Chapter 2

DEVELOPING MARKETING
STRATEGIES AND PLANS

Dr. Nu Nu Lwin
Professor
Dept. of Management Studies
Yangon University of Economics
 Learning Objectives

1. How does marketing affect customer value?

2. How is strategic planning carried out at the corporate and

divisional levels?

3. How is strategic planning carried out at the business unit level?

4. What does a marketing plan include?

Marketing and Customer Value

 The value delivery process

 The value chain

 Core competencies

 The central role of strategic planning

Value Delivery Process

 Consists of choosing (or identifying), providing (or delivering) &

communicating superior customer value

Choosing the value Providing the value Communicating the value

 Customer  Product/service  Sale force

segmentation development  Sale promotion

 Market selection  Pricing  Advertising
 Value positioning  Distribution
The Value Delivery Process

CHP: 2&11-5
The Value Chain

 A tool for identifying ways to create more customer value

 Synthesis of activities performed to design, produce, market,
deliver, and support a firm’s products
 Value Chain Process

Firm’s Main Task

To examine costs & performance of each value-creating activity & to look for ways to improve it
Core Business Process
 Firm’s success depends on well coordination of departmental activities in
conducting core business processes
1. The market-sensing process: Gathering & acting upon information about
the market
2. The new-offering realization process: Researching, developing, & launching
new high-quality offerings quickly & within
budget
3. The customer acquisition process: Defining target markets & prospecting
for new customers
4. The customer relationship management process: Building deeper
understanding, relationships, & offerings to
individual customers
5. The fulfillment management process: Receiving & approving orders,
shipping goods on time, & collecting payment
Core Business Process

 Value delivery network (supply chain)

 Company, suppliers, distributors, and ultimately customers who partner

with each other to improve performance of the entire system

Core Competencies

 A source of competitive advantage & makes a significant contribution to

perceived customer benefits
 Competitive advantage: Distinctive capabilities or excellence in broader
business processes
 Areas of special technical & production expertise & applications in a wide
variety of markets
 To own and nurture the resources & competencies that make up the
essence of business
Core Competencies
 Three Characteristics
 A source of competitive advantage in that it makes a significant
contribution to perceived customer benefits
 Applications in a wide variety of markets
 Difficult for competitors to intimate

Distinctive capabilities
 Excellence in broader business processes (market sensing, customer linking,
channel bonding)
 Both are sources of competitive advantage
 Core Competencies

 Business realignment for maximizing core competencies

 (Re)defining the business concepts
 (Re)shaping the business scope
 (Re)positioning the brand identity
Central Role of Strategic Planning

 Managing the businesses as an investment portfolio

 Assessing the market’s growth rate & the company’s position in that
market

 Establishing a strategy

COPYRIGHT © 2016 PEARSON EDUCATION, INC. 1-13

Central Role of Strategic Planning
Strategic planning
 The process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing
opportunities
Three Key Areas of Strategic Planning
 Managing businesses
 Assessing each business’s strength
 Establishing strategy
Four organization levels
 Corporate level, division level, business unit level, product level
Central Role of Strategic Planning
Marketing plan
 Central instrument for directing & coordinating the marketing effort
 Operates at two level: strategic & tactical
Strategic Marketing plan
 Lay out the target markets & the value proposition the firm will offer
Tactical Marketing plan
 Specify the marketing tactics: Product feature, merchandising
pricing, promotion, sales channels & services
Central Role of Strategic Planning
Corporate & Division Strategic Planning

All corporate headquarters undertake four planning activities

 Defining the Corporate Mission
 Establishing Strategic Business Units (SBUs)
 Assigning resources to each SBU
 Planning new businesses, downsizing, or terminating older businesses
Defining the Corporate Mission
Mission statement
 The organization’s purpose, what it wants to accomplish in the larger
environment
 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?
 To share the sense of purpose, direction & opportunity with managers,
employees, customers
E.g. Google: “To organize the world’s information and make it universally
accessible and useful”
4-18
Good Mission Statements

Focus
Focus on
on limited
limited number
number of
of goals
goals

Stress
Stress major
major policies
policies and
and values
values

Define
Define major
major competitive
competitive
spheres
spheres

Take
Take aa long-term
long-term view
view

As
As short,
short, memorable,
memorable, &&
meaningful
meaningful as
as possible
possible
Product-Oriented vs. Market-Oriented Definitions of a Business
Market definitions of a business are superior to product definitions

