Marketing Management

Developing Marketing
Strategies and Plans
Chapter # 2

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 1. THE VALUE DELIVERY PROCESS
Make the Sell the Product
Product

Design Procure Make Price Sell Advertise/ Distribute Services

product Promote

A. Traditional Physical Process Sequence

 The traditional view of marketing is that the firm makes something and then sells
it.
 Marketing takes place in the second half of the process.
 The company knows what to make and the market will buy enough units to
produce profits.
 The Traditional view of business process however will not work in economics
where people face abundant choices.
 There the Mass Market is actually dividing into numerous micro-markets, each
with its own wants, perceptions, preferences and buying criteria.

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 THE VALUE DELIVERY PROCESS
Communicate
Choose the value Provide the value the value

Customer Market Value Product Service Pricing Distributing Sourcing Sales Sales Advertising
Segmentation Selection/ Positioning Develop- Develop-
Servicing Making Force Promotion
Focus ment ment

Strategic Marketing Tactical Marketing

B. Value Creation and Delivery Sequence
 The first phase, choosing the value, represents the homework marketing must do before
any products exists.
 The Marketing Staff must segment the market, select the appropriate target market and
develop the offering’s value positioning.
 Once the business unit has chosen the value, the second phase is providing the value.
 Marketing must determine specific product features, prices and distribution.
 The task in the third phase is communicating the value by utilizing the sales force, sales
promotion, advertising and other communication tools to announce and promote the
product.
 The value delivery process begins before there is a product and continues while it is being
developed and after it becomes available.
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Defining the Value Chain
The Value Chain is a tool for identifying ways to create
more customer value because every firm is a
combination of primary and support activities
performed to design, produce, market, deliver, and
support its product.

- To provide superior value to the customers, each

value stick should tidily bundled together:
1. Primary activities
2. Support activities

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Defining the Value Chain
 Primary activities:
1. Bringing materials into business
2. Converting inputs into outputs
3. Shipping out final products
4. Marketing & Sales
5. Servicing

Support activities:

1. Procurement
2. Technology Development
3. Human Resource Management
4. Firm Infrastructure
----General Management, Planning, Finance, Accounting, Legal and
Government Affairs

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Core Business Process
The firm’s success depends not only on how well
each department performs its work, but also on how
well the company coordinates departmental activities
to conduct core business processes. These core
business process include:

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Core Business Process
Market-sensing process
(All activities in gathering marketing
intelligence, designing it within the
organization and acting on the information)
New-offering realization process
(All activities involved in researching,
developing and launching new high-quality
offerings quickly and within budget)

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Core Business Process
Customer Acquisition Process
(All activities involved in defining target markets and
prospecting for new customers)
 Customer Relationship Management Process
(All the activities involved in building deeper
understanding, relationships and offering to individual
customers)
The Fulfillment Management Process
(All activities involved in receiving & approving orders,
shipping the goods on time and collecting payment)

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Creating Value Delivery Network
Value Delivery Network is the network made up
of the company, suppliers, distributors, and
ultimately customers who partner with each
other to improve performance of the entire
system.
-Value delivery network can be formed and work through:
1. Horizontal Integration (AIUB, NSU, EWU)
2. Vertical Integration (AIUB and BAT, Unilever, etc.)

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Core Competencies
The unique characteristics, strengths and
benefits of a firm that gives an absolute power
to compete with others.

- Competencies has three characteristics:

A source of competitive advantage
Applications in a wide variety of markets
Difficult for competitors to imitate/copy

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 3. Marketing Plan
A Marketing Plan is the central instrument for
directing and coordinating the marketing effort.

There are three Layers of Marketing Planning:

1. Strategic planning
2. Implementing
3. Controlling

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 Levels of Marketing Plan
Strategic Tactical
◦ Target marketing ◦ Product features
decisions ◦ Promotion
◦ Value proposition ◦ Merchandising
◦ Analysis of marketing ◦ Pricing
opportunities ◦ Sales channels
◦ Services

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2. (i). Corporate and Division Level
Strategic Planning

Planning Activities Includes…

Defining the corporate mission
Establishing strategic business units (SBUs)
Assigning resources to each SBU
Assessing growth opportunities

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 Defining Corporate Mission
Mission Statement:
The organization’s purpose, what it wants
to accomplish in the larger environment.
A clear mission statement acts as an “invisible hand”
that guides the people of the organization. Mission
should be:
- Specific
- Realistic
- Fit with the market environment
- Based on distinctive competencies
- Motivating

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 Defining Corporate Mission
Over time the mission may change, to take
advantage of new opportunities or respond to new
market conditions.
Changed its mission from being the world’s
largest online bookstore to aspiring to become the
world’s largest online store.

