Chapter two

Winning Markets Through Strategic

Planning, Implementation, and Control

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 We will address the following questions:
 How is strategic planning carried out at the corporate,
division, and business-unit levels?
 What are the major steps in planning the marketing
process?
 How can a company effectively manage the marketing
process?

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Introduction
 How do companies compete in a global
marketplace?
 One part of the answer is a commitment to creating
and retaining satisfied customers.
 We can now add a second part: Successful companies
know how to adapt to a continuously changing
marketplace through strategic planning and careful
management of the marketing process.

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Introduction
 In most large companies, corporate headquarters is responsible for
designing a corporate strategic plan to guide the whole
enterprise and deciding about resource allocations as well as
starting and eliminating particular businesses.
 Guided by the corporate strategic plan, each division establishes a
division plan for each business unit within the division; in turn,
each business unit develops a business unit strategic plan.
 Finally, the managers of each product line and brand within a
business unit develop a marketing plan for achieving their
objectives.
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Introduction
Corporate
Corporate
strategic
headquarters
plan

Division
Division
plan

Business Business
unit
unit strategic
plan

Product line
and brand Marketing
plan
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Introduction
 However, the development of a marketing plan is not the end of the
marketing process.
 High-performance firms must hone their expertise in organizing,
implementing, and controlling marketing activities as they follow
marketing results closely, diagnose problems, and take corrective action
when necessary.
 In today’s fast-paced business world, the ability to effectively manage
the marketing process—beginning to end—has become an extremely
important competitive advantage.

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Corporate and Division Strategic Planning
 Marketing plays a critical role in corporate strategic planning within
successful companies.
 Market-oriented strategic planning is the managerial process
of developing and maintaining a viable fit among the organization’s
objectives, skills, and resources and its changing market
opportunities.
 The aim of strategic planning is to shape the company’s
businesses and products so that they yield target profits and
growth and keep the company healthy despite any unexpected
threats that may arise.
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Corporate and Division Strategic Planning
 Strategic planning calls for action in three key areas.
 Managing a company’s businesses as an investment portfolio.
 Assessing each business’s strength by considering the market’s
growth rate and the company’s position and fit in that
market.
 Development of strategy, a game plan for achieving long-term
objectives.
 The complete strategic planning, implementation, and control
cycle is shown in Figure below.

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Figure 1: The Strategic Planning, Implementation, and Control Process

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Corporate And Division Strategic Planning
 Corporate headquarters starts the strategic planning process by preparing
statements of mission, policy, strategy, and goals, establishing the framework
within which the divisions and business units will prepare their plans.
 Some corporations allow their business units a great deal of freedom in setting
sales and profit goals and strategies.
 Others set goals for their business units but let them develop their own
strategies.
 Still others set the goals and get involved heavily in the individual business unit
strategies.
 Regardless of the degree of involvement, all strategic plans are based on the
corporate mission.

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Defining the Corporate Mission
 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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Defining the Corporate Mission
 Good mission statements focus on:
 A limited number of goals,
 Stress the company’s major policies and values,

 Define the company’s major competitive scopes.

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Defining the Corporate Mission
 These include:
 Industry scope: The industry or range of industries in which a company will
operate.
 Products and applications scope: The range of products and applications that a
company will supply.
 Competence scope: The range of technological and other core competencies that
a company will master and leverage.
 Market-segment scope: The type of market or customers a company will serve.
 Vertical scope: The number of channel levels from raw material to final product
and distribution in which a company will participate.
 Geographical scope: The range of regions or countries in which a company will
operate.

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Establishing Strategic Business Units
 A business can be defined in terms of three dimensions:
 Customer groups,
 Customer needs, and
 Technology.
 For example, a company that defines its business as designing
incandescent lighting systems for television studios would
have television studios as its customer group; lighting as its
customer need; and incandescent lighting as its technology.

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Establishing Strategic Business Units
 Large companies normally manage quite different
businesses, each requiring its own strategy; General
Electric, as one example, has established 49 strategic
business units (SBUs).
 An SBU has three characteristics:
1. It is a single business or collection of related businesses
that can be planned separately from the rest of the
company;
2. It has its own set of competitors; and
3. It has a manager responsible for strategic planning and
profit performance who controls most of the factors
affecting profit.

