QuestionsHow does marketing affect customer value?

How is strategic planning carried out at different levels of the organization?

What does a marketing plan include?

The Value Delivery Process

3 V’s Approach to MarketingDefine the value segment

Define the value proposition

Define the value network

Porter’s Value Chain

Organizational costs and

performance measures

Competitorcosts and

performance measures

Market sensing

Fulfillmentmanagement

Customer acquisition

New offering realization

Customer relationship management

Wal-Mart’s stock replenishment process is legendary

Characteristics of Core Competencies

A source of competitive advantageApplications in a wide variety of marketsDifficult to imitate

Challenges Facing CMO’s

Doing more with less

Driving new businessdevelopment

Becoming a full business partner

Levels of a Marketing PlanStrategic

Target marketing decisions

Value propositionAnalysis of

marketing opportunities

TacticalProduct featuresPromotionMerchandisingPricingSales channelsService

The Strategic Planning, Implementation, and Control Processes

Define the corporate missionEstablish SBUsAssign resources to each SBUAssess growth opportunities

Good Mission StatementsFocus on limited number of goals

Stress major policies and values

Define major competitive spheres

Industry

Products

Marketsegment

Geographical

CompetenceVerticalchannels

Customer groups

TechnologyCustomer needs

Existing Business Model

Mission , Vision, Values & Goals

External Analysis: Opportunities &

Threats

Internal Analysis:

Strengths & Weaknesses

SWOT Strategic Choice

Business - Level Strategies

Functional – Level Strategies

Global Strategies

Corporate – Level Strategies

Governance and Ethics

Designing Organization

Culture

Designing Organization

Structure

Designing Organization

Controls

Components of Strategic Management Process

STRATEGY FORMULATION

STRATEGY IMPLEMENTATION

FEE

DB

AC

K

Corporate Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level Managers

Business-Level Managers

Functional Managers

OperatingManagers

Business Strategy

Two-Way Influence

Functional Strategies

Operating Strategies

Business-Level Managers

OperatingManagers

Functional Managers

Two-Way Influence

Corporate Level Issues

Corporate Portfolio ManagementPortfolio balance

MarketsOrganisation’s needs

Attractiveness of business unitsProfitabilityGrowth rates

Portfolio ‘fit’Synergies between business unitsSynergies with corporate parent

The Growth Share (or BCG) Matrix

The BCG Matrix• The BCG Matrix method is based on the product life cycle

theory that can be used to determine what priorities should be given in the product portfolio of a business unit

• To ensure longterm value creation, a company should have a portfolio of products – both high – growth products in need of cash inputs and low-growth products that generate a lot of cash

• BCG Matrix has two dimensions : market share and market growth

• Placing Products in the BCG Matrix results in four categories in the portfolio of a company :• STARS – High Growth / High Market Share• CASH COWS – Low growth / High Market Share• DOGS – Low Growth / Low Market Share• QUESTION MARKS – High Growth / Low Market

Share

• BCG Matrix Method can help understand a frequently made strategy mistake – having a one-size-fits-all approach to strategy : such as a generic growth target (say 10% p.a) or a generic return on capital (say 8% p.a) for the entire corporation

GE / McKinsey Matrix• The GE / McKinsey Matrix is a model to perform a business portfolio

analysis on the strategic Business Units of a corporation

• A Business Portfolio is the collection of Strategic Business Units that make up a corporation

• The Aim of a portfolio Analysis is:• Analyse it’s current business portfolio and decide which SBU’s should

receive more or less investments• Develop growth strategies for adding new products and businesses to the

portfolio• Decide which businesses or products should no longer be retained

• BCG Matrix is the best-known portfolio planning framework - the GE / McKinsey Matrix is a later and more advanced form of the BCG Matrix

• The GE / McKinsey Matrix is more sophisticated than the BCG Matrix in three aspects:• Market / Industry attractiveness replaces market growth

as the dimension of industry attractiveness

• Competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed

• GE / McKinsey Matrix works with a 3x3 Grid while the BCG Matrix has only 2x2 Grid (allows for more sophistication)

Strategic Business Units are portrayed as a circle plotted in the GE / Mckinsey Matrix, whereby:

• The size of the circles represent the market size

• The size of the pies represent the market share of the SBU’s

• Arrows represent the direction and the movement of the SBU’s in the future

The 7-S framework of McKinsey is a Value Based Management (VBM) model that describes how one can holistically

and effectively organize a company. Together these factors determine the way in which a corporation operates.

