Strategic marketing process

Unit 2: Strategic Marketing Process:
2.1. Introduction.
Marketing strategies and programs in the organizations are derived from the companywide strategic planning. Thus, you have to understand how organizations develop their strategic plans. After analyzing the strategic plan, you should be able to relate these plans’ role in guiding the marketers, and application of these plans to serve customers with the help of company employees as well as intermediaries.

Objectives:
After studying this chapter you should be able to:
1. Describe the companywide strategic planning.
2. Discuss how to design marketing planning models
3. Identify the marketing mix exists in the company.
4. Prepare marketing planning for the company.

2.2. Strategic Planning
Strategic planning is the process of defining the company mission, setting the long term and short term objectives, designing an appropriate business portfolio and coordinating functional strategies of the company.
Looking at the definition, you will be able to identify four important factors of the strategic planning. They are
1. Defining the company mission.
2. Formulating the objectives
3. Designing an appropriate business portfolio
4. Coordination among functional strategies.
Now, we will discuss the above points and their relevance to the marketing plans.
2.2.1. Defining the company mission:
An organization mission explains who its customers are, how it satisfies their needs and what type of products it offers.
Let me explain this concept by taking a mission statement of the trends in vogue, a family beauty saloons chain from cavin care, a well known fast moving consumer goods (FMCG) company in India. The mission statement is
“1. To provide the customer an unparalleled service experience
2. To provide the customer the largest range of "natural" products and services
3. To be the first to introduce sub-formats and value-added services
4. To be the most preferred family beauty salon chain for customers, employees and
Alliance partners
5. To provide consistent profits to all stakeholders”
Trends in vogue mission statement analysis:
a. Who its customer is? Mission statement 4 states “family who are going to beauty saloons” as their customers.
b. How it satisfy their needs? Mission statement 1 and 2 describes the needs as unparalleled service experience and offering largest range of natural products and services
c. What type of products it offers? The company offers natural products in their beauty saloons.
2.2.2: Formulating the objectives.
Mission statement provides a general view of the company’s customer, products and their method of satisfying the customer. Mission statement is once again divided into specific objectives which are stated in writing, can be measured quantitatively and fixed for particular time. Objectives may be business oriented or market oriented. They help marketers to develop strategies and programs. You will come to know how organizations deduce their mission into different objectives form the following example of Bharat Electronics Limited (BEL), a public sector enterprise in the electronic field.
Mission: To be a customer focused globally competitive company in defence electronics and in other chosen areas of professional electronics, through quality, technology and innovation.
Objectives:
o To be a customer focused company providing state-of-the-art products & solutions at competitive prices, meeting the demands of Quality, delivery & service.
o To generate internal resources for profitable growth.
o To attain technological leadership in defence electronics through in-house R&D, partnership with defence/research laboratories & Academic institutions.
o To give thrust to exports.
o To create a facilitating environment for people to realize their full potential through continuous learning & team work.
o To give value for money to customers & create wealth for shareholders.
o To constantly benchmark company’s performance with best-in-class internationally.
o To raise marketing abilities to global standards.
o To strive for self-reliance through indigenization
2.2.3: Designing an appropriate business portfolio.
After setting mission and objectives, management will develop its business portfolio.
Business portfolio is the right mix of businesses that company operates and products that offers to customers.
Portfolio analysis is the process by which company analyze its products and businesses.
Company develops their business portfolio in two steps
a. Analyze the existing business portfolio and decide which business should receive more, less or no investment.
b. Developing the new business portfolio for future to meet growth opportunities and eliminating the unprofitable portfolios.
Analyzing the existing business portfolio:
The current business portfolio of the company is analyzed by the businesses in which it operates. To make it clearer, let me take an example of ITC group. The company operates in FMCG, hotels, paper boards, specialty papers and packaging and agribusiness. These businesses are independent from each other and have their mission and objectives separately. These subsidiaries of organizations are called as Strategic business units (SBU)Strategic business unit: The unit of the company that has separate mission and objectives and that can be planned independently from other businesses.
Characteristics of SBU.
1. It may be brand, or a product line or separate division of the company.
2. It is having distinct mission and objectives.
3. Have own executive team.
Strategic planning models used in assessing the existing businesses:
1. BCG matrix ( Boston Consultancy Group)
2. GE matrix ( General electric)
BCG matrix: This model is used to identify company’s SBU’s position in the market. As it identity’s the company’s SBU’s strength, weaknesses, opportunities and threats on the basis of market growth rate and relative market share, this model is also known as growth share matrix .