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Assigning Resources to SBUs
 The purpose of identifying the company’s strategic business
units is to develop separate strategies and assign appropriate
funding to the entire business portfolio.
 Senior managers generally apply analytical tools to classify all
of their SBUs according to profit potential. Two of the best-
known business portfolio evaluation models are
1. The Boston Consulting Group model and

2. The General Electric model.

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The Boston Consulting Group Approach
 The Boston Consulting Group (BCG), a leading
management consulting firm, developed and
popularized the growth-share matrix shown in
Figure below. The eight circles represent the current
sizes and positions of eight business units in a
hypothetical company.
 The dollar-volume size of each business is
proportional to the circle’s area.
 Thus, the two largest businesses are 5 and 6. The
location of each business unit indicates its market
growth rate and relative market share.
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Figure 2: The Boston Consulting Group’s Growth-Share Matrix

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The Boston Consulting Group Approach
 The market growth rate on the vertical axis indicates the
annual growth rate of the market in which the business
operates.
 Relative market share, which is measured on the horizontal
axis, refers to the SBU’s market share relative to that of its
largest competitor in the segment. It serves as a measure of
the company’s strength in the relevant market segment.
 The growth-share matrix is divided into four cells, each
indicating a different type of business:

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The Boston Consulting Group Approach
 Question marks:
 Businesses that operate in high-growth markets but have low relative

market shares.
 Most businesses start off as question marks as the company tries to

enter a high-growth market in which there is already a market leader.

 A question mark requires a lot of cash because the company is

spending money on plant, equipment, and personnel.

 The term question mark is appropriate because the company has to

think hard about whether to keep pouring money into this business.

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The Boston Consulting Group Approach
 Stars:
 Market leaders in a high-growth market.

 A star was once a question mark, but it does not

necessarily produce positive cash flow; the company

must still spend to keep up with the high market
growth and fight off competition.

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The Boston Consulting Group Approach
 Cash cows:
 Are former stars with the largest relative market share in a

slow-growth market.
 A cash cow produces a lot of cash for the company (due to

economies of scale and higher profit margins), paying the

company’s bills and supporting its other businesses.
 Dogs:
 Are businesses with weak market shares in low-growth

markets; typically, these generate low profits or even

losses. 22
The Boston Consulting Group Approach
 After plotting its various businesses in the growth-share
matrix, a company must determine whether the portfolio is
healthy.
 An unbalanced portfolio would have too many dogs or
question marks or too few stars and cash cows.
 The next task is to determine what objective, strategy, and
budget to assign to each SBU. Four strategies can be
pursued:

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The Boston Consulting Group Approach
 Build:
 The objective here is to increase market share, even forgoing short-
term earnings to achieve this objective if necessary.
 Building is appropriate for question marks whose market shares
must grow if they are to become stars.
 Hold:
 The objective in a hold strategy is to preserve market share, an
appropriate strategy for strong cash cows if they are to continue
yielding a large positive cash flow.

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The Boston Consulting Group Approach
 Harvest:
 The objective here is to increase short-term cash flow regardless of long-term
effect.
 Harvesting involves a decision to withdraw from a business by implementing a
program of continuous cost retrenchment. The hope is to reduce costs faster than
any potential drop in sales, thus boosting cash flow.
 This strategy is appropriate for weak cash cows whose future is dim and from
which more cash flow is needed. Harvesting can also be used with question
marks and dogs.
 Divest:
 The objective is to sell or liquidate the business because the resources can be
better used elsewhere. This is appropriate for dogs and question marks that are
dragging down company profits.
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The Boston Consulting Group Approach
 Successful SBUs move through a life cycle, starting as
question marks and becoming stars, then cash cows,
and finally dogs.
 Given this life-cycle movement, companies should be aware
not only of their SBUs’ current positions in the growth-
share matrix (as in a snapshot), but also of their
moving positions (as in a motion picture).
 If an SBU’s expected future trajectory is not satisfactory, the
corporation will need to work out a new strategy to improve
the likely trajectory.
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 The General Electric Model
 An SBU’s appropriate objective cannot be determined
solely by its position in the growth-share matrix.
 If additional factors are considered, the growth-share matrix
can be seen as a special case of a multifactor portfolio
matrix that General Electric (GE) pioneered.
 This model, each business is rated in terms of two major
dimensions— market attractiveness and business
strength. These two factors make excellent marketing
sense for rating a business.

