Kotler on Marketing

A key ingredient of the marketing

management process is insightful, creative

marketing strategies and plans that can guide marketing activities. Developing the

right marketing strategy over time requires

a blend of discipline and flexibility. Firms must stick to a strategy but must also find new ways to constantly improve it.1 Marketing strategy also requires a clear understanding of how marketing works.2
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Strategic Market Planning

Strategic market planning is the managerial process that
entails analysis, formulation and evaluation of strategies that would enable an organisation to achieve its goals by

developing and maintaining a strategic fit between the

organisations capabilities and the threats and opportunities arising from its changing environment.

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Strategic Market Planning Process

The SMP Process involves :
Analysis (environmental analysis, competitor and industry analysis; customer and market analysis, firm internal analysis. The formulation and evaluation of alternative strategies. The selection of a strategy, and

The development of detailed plans for implementing.

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While the Companies Corporate strategic planning formulates and decides on strategies they need to consider the following aspects : What is our corporate mission? What are our strengths and weaknesses? What are the relevant threats and opportunities?

What are our corporate objectives?

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Defining Corporate Mission

What is our business?
Who is our customer? What is of value to the customer?

What will our business be?

What should our business be?

Answering these questions leads to a shared sense of purpose, direction and opportunity.

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 Establishing Strategic Business Units (SBU) A business can be defined in terms of three dimensions: customer groups, customer needs, and technology. Assigning Resources to each SBU The purpose of identifying the companys SBUs is to develop separate strategies and assign appropriate funding.

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Planning New Business, Downsizing Older Businesses

When there is a strategic gap between future desired sales and projected sales.

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Desired sales

Diversification Integrative growth Intensive growth

Strategic planning gap

Current portfolio

Time (years)
8

5
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Current Products Market Current Markets

New Products

Penetration
Strategy Market Development Strategy

Product Development Strategy

New Markets

Diversification Strategy

Ansoffs Product Market Expansion Grid

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Ansoffs Model
Present Products I. Market Penetration (Intensive Growth) Increase Market Share New Products III. Product Development (Intensive) Product reformulation strategy Product quality improvement strategy Product feature additions strategy Product line extension strategy New product development strategy IV. Diversification

Present Market

Attract users of competitors products Convert nonusers into users Increase product usage Increase the frequency of purchase Find new applications for current users II. Market Development (Intensive)

Expand geographically

Related
unrelated Integrative Growth Forward Integration Backward Integration Horizontal Integration

New Market

Target new segments

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Strategic Business Unit (S B U )

SBU denotes a division, product line, or other profit
centre within a company that: Produces and markets a well defined set of related products and / or services, Serves a clearly defined set of customers, and

Competes with a distinctive set of competitors.

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Boston Consulting Groups (BCG) Growth / Share Matrix :

BCG is simple but useful strategic planning technique based on an analysis of a companys product portfolio. The technique entails assigning each individual product (SBU) of an organisation to one of four possible cells in a simple matrix according to the relative market share and rate of market growth associated with that particular product / business. According to the cell of the matrix, the product / business is calculated. They are classified as : Stars, Cashcows, Question Marks / Problem Children and Dogs.
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20% 18%

Market Growth Rate

16% 14% 12% 10% 8% 6% 4% 2%

Stars

Question Marks

Cash Cow

Dogs

Relative Market Share

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Stars
These SBUs are in the high market growth rate / high
relative market quadrant.

Deletion / retention decision SBUs here should be

retained in the firms portfolio.

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Market Share Strategy Decision : An SBU in this quadrant with a very high relative market share the appropriate strategy would be market share maintenance. On the other hand, for an SBU whose relative market share is marginal then the appropriate market-share strategy would be to build share.

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Cash Flow Outlook : An SBU with a high relative market share in a highgrowth market will produce a high level of cash owing to experience effects and the result is high profit margins. Maintaining market share will require considerable cash to support increased expenditures on working capital and

on plant and equipment.

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 Building Market share in such a market will require even larger cash outlays to support increased, scale of operations. SBUs in the high market growthrate / high-relative market share quadrant will be self sustaining.

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 Their high relative market share, coupled with relatively

high profit margins and low costs owing to experience

effects makes them a major generator of cash.

However, a strategy of share building or share

maintenance in a high growth market also makes them a major user of cash.

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SBUs in this quadrant tend to be either in a state of cash

balance (cash outflow = cash inflow) marginal cash

surplus, or marginal cash deficit.

