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MARKET- ORIENTED
STRATEGIC
PLANNING
 STRATEGIC
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PLANNING
 Introductio
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n
•Strategic planning is the organizational
management activities to define it s purpose
and long term goals, setting the aim and
direction, determining the future, set
priorities, making the right decision and
allocating resources effectively.
 Definition of Strategic
4
Plan
 Strategic planning processes emphasize “the execution of plans
produced
through comprehensive analysis and systematic procedure” (Hart, 1992).
 According to Olsen and Eadie (1982), strategic planning is a disciplined
effort to make essential decisions and actions that shape and guide what
an organization is, what it does, and why it acts the way it does.
 Strategic planning is a process of determining and revealing the
organizational purpose in terms of long terms objectives, action
programs, and resource allocation priorities (Ornoldo C.Hax & Nicolas
S.Majlus, 1996)
 Strategic planning is a systematic process of identifying opportunities
and threats in future environment and of formulating policies,
based on organizational resources and goals for operations in the
environment over relatively long term (Steiner, 1983)
 The Nature of High-performance
5
Businesse
s
 Satisfy or exceed the expectations of their stakeholders.
 Manage and link core business processes (i.e. improving way of
performing activities e.g. through reengineering work flows and
establish cross-functional teams to develop new products).
 Able to source and outsource resources efficiently (i.e. knowing its and
others core competencies).
 Develop its own distinctive organizational culture and
competency.
 What is Strategic
6 Planning?
 Strategic planning is a process where people make
decisions about intended future outcomes, how these
outcomes are to be accomplished, and how success is to be
measured and evaluated.
 Strategic planning needs to answer 3 basic questions:

Where it is
going?
What is the
environment
?
How does it
 Current Situation……
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 Strategic Central Role of
Planning
8

Three key areas of action for strategic planning:

Assessing each
business strength by
Managing a company's
considering the
businesses as an
market’s growth rate Establishing a strategy
investment portfolio
and firm’s competitive
position and fit in that
market
 Levels of Strategic
9 Planning The corporate/top management
establish the corporate strategic plan to
Corporat guide the whole organization.
e level
Each division sets its own plan covering
the allocation of each business unit
Divisio within the division and the strategies
n for that particular division.
level Each SBU is a separate profit center
within the larger corporation and is
Business unit responsible for its own costs,
level revenue, and profits.
Each product level (product
Product line, brand) within a business
level unit develops a marketing
plan for achieving its
objectives in its product
market.
 Purposes of Strategic
10
Planning
Assist
company to
capitalize on
its strengths,
Provide overcome its
Guide objective weaknesses,
Provide priority use Set basis for take
of resources standards of control & advantage
directio excellence evaluatio of
n n opportunities,
and defend
against
threats to its
organization
Figure 4-1: The Strategic-Planning,
Implementation, and Control
Processes

4-11
 Market-oriented Strategic
12
plan
 Market-oriented SP – managerial process of
developing and maintaining viable fit
between the organization's objectives,
skills and resources and its changing market
opportunities in order to yield target profits
and growth
 Marketing Plan Strategic
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Plan
Marketing plan operates at 2 levels:
1. Strategic - lays out target markets and the value
proposition based on the analysis of the best market
opportunities
2. Tactical – specifies marketing tactics including product
features, promotion, merchandising, pricing, sales channels
and service

Marketing Plan – central tool for directing

and coordinating the marketing effort.
 Why Some Strategic Plans
14 Fail?
1. Inappropriate strategies may arise due to:-

 Poor market research or other information upon which the

plan is founded
 Failure to define end states (objectives) correctly
 Incomplete SWOT analysis with respect to the desired end
state(s)
 Lack of creativity in identifying possible strategies
 Strategies incapable of obtaining the desired objective
 Poor fit between the external environment and
organizational resources - infeasibility
 Why Some Strategic Plans
15 Fail?
2. Poor implementation of a strategy may
happen due to:

 Over-estimation of resources and abilities

 Under-estimation of time, personnel, or financial
requirements
 Failure to coordinate
 Ineffective attempts to gain the support of others or
resistance
 Failure to follow the plan
 Loss of senior management focus and continued
sponsorship
 Corporate Strategic Planning
16 Process
 All corporate headquarters undertake four
planning activities:
Defining the
corporate mission

Establishing strategic
business units (SBUs)

Assign resources to
each SBU

Assessing growth
opportunities
 •In defining its mission, the organization needs to add several key
questions, such as “ What is our business?”, “Who is the
customer?”, “What will our business be?”.
•Mission statements are best when guided by a vision. Good
Defining the mission statements have three major characteristics:
corporate mission 1. Focuses on a limited number of goals
2. Stresses the company’s major policies and values
3.Defines the major competitive spheres within the company will
operate by defining the industry, products and applications,
competence, market-segment, channel and geographical.

