marketing strategy
DESCRIPTION
Marketing StrategyTRANSCRIPT
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Strategic andMarketing Planning
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Benefitsof
Planning
Consistency
Commitment
Responsibility
Communication
Benefits of Planning
Direction
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#1:
Top Down
#2:
Bottom Up
#3:
Goals Down,Plans Up
Approaches to Planning
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The Strategy Hierarchy
SBUStrategy
Marketing StrategyMarketingobjectives
Product marketsstrategies
CorporateLevel
Functional Levelof SBU
StrategicBusinessUnit Level
Corporate StrategyMission and visionObjectivesBusiness portfolio strategyResource development
Corporate values
SBU StrategyBusiness definitionObjectivesProduct market portfolioCompetitive strategyResource allocation and management
SBUStrategy
Finance andadministration
Strategy
Productionand operation
strategy
R&D StrategyTechnology
Productdevelopment
Humanresources
Strategy
Strategic Planning
Investment Management
Growth & Company Position
Strategy
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Corporate, Business and Marketing
Strategy Model
Corporate Strategy
Building corecompetencies
Business portfolioCapital investments andresource allocationCorporate cultureCorporate structure
Product/market portfolioResource allocationProduct-marketsBusiness cultureStrategic cost
management
MarketsProducts and servicesProfit-yielding strategiesBrand management
Profit improvement
Business Strategy
Distinctive competenciesDeveloping competitive
position
Competitive advantage
Marketing Strategy
Developing marketposition
Customer satisfaction
Focus
Customer valuecreation,
maintenance anddefence
Focus
Economicvalue added
Focus
Economicvalue added
ShareholderValue
BusinessValue
CustomerValue
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Measuringresults
Diagnosingresults
Takingcorrective
action
Implementation
Corporateplanning
Divisionplanning
Business
planning
Productplanning
Organising
Implementing
Control
Strategic-Planning, Implementation, and
Control Process
Planning
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Objectives Address Two Questions:
Wheredo we want to be?
Whendo we expect to get there?
Corporate Plan Objectives
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Planning Terms
Vision:the long term, I have a dream
Mission: purpose of organisation
Objective:a shorter term goal leading to the
achievement of the Mission
Strategy:a description of the method of
achieving the objective
Tactic:the short term application of the
strategy
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Porters five forces
model
SUBSTITUTES
INDUSTRY
COMPETITORS
Rivalry among
Existing Firms
BUYERS
POTENTIAL
ENTRANTS
Threat of entryBargainingpower ofsuppliers
Bargaining power ofbuyersThreat of Substitute
Products or Services
SUPPLIERS
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Porters five-forces model (2)
Bargaining powerof suppliers
Threat of
new entrants
Competitiverivalry
Threat of
substitutes
Bargaining powerof buyers
Where there are numerous or equally
balanced competitors,there is slow industry growth, lack of
differentiation, low buyer switching costs,
high fixed costs, overcapacity, perishable
products (and services) and high exit barriers.
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Porters five-forces model (3)
Bargaining power
of suppliers
Threat ofnew entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
When there are only a few large buyers in the market, the
buying volume is large, there is low differentiation
between competitive products, the value of the industry
product is low, the sellers quality is relatively
unimportant to the buyer, there are low switching costs forthe buyer or high switching costs for the seller, the buyer
is a low profit earner, the buyer has access to full market
information or the buying company could forward
integrate and become a competitor.
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Porters five-forces model (4)
Bargaining powerof suppliers
Threat of
new entrants
Competitiverivalry
Threat of
substitutes
Bargaining powerof buyers
When the barriers to industry entry are
low, there are:
no cost advantages for existing
competitors
a lack of product differentiation
low capital costs for market entryrelatively easy access to
distribution channels.
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Porters five-forces model (5)
Bargaining powerof suppliers
Threat ofnew entrants
Competitiverivalry
Threat ofsubstitutes
Bargaining powerof buyers
When there are only a few large
suppliers, the suppliers product is
highly differentiated or unique, thesupplier sells the same product to
other industries or a supplier could
forward-integrate and enter the
market as a competitor.
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Porters five-forces model (6)
Bargaining powerof suppliers
Threat ofnew entrants
Competitiverivalry
Threat of
substitutes
Bargaining powerof buyers
When substitute products are close in
performance and price to the industrys
product, there are low switching costs and
switching is a commonplace occurrence.
