MKTG3118 Strategy and Planning Textbook Notes. Chapter 1 Marketing and the Concept of Planning and Strategy

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1 PART I INTRODUCTION MKTG3118 Strategy and Planning Textbk Ntes Resurce based view, prter s five frces and psitining mdel! framewrks fr this curse Chapter 1 Marketing and the Cncept f Planning and Strategy Marketing cncept apprach directs the marketer t develp the prduct ffering, and entire marketing prgram, t meet the needs f the custmer base. Gal f this apprach is t sense and respnd strategically t cnsumer infrmatin Systems apprach instructs the marketer t view the marketing prcess hlistically and view prduct nt as an individual entity but as just ne aspect f the custmer s ttal needsatisfactin system Envirnmental apprach marketing decisin maker as the fcal pint f numerus envirnment within which the firm perates and that affect the success f the firm s marketing prgram (PEST) McKinsey & Cmpany s 5 glbal frces causing strategic marketers t questin their assumptins:! Emerging markets as the centres fr cnsumerism ad innvativeness! The necessity t imprve develped market prductivity! Increasing glbal netwrks! The tensin between rapidly rising resurce cnsumptin and sustainability! The increasingly larger rle f the state as a business regulatr and partner 1.1 Cncept f planning Planning! Leads t a better psitin, r standing, fr the rganisatin! Helps the rganisatin prgress in ways that its management cnsiders mst suitable! Helps every manager think, decide and act mre effectively and prgress in the desired directin! Helps keep the rganisatin flexible! Stimulates a cperative, integrated, enthusiastic apprach t rganisatinal prblems! Indicates t management hw t evaluate and check up n prgress tward planned bjects! Leads t scially and ecnmically useful results Planning prcess direct tward making tday s decisins with tmrrw in mind and a means f preparing fr future decisin s that they may be made rapidly, ecnmically, and with as little disruptin t the business as pssible! The basis f all planning shuld be t design curses f actin t be pursued fr achieving stated bjectives such that pprtunities are sized and threats are guarded against, but exact planning psture must be custm made with tailred decisin making fr the rganisatin! Distinctin must be made between Budget (yearly prgram f peratins) Planning (lng range setting bjectives and gals and develp strategy) Frecasting (cnsidering future changes and assessing the impact these changes n cmpany peratins)! Shift twards imprtance f planning, frm an aspect f the rganisatin as the basis f all effrts and decisins, t building f an entire rganisatin tward the achievement f designated bjectives! Planning can be a surce f cmpetitive advantage! Planning philsphies f Ackff

2 Satisfying philsphy aims at easily achievable gals and thus mulds planning accrdingly! gals are high enugh but nt high as pssible Optimising philsphy is funded in peratins research, seeking t mdel varius aspects f the rganisatin and defining them as bjective functins (which are then maximised r minimised accrding t cnstraints f management/envirnment)! seeks best available curse t realise bjectives and gals, whse success depends n hw cmpletely and accurately the mdel depicts the situatin and slutins t mdel can be planned and devised Adaptivising planning plans t prduce changes in underlying relatinships (rganisatin s internal and external envirnment and dynamics f the values f actrs in these envirnments) 1.2 Ethics and strategic marketing Wal-Mart s key strategy allws fr cst advantage thrugh passing csts alng the retail supply chain (upstream and dwnstream channel), which drives dwn peratinal csts. Fr example, it frced Kraft t lwer it s prices, and Kraft resultantly culd nt absrb the prfit reductins resulting frm price cuts, and had t restructure it s whle peratin and clse 39 plants, retrenching a significant amunt f peple. This lw cst fcus = lwer wages, increased sweatshp cnditins, and negative implicatins fr lcal business 1.3 Cncept f strategy Organisatins require strategy when! Resurces are finite! There is uncertainty abut cmpetitive strengths and behaviur! Cmmitment f resurces is irreversible! Decisins must be crdinated between far flung places and ver time! There is uncertainty abut cntrl f the initiative Strategy in a firm is the pattern f majr bjectives, purpses, r gals and essential plicies and plans fr achieving thse gals, stated in such a way as t define what business the cmpany is in r is t be in and the kind f cmpany it is r is t be.! Strategy prvides a unified sense f directin t which all members f the rganisatin can relate! Strategy is cncerned with deplyment f ptential fr results and the develpment f a reactin capability t adapt t envirnmental changes! Hierarchy f strategy Crprate strategy seeks t unify all the business lines f a cmpany and pint them tward an verall gal; defining the set f businesses that shuld frm the cmpany s verall prfile Business strategy fcuses n defining the manner f cmpetitin in a given industry r prduct/market segment; usually cvers a plan fr a single prduct r a grup f related prducts (ften mst ppular f strategic actin)! Each functinal area f the business cntributes t strategy frmulatin at different levels, and marketing ften has the highest degree f cntact with external envirnment, the least cntrllable envirnment f the firm Strategic rle f marketing is t establish a match between the firm and it s envirnment with tw dimensins " Present dimensin deals with existing relatinships f the firm t its envirnments " Future dimensin encmpasses intended future relatinships (in the frm f a set f bjectives) and the actin prgrams necessary t reach thse bjectives 1.4 Cncept f strategic planning