Company Product Definition Market Definition

Union-Pacific Railroad We run a railroad We are a people-and-goods mover

We make copying We help improve office
Xerox
equipment productivity
Hess Corporation We sell gasoline We supply energy
Paramount Pictures We make movies We market entertainment
Encyclopedia We sell encyclopedias We distribute Information
We make air conditioners We provide climate control in the
Carrier
and furnaces home

4-20
Establishing Strategic Business Units

 Purpose of identifying SBU: To develop separate strategies and assign

appropriate funding
 Target Market Definition: Focus on selling a product or service to a
current market
 Strategic Market Definition: Focus on both current & potential market
 Three characteristics of SBUs
 Single business or collection of related businesses that can be planned for
separately
 Has its own set of competitors
 Has a manager who is responsible for strategic planning and profit
performance
4-21
Assigning Resources to Each SBU
 Decide how to allocate corporate resources to each SBU
 Portfolio-planning models
 GE/McKinsey Matrix
 Competitive advantage of the firm
 Attractiveness of the industry
 BCG Growth-Share Matrix
 Market share
 Market growth rate
 Shareholder Value Analysis
 Assess the potential of a business based on potential growth opportunities
from global expansion, repositioning, & strategic outsourcing
4-22
Assessing Growth Opportunities
 Planning new businesses, downsizing & terminating older businesses
Strategic Planning Gap
 Gap between future desired sales & projected sales, need to develop or acquire
new business to fill it
 Intensive opportunities
 To identify opportunities to achieve further growth within current
businesses
 Integrative opportunities
 To identify opportunities to build or acquire businesses that are related to
current businesses
 Diversification opportunities
 To identify opportunities to add attractive businesses unrelated to current
businesses 4-23
Assessing Growth Opportunities

1-24
Assessing Growth Opportunities

Intensive Growth
 Market penetration: A growth strategy increasing
sales to current market segments
without changing the product
 Market development: A growth strategy that identifies and develops new market
segments for current products
 Product development: A growth strategy that offers new or modified products to
existing market segments
 Diversification: A growth strategy through starting up or acquiring businesses
outside the company’s current products & markets

4-25
ESPN Growth Opportunities
Assessing Growth Opportunities

Integrative Growth
 To increase sales & profits through backward, forward or horizontal integration
within its industry

Diversification Growth
 When good opportunities exist outside the present businesses – the industry is highly
attractive & the company has the right mix of business strengths to succeed

Downsizing & Divesting Older Businesses

 The reduction of the business portfolio by eliminating products or business units that
are not profitable or that no longer fit the company’s overall strategy
 To release needed resources for other uses or to reduce costs
4-27
Organization & 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
 The shared experiences, stories, beliefs, and norms that characterize an
organization.”
E.g. The way people dress, talk to one another, and greet customers.
Marketing Innovation

 Critical in any marketing organization

 Employees can challenge company orthodoxy and stimulate new ideas
 Need to identify and encourage fresh ideas from three generally
underrepresented groups:
 Employees with youthful or diverse perspectives,
 Employees far removed from company headquarters, &
 Employees new to the industry
 Firms develop strategy by choosing their view of the future
Marketing Innovation

Scenario analysis:
 Developing plausible representations of a firm’s possible future using
assumptions about forces driving the market and different uncertainties
 Managers need to think through each scenario with the question:
 “What will we do if it happens?,”
 Adopt one scenario as the most probable, &
 Watch for signposts that might confirm or disconfirm it.
Business Unit Strategic Planning

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 Business Unit Strategic Planning

Business Mission
 Define specific mission within the broader company mission

SWOT Analysis Strengths

Weaknesses

Opportunities

Threats
CHP: 2&11-32 4-32
 External Environment Analysis

Marketing Opportunity: An area of buyer need and interest that a

company has a high probability of profitably
satisfying
 Sources of Marketing Opportunity
 Supplying something that is short supply
 Supplying an existing product or service in a new or superior way
 Supplying a totally new product or service
Environmental Threat: Challenge posed by an unfavorable trend or
development that, in the absence of defensive
marketing action, would lead to lower sales or profit
CHP: 2&11-33 4-33
 Market Opportunity Analysis (MOA)

 Can we articulate the benefits convincingly to a defined target market?

