Strategic and

Marketing Planning
Benefits
of
Planning
Consistency
Commitment
Responsibility
Communication
Benefits of Planning
Direction
#1:
Top Down
#2:
Bottom Up
#3:
Goals Down,
Plans Up
Approaches to Planning
The Strategy Hierarchy
SBU
Strategy
Marketing Strategy
Marketing
objectives
Product markets
strategies
Corporate
Level
Function
al Level
of SBU
Strategic
Business
Unit Level
Corporate Strategy
Mission and vision
Objectives
Business portfolio strategy
Resource development
Corporate values
SBU Strategy
Business definition
Objectives
Product market portfolio
Competitive strategy
Resource allocation and management
SBU
Strategy
Finance and
administration
Strategy

Production
and operation
strategy

R&D Strategy
Technology
Product
development
Human
resources
Strategy
Strategic Planning
Investment Management
Growth & Company Position
Strategy
Corporate, Business and Marketing
Strategy Model
Corporate Strategy

Building core
competencies
Business portfolio
Capital investments and
resource allocation
Corporate culture
Corporate structure
Product/market portfolio
Resource allocation
Product-markets
Business culture
Strategic cost
management
Markets
Products and services
Profit-yielding strategies
Brand management
Profit improvement
Business Strategy

Distinctive competencies
Developing competitive
position
Competitive advantage
Marketing Strategy

Developing market
position
Customer satisfaction
Focus

Customer value
creation,
maintenance and
defence
Focus

Economic
value added
Focus

Economic
value added
Shareholder
Value
Business
Value
Customer
Value
Measuring
results



Diagnosing
results



Taking
corrective
action
Implementation
Corporate
planning


Division
planning


Business
planning


Product
planning

Organising





Implementing
Control
Strategic-Planning, Implementation, and
Control Process
Planning

Objectives Address Two Questions:

Where do we want to be?
When do we expect to get there?



Corporate Plan Objectives
Planning Terms
Vision: the long term, I have a dream
Mission: purpose of organisation
Objective: a shorter term goal leading to the
achievement of the Mission
Strategy: a description of the method of
achieving the objective
Tactic: the short term application of the
strategy
Porters five forces
model
SUBSTITUTES
INDUSTRY
COMPETITORS

Rivalry among
Existing Firms
BUYERS
POTENTIAL
ENTRANTS
Threat of entry
Bargaining
power of
suppliers
Bargaining power of
buyers
Threat of Substitute
Products or Services
SUPPLIERS
Porters five-forces model (2)
Bargaining power
of suppliers
Threat of
new entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
Where there are numerous or equally
balanced competitors,
there is slow industry growth, lack of
differentiation, low buyer switching costs,
high fixed costs, overcapacity, perishable
products (and services) and high exit barriers.
Porters five-forces model (3)
Bargaining power
of suppliers
Threat of
new entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
When there are only a few large buyers in the market, the
buying volume is large, there is low differentiation
between competitive products, the value of the industry
product is low, the sellers quality is relatively
unimportant to the buyer, there are low switching costs for
the buyer or high switching costs for the seller, the buyer
is a low profit earner, the buyer has access to full market
information or the buying company could forward
integrate and become a competitor.
Porters five-forces model (4)
Bargaining power
of suppliers
Threat of
new entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
When the barriers to industry entry are
low, there are:
no cost advantages for existing
competitors
a lack of product differentiation
low capital costs for market entry
relatively easy access to
distribution channels.
Porters five-forces model (5)
Bargaining power
of suppliers
Threat of
new entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
When there are only a few large
suppliers, the suppliers product is
highly differentiated or unique, the
supplier sells the same product to
other industries or a supplier could
forward-integrate and enter the
market as a competitor.
Porters five-forces model (6)
Bargaining power
of suppliers
Threat of
new entrants
Competitive
rivalry
Threat of
substitutes
Bargaining power
of buyers
When substitute products are close in
performance and price to the industrys
product, there are low switching costs and
switching is a commonplace occurrence.
Business Portfolio Analysis
Outline
Introduction