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The General Electric Model
 Companies are successful to the extent that they enter
attractive markets and possess the required business
strengths to succeed in those markets.
 If one of these factors is missing, the business will not
produce outstanding results. Neither a strong company
operating in an unattractive market nor a weak company
operating in an attractive market will do well.

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The General Electric Model
 Using these two dimensions, the GE matrix is divided into nine cells, as
shown in Figure below.
 The three cells in the upper-left corner indicate strong SBUs
suitable for investment or growth.
 The diagonal cells stretching from the lower left to the upper
right indicate SBUs of medium attractiveness; these should be
pursued selectively and managed for earnings.
 The three cells in the lower-right corner indicate SBUs low in
overall attractiveness, which the company may want to harvest or
divest.

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Figure 3: Market-Attractiveness Portfolio Strategies

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Figure 4: Market-Attractiveness Portfolio Strategies

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Business Strategic Planning
 Below the corporate level, the strategic-planning
process for each business or SBU consists of the eight
steps shown in Figure below.
 We examine each step in the sections that follow.

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Figure 6: The Business Strategic-Planning Process

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Business Mission
 Each business unit needs to define its specific mission within
the broader company mission.
 Thus, a television studio-lighting-equipment company might
define its mission as:
 “The company aims to target major television studios and become
their vendor of choice for lighting technologies that represent the
most advanced and reliable studio lighting arrangements.”

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SWOT Analysis
 The overall evaluation of a business’s strengths,
weaknesses, opportunities, and threats is called SWOT
analysis.
 SWOT analysis consists of an analysis of the external
and internal environments.

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SWOT Analysis
 External Environment Analysis
 In general, a business unit has to monitor key
macroenvironment forces (demographiceconomic,
technological, political-legal, and social-cultural) and
microenvironment actors (customers, competitors,
distributors, and suppliers) that affect its ability to earn
profits.
 Then, for each trend or development, management needs to
identify the associated marketing opportunities and threats.

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7 The Components of a Company’s Macro-Environment
SWOT Analysis
 Internal Environment Analysis
 It is one thing to discern attractive opportunities and another to have
the competencies to succeed in these opportunities.
 Thus, each business needs to periodically evaluate its internal strengths
and weaknesses in marketing, financial, manufacturing, and
organizational competencies.
 Clearly, the business does not have to correct all of its weaknesses, nor
should it gloat about all of its strengths. The big question is whether the
business should limit itself to those opportunities in which it possesses
the required strengths or consider better opportunities to acquire or
develop certain strengths.
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 Goal Formulation
 Once the company has performed a SWOT analysis of the
internal and external environments, it can proceed to
develop specific goals for the planning period in a
process called goal formulation.
 Managers use the term goals to describe objectives that are
specific with respect to magnitude and time.
 Turning objectives into measurable goals facilitates
management planning, implementation, and control.

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Goal Formulation
 To be effective, goals must:
1. Be arranged hierarchically to guide the
businesses in moving from broad to
specific objectives for departments and
individuals;
2. Be stated quantitatively whenever
possible;
3. Be realistic; and
4. Be consistent.
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Strategy Formulation
 Goals indicate what a business unit wants to achieve;
strategy describes the game plan for achieving those
goals.
 Every business strategy consists of a marketing strategy plus
a compatible technology strategy and sourcing strategy.
 Although many types of marketing strategies are available,
Michael Porter has condensed them into three generic types
that provide a good starting point for strategic thinking:
overall cost leadership, differentiation, or focus.

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Strategy Formulation
 Overall cost leadership:
 Here the business works to achieve the lowest production and
distribution costs so that it can price lower than competitors and win
more market share.
 Firms pursuing this strategy must be good at engineering,
purchasing, manufacturing, and physical distribution; they need less
skill in marketing.
 The problem is that rivals may emerge with still lower costs, hurting a
firm that has rested its whole future on cost leadership.

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8 Cost Drivers: The Keys to Driving Down Company Costs
Strategy Formulation
 Differentiation:
 Here the business concentrates on achieving superior

performance in an important customer benefit area, such

as being the leader in service, quality, style, or
technology—but not leading in all of these things.
 Intel, for instance, differentiates itself through leadership in

technology, coming out with new microprocessors at

breakneck speed.

