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Unit2
Structure
2.1 Introduction 2.2. StrategicPlanning 2.3. SWOTanalysis 2.4. DevelopingtheMarketingmix 2.5. Planning,ControlandImplementation. 2.6. Summary 2.7. TerminalQuestions 2.8. AnswerstoSAQsandTQs 2.1. Introduction.

StrategicMarketingProcess

Marketingstrategiesandprogramsintheorganizationsarederivedfromthecompanywidestrategic planning. Thus, you have to understand how organizations develop their strategic plans. After analyzingthestrategicplan,youshouldbeabletorelatetheseplansroleinguidingthemarketers, and their application in serving the customers with the help of companys employees as well as intermediaries. LearningObjectives Afterstudyingthischapteryoushouldbeableto: 1. Understandthemarketingmixexistsinthecompany 2. Describethecompanywidestrategicplanning. 3. Discusshowtodesignmarketingplanningmodels 4. Preparemarketingplanningforthecompany.

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2.2.

StrategicPlanning

Strategicplanning is theprocessof defining thecompany mission, settingthe long term and short termobjectives,designinganappropriatebusinessportfolioandcoordinatingfunctionalstrategiesof thecompany. Lookingatthedefinition,youwillbeabletoidentifyfourimportantfactorsofthestrategicplanning. Theyare 1. Definingthecompanymission. 2. Formulatingtheobjectives 3. Designinganappropriatebusinessportfolio 4. Coordinationatbusinesslevels. Now,wewilldiscusstheabovepointsandtheirrelevancetothemarketingplans. 2.2.1.Definingthecompanymission: Anorganizationmissionexplainswhoitscustomersare,howitsatisfiestheirneedsandwhattypeof productsitoffers. LetmeexplainthisconceptbytakingamissionstatementoftheTrendsinVogue,afamilybeauty saloons chain from Cavin Kare, a well known fast moving consumer goods (FMCG) company in India.Themissionstatementis 1. Toprovidethecustomeranunparalleledserviceexperience 2. Toprovidethecustomerthelargestrangeof"natural"productsandservices 3. Tobethefirsttointroducesubformatsandvalueaddedservices 4. Tobethemostpreferredfamilybeautysalonchainforcustomers,employeesand Alliancepartners. 5. Toprovideconsistentprofitstoallstakeholders TrendsinVoguemissionstatementanalysis: a. Whoitscustomeris?Missionstatement4statesfamilywhoaregoingtobeauty
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saloonsastheircustomers. b. Howitsatisfytheirneeds?Missionstatement1and2describestheneedsasunparalleled serviceexperienceandofferinglargestrangeofnaturalproductsandservices c. Whattypeofproductsitoffers?Thecompanyoffersnaturalproductsintheirbeauty saloons. 2.2.2:Formulatingtheobjectives. Mission statement providesageneral view of the companys products and its methodof satisfying the customer. Mission statement isonce againdivided into specific objectives whicharestated in writing, can be measured quantitatively and fixed for particular time. Objectives may be business orientedormarketoriented.Theyhelpmarketerstodevelopstrategiesandprograms.Youwillcome toknowhoworganizationsdeducetheirmissionintodifferentobjectivesformthefollowingexample ofBharatElectronicsLimited(BEL),apublicsectorenterpriseintheelectronicfield. Mission:Tobeacustomerfocusedgloballycompetitivecompanyindefenceelectronicsandinother chosenareasofprofessionalelectronics,throughquality,technologyandinnovation. Objectives:

1. Tobeacustomerfocusedcompanyprovidingstateoftheartproducts&solutionsatcompetitive
prices,meetingthedemandsofQuality,delivery&service.

2. Togenerateinternalresourcesforprofitablegrowth. 3. ToattaintechnologicalleadershipindefenceelectronicsthroughinhouseR&D,partnershipwith
defence/researchlaboratories&Academicinstitutions.

4. Togivethrusttoexports. 5. To create a facilitating environment for people to realize their full potential through continuous
learning&teamwork.