3 Strategy statement includes a descriptin f the new cmpetitive equilibrium t be created, the cause and effect relatinship that will bring it abut and the lgic t supprt the curse f actin! Planning articulates the means f implementing strategy.! Strategic plan specifies the sequence and he timing f steps that will alter cmpetitive relatinships Steps in effective strategic planning! Cmpany is in lgical business units that can identify markets, custmers, cmpetitrs and the external threats t business; business units managed semiautnmusly! There is willingness at crprate level t cmpensate line managers n lng term achievements, nt just yearly bttm line; fund research prgrams that culd give unit lng term cmpetitive edge; ffer unit planning supprt that prvides data n key issues and teach sphisticated planning techniques! Develp at crprate level capacity t evaluate and balance cmpeting requests frm business units fr crprate funds based n degree f risk and reward! Match shrter term business unit gals t a lng term cncept f cmpany s evlutin (15-20 years) T thrive in the cmpetitive markets with decreasing barriers t entry! Management must assume mre explicit rle in strategic planning, determining hw thughts ught t be rather than analysing hw they are! Strategic planning must becme an exercise in creativity instead f an exercise in frecasting strategic planning prcesses and tls that assume that the future will be similar t the past must be replaced by a mindset bsessed with being first t recgnise change and turn it int cmpetitive advantage! The rle f the planner must change frm being a purveyr f incrementalism t that f a crusader fr actin! Strategic planning must be restred t the cre f line management respnsibilities The abve can be described ver six actin-riented dimensins:! Managing fr cmpetitive advantage Key t prfitability is SCA based n superir perfrmance relative t cmpetitin. Superir perfrmance requires ding three things better than the cmpetitin: " Prduct/market clearly chsen r designated, based n marketplace realities and true understanding f weaknesses and strengths " Business system r structure enables cmpany t utperfrm cmpetitrs in prducing and delivering prduct r service " Management f verall business system, nt nly within the crpratin, but with external relatinships with suppliers, custmers and cmpetitrs SCA is increasingly difficult t btain temprary SCA culd be ptential alternative SCA s ethical cnsequences are being scrutinised mre than ever especially with regards t mnplistic and ligplistic behaviur White Spaces in cmpetitive advantage! Viewing change as an pprtunity Change culture t encurage adapting t cntinuusly emerging cnditins Especially changes in technlgy which shuld be seen as ptential pprtunities! Managing thrugh peple Management must create a visin f the rganisatin that includes " Where the rganisatin shuld be ging, based n clear examinatins f the cmpany s strengths and weaknesses " What markets it shuld cmpete in " Hw it will cmpete " Majr actin prgrams required Make said visin a reality

