CHAPTER 2 STRATEGIC PLANNING

Chapter Questions
How does marketing affect customer

value? How is strategic planning carried out at different levels of the organization? What does a marketing plan include?

Two Views of the Value-Delivery Process

Improving Value Delivery the Japanese Way

Zero customer feedback time

Zero product improvement time

Zero purchasing time

Zero setup time

Zero defects

The Generic Value Chain

 Core Business Processes / Benchmarks

The market sensing process Gathering MIS The new offering realization process R&D n launching The customer acquisition process targeting n
prospecting

The customer relationship management process understanding n offering product The fulfillment management process from receiving
order collecting payment

Characteristics of core competency

Applications in a wide variety of

markets Difficult to imitate A source of competitive advantage

Core Business Practices

Market Sensing

New Offering Realization

Customer Acquisition

Fulfillment Management

Customer Relationship Management

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Services of Air Deccan

This airline has been instrumental in providing air travel

to the common man who could not previously afford air travel.

Introducing tele-check-in facility

Positioning as a low cost carrier

Single class aircraft configuration Internet booking and cheap fare

Offering non-trunk short-haul routes and attracting high-

end railway traffic through comparable fares

Strategies of Air Deccan

Air Deccan has introduced the credit card masking

system at their call centers The company has acquired 30 Airbus A320, which are to be deployed starting in 2008 Advertisement through print, radio and billboards In flight magazine for revenue generating Tie-up with Caf Coffee Day ICICI-Travel agent purchase card Tie-ups with Reliance Web World

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3 Vs Approach to Marketing
Define the value exploration: cognitive

space, competencies space, resource space Define the value creation: customer benefits, business domain, business partners Define the value delivery: CRM, internal resource mgmt, business partner mgmt

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Nature of Strategic Planning

The Strategic Planning, Implementation, and Control Process

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The key elements DLFs business strategy

Increase land reserves in strategic locations

Expand core business verticals nationally

Diversify into SEZ development Undertake infrastructure development.

Diversify into hotel development

Enhance execution capabilities

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Corporate and Division Strategic Planning

Planning activities include:
1. 2.

3. 4.

Defining the Corporate Mission Establishing Strategic Business Units (SBUs), Assigning Resources to SBUs Planning New Businesses, Downsizing Older Businesses

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1 Mission statements define the companys major competitive scopes

Industry scope
Products and

Vertical scope Market-segment

applications scope Competence scope

scope Geographical scope

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Good Mission Statements

Focus on limited number of goals Stress major policies and values Define major competitive spheres
Critique the following hypothetical mission statement.

The

overall mission of XYZ is to provide cutting edge Internet services to consumer and business clients, while increasing the value of our shareholders investment.

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Mission statement example

eBay We help people trade
anything on earth. We will continue to enhance the online trading experiences of all collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.

Motorola
The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal objectives.

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2 Strategic business units (SBUs) share three characteristics:

Single business or collection of businesses which can be managed separately Has own set of competitors Has manager responsible for strategic planning and profits

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4 Assessing growth opportunities

Planning New Businesses and Downsizing Old Businesses

Involves taking advantage of one or more of the following: 1. Intensive growth: achieve further growth through a) penetration, b) product dev. c) mkt dev. d) diversify 2. Integrative growth: build acquire business related to current business 3. Diversification growth: unrelated business 4. Harvesting or divesting old businesses : sell off
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The strategic planning gap

Diversification growth Desired sales sales

Strategic planning gap

Integrative growth
Intensive growth

Current portfolio Time / years

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Three intensive growth strategies: Ansoffs product mkt expansion grid

Current product New product

Current market

Market penetration strategy

Product development strategy

New market

Market development strategy

Diversification strategy

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Dimensions That Define A Business

Customer groups

Customer needs

Technology
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Characteristics of SBUs
It is a single business or collection of

related businesses It has its own set of competitors It has a leader responsible for: Strategic planning Profitability Efficiency

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Corporate and Division Strategic Planning

The Business Strategic-Planning Process

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Product-Oriented versus Market-Oriented Definitions of a Business

Company
Missouri-Pacific Railroad

Product Definition
We run a railroad

Market Definition
We are a people-and-goods mover We help improve office productivity We supply energy

Xerox

We make copying equipment

Standard Oil

We sell gasoline

Columbia Pictures

We make movies

We market entertainment

Encyclopaedia

We sell encyclopedias

We distribute Information

Carrier

We make air conditioners and furnaces

We provide climate control in the home

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Business Strategic Planning

2 SWOT Analysis
Opportunities and threats

Monitor key forces for

stemming from the external environment Internal strengths and weaknesses

trends For each trend, conduct an MOA - Marketing Opportunity Analysis

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Business Strategic Planning

3 SWOT Analysis
Opportunities and threats

Brand awareness, image,

stemming from the external environment Internal strengths and weaknesses

reputation Distribution, pricing, customer loyalty, product benefits Finance, R&D, manufacturing

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2/3 SWOT ANALYSIS

Internal
Strength
Apply, sustain

External
Opportunity
Discover

Strategy
Overcome Avert

Weakness

Threat
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Different Strategic Imperatives

Internal
Strength
(1) Apply or Extend Advantage/Strength/Opportunity)

External
Opportunity

Weakness

Threat
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Business Strategic Planning

4 Effective Goals:
Must be Realistic Must be Consistent

Must be Hierarchical
Must be Stated Quantitatively
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5 Business Strategic Planning / strategy formulation

Differentiation

Focus

Porters Generic Strategies

Overall cost leadership

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Business Strategic Planning

6 Program formulation and program

implementation involves:

Developing supporting programs Estimating implementation costs Carefully managing the details so great strategy isnt ruined by poor implementation

7 Feedback and control is crucial

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The Marketing Process

a) Factors Influencing Company Marketing Strategy

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The Marketing Process

b) Marketing Plan Contents
Executive summary and TOC Current situation

Opportunity and issue analysis

Objectives Marketing strategy

Action programs
Financial projections

Controls

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Managing The Marketing Process

c) Methods of Organizing the Marketing Department
Function Global Aspects
Geographic Area Products or Brands

Corporate Divisions
Customers or Markets
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Managing The Marketing Process

D) Building a Companywide Marketing

Orientation Requires:

Commitment from top management Training programs; employee empowerment Recognitions and rewards programs Modern marketing planning system Process-outcome focus

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Managing The Marketing Process

e) Injecting more creativity into the

organization can be beneficial Successfully implementing programs requires four sets of skills: Diagnostic skills Identification of company level Implementation skills Evaluation skills

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The Marketing Process

f) Evaluating Annual Performance:
Marketing expenseto-sales analysis Market share analysis

Financial analysis

Performance Analysis Tools

Sales analysis

Market-based scorecard analysis

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Types of Control
Responsibility of top

Types of Control
Annual plan Profitability Efficiency Strategic

and middle management Examines whether planned results are achieved

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Types of Control
Responsibility of

Types of Control
Annual plan Profitability Efficiency Strategic

marketing controller Examines where the company is making and losing money

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Types of Control
Responsibility of line & staff

Types of Control
Annual plan Profitability Efficiency Strategic

and / or marketing controller Evaluates and attempts to improve spending efficiency of marketing expenditures

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Types of Control
Responsibility of top

Types of Control
Annual plan Profitability Efficiency Strategic

management and marketing auditor Examines whether company is pursuing its best opportunities

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Types of Control
Strategic controls should be conducted periodically

via:

Marketing-effectiveness reviews Marketing audits

Additional reviews to consider: Marketing excellence review Ethical and social responsibility review

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