UCSI UNIVERSITY

MARKETING PROCESSES 1

DEVELOPING MARKETING STRATEGIES AND PLANS

 Corporate and division strategic planning

All corporate headquarters undertake four planning activities:

a. Defining the corporate mission.

b. Establishing strategic business units (SBUs).
c. Assign resources to each SBU.
d. Assessing growth opportunities.

1. Defining the Corporate Mission

To define its mission, a company should address Peter Drucker’s classic questions: What is
our business? Who is the customer? What is of value to the customer? What will our business
be? What should our business be? Organisations develop mission statements to share with
managers, employees, and customers. A clear, thoughtful mission statement provides
employees with a shared sense of purpose, direction, and opportunity.

Good mission statements have five major characteristics:

a. They focus on a limited number of goals.

b. They stress the company’s major policies and values.
c. They define the major competitive spheres within which the company will operate:

o Industry. The range of industries in which a company will operate. Some companies
will operate in only one industry; some only in a set of related industries; some only
in industrial goods, consumer goods, or services; and some in any industry.
o Products and applications. Range of products and applications a company supply.
o Competence. The range of technological and other core competencies that a company
will master and leverage.
o Market-segment. The type of market or customers a company will serve.
o Vertical. The number of channel levels from raw material to final product and
distribution in which a company will participate.
o Geographical. The range of regions, countries, or country groups in which a
company will operate.

d. They take a long-term view – the yrs to achieve this

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 - Corporate mission usually take 10 yrs to achieve (mission, goal, objectives)
e. They are as short, memorable, and meaningful as possible
- Short is easy to catch ppl attention

2. Establishing strategic business units (SBUs)

Levitt encouraged companies to redefine their businesses in terms of needs, not products.
Table 2.2 gives several examples of companies with a product and a market definition of their
businesses. A target market definition tends to focus on selling a product or service (Pepsi®
and all who drink cola sodas). A strategic market definition is broader and more
encompassing (Pepsi redefines its strategy to everyone who has a “thirst”).

- Market definition – produce diff products

Product definition:
Weakness: Saturation point – sales not increasing
- Adv = the leader of the industry (e.g., Japanese company)
- Dis= lack of creativity

Market Definition:
Productivity – related to time (help to improve the office efficiency)
e.g., Canon- printer, calculator, fax etc
problems – inventory, cost, money – expenditure increase

A business can be defined in terms of three dimensions: Customer groups, Customer needs,
Technology. General Electric classified its business into strategic business units (SBUs). An
SBU has three characteristics:

a. It is a single business or collection of related businesses that can be planned separately

from the rest of the company.
b. It has its own set of competitors.
c. It has a manager who is responsible for strategic planning and profit performance and
who controls most of the factors affecting profit.

3. Assigning resources to each SBUs

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Several portfolio-planning models provide an analytical means for making investment
decisions. Management would want to grow, “harvest” or draw cash from, or hold on to the
business. More recent methods that firms use to make internal investment decisions are based
on shareholder value analysis, and whether the market value of a company is greater with an
SBU or without it.

4. Assessing Growth Opportunities

Assessing growth opportunities involves planning for new businesses, downsizing or

terminating old businesses. Figure 2.5 illustrates this strategic-planning gap for a major
manufacturer.

The first option is to identify opportunities to achieve further growth within current
businesses (intensive opportunities). The second is to identify opportunities to build or
acquire businesses that are related to current businesses (integrative opportunities). The third
is to identify opportunities to add attractive businesses that are unrelated to current businesses
(diversification opportunities).

 Intensive Growth

Corporate manager’s first course of action should be a review of opportunities for improving
existing businesses. Figure 2.6 shows Ansoff’s “product-market expansion grid.”

Market Penetration strategy

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Tactics
1. Increase the frequency of use
e.g., the toothpaste ads – mentioned to brush teeth after every meal – the replenish of
toothpaste is high

2. Increase the quantity of use

e.g., increase the mm of the toothpaste, ppl use more, replenish faster

subconscious mind ads – e.g., toothpaste

2. Introduce new uses

3. Increase the market share
- Sell to competitors’ customer
- Promotion to use to encourage competitors’ customer to buy our products

 Integrative Growth (Market penetration)

Sales and profits may be increased through: Backward integration, Forward integration, and
Horizontal integration.

 Diversification Growth (diversification strategy) – high risk

When opportunities are found outside the present business and the company has the right mix
of business strengths to be successful. Several types are possible: New products that have
technological or marketing synergies with existing product lines (concentric strategy), New
products unrelated to the current industry (horizontal strategy), New businesses that have no
relationship to its current technology, products, or markets (conglomerate strategy).