BCG (Boston Consulting Group) Matrix

GE(General Electric)/McKinsey Multi-
Factor Matrix

Introduction
The creation of SBUs enables the setting
of SBUs mission and objectives and the
allocation of resources across SBUs in the
organization
Senior management need to have a
framework to evaluate SBUs and to assign
limited resources among them; hence
portfolio analysis
Many models but only 2 are covered here:
BCG, & GE models
BCG (Boston Consulting
Group) Matrix
Provides a framework for senior
management in allocating resources
across business units in a diversified
firm by
Balancing cash flows among
business units, and
Balancing stages in the product
life-cycle (PLC)
The BCG Matrix
(Log Scale)
BCG Matrix (contd)
The horizontal axis is the Relative Market Share
shown in a log scale
Vertical line is usually set as 1.0 Relative Market
Share
An SBU to the left of this line means it is the market
leader in the industry or segment in which it operates
Conversely, an SBU to the right of this line (1.0 RMS)
means it is not the leader
The vertical axis is the industry growth rate .
The horizontal rate is usually set at 10% market
growth
High
Low
High
Low
Market
Growth
Rate
Relative Market Share
The BCG Matrix
The Strategic Implications of
the BCG
Cash cows
Investments sufficient to maintain
competitive position. Cash
surpluses used in developing and
nurturing stars and selected
question mark firms.
Stars
Aggressive investments to support
continued growth and consolidate
competitive position of firms.
The Strategic Implications of
the BCG
Question marks
Selective investments; divestiture
for weak firms or those with
uncertain prospects and lack of
strategic fit.
Dogs
Divestiture, harvesting, or
liquidation and industry exit.
Co then considers acquisitions, divestments
and new ventures to get a balanced
portfolio
Question Marks
(Problem Children)
Investmentheavy initial capacity
expenditures and high R&D costs
Earningsnegative to low
Cash-flownegative (net cash user)
Strategy Implications
If possible to dominate segment,
go after share. If not, redefine the
business or withdraw



Stars
Investmentcontinue to invest for
capacity expansion
EarningsLow to high earnings
Cash-flowNegative (net cash user)
Strategy Implications
Continue to increase market
shareeven at the expense of
short-term earnings



Cows
InvestmentCapacity maintenance
EarningsHigh
Cash-flowPositive (net cash contributor)
Strategy Implications
Maintain market share and cost
leadership until further investment
becomes marginal

Dogs
Investment
Gradually reduce capacity
EarningsHigh to low
Cash-flow
Positive (net cash contributor) if
deliberately reducing capacity
Strategy Implications
Plan an orderly withdrawal to
maximize cash flow
Example of a BCG Matrix for a
Engineering company in India
High
Low
High
Low
Product
Sales
Growth
Rate
Relative Market Share
Lighting
Switchgear
Transformer
Fan
Pumps
Motor
BCG Matrix
(Three Paths to Success)
Continuously generate cash cows and use
the cash throw-up by the cash cows to invest
in the question marks that are not self-
sustaining
Stars need a lot of reinvestments and as the
market matures, stars will degenerate into
cash cows and the process will be repeated.
As for dogs, segment the markets and nurse
the dogs to health or manage for cash
Three Paths to Success
(contd)
High
Low
High
Low
Market
Growth
Rate
Relative Market Share
BCG Matrix
(Three Paths to Failure)
Over invest in cash cows and under invest
in question marks
Trade further opportunities for present
cash flow
Under invest in the stars
Allow competitors to gain share in a
high growth market
Over milked the cash cows
Three Paths to Failure
(contd)
High
Low
High
Low
Market
Growth
Rate
Relative Market Share
Limitations on Portfolio
Planning
Flaws in portfolio planning:
The BCG model is simplistic if used blindly;
considers only two competitive environment
factors relative market share and industry
growth rate.
High relative market share is no guarantee of a
cost savings or competitive advantage (but
normally does a good job of predicting cash flow)
Low relative market share is not always an
indicator of competitive failure or lack of
profitability (but normally does a good job of
predicting cash flow).
Limitations on Portfolio
Planning
Flaws in portfolio planning:
Multifactor models (e.g., the McKinsey matrix or
the GE Grid) are better though imperfect.
Importantly, goals other than cash flow may be
more critical (such as ROI). If so, use the BCG
with caution
Fail to look at dependencies among SBUs wrt
transferring competencies, economies of
scope,etc.
GE(General Electric)/McKinsey
Multi-Factor Matrix
Originally developed by GEs planners
drawing on McKinseys approaches
Market attractiveness is based on as
many relevant factors as are appropriate
in a given context
Business-position assessment also made
on a many factors
SBU needs to be rated on each factor
GE Multifactor Portfolio Matrix
Business Strength
High
High
Medium
Medium
Low
Low
Invest/Grow
Selectivity
/earnings
Harvest
/Divest
Protect
Position
Invest to
Build
Build
selectively
Build
selectively
Selectively
manage for
earnings
Limited
expansion
or harvest
Protect &
refocus
Divest
Manage for
earnings
GE Multifactor Portfolio Matrix
(Contd)
Invest/Grow
Selectivity
/earnings
Harvest
/Divest
Business Strength
High
High
Medium
Medium
Low
Low
Some Limitations of the
GE Model
Subjective measurements across SBUs
Process also highly subjective
From the selection and weighting of
factors to the subsequent development
of both a firms position and the market
attractiveness
Businesses may have been evaluated with
respect to different criteria
Sensitive to how a product market is
defined
Ansoffs Growth Vector Matrix
Market penetration
Market
development
Diversification
Product / Service
development
P
r
e
s
e
n
t