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Cash Cows :
These are SBUs in the low market growth / high relative market share quadrant. Deletion / Retention decision : SBUs in this quadrant should be retained in the firms portfolio.

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Market Share Strategy Decision : A strategy of market share maintenance is recommended in view of low rate of their market growth. Investments in capacity expansion may not be desirable. However, investments may be made which will improve manufacturing processes that might lead to lower costs

and / or better quality products.

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Cash Flow Outlook

Here, the SBU will be a net cash generator given its high relative market share. Relatively lower costs, vis--vis competitors because of

experience effects and high profit margins,

A sizable net cash surplus will be a major source of

cash to the parent corporation.

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It may be used to : Finance the growth (share building strategy) of selected SBUs in the highmarketgrowth- rate / low-relativemarket-share. Finance corporate R & D efforts oriented towards the development of new SBUs, Finance the acquisition of new SBUs, and

Meet other financial obligations of the parent company

eg. Dividend payments.
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Question Marks
SBUs in high-market-growth-rate / low-relative-market share quadrant. Retention / Deletion Decision :

For some SBUs, a firms competitors might be holding

commendable position under such circumstances the firm needs to invest heavily to build market share and move the SBU into Star quadrant.

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The viability of a market share building strategy should be on identifiable sources of sustainable

advantage which will be a major consideration in

deciding which SBUs should be retained or deleted.

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 Market Share Strategy Decision :

A share building strategy for SBUs retained in the

portfolio and a share harvesting or liquidation strategy for

SBUs to be deleted.

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 Cash Flow Outlook : SBUs here need a sizable cash infusion to finance share building strategies and to make investments in plant and equipment. The source of cash to finance share-building strategy of the SBUs to be retained comes from the cash surplus

generated by cash cow (SBU).

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Dogs
SBUs are in the low market growth rate / low relative market share. Retention / Deletion Decision : Deletion of SBU is generally advocated. Market share strategy decision : A market share harvesting strategy is generally advocated if

for some reason (exit barriers, lack of buyers) a firm is

unable to divert some of SBUs.

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Cash Flow Outlook

Minimum investment in running day-to-day operations of these SBUs and pursuing a share harvesting strategy could lead to the generation of a substantial cash surplus.

Low Investment : Attempt to harvest the business, drawing

cash out and cutting investment to a minimum.

Divestiture : Sell or liquidate the business

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Porters Generic Strategies

Michael Porter proposed three generic strategies for
strategic thinking. a) Overall cost leadership. b) Differentiation. c) Focus.

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G E Matrix Business Strength / Position (its ability to compete) High Medium Low

H Market / Industry Attractiveness

M
L

1
2

2
3

3
3

1. Invest / Grow 2. Selective Investment 3. Harvest / Divest

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Evaluating the ability to compete Market Share Share Growth Share by Segment Customer Loyalty Brand Reputation Margins Technology Skills Marketing Distribution Network

Evaluating Market Attractivenss Market Size Annual Market Growth Customers satisfaction levels Competition ; types Profitability Technology Government regulations Sensitivity to economic trends

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BUSINESS STRENGTH / POSITION

Strong
M A R K E T A T T R A C T I V E N E S S

Medium
INVEST TO BUILD

Weak
BUILD SELECTIVELY

PROTECT POSITION

Invest to grow Challenge for at maximum leadership digestible rate. Build selectively High Concentrate on strengths effort on maintaining Reinforce strength. vulnerable Areas

Specialize around limited strengths. Seeks ways to overcome weaknesses

Withdraw if indications of sustainable growth are lacking

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M A R K E T A T T R A C T I V E N E S S

Strong
BUILD SELECTIVELY Invest heavily in most attractive segments.

Medium

Weak LIMITED EXPANSION OR HARVEST Look for ways to expand without high risk ; otherwise, minimize investment and rationalize operations.

SELECTIVITY / MANAGE FOR EARNINGS

Protect existing program. Concentrate investments in segments where profitability is good and risks are relatively low.

Medium
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Build up ability to counter competition.

Emphasise profitability by raising productivity.

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M A R K E T A T T R A C T I V E N E S S

Strong PROTECT AND REFOCUS Manage for current earnings.

Medium MANAGE FOR EARNINGS Protect position in most profitable segments.

Weak DIVEST Sell at time that will maximise cash value.

Low

Concentrate on attractive segments.

Defend strengths,

Upgrade product line.

Minimise investment.

Cut fixed costs & avoid investment meanwhile.

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