 Downsizing and Divesting Older Businesses

Weak businesses require a disproportionate amount of managerial time/talent. Manager

should focus on growth opportunities, not fritter away energy and resources trying to salvage
haemorrhaging businesses.
5. Organization and Organizational Culture

Organization consists of its structures, policies, and corporate culture, all of which can
become dysfunctional in a rapidly changing business environment. Corporate culture
defined as “shared experiences, stories, beliefs, and norms that characterize an
organization.” Sometimes corporate culture develops organically and is transmitted by the
CEOs personality and habits to the company employees.

6. Marketing innovation

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Senior management should identify and encourage fresh ideas from three groups that tend to
be underrepresented in strategy making: employees with youthful perspectives; employees
who are far removed from company headquarters; and employees who are new to the
industry.

A scenario analysis consists of developing plausible representations of a firm’s possible

future that make different assumptions about forces driving the market and include different
uncertainties. Managers think through each scenario with the question: “What will we do if it
happens?” They adopt one scenario as the most probable and watch for signposts that might
confirm or disconfirm the scenarios.

 Business unit strategic planning

1. The Business Mission

Each business unit needs to define its specific mission within the broader company mission.

2. SWOT Analysis

The evaluation of a company’s strengths, weaknesses, opportunities, and threats is called

SWOT analysis. It involves monitoring the external and internal marketing environment.

 External Environment (Opportunity and Threat) Analysis

A business unit must monitor key macro-environment forces (Demographic-economic,

Natural, Technological, Political-legal, Social-cultural) and significant microenvironment
actors (Customers, Competitors, Suppliers, Distributors, Dealers) that affect its ability to
earn profits.

A marketing opportunity is an area of buyer need and interest in which there is a high
probability that a company can profitably satisfy that need. There are three sources of market
opportunities:

a. First is to supply something in short supply

b. Second is to supply an existing product or service in a new or superior way. There are
several ways to uncover possible product or service improvements:

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 o By asking customers for their suggestions (problem detection method).
o By asking consumers to imagine an ideal version of the product or service (ideal
method).
o By asking consumers to chart their steps in acquiring, using, and disposing of a
product (consumption chain method).

c. Third is a very new product or service.

Opportunities can take many forms, and marketers must be good at spotting them. Consider
the following:

o A company may benefit from converging industry trends and introduce hybrid
products or services that are new to the market.
o A company may make a buying process more convenient or efficient.
o A company can meet the need for more information and advice.
o A company can customise a product or service that was formerly offered only in
a standard form.
o A company can introduces a new capability.
o A company may be able to deliver a product or a service faster.
o A company may be able to offer a product at a much lower price.

To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to

determine attractiveness and probability of success:

a. Can the benefits involved in the opportunity be articulated convincingly to a defined

target market(s)?
b. Can the target market(s) be located and reached with cost-effective media and trade
channels?
c. Does the company possess or have access to the critical capabilities and resources
needed to deliver the customer benefits?
d. Can the company deliver the benefits better than any actual or potential competitors
can?
e. Will the financial rate of return meet or exceed the company’s required threshold for
investment?

An environmental threat is a challenge posed by an unfavourable trend or development that

would lead, in the absence of defensive marketing action, to lower sales or profit.

 Internal Environment (Strengths/Weaknesses) Analysis

It is one thing to find attractive opportunities and another to be able to take advantage of
them. Each firm must evaluate its internal strengths and weaknesses. George Stalk suggests
that winning companies are those that have achieved superior in-company capabilities, not
just core competencies. Stalk calls this capabilities-based competition.

3. Goal Formulation

Once the company has performed a SWOT analysis, it can proceed to develop specific goals
for the planning period. This stage of the process is called goal formulation. Managers use
the term “goals” to describe objectives that are specific with respect to magnitude and time.

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The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they
must meet four criteria:

a. They must be arranged hierarchically, from the most to least important.

b. Objectives should be stated quantitatively whenever possible.
c. Goals should be realistic.
d. Objectives must be consistent.

4. Strategic Formulation

Every business must design a strategy for achieving its goals, consisting of a marketing
strategy, and a compatible technology strategy, and sourcing strategy.

