Course Instructor: Junaid Ahmed Subject: Marketing Management

Chapter 2 Developing Marketing strategies and plans

The Value Chain

Michael Porter proposed Value Chain as a tool for identifying ways to create more customer value
according to this model every company is synthesis of activities perform to design, produce, and
market, deliver and support its product.

There are 9 strategically relevant activities 5 primary activities and 4 support activities

Primary activities

1. Inbound logistics, or bringing material into the business

2. Operations, or converting materials into the final products
3. Out bound logistics, shipping out final products
4. Marketing including sales
5. Services

Support activities

1. Procurement
2. Technology development
3. Human resources management
4. Firm infrastructure

Core business processes

 The market sensing process: gathering and acting upon the information about market
 The new offering realization process: Researching, developing and launching new high
quality offerings quickly and within budget.
 The customer acquisition process: define target markets and prospecting for new
customers
 The customer relation management: building deeper understanding, relationships and
offering to individual customer
 The fulfillment management process: receiving and approving orders, shipping goods on
time and collecting payments.

Core competencies

A core competency has three characteristics

1. It is source of competitive advantage

2. It has application in a wide variety of markets
3. It is difficult for competitors to imitate
Course Instructor: Junaid Ahmed Subject: Marketing Management

Central Role of Strategic planning

Marketers must prioritize planning in three key areas:

1. Managing the business as an investment portfolio.
2. Assessing the market growth rate and company’s position in the market.
3. Establishing a strategy. The company must develop a game plan for each of
its businesses to achieve long-term objectives.

Strategic Planning is done in 4 levels

(the strategic planning, implementation and

control process)

1. Corporate Strategic
Plan – It decides
what resources to
allocate to which
business and what
businesses to
diversify into
2. Division Plan – It decides how much funds to allocate to the SBUs.
3. SBU Plan –
4. Product Plan –

Corporate and Division Strategic Planning

All corporate undertake four planning activities:
1. Defining corporate mission
2. Establishing SBU
3. Assigning resources to each SBU
4. Planning new businesses, downsizing older ones

1. Defining the Corporate Mission –

A good mission statement provides employees with a shared sense of purpose,
direction and opportunity.
A good mission statement has 5 characteristics –
1. They focus on a limited number of goals
2. They stress on major policies and values the company wants to honor
3. They define the major competitive scope within which the company will
operate. Some of such scopes are: industry scope, products scope,
geographical scope, etc.
4. They take a long term view.
5. They are as short, memorable and meaningful as possible.

2. Establishing Strategic Business units (SBUs) –

Companies should define business units in terms of needs, not
Course Instructor: Junaid Ahmed Subject: Marketing Management

products. A business can be defined in terms of three dimensions –

Customer groups, Customer needs and
Technology. Characteristics of an SBU are –
1. It is a single business, or a collection of related businesses that can be planned separately
from the rest of the company
2. It has its own set of competitors
3. It has manager responsible for strategic planning and profit performance, who controls most
of factors affecting profits.

3. Assigning Resources to each SBU –

Once it has defined SBUs management must decide how to allocate corporate resources to each
SBU.

(BCG MATRIX)
Course Instructor: Junaid Ahmed Subject: Marketing Management

1. Question marks
2. Stars
3. Cash cows
4. Dogs
After plotting the matrix, the company can judge the health of its portfolio and can
take one of the following 4 actions to determine the budget to assign to each SBU–
1. Build – to increase market share, at the expense of short-term earnings, if
necessary. Done on dogs
2. Hold – to preserve market share. Done on cash cows
3. Harvest – to increase short term flow, regardless of long-term effect. This
generally diminishes the value of the SBU. Done so that the costs are reduced
at a faster rate than the fall in sales. Done on losing cash cows, dogs and
question marks
4. Divest – to liquidate the business. Done on question marks and dogs

4. Assessing Growth opportunities

Assessing growth opportunities includes planning new businesses, downsizing and
terminating older business, if there is Gap between future desired sales and projected sales,
corporate management will need to develop or acquire new businesses to fit in.

(The strategic Planning Gap)

Intensive Growth/Improve existing businesses

 Market-penetration strategy- Gain more market share with current products in current
markets.
 Market-development strategy- Find or develop new markets for current products.
 Product-development strategy- Develop new products of potential interest to current
markets.
 Diversification strategy - Develop new products for new markets .
Course Instructor: Junaid Ahmed Subject: Marketing Management

2. Integrative growth / Build or acquire businesses related to current businesses

 Backward integration-Example: acquire supplier.

