Professional Documents
Culture Documents
STRATEGY FORMULATION
UNIT - 4
COMPONENTS OF A MARKET PLANING
• Marketing should always begin with a thorough marketing plan, which allows you to evaluate the
market potential for your products or services and develop strategies to meet that potential.
• A complete, written marketing plan contains seven main components:
1. Market research and analysis: The first component of a marketing plan allows you to gather
pertinent information about the potential market for your product(s) and/or service(s),
evaluate strengths and weaknesses, and identify a target audience.
2. Marketing and financial goals and objectives: This component of a marketing plan consists of
defining your marketing and financial goals and objectives. The goals and objectives will help
you focus and evaluate your marketing efforts.
3. Marketing mix: The marketing mix component of a marketing plan describes the specific
strategies you will implement to reach your target audience, entice the target audience to spend
their money, and create a desire in them to return to your enterprise. Strategies covering the 4 P’s
of marketing (product, price, place, and promotion) are developed.
5. Monitoring and evaluating market response: This component of a marketing plan describes the
strategies you will use to monitor and evaluate the market response to your marketing strategies.
Evaluating the effectiveness of your marketing plan will allow you to make adjustments to meet
your goals.
7. Marketing plan checklist: The final component of your marketing plan is a marketing plan
checklist. This checklist allows you to summarize the tasks that need to be accomplished to put your
plan into action.
STRATEGY FORMULATION
Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision. The process
of strategy formulation basically involves six main steps. Though these steps do not follow a rigid
chronological order, however they are very rational and can be easily followed in this order.
1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term
objectives of the organization. It is known that strategy is generally a medium for realization of organizational
objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching
there. Strategy includes both the fixation of objectives as well the medium to be used to realize those
objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to
achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which influence the selection of
objectives must be analyzed before the selection of objectives. Once the objectives and the factors
influencing strategic decisions have been determined, it is easy to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is to evaluate the general economic
and industrial environment in which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a qualitative and quantitative review of
an organizations existing product line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors’ strengths and
weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors’
moves and actions so as to discover probable opportunities of threats to its market or supply
sources.
3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with long
term customers, so as to evaluate the contribution that might be made by various product zones or
operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between
the planned or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the organization to estimate its probable
future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is
actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.
Marketing Process
The marketing process is a step-by-step guideline for an organization's marketing efforts. Here are the
six steps of the marketing process:
5C analysis: This process helps the business analyze internal and external positioning by looking at
five factors: the company, customers, competitors, collaborators and climate (environment).
3. Create a marketing plan
A marketing plan is an actionable process that the business can implement, measure, adapt and improve to
reach its customers and meet its objectives. Companies usually use the following foundational business
elements to create a marketing plan:
Brand identity:
This refers to the tangible elements that help convey a company's desired image to consumers. Brand
identity elements include a company's vision, mission, values, personality and voice.
Target audience:
The target audience is the group of people most likely to buy a company's product or service. A business can
define its target audience using customer evaluation and profiling and competitor analysis, all of which can
help the company make marketing decisions and determine its distribution channels.
Marketing goals:
These are the results a company hopes to gain from its marketing efforts, such as increased brand awareness,
improved customer engagement or boosted sales. Marketing goals don't need to be financial, but it's helpful
when they're measurable and trackable.
Budget:
The company's strategic tactics depend on the organization's available budget and resources. The marketing
plan's budget section clearly outlines the costs of individual initiatives, and in most organizations, management
approves the budget before implementing the plan.
4. Determine which marketing strategies to use
Organizations often use the following marketing strategies, known as the four Ps of marketing, to identify
their ideal marketing activities:
Product strategy:
The product is the good or service the company provides to consumers, and it typically fills a need or gap in
the marketplace. For instance, a child care facility may open next to a large corporation, and the proximity
of this centre to the corporation may fill a gap for employees who want the opportunity to visit their
children during the workday.
Price strategy:
The company provides the product or service at a cost that allows for profit. There are many variables
around price strategy, such as established price points in the marketplace, the effectiveness of discounts,
the cost to provide the offer and the profit margin.
Place strategy:
This refers to where consumers find the product, such as in stores or catalogues. It also pertains to factors
like placement in the stores, such as on specific shelves or displays, and the distribution channels necessary
for marketing.
Promotion strategy:
A company uses promotion strategies to make consumers aware of the product or service. This usually
includes advertising and other promotional activities, like offering a sale.