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Business Portfolio Analysis
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Outline
Introduction
BCG (Boston Consulting Group) Matrix
GE(General Electric)/McKinsey Multi-Factor Matrix
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Introduction
The creation of SBUs enables the settingof SBUs mission and objectives and theallocation of resources across SBUs in theorganization
Senior management need to have aframework to evaluate SBUs and to assignlimited resources among them; henceportfolio analysis
Many models but only 2 are covered here:BCG, & GE models
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BCG (Boston Consulting
Group) Matrix Provides a framework for senior
management in allocating resourcesacross business units in a diversifiedfirm by
Balancing cash flows amongbusiness units, and
Balancing stages in the productlife-cycle (PLC)
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The BCG Matrix
(Log Scale)
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BCG Matrix (contd)
The horizontal axis is the Relative Market Shareshown in a log scale
Vertical line is usually set as 1.0 Relative MarketShare
An SBU to the left of this line means it is the marketleader in the industry or segment in which it operates
Conversely, an SBU to the right of this line (1.0 RMS)means it is not the leader
The vertical axis is the industry growth rate .
The horizontal rate is usually set at 10% marketgrowth
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High Low
High
Low
Market
Growth
Rate
Relative Market Share
The BCG Matrix
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The Strategic Implications of
the BCG
Cash cows
Investments sufficient to maintaincompetitive position. Cashsurpluses used in developing andnurturing stars and selectedquestion mark firms.
Stars
Aggressive investments to supportcontinued growth and consolidate
competitive position of firms.
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The Strategic Implications of
the BCG
Question marks
Selective investments; divestiturefor weak firms or those withuncertain prospects and lack ofstrategic fit.
Dogs
Divestiture, harvesting, orliquidation and industry exit. Co then considers acquisitions, divestments
and new ventures to get a balancedportfolio
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Question Marks(Problem Children)
Investmentheavy initial capacityexpenditures and high R&D costs
Earningsnegative to low Cash-flownegative (net cash user)
Strategy Implications
If possible to dominate segment,
go after share. If not, redefine thebusiness or withdraw
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Stars
Investmentcontinue to invest for
capacity expansion
EarningsLow to high earnings
Cash-flowNegative (net cash user)
Strategy Implications
Continue to increase market
shareeven at the expense ofshort-term earnings
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Cows
InvestmentCapacity maintenance
EarningsHigh
Cash-flowPositive (net cash contributor)
Strategy Implications
Maintain market share and cost
leadership until further investment
becomes marginal
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Dogs
Investment
Gradually reduce capacity EarningsHigh to low
Cash-flow
Positive (net cash contributor) ifdeliberately reducing capacity
Strategy Implications
Plan an orderly withdrawal tomaximize cash flow
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Example of a CG Matrix for aEngineering company in IndiaHigh Low
High
Low
Product
Sales
Growth
Rate
Relative Market Share
Lighting
SwitchgearTransformer
Fan
Pumps
Motor
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BCG Matrix
(Three Paths to Success)
Continuously generate cash cows and usethe cash throw-up by the cash cowsto invest
in the question marks that are not self-sustaining
Stars need a lot of reinvestments and as themarket matures, stars will degenerate intocash cows and the process will be repeated.
As for dogs, segment the markets and nursethe dogs to health or manage for cash
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Three Paths to Success
(contd)High Low
High
Low
Market
Growth
Rate
Relative Market Share
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BCG Matrix
(Three Paths to Failure)
Over invest in cash cows and under invest
in question marks
Trade further opportunities for presentcash flow
Under invest in the stars
Allow competitors to gain share in a
high growth market
Over milked the cash cows
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Three Paths to Failure
(contd)
High Low
High
Low
Market
Growth
Rate
Relative Market Share
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Limitations on Portfolio
Planning
Flaws in portfolio planning:
The BCG model is simplistic if used blindly;
considers only two competitive environmentfactorsrelative market share and industry
growth rate.
High relative market share is no guarantee of a
cost savings or competitive advantage (butnormally does a good job of predicting cash flow)
Low relative market share is not always an
indicator of competitive failure or lack of
profitability (but normally does a good job ofredictin cash flow .