STAR
Question Mark
COW
DOG
High Low
Relative Market Share
Axis components:
1. Market growth rate: The rate at which market is growing
2. Relative market share: Market share of the SBU divided by the market share of the largest competitor.
Model components:
Star: This category represents the high market share and high industry growth. SBU’s in this category require large investment to defend their position. Ultimately they will turn as cash cow after some time.
Cash cows: This category represents the low growth rate and high market share which is the characteristic of SBU operating in mature industry. Here company needs less investment to hold their position. Hence it generates more cash or in management terms we say cash cow can be milked.
Question Mark: This category represents high market growth and low market share. SBU’s in this category has two options, either to invest heavily and bring them to star position or divest / liquidate from that position.
Dogs: SBU’s in this category generates less cash for the company as it operates in low growth and low market share. Usually companies will not invest in this category and try to liquidate or divest.


BCG matrix for ITC
1. SBU: FMCG
Industry growth rate: 24% (AC Nielson retail audit report 2007)
Company growth rate: 50% (the Hindu business line 19th January 2008)
Company’s market share : 8% (outlook business)
Largest competitor share: HUL: 54% (outlook business)
Relative market share= 0.14
2. SBU: Paper board
Industry growth rate: 7.2% (the Hindu business line 27th May 2007)
Company growth rate: 11% (the Hindu business line 19th January 2008)
Company’s market share: 55%
Largest competitors share: BILT 35%
ITC’s FMCG segment analysis shows that though it is market leader in some categories their overall relative market share is 0.14. Company is in the high growth low relative market share area i.e. question mark position. ITC should invest heavily to convert its SBU business position into star.
ITC’s Paperboard industry is in low growth and high market share category i.e. in cash cow segment. It should plan for investing the cash generated from this position into other businesses.
GE matrix:
Management can use the GE business matrix to classify SBU’s on the basis of two factors
1. Market attractiveness: Market size, entry barriers, competitors, technology and profit margin are some factors used to analyze the market attractiveness.
2. Business position: On the basis of market share, SBU size, R&D capabilities and cost controls we can determine the business position.
Each cell in the model represented by the particular strategy namely, invest strategy, protect strategy, harvest strategy and divest strategy
Invest strategy: In this position SBU
a. Should receive ample resources
b. Should support by well financed marketing efforts.
Protect strategy: SBU’s in this position should
a. Allocate the resources selectively.
b. Develop strategies which help in maintain its market position.
c. Generate cash needed by other SBU’s.

Business position
High Medium Low

Invest

Invest

Protect

Invest

Protect

Harvest

Protect

Harvest

Divest


Harvest strategy: SBUs should not receive substantial new resources and if required, sell them.
Divest strategy: SBUs which falls into this category should not receive any resources and sell i or shut it as early as possible.

Developing the new business portfolios
After analyzing the existing business of the company, let us discuss company’s future plans i.e. growth or downsizing. Company adopts growth strategies to become more competitive in the market, tap new opportunities and become preferred employer. Downsizing is used when product or market became unattractive to it. The Ansoff Product-Market Growth Matrix is a marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets.