Changed its mission from running online auctions

for collectors to running online auctions covering
all kinds of goods.

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 Defining Corporate Mission
Mission Statement:
To define its mission, a company should address
Peter Drucker’s classic questions:
 What is our business?
 Who is the customer?
 What is of value to the customer?
 What will our business be?
 What should our business be?

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 Characteristics of Good Mission
Statements
Focus on limited number of goals
(We want to produce the highest-quality products,
offer the most service, achieve the most widest
distribution and sell at the lower price – The statement
claims too much)
Stress major policies and values
(Narrow the range of individual discretion so that
employees act consistently on important issues)
Define major competitive spheres
(Define the major competitive spheres within which
the company will operate)

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Major Competitive Spheres
Industry
Products and applications
Competence
Market segment
Vertical channels
Geographical

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 Characteristics of Good Mission
Statements
They take a long-term view
They should be enduring: management should
change the mission only when it ceases to be
relevant.

Isas short, memorable and meaningful as

possible

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Planning Activities Includes…

An Unit of the company that has a separate mission and

objectives and that can be planned independently
from other company businesses.
Each individual Product, Brand or Subsidiary
business of an organization can be considered as
Strategic Business Units (SBU).

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Using the Boston Consulting Group (BCG) approach, a
company classifies all its SBUs according to the growth
share matrix.
On the vertical axis, market growth rate provides a
measure of market attractiveness. On the horizontal
axis, relative market share serves as a measure of
company strength in the market.

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 Relative Market Share
High Low

Stars Question
QuestionMarks
Marks ?
• High growth & share ••High
Highgrowth,
growth,low
lowshare
High • Profit potential ••Build
share
Buildinto
intoStars
Starsor
orphase
phaseout
out
• May need heavy ••Require cash to hold
Require cash to hold
investment to grow market
marketshare
Market share

Growth Cash
CashCows
Cows Dogs
Dogs
Rate ••Low
Lowgrowth,
growth,high
highshare
• Low growth & share
share • Low growth & share
••Established, successful ••Low
Established,successful Lowprofit
profitpotential
potential
SBU’s
Low SBU’s
•Produce
•Producecash
cash

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Stars are high-growth, high-share businesses or
products requiring heavy investment to finance
rapid growth. They will eventually turn into cash
cows.
When growth slows, stars become cash cows if they have
been able to maintain their category leadership.

Cash Cows are low-growth, high-share

businesses or products that are established and
successful SBUs requiring less investment to
maintain market share.
These are mature, successful business with relatively
little need for investment. They generate to continue the
strong cash flows that the company needs for its stars.

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Question Marks are low-share business units
in high-growth markets requiring a lot of cash
to hold their share.
A question mark has the potential to gain market share
and become a star, and eventually a cash cow when
the market growth slows.

Dogs are low-growth, low-share businesses and

products that may generate enough cash to
maintain themselves but do not promise to be
large sources of profit for the organization.
These units typically "break even", generating barely
enough cash to maintain the business's market share.

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 Problems With BCG Matrix Approaches…

Can
Canbe
beDifficult,
Difficult,Time-Consuming,
Time-Consuming,&&Costly
Costlyto
toImplement
Implement

Difficult
Difficultto
toDefine
DefineSBU’s
SBU’s&&Measure
MeasureMarket
MarketShare/
Share/Growth
Growth

Focus
Focuson
onCurrent
CurrentBusinesses,
Businesses,But
ButNot
Notfuture
futurePlanning
Planning

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 Characteristics of SBUs
It is a single business or collection of related
businesses
It has its own set of competitors
It has a leader/manager responsible for:
◦ Strategic planning
◦ Profitability
◦ Efficiency

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 Assessing Growth Opportunities
(Ansoff’s Product-Market Expansion Grid)

Current Products New Products

Current
Markets 1. Market Penetration 3. Product Development

New 2. Market Development 4. Diversification

Markets

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 Assessing Growth Opportunities
(Ansoff’s Product-Market Expansion Grid)
Market Penetration: A strategy for company growth
by increasing sales of current products to current
market segments without changing the product.
How?
By adding new stores in current market areas to make it easier for
more customers to visit, improve advertising, prices, service or
store design.
Examples: SMC Oral saline, COSCO soap
– they are operating in the same market
with unchanged or undifferentiated.

