Class.3/1 – Strategic Planning and Marketing Process

Many companies operate without formal plans. In small companies, managers sometimes think that only large corporations need formal planning. In mature companies, many managers argue that they have done well without formal planning and that therefore it cannot be too important. They may resist taking the time to prepare a written plan.

Granted, planning is not much fun, and it takes time away from doing. Yet companies must plan. As someone said, "If you fail to plan, you are planning to fail." Formal planning can yield many benefits for all types of companies, large and small, new and mature.

The process of planning may be as important as the plans that emerge.  It forces the company to sharpen its objectives and policies, leads to better coordination of company efforts, and provides clearer performance standards for control.

Companies usually prepare annual plans, long-range plans, and strategic plans. The annual and long-range plans deal with the company's current businesses and how to keep them going. In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment.

We define strategic planning as the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities.

Strategic planning sets the stage for the rest of the planning in the firm. It relies on defining a clear company mission, setting supporting company objectives, designing a sound business portfolio, and coordinating functional strategies.

At the corporate level, the company defines :

1- its Vision & overall  mission. This mission then is turned into detailed supporting objectives that guide the whole company.

2- portfolio of businesses and products which is best for the company and how much support to give each one ( Current, future & expansion).

At The business level, In turn, each business and product unit must develop detailed marketing and other departmental plans that support the companywide plan. Thus, marketing planning occurs at the business unit, product, and market levels. It supports company strategic planning with more detailed planning for specific marketing opportunities.

1) Corporate Level Decisions

1- Defining the Company's Vision and Mission

Vision is simply the company’s long-term dream for which the company is running to reach. It could be changed from time to time. While Mission is the pathway leads to that dream

Why Mission? ..Because Any organization exists to accomplish something. At first, it has a clear purpose, but over time its purpose may become unclear as the organization grows, adds new products and markets, or faces new conditions in the environment. When management senses that the organization is drifting, it must renew its search for purpose. It is time to ask:

- What is our business?

- Who is the customer?

- What do consumers value?

- What should our business be?

These simple-sounding questions are among the most difficult the company will ever have to answer. Successful companies continuously raise these questions and answer them carefully and completely.

Company mission: 3M does more than just make adhesives, scientific equipment, health care, and communications products. It solves people's problems by putting innovation to work for them.

Many organizations develop formal mission statements that answer these questions. 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.

Traditionally companies have defined their businesses in product terms ("We manufacture furniture") or in technological terms ("We are a chemical-processing firm"). But mission statements should be market oriented. Products and technologies eventually become outdated, but basic market needs may last forever.

A market-oriented mission statement defines the business in terms of satisfying basic customer needs.

- For example, AT&T is in the communications business, not the telephone business.

- 3M does more than just make adhesives, scientific equipment, and health care products. It solves people's problems by putting innovation to work for them.

- Amazon.com's mission isn't simply to sell books, CDs, videos, toys, and consumer electronics. Instead, it wants to "transform Internet buying into the fastest, easiest, and most enjoyable shopping experience possible—to be the place where you can find and discover anything you want to buy online.

Management should avoid making its mission too narrow or too broad. ..for example, A pencil manufacturer that says it is in the communication equipment business is stating its mission too broadly.

Missions should be realistic. Missions should also be specific.

Many mission statements are written for public relations purposes and lack specific, workable guidelines. The statement "We want to become the leading company in this industry by producing the highest-quality products with the best service at the lowest prices" sounds good, but it is full of generalities and contradictions since it doesn’t determine the field at which those products will be offered.

Finally, mission statements should be motivating.

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's lives.

Contrast the missions of IBM and Microsoft. When IBM sales were $50 billion, then-President John Akers said that IBM's mission was to become a $100 billion company by the end of the century. Meanwhile, Microsoft's long-term mission has been IAYF—"information at your fingertips"—to put information at the fingertips of every person. Microsoft's mission is much more motivating than is IBM's.

2- Designing the Business Portfolio

Guided by the company's mission statement and objectives, management now must plan its business portfolio—the collection of businesses and products that make up the company. The best business portfolio is the one that best fits the company's strengths and weaknesses to opportunities in the environment.

The company must:

 (2.1) analyze its current business portfolio and decide which businesses should receive more, less, or no investment; and

 (2.2) develop growth strategies for adding new products or businesses to the portfolio.

2.2 Analyzing the Current Business Portfolio

The major activity in strategic planning is business portfolio analysis, whereby management evaluates the 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.

For example, in recent years, Dial Corporation has strengthened its portfolio by selling off its less attractive businesses: bus line (Greyhound), knitting supplies, meatpacking, and computer leasing businesses. At the same time, it invested more heavily in its consumer products (Dial soap, Armour Star meats, Purex laundry products, and others) and services (Premier Cruise Lines, Dobbs airport services).

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 brand.

The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. So most standard portfolio-analysis methods evaluate SBUs on two important dimensions:

—the attractiveness of the SBU's market or industry ( Market growth rate)

- and the strength of the SBU's position in that market or industry ( relative market share) .

The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm.

The Boston Consulting Group Approach

Using the Boston Consulting Group (BCG) approach, a company classifies all its SBUs according to the growth-share matrix shown in Figure 2.2. 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. By dividing the growth-share matrix as indicated, four types of SBUs can be distinguished:

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

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 sources of cash.

