Lecture 2

Strategic Planning
and the Marketing Process

BSAD 110
1
Winter 2005
Agenda

Strategic Planning and the Marketing Process

(textbook ch. 2)
Strategic planning process at corporate level
Marketing management process

Video case

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Strategic Planning and Marketing
Process
Strategic planning
The process of developing and maintaining a strategic fit
between the organization’s goal and capabilities and its
changing marketing opportunities
Why strategic planning?
Clarify objectives and policies
Better coordination of efforts
Help companies respond quickly to changes
“If you fail to plan, you are planning to fail.”

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Levels of Strategic Planning
Corporate Level
Company Mission
Company Goals
Business Portfolio

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.
Sony: TVs, video game consoles, DVD players, Hi-Fi speakers.
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 Corporate Strategic Planning

Corporate
level strategy
1. Defining the Company Mission

2. Setting Corporate goals

3. Designing the Business Portfolio

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Corporate Strategic Planning
1. Defining the company mission
 Mission statement
 A statement of the organization’s long-term
vision
 Mission statements should . . .
• serve as a guide for what the organization wants to accomplish.
• be motivating.
 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”.

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 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

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Market-oriented mission statements

Product-oriented Market-oriented

America We provide online We create customer

Online services connectivity, anytime,
anywhere
Disney We run theme parksWe create fantasies

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Corporate Mission Change

Company mission may change over time

To explore new opportunities
To respond to market change

Amazon.com changes its mission from

“become the world’s largest online bookstore”
to “become the world’s largest online store”.

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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

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

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

GE Applicances, GE
Aircraft Engines, GE
Captial, GE
Lighting,GE Medical
Systems, GE Plastics,
etc.
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Portfolio Analysis
A tool by which management identifies and evaluates
SBU’s.
Two steps:
 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

 2. develop growth strategies for adding new products or businesses to

the portfolio: product/market expansion grid

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Boston Consulting Group (BCG) matrix

Developed by Boston Consulting Group (BCG), a leading

management consulting firm.
Analyze a firm’s strategic business units and advise a firm
to locate the positions of each SBUs.
Used by more than 75% of the largest U.S. firms
Step 1: Analyze the Current Business Portfolio
Identifies Strategic Business Units
Each SBU is classified according to
Relative market share
Growth Rate of the industry
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Boston Consulting Group (BCG) matrix

Step 1: Analyze the Current Business

Portfolio
Identifies Strategic Business Units
Each SBU is classified according to
Relative market share
Growth Rate of the industry

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 Market Share and Relative Market Share

Unit sales of a firm

Market Share =
Unit sales of all firms in the industry

Unit sales of a firm

Relative Market Share =
Unit sales of the largest competitor in the industry

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 Market share vs. Relative market share

Unit sales of a firm

Relative Market Share =
Unit sales of the largest competitor in the industry

A Co. B Co. C Co. Market Relative

Share MS
Sedan 50 units 40 units 10 units ? ?

SUV 30 units 40 units 30 units ? ?

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 Boston Consulting Group matrix
Relative Market Share
High Low
10 1.0 .1
Stars Question Marks
Market Growth Rate

?
High

High growth & share High growth, low share

Profit potential Build into Stars or phase
May need heavy out
investment to grow Requires cash to hold
market share

Cash Cows Dogs

Low

Low growth, high share Low growth & share

Established, successful SBU Low profit potential
Produce cash
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 Boston Consulting Group matrix
Relative Market Share
High Low
10 1.0 .1
Market Growth Rate
High

Stars Question Marks

? ?
?
Cash Cows Dogs
Low

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Boston Consulting Group (BCG) matrix
 Step 2: Shape the future Business Portfolio
 Determine the future role of each SBU and choose the appropriate resource allocation
strategy:
Build: Investing more to build its share
• May be good for question marks
• Question markets may grow to stars
Hold: Defending the share at the current level
• May be good for cash cows
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.
Divest: selling or phasing out the SBU
• Good for dogs and question marks.
 SBUs change positions over time

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 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
Xbox Build
Marks
Microsoft High Low Cash cow Hold
Windows
Harvest
GM Low Low Dog
Oldsmobile Divest
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SONY’s BCG Matrix
Unit sales of a firm
Relative Market Share =
Unit sales of the largest competiror in the industry
Market share of a firm
=
Market share of the largest competiror

SBU Market Share Relative Market Market

market growth Size
share rate
Sony Largest
competito
r

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
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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

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Portfolio Analysis
A tool by which management identifies and evaluates
SBU’s.
Two steps:
 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

 2. develop growth strategies for adding new products or

businesses to the portfolio: product/market expansion grid

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Product/ Market Expansion Grid
A portfolio planning tool for identifying
company growth opportunities
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

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Product/ Market Expansion Grid

Existing New
Products Products

Existing
Markets Market Penetration Product Development

New
Markets Market Development Diversification

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Product/ Market Expansion Grid

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

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Marketing Management Process

Situational Analysis Situational Analysis

includes the analysis
of external and
Marketing Goals
internal marketing
environment
Market Segmentation,
Target Market Selection, We can find market
and Product Positioning
opportunities from
situational studies for
Marketing Mix each SBUs
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Marketing Goals

Goals must be
SMART!!
Poorly Stated Goals Well-Stated Goals
 Our objective is to  Our objective is to
maximize profits. increase market share
 Our objective is to better from 30 percent to 40
serve the customers. percent in 2003 by
increasing promotional
expenditures by 11
percent.
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Marketing Management Process
Situational Analysis
Market Segmentation
Target Market Selection
Marketing Goals Product Positioning

Market Segmentation,
Target Market Selection,
and Product Positioning

Marketing Mix

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Marketing Management Process
 Marketing mix strategy involves
Situational Goals decisions on 4P’s
Product
Price
Marketing Goals
Place (= distribution)
Market Segmentation,
Promotion
Target Market Selection,  Marketing mix is designed to
and Product Positioning satisfy the needs of consumers in
the target market

Marketing Mix

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Marketing Mix (= 4P’s)

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Understanding and Learning

Strategic Marketing Planning

Corporate level
Mission
Goals
Business portfolio

SBU level
Marketing management process

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Assignment #1
 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?

 Assignment #1 is due on 1/14.

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