Chapter 2.pdf

PRINCIPLES OF MARKETING MKT204 CHAPTER 2 JUHI SURYAVANSHI NAVRACHNA UNIVERSITY STRATEGIC MARKETING PLANNING Strategic planning is the process of developing and maintaining a strategic it between the organisation’s goals and capabilities and i...

PRINCIPLES OF MARKETING MKT204 CHAPTER 2 JUHI SURYAVANSHI NAVRACHNA UNIVERSITY STRATEGIC MARKETING PLANNING Strategic planning is the process of developing and maintaining a strategic it between the organisation’s goals and capabilities and its changing marketing opportunities. It is the base for the long term planning of the irm. At a corporate level, the irm starts de ining the company’s mission. A mission statement is a statement of the organisation’s purpose. The mission leads to a hierarchy of goals. Based on this, the management must plan the business portfolio: the collection of businesses and products that make up the company. Portfolio analysis is the process by which management evaluates the products and businesses that make up the company. f f f f  The irst step is identifying the strategic business units (SBU) that are vital to the company. The well-known model of the Boston Consulting Group (BCG) sorts the SBUs into a growth-share matrix, leading to four types of SBUs: 1. Stars: high growth and high share units, in need of investment. 2. Cash cows: low-growth, high share units, producing cash. 3. Question marks: low-share units, in high-growth markets. Require cash, but can turn out to be unpro itable. 4. Dogs: low-growth, low-share units, which are not very pro itable. After the units are classi ied, the company should determine in which units to build share, hold share, harvest the pro its or divest the SBU f f f f f 3 Characteristics Market growth Market share Investment The BCG Matrix: Dogs Products in the dogs quadrant are in a market that is growing slowly and where the product(s) have a low market share. Products in the dogs quadrant are typically able to sustain themselves and provide cash lows, but the products will never reach the stars quadrant. Firms typically phase out products in the dogs quadrant (as indicated by B) unless the products are complementary to existing products or are used for a competitive purpose. The BCG Matrix: Stars Products in the star quadrant are in a market that is growing quickly and one where the product(s) have a high market share. Products in the stars quadrant are market-leading products and require signi icant investment to retain their market position, boost growth, and maintain a competitive advantage. Stars consume a signi icant amount of cash but also generate large cash lows. As the market matures and the products remain successful, stars will migrate to become cash cows. Stars are a company’s prized possession and are top-of-mind in a irm’s product portfolio. f f f f f The BCG Matrix: Question Marks Products in the question marks quadrant are in a market that is growing quickly but where the product(s) have a low market share. Question marks are the most managerially intensive products and require extensive investment and resources to increase their market share. Investments in question marks are typically funded by cash lows from the cash cow quadrant. In the best-case scenario, a irm would ideally want to turn question marks into stars (as indicated by A). If question marks do not succeed in becoming a market leader, they end up becoming dogs when market growth declines. f f Designing the business portfolio also means looking at future businesses. The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through: Market penetration: company growth by increasing sales of current products to current market segments without changing the product. Market development: company growth by identifying and developing new market segments for current company products. Product development: company growth by offering modi ied or new products to current market segments. Diversi ication: company growth through starting up or acquiring businesses outside the company’s current products and markets. Companies also need strategies for downsizing, which means reducing the business portfolio by eliminating products or business units that are not pro itable or that no longer it the company’s overall strategy. f f f f The BCG Matrix: Cash Cows Products in the cash cows quadrant are in a market that is growing slowly and where the product(s) have a high market share. Products in the cash cows quadrant are thought of as products that are leaders in the marketplace. The products already have a signi icant amount of investments in them and do not require signi icant further investments to maintain their position. Cash lows generated by cash cows are high and are generally used to inance stars and question marks. Products in the cash cows quadrant are “milked” and irms invest as little cash as possible while reaping the pro its generated from the products. f f f f f f MARKETING STRATEGY Marketing strategy is the marketing logic by which the company hopes to create customer value and achieve pro itable customer relationships. The company must choose which customers to serve and how to serve them. This process involves four steps: 1. Market segmentation: dividing a market into distinct groups of buyers who have different, needs, characteristics or behaviour and who might require separate products or marketing programmes. A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts. 2. Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. 3. Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of consumers. 4. Differentiation is actually differentiating the market offering to create superior -customer value. f  MARKETING MIX The marketing mix is the set of tactical marketing tools: product, price, place and promotion, that the irm blends to produce the response it wants in the target market. Product refers to the combination of goods and service the irm offers. Price is the amount the customer pays to obtain the product. Place refers to the availability of the product. Promotion relates to the activities that communicate the bene its of the product. f f f Managing the marketing process requires four marketing management functions. The irst is marketing analysis, starting with a SWOT analysis. A SWOT analysis is an overall evaluation of the company’s strengths (S – internal capabilities), weaknesses (W – internal limitations), opportunities (O – external factors that can be pro itable) and threats (T – external factors that might challenge the company). Secondly, marketing planning involves choosing the right marketing strategies. Third is marketing implementation: turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. (Execution) And inally, there is marketing control: measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved. Operating control refers to checking the performance against the annual plan, while strategic control involves looking at the match between strategies and opportunities. f f f The return on marketing investment (marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. The marketing ROI measures the pro its generated by investments in marketing activities and can be a helpful tool, but is also dif icult to measure. f f