaluate whether the company has adopted the
      marketing concept
    ¡ How does the company try to establish
      relationships with customers?

l   Assignment #1 is due on 1/14.

                                                           35

				
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