Establishing An SBU is defined as a stand-alone business within a

strategic business
units (SBUs) corporation that faces an identifiable competitors in a given
market.

Once the SBUs has been defined, management must decide

Assign resources to how to allocate corporate resources to each SBU. The most
each SBU common tools used for portfolio analysis are BCG’s Growth-
Share Matrix and GE/McKinsey Matrix.

Assessing growth Assessing growth opportunities involves planning for new

opportunities businesses and downsizing or terminating old businesses.
 Vision and Mission
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Statement
 Vision
🞑 Outlined what the company wants to be in the
future.
🞑 Long term view

🞑 Inspirational
 Mission
🞑 How does the company going to achieve the
vision
🞑 How the market will served

🞑 Intended direction of the company

🞑 The core task or duty assigned

 Vision & Mission
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Statement
Vision:
“To be the most respected and successful enterprise, delight customers with a wide
range of products and solutions in the automobile industry with the best people
and best technology.”
 The most respected.
 The most successful.
 Delighting customers.
 Wide range of products.
 The best people.
 The best technology.
Mission:
 Mission of Toyota is to provide safe & sound journey. Toyota is developing
various new technologies from the perspective of energy saving and diversifying
energy sources. Environment has been first and most important issue in priorities
of Toyota and working toward creating a prosperous society and clean world.
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 Options for Growth Opportunities
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1. Intensive growth opportunities –

identify opportunities to achieve
further growth with current businesses.
2. Integrative growth opportunities –
identify opportunities to build or
acquire businesses that are related
to current businesses.
3. Diversification growth
opportunities – identify Combination of products
and machines:
opportunities to add attractive Nespresso and Nescafé
businesses that are unrelated to Dolce Gusto beverage
systems
current businesses.
 Intensive Growth
(Product/market expansion grid)
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Is a
strategy
growth Is a growth strategy
increasing sales that identifies and
to current market develops new
segments without Market Market market segments
changing the penetration development for current
product (e.g.: products. (e.g.:
Dell’s laptop was baby lotion)
selling around the
world)
Product Is a growth
development Diversification
Is a growth strategy for
strategy that starting up or
offers new or acquiring
modified products businesses outside
to existing market the
segments company’s current
(e.g.: i- products and
phone, markets (e.g.:
 Precondition for Market
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Penetration
 When current market are not saturated with a particular
product or services
 When the usage rate of present customers could be
increased significantly.
 When the market shares of major competitors have
been declining while total industry sales has been
increasing.
 When the correlation between dollar sales and dollar
marketing expenditures historically has been high.
 When increased economies of scale provide major
competitive advantages.
 Precondition for Market
Development
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🞑 When new channels of distribution are available that are

reliable, inexpensive, and of good quality.
🞑 When an organization is very successful what it does.

🞑 When new untapped or unsaturated markets exists.

🞑 When an organization has the need capital and human

resources to manage expanded operations.
🞑 When an organization has excess production capacity.

🞑 When an organization’s basic industry rapidly is

becoming global in scope.
 Precondition for Product
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Development
 When an organization has successful products that are in the
maturity stage of the product life cycle; the idea here is to
attract satisfied customers to try new (improved) products as a
result of their positive experience with the organization’s
present products or services.
 When an organization competes in an industry that is
characterized by rapid technological developments.
 When major competitors offer better quality products at
compatible prices.
 When organization competes in a high growth industry
 When an organization has strong research and
development capabilities.
 Integrative Growth
26 Opportunities
 Sales and profits may be increased through:
Backward Integration Forward Horizontal Integration
Integration
• Acquire suppliers • Acquire retailer • Acquire competitors
• e.g.: A hotel • e.g.: A hotel • e.g.: TESCO
company company acquiring acquire MACRO
acquiring one of tour wholesaler or • When Ali Express
its suppliers travel agents. acquire Lazada
• Starbucks acquire • Costco wholesale
600 acres of coffee sell directly to
farm in Costa Rica consumer (skipping
the retailer)
• Ali Baba wholesale
sell directly to
consumer (skipping
the retailer)
 Diversification Growth
27 Opportunities
Concentric diversification

Horizontal diversification

Conglomerate diversification
(or lateral diversification)

Downsizing the older businesses

 Concentric
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Diversification
Adding new but related products to
the existing customers.

 When Telekom Malaysia (TM) national

telecommunications company or fixed line become the
largest broadband services provider offerings in data, fixed
line, pay television and network services, this represented
concentric diversification.
 For instance, when PERODUA company developed and
launched sedan car (Bezza).
 Precondition for Concentric
Diversification
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🞑 When organization competes in a no growth or slow

growth industry
🞑 When adding new, but related products
significantly would enhance sales of current
products.
🞑 When new, but related products could be offered at highly
competitive price.
🞑 When organization’s products are currently in the
decline stage of the product life cycle.
🞑 When organization has a strong management team.
 Horizontal
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Diversification
Adding a new unrelated product or
services for present customers.

