Chapter 2 Company and Marketing strategy

Partnering to Build Customer Engagement, Value And

Relationship

Company wide strategic planning: Defining marketing role

Plan: To make detailed arrangement for something you want to do
in the future or a set of things to do in order to achieve something,
especially one that has been considered in detail in advance is
called plan.
Strategic: It is done as part of a plan that is meant to achieve a
particular purpose or to gain an advance.

Strategic Planning: The process of developing and maintaining

a strategic fit between the organization’s goals and capabilities
and its changing marketing opportunities .
It involves :
1.defining a market oriented mission,
2.setting company objectives and goals ,
3.designing the business portfolio, and
product,

. and market
Defining The Setting Designing Planning, marketing
levelcompany
mission company the business and other functional
objectives and portfolio. strategies
goals.

Figure: Steps in strategic planning

1. Defining a Market Oriented Mission

A Mission Statement is a statement of the organization’s purpose- what it
wants to accomplish in the larger environment.
-A clear mission statement acts as an ‘invisible hand’ that guides people in the
organization.

There are two kind of mission statement which defines the business
1) Product or technology terms: Some companies define their missions in
product and technology terms.
2) Market oriented mission statement: A market oriented mission statement
Examples:

Company Product oriented Market oriented

definition definition

Revlon We make We sell lifestyle and

cosmetics self expression,
success and status;
memories; hopes and
dreams
America online We provide We create customer
online services connectivity,
anytime, anywhere

Wal-Mart We run discount We deliver low prices,

stores everyday
Five characteristics of effective mission statements:
Management should avoid making its mission too narrow or too
broad. So characteristics of effective mission statements should
be:
1) Realistic
2) Specific
3) Market Environment
4) Distinctive competencies
5) Motivating

1.Missions statement should be realistic.

Suppose, Singapore airlines would be deluding itself if it adopted
the mission to become the world’s largest airline.

2. Missions should also be specific.

Example-A company want to produce the highest quality
products, offer the most service.
3. Missions should fit the market environment.
Example-The girl’s scout of America would not recruit successfully
in today’s environment with its former mission: “to prepare young
girls for motherhood and wifely duties.”

4. The organization should base its mission on its

distinctive competencies.
Suppose, McDonald’s could probably enter the solar
energy business, but that would not take advantage of
its core competencies-providing low cost food and fast
service to large customers.
5. Mission statements should be motivating.
Example-A company’s mission should not be stated as
making more sales or profits-profits are only a reward
for undertaking a useful activity.
A company’s employees need to feel that their work is
significant and that it contributes to people is lives
2. Setting Company Objectives and Goals

The company’s mission needs to be turned into detailed

supporting objectives for each level of management.
-Each manager should have objectives and be responsible for
reaching them.
For example: Monsanto operates in many business including
agriculture, pharmaceuticals, and food products.
-Their mission is creating “abundant food and healthy
environment”. This mission leads to a hierarchy of objectives,
including :
a. business objectives and
b. marketing objectives.
-Monsanto’s overall objective is to create environmentally better
products and get them to market faster at lower costs.
-By this way, they sale product and get profits. Profits can be
improved by increasing sales or reducing costs. Sales can be
increased by improving the company shared U.S. market, by
entering new foreign markets.
-These goals then become the company’s current marketing
objectives.
3. Designing the Business Portfolio
Guided by the company’s mission statement and objectives,
management plants its business portfolio.

Business portfolio: It is the collection of business and product

that make up the company .

Business portfolio planning involves two steps:

• First: company must analyze its current business portfolio and
decide which businesses should receive more, less or no
investment.
• Second: company must shape the future portfolio by
developing strategies for growth and downsizing
Analyzing the Current Business Portfolio
The major activity in strategic planning is business portfolio
analysis, whereby management evaluates the products and
businesses making up the company.
-The company will want to put strong resources into its more
profitable businesses and phase down or drop its weaker
ones.
• Strategic business unit (SBU): Management’s first step is to
identify the key businesses making up the company.
-These can be called the strategic business units.
-A strategic business unit (SBU) is a unit of the company that
has a separate mission and objectives and that can be planned
independently from other company businesses.
-An SBU can be:
*a company division,
*a product line within a division, or sometimes
*a single product or
*a brand.
The Boston Consulting Group Approach
The beast-known planning method was developed by the Boston
Consulting Group a leading management consulting firm .
-The Boston consulting group approach :Using this approach ,a
company classifies all its SBU according to the growth share
matrix shown in figure.