 Porter’s Generic Strategies

Michael Porter has proposed three generic strategies that provide a good starting point for
strategic thinking:

a. Overall cost leadership

The business works hard to achieve the lowest production and distribution costs so that it can
price lower than its competitors and win a large market share. The problem with this strategy
is that other firms will usually compete with still lower costs and hurt the firm.

b. Differentiation

The business concentrates on achieving superior performance in an important customer

benefit area valued by a large part of the market. The firm cultivates those strengths that will
contribute to the intended differentiation.

c. Focus

The business focuses on one or more narrow market segments. The firm gets to know these
segments intimately and pursues either cost leadership or differentiation within the segment.

According to Porter, firms pursuing the same strategy to the same target market constitute a
strategic group. The firm that carries out that strategy best will make the most profits. Porter
defines strategy as “the creation of a unique and valuable position involving a different set of
activities”.

 Strategic Alliances

Companies are discovering that there is a need for strategic partners if they hope to be
effective. Many strategic alliances take the form of marketing alliances. These fall into four
major categories:

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 a. Product or service alliances - One company licenses another to produce its product,
or two companies jointly market their complementary products or a new product.
b. Promotional alliances - One company agrees to carry a promotion for another
company’s product or service.
c. Logistics alliances - One company offers logistical services for another company’s
product.
d. Pricing collaborations – One or more companies join in a special pricing
collaboration.

To keep strategic alliances thriving, corporations have begun to develop organizational

structures for support and have come to view the ability to form and manage partnerships as
core skills (called Partner Relationship Management, PRM).

5. Program Formulation and Implementation

A great marketing strategy can be sabotaged by poor implementation. Marketing must

estimate its costs. In implementing strategy, companies must not lose sight of the multiple
stakeholders involved and their needs.

According to McKinsey & Company, strategy is only one of seven elements in successful
business practice. The first three—strategy, structure, and systems are the “hardware” of
success. The next four—style, skills, staff, and shared values are the “software”

“Style” means that company employees share a common way of thinking and behaving.
“Skills” means that the employees have the skills necessary to carry out company’s strategy.
“Staffing” means that the company has hired able people, trained them well, and assigned
them to the right jobs. “Shared values,” means that employees share the same guiding values.

6. Feedback and Control

As it implements its strategy, the firm needs to track the results and monitor new
developments. A company’s strategic fit with the environment will inevitably erode because
the market environment changes faster than the company’s 7Ss.

Organizations are subject to inertia and are set up as efficient machines and it is difficult to
change one part without adjusting everything else.

 Product planning: the nature and contents of a marketing plan

Each product level (product line, brand) develops a marketing plan for achieving its goals. A
marketing plan is a written document that summarizes what the marketer has learned about
the marketplace and indicates how the firm plans to reach its marketing objectives.

Marketing plans are becoming more customer and competitor orientated better reasoned and
more realistic than in the past. The plan draws more input from all the business functions and
is team developed.

1. Contents of the marketing plan

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  Executive summary and table of contents

The marketing plan should open with a summary of the main goals and recommendations.
The executive summary permits senior management to grasp the plan’s major thrust.

 Situation analysis

This section presents relevant background data on sales, costs, the market, competitors, and
the various forces in the macro-environment. Pertinent historical information can be included
to provide context. All this information is used to carry out on a SWOT analysis.

 Marketing strategy

Here the product manager defines the mission, and marketing and financial objectives. The
manager also defines those groups and needs which the market offerings are intended to
satisfy. The manager then establishes the product line’s competitive positioning.

 Financial projections

Financial projections include a sales forecast, an expense forecast, and a breakeven analysis.
On revenue side, the projections show the forecasted sales volume by month and product
category. On the expense side, the projections show the expected costs of marketing. A more
complex method of estimating profit is risk analysis. The computer stimulates possible
outcomes and computes a distribution showing the range of possible rates of returns and their
probabilities.

 Implementation controls

The last section of the marketing plan outlines the controls for monitoring and adjusting
implementation of the plan. Typically, the goals and budget are spelled out for each month or
quarter, so management can review each period’s results and take corrective action.

2. The role of research

To develop innovative products, successful strategies, and action programs, marketers need
up-to-date information about the environment, the competition, and the selected market
segments. Marketing research helps marketers learn more about their customers’
requirements, expectations, perceptions, satisfaction, and loyalty.

3. The role of relationships

Although the marketing plan shows how the company will establish and maintain profitable
customer relationships, it also affects both internal and external relationships.

4. From marketing plan to marketing action

Marketers start planning well in advance of the implementation date to allow time for
marketing research, analysis, management review, and coordination between departments.
The marketing plan should define how progress toward objectives will be measured.

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