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Appraising the Company Situation

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  1. Appraising the Company Situation

  2. Marketing Planning • Planning • the process of anticipating the future and determining courses of action necessary to achieve organizational objectives • Market Planning • implementation of planning activities related to marketing objectives • basis for all marketing strategies

  3. Market Planning • Relationship Marketing • org’s attempt to develop long-term, cost-effective links with individual customers, suppliers for mutual benefit • Strategic Planning • process of determining the org’s primary objectives • then adopting courses of action

  4. Fig. 3.01 T11 Strategic Planning, Implementation, and Control Process Planning Implementation Control Corporate planning Division planning Business planning Product planning Organizing Implementing Measuring results Diagnosing results Taking corrective action

  5. Fig. 3.05 T14 The Strategic-Planning Gap Desired sales Diversification growth Strategic- planning gap Integrative growth Intensive growth Sales Current portfolio 0 5 10 Time (years)

  6. Fig. 3.06 T15 Three Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid Current products New products 1. Market- penetration strategy 3. Product- development strategy Current markets 2. Market- development strategy (Diversification strategy) New markets

  7. Market Planning • Tactical Planning • implementation of activities specified in the strategic plan • Organizational Levels of Planning • Top management - strategic, long-range planning • Middle/supervisory management (divisional or departmental) - shorter-term planning • tactical • operational

  8. Steps in the Marketing Planning Process • Define the org’s mission • mission statements provide general guidelines for management actions • Determine org objectives • derived from mission statement • Assess org resources and evaluate risks/opportunities

  9. Org Resources, Risks, Opportunities • Org resources include: • production • marketing • finance • technology • employee capabilities

  10. Org Resources, Risks, Opportunities • Environment dimensions influencing risk/opportunity: • competitive • political-legal • economic • technological • social-cultural

  11. Org Resources, Risks, Opportunities • SWOT analysis • strengths • weaknesses • opportunities • threats • important strategic planning tool • compares internal org strengths/weaknesses • to external opportunities and threats

  12. Org Resources, Risks, Opportunities • Match internal strength and external opportunity = leverage • Internal weakness attacked by external environmental threat = problem • Org unable to capitalize on external opportunities because of internal limitations = constraints • External environmental threat to internal strength = vulnerability

  13. Org Resources, Risks, Opportunities • Strategic Window • limited periods during which key requirements of a market and particular competencies of the firm best fit together

  14. Fig. 3.08 1. Company develops a more powerful lighting system 2. Company develops a device for measuring the energy efficiency of any lighting system 3. Company develops a device for measuring illumination level 4. Company develops a software program to teach lighting fundamentals to TV studio personnel T16a Opportunity Matrix Success Probability Opportunities High Low 1 2 High Attractiveness 3 4 Low

  15. Fig. 3.08 1. Competitor develops a superior lighting system 2. Major prolonged economic depression 3. Higher costs 4. Legislation to reduce number of TV studio licenses T16b Threat Matrix Probability of Occurrence Threats High Low 1 2 High Seriousness 3 4 Low

  16. T17 Fig. 3.09 The McKinsey 7-S Framework Structure Strategy Systems Shared values Skills Style Staff

  17. Michael Porter’s Five Forces • Predict profitability of an industry • The five forces are: • Industry competitors • Power of buyers • Power of suppliers • Barriers to entry • Availability of substitutes

  18. Formulating a Marketing Strategy • Marketing Strategy • overall company program (including feedfack cycles) for selecting a particular target market, then satisfying consumers in that market through careful use of elements of: • marketing environmental factors • marketing mix factors • five forces factors • Marketing strategy - basis for operating plans necessary to accomplish objectives

  19. Fig. 3.13 T19 Marketing-Mix Strategy Promotion Mix Sales promotion Advertising Offer Mix Company ProductsServices Prices Sales force Distri- bution channels Target customers Public relations Direct mail and telemarketing

  20. Fig. 3.14 T20 Factors Influencing Company Marketing Strategy Marketing intermediaries Demographic/ economic environment Technological/ physical environment Marketing planning system Marketing information system Product Target customers Place Price Suppliers Publics Marketing organization and implementation Promotion Marketing organization system Political/ legal environment Social/ cultural environment Competitors

  21. Marketing Planning Tools • Strategic Business Units (SBUs) • Market Share/Market Growth Matrix • Market Attractiveness/Business Strength Matrix • Spreadsheet Analysis

  22. Strategic Business Units • Divisions within multiproduct companies composed of key businesses with specific managers, resources, objectives, competitors • SBUs possess: • a distinct mission • their own managers • identifiable customer segments • specific competitors • ability to be planned independently

  23. Market Share/Market Growth Matrix • 4-quadrant matrix • plots market share (% of market firmcontrols) against market growth potential of industry (changes during SBU lifecycle) • Quadrants defined as: • Question Marks • Stars • Cash Cows • Dogs