• 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.

- The growth-share matrix define four types of SBUs:

Stars: Stars are high-growth, high-share businesses or product.
-They often need heavy investment to finance their rapid growth.
-Eventually their growth will slow down, and they will turn into cash
cows.

Star Question mark

High Low
Cash cow Relative market share
Dog

Figure: The BCG growth-share matrix

Cash cows: Cash cows are low-growth, high-share businesses or
products.
-These established and successful SBUs need less investment to
hold their market share.
-Thus, they produce a lot of cash that the company uses to pay its
bills and to support other SBUs that need investment.

• Question marks: Question marks are low-share business units

in high-growth markets.
-They require a lot of cash to hold their share, let alone increase
it.
-Management has to think hard about which question marks it
should try to build into stars and which should be phased out.
• Dogs: Dogs are low-growth, low-share businesses and
products.
-They may generate enough cash to maintain themselves but
do not promise to be large source of cash.
-The ten circles in the growth share matrix represent a company’s
ten current SBUs .
-The company has two stars, two cash cows, three questions
marks, and three dogs.
-The areas of the circles are proportional to the SBUs dollar sales.

-One of four strategies can be pursued for each SBU.

-The company can invest more in the business unit in order to

build its share. Or

-It can invest just enough to hold the SBU’s share at current level.

-It can harvest the SBU, milking its short term cash flow
regardless of the long term effect.

-Finally, the company can divest the SBU by selling it or phasing it

out and using the resources elsewhere.
Problem with Matrix Approach
1.Difficult time consuming and costly to implement
2.Difficult to define SBU and measure market share and growth
3. Focus on current business but no suggestions for future business
Developing Strategies for Growth and Downsizing
One useful device for identifying growth opportunities is the
product /market expansion grid shown in figure.

A portfolio planning tool for identifying company growth

opportunities through:
1.market penetration,
2.market development,
3.product development, or
4.diversification.
 Existing New
products products
Existing Market Product
markets penetration development

New Market
markets development diversification

Figure: The product/market expansion grid

Market penetration: It is a strategy for company growth by
increasing sales of current products to current markets segments
without changing the product.

-Improvements in advertising, prices, service, menu selection, or

store design might encourage customers to stop by more often or
to buy more during each visit.

 Market development: It is a strategy for company growth by

identifying and developing new market segments for its current
products.
-Example, managers could review new demographic markets.
-Such as senior customers or ethic groups-could be encouraged
to visit Starbucks coffee shops for the first time or to buy more
from them.
-Managers also could review new geographical markets.
Product development: It is a strategy for company growth by
offering modified or new products to current market segments.

-Example, Starbucks has increased its food offerings in an effort

to brings customers into its stores during the lunch and dinner
hours and to increase the amount of the average customer’s sales
ticket.

 Diversification: It is a strategy for company growth through

starting up or acquiring businesses outside the company’s
current products and markets.

-For example, Starbucks is testing two new restaurant concepts-

Café Starbucks and Circadian-in an effort to offer new formats
to related but new markets.
Downsizing: Companies must not only develop strategies for growing their
business portfolios but also strategies for downsizing them.
-Downsizing is reducing the business portfolio by eliminating
products or business units that are not profitable or that no longer
fit the company’s overall strategy.
# There are many reasons that a firm might want to abandon product or
markets:
1. The market environment might change, making some of the company’s
product or markets less profitable.

2. This might happen during an economic recession or when a strong

competitor open next door.

3. The firm may have grown too fast or entered areas where it lacks
experience.

4. This can occur when a firm enters too many foreign markets without the
proper research or when a company introduces new products that do not
offer superior customer value.

5. Some products or business units just age and die. When a firm find products
or businesses that no longer fit its overall strategy, it must carefully prune,
harvest or divest them.
 Strategic Planning Process Of Small Business
• The Strategic Planning Process Of Small Business are:

1. Identify the major elements of the business environment in which the

organization has operated over the past five years.