Ansoffs model of product/ market expansion.


a. Market penetration: A strategy used in increasing the sales of company’s existing products without modifying it in the existing market.
Characteristics of market penetration.
1. Serve customer with existing products by opening new stores.
2. Increase the promotion activities to increase the consumption.
3. Improve the service offerings.
Café- coffee day a reputed coffee chain in south India, started its operation in brigade road, Bangalore, in the year 1996. It offers different varieties of the coffee to its existing customers. Today it is having 100 stores in Bangalore.
b. Market development: In this strategy company identifies the new markets to sell their existing products.
In case of market development company identifies and develops new markets for its existing products
Café coffee day, enthused by the success of offering a world-class coffee experience, has opened a Café in Vienna, Austria and is planning to open other Cafes in the Middle East, Eastern Europe, Eurasia, Egypt and South East Asia in the coming months.
(Source: www.cafécoffeeday.com)
c. Product development: In this strategy, Company identifies new markets and sells their existing products.
Café coffee day added quick bites and ice-cream in their menu to cater to the needs of customers.
d. Diversification:A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets.
Café coffee day started offering tea and cold drinks in its highway café retail outlets. These highway café outlets offer excellent service to the travelers on the high way.
Downsizing: Eliminating the unprofitable products of the company from its product line
In the year 2000 M.S. Banga then chairman of Hindustan Unilever limited (HUL), used power branding strategy to improve the sales and productivity. He reduced HUL’s number of products from 110 to 35. Remember, now you won’t find vigil or Margo in the market. These products from HUL, removed from the market as they were unable to contribute to the bottom line.
2.2. 4. Coordination among functional strategies.
Organization’s strategies exist in three different levels. They are corporate level, business level and operation level. In the strategic plan, company brings the synergy between all the three levels. To make it more clearly to you, company’s marketing strategy are different from HR strategies but it should bring coordination between both to meet organization’s objectives.
Self Assessment Questions 1:
i. ------------ explains who its customers are, how it satisfies their needs and what type of products it offers.
ii. Growth share matrix is also known as---------------------
iii. Cash cow in BCG matrix represents
a. High market growth and high relative market share
b. High market growth and low relative market share
c. Low market growth and high relative market share
d. Low market growth and low relative market share
iv. Product market growth model was developed by------------------
v. A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets is known as----------------




2.3. Developing the marketing mix.
Marketing mix: The product, its price, promotion and distribution blended together to get favorable response from the customer.
This is also called as 4P’s of Marketing or Market assortment.

Figure 2.1
The marketing mix
Product
· Variety
· Quality
· Features
· Brand name
· Packaging
· Services
Promotion
· Advertising
· Sale promotion
· Public relation
· Publicity
· Personal selling
Place
· Channels
· Coverage
· Assortments
· Locations
· Inventory
· Transportation

Customers and
Intended positioning
Price
· List price
· Discounts
· Allowances
· Credit period
· Credit terms






