  24. Market Share/Market Growth Matrix • Question Marks - products with low market share in industries with high growth potential • convert to Star, or • Exit market • Stars - products with high market share in industries with high growth potential • make heavy investment because of sales/profit potential

  25. Market Share/Market Growth Matrix • Cash Cows - products with high market share in industries with low market growth potential • maintain status as long as possible • products produce strong, positive cash flows • Dogs - products with low market share in industries with low market growth potential • minimize position • withdraw

  26. Fig. 3.03 T12 The Boston Consulting Group’s Growth-Share Matrix 20%- 18%- 16%- 14%- 12%- 10%- 8%- 6%- 4%- 2%- 0 Stars Question marks 4 ? ? 1 3 ? ? 5 2 Market growth rate Dogs Cash cow 8 6 7 10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x Relative market share

  27. Market Attractiveness/Business Strength Matrix • A portfolio analysis technique that rates SBUs according to: • market attractiveness • the org’s strengths • Useful diagnostic tool for identifying SBUs with greatest and least potential

  28. Fig. 3.04 T13 Market Attractiveness: Competitive- Position Portfolio Classification BUSINESS STRENGTH Strong Medium Weak 5.00 Joints High Aerospace fittings Hydraulic pumps 3.67 MARKET ATTRACTIVENESS Clutches Medium Fuel pumps Flexible diaphragms 2.33 Low Relief valve 1.00 3.67 2.33 1.00 5.00 Invest/grow Selectivity/earnings Harvest/divest

  29. Sales Forcasting • Sales Forecast • estimate of firm’s sales or income for a specified future period • short-run - 1 year • longer run - 3-5-10 years • used for forecasting: • sales • production scheduling • financial planning • inventory planning and procurement • determination of personnel needs

  30. Sales Forecasting • Qualitative Forecasting Techniques • more subjective • based on opinions rather than exact historical data • jury of executive opinion • Delphi technique • sales force composite • survey of buyer intentions

  31. Qualitative Forecasting Techniques • Jury of Executive Opinion • combines and averages outlooks of top company executives (finance, production, marketing, purchasing) • Delphi Technique • seeks opinions of experts outside the firm • used to predict long-term issues

  32. Qualitative Forecasting Techniques • Sales Force Composite • technique based on belief that org members closest to marketplace (sales force) have better insight about short-term future sales • bottoms up approach • shortcomings include: • trend myopia • reporting selfishness

  33. Qualitative Forecasting Techniques • Survey of Buyer Intentions • uses: • mail-in questionnaires • telephone polls • personal interviews • to determine buying intentions of representative group of present and potential customers • weaknesses include: • limitations of survey media • buying intentions do not equal buyers

  34. Quantitative Forecasting Techniques • Employment of statistical computations (trend analysis based on past data, computer simulations, econometrics) to produce numerical forecasts • Market Tests • Trend Analysis • Exponential Smoothing

  35. Quantitative Forecasting Techniques • Market Tests • compare actual test markets, • gauge consumer response to: • new products • prices • promotional strategies • other marketing mix variables • advantage - provides realistic data for decision making • disadvantage - expensive, time-consuming

  36. Quantitative Forecasting Techniques • Trend Analysis • forecasting future sales by analyzing historical relationship between sales and time, based on assumption that: • factors that collectively determined past sales will continue to exert similar influence in future • advantage - predictive in steady times, industries • disadvantage - incorrect when market conditions/industries change

  37. Quantitative Forecasting Techniques • Exponential Smoothing • more sophisticated approach to trend analysis • assigns a weight factor to each year of sales data

  38. Sales Forecasting Steps • Top-Down Method • environmental forecast of general economic conditions • industry sales forecast • company forecast • product forecast • Bottoms-up (Grassroots) Method • alternative approach which begins with product forecasts

  39. Top-Down/Bottoms-Up Forecasting • Environmental Forecast • based on: • consumer spending/savings patterns • balance-of-trade surpluses/deficits • government expenditures • business investments • GDP • market value of all final products produced in a country in a given year

  40. Top-Down/Bottoms-Up Forecasting • Industry Sales Forecast • measuring relationship between the general economic forecast and other relevant environmental factors • Company and Product Forecasts • begins with analysis of previous years • review of past and present market shares • various product, regional, district managers are consulted about expected sales

  41. Top-Down/Bottoms Up Forecasting • New Product Sales Forecasting • no historical data available • frequently uses “substitute method” • forecasters carefully analyze sales of competing products that may be displaced by the new entry • can use test market results

  42. Top-Down/Bottoms Up Forecasting • Bottoms-Up Forecasting (Grassroots) • begins with sales estimates • provided by each salesperson • sales estimates combined at divisional, regional, and national levels by sales/marketing managers • become aggregate sales estimate for next time period