2. Describe the mission of the organization in terms of its nature & function for
the next two years

3. Explain the internal & external forces that will impact the mission of the
organization.

4. Identify the basic driving force that will direct the organization in the future.

5. Develop a set of long term objectives that will identify what the organization
will become in the future.

6. Outline a general plan of action that defines the logistical, financial &
personal factors needed to integrate the long-term objectives into the total
organization.
-Clearly, strategic planning is crucial to a small company’s future.
Planning Marketing: Partnering to Build Customer
Relationship
-The company strategic plan establishes what kinds of businesses the company will
operate in and its objectives for each. Then, within each business unit, more detailed
planning takes place.
-The major functional departments in each unit marketing, finance, accounting,
purchasing, operations, information systems, human resources, and other must work
together to accomplish strategic objectives.
-Marketing plays a key role in the company strategic planning in several ways.
1.Marketing provides a guiding philosophy which suggests that company strategy should
revolve/turn around building profitable relationship with important consumer groups.
2.Marketing provides inputs to strategic planner by helping to identify attractive market
opportunities and assessing the firm’s potential to take advantage of them.
3.Within individuals business units, marketing designs strategies for reaching the unit's
objectives.
-Marketers must also practice partner relationship management. They must work
closely with partners to other company departments to form an effective value chain
that serve customers.
Partnering with other company departments
The Value Chain is the series of internal departments that carry out
value creating activities to design, produce, market, deliver, and support
a firms products.
Harvard’s Michael Porter has proposed the value chain as a tool for
identifying ways to create more customer value.
- According to this model, every firm is a synthesis of activities
performed to design, produce, market, deliver, and support its product.
-The value chain identifies nine strategically relevant activities
—five primary and four support activities—that create value
and cost in a specific business.
a.The primary activities are (1) inbound logistics, or bringing materials
into the business; (2) operations, or converting materials into final
products; (3) outbound logistics, or shipping out final products; (4)
marketing, which includes sales; and (5) service.
b. Specialized departments handle the support activities—(1)
procurement, (2) technology development, (3) human resource
management, and (4) firm infrastructure. (Infrastructure covers the costs
of general management, planning, finance, accounting, legal, and
Partnering with Others in the Marketing System
-More companies today are partnering with other
members of the supply chain-suppliers, distributors,
customers to improve the performance of the customer
value delivery network.
Value delivery network is a network composed of the
company, suppliers, distributors, and ultimately
customers who partner with each other to improve the
performance of the entire system in delivering customers
value.
Marketing Strategy and Marketing Mix
Marketing Strategy is the marketing logic by which the company
hopes to create customer value and achieve profitable customer
relationships.
-The company decides which customers it will
serves(segmentation and targeting), and how differentiation and
positioning).
-It identifies the total market and then divides it into smaller
segments, select the most promising segments, and focuses on
serving and satisfying the customers in these segments.
-Guided by marketing strategy, the company design an integrated
marketing mix made up of factors under its control-product, price,
place and promotion(the four Ps).
-To find the best marketing strategy and mix, the company
engage in marketing analysis, planning, implementing, and
control. Through these activities, the company watches and
adapts to the actors and forces in the marketing environment.
Customer Value-driven Marketing Strategy
To succeed in today’s competitive market place companies must
be customer centered, winning customers’ from competitors, then
keeping and growing them by delivering greater value.
-But before it can satisfy consumers, a company must first
understand their needs and wants.
-This, sound marketing requires a careful customer analysis.
-Thus, companies must divide up the total market, choose the
best segments, and design strategies for profitably serving chosen
segments.
*Market segmentation: It is the process of dividing a market into
distinct groups of buyers who have distinct needs, characteristics,
or behavior and who might require separate products or marketing
mixes.
-So the marketer will have to determine which segments offer the
best opportunity for achieving company objectives.
-A market segment is a group of consumers who respond in a
similar way to a given set of marketing efforts.
*Target marketing: After a company has defined market segments, it can enter
one or many segments of given market.
-Target marketing is the process of evaluating each market
segments attractiveness and selecting one or more segments
to enter.
-A company should target segments in which it can generate the
greatest customer value ,profitably and sustain it over time.
-A company with limited resources might decide to serve only one
or few special segments or market niches.
*Market Differentiation and Positioning: After a company has
decided which market segments to enter, it must decide what positions it wants to
occupy in those segments.

A product’s position is the place the product occupies

relative to competitors in consumer’s minds.

Marketers want to develop unique market positions for their products.

Market positioning is arranging for a product to occupy
a clear, distinctive, and desire able place relative to
competing products in the minds of target consumers.

-Thus, marketers plan positions that distinguish their products from competing
brands and give them the greatest strategic advantage in their target markets.