5. Implement the marketing plan
After devising a marketing plan and establishing strategic marketing tactics, the business can
complete the following actions:
Determine and obtain the budget, platforms and staff required to fulfill the plan
Create content types and promotion plans and a timeline for accomplishing these plans
Set metrics and key performance indicators (KPIs) and select tracking tools and methods
Take the actions stated in the plan
Marketing implementation is the process of turning your marketing strategy into real-life actions: tasks and
projects, people responsible for them, and deadlines.
In other words, it’s about bringing your marketing plan to life. Instead of living on paper, it starts living on a day-
to-day calendar because it’s translated into action.
Review your marketing strategy another time to make sure it's well-defined, actionable and result-driven.
Add any additional elements you might discover through building your implementation plan, and be sure
to have the following essentials of a marketing strategy: Marketing budget, target audience, brand
positioning, analytics and strength, weaknesses, opportunities and threat (SWOT) analysis.
Once you establish the marketing strategy and team, workflows and measurement tools, communicate
the plan to everyone. Open transparency and team accountability can help boost motivation,
productivity and results. The team invests in the goal and understands how their role is a key factor in
achieving it. Share with stakeholders and other company departments or teams to help gain approval
and support for the team's efforts.
Portfolio analysis is a process of examining all the aspects related to the organization to improve the
organization’s profits.
Portfolio analysis aims to identify the components that need to be enhanced to remove barriers from making
the working process recognize better methods to allocate resources to improve the return on investment(ROI).
Reasons for portfolio analysis
A different purpose for conducting a business portfolio analysis in strategic management. The three main
reasons why management focuses on business portfolio analysis in strategic management, which are:
1. Analysis
2. Formulate Growth Strategy
3. To take decisions regarding product retention
Process For Portfolio Analysis
Step 1: Identify Lines Of Business
The first step of business portfolio analysis in strategic management is to identify all the current business
lines and strategic business units.
Weight the relative importance of each factor of attractiveness and capability in terms of its contribution
to the goal of the marketing strategy out of 1.
Allocate the respective weight of a total score of 48 points to each factor. e.g. if the weighting for a factor
was 0.2 then the total points available for that factor is 0.2X48=10 (rounded up)
Score each segment relative to the other segments in how much each segment meets the criteria of the
factor. e.g. For the attractiveness factor ‘Size of segment’, in the example Table 1, score the largest
segment 10 and the smallest segment 1.
Plot the resultant score in excel and create a bubble chart graph where the size of the bubble represents
the size of the segment for greater visual clarity when it comes to interpreting the analysis.
ANSOFF GRID
• The Ansoff Matrix, often called the Product/Market Expansion Grid, is a two-by-two framework used by
management teams and the analyst community to help plan and evaluate growth initiatives.
• The tool helps stakeholders conceptualize the level of risk associated with different growth strategies.
• The Ansoff Matrix is a fundamental framework taught by business schools worldwide. It is a simple and
intuitive way to visualize the levers a management team can pull when considering growth
opportunities.
• It features Products on the X-axis and Markets on the Y-axis.
The Matrix is used to evaluate the relative attractiveness of growth strategies that leverage
both existing products and markets vs. new ones, as well as the level of risk associated with each.
Market Penetration
The least risky, in relative terms, is market penetration.
When employing a market penetration strategy, management seeks to sell more of its existing products into markets that
they’re familiar with and where they have existing relationships. Typical execution strategies include:
•Increasing marketing efforts or streamlining distribution processes
•Decreasing prices to attract new customers within the market segment
•Acquiring a competitor in the same market
Market Development
A market development strategy is the next least risky because it does not require significant investment in R&D or product
development. Rather, it allows a management team to leverage existing products and take them to a different market.
Approaches include:
•Catering to a different customer segment or target demographic
•Entering a new domestic market (regional expansion)
•Entering into a foreign market (international expansion)
Product Development
A business that firmly has the ears of a particular market or target audience may look to expand its share
of wallet from that customer base. Think of it as a play on brand loyalty, which may be achieved in a
variety of ways, including:
•Investing in R&D to develop an altogether new product(s).
•Acquiring the rights to produce and sell another firm’s product(s).
•Creating a new offering by branding a white-label product that’s actually produced by a third party.
Diversification
In relative terms, a diversification strategy is generally the highest risk endeavor; after all, both product
development and market development are required. While it is the highest risk strategy, it can reap huge
rewards – either by achieving altogether new revenue opportunities or by reducing a firm’s reliance on a
single product/market fit (for whatever reason).
There are generally two types of diversification strategies that a management team might consider:
1. Related Diversification – Where there are potential synergies that can be realized between the existing
business and the new product/market.
2. Unrelated Diversification – Where it’s unlikely that any real synergies will be realized between the
existing business and the new product/market.