Once it has classified its SBUs, the company must determine what role each will play in the future. 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 the 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.

As time passes, SBUs change their positions in the growth-share matrix. Each SBU has a life cycle. Many SBUs start out as question marks and move into the star category if they succeed. They later become cash cows as market growth falls, then finally die off or turn into dogs toward the end of their life cycle. The company needs to add new products and units continuously so that some of them will become stars and, eventually, cash cows that will help finance other SBUs.

2.2 Developing Growth Strategies in the Age of Connectedness

Companies need growth if they are to compete more effectively, satisfy their stakeholders, and attract top talent. "Growth is pure oxygen," states one executive. "It creates a vital, enthusiastic corporation where people see genuine opportunity. . . . In that way, growth is more than our single most important financial driver; it's an essential part of our corporate culture." At the same time, a firm must be careful not to make growth itself an objective. The company's objective must be "profitable growth."

One useful device for identifying growth opportunities is the product-market expansion grid, shown in Figure 2.4. We apply it here to Starbucks.

- First, Starbucks management might consider whether the company can achieve deeper market penetration —making more sales to current customers without changing its products. It might add new stores in current market areas to make it easier for more customers to visit. 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. For example, Starbucks recently began adapting its menu to local tastes around the country.

Second, Starbucks management might consider possibilities for market development—identifying and developing new markets for its current products. For instance, managers could review new demographic markets—such as senior consumers or ethnic groups—to see if new 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. Starbucks is now expanding swiftly into new U.S. markets, especially in the Southeast and Southwest. It is also developing its international markets, with stores popping up rapidly in Asia, Europe, and Australia.

Third, management could consider product development—offering modified or new products to current markets. For example, Starbucks is increasing its food offerings in an effort to bring customers into its stores during the lunch and dinner hours and to increase the amount of the average customer's sales ticket. The company is also partnering with other firms to sell coffee in supermarkets and to extend its brand to new products, such as coffee ice cream (with Breyer's) and bottled Frappuccino drinks (with PepsiCo).

Fourth, Starbucks might consider diversification. It could start up or buy businesses outside of its current products and markets. For example, Starbucks is testing two new restaurant concepts—Café Starbucks and Circadia—in an effort to offer new formats to related but new markets.

In a more extreme diversification, Starbucks might consider leveraging its strong brand name by making and marketing a line of branded casual clothing consistent with the "Starbucks experience." However, this would probably be unwise. Companies that diversify too broadly into unfamiliar products or industries can lose their market focus, something that some critics are already concerned about with Starbucks.

2) Business Level Decisions

1- Setting SBU Mission

Which is consistent with the company’s overall mission

2- SWOT Analysis

Discussed in the next article

3- Defining Goals & Objectives

using SMART criteria at which the objectives must be:

- Specific … well determined

- Measurable … with something can be measured ( like numbers, percentages …etc)

- Achievable ( or sometimes stands for ambitious or attainable) …. higher than what the company has now

- Realistic… matched with the company Resources &  capabilities

- Time Related … With a certain time frame ( start & end time)  

4- Marketing Planning

A detailed marketing plan is needed for each business, product, or brand. What does a marketing plan look like? Our discussion focuses on product or brand plans.

Table 2.2 outlines the major sections of a typical product or brand plan.

Section	Purpose
Executive summary	Presents a brief summary of the main goals and recommendations of the plan for management review, helping top management to find the plan's major points quickly. A table of contents should follow the executive summary.
Current marketing situation	Describes the target market and company's position in it, including information about the market, product performance, competition, and distribution. This section includes: A market description that defines the market and major segments, then reviews customer needs and factors in the marketing environment that may affect customer purchasing. A product review that shows sales, prices, and gross margins of the major products in the product line. A review of competition, which identifies major competitors and assesses their market positions and strategies for product quality, pricing, distribution, and promotion. A review of distribution, which evaluates recent sales trends and other developments in major distribution channels.
Threats and opportunity analysis	Assesses major threats and opportunities that the product might face, helping management to anticipate important positive or negative developments that might have an impact on the firm and its strategies.
Objectives and issues	States the marketing objectives that the company would like to attain during the plan's term and discusses key issues that will affect their attainment. For example, if the goal is to achieve a 15 percent market share, this section looks at how this goal might be achieved.
Marketing strategy	Outlines the broad marketing logic by which the business unit hopes to achieve its marketing objectives and the specifics of target markets, positioning, and marketing expenditure levels. It outlines specific strategies for each marketing mix element and explains how each responds to the threats, opportunities, and critical issues spelled out earlier in the plan.
Action programs	Spells out how marketing strategies will be turned into specific action programs that answer the following questions: What will be done? When will it be done? Who is responsible for doing it? How much will it cost?
Budgets	Details a supporting marketing budget that is essentially a projected profit-and-loss statement. It shows expected revenues (forecasted number of units sold and the average net price) and expected costs (of production, distribution, and marketing). The difference is the projected profit. Once approved by higher management, the budget becomes the basis for materials buying, production scheduling, personnel planning, and marketing operations.
Controls	Outlines the control that will be used to monitor progress and allow higher management to review implementation results and spot products that are not meeting their goals.

5- implementation & control