 A dairy, producing milk adds a new type of cheese to its

products.
 ADIDAS offer new service ‘personal training which is
unrelated to their core business of manufacturing and
marketing sports, apparels and equipment .
 In 2010 the Coca-Cola Company purchased the North
American operations of the largest Coca-Cola bottling
company.
 Precondition for Horizontal
Diversification
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🞑 When revenues derived from an organization current

product or services would increase significantly by
adding the new unrelated products.
🞑 When an organization competes in a highly
competitive and / or a no-growth industry indicated by
low profit margin or return.
🞑 When an organization’s present channel of
distribution can be used to market the product to
current customers.
🞑 When the new products have counter cyclical sales
pattern compared to organization present products.
 Conglomerate
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Diversification
Developing new product for new
market or unrelated industry.

The brand name "Virgin" arose when Richard Branson and

Nick Powell formed a Record Shop. They expand their business
by acquiring and developed Virgin Atlantic, a trade name of
Virgin Atlantic Airways Limited, is a British airlines.
 Precondition for
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Conglomerate Diversificatio
🞑
n
When an organization has the capital and managerial
talent needed to compete successfully in new industry.
🞑 When the organization has opportunity to purchase an
unrelated business opportunity.
🞑 When there exist financial synergy between the
acquired and acquiring firms.
🞑 When existing market for an organization present
product is saturated.
34
 Why Firms
Diversify?
🞑 To grow and to expand
🞑 To more fully utilize existing resources and
capabilities.
🞑 To escape from undesirable or unattractive
industry environments.
🞑 To make use of surplus cash flows.
 Example of Diversification
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growth opportunities
 Nestle is rumored to have paid around £500m (the deal value was not
formally disclosed) to acquire Prometheus Laboratories Inc., a maker of
treatments for cancer and gastrointestinal illnesses. This is not
Nestle first acquisition into consumer healthcare. The Swiss company has
said it aims to become the world leader in health-science nutrition in 10
years, extending its dominance beyond coffee, powdered milk and baby
food.
 Why the change in strategic direction? The answer, simply stated, is
growth. Healthcare markets are expected to grow significantly faster
than mature food product markets in the medium and long-term.
Developing economies are having to handle ageing populations, with
consumers increasingly prepared to spend on healthcare and nutrition.
 Another reason is profit margins. Net profit margins in pharmaceuticals
are generally much higher than those earned in food products, though
there is often a long lead time between new product development and
product profitability.
 Review Of Boston Consulting Group Growth (BCG) Share
Market growth rate is annual increase Matrix
in product sales or population within
a given market

Relative market share is comparing market share

of a company with that of its next
biggest competitor.

Represents SBU’s dollar sales

 Review Of Boston Consulting
Group Growth (BCG) Share
Matrix
Stars are high-
growth, high-share Question marks are
businesses or low- share business
products requiring units in high-growth
heavy investment markets requiring a lot
to finance rapid of cash to hold their
growth. share.
They will
eventually turn
into cash cows. Dogs are low-growth,
Cash cows are low- low- share businesses
growth, high-share and products that may
businesses or products generate enough cash to
that are established and maintain themselves but
successful SBUs
The BCG matrix was created by Bruce D. Henderson do not promise to be
for the Boston Consulting Group in 1970. This chart
requiring less was created with the purpose of helping companies large sources of cash.
analyze their different business units or product lines
investment to maintain
market share.
 How to use the BCG

Matrix?
Dogs: The usual marketing advice is to remove any dogs from your product
portfolio as they are a drain on resources. However, some can generate ongoing
revenue with little cost.
🞑 For example, in the automotive sector, when a car line ends, there is still a need for spare parts. As SAAB
ceased trading and producing new cars, a whole business has emerged providing SAAB parts.
 Question marks: Named this, as it’s not known if they will become a star or drop into
the dog quadrant. These products often require significant investment to push them into
the star quadrant. The challenge is that a lot of investment may be required to get a
return.
🞑 For example, Rovio, creators of the very successful Angry Birds game has developed many other games you
may not have heard of. Computer games companies often develop hundreds of games before gaining one
successful game. It’s not always easy to spot the future star and this can result in potentially wasted funds.
 Stars: Can be the market leader though require ongoing investment to sustain.
They generate more ROI than other product categories.
 Cash cows: ‘Milk these products as much as possible without killing the cow!.
Often mature, well established products.
🞑 The company Procter & Gamble which manufactures Pampers nappies to Lynx deodorants has
often been described
as a ‘cash cow company’.
 APPLE BCG
Matrix
Question Mark- Apple TV makes a bit of money, but it’s not reaching it’s potential. If
Apple can solve a few ecosystem problems, they could really own the TV space.
There are tons of rumors of an Apple TV product that might just maybe dominate like
the iPod/iPhone/i Pad

Rising Star -The iPhone and iPad are rising stars. They can’t make enough of them.
These
products are so successful that their growth potential is really unknown.