N
e
w

Present
New
M
A
R
K
E
T

PRODUCTS / SERVICES
Using the Ansoff Matrix in the
Objective-setting Process
Market penetration (1)







Market
development (3)




Diversification (4)
Product / Service
development (2)


E
s
t
a
b
l
i
s
h
e
d

N
e
w

Established New
M
A
R
K
E
T

PRODUCTS / SERVICES
High Risk
S
a
l
e
s

10 5 0
Time (years)
The Strategic-Planning Gap
Desired
sales
Integrative growth
Intensive growth
Current
portfolio
Strategic-
planning
gap
Diversification growth
Integrative Growth
Backward Integration

Forward Integration

Horizontal Integration



Diversification Growth
Concentric diversification
A process that occurs when new products related to
current products are introduced into new markets.

Conglomerate diversification
A process that occurs when new products unrelated
to current technology, products or markets are
introduced into new markets.

Corp as a Portfolio of
Competencies
Identify current competencies
Compare competencies to
opportunities and threats
Develop an agenda for corporate
development
Advantage is that this method
recognizes need to add value by
looking at inter-dependencies
From Agenda to Action
Based on the analysis of the
portfolio and what do you have to
do the next step is how to you get
there

Internal New Ventures
Acquisitions
Joint Ventures
Internal New Venturing
Internal new venturing is attractive when:
Entering as a science-based company.
Entering an emerging industry with no
established competitors.
Good if company has key competencies
that can be leveraged
Internal New Venturing
Pitfalls of new venturing (very high failure
rate):
Scale of entry Low-scale entry reduces
probability of long-term success (low
share drives high costs and low revenue)
Commercialization Failure to develop a
product that meets basic customer
needs.
Poor Implementation Using shotgun
approach, not setting clear strategic
objectives, abandoning projects too
soon.
Internal New Venturing
Guidelines for successful new
venturing:

Adopt a structural approach with
clear strategic objectives setting
R&D direction.
Foster close links between R&D
and marketing.
Use project teams to reduce
development time.
Internal New Venturing
Guidelines for successful new
venturing:

