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Chapter-02

Market Oriented Strategic Planning

Q-1. Define strategic marketing planning. How strategic planning is carried out at the
corporate and division level of an organization?

Definition of Strategic MarketingPlanning :

“Marketing oriented strategic planning is the managerial process of developing and maintaining a
viable fit between the organizational objectives, skills and resources and its changing market
opportunities.”-- Philip Kotler& Kevin Lane Keller.

“Strategic marketing planning is the continuous process of developing and implementing marketing
strategies to achieve specific marketing objectives, which in turn lead to the achievement of an
organizations overall objective” --- Steven J. Skinner.

Fig: The strategic planning, implementation and control process

To understand marketing management, we must understand strategic planning. And to understand strategic
planning, we need to recognize that most large companies consist of four organizational levels:

i. The corporate level,

ii. Division level,
iii. Business unit level, and
iv. Product level.
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Q-2. What is mission statement? Why it is so important to a company and what are major
characteristics of a good mission statement?

 Defining the Corporate Mission:

Defining the corporate mission is the first step of strategic marketing planning.

“A mission statement is a statement of the organizations purpose what it wants to accomplish in the
larger environment.”---Philip Kotler&Gary Armstrong.

Organizations develop mission statements to share with manager, employees and (in many cases) Customers.

A clear, thoughtful mission statement provides employees with shared sense of purpose , direction and
opportunity.

Mission statement are at their best when they reflect vision, an almost “Impossible Dream” that provides a
direction for the company for the next 10 to 20 years.

Mission statement acts as an invisible hand and guides geographically dispersed employees to work
independently and yet collectively toward realizing the organizational goal.

Good missionstatements have five major characteristics;

First, they focus on a limited number of goals.

Second,mission statements stress the company’s major policies and values.
Third, they define the major competitive spheres within which the company will operate.
1. Industry scope
2.Products and application scope
3.Competence scope
4.Market-segmentation scope
5.Vertical scope
6.Geographical scope

Fourth, they take a long-term view, and

Finally,a good mission statement is as short,memorable and meaningful as possible.

Example:
Kodak has redefined itself from a film company to an image company. So that it could add digital
imaging.
1BM has redefined itself from a hardware and software manufacturer to a builder of networks.
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Q-3. What do you mean by strategic business unit (SBU)? Discuss the characteristics of an
SBU.
 Establishing strategic Business units:

Companies often define their businesses in terms of products;they are in the “auto business”or the “clothing
business”. But Levitt argued that market definitions of a business are superior to product definitions.
Companies must see their businesses,as a customer satisfaction process,not a goods production
process.Products are transient, but basic needs and customer groups endure forever.
A business can be defined in terms of three dimensions;

1. Customer groups.
2. Customer needs,and
3. Technology.

Large companies normally manage quite different businesses,each requiring its own strategy.

“Strategic business unit (SBU) is a single business or collection of related businesses that can be
planned separately from the rest of the company”
-Philip Kotler and Kevin Lane Keller.

“The strategic business unit is a division,product line in a division,or other profit center within a
parent company”
-Steven J.Skinner.

An SBU has three characteristics:

1. It is a single business,or 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 a manager responsible for strategic planning and profit performance,who controls most of the
factors affecting profit.

The purpose of identifying the company’s SUB is to develop separate strategies and assign
appropriate funding.

4. Assume that, you are the responsible executive of Akij food and Beverage co. Ltd. And assigned
to determine the appropriate position of its SBUs to allocate optimum resources on them. How can
you measure the SBUs positions by using BCG matrix?

The Boston Consulting Group Approach:

The BCG matrix, also known as the Boston growth-share matrix, is a tool to assess a company’s current
product portfolio. Based on this assessment, the Boston matrix helps in the long-term strategic planning of
the company’s portfolio, as it indicates where to invest, to discontinue or develop products. As the name
suggests, the BCG matrix has been developed by the Boston Consulting Group, and it has become a very
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popular tool to assess a company’s portfolio and derive strategic investment decisions. But how does the
BCG matrix work?

The Boston Consulting Group (BCG), a leading management consulting firm,developed and popularized the
growth-share matrix,shown in the following figure.

Different business units of a company are been plotted on the matrix and their position in the matrix
represent their current sizes and positions in the company.

Fig: Boston consulting Group’s growth share matrix.

The market growth rate on the vertical axis indicates the annual growth rate of the market in which the
business operates.In the above figure,it ranges from 0 percent to 20 percent. A market growth rate above 10
percent is considered high.

Relative market share, which is measured on the horizontal axis, refers to the SBU’s market share relative to
that of its largest competitor in the segment. It serves as a measure of the company’s strength in the relevant
market segment.

A relative market share of 0.1 means that the company’s sales volume is only 10 percent of the leader’s sales
volume. A relative share of 10 means that the company’s SBU is the leader and has 10 times the sales of the
next strongest competitor in that market.

The growth share matrix is divided into four cells, each indicating different types of business.