6. Togivevalue formoneytocustomers&createwealthforshareholders. 7. Toconstantlybenchmarkcompanysperformancewithbestinclassinternationally. 8. Toraisemarketingabilitiestoglobalstandards. 9. Tostriveforselfreliancethroughindigenization

2.2.3:Designinganappropriatebusinessportfolio.
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Aftersettingmissionandobjectives,managementwilldevelopitsbusinessportfolio. Businessportfolioistherightmixofbusinessesthatcompanyoperatesandproductsthatoffersto customers. Portfolioanalysisistheprocessbywhichcompanyanalyzeitsproductsandbusinesses. Companydevelopstheirbusinessportfoliointwosteps a. Analyzetheexistingbusinessportfolioanddecidewhichbusinessshouldreceivemore,lessor noinvestment. b. Developingthenewbusinessportfolioforfuturetomeetgrowthopportunitiesandeliminatingthe unprofitableportfolios. Analyzingtheexistingbusinessportfolio: Thecurrentbusinessportfolioofthecompanyisanalyzedbythebusinessesinwhichitoperates.To makeitclearer,letmetakeanexampleofITCgroup.ThecompanyoperatesinFMCG,hotels,paper boards,specialtypapersandpackagingandagribusiness.Thesebusinessesareindependentfrom eachotherandhavetheirmissionandobjectivesseparately.Thesesubsidiariesoforganizationsare calledasStrategicbusinessunits(SBU) Strategicbusinessunit:Theunitofthecompanythathasseparatemissionandobjectivesandthat canbeplannedindependentlyfromotherbusinesses. CharacteristicsofSBU. 1. Itmaybebrand,oraproductlineorseparatedivisionofthecompany. 2. Itishavingdistinctmissionandobjectives. 3. Itismanagedbyseparateexecutiveteam. Strategicplanningmodelsusedinassessingtheexistingbusinesses: 1. BCGmatrix(BostonConsultancyGroup) 2. GEmatrix(Generalelectric) BCG matrix: This model is used to identify companys SBUs position in the market. This model identifiestheSBUsstrength,weaknesses,opportunitiesandthreatsonthebasisofmarketgrowth rateandrelativemarketshare. Thismodelisalsoknownasgrowthsharematrix.

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Figure2.1.

Marketgrowthrate

High

QuestionMark STAR

Low

DOG COW High RelativeMarketShare Low

Axiscomponents: 1. Marketgrowthrate:Therateatwhichmarketisgrowing 2. Relative market share: Market share of the SBU divided by the market share of the largest competitor. Modelcomponents: Star: This category represents the high market share and high industry growth. SBUs in this category require large investment to defend their position. SBU will turn as cash cow after some time. Cash cows: This category represents the low growth rate and high market share which is the characteristicofSBUoperatinginmatureindustry.Herecompanyneedslessinvestmenttoholdtheir position.Henceitgeneratesmorecashorinmanagementtermswesaycashcowcanbemilked. Question Mark: This category represents high market growth and low market share. SBUs in this categoryhastwooptions,eithertoinvestheavilyandbringthemtostarpositionordivest/liquidate fromthatposition.
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Dogs:SBUsinthiscategorygenerateslesscashforthecompanyasitoperatesinlowgrowthand lowmarketshare.Usuallycompanieswillnotinvestinthiscategoryandtrytoliquidateordivest. BCGmatrixforITC 1. SBU:FMCG Industrygrowthrate:24%(ACNielsonretailauditreport2007)

th Companygrowthrate:50%(theHindubusinessline19 January2008)

Companysmarketshare:8%(outlookbusiness) Largestcompetitorshare:HUL:54%(outlookbusiness) Relativemarketshare=0.14 2. SBU:Paperboard

th Industrygrowthrate:7.2%(theHindubusinessline27 May2007) th Companygrowthrate:11%(theHindubusinessline19 January2008)

Companysmarketshare:55% Largestcompetitorsshare:BILT35% ITCsFMCGsegmentanalysisshowsthatthoughitismarketleaderinsomecategoriestheiroverall relative market share is 0.14. Company is in the high growth low relative market share area i.e. questionmarkposition.ITCshouldinvestheavilytoconvertitsSBUpositionintostar. ITCsPaperboardindustryisinlowgrowthandhighmarketsharecategoryi.e.incashcowsegment. Itshouldplanforinvestingthecashgeneratedfromthispositionintootherbusinesses. GEmatrix: 1 ManagementcanusetheGEbusinessmatrixtoclassifySBUsonthebasisoftwofactors a. Marketattractiveness:Marketsize,entrybarriers,competitors,technologyand profitmarginaresomefactorsusedtoanalyzethemarketattractiveness. b. Businesspositioncanbedeterminedonthebasisofmarketshare,SBUsize,R&Dcapabilities andcostcontrols Each cell in the model represented by the particular strategy namely, invest strategy, protect strategy,harveststrategyanddiveststrategy
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2 Investstrategy:InthispositionSBU a. b. Shouldreceiveampleresources Shouldsupportbywellfinancedmarketingefforts.