 Forward integration-Example: acquire wholesaler or retailer.
 Horizontal integration- Example: acquire one or more competitors .

3. Diversification growth /Add attractive unrelated businesses

 Concentric strategy-Seek new products that have technological or marketing synergies

with existing product lines that appeal to a different group of customers.
 Horizontal strategy-Search for unrelated new products that appeal to current customers.
 Conglomerate strategy-Seek new businesses that have no relationship to current
technology, products, or markets

4. Downsizing businesses / Divesting older businesses

 Downsizing- Whereby a company reduces its size and operations to increase its efficiency
and profitability. Reduce employees and company activities.
 Terminating older businesses- Sell off old unprofitable businesses to reduce costs
Course Instructor: Junaid Ahmed Subject: Marketing Management

Business unit Strategic planning

The unit strategic planning for a business consists of the following steps-
1. Business Mission –
Each business unit needs to come up with a mission within the broader company mission.
2. SWOT analysis
This is further carried out into parts

Opportunity and threat analysis (External Environment analysis)

In general companies need to identify the major macroeconomic forces (demographic,
economic, technological, socio-cultural, etc.) and the major microeconomic forces (customers,
competitors, suppliers, distributors, etc.) that have an effect on its profitability. Further, they
need to trace trends in these factors then identify which can be their opportunities and
weaknesses. A marketing opportunity is an area of buyer need in which a company can perform
profitably.
A threat is a challenge posed by an unfavorable trend which, in absence of
marketing action would lead to fall in profitability. A company needs to chalk out
a strategy for dealing with these threats.
After the opportunity and threat analysis is done, a business’s overall
attractiveness can be identified.
Course Instructor: Junaid Ahmed Subject: Marketing Management

.
Strengths and Weaknesses analysis (Internal Environment Analysis)
A company’s internal strengths and weaknesses in various departments need to
be identified periodically.
3. Goal Formulation
Goals are developed to facilitate the management in planning, implementation
and control of achieving the targets.
Most businesses pursue a variety of objectives, which should ideally meet the
following criteria
- the objectives must be placed hierarchically, in decreasing order of
priorities
- they should be stated quantitatively
- the goals should be realistic
- the goals should be consistent with each other
4. Strategic formulation
Strategy is the roadmap for achieving the envisaged goals. Porter defined
strategy as “creation of a unique and valuable position involving different set of
activities” Strategy can be formulated into 3 generic types –
Overall cost leadership – here a business aims at delivering its products at the
lowest prices in the market and wins a large market share. Such businesses
require to be good at engineering, purchasing, manufacturing and distribution. A
disadvantage of this strategy is that some other company will eventually emerge
with still lower costs. Differentiation – here a business aims at achieving superior
performance in an important customer area valued by a large chunk of the
market. It could strive to be the service leader, the quality leader, the style leader
or technology leader.
Focus – Here a firm concentrates on one or more narrow market segments. It
first identifies such a segment and then pursues either cost leadership or
differentiation in them.

(Strategic Alliances)
Companies are discovering that to achieve leadership they need to form strategic
alliances with domestic or multinational companies that complement or leverage
their capabilities and resources.
The strategic alliances could be in the form of marketing alliances in the
following ways –
Course Instructor: Junaid Ahmed Subject: Marketing Management

1. Product or service alliance – one company licenses the other to produce its
product, or two companies jointly market their complementary product or a
new product.
2. Promotional alliance – one company agrees to carry the promotion for
another company’s product or service
3. Logistics alliance – one company offers logistic services to another
company’s product.
4. Pricing collaboration – one more companies join in a special pricing
collaboration.

5. Program formulation
After developing the principal strategies, companies must work out detailed
supporting programs for them. After formulating the marketing programs, the
costs and benefit scenario is calculated. Activity Based Costing should be applied
to each program to determine whether the benefits form it outdo the costs.
6. Implementation

For the implementation of strategy, McKinsey has come up with a 7-S

framework. The implementation part of this framework consists of
- Style : employees should share a common way of thinking and behaving
- Skills : these should be in consonance with the strategy
- Staff : includes hiring able people, training them and then assigning
them to the right jobs
- Shared values: employees should share the same guiding values.
7. Feedback and Control
A firm needs to constantly track and monitor new developments in the internal
and external environment. For when the marketplace changes, the company will
have to rethink the implementations, programs, strategies, or even objectives.
A company’s strategic fit with the environment will definitely erode, because the
market environment changes faster than the 7-S s.
Drucker says it is important to “do the right thing” than “doing things right”
Course Instructor: Junaid Ahmed
Subject: Marketing Management