Strategic Planning

Kotler on Marketing
A key ingredient of the marketing management process is insightful, creative marketing strategies and plans that can guide marketing activities. Developing the right marketing strategy over time requires a blend of discipline and flexibility. Firms must stick to a strategy but must also find new ways to constantly improve it.1 Marketing strategy also requires a clear understanding of how marketing works.2
STRATEGIC MARKET PLANNING

Strategic market planning is the managerial process that entails analysis, formulation and evaluation of strategies that would enable an organisation to
achieve its goals by developing and maintaining a

strategic fit between the organisations capabilities and the threats and opportunities arising from its changing environment.
Strategic Market Planning Process

The SMP Process involves :
Analysis (environmental analysis, competitor and industry analysis; customer and market analysis, firm internal analysis. The formulation and evaluation of alternative strategies.
The selection of a strategy, and The development of detailed plans for implementing.
While the Companies Corporate strategic planning formulates and decides on strategies they need to
consider the following aspects :

What What What What
is our corporate mission? are our strengths and weaknesses? are the relevant threats and opportunities? are our corporate objectives?
Defining Corporate Mission

What is our business? Who is our customer? What is of value to the customer?
What will our business be?

What should our business be? Answering these questions leads to a shared sense of purpose, direction and opportunity.
Establishing Strategic Business Units (SBU) A business can be defined in terms of three
dimensions: customer groups, customer needs,

and technology.
Assigning Resources to each SBU The purpose of identifying the companys
SBUs is to develop separate strategies and

assign appropriate funding.
Planning New Business, Downsizing Older Businesses
When there is a strategic gap between

future desired sales and projected sales.
Desired sales
Diversification
Integrative growth Intensive growth Strategic planning gap
Current portfolio
Time (years)
Current Products
New Products
Market
Current Markets
Penetration
Strategy
Product Development Strategy
New Markets
Market Development Strategy
Diversification Strategy
Ansoffs Product Market Expansion Grid
Ansoffs Model
Present Products I. Market Penetration (Intensive Growth) New Products III. Product Development (Intensive)
Present Market
Increase Market Share
Attract
users of competitors products

nonusers into users
Product Product Product Product New
reformulation strategy
quality improvement strategy
Convert Increase Increase Find
product usage
the frequency of purchase
feature additions strategy

line extension strategy
new applications for current users geographically
product development strategy
II. Market Development (Intensive)

Expand
Diversification
Related unrelated
New Market
Target
new segments
Integrative Growth Forward Integration Backward Integration Horizontal Integration
STRATEGIC BUSINESS UNIT (S B U )

SBU denotes a division, product line, or other profit centre within a company that:
Produces and markets a well defined set of related products and / or services,
Serves a clearly defined set of customers, and Competes with a distinctive set of competitors.
Boston Consulting Groups (BCG) Growth / Share Matrix :

BCG is simple but useful strategic planning
technique based on an analysis of a companys

product portfolio.
The technique entails assigning each individual

product (SBU) of an organisation to one of four possible cells in a simple matrix according to the relative market share and rate of market growth associated with that particular product / business.
According to the cell of the matrix, the

product / business is calculated. They are
classified as : Stars, Cashcows, Question

Marks / Problem Children and Dogs.
20% 18% 16%
Stars
Question Marks
14%
12% 10%
8%
6% 4% 2%
Cash Cow
Dogs
Relative Market Share
Stars
These SBUs are in the high market growth rate / high relative market quadrant. Deletion / retention decision SBUs here should be retained in the firms portfolio.
Market Share Strategy Decision :

An SBU in this quadrant with a very high relative market share the appropriate strategy would be market share maintenance.
On the other hand, for an SBU whose relative market share
is marginal then the appropriate market-share strategy

would be to build share.
Cash Flow Outlook :

An SBU with a high relative market share in a high-growth market will produce a high level of cash owing to experience effects and the result is high profit margins.
Maintaining considerable equipment.
market cash to
share
will
require increased
support
expenditures on working capital and on plant and
Building Market share in such a market will require even larger cash outlays to support increased, scale of operations.
SBUs in the high market growthrate / highrelative market share quadrant will be self
sustaining.
Their high relative market share, coupled with relatively high profit margins and low costs owing to experience effects makes them a major generator of cash.
However, a strategy of share building or share maintenance in a high growth market also makes them a major user of cash.
SBUs in this quadrant tend to be either in a state

of cash balance (cash outflow = cash inflow) marginal cash surplus, or marginal cash deficit.
Cash Cows :
These are SBUs in the low market growth / high relative market share quadrant.
Deletion / Retention decision :
SBUs in this quadrant should be retained in the firms portfolio.
Market Share Strategy Decision :

A strategy of market share maintenance is recommended in view of low rate of their market growth.
Investments in capacity expansion may not be desirable, However, investments may be made which will improve manufacturing processes that might lead to lower costs and / or better quality products.
Cash Flow Outlook