3 Protectstrategy:SBUsinthispositionshould a. Allocatetheresourcesselectively. b. Developstrategieswhichhelpinmaintainitsmarketposition. c. GeneratecashneededbyotherSBUs. Businessposition High Medium Low

LowMediumHigh

Marketattractiveness

Invest

Invest

Protect

Invest

Protect

Harvest

Protect

Harvest

Divest

Figure2.2 4. Harveststrategy:SBUsshouldnotreceivesubstantialnewresourcesandifrequired,sellthem. 5. Divest strategy: SBUs whichfalls into this category should not receive any resources and sell i or shutitasearlyaspossible. Developingthenewbusinessportfolios After analyzing the existing business of the company, let us discuss companys future plans i.e. growthordownsizing.Companyadoptsgrowthstrategiestobecomemorecompetitiveinthemarket,
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tap new opportunities and become preferred employer. Downsizing is used when the product or market became unattractive to it. The Ansoff ProductMarket Growth Matrix is a marketing tool createdbyIgorAnsoffandfirstpublishedinhisarticle"StrategiesforDiversification"intheHarvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existingand/ornewproducts,inexistingand/ornewmarkets. Ansoffsmodelofproduct/marketexpansion.

Figure2.3. a. Marketpenetration:Astrategyusedinincreasingthesalesofcompanysexistingproductswithout modifyingitintheexistingmarket. Characteristicsofmarketpenetration. 1. Servecustomerwithexistingproductsbyopeningnewstores. 2. Increasethepromotionactivitiestoincreasetheconsumption. 3. Improvetheserviceofferings. Caf coffee day a reputed coffee chain in south India, started its operation in brigade road, Bangalore,intheyear1996.Itoffersdifferentvarietiesofthecoffeetoitsexistingcustomers.Today itishaving100storesinBangalore. b. Market development: In this strategy company identifies the new markets to sell their existing products.
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In case of market development company identifies and develops new markets for its existing products Cafcoffeeday,enthusedbythesuccessofofferingaworldclasscoffeeexperience,hasopeneda Caf in Vienna, Austria and is planning to open other Cafes in the Middle East, Eastern Europe, Eurasia,EgyptandSouthEastAsiainthecomingmonths. (Source:www.cafcoffeeday.com) c. Product development: In this strategy, company identifies new product and sells them existing markets. Cafcoffeedayaddedquickbitesandicecreamintheirmenutocatertotheneedsofcustomers. d. Diversification: A strategy for company growth through starting up or acquiring businesses outsidethecompanyscurrentproductsandmarkets. Cafcoffeedaystartedofferingteaandcolddrinksinitshighwaycafretailoutlets.Thesehighway cafoutletsofferexcellentservicetothetravelersonthehighway. Downsizing:Eliminatingtheunprofitableproductsofthecompanyfromitsproductline In the year 2000 M.S. Banga then chairman of Hindustan Unilever limited (HUL), used power brandingstrategytoimprovethesalesandproductivity.HereducedHULsnumberofproductsfrom 110to35. 2.2.4.Coordinationatbusinesslevels 1. Organizationsstrategiesexistinthreedifferentlevels.Theyarecorporatelevel,businesslevel andoperationlevel. 2. Corporatelevel: a. Highriskandgreaterprofit b. Greaterneedforflexibilityexists. c. Longtermplanning
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d. Choiceofbusinesses,dividendpolicies,sourcesoflongtermfinancing,andprioritiesforgrowth 3. Operationlevelstrategies a. Implementtheoverallstrategyformulatedatthecorporateandbusinesslevels b. Involveactionorientedandoperationalissues c. Relativelyshortrangeandlowrisk d. Modestcosts:dependuponavailableresources e. Relativelyconcreteandquantifiable 4. Businesslevelstrategies a. Actsasabridgebetweendecisionsatthecorporateandfunctionallevels b. Lesscostly,risky,andpotentiallyprofitablethancorporateleveldecisions c. Morecostly,risky,andpotentiallyprofitablethanfunctionalleveldecisions d. Includedecisionsonplantlocation,marketingsegmentation,anddistribution In the strategic plan, company brings the synergy between all the three levels. To make it more clearer, companys marketing strategy are different from HR strategies but it should bring coordinationbetweenbothtomeetorganizationsobjectives.Companyshouldbringthecoordination betweenitsgrowthplansandsegmentationthenonlytheoperationstrategyworkswell. 1.3. SWOTanalysis