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Limitations on Portfolio
Planning
Flaws in portfolio planning:
Multifactor models (e.g., the McKinsey matrix or
the GE Grid) are better though imperfect.
Importantly, goals other than cash flow may be
more critical (such as ROI). If so, use the BCG
with caution
Fail to look at dependencies among SBUs wrttransferring competencies, economies of
scope,etc.
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GE(General Electric)/McKinsey
Multi-Factor Matrix Originally developed by GEs planners
drawing on McKinseys approaches
Market attractiveness is based on as
many relevant factors as are appropriate
in a given context
Business-position assessment also made
on a many factors
SBU needs to be rated on each factor
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GE Multifactor Portfolio Matrix
Business Strength
High
High
Medium
Medium
Low
Low
Invest/Grow
Selectivity
/earnings
Harvest
/Divest
Protect
Position
Invest to
Build
Build
selectively
Build
selectively
Selectively
manage for
earnings
Limited
expansion
or harvest
Protect &
refocus
Divest
Manage for
earnings
u ac or or o o a r x
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u ac or or o o a r x(Contd)
Invest/Grow
Selectivity
/earnings
Harvest
/Divest
Business Strength
High
High
Medium
Medium
Low
Low
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Some Limitations of the
GE Model Subjective measurements across SBUs
Process also highly subjective
From the selection and weighting of
factors to the subsequent developmentof both a firms position and the marketattractiveness
Businesses may have been evaluated withrespect to different criteria
Sensitive to how a product market isdefined
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Ansoffs Growth Vector Matrix
Market penetration
Marketdevelopment
Diversification
Product / Servicedevelopment
Presen
t
New
Present New
MARKET
PRODUCTS / SERVICES
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Using the Ansoff Matrix in the
Objective-setting Process
Market penetration (1)
Marketdevelopment (3) Diversification (4)
Product / Servicedevelopment (2)
Establishe
d
New
Established New
MARKET
PRODUCTS / SERVICES
High Risk
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Sales
1050
Time (years)
The Strategic-Planning Gap
Desiredsales
Integrative growth
Intensive growth
Currentportfolio
Strategic-
planninggap
Diversification growth
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Integrative Growth
Backward Integration
Forward Integration
Horizontal Integration
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Diversification Growth
Concentric diversification
A process that occurs when new products related to
current products are introduced into new markets.
Conglomerate diversification
A process that occurs when new products unrelated
to current technology, products or markets areintroduced into new markets.
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Corp as a Portfolio of
Competencies
Identify current competencies
Compare competencies to
opportunities and threats Develop an agenda for corporate
development
Advantage is that this method
recognizes need to add value by
looking at inter-dependencies
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From Agenda to Action
Based on the analysis of the
portfolio and what do you have to
do the next step is how to you get
there
Internal New Ventures
Acquisitions
Joint Ventures
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Internal New Venturing
Internal new venturing is attractive when:
Entering as a science-based company. Entering an emerging industry with no
established competitors.
Good if company has key competencies
that can be leveraged
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Internal New Venturing
Pitfalls of new venturing (very high failure
rate):
Scale of entryLow-scale entry reduces
probability of long-term success (lowshare drives high costs and low revenue)
CommercializationFailure to develop a
product that meets basic customer
needs. Poor ImplementationUsing shotgun
approach, not setting clear strategic
objectives, abandoning projects too
soon.
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Internal New Venturing
Guidelines for successful newventuring:
Adopt a structural approach withclear strategic objectives settingR&D direction.
Foster close links between R&Dand marketing.
Use project teams to reducedevelopment time.
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Internal New Venturing
Guidelines for successful newventuring:
Use a selection process to pickventure projects with the highestprobability of success.
Monitor progress of ventures ingaining initial market share goals.
Large-scale entry is important forventure success.
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Acquisition is an attractive strategy when:
Competencies important in a new
business area are lacking in the enteringfirm.
Speed of entry is considered important.
Acquisition is perceived as a less risky
form of entry.
Barriers to entry can be overcome
by acquisition of a firm in the
industry targeted for entry.
Acquisitions as an Entry
Strategy
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Acquisitions as an Entry
Strategy Pitfalls of acquisitions:
Failing to follow through on
postacquisition integration of the
acquired firm.