Here, the SBU will be a net cash generator given
its high relative market share.
Relatively lower costs, vis--vis competitors
because of experience effects and high profit

margins,
A sizable net cash surplus will be a major source

of cash to the parent corporation.
It may be used to :
Finance the growth (share building strategy) of selected SBUs in the highmarketgrowth- rate / low-relative-market-share.
Finance corporate R & D efforts oriented towards the development of new SBUs,
Finance the acquisition of new SBUs, and Meet other financial obligations of the parent company eg. Dividend payments.
Question Marks
SBUs in high-market-growth-rate / low-relativemarket share quadrant.
Retention / Deletion Decision :
For some SBUs, a firms competitors might be

holding commendable position under such circumstances the firm needs to invest heavily to build market share and move the SBU into Star quadrant.
The viability of a market share building strategy should be on identifiable sources of sustainable advantage which will be a major consideration in deciding which SBUs should be retained or deleted.
Market Share Strategy Decision : A share building strategy for SBUs retained in the
portfolio and a share harvesting or liquidation

strategy for SBUs to be deleted.
Cash Flow Outlook : SBUs here need a sizable cash infusion to finance share building strategies and to make investments in plant and equipment. The source of cash to finance share-building strategy of the SBUs to be retained comes from the cash surplus generated by cash cow (SBU).
Dogs
SBUs are in the low market growth rate / low relative market share.
Retention / Deletion Decision : Deletion of SBU is generally advocated.
Market share strategy decision :
A market share harvesting strategy is generally advocated if for some reason (exit barriers, lack of buyers) a firm is unable to divert some of SBUs.
Cash Flow Outlook

Minimum investment in running day-to-day operations of these SBUs and pursuing a share harvesting strategy could lead to the generation of a substantial cash surplus. Low Investment : Attempt to harvest the
business, drawing cash out and cutting investment
to a minimum.
Divestiture : Sell or liquidate the business
Porters Generic Strategies
Michael
Porter
proposed
three
generic
strategies for strategic thinking
a) Overall cost leadership

b) Differentiation
c) Focus
G E MATRIX
Business Strength / Position
(its ability to compete)
High
Medium
Low
Market / Industry Attractiveness
M
L
1
2
2
3
3
3
1. Invest / Grow 2. Selective Investment 3. Harvest / Divest
Evaluating the ability to compete

Market Share Share Growth Share by Segment Customer Loyalty Brand Reputation Margins Technology Skills Marketing Distribution Network
Evaluating Market Attractivenss
Market Size Annual Market Growth Customers satisfaction levels Competition ; types Profitability Technology Government regulations Sensitivity to economic trends
BUSINESS STRENGTH / POSITION Strong

M A R K E T A T T R A C T I V E N E S S
Medium
INVEST TO BUILD
Weak
BUILD SELECTIVELY
PROTECT POSITION
High
Invest to grow at maximum digestible rate Concentrate effort on maintaining strength
Challenge for leadership Build selectively on strengths Reinforce vulnerable Areas
Specialise around limited strengths Seeks ways to overcome weaknesses Withdraw if indications of sustainable growth are Lacking
M A R K E T
Strong
BUILD SELECTIVELY Invest heavily in most attractive segments
Medium
SELECTIVITY / MANAGE FOR EARNINGS Protect existing program Concentrate investments in segments where profitability is good and risks are relatively low
Weak
LIMITED EXPANSION OR HARVEST Look for ways to expand without high risk ; otherwise, minimise investment and rationalise operations
A T T R A C T I V E N E
Medium
Build up ability to counter competition Emphasise profitability by raising productivity
S
S
M A R K E T
Strong
PROTECT AND REFOCUS Manage for current earnings
Medium
MANAGE FOR EARNINGS Protect position in most profitable segments Upgrade product line Minimise investment
Weak
DIVEST Sell at time that will maximise cash value Cut fixed costs and avoid investment meanwhile
A T T R A C T I V E N E
Low
Concentrate on attractive segments Defend strengths
S
S

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Kotler on Marketing

STRATEGIC MARKET PLANNING

achieve its goals by developing and maintaining a

Strategic Market Planning Process

consider the following aspects :

Defining Corporate Mission

What will our business be?

dimensions: customer groups, customer needs,

Assigning Resources to each SBU The purpose of identifying the companys

SBUs is to develop separate strategies and

Planning New Business, Downsizing Older Businesses

When there is a strategic gap between

Product Development Strategy

Market Development Strategy

Ansoffs Product Market Expansion Grid

Increase Market Share

users of competitors products

Product Product Product Product New

Convert Increase Increase Find

feature additions strategy

new applications for current users geographically

product development strategy

II. Market Development (Intensive)

Integrative Growth Forward Integration Backward Integration Horizontal Integration

STRATEGIC BUSINESS UNIT (S B U )

Boston Consulting Groups (BCG) Growth / Share Matrix :

technique based on an analysis of a companys

The technique entails assigning each individual

According to the cell of the matrix, the

classified as : Stars, Cashcows, Question

20% 18% 16%

Relative Market Share

Market Share Strategy Decision :

On the other hand, for an SBU whose relative market share

is marginal then the appropriate market-share strategy

Cash Flow Outlook :

Maintaining considerable equipment.

expenditures on working capital and on plant and

SBUs in this quadrant tend to be either in a state

Deletion / Retention decision :

SBUs in this quadrant should be retained in the firms portfolio.

Market Share Strategy Decision :

Cash Flow Outlook

its high relative market share.

Relatively lower costs, vis--vis competitors

because of experience effects and high profit

A sizable net cash surplus will be a major source

Retention / Deletion Decision :

For some SBUs, a firms competitors might be

portfolio and a share harvesting or liquidation

Retention / Deletion Decision : Deletion of SBU is generally advocated.

Market share strategy decision :

Cash Flow Outlook

business, drawing cash out and cutting investment

Porters Generic Strategies

strategies for strategic thinking

a) Overall cost leadership

Market / Industry Attractiveness

1. Invest / Grow 2. Selective Investment 3. Harvest / Divest