1. Question marks:

Question marks are business that operate in high growth markets but have low relative market sha res. Most
businesses start off as question marks as the company tries to enter a high-growth market in which there is
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already a market leader. A question mark requires a lot of cash because the company has to spend money on
plant, equipment and personnel to keep-up with the fast growing market, and because it wants to overtake the
leader. The term question mark is appropriate because the company has to think hard about whether to keep
proving money into this business.

2. Stars:

If the question mark business is successful, it becomes a star. A star is the market leader in a high-growth
market. A star does not necessarily produce a positive cash flow for the company. The company must spend
substantial funds to keep up with the high market growth and fight off competitors’ attacks.

3. Cash Cows:

When a market’s annual growth rate falls to less than 10 percent, the star becomes a cash cow, if it still has
the largest relative market share. A cash cow produces a lot of cash for the company. As the business is the
market leader, it enjoys economies of scale and higher profit margins.

4. Dogs:

Dogs are businesses that have weak market shares in low growth markets. They typically generate low
profits or losses.

5. Explain the strategies under the Boston Consulting Group (BCG) approach to determine
the objective, strategy and budget to assign to each strategic business unit.

The BCG matrix, also known as the Boston growth-share matrix, is a tool to assess a company’s current
product portfolio. Based on this assessment, the Boston matrix helps in the long-term strategic planning of
the company’s portfolio, as it indicates where to invest, to discontinue or develop products. As the name
suggests, the BCG matrix has been developed by the Boston Consulting Group, and it has become a very
popular tool to assess a company’s portfolio and derive strategic investment decisions. But how does the
BCG matrix work?

1. Question marks: Question marks are business that operate in high growth markets but have low relative
market shares. Most businesses start off as question marks as the company tries to enter a high-growth
market in which there is already a market leader.

2. Stars: If the question mark business is successful, it becomes a star. A star is the market leader in a high-
growth market.

3. Cash Cows: When a market’s annual growth rate falls to less than 10 percent, the star becomes a cash
cow, if it still has the largest relative market share.

4. Dogs: Dogs are businesses that have weak market shares in low growth markets. They typically generate
low profits or losses.
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After putting its various businesses in the growth share matrix a company must determine whether its
portfolio is healthy.

The company’s next task is to determine what objective, strategy, and budget to assign to each SBU. Four
strategies can be pursued;

1. Build:

Here the objective is to increase market share. Building is appropriate for questions marks whose market
shares must grow if they are to become stars.

2. Hold:

Here the objective is to preserve market shares. This strategy is appropriate for strong cash cows if they
are to continue yielding a large, positive cash flow.

3. Harvest:

Here the objective is to increase short-term cash flow regardless of long-terms effects. This strategy is
appropriate for weak cash cows whose future is dim and from which more cash flow is needed. Harvesting
can also be used with question marks and dogs.

4. Divest:

Here the objective is to sell or liquidate the business, because resources can be better used elsewhere.
This strategy is appropriate for dogs and question marks that are acting as a drag on the company’s profits.
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At time passes, SBUs change their position in the growth share matrix. Successful SBUs have a life
cycle. They start as question marks, become stars, then cash cows, and finally dogs. For this reason,
companies should examine not only their businesses’ current positions in the growth share matrix but
also their moving positions.

Q-6. Explain the General Electric model to determine the objective, strategy and budget to
assign to each strategic business unit.

The General Electric (GE) model:

An SBU’s appropriate objective cannot be determined solely by its position in the growth share matrix.

Under general electric mode, each business is rated in terms of two major dimensions.

i. Market attractiveness, and

ii. Business Strengths.

To measure these two dimensions, strategic planned must identify the factors underlying each dimension and
find a way to measure them and combine them into an index.

Market attractiveness varies with the market’s size, annual market growth rate, historical profit
margins, and so on.

Business strength varies with the company’s market share, share growth, product quality, and so on.

Business Strength

StrongMedium Week
Market Attractiveness

High

5.00
5.00 3.67 2.33 1.00

3.67
Invest/grow Selectivity/earnings
Medium

Harvest/divesto
2.33
Fig: Market attractiveness-
Competitive-position portfolio.
Low

1.00
The GE matrix is divided into nine cells, which in turn
fall into three zones.

The three cells in the upper left cornerindicate SBUS in which the company should invest or grow.

The diagonal cells stretching from lower left to the upper right indicate SBUs that are medium in overall
attractiveness. The company should pursue selectivity and manage for earning in these SBUs.
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The three cells in the lower right corner indicate SBUs that are low in overall attractiveness. The company
should give serious thought to harvesting or divesting these companies.

SBU Strategies:

Invest and grow:For the strong SBUs, positioned in the three cells in the upper left corner.

Maintain investment:For the medium SBUs, positioned in the diagonal cells stretching from lower left to
the upper right corner.

Harvest or divest:For the weak SBUs, positioned in the three cells in the lower right corner.