 Can we locate the target market and reach them with cost-effective
media and trade channels?
 Does the company possess or have access to the critical capabilities and
resources needed to deliver the customer benefits?
 Can we deliver the benefits better than any actual or potential
competitors?
 Will the financial rate of return meet exceed the required threshold for
investment?
Opportunity and Threat Matrices
 Internal Environment Analysis

Strengths & Weaknesses

 Need to evaluate internal strengths & weaknesses to find attractive
opportunities and to take advantage of them
 Not necessarily correct all weaknesses nor should it gloat all strengths
Question
 Whether the firm should limit itself to those opportunities for which it
possess the required strengths or consider those that might require it to
find or develop new strengths

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 Goal Formulation

 To develop goals for the planning period

E.g.: Profitability, sale growth, market share improvement, risk
containment, innovation, reputation
 Requirements for using MBO
 Objectives must be hierarchical in order of importance
 Objectives should be quantitative
 Goals should be realistic
 Objectives must be consistent
 Strategic Formulation
 To design a strategy for achieving the goals
 Marketing strategy
 Compatible technology strategy
 Sourcing strategy
1) Porter’s Generic Strategies
 Overall cost leadership
 Differentiation
 Focus
 Strategic group
 Firms pursuing same strategy directed to the same target market
 Strategic Formulation
2) Strategic Alliances
 Forming alliances with domestic or multinational companies that
complement or leverage their capabilities & resources
 Product or Service Alliances
 Promotional Alliances
 Logistics Alliances
 Pricing collaborations
 Partner Relationship Management (PRM)
 Forming and managing partnerships
 Program Formulation & Implementation,
 Preparing marketing programs based on marketing strategy
 Cost estimation & justification of costs & benefits
 Nurture stakeholders’ benefits (Be careful not violate any stakeholder group’s
sense of fairness)
 Successful implementation need 7Ss (McKinsey)
 Hardware (3Ss): Strategy, structure, systems
 Software (4Ss):
 Style: Share a common way of thinking & believing
 Skills: Having the skills needed to carry out the strategy
 Staff: Hiring able people, training them well & assigning the right jobs
 Shared value: Sharing the same guiding values
 Feedback & Control
 Inevitable erosion of the company’s strategic fit with the environment
 Due to changes on market environment faster than the 7Ss
 Key to success:
 Willingness to examine the changing environment and adopt new goals &
behaviors

 Peter Drucker:
 It is more important to “do the right thing”—to be effective—than “to do
things right”—to be efficient
 The most successful companies, however, excel at both
 Marketing Plan

A written document that summarizes what the marketers has learned

about the marketplace & indicates how the firm plans to reach its
marketing objectives
Contents
Executive summary & table of contents
Situation analysis
Marketing strategy
Financial projections
Implementation controls
 Marketing Plan
1. Executive Summary and Table of Contents
2. Situation Analysis
 Relevant background data on sales, costs, the market, competitors, and
the macroenvironment
 How do we define the market, how big is it, and how fast is it growing?
 What are the relevant trends and critical issues?
 Use all information to carry out a SWOT analysis.
3. Marketing Strategy
 Define mission, marketing and financial objectives, and needs the market
offering is intended to satisfy, & its competitive positioning.
 Require inputs from other areas, such as purchasing, manufacturing,
sales, finance, and human resources.
 Marketing Plan
4. Marketing Tactics
 Outline the marketing activities that will be undertaken to execute the
marketing strategy.
 Product or service: Key attributes & benefits that will appeal to
target customers.
 Pricing: General price range & how it might vary across different
types of customers or channels, including any incentive
or discount plans.
 Channel: Different forms of distribution, such as direct or indirect
 Communications: General message and media strategy.
 Often develop a separate communication plan to provide the detail
necessary for agencies and other media partners to effectively design
the communication program.
Marketing Plan
5. Financial projections
 Sales forecast, an expense forecast, and a break-even analysis
 Forecasted sales volume by month & product category
 Expected costs of marketing, in details
 Break-even analysis: Estimate how many units the firm must sell monthly
(or how many years it will take) to offset its monthly
fixed costs and average per-unit variable costs.
 Estimating profit through risk analysis
 Optimistic, pessimistic, & most likely for each uncertain variable affecting
profitability, under an assumed marketing environment & marketing
strategy for the planning period
 May use simulation programs
Marketing Plan
6. Implementation controls
 Outline the controls for monitoring & adjusting implementation of the plan.
 Spell out the goals and budget for each month or quarter
 (For management to review each period’s results and take corrective action
as needed)

Evaluating a Marketing Plan

 Is the plan simple/succinct?
 Is the plan complete?
 Is the plan specific?
 Is the plan realistic?
End of Lecture 2

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