Company and Marketing Strategy

Strategic Planning: the process of developing and maintaining a strategic fit between the organization’s goals and
capabilities and its changing marketing opportunities.

 Steps in strategic planning: Today we are going to go through the four steps of implementing company-wide
strategic planning –

Defining a Marketing-Oriented Mission

Some companies define their mission statements myopically in product and technology terms such as “We make and
sell furniture” or “We are a chemical-processing firm”. But mission statements market oriented and defined in terms
of satisfying basic customer needs. Products and technologies eventually become outdated but basic market needs
may last forever.

Setting Company Objectives and Goals

The company needs to turn its mission into detailed supporting objectives for each level of management. Each
manager should have objectives and be responsible for reaching them.

Designing the Business Portfolio

Guided by the company’s mission statement and objectives, management must plan its business portfolio — the
connection of businesses and products that make up the company. The best business portfolio is the one that best
fits the company’s strengths and weaknesses to opportunities in the environment.

Planning Marketing and Other Functional Strategies

“The relationship of marketing to the other business functions is often misunderstood.

 Marketing alone cannot produce superior value for customers. All departments must work together to
accomplish this.

 Each department is a link in the value chain — a major tool for identifying ways to create value for the
customers.

 A company’s value chain is only as strong as the weakest link.

 Marketers are challenged to find ways to get all departments to “think customer”
 Portfolio Analysis: The process by which management evaluates the products and businesses that makes up
the business.

Growth-Share Matrix-

The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses graphical representations of a
company’s products and services in an effort to help the company decide what it should keep, sell, or invest more in.

The growth-share matrix is a business framework that helps companies analyzes their business units or any other
cash-generating entities by their degree of profitability. The matrix was created in 1970 by management
expert Bruce Henderson, founder of Boston Consulting Group (BCG), one of the most influential strategies consulting
organizations in the world.

Also known as the BCG growth-share matrix, this business analytical tool provides the company with a four-quadrant
chart where products are ranked on the basis of their relative market shares and growth rates. The company then
decides where to allocate resources and which products to prioritize. The 4 quadrants of the BCG growth-share
matrix are “cash cows”, “dogs”, “question marks” and “stars”.

BCG growth-share matrix – Cash cows

Cash cows are products in low-growth areas for which the company has a high market share. These products
generate large amounts of cash that are higher than the market’s growth rate. Also, the revenues generated by
these products exceed the amounts reinvested to maintain share. These products are the company’s most profitable
and they should be milked for cash for as long as possible.

BCG growth-share matrix – Dogs

Products with a low market share in areas with slow growth are dogs. They may show an accounting profit, but the
profit must be reinvested to maintain share which in the end, leaves the company with empty pockets or even
negative cash returns. Companies should investigate further to determine if these products are profitable in the long
run or they should be liquidated.

BCG growth-share matrix – Question marks

The Question marks in the company’s portfolio are the products with a low market share in a high growth rate
market. These products typically grow fast and have the potential to become stars. But before they reach this stage,
question marks almost always require far more cash than they can generate. Companies should investigate these
products and the market circumstances to determine if they are worth maintaining in their portfolio.

BCG growth-share matrix – Stars

Stars are products with a high market share in a high growth rate market. They generate cash and use cash at the
same time. Companies should invest in stars to support their further growth as they are expected to become cash
cows. Depending on the characteristics of the market these products live in, they could become cash cows or they
could turn for the worst and become dogs.

Every company needs products in which to invest cash. Every company needs products that generate cash. And
every product should eventually be a cash generator; otherwise, it is worthless.
Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth
opportunities.
 The Product Market Expansion Grid:

The Product Market Expansion Grid, also called the Ansoff Matrix, is a tool used to develop business growth
strategies by examining the relationship between new and existing products, new and existing markets, and the risk
associated with each possible relationship. The matrix aids growth plans through the introduction of existing or new
products, in existing or new markets. The Product Market Expansion Grid offers four main suggested
strategies: Market Penetration, Market Development, Product Development, and Diversification.

Market Penetration Strategy: Existing Products + Existing Markets = Low Risk

Market penetration is a strategy for company growth by increasing sales of current products to current market
segments without changing the product. In such instances, customers may be aware of a product but for some
reason are not purchasing it. This strategy is typically used to achieve one or more of the following objectives.