Overestimating the economic
benefits of the acquisition.
Underestimating the expenseof an acquisition.
Failing to properly screen
candidates
before ac uisition.
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Acquisitions as an Entry
Strategy
Guidelines for successful
acquisitions: Properly identify acquisition
targets and conduct a thorough
preacquisition screening of the
target firm. Use a bidding strategy with proper
timing to avoid overpaying for an
acquisition.
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Acquisitions as an Entry
Strategy
Guidelines for successful
acquisitions: Follow through on post acquisition
integration synergy-producing
activities of the acquired firm.
Dispose of unwanted residualacquisition assets.
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Joint Ventures as an
Entry Strategy
Attractions Sharing new project costs and
risks.
Increasing the probability of
success
in establishing the new business.
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Joint Ventures as an
Entry Strategy
Drawbacks
Requires a sharing of control withpartner firms.
Requires that partner firms share
profits.
Risks giving away critical
knowledge.
Risks creating a potential
competitor.
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Restructuring
Why restructure?
Pull-back from overdiversification. Attacks by competitors on core
businesses.
Diminished strategic advantages of
vertical integration and diversification.
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Restructuring
Exit strategies
Divestmentspinoffs of profitable SBUsto investors; management buy outs(MBOs).
Harvesthalting investment, maximizingcash flow.
LiquidationCease operations, write offassets.
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Turnaround Strategy
The causes of corporate decline
Poor managementincompetence,
neglect
Overexpansionempire-building
CEOs
Inadequate financial controlsnoprofit responsibility
High costslow labor productivity
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Turnaround Strategy
The causes of corporate decline
New competitionpowerfulemerging competitors
Unforeseen demand shiftsmajor
market changes
Organizational inertiaslow to
respond to new competitive
conditions
Th M i St f
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The Main Steps of
Turnaround
Changing the leadership
Replace entrenched management with
new managers. Redefining strategic focus
Evaluate and reconstitute theorganizations strategy.
Asset sales and closures Divest unwanted assets for investment
resources.
Th M i St f
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The Main Steps of
Turnaround
Improving profitability
Reduce costs, tighten finance and
performance controls. Acquisitions
Make acquisitions of skills andcompetencies to strengthen corebusinesses.
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Successful Planning
Successful marketing
planning requires:
Commitment Time
Understanding
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The McKinsey 7-S Framework
Skills
Sharedvalues
Staff
Style
Strategy
Structure
Systems
P fit i t ti
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Profit improvement options
Profit Improvement
Sales Growth Productivity Improvement
Market
Penetration
Existing
Assets
Market
Development
Product
Development
Change
Asset base
Improve
product
sales
mix
( margin)
Increase
Price
Increase
usage
Take
competitors
customers
Improve
asset
utilisation
(experience
and
efficiency
New
Segments
Convert
non-users
Existing
Markets
New
Markets
Cost
Reduction
Investment
innovation
diversification
Divestment
redeployment of
capital resources
Growth focus Cash and margin focus
Capital utilisation focus
Extended Marketing Mix
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Extended Marketing Mix
1.PRODUCT &
SERVICE
VarietyQualityDesignFeaturesBrand name
PackagingSizesAdd-onsWarrantiesReturns
7. PROMOTION
AdvertisingSales PromotionPersonal selling
Direct marketingPublic relations
6. PLACEMENTfor customer service
ChannelsCoverageLocationsInventory
Logistics management
2. PRICE
List priceDiscountsAllowancesSettlement andcredit terms
3. PEOPLE
People interacting with peopleis how many service situationsmight be described.Relationships are important inmarketing
4. PROCESS
In the case of high-contactservices, customers areinvolved in the process.Technology is also importantin conversion operations andservice delivery
5. PHYSICAL EVIDENCE
Services are mostly intangible.Thus the meaning of other toolsand techniques used in
measures of satisfaction areim ortant
TARGET CUSTOMERS
INTENDEDPOSITIONING
Th M k ti E i t
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The Marketing Environment
TargetConsumers
Product
Place Price
Promotion
Competitors
MarketingChannels
PublicsSuppliers
Demographic-Economic
Environment
Technological-Natural
Environment
Political-Legal
Social-Cultural