-Effective positioning begins with actually differentiating the company’s

marketing offer so that it gives consumers more value.
Marketing strategies for competitive advantages:
-To be successful, the company must do a better job than
competitors of satisfying target consumer’s .
-Thus, marketing strategies must be geared to the needs of
consumers but also to the strategies of competitors.
-Designing competitive marketing strategies begins with thorough
competitor analysis.
-The company constantly compares the value and customer
satisfaction delivered by its product, prices, channels and
promotion with those of close competitors.
-The competitive marketing strategy a company adopts depends
on its industry position .It may be:
 Market leader: The firm with the largest market share in an
industry. It can take market leader strategy.
Example: Coca-cola, Microsoft, Wall-mart, IBM.

Market challengers: Market challengers are runner-up

companies that aggressively attack competitors to get more
market share.
Example: Pepsi challenges coke, Komatsu challenges
caterpillar and MSN challenges AOL.
Market followers: These seek stable market shares and profits by
following competitors products offers, prices, and marketing programs.
• Example-Smaller firms in a market or even larger firms that lack
established positions.
Market niches: A firm in an industry that serve small segments or niches
which is overlooked or ignored by another firm.
- The firm specializes in providing one or more unique services .
-Example-A bank takes loan requests over the phone and hand-delivers
the money to the customer.
Developing an integrated the Marketing Mix: Once the company decided
on its overall competitive marketing strategy, it is ready to begin planning the details of the
marketing mix, one of the major concepts in modern marketing.

The Marketing mix: It is the set of controllable, tactical marketing

tools that the firm blends to produce the response it wants in
the target market.
-The marketing mix consists of everything the firm can do to
influence the demands for its product.
-The many possibilities can be collected into four groups of
variables known as the “Four Ps”:

Product: Product means the goods and services combination

the company offers to the target market.
-Thus, a ford Taurus product consists of nuts and bolts,
spark-plugs, pistons, headlights, and thousands of other
parts.
 Price: Price is the amount of money customers have to pay
to obtain the product.
Example-Ford calculates suggested retail prices that its
dealers might charge for each Taurus, but Ford dealers
rarely change the full sticker price.

• Place: Place includes company activities that make the

product available to target consumers.

-The dealers keep an Inventory of ford automobiles,

demonstrate them to potential buyers, negotiate prices, close
sales, and service the cars after the sale.

• Promotion: Promotion means activities that communicate the

merits of the product and persuade target customer to buy it.
An effective marketing program blends all of the marketing mix elements into a coordinated
program designed to achieve the company’s marketing objectives by delivering value to
consumers.
Managing the Marketing Effort and Marketing Return
on Investments
Managing the Marketing Effort
Managing the marketing process requires the five marketing
management functions shown in figure2.6 analysis, planning,
implementation, organization, and control.
-the company first develops company-wide strategic plans and
then translates them into marketing and other plans for each
division, product, and brand.
-through implementation and organization, the company turns
the plan into actions.
-control consists of measuring and evaluating the results of
marketing activities and taking corrective action where
needed.
-finally, marketing analysis provides the information and
Marketing Analysis: Managing the marketing function begin with a complete
analysis of the company situation. The company must analyze its.
-Markets and marketing environment to fad attractive opportunistic and avoid
environmental threats.
-It must analyze company strengths and weaknesses as well as current and
possible marketing actions to deter mine which opportunity it can best pursue.
Marketing produces in put to each of the other marketing management

function.
Marketing Panning: Marketing planning involves
deciding on marketing strategies that will help the
company attain its overall strategic objectives.

-A detailed marketing plan is needed for each business

produce or brand.

-The main section of the plan should represent a

detailed analysis of the current marketing situation as
well as potential threats and opportunities.
 -A marketing strategy : It is the marketing logic where by the
company hopes to achieve its marketing objective .
-It consists of specific strategies for target markets positioning,
Marketing mix and marketing expenditure levels.

• Marketing implementation: It is the process that

turns marketing plans into marketing actions in order
to accomplish strategic marketing objectives.

-Implementation involves day today, Month to month

activities that effectively put the marketing plan to
work .

-Whereas marketing planning address the what and

why of marketing activities implementation addressee
the who, where when and how.
 Analysis

Planning Implementation Control

Develop strategic carry out the plants Measure results
plans

Evaluate results
Develop marketing
plans
Take corrective
action

Figure shows the relationship between the four marketing management functions
analysis paining implantation and control