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Strategic Planning

Strategic planning is an organization process of defining its

strategy or direction. In other words, strategic planning is the art
of creating strategies to beat competitors ,achieving goals.
Marketing strategies are made to achieve maximum sales and
profit .

In marketing strategy planning is done to

a. Define market
b. To beat competitors
c. To achieve sales
d. To define business
e. To survey environment
f. To influence customers

There are some strategies by which marketers expand their

market and products.

These strategies are

a. Generic strategies
b. Grand strategies
c. Porter's five forces model
d. BCG matrix
f. Ansoff matrix
g. VRIO Framework
h. Porter's value chain model

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1.Ansoff’s growth factor(growth model)

Ansoff growth is a model for market expansion. This path

indicates the direction or path in which the firm is moving. Growth
factors basically means the path of growth adopted by the firm.
This model gives answers for the integration or diversification of
the products.
This model helps executives, senior managers and marketers to
analyze future growth of products .

It is 2 * 2 Matrix having 2 rows and two columns

a. Market penetration -In this existing product is sold in the

existing market .
b. Product development-New development is sold into the existing
market.
c. Market expansion- In this existing product is sold into a new
market to achieve more market share.
d. Diversification -In this there is selling of new products in new
markets.

2. BCG Model
Boston Consulting Group model also known as portfolio planning
model. It was developed under the chairmanship of Bruce D
Henderson in 1970. BCG model is based on the application of two
interrelated concept and these concepts helps in deciding where
to invest or divest

i. The experience curve theory

ii. Growth-share Matrix

Growth- it means expanding market share as soon as possible .

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Divestment-It means getting out of business segments with the

product which is not profitable.

In BCG Matrix there are four categories of product:-

a. Question marks
b. Stars
c. Dogs
d. Cash cows

Question marks- these are those products which have high

market growth rate and low market share producers are advised
to invest in advertising and other promotional activities to increase
the market share of the products.

Stars- These are the products which have high market share and
high growth rate .Manufacturers of the product are advised to
follow the current strategies to continue the product in the
category of stars.

Cash cows -Cash cows are the products that have low market
share but have high market generation. Cash cows are innovative
products which may become new stars.

Dogs- Dogs are the products that have no growth and no market
share. Producers are advised to eliminate these products from the
product line,they are not worth investing in market share and
growth.

Porter's Generic strategy

According to Michael Porter there are three ways in which a firm
achieve sustainable competitive advantages

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these are
a. Cost leadership
b. Differentiation strategy
c. Focus strategy

a. Cost leadership strategy - It means a firm have to achieve

lowest cost leadership strategy in production and marketing to
gain a large market share from the competitors by doing this a
firm is getting economies of scale, buying power or cost efficiency
b. Differentiation strategy- In this a firm has an ability to become
unique in the whole firm, they have distinct products from the
competitors.
c. Focus strategy- A Firm should focus on a selected segment or
group of segments in the industry.

Porter's model for industries

An industry is defined as a group of companies offering products

or services that are close substitutes of each other or services
that satisfy the same basic customer needs like tea and coffee
are substitutes.
so It is necessary to analyze industry and competitors.

This model consists of five competitive forces that has been

proposed by Porter to gain competitive advantages-

1. Threat of new entrants

2. Threat of rivalry among competitors
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. Threat of substitutes

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1. Threat of new entrants-An profitable industry tends to attract

more investors, these new entrants are firms that are interested in
industry.
The chances that new entrant will enter in an industry depends on
two factor- the entry barriers to an industry and the existing
weakness from existing firm
If it takes little money and efforts to enter in your product line, it
means you are in weak position that’s why it is very necessary for
every firm to protect your firm from new entries and make
favourable positions

2. Threat of rivalry- This says that it is very necessary to look at

the strength of your competitors or rival companies because they
can attract customers through attractive prices, goods, services
and high marketing efforts so it is very important to keep watching
every step of your rivals .

3. Supplier bargaining power- In this it is necessary for every

firm to watch the supplier power- to increase the resources prices

For that every firm must consider

a. Uniqueness of product
b. How expensive would it be to switch one supplier to another
c. How to find better profit from suppliers because supplier’s price
are the base of your product price.

4. Consumer bargaining power- In this firm has to keep eyes on

the reactions of the consumers about their products. Every firm
has to analyze the fact that it is easy for the consumers to switch
for other firm’s products and what would be the reason for that.

