Kotler on Marketing

A key ingredient of the marketing management process is insightful, creative marketing strategies and plans that can guide marketing activities. Developing the right marketing strategy over time requires a blend of discipline and flexibility. Firms must stick to a strategy but must also find new ways to constantly improve it.1 Marketing strategy also requires a clear understanding of how marketing works.2

STRATEGIC MARKET PLANNING

Strategic market planning is the managerial process that entails analysis, formulation and evaluation of strategies that would enable an organisation to

achieve its goals by developing and maintaining a

strategic fit between the organisations capabilities and the threats and opportunities arising from its changing environment.

Strategic Market Planning Process

The SMP Process involves :

Analysis (environmental analysis, competitor and industry analysis; customer and market analysis, firm internal analysis. The formulation and evaluation of alternative strategies.
The selection of a strategy, and The development of detailed plans for implementing.

While the Companies Corporate strategic planning formulates and decides on strategies they need to

consider the following aspects :

What What What What

is our corporate mission? are our strengths and weaknesses? are the relevant threats and opportunities? are our corporate objectives?

Defining Corporate Mission

What is our business? Who is our customer? What is of value to the customer?

What will our business be?

What should our business be? Answering these questions leads to a shared sense of purpose, direction and opportunity.

Establishing Strategic Business Units (SBU) A business can be defined in terms of three

dimensions: customer groups, customer needs,

and technology.

Assigning Resources to each SBU The purpose of identifying the companys

SBUs is to develop separate strategies and

assign appropriate funding.

Planning New Business, Downsizing Older Businesses

When there is a strategic gap between

future desired sales and projected sales.

Desired sales

Diversification
Integrative growth Intensive growth Strategic planning gap

Current portfolio

Time (years)

Current Products

New Products

Market

Current Markets

Penetration
Strategy

Product Development Strategy

New Markets

Market Development Strategy

Diversification Strategy

Ansoffs Product Market Expansion Grid

Ansoffs Model
Present Products I. Market Penetration (Intensive Growth) New Products III. Product Development (Intensive)

Present Market

Increase Market Share

Attract

users of competitors products

nonusers into users

Product Product Product Product New

reformulation strategy
quality improvement strategy

Convert Increase Increase Find

product usage
the frequency of purchase

feature additions strategy

line extension strategy

new applications for current users geographically

product development strategy

II. Market Development (Intensive)

Expand

Diversification
Related unrelated

New Market

Target

new segments

Integrative Growth Forward Integration Backward Integration Horizontal Integration

STRATEGIC BUSINESS UNIT (S B U )

SBU denotes a division, product line, or other profit centre within a company that:

Produces and markets a well defined set of related products and / or services,

Serves a clearly defined set of customers, and Competes with a distinctive set of competitors.

Boston Consulting Groups (BCG) Growth / Share Matrix :

BCG is simple but useful strategic planning

technique based on an analysis of a companys

product portfolio.

The technique entails assigning each individual

product (SBU) of an organisation to one of four possible cells in a simple matrix according to the relative market share and rate of market growth associated with that particular product / business.

According to the cell of the matrix, the

product / business is calculated. They are

classified as : Stars, Cashcows, Question

Marks / Problem Children and Dogs.

20% 18% 16%

Stars

Question Marks

14%
12% 10%

8%
6% 4% 2%

Cash Cow

Dogs

Relative Market Share

Stars
These SBUs are in the high market growth rate / high relative market quadrant. Deletion / retention decision SBUs here should be retained in the firms portfolio.

Market Share Strategy Decision :

An SBU in this quadrant with a very high relative market share the appropriate strategy would be market share maintenance.

On the other hand, for an SBU whose relative market share

is marginal then the appropriate market-share strategy

would be to build share.

Cash Flow Outlook :

An SBU with a high relative market share in a high-growth market will produce a high level of cash owing to experience effects and the result is high profit margins.

Maintaining considerable equipment.

market cash to

share

will

require increased

support

expenditures on working capital and on plant and

Building Market share in such a market will require even larger cash outlays to support increased, scale of operations.

SBUs in the high market growthrate / highrelative market share quadrant will be self

sustaining.

Their high relative market share, coupled with relatively high profit margins and low costs owing to experience effects makes them a major generator of cash.

However, a strategy of share building or share maintenance in a high growth market also makes them a major user of cash.

SBUs in this quadrant tend to be either in a state

of cash balance (cash outflow = cash inflow) marginal cash surplus, or marginal cash deficit.