S W O T represents strengths, weaknesses, opportunities and threats. SWOT analysis helps companytoimplementitsstrategiesbyleveragingstrengths,overcomingfromweaknesses,tapping theopportunitiesandminimizingthethreats 1) Strengths: Followingarethelistofstrengthsthatcompanyshouldhave

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i. Valuablecompetenciesorknowhow ii. Valuablephysicalassets iii. Valuablehumanassets iv. Valuableorganizationalassets v. Valuableintangibleassets vi. Importantcompetitivecapabilities 2) Weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage. Resource weaknesses relate to inferior or unproven skills, expertise, or intellectual capital and Lackofimportantphysical,organizational,orintangibleassets. 3) Opportunities: Opportunities are those which match with its financial and organizational resources,cangenerateprofitsforlongtermandbecomestrengthinfuture. 4) IdentifyingExternalThreats i. Improvedtechnology ii. Improvedproductsbycompetitors iii. Dumpingofmaterials iv. Unfavorablepoliticalsituation v. Potentialofahostiletakeover vi. Changeinthedemography SWOThelpsmarketertounderstandthecurrentpositionofthecompany.Italsohelpstoleverageits strengthstoimprovetheperformanceandtaptheopportunitythatexists.Weaknessesandthreats analysishelpscompanytoovercomefromthemandbecomemoreagile. SelfAssessmentQuestions1:

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1. explainswhoitscustomersare,howitsatisfiestheirneedsandwhattypeofproductsit
offers.

2. Growthsharematrixisalsoknownas 3. CashcowinBCGmatrixrepresents 4. Highmarketgrowthandhighrelativemarketshare 5. Highmarketgrowthandlowrelativemarketshare 6. Lowmarketgrowthandhighrelativemarketshare 7. Lowmarketgrowthandlowrelativemarketshare 8. Productmarketgrowthmodelwasdevelopedby 9. A strategy for company growth through starting up or acquiring businesses outside the its
currentproductsandmarketsisknownas 1.4. Developingthemarketingmix.

Marketing mix: The product, its price, promotion and distribution blended together to get favorable responsefromthecustomer. Thisisalsocalledas4PsofMarketingorMarketassortment. 1. Product: It is a good, service, idea, place or person thatofferedto customer to satisfy his/her need.Theattributesofproductarevariety,quality,warranty,design,packaging,andservice For example, Marico, a FMCG company offers hair oil in two brand names i.e. parachute and nihar.Thebrandnihar,offeredintwotypesofpackagingi.e.Sachetsandbottlesandofferedin twoqualitiesi.e.coconutoilandperfumedhairoil. 2. Price:thevalueatwhichcustomeriswillingtopurchasetheproduct. For example, BSNL offers prepaid service recharge coupons in Rs175, Rs335, Rs500, Rs 1000, Rs2000andRs5000denominations.

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Figure2.4. Themarketingmix Product Variety Quality Features Brandname Packaging Services Price Listprice Discounts Allowances Creditperiod Creditterms

Customersand Intended positioning

Promotion Advertising Salepromotion Publicrelation Publicity Personalselling

Place Channels Coverage Assortments Locations Inventory Transportation

3. Place: Distribution of goods from the factory to the target customer. It includes distributors, stockiestandretailers.Toillustrate,Zenithcomputersusesauthorizeddistributortoselllaptops anddesktopstothetargetcustomers.

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4. Promotion: communicating product features and its uses to target customers through different Medias. For example, Bharatigrouppromotes its cellular services (AIRTEL) through TV, Radio andnewspaper. 1.5. Planning,controlandimplementation. 2.5.1Marketingplanning: Though strategic plan exists in the organization but it is very essential to have functional plans to coordinatedepartmentalactivities.Forexample,themarketingplanguidesthesalesanddistribution activitiesoftheorganization.Thereforeitisessentialtoknowwhatthecontentsofamarketingplan are. Contentsofmarketingplan a. Executivesummary:Briefsummaryofplan,whichhelpbusyexecutivestogothroughthepoints veryquickly. b. Analyzingthecurrentmarketsituation:Thefollowingfactorsshouldbeansweredinthissection.