Shared Value The interconnecting center of

McKinsey's model is: Shared Values. What does the organization stands for and what it believes in - Central beliefs and attitudes.

Strategy Plans for the allocation of a firm’s scarce resources, over time, to reach identified goals, Environment, competition, customers

Structure The way the organization's

units relate to each other: centralized, functional divisions (top-down); decentralized (the trend in larger organizations); matrix, network, holding, etc.

System The procedures, processes

and routines that characterize how important work is to be done: financial systems; hiring, promotion and performance appraisal systems; information systems

Staff Numbers and types of

personnel within the organization

Style Cultural behaviour of the

organization and how key managers behave in achieving the organization’s goals - Management Styles.

Skills Distinctive capabilities of

personnel or of the organization as a whole - Core Competences.

Grand Strategies Grand strategies, often called master or

business strategies, provide basic direction for strategic actions

Indicate the time period over which long-range objectives are to be achieved

Any one of these strategies could serve as the basis for achieving the major long-term objectives of a single firm

Firms involved with multiple industries, businesses, product lines, or customer groups usually combine several grand strategies

Types of Grand Strategies

Consortia

Concentrated Growth

Market Development

Product Development

Innovation

Horizontal Integration

Vertical Integration

Concentric Diversification

Conglomerate Diversification

Turnaround

Divestiture

Liquidation

Bankruptcy

Joint Ventures

Strategic Alliances

Porter’s Generic Strategies

Overall Cost Leadership

Differentiation

Focus

-Were initially used in early 1980s and seem to be popular even today.-They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage

Cost LeadershipThe low cost leader in any market gains

competetive advantage from being able to produce at the lowest cost. ‘No Frills’

Cost is driven down through all the elements of the Value Chain

The sources of Cost AdvantagesEconomies of ScaleExperience or Learning CurveCapacity UtilizationProduct DesignLocationVertical Integration/OutsourcingValue chain Configuration

Differentiation‘D means providing something unique that is

valuable to the buyer beyond simply offering a low price’..Porter

Differentiated goods & services satisfy the needs of customers through a sustainable competitive advantage.

This allows companies to desensitize price and focus on value that generates a comparatively higher price and a better margin

DifferentiationIncurs additional cost in creating competitive

advantageCould be copies by competitors

Key to Successful DifferentiationUnderstanding customer needs & preferencesCommitment to customersKnowledge of company’s capabilitiesinnovation

Key is creating value for the customersTangibleSizeColourMaterialsPerformancePackagingComplementary

services

IntangibleSubjectiveRelated to image &

statusExclusivity, identity

PitfallsUniqueness that is not valuableToo much differentiationToo high a premium priceEasy imitationDilution of brandDifferent perceptions

Niche or Focus StrategyFocus based on the choice of a narrrow

competitive scope within an industryTwo variants – cost focus, differentiation

focus

Characteristics of SBUsIt is a single business or collection of related

businessesIt has its own set of competitorsIt has a leader responsible for

Strategic planningProfitabilityEfficiency

ASSESSING GROWTH OPPORTUNITIESThe Strategic Planning Gap

Ansoff’s Product-Market Expansion Grid – Used for intensive growth strategies

Integrative growthBackward IntegrationForward IntegrationHorizontal Integration

Diversification GrowthDownsizing & divesting older businesses

The Business Unit Strategic Planning Process

SWOT AnalysisStrengths

Weaknesses

Opportunities

Threats

Market Opportunity Analysis (MOA)Can the benefits involved in the opportunity be

articulated convincingly to a defined target market?

Can the target market be located and reached with cost-effective media and trade channels?

Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?

Market Opportunity Analysis (MOA)_2Can the company deliver the benefits better

than any actual or potential competitors?

Will the financial rate of return meet or exceed the company’s required threshold for investment?

Opportunity Matrix

Threat Matrix

Goal Formulation and MBORequirements for using MBO

Unit’s objectives must be hierarchicalObjectives should be quantitativeGoals should be realisticObjectives must be consistent

The Star Alliance

Categories of Marketing AlliancesProduct or Service Alliances

Promotional Alliances

Logistics Alliances

Pricing Collaborations

Feedback and Control

Executive summary Table of contents Situation analysis Marketing strategy Financial projections Implementation controls

Is the plan simple? Is the plan specific? Is the plan realistic? Is the plan complete?