Cash Cows-The Mac Books are the portables of choice right now. The all-in-one i Mac
is in that cash cow place. They make a lot of them, but computing is quickly shifting to
portable and mobile so they are also in the dog section.

Dogs- The big multi-part desktop is fading away. Hard drive based iPods peaked a
while ago as well and there are just so may competitors that can create a simple product
such as an i pod now. Apple's Macs could be considered in the dog category as Apple
is not a market leader in this market segment as there competitors have the desktop
market in a monopoly.
The Weaknesses With The
Matrix
 It is not easy to implement as decisions are not simply
based on the two factors only
 Time consuming
 Higher market growth doesn’t meant higher profits
 Firm may enter high growth market in which the
company has no expertise
 May terminate a losing business that actually their core
competencies
 The GE Planning Grid
or GE/McKinsey

Matrix
The GE/McKinsey Matrix evaluates a business on the basis of two
composite dimensions: industry attractiveness and business
strength.
 Several Factors that Affect Market Attractiveness:
🞑 Market Size- Market growth
🞑 Market profitability
🞑 Pricing trends
🞑 Competitive intensity / rivalry
🞑 Overall risk of returns in the industry
🞑 Segmentation
🞑 Technology development
🞑 Distribution structure
🞑 Opportunity to differentiate products and services
 The GE Planning Grid
or GE/McKinsey

Matrix
Several Factors that Affect Competitive Strength of the SBU:
🞑 Strength of assets and competencies
🞑 Distribution strength

🞑 Relative brand strength

🞑 Market share growth

🞑 Customer loyalty

🞑 Record of technological/innovation

🞑 Relative cost position (cost structure compared with competitors)

🞑 Access to financial and other investment resources
44
45
 Business Unit Strategic Planning
46 Process
2

1 4 5 6 7 8

3
 • Each business unit must define its specific mission with the
Step 1: Business Mission
broader company mission.

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• External & internal analysis should be run to evaluate the
Step 2 & 3: SWOT Analysis
strength, weaknesses, opportunities & threats.

• Goal indicates what a business unit wants to achieve. Company could

Step 4: Goal Formulation established goals/objectives via Managing by Objectives (MBO).

• Every business must design a strategy for achieving its goals

consisting of: marketing strategy, technology strategy, and
Step 5: Strategy Formulation sourcing strategy. Some common strategies could refer was
Michael Porter’s Generic Strategies & Strategic Alliances.

• Program formulation ~ detailed programs need to be develop to

support the strategy.
Step 6 & 7: Program Formulation & • Implementation ~ involves a day-to-day, month-to-month activities that
Implementation effectively put the marketing plan to work.
• There are 7-S success for business: Strategy, Structure,
Systems, Skills, Style, Staff and Shared values.

• The firm needs to track the results and monitor new

Step 8: Feedback & Control
developments.
 Product Planning: The Nature And
Contents
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Of A Marketing Plan
 A marketing plan is a highly detailed, heavily
researched and, hopefully, well written report
that many inside and possibly outside the
organization will evaluate.
 It summarizes what the marketer has learned
about the marketplace and indicates how the firm
plans to reach its marketing objectives.
 Why write a marketing
49
plan?
 State clearly the activities that help employees
understand and work toward common goals
 Provide basis by which actual and expected
performance can be compared.
 Allow us to examine the marketing environment in
relation with the inner workings of the business.
 Can be served as a reference point for the success of
future activities.
 Allows marketing manager to enter market place with an
awareness of possibilities and problems.
 It is a key component in obtaining funding to pursue new
initiatives.
 Marketing Plan Criteria
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 In evaluating the marketing plan, several questions are asked:

🞑 Is the plan simple? Is it easy to understand and act on? Does
it communicate its content easily and practically?
🞑 Is the plan specific? Are its objectives concrete and measurable?
Does it include specific actions and activities? Are there specific
dates of completion, specific person in- charge and specific
budgets?
🞑 Is the plan realistic? Are the goals, strategies, budget and dates
realistic? Has any feasibility or self-critique assessment been
carried out?
🞑 Is the plan complete? Does it include all the necessary
elements?
 Contents of Marketing
51
Plan
52
 Reference
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s

http://michael-roberto.blogspot.my/2013/03/backward-integration-at-
starbucks.html