Strategic planing for competitive advantage

Strategic Planning for
Competitive Advantage

2
chapter

Prepared by
Deborah Baker
Texas Christian University

©2002 South-Western
Chapter 2 Version 6e 1

Learning Objectives
1. Understand the importance of strategic
marketing and know a basic outline for a
marketing plan.
2 2. Develop an appropriate business mission
statement.
chapter

3. Describe the criteria for stating good
marketing objectives.


Learning Objectives (continued)
4

2
chapter


Learning Objectives (continued)
8. Describe elements of the marketing mix.

9. Explain why implementation, evaluation, and
control of the marketing plan are
2 necessary.
chapter

10. Identify several techniques that help make
strategic planning possible.


1
Learning Objective

Understand the importance of
strategic marketing and know
a basic outline for a marketing plan.


1
Strategic Planning

The managerial process of
creating and maintaining a
fit between the
organization’s objectives
and resources and evolving
market opportunities.


1
Strategic Planning
N
G RU TY
LON ABILI
FIT OWTH
EVOLVING PRO GR
D
MARKET AN
OPPORUNITIES

RESOURCES
&
OBJECTIVES


1
Strategic Marketing Planning

 What is the organization’s main activity?

 How will it reach its goals?

The Marketing Plan
The Marketing Plan


1
Planning

The process of anticipating
future events and
determining strategies to
achieve organizational
objectives in the future.


1
The Marketing Plan

A written document that
acts as a guidebook of
marketing activities for the
marketing manager.


1
Why Write a Marketing Plan?
 Provides a basis for comparison of actual
and expected performance

 Provides clearly stated activities to work
toward common goals

 Serves as a reference for the

Pla ng
success of future activities

keti
n
Mar

1
Marketing Plan Elements
Business Mission
Statement

Objectives

Situation or
SWOT Analysis

Marketing Strategy
Target Market
Strategy

Marketing Mix
Product Distribution

Promotion Price

Implementation
Chapter 2 Version 6e Evaluation 12
Control

2
Learning Objective

Develop an appropriate
business mission statement.


2
Defining the Business Mission
 Answers the question:
What business are we in and
where are we going?

 Focuses on the market(s) rather than
the good or service

 Strategic Business Units may also
have a mission statement

2
PepsiCo’s Mission Statement
“PepsiCo’s overall mission is to increase the value of our
shareholders’ investment. We do this through sales
growth, cost controls and wise investment of resources.
We believe our commercial success depends upon
offering quality and value to our consumers and
customers; providing products that are safe, wholesome,
economically efficient and environmentally sound; and
providing a fair return to our investors while adhering to
the highest standards of integrity.”

http:www.pepsico.com


2
Strategic Business Units (SBUs)
Characteristics
Characteristics
1. A distinct mission and specific target market

2. Control over their resources

3. Their own competitors

4. Plans independent of other SBUs


3
Learning Objective

Describe the criteria for stating
good marketing objectives.


3
Marketing Objective

A statement of what is to be
accomplished through
marketing activities.


3
Marketing Objectives
Marketing Objectives Must Be:

 Realistic
“Our objective is to
increase market
 Measurable share by 40% and to
obtain customer
 Time specific satisfaction ratings
of at least 90% in
2001.”
 Consistent with
Organization’s Priorities


3
Marketing Plan Objectives
 Communicate marketing
management philosophies

 Provide direction
 Serve as motivators
 Clarify thinking

 Provide basis for control

4
Learning Objective

Explain the components
of a situation analysis.


4
SWOT Analysis

Identifying
internal strengths (S)
and weaknesses (W)
and also examining
external opportunities (O) and
threats (T)


4
SWOT Analysis
S Things the company does well.
Things the company does well.
Internal

W Things the company does not do well.
Things the company does not do well.