4 " Develp capabilities f the rganisatin " Expedite change " Remve bstacles " Shape envirnment Establishment and executin f crprate visin relies n effective recruitment, develpment and deplyment f human resurces! Shaping the strategically managed rganisatin Organisatinal change depends n structure, strategy, systems, style, skills, staff, shared value etc. Organisatins with an externally fcused, frward lking apprach t design f these abve depending factrs have a much better chance f self renewal than thse whse perspective is predminantly internal and histrical! Managing fr fcus and flexibility Fcus means finding ut and building n what the cmpany des best, meaning identifying custmer s evlving needs and develping cre cmpetencies Flexibility means identifying different pssible future scenaris and being ready t capitalise n ptential pprtunities shuld they arise Strategic planning f the past (e.g. 5 year plans updated annually) shuld be replaced by nging cncern fr the directin the rganisatin is taking! Managing fit acrss all functins Different functins r activities must reinfrce each ther fr a successful strategy 1.5 Strategic business units (SBU s) Business unit a unit cmprising ne r mre prducts having a cmmn market base whse manager has cmplete respnsibility fr integrating all functins int a strategy against an identifiable cmpetitr.! Business units = strategic business units = strategy centres = strategic planning units = independent business units! The philsphy behind SBUs: The diversified fir shuld be managed as a prtfli f businesses, with each business unit serving a clearly defined prduct-market segment with a clearly defined strategy. Each business unit in the prtfli shuld develp a strategy tailred t its capabilities and cmpetitive needs, but cnsistent with the verall crprate capabilities and needs The ttal prtfli f the business shuld be managed by allcating capital and managerial resurces t serve the interests f the firm as a whle t achieve balanced grwth in sales, earnings and assets mix at an acceptable and cntrlled level f risk Identifying SBUs! This is the first step in integrating prduct/market strategies! This means identifying natural businesses in which the crpratin is invlved SBUs are nt necessarily synnymus with existing divisins r prfit centres A SBU is cmpsed f a prduct r prduct lines having identifiable independence frm ther prducts r prduct lines in terms f cmpetitin, prices, sustainability f prduct, style/quality and impact f prduct withdrawal Creating SBUs! They may be created by applying a set f criteria cnsisting f price, cmpetitrs, custmer grups, and shared experience! The extent t which changes in a prduct s price entail a review f the pricing plicy f ther prducts can imply that these prducts have a natural alliance! If varius prducts/markets f a cmpany share the same grup f cmpetitrs, they may be amalgamated int an SBU fr the purpse f strategic planning

5 An effective marketing strategy is characterised by! Clear market definitin! Skilful match between crprate strengths and needs f the market! Superir perfrmance, relative t the cmpetitin, in the key success factrs f the business Matching needs between custmer and crpratin must nt nly be psitive it must be perceived t be better r strnger than the match between custmer and the cmpetitr. Marketing strategy in terms f the three cnstituents, is defined as an endeavur by a crpratin t differentiate itself psitively frm it cmpetitrs, using its relative crprate strengths t better satisfy custmer needs in a given envirnmental setting! The interplay between the three Cs shuld be encmpassed by a mind set f questining assumptins in the cntemprary dynamic marketing envirnment Debate regarding the rle f strategic marketing in crprate strategy! Marketing is lsing its influence within the crpratin Marketing isn t being emphasised in the bardrm (TMT) Marketing is perceived as a spend functin and nt as an investment that affects crprate perfrmance Issues that were under the marketing dmain have shifted t ther functins within the rganisatin (e.g. decisins n pricing and distributin shifted t finance and sales but are primarily marketing decisins) The CMO is less imprtant than the CFO The attritin rate fr CMOs is high, resulting in the average tenure f nly 22.9 mnths Link between marketing and finance:! The ultimate gal f any marketing expenditure shuld be t increase the value f the firm Three C s checklist! Based n the interplay f the strategic three Cs, frmatin f marketing strategy requires the fllwing three decisins Where t cmpete (definitin f the market cmpeting acrss an entire market r in ne r mre segments; chice f market and market segments t serve) Hw t cmpete (a means fr cmpeting new prduct t meet custmer need r establishing a new psitin fr an existing prduct etc.) When t cmpete (cnsideratin f timing f market entry first mver advantage r wait until primary demand is established etc.) 2.2. Aspects f strategic marketing Emphasis n lng-term implicatins! Lng term rientatin f strategic marketing requires greater cncern fr the envirnment! In the shrt run, ne may assume that the envirnment will remain stable, but this assumptin is nt at all likely in the lng run. Crprate units! Strategic marketing decisins require inputs frm three crprate aspects Crprate culture " Style, whims, fancies, traits, tabs, custms and rituals f tp management that ver time cme t be accepted as intrinsic t the crpratin Crprate publics " Varius stakehlders with an interest in the rganisatin e.g. custmers, emplyees, vendrs, gvernments and sciety Crprate resurces