Cash Cows :
These are SBUs in the low market growth / high relative market share quadrant.

Deletion / Retention decision :

SBUs in this quadrant should be retained in the firms portfolio.

Market Share Strategy Decision :

A strategy of market share maintenance is recommended in view of low rate of their market growth.

Investments in capacity expansion may not be desirable, However, investments may be made which will improve manufacturing processes that might lead to lower costs and / or better quality products.

Cash Flow Outlook

Here, the SBU will be a net cash generator given

its high relative market share.

Relatively lower costs, vis--vis competitors

because of experience effects and high profit

margins,

A sizable net cash surplus will be a major source

of cash to the parent corporation.

It may be used to :

Finance the growth (share building strategy) of selected SBUs in the highmarketgrowth- rate / low-relative-market-share.

Finance corporate R & D efforts oriented towards the development of new SBUs,

Finance the acquisition of new SBUs, and Meet other financial obligations of the parent company eg. Dividend payments.

Question Marks
SBUs in high-market-growth-rate / low-relativemarket share quadrant.

Retention / Deletion Decision :

For some SBUs, a firms competitors might be

holding commendable position under such circumstances the firm needs to invest heavily to build market share and move the SBU into Star quadrant.

The viability of a market share building strategy should be on identifiable sources of sustainable advantage which will be a major consideration in deciding which SBUs should be retained or deleted.

Market Share Strategy Decision : A share building strategy for SBUs retained in the

portfolio and a share harvesting or liquidation

strategy for SBUs to be deleted.

Cash Flow Outlook : SBUs here need a sizable cash infusion to finance share building strategies and to make investments in plant and equipment. The source of cash to finance share-building strategy of the SBUs to be retained comes from the cash surplus generated by cash cow (SBU).

Dogs
SBUs are in the low market growth rate / low relative market share.

Retention / Deletion Decision : Deletion of SBU is generally advocated.

Market share strategy decision :

A market share harvesting strategy is generally advocated if for some reason (exit barriers, lack of buyers) a firm is unable to divert some of SBUs.

Cash Flow Outlook

Minimum investment in running day-to-day operations of these SBUs and pursuing a share harvesting strategy could lead to the generation of a substantial cash surplus. Low Investment : Attempt to harvest the

business, drawing cash out and cutting investment

to a minimum.
Divestiture : Sell or liquidate the business

Porters Generic Strategies

Michael

Porter

proposed

three

generic

strategies for strategic thinking

a) Overall cost leadership

b) Differentiation

c) Focus

G E MATRIX
Business Strength / Position
(its ability to compete)

High

Medium

Low

Market / Industry Attractiveness

M
L

1
2

2
3

3
3

1. Invest / Grow 2. Selective Investment 3. Harvest / Divest

Evaluating the ability to compete

Market Share Share Growth Share by Segment Customer Loyalty Brand Reputation Margins Technology Skills Marketing Distribution Network

Evaluating Market Attractivenss

Market Size Annual Market Growth Customers satisfaction levels Competition ; types Profitability Technology Government regulations Sensitivity to economic trends

BUSINESS STRENGTH / POSITION Strong

M A R K E T A T T R A C T I V E N E S S

Medium
INVEST TO BUILD

Weak
BUILD SELECTIVELY

PROTECT POSITION

High

Invest to grow at maximum digestible rate Concentrate effort on maintaining strength

Challenge for leadership Build selectively on strengths Reinforce vulnerable Areas

Specialise around limited strengths Seeks ways to overcome weaknesses Withdraw if indications of sustainable growth are Lacking

M A R K E T

Strong
BUILD SELECTIVELY Invest heavily in most attractive segments

Medium
SELECTIVITY / MANAGE FOR EARNINGS Protect existing program Concentrate investments in segments where profitability is good and risks are relatively low

Weak
LIMITED EXPANSION OR HARVEST Look for ways to expand without high risk ; otherwise, minimise investment and rationalise operations

A T T R A C T I V E N E

Medium

Build up ability to counter competition Emphasise profitability by raising productivity

S
S

M A R K E T

Strong
PROTECT AND REFOCUS Manage for current earnings

Medium
MANAGE FOR EARNINGS Protect position in most profitable segments Upgrade product line Minimise investment

Weak
DIVEST Sell at time that will maximise cash value Cut fixed costs and avoid investment meanwhile

A T T R A C T I V E N E

Low

Concentrate on attractive segments Defend strengths

S
S