O Conditions in the external environment
Conditions in the external environment
that favor strengths.
that favor strengths.
External
T
that do not relate to existing strengths
that do not relate to existing strengths
or favor areas of current weakness.
or favor areas of Publishing weakness.
©South-Western College current

4
SWOT Analysis

Strengths and Weaknesses
Strengths and Weaknesses
INTERNAL
INTERNAL
 Production Costs
 Marketing Skills
 Employee Capabilities
 Financial Resources
 Available Technology
 Company/Brand Image

4
SWOT Analysis

Opportunities and Threats
Opportunities and Threats
EXTERNAL
EXTERNAL

Social Technological

Demographic Political/Legal

Economic Competitive


4
Environmental Scanning

Collection and interpretation of
information about forces,
events and relationships in the
external environment that may
affect the future of the
organization or the marketing
plan implementation.

4
Environmental Scanning
 Examination of macroenvironmental forces
Social
Demographic
Economic
Technological
Political / Legal
Competitive

 Helps identify market
opportunities

 Provides guidelines for
design of marketing strategy

5
Learning Objective

Identify sources of
competitive advantage


5

The set of unique features of
a company and its products
that are perceived by the target
market as significant and
superior to the competition.


5

Cost
Cost

Types of
Types of
Competitive
Competitive Product/Service
Product/Service
Advantage
Advantage Differentiation
Differentiation

Niche Strategies
Niche Strategies


5
Cost Leadership

 Obtain inexpensive raw materials
 Create efficient operations
 Design products for manufacture
 Control overhead costs
 Avoid marginal customers


5
Cost Competitive Advantage

Being the low-cost competitor
in an industry while
maintaining satisfactory
profit margins.


5
Sources of Cost Reduction

Experience Curves
Experience Curves Product Design
Product Design

Efficient Labor
Efficient Labor Reengineering
Reengineering

No-frills Products
No-frills Products Production Innovations
Production Innovations

Government Subsidies
Government Subsidies New Delivery Methods
New Delivery Methods


Differentiation 5

Advantage achieved when a
firm provides something that
is unique and valuable to
buyers beyond simply
offering a lower price
than the competition.


5
Common Differential Advantages
 Brand names
 Strong dealer network
 Product reliability
 Image
 Service


Sources of Differential 5

Value impressions Augmented products

 Features of a  Features of a
product that product that are
signal value not expected by
the customer


Niche 5

Advantage achieved when a
firm seeks to target and
effectively serve a small
segment of the market.


5
Niche Competitive Advantage
 Used by small companies with
limited resources
 May be used in a limited geographic
market
 Product line may be focused on a
specific product line


Sustainable 5

A differential advantage
that cannot be copied
by the competition.


Sources of Sustainable 5
Patents
Patents
Copyrights
Copyrights
Locations
Locations
Equipment
Equipment
Technology
Technology
Organization’s
Organization’s
Skills and Assets Customer Service
Customer Service
Skills and Assets
Promotion
Promotion

Strategic Windows 5

The limited period during which the “fit”
between
the key requirements
of a market and the
particular competencies
of a firm are at an optimum.


6
Learning Objective

Identify strategic alternatives
and describe tools used
to help select alternatives.


6
Strategic Windows
Market
Market Increase market share among
Penetration
Penetration existing customers

Market
Market Attract new customers to
Development
Development existing products

Product
Product Create new products for
Development
Development present markets

Diversification Introduce new products
Diversification
into new markets


6
Strategic Alternatives
Market
Market Increase market share among
Increase market share among
Penetration
Penetration existing customers.
existing customers.

Market
Market Attract new customers
Attract new customers
Development
Development to existing products
to existing products

Product
Product Create new products
Create new products
Development
Development for present markets
for present markets

Introduce new products
Introduce new products
Diversification
Diversification into new markets.
into new markets.

6
Strategic Opportunity Matrix
Present Product New Product

Present Market Product
Market
Penetration Development

New Market Diversification
Market Development


6
Selecting a Strategic Alternative

Common Tools Philosophy

Profitability
Portfolio Matrix

$ Market Share


Portfolio Matrix 6

Tools for allocating resources
among products or strategic
business units on the basis of
relative market share and market
growth rate.