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Assessing Growth Opportunities
(Ansoff’s Product-Market Expansion Grid)
Market Development: A strategy for company
growth by identifying and developing new market
segments for current company products.
How?
By identifying and targeting new demographic or geographic
markets and increasing sales of current products to those
market segments without changing basic products.
Examples: SQUARE Group is creating
new markets for their Ruchi and Radhuni
branded products is newly packed to be
exported to Dubai and other middle-east countries.

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 Assessing Growth Opportunities
(Ansoff’s Product-Market Expansion Grid)
Product Development: A strategy for company
growth by offering new or modified products to current
market segments.
How?
By adding and offering new design, styles, flavors, colors,
sizes or modified products to the existing customers.
Examples: Unilever has changed the color, fragrance, size of
their recognized brand “Lifebuoy” and Same is for Lux, Sun Silk
and Fair & Lovely.

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 Assessing Growth Opportunities
(Ansoff’s Product-Market Expansion Grid)
Diversification: A strategy for company
growth through starting up or acquiring
businesses outside the company’s current
products and current markets.
How?
By establishing or buying new businesses venture for adding
completely new categories of products to serve new
customer segments.
Examples: From the flagship business ‘Tea & Jute’,
Transcom Group diversified their business to Food &
Beverage, Pharmaceuticals, Electronics, Media etc.

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2. (ii) Business Unit Level Strategic
Planning

Organization and Organizational Culture

Corporate Culture is the shared experiences,
stories, beliefs, and norms that characterize
an organization.
- A company’s Corporate Culture can be
understand by observing:
 The way people are dressed?
 How they talk to another?
 The way they greet the customers?
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SWOT Analysis
SWOT Analysis is the complete analysis of
the company’s situation that evaluates the
company’s:
Strengths
Weaknesses
Opportunities
Threats

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SWOT Analysis
Internal Evaluation
Strengths include internal capabilities,
resources, and positive situational factors
that may help to serve company customers
and achieve company objectives.
Weaknesses include internal limitations and
negative situational factors that may
interfere/hamper with company performance.

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SWOT Analysis
External Evaluation
Opportunities are favorable factors or
trends in the external environment that
the company may be able to exploit to its
advantage
Threats are unfavorable factors or trends
that may present challenges to
organizational performance

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Strategic Formulation
(Michel Porter’s Generic Strategies)

Goals indicate what a business unit wants to

achieve and Strategy is a game plan for
getting there.

Three generic strategies for strategic thinking:

Overall cost leadership
Differentiation
Focus

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Strategic Formulation
(Michel Porter’s Generic Strategies)
Overall Cost Leadership
Firms pursuing this strategy work hard to achieve the
lowest production and distribution costs so they can
price lower than their competitors and win a large market
share. They need less skills in marketing. The problem
with this strategy is that other firms will usually compete
with still-lower costs and hurt the firm that rested its
whole future on cost.
Examples: Wall-mart (departmental chain shop), Konka,
Walton (electronics company) etc.

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Strategic Formulation
(Michel Porter’s Generic Strategies)
Differentiation
The business concentrates on uniquely achieving superior
performance in an important customer benefit area valued
by a large part of the market. Thus the firm seeking
quality leadership, for example, must make products with
the best components, put them together expertly, inspect
them carefully and effectively communicate their quality.
Examples: Mercedes (car), Sony (electronics &
multimedia), KFC (restaurant) etc.

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Strategic Formulation
(Michel Porter’s Generic Strategies)
Focus
The business focuses on one or more narrow market
segments. The firm gets to know these segments
intimately and pursues either cost leadership or
differentiation within the target segment.
Examples: ‘Anik Telecom’ for mobile accessories (cost
leadership) and ‘Nike’ for sports wear & accessories
(differentiation).

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Strategic Alliances
(Categories of Marketing Alliances)

Product or Service Alliances

Promotional Alliances
Logistics Alliances
Pricing Collaborations

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Strategic Alliances
(Categories of Marketing Alliances)

Product or Service Alliances

One company licenses another to produce its
products, or two companies jointly market their
complementary products or a new product.

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Strategic Alliances
(Categories of Marketing Alliances)

Promotional Alliances
One company agrees to carry a promotion for
another company’s goods or services.

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Strategic Alliances
(Categories of Marketing Alliances)

Logistic Alliances
One company offers logistical services for another
company’s product.

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Strategic Alliances
(Categories of Marketing Alliances)

Pricing Alliances
One or more companies join in a special pricing
collaborations.

Rental Car Companies

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END OF CHAPTER # 2

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