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9 Uniqueness Drivers: The Keys to Creating
a Differentiation Advantage
Strategy Formulation
 Focus:
 Here the business focuses on one or more narrow market

segments, getting to know these segments intimately and

pursuing either cost leadership or differentiation within the
target segment.
 Airwalk shoes, for instance, came to fame by focusing on

the very narrow extreme-sports segment.

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 Successful Competitive Strategies
Are Resource-Based
 A firm’s competitive strategy is unlikely to
succeed unless it is predicated on leveraging:
 A competitively valuable collection of resources
and
 Capabilities that match the strategy.
 Sustaining a firm’s competitive advantage
depends on its resources, capabilities, and
competences that are difficult for rivals to
duplicate and have no good substitutes.
 Program Formulation
 Once the business unit has developed its principal
strategies, it must work out detailed supporting programs.
 Thus, if the business has decided to attain technological
leadership, it must plan programs to:
 Strengthen its R&D department,

 Gather technological intelligence,

 Develop leading-edge products,

 Train the technical sales force, and

 Develop ads to communicate its technological leadership.

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 Implementation
 A clear strategy and well-thought-out supporting programs may
be useless if the firm fails to implement them carefully.
 Indeed, strategy is only one of seven elements, according to McKinsey &
Company, that the best-managed companies exhibit.
 In the McKinsey 7-S framework for business success:
 Strategy, structure, and systems are considered the “hardware” of success, and
 Style (how employees think and behave), skills (to carry out the strategy), staff
(able people who are properly trained and assigned), and shared values (values
that guide employees’ actions) are the “software.”
 When these software elements are present, companies are usually more
successful at strategy implementation. Implementation is vital to
effective management of the marketing process.
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McKinsey 7-S framework

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Feedback and Control
 As it implements its strategy:
 The firm needs to track the results and
 Monitor new developments in the internal and external
environments.
 Some environments are fairly stable from year to year. Other
environments evolve slowly in a fairly predictable way. Still other
environments change rapidly in significant and unpredictable ways.
 Nonetheless, the company can count on one thing: The
marketplace will change. And when it does, the company will need
to review and revise its implementation, programs, strategies, or
even objectives.
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The Nature and Contents of a Marketing Plan
 The marketing plan created for each product line or
brand is one of the most important outputs of
planning for the marketing process. A typical
marketing plan has eight sections:

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The Nature and Contents of a Marketing Plan
 Executive summary and table of contents: This brief summary
outlines the plan’s main goals and recommendations; it is followed by a
table of contents.
 Current marketing situation: This section presents relevant
background data on sales, costs, profits, the market, competitors,
distribution, and the macro environment, drawn from a fact book
maintained by the product manager.
 Opportunity and issue analysis: This section identifies the major
opportunities and threats, strengths and weaknesses, and issues facing
the product line or brand.
 Objectives: This section spells out the financial and marketing
objectives to be achieved.
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The Nature and Contents of a Marketing Plan
 Marketing strategy: This section explains the broad marketing strategy that will be
implemented to accomplish the plan’s objectives.
 Action programs: This section outlines the broad marketing programs for achieving the
business objectives. Each marketing strategy element must be elaborated to answer these
questions: What will be done? When will it be done? Who will do it? How much will it cost?
 Projected profit-and-loss statement: Action plans allow the product manager to build a
supporting budget with forecasted sales volume (units and average price), costs (production,
physical distribution, and marketing), and projected profit. Once approved, the budget is the
basis for developing plans and schedules for material procurement, production scheduling,
employee recruitment, and marketing operations.
 Controls: This last section outlines the controls for monitoring the plan. Typically, the goals and
budget are spelled out for each month or quarter so senior management can review the results
each period. Sometimes contingency plans for handling specific adverse developments are
included.

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Managing The Marketing Process
 Organization of the Marketing Department
 Functional Organization
 Geographic Organization
 Product- or Brand-Management Organization
 Market-Management Organization
 Product-Management/Market-Management Organization
 Corporate-Divisional Organization

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 Evaluating and Controlling the Marketing
Process
Annual Plan Control Profitability Control
 Sales analysis  product
 Market-share analysis  territory
 Marketing expense to-  customer
sales analysis  segment
 Financial analysis  trade channel
 Market-based scorecard  order size
analysis

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 Evaluating and Controlling the Marketing
Process
Efficiency Control Strategic Control
 sales force  Marketing effectiveness review
 advertising  Marketing audit
 sales promotion  Marketing excellence review
 distribution  Company ethical and social
responsibility review

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