 Increasing or growing the market share of current products with pricing strategies, promotions, advertising
and an increase in sales efforts

 Securing dominance of growth markets by identifying which markets offer the best prospects for existing
products

 Driving competitors out of a mature market with aggressive pricing and promotional campaigns

 Increasing usage of a product by existing customers through special offers and loyalty schemes

Market Development Strategy: Existing Products + New Markets = Some Risk

Market development is a strategy for company growth by identifying and developing new market segments for
current company products. This strategy is used when a company has identified markets that were previously
unidentified or when it wants to expand its market reach. Here too, there are a number of tactics to enter and
develop a new market for existing products.

 Focus can be turned to new and untapped geographical areas

 New pricing procedures can be used to attract new target audiences

 New distribution channels can be created to offer products in new ways and to new customers
Product Development Strategy: New Products + Existing Markets = Some Risk

Product development strategy for company growth by offering modified or new products to current market
segments. A company would typically use this approach when current products are no longer selling. New
competencies and skills may be required by the company to successfully develop products. This strategy is likely to
be more expensive than the market focused tactics and requires more time. Emphasis needs to be placed on a
detailed analysis of customer needs, research and development, and early introduction to ensure products are first
to market. The company can use the following methods to stimulate growth.

 Adding new features to existing products

 Innovative and new technologies can be added to products or used to improve products

Diversification Strategy: New Products + New Markets = High Risk

Diversification is a strategy for company growth by starting up or acquiring businesses outside the company’s
current products and markets. Diversification is the most risky of all the approaches. This strategy requires the
highest amount of investment of both time and resources. While this approach is likely to be the most costly,
diversification offers a company security and an advantage should it suffer in one sector of the business because it
can then rely on another. Ansoff reinforces that this strategy will require the company to acquire new skills,
techniques and possibly facilities. Good feasibility studies and research are key to ensure a winning approach. There
are three diversification strategies that an organization can consider: concentric diversification, horizontal
diversification, and conglomerate diversification.

 Concentric Diversification – leveraging a company’s core technical know-how to diversify its current products
into new markets

 Horizontal Diversification – the introduction of products that are unrelated to a company’s core products to
existing markets

 Conglomerate Diversification – the purchasing of another company in order to diversify

To better understand these three diversification strategies, consider the following example: Through concentric
diversification a company that manufactures glass jars for the food industry enters the construction market through
the manufacturing of glass bricks. Through horizontal diversification, the glass manufacturer sees the opportunity
to offer specialized cement products with which to build glass brick walls. And through conglomerate
diversification, the glass manufacturing company will acquire the manufacturer of colored dies with which to color
the glass it makes.
 Marketing Analysis:

Managing the marketing function begins with a complete analysis of the company's situation in the marketing
environment. Marketing analysis offers accurate and complete information to each other marketing management
functions: planning, implementation, and control.

The authors suggest a company conducting a SWOT analysis, by which companies evaluates their overall
strengths(S), weaknesses (W), opportunities (O), and threats (T).

"Strengths include internal capabilities, resources, and positive situation factors that may help the company serve its
customers and achieve its objectives. Weaknesses include internal limitations and negative situation factors that
may interfere with the company's performance. Opportunities are favorable factors or trends in the external
environment that the company may be able to exploit to its advantage. Threats are unfavorable external factors or
trends that may present challenges to performances."

The company should analyze its markets and marketing environment to find attractive opportunities and identify
threats. It should analyze company strength and weakness as well as current and possible marketing actions to
determine which opportunities it can best pursue. The goal is to match the company’s strength to attractive
opportunities in the environment, while simultaneously eliminating or overcoming the weakness and minimizing the
threats. Marketing analysis provides input to each of the other marketing management functions.

Marketing planning: Marketing planning involves choosing marketing strategies that will help the company attain its
overall strategic objectives. A detailed marketing plan is needed for each business unit, product, and brand

Marketing Implementation: Marketing implementation is the process that turns marketing plans into
marketing actions to accomplish strategic marketing objectives

Marketing Control: The authors points out that because many unexpected "surprises may occur during the
implementation of marketing plans, marketers must practice constant marketing control--measuring and evaluating
the results of marketing strategies and plans and taking corrective action to ensure that the objectives are
achieved.

The authors introduce that there are four steps in marketing control. First, management set specific marketing goals;
then, management measures its performance in the marketplace; third, management evaluates the causes of any
differences between expected and actual performance; finally, it takes corrective action to close the gaps between
goals and performance. There are two different level of control: operating control and strategic control.

"Operating control involves checking ongoing performance against the annual plan and taking corrective action
when necessary. Its purpose is the ensure that the company achieves the sales, profits, and other goals set out in its
annual plan. It also involves determining the profitability of different products, territories, markets, and channels.

Strategic control involves looking at whether the company's basic strategies are well matched to its opportunities.
Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its
overall approach to the marketplace.