Chapter 2. Strategic Planning for Competitive Advantage. Strategic Business Units (SBUs). Large companies may manage a number of very different businesses i.e., Strategic Business Units SBUs have distinct characteristics A distinct mission and a specific target market
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Chapter 2 Strategic Planningfor Competitive Advantage
Strategic Business Units (SBUs) • Large companies may manage a number of very different businesses i.e., Strategic Business Units • SBUs have distinct characteristics • A distinct mission and a specific target market • Control over its resources • Its own competitors • A single business or a collection of related businesses • Plans independent of the other SBUs in the total organization
Strategic Alternatives • There are several tools available to businesses or SBUs to use to manage the strategic direction of its portfolio of businesses • Ansoff’s Grid/Strategic Opportunity Matrix • Boston Consulting Group (BCG) Model • The General Electric Model
Strategic PlanningAnsoff’s Grid Product/ Market Expansion Grid
Innovation Matrix • As a company moves away from its core competencies it traverses a range of change and innovation • Core Innovation • Change that use existing assets to provide added convenience to existing customers and entice customers from other brands • Packaging changes – Tide Pods, 100 cal snacks • Adjacent Innovation – take company strengths into new markets i.e., Rogaine • Transformational Innovations – brand new products, markets and/or businesses i.e., GoPro video camera
BCG Matrix • Determines future cash contributions and cash requirements • Portfolio MatrixClassifies each SBU by present or forecast growth and market share • Relative Market Share • Ratio between the company’s share and the share of the largest competitor
Strategic PlanningBCG Matrix SBUs or Product Classifications
Allocation of Future Resources Harvest Used for all classifications but stars Lifebuoy, Lavoris No promotional investment, stable customer base (small) • Build • Taking a problem child and working towards being a star • Hold • Preserve the market share of a cash cow and fund ? NCIS to NCIS LA to NCIS New Orleans
General Electric Model Market Attractiveness High Medium Low Business Position
Situation Analysis Marketing Problems and Opportunities Marketing Objectives Control Plans Preparing a Marketing Plan Business Mission Statement Contingency Plans Marketing Strategies Marketing Action Plans Implementation Plans
Strategic Planning:Define the Business Mission How should we develop the firm’s capabilities? What business are we in? A Mission Statement Describes the Organization's Overall Purpose What customers should we serve? What products & benefits can we create for our customers?
Mission Statement for AT&T “We aspire to be the most admired and valuable company in the world. Our goal is to enrich our customers’ personal lives and to make their businesses more successful by bringing to market exciting and useful communications services, building shareowner value in the process.” (www.att.com/factbook/co_mission.html)
Evaluating the Marketing Environment Setting Marketing Objectives Evaluating the Marketing Environment and Setting Objectives Sales Objectives Product-Oriented Objectives Market Objectives
Evaluate the Environment: SWOT Analysis • SWOT Analysis • Assessment of Organization’s Internal & • External Environments Internal Environment Identify Strengths & Weaknesses in Firm’s Employees, Technologies, Facilities, Finances, etc. External Environment Identify Opportunities & Threats to a Firm From Consumers, Competitors, the Economy, etc.
Creating a Competitive Advantage • A competitive advantage is the ability of a firm to outperform the competition, providing customers with a benefit the competition can’t. How? • Step 1. Identifydistinctive competency(firm’s capability superior to that of its direct competition). • Cost Competitive Advantage, Product/Service Differentiation, Niche Competitive Advantage, Sustainable Competitive Advantage • Step 2. Turn a distinctive competency intoadifferential benefit(one that is important to customers).
Cost Competitive Advantage Low Cost Less Options? Product Design Reverse engineering less R&D Reengineering Rethinking and redesign (P&G Brand Management) Production Innovations CAD/CAM New Method of Service Delivery Online Newspapers • Experience Curves • Learning by doing, economies of scale • Efficient Labor • No Frills Goods and Services – SW Airlines • Government Subsidies – grants/loans
Competitive Advantages Product/Service Competitive Advantage Niche Competitive Advantage Target and serve one segment Smaller companies Limited resources Limited geographic coverage i.e., Blue Bell Ice Cream Rare items offered by no other competitor • Providing something unique and valuable to the consumer • Brand • Strong dealer network • Image • Product Reliability
Sustainable CompetitiveAdvantage Cannot be Copied Unique Position
Set Organizational Goals and Objectives • Objectives (Goals) are specific accomplishments or outcomes that an organization hopes to achieve by a specific time. • Direct outgrowth of the mission statement. • May relate to: • revenue/sales, profitability, ROI, or • innovation, customer relations, etc.
Marketing Objectives • Realistic – if no chance to meet does not motivate employees or investors • Measurable – quantifiable • Time Specific – Jan 1 – Dec 31, 2014 • Compared to a Benchmark – last year’s sales? A certain product line vs. total sales?
Developing Marketing Strategies Selecting a Target Market Marketing Strategies- Activities to Achieve the Marketing Objectives Developing the Marketing Mix
Target Market Strategy • While many segments exist in most markets, target market strategy allows you to best match your firm’s capabilities and strengths to one or more segments • Undifferentiated marketing • Differentiated marketing • Focused or Niche marketing
Product Strategies Developing Marketing Mix Programs Pricing Strategies Decisions about Product Design, Packaging, Branding, Positioning, and Features. Determines What Specific Price a Firm Charges for a Product. How Marketers Communicate Product Benefits and Features to Target Market. Promotion Strategies Outlines How, When, and Where the Firm Makes the Product Available to Customers. Distribution Strategies
Implementing the Marketing Plan Strategies are Put Into Action on a Day-to-Day Basis Through: • Marketing Budgets • Total amount of money • spent on marketing, and • Allocation of money for • each activity under the • marketer’s control, such • as for: • product development • promotional activities Organizing the Marketing Function • Functional Structure • Geographic Structure • Product Structure
Marketing Research Trend Analysis Marketing Audit Controlling the Marketing Plan Measuring Actual Performance, Comparing it to Planned Performance, and Making Necessary Changes in Plans and Implementation.