Use a selection process to pick
venture projects with the highest
probability of success.
Monitor progress of ventures in
gaining initial market share goals.
Large-scale entry is important for
venture success.
Acquisition is an attractive strategy when:
Competencies important in a new
business area are lacking in the entering
firm.
Speed of entry is considered important.
Acquisition is perceived as a less risky
form of entry.
Barriers to entry can be overcome
by acquisition of a firm in the
industry targeted for entry.
Acquisitions as an Entry
Strategy
Acquisitions as an Entry
Strategy
Pitfalls of acquisitions:
Failing to follow through on
postacquisition integration of the
acquired firm.
Overestimating the economic
benefits of the acquisition.
Underestimating the expense
of an acquisition.
Failing to properly screen
candidates
before acquisition.
Acquisitions as an Entry
Strategy
Guidelines for successful
acquisitions:
Properly identify acquisition
targets and conduct a thorough
preacquisition screening of the
target firm.
Use a bidding strategy with proper
timing to avoid overpaying for an
acquisition.
Acquisitions as an Entry
Strategy
Guidelines for successful
acquisitions:
Follow through on post acquisition
integration synergy-producing
activities of the acquired firm.
Dispose of unwanted residual
acquisition assets.
Joint Ventures as an
Entry Strategy
Attractions
Sharing new project costs and
risks.
Increasing the probability of
success
in establishing the new business.
Joint Ventures as an
Entry Strategy
Drawbacks
Requires a sharing of control with
partner firms.
Requires that partner firms share
profits.
Risks giving away critical
knowledge.
Risks creating a potential
competitor.
Restructuring
Why restructure?
Pull-back from overdiversification.
Attacks by competitors on core
businesses.
Diminished strategic advantages of
vertical integration and diversification.
Restructuring

Exit strategies
Divestment spinoffs of profitable SBUs
to investors; management buy outs
(MBOs).
Harvest halting investment, maximizing
cash flow.
Liquidation Cease operations, write off
assets.
Turnaround Strategy
The causes of corporate decline
Poor management incompetence,
neglect
Overexpansion empire-building
CEOs
Inadequate financial controls no
profit responsibility
High costs low labor productivity
Turnaround Strategy
The causes of corporate decline
New competition powerful
emerging competitors
Unforeseen demand shifts major
market changes
Organizational inertia slow to
respond to new competitive
conditions
The Main Steps of
Turnaround
Changing the leadership
Replace entrenched management with
new managers.
Redefining strategic focus
Evaluate and reconstitute the
organizations strategy.
Asset sales and closures
Divest unwanted assets for investment
resources.
The Main Steps of
Turnaround
Improving profitability
Reduce costs, tighten finance and
performance controls.
Acquisitions
Make acquisitions of skills and
competencies to strengthen core
businesses.
Successful Planning
Successful marketing
planning requires:
Commitment Time
Understanding
The McKinsey 7-S Framework
Skills
Shared
values
Staff
Style
Strategy
Structure
Systems
Profit improvement options
Profit Improvement
Sales Growth Productivity Improvement
Market
Penetration
Existing
Assets
Market
Development
Product
Development
Change
Asset base
Improve
product
sales
mix
( margin)
Increase
Price
Increase
usage
Take
competitors
customers
Improve
asset
utilisation
(experience
and
efficiency
New
Segments
Convert
non-users
Existing
Markets
New
Markets
Cost
Reduction
Investment
innovation
diversification
Divestment
redeployment of
capital resources
Growth focus
Cash and margin focus
Capital utilisation focus
Extended Marketing Mix
1. PRODUCT &
SERVICE

Variety
Quality
Design
Features
Brand name
Packaging
Sizes
Add-ons
Warranties
Returns
7. PROMOTION

Advertising
Sales Promotion
Personal selling
Direct marketing
Public relations
6. PLACEMENT
for customer service
Channels
Coverage
Locations
Inventory
Logistics management

2. PRICE

List price
Discounts
Allowances
Settlement and
credit terms
3. PEOPLE

People interacting with people
is how many service situations
might be described.
Relationships are important in
marketing
4. PROCESS

In the case of high-contact
services, customers are
involved in the process.
Technology is also important
in conversion operations and
service delivery
5. PHYSICAL EVIDENCE

Services are mostly intangible.
Thus the meaning of other tools
and techniques used in
measures of satisfaction are
important
TARGET CUSTOMERS

INTENDED
POSITIONING
The Marketing Environment
Target
Consumers
Product
Place Price
Promotion
Competitors
Marketing
Channels
Publics Suppliers
Demographic-
Economic
Environment
Technological-
Natural
Environment
Political-
Legal
Environment
Social-
Cultural
Environment