5. Threatof substitution- It refers to the rate of shifting of

consumers from one product to the another product of the rival
firm which is producing a substitute of your product with advanced

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technology, services or at a lower price. So every firm should

update their products from time to time.

Grand strategies

Grand strategies are the corporate level strategies designed to accomplish

goals.
According to this there are four Grand strategies available, these strategies
are also called Master Strategies or corporate strategies

1. Stability strategy
2. Expansion strategy
3. Retrenchment strategy
4. Combination strategy

Stability strategy -It implies continuing the current activities of the firm
without any significant changes.

Expansion Strategy/ Growth strategies –These are the widely used

corporate strategy this strategy helps company to grow and expand their
business through merger, acquisition ,joint venture or strategic Alliance

Growth strategies can be divided into three categories

a. Intensive strategies
b. Integration
c Diversification

a. Intensive strategies-- this strategy implies that the company is expanding

without moving out the existing product range of the firm.

b. Integration- in this integration present activity is integrated with some

other activities

c. Diversification strategy -In this strategy Product is diversified by adding

more new products.

Retrenchment /defensive strategies

These strategies are followed to eliminate competitive positions.

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Combination strategies
In this, the company combines two or more strategies simultaneously.

3.VRIO Framework

This is a Framework which is made to analyze firm's internal resources and

capabilities to find out that they can be source of sustained competitive
advantage .This framework was developed by JB in 1991
He said that resources must be valuable, rare, imitable and organized to
gain sustained competitive advantages.

Valuable- it means resources are valued by enabling a firm to use

opportunities. These resources are valuable.

Rare products-These products are that products which are only acquired
by one or two companies ,are considered rare products

Imitate products- other organisations do not have the ability of duplicating

these products.

Organized - A firm must organize its management system processes,

policies, organizational structure and culture.
Value Chain Analysis

It is also known as Porter’s Value Chain Analysis is a business

management concept that was developed by Michael Porter in the book of
Competitive Advantage in 1985. This model explains a value chain is a
collection of those activities that are performed by an organization to create
value for its customers. Value Creation creates added value which leads
to competitive advantage for the organization & help to achieve
organizational objective.

Porter's Value Chain Analysis concentrates on those activities which serve

as the central principle for customers rather than on departments and

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accounting expense categories. This model links systems and activities to

each other and shows what effect this has on costs and profit.

The Value Chain activities

Porter’s Value Chain Analysis consists of a number of activities which can

be divided into primary activities and support activities. Primary activities
are those activities which have an immediate effect on the production,
maintenance, sales and support of the products or services to be supplied.
Following are considered as Primary activities:-

Inbound Logistics

It includes all processes that are involved in the receiving, storing, and
internal distribution of the raw materials or basic ingredients of a product or
service.

Production

It includes all the activities that convert inputs of products or services into
semi-finished or finished products.

Outbound logistics

It includes all activities that are related to delivering the products and
services to the customer For example:- storage, distribution and transport.

Marketing and Sales

It includes all processes related to putting the products and services in the
markets including managing and generating customer relationships which
helps to create competitive advantage.

Service

It includes all activities that maintain the value of the products or service to
customers based on the procurement of services and products.

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Support activities of the Value Chain Analysis

Support activities within the Porter’s Value Chain Analysis assist or provide
support to the primary activities A support activity such as human resource
management for example is of importance within the primary activity
operation but also supports the other primary activities such as service and
outbound logistics. Support activities are consist of following:-

Firm infrastructure

This concerns the support activities within the organization that enable the
organization to maintain its daily operations like administrative handling,
financial management are examples of activities that create value for the
organization.

Human resource management

This includes the support activities in which the workforce within an

organization is the key element for the purpose of growth of the enterprise.
Examples of activities are recruiting staff, training, development and
coaching of staff and compensating and retaining staff.

Technology development

These activities relate to the development of the products and services of

the organization For example IT, technological innovations and
improvements and the development of new products based on new
technologies as it helps to create value using innovation and optimization.

Procurement

These are all the support activities related to procurement to service the
customer from the organization For example entering into and managing
relationships with suppliers, negotiating or bargaining to arrive at the
suitable prices or entering into purchase agreements with suppliers and
outsourcing agreements.

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