1. Whatistheintendedmarketandmarketsegment? 2. Whatistheconsumerbuyingbehaviorprocessforparticularcategoryofproducts? 3. Howconduciveisthemarketingenvironmenttodothebusiness? 4. Whethercompanygotrightmarketingmixforintendedtargetcustomer? 5. Whoaremajorcompetitorsandwhataretheirmarketingstrategies?

c. PEST analysis: In this section, the external environment of the company is analyzed to find opportunitiesandthreats.(fordetailseeUNIT3) d. Objectivesandissues:Thispartofthemarketingplanshoulddiscussmarketingobjectivesthat companywouldliketoachieveinparticularperiodandissuesthatmayaffectthem. e. Marketingstrategy:Thissectionshouldhighlighton

1. Identifyingthesegmentation,targetcustomerandpositioningstrategy 2. 4Psofmarketing 3. Plannedactivities:thefollowingfactorsshouldbediscussedinthissection 4. Whataretheprogramsthatcompanyplanstoundertake? 5. Whoareresponsibletomonitortheseprograms? 6. Howmuchtimeittakestocompletetheprogram? 7. Howmuchwillitcost?

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8. MarketingBudget 9. Control: Any program implemented need to be controlled to check its performance. Hence
organization should take periodic auditing by a review committee. The control process for the planshouldbediscussedinthissection. 2.5.2MarketingImplementationandcontrol. Marketingimplementation: Theprocessinwhichmarketingstrategiesandplansareconvertedin topropermarketingactionstoachievetheobjectives. Marketingimplementationdependsonthefollowingfactors: 1. Organizationstructure 2. Organizationculture Marketingcontrol:Theprocessofevaluatingmarketingperformanceandtakingcorrectiveactions. Marketingcontrolinvolvesfoursteps.Theyare a. Setspecificmarketinggoals. b. Measurethemarketingperformance c. Evaluatethemarketperformanceagainstobjectives d. Takecorrectiveactions Marketing control is divided into two parts. They are operation control and strategic control. Operationcontrolinvolvesassessingthecurrentactivitiesagainstannualplanandtakingcorrective actions.Strategic control is used to assess whetherexisting strategic plans of the company meets theopportunitiesexistforit.Marketingauditisusedasastrategiccontroltool. AccordingtoPhilipKotlermarketingauditiscomprehensive,systematic,independentandperiodic examinationofacompanysenvironment,objectives,strategiesandactivitiestodetermineproblem areas and opportunities and to recommend a plan of action to improve the companys marketing performance. Characteristicsofmarketingaudit: 1. Comprehensive.
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2. Systematic 3. Independent 4. periodic Componentsofmarketingaudit: 1. Marketingenvironmentaudit 2. Marketingstrategyaudit 3. Marketingorganizationaudit 4. Marketingsystemsaudit 5. Marketingproductivityaudit. 6. Marketingfunctionaudit Selfassessmentquestions2: f. Exampleofstrategiccontrolis ii.Marketingimplementationdependsonand. iii.Marketingmixisalsoknownasand iv.Whichofthefollowingdoesnotbelongtothemarketingcontrol?

1. Setspecificmarketinggoals. 2. Measurethemarketingperformance 3. Evaluatethemarketperformanceagainstobjectives 4. Understandtheorganizationculture 5. PESTanalysishelpstoidentifycompanysand

2.6. Summary:

1. Strategic planning process involves defining the company mission, formulating the objectives,
designinganappropriatebusinessportfolioandcoordinationamongfunctionalstrategies.

2. BCGandGeneralelectricmodelsareusedtoanalyzeexistingmarketsituationofSBU. 3. SBUs growth and downsizing strategies are determined by Ansoff model of product market
growthmatrix.

4. Marketingmixor4Psofmarketingistheassortmentofproduct,place,priceandpromotion.
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5. Marketingimplementationdependsonorganizationstructureanditsculture. 6. MarketingAuditisusedasstrategiccontroltool.
Terminalquestions: 1. Explainhoworganizationdefinesitsmission.. 2. Discussthemodelsusedtoanalyzetheexistingbusinessportfolioofthecompany. 3. ExplaintheAnsoffsproductmarketgrowthmatrix 4. Whatismarketingmix?Explainitscomponents. 5. Brieflyexplainthecontentsofmarketingplanning. AnswerstoSelfAssessmentQuestions: SelfAssessmentQuestions1:

1. Mission 2. BCG 3. C.Lowmarketgrowthandhighrelativemarketshare 4. IgorAnsoff 5. Diversification.

SelfAssessmentQuestions2

1. Marketingaudit 2. Organizationstrictureandorganizationculture 3. 4Psofmarketingandmarketassortment. 4. D.understandingtheorganizationculture 5. Opportunitiesandthreats.

AnswerstoTerminalQuestions: 1. Refer2.2.1 2. Refer2.2.3 3. Refer2.2.3 4. Refer2.3 5. Refer2.4
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