6
BCG Portfolio Matrix
MARKET SHARE DOMINANCE
MARKET GROWTH RATE

HIGH LOW
HIGH

?
$
LOW


6
BCG Portfolio Matrix
HIGH LOW

High growth
High growth Low market share
Market leaders
HIGH LOW
Need cash
MARKET GROWTH RAT Require cash Poor profit margins

$ Low growth Low growth
High market share Low market share
High cash flow Minimal cash flow

6
Portfolio Matrix Example
HIGH LOW

Notebook Palmtop
Computer (PROBLEM
(STAR) CHILD)
HIGH LOW
MARKET GROWTH RAT
Personal Mainframe
Computer Computer
(CASH COW) (DOG)


6
Strategies for Resource Allocation
Provide financial resources if SBU
Build
Build (Problem Child) has potential to be a Star.

Preserve market share if SBU is a successful
Hold
Hold Cash Cow. Use cash flow for other SBUs.

Increase short-term cash return.
Harvest
Harvest Appropriate for all SBUs except Stars.

Get rid of SBUs with low shares in
Divest
Divest low-growth markets.


6
Market Attractiveness Matrix

Tool for allocating resources
among strategic business units
on the basis of market
attractiveness and firm’s
positioning.


6
Market Attractiveness Matrix (GE)
BUSINESS POSITON
STRONG MEDIUM WEAK
MARKET ATTRACTIVENESS
HIGH

High Attractiveness

Medium Attractiveness
MEDIUM

Low Attractiveness
LOW


6
Market Attractiveness

Attributes of an
Attractive Market

 High profitability
 Rapid growth
 Lack of government regulation
 Insensitivity to price increase
 Lack of competition
 Availability of technology

7
Learning Objective

Discuss target market strategies.


7
Marketing Strategy

The activities of selecting and
describing one or more target
markets and developing and
maintaining a market mix that
will produce mutually
satisfying exchanges with
target markets.


7
Target Market Strategy

 Segment the market based on
groups with similar characteristics

 Analyze the market based on
attractiveness of market segments

 Select one or more target markets


7
Target Market Strategy

 Develop a marketing mix that will produce
satisfying exchanges with target markets


8
Learning Objective

Describe elements of the marketing mix.


8
The Marketing Mix

A unique blend of product,
distribution, promotion, and
pricing strategies designed to
produce mutually satisfying
exchanges with a target
market.


8
Marketing Mix: The “Four Ps”

Price
Price

Promotion
Promotion

Place
Place

Product
Product

8
Product Strategies
 The starting point of
the “4 Ps”
Product
Product
 Includes physical unit,
package, warranty,
service, brand, image,
and value


8
Distribution (Place) Strategies
 Product availability
where and when
Place
Place customers want them.

 Involves all activities
from raw materials to
finished products


8
Promotion Strategies
 Role is to bring about
exchanges with target
Promotion
Promotion markets

 Includes integration of
personal selling,
advertising, sales
promotion, and public
relations


8
Pricing Strategies
 The most flexible of
the “4 Ps”
Price
Price
 Price X Units Sold =
Total Revenue


9
Learning Objective

Explain why implementation, evaluation,
and control of the
marketing plan are necessary.


9
Following Up the Marketing Plan
 Implementation

 Evaluation

 Control
 Marketing Audit
Comprehensive
Systematic
Independent
Periodic

9
The Marketing Audit

A thorough, systematic,
periodic evaluation of the
goals, strategies, structure,
and performance of the
marketing organization.


10
Learning Objective

Identify several techniques that help
make strategic planning effective.


10
Effective Strategic Planning
Ongoing
Ongoing
Process
Process

Requirements
Requirements Creativity
Creativity

Management
Management
Support
Support


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