1. Product: It is a good, service, idea, place or person that offered to customer to satisfy his/her need. The attributes comprising product are variety, quality, warranty, design, packaging, and service
For example, Marico, a FMCG company offers hair oil in two brand names i.e. parachute and nihar. The brand nihar, offered in two types of packaging i.e. Sachets and bottles and offered in two qualities i.e. coconut oil and perfumed hair oil.
2. Price: the value at which customer is willing to purchase the product.
For example, BSNL offers prepaid service recharge coupons in Rs175, Rs335, Rs500, Rs 1000, Rs2000 and Rs 5000 denominations.
3. Place: Distribution of goods from the factory to the target customer. It includes distributors, stockiest and retailers. To illustrate, Zenith computers uses authorized distributor to sell laptops and desktops to the target customers.
4. Promotion: communicating product features and its uses to target customers through different Medias. For example, Bharati group promotes its cellular services AIRTEL through TV, Radio and news paper.
2.4. Planning, control and implementation.
2.4.1 Marketing planning:
Though strategic plan exists in the organization but it is very essential to have functional plans to coordinate departmental activities. For example, the marketing plan guides the sales and distribution activities of the organization. Therefore it is essential to know what the contents of a marketing plan are.
Contents of marketing plan
a. Executive summary: Brief summary of plan, which help busy executives to go through the points very quickly.
b. Analyzing the current market situation: The following factors should be answered in this section.
i. What is the intended market and market segment?
ii. What is the consumer buying behavior process for particular category of products?
iii. How conducive is the marketing environment to do the business?
iv. Whether company got right marketing mix for intended target customer?
v. Who are major competitors and what are their marketing strategies?
c. PEST analysis: In this section, the external environment of the company is analyzed to find opportunities and threats.( for detail see UNIT 3)
d. Objectives and issues: This part of the marketing plan should discuss marketing objectives that company would like to achieve in particular period and issues that may affect them.
e. Marketing strategy: This section should highlight on
i. Identifying the segmentation, target customer and positioning strategy
ii. 4P’s of marketing
f. Planned activities: the following factors should be discussed in this section
i. What are the programs that company plans to undertake?
ii. Who are responsible to monitor these programs?
iii. How much time it takes to complete the program?
iv. How much will it cost?
g. Marketing Budget
h. Control: Any program implemented need to be controlled to check its performance. Hence organization should take periodic auditing by a review committee. The control process for the plan should be discussed in this section.
2.4.2 Marketing Implementation and control.
Marketing implementation:
The process in which marketing strategies and plans are converted in to proper marketing actions to achieve the objectives.
Marketing implementation depends on the following factors:
1. Organization structure
2. Organization culture

Marketing control: The process of evaluating marketing performance and taking corrective actions .
Marketing control involves four steps they are
a. Set specific marketing goals.
b. Measure the marketing performance
c. Evaluate the market performance against objectives
d. Take corrective actions
Marketing control is divided into two parts. They are operation control and strategic control. Operation control involves assessing the current activities against annual plan and taking corrective actions. Strategic control is used to assess whether existing strategic plans of the company meets the opportunities exist for it. Marketing audit is used as a strategic control tool.
According to Philip Kotler “marketing audit is comprehensive, systematic, independent and periodic examination of a company’s environment, objectives, strategies and activities to determine problem areas and opportunities and to recommend a plan of action to improve the company’s marketing performance.
Characteristics of marketing audit:
1. Comprehensive.
2. Systematic
3. Independent
4. periodic
Components of marketing audit:
1. Marketing environment audit
2. Marketing strategy audit
3. Marketing organization audit
4. Marketing systems audit
5. Marketing productivity audit.
6. Marketing function audit
Self assessment questions2:
i. Example of strategic control is-----------------
ii. Marketing implementation depends on ------------------- and -----------------.
iii. Marketing mix is also known as--------------- and ---------------
iv. Which of the following does not belong to the marketing control?
a. Set specific marketing goals.
b.Measure the marketing performance
c. Evaluate the market performance against objectives
d. Understand the organization culture
v. PEST analysis helps to identify company’s ------------------ and -----------------------
Summary:
· Strategic planning process involves defining the company mission, formulating the objectives, designing an appropriate business portfolio and coordination among functional strategies.
· BCG and General electric models are used to analyze existing market situation of SBU.
· SBU’s growth and downsizing strategies are determined by Ansoff model of product- market growth matrix.
· Marketing mix or 4Ps of marketing is the assortment of product, place, price and promotion.
· Marketing implementation depends on organization structure and its culture.
· Marketing audit is used as a tool for control.

Terminal questions:
1. Explain how organization defines its mission..
2. Discuss the models used to analyze the existing business portfolio of the company.
3. Explain the Ansoff ‘s product market growth matrix
4. What is marketing mix? Explain its components.
5. Briefly explain the contents of marketing planning.



Answers to SAQ’s and TQ’s:
SAQ1:
i. Mission
ii. BCG
iii. C. Low market growth and high relative market share
iv. Igor Ansoff
v. Diversification.
SAQ2:
i. Marketing audit
ii. Organization stricture and organization culture
iii. 4P’s of marketing and market assortment.
iv. D. understanding the organization culture
v. Opportunities and threats.