Chapter 2: Company and Marketing Strategy: Partnering to Build Customer Relationships:
STRATEGIC PLANNING:
The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities is called Strategic planning.
Steps in the Strategic Planning:
DEFINING THE COMPANY MISSION:
§ The Mission Statement:
A statement of the organization’s purpose -what it wants to accomplish in the larger environment.
Characteristics of the Mission statement.
§ The mission statement should be market oriented and defined in terms of the customer needs.
§ The mission statement Should be realistic.
§ The mission statement should be specific.
§ The mission statement should fit the market environment.
§ The mission statement should be based on distinctive competencies.
§ The mission statement should be motivating.
The Pepsi Co Mission Statement:
"To be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity."
DESIGNING THE BUSINESS PORTFOLIO
The business portfolio is the collection of businesses and products that make up the company.
Guided by the company’s mission statement and objectives, management must plan its Business Portfolio. The best business portfolio is the one that best fits the company’s strengths and weakness to opportunities in the environment.
Business Portfolio planning involves two steps.
1. The company must analyze its current business portfolio and decide which business should receive more, less or no investment.
2. The company must shape the future portfolio by developing strategies for growth and downsizing.
Step I. Analyzing the Current Business Portfolio:
Portfolio Analysis: The process by which management evaluates the products and businesses making up the company.
Management’s first step is to identify the key businesses making up the company. These can be called Strategic Business Units (SBUs).
A Strategic Business Unit (SBU) is a unit of the company that has separate mission and objectives and that can be planned independently from other company’s businesses.
An SBU can be a company division, a product line within a division, or sometimes a single product or brand.
The next step in the business portfolio analysis calls for management to assess the attractiveness of various SBUs and decide how much support each deserves.
The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment.
The best known portfolio planning method was developed by the Boston Consulting Group, a leading management consulting firm.
The BCG Growth Share Matrix:
A portfolio planning method that evaluates a company’s strategic business units in terms of their market growth rate and relative market share.
SBUs are classified as STARS, CASH COWS, QUESTION MARKS, or DOGS.
BCG Growth-Share Matrix
§ Stars
– High share of low growth market.
– Build into cash cow via investment.
§ Cash Cows
– High share of low growth market.
– Maintain or harvest for cash to build STARS.
§ Question Marks
– Low share of high growth market.
– Build into STAR via investment if warranted, or reallocate financing and let slip into DOG status.
§ Dogs
– Low share of low growth market. Maintain or divest.
BCG Growth-Share Matrix
Problems with Matrix Approaches
§ Can be difficult, time consuming, and costly to implement.
§ Difficult to define SBUs and measure market share and growth rate.
§ Focus is on current businesses; gives little help with future planning.
§ Can place too much emphasis on growth.
Step II. Developing strategies for growth and Downsizing
Marketing has the main responsibility for achieving profitable growth for the company. Marketing must identify, evaluate, and select market opportunities and lay down strategies for collecting them. One useful device for identifying growth opportunities is the Product/Market Expansion Grid.
Product/Market Expansion Grid
EXAMPLE: Product/Market Expansion Grid Based on Starbucks
• Market Penetration: make more sales to current customers without changing products.
– Add new stores in current market areas; improve advertising, prices, menu, and service.
• Market Development: identify and develop new markets for current products.
– Review new demographic (seniors/ethnic consumers) or geographic (Asian, European, Australian, & South American) markets.
• Product Development: offering modified or new products to current markets.
– Add food offerings, sell coffee in supermarkets, co-brand products.
• Diversification: start up or buy businesses outside current products and markets.
– Making and selling CDs, testing restaurant concepts, or branding casual clothing.
Downsizing:
Reducing the business portfolio by eliminating the products or business units that are not profitable or that no longer fit the company’s overall strategy.
MARKETING STRATEGY AND THE MARKETING MIX:
Marketing strategy: The marketing logic by which the business units hopes to achieve its marketing objectives.
Customer centered marketing strategy:
Companies know that they cannot profitably serve all consumers in a given market-at least not all consumers in the same way. There are too many different kinds of consumers with too many different kinds of needs.
And most companies are in a position to serve some segments better than the others. Thus each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments. This process involves three steps.
1. Market Segmentation
2. Target Marketing
3. Market Positioning
I. Market Segmentation
Ø Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products of marketing programs.
Ø A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.
II. Target Marketing
Ø Target Marketing involves evaluating each market segment’s attractiveness and selecting one or more segments to enter.
Ø Target segments that can sustain profitability.
Ø Alternatively, a company might choose to serve several related segments- perhaps those with different kinds of customers but with same basic wants.
III. Market Positioning:
Ø Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
Ø Process begins with differentiating the company’s marketing offer so it gives consumers more value.
The Marketing Mix
Ø The set of controllable, tactical marketing tools (product, place, price, promotion) that the firm blends to produce the response it wants in the target market.
Ø Also called 4Ps of Marketing
Product:
Product means goods and services combination, the company offers to target market.
Product concept includes Variety, Quality, Design, Features, Brand name, packaging, services etc.
Price:
Price is the amount of money customers have to pay to obtain the product.
Price includes List price of the product, discounts, allowances, payment period, credit terms etc.
Place:
Place includes the company activities that make the product available to target customers.
Place includes Channels, Coverage, Locations, Inventory, transportation, logistics etc
Promotion:
Promotion means activities that communicate the merits of the products and persuade the target customers to buy it.
Advertising, Sales promotion, personal selling, public relations etc are coming under the Promotion concept.
SWOT ANALYSIS
An overall evaluation if the company’s strength (S), weakness (W), Opportunities (O), and Threats (T) is called SWOT analysis.