Q-7. What do you mean by strategic planning gap?How Ansoff’s intensive growth strategies
can help Walton (a leading domestic electronics company) to identify opportunities to
achieve further growth within its current business? Explain.

Strategic planning gap:

“Strategic planning gap is the gap between future desired sales and projected sales”

……………Philip Kotler and Kevin Lane Keller.

The lowestcurvesprojected the expected sales over the next five years from the company’s current business
portfolio. The highest curve describes the corporation’s desired sales over the next five years,

Three options are available for the companies, want to fill the strategic planning gap; namely;

1) Intensive growth opportunities.

(Identify opportunities to achieve further growth within the company’s current business)
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2) Integrative growth opportunities.

(Identify opportunities to build or acquire businesses that are related to the company’s current business)

3) Diversification growth opportunities

(The opportunities to attractive businessesthose are unrelated to the company’s current business).

 Intensive Growth:

Intensive growth is to identify opportunities to achieve further growth within current business.

Corporate management’s first course of action should be a review of whether any opportunities exist for
improving its existing businesses performance.

Ansoff has proposed a useful framework for detecting new intensive growth opportunities called a product
market expansion grid, which is shown by the following figure;

Fig: Ansoff’s product market expansion grid.

i. Market penetration strategy:

The company first considers whether it could gain more market share with its current products in their
current markets.

ii. Market development strategy:

Next the company considers whether it can find or develop new markets for its current products.

i. Product development strategy:

Then the company considers whether it can develop new products of potential interest to its current markets.
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ii. Diversification strategy:

The company will also review opportunities to develop new products for new markets.

 Integrative growth:

Integrative growth is to identify opportunities to build or acquired businesses that are related to current
businesses. After a business’s sales and profits can be increased through backward, forward or horizontal
integration within its industry.

i) Backward integration:

To acquire one or more of its suppliers to gain more control or generate more profit.

ii) Forward integration:

Acquire some wholesalers or retailers, especially when they are highly profitable.

iii)) Horizontal integration:

Acquire one or more competitors, provided that the government does not bar this move.

 Diversification growth:

Diversification growth is to identify opportunities to add attractive businesses that are unrelated to current
businesses.

Diversification growth makes sense, when good opportunities can be found outside the present businesses.

Three types of diversification are possible.

i) Concentric diversification strategy:

Concentric diversification strategy is to seek, new products that have technological and/ or marketing
synergies with existing product lines, even through the new products themselves may appeal to a different
group of customers.

ii) Horizontal diversification strategy:

Horizontal diversification strategy is to search for new products that could appeal to its current customers
even though the new products are technologically unrelated to its current product lines.

iii) Conglomerate diversification strategy:

Conglomerate diversification strategy seeks new businesses that have no relationship to the company’s
current technology, products or markets.
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 Downsizing and divesting older businesses:

Companies not only develop new businesses, but also carefully prove, harvest or divest tired old businesses
in order to release needed resources and reduce costs.

Q-8. How different possible diversification strategies can help marketers to fill up strategic
planning gap? Explain with appropriate examples.

Diversification growth is to identify opportunities to add attractive businesses that are unrelated to current
businesses.

Diversification growth makes sense, when good opportunities can be found outside the present businesses.

Three types of diversification are possible.

i) Concentric diversification strategy:

Concentric diversification strategy is to seek, new products that have technological and/ or marketing
synergies with existing product lines, even through the new products themselves may appeal to a different
group of customers.

ii) Horizontal diversification strategy:

Horizontal diversification strategy is to search for new products that could appeal to its current customers
even though the new products are technologically unrelated to its current product lines.

iii) Conglomerate diversification strategy:

Conglomerate diversification strategy seeks new businesses that have no relationship to the company’s
current technology, products or markets.

Q-9. Define strategic marketing planning. How strategic planning is carried out at the
business unit level?

 Business Unit Strategic Planning:

The Business unit Strategic Planning process consists of the steps shown in the following figure:

Shared
Values
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 The business mission:

Each business unit needs to define its specific mission within the broader company mission.

 SWOT analysis:

The overall evaluation of a company’s strengths, weaknesses, opportunities and threats is called SWOT
analysis. It is way of monitoring the external and internal Marketing environment.

External environment (opportunity and threat analysis):

A business unit must monitor key macro environmental forces and significant microenvironment
factors that affect its ability to earn profits. The business unit should set up a marketing intelligence system
to track treads and important developments and any related opportunities and threats.

Good marketing is the art of finding, developing and profiting from these opportunities.

A marketing opportunity is an area of buyer need and interest that a company has a
high probability of profitably satisfying.

An environment threat is a challenge posed by an unfavorable tread or development that would lead, in
the absence of defensive marketing action, to lower sales or profit.

Internal Environment (strength and weaknesses) analysis:

Each business needs to evaluate its internal strengths and weaknesses.

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 Goal formulation:

Once the company has performed a SWOT analysis, it can proceed to goal formulation, developing specific
goals for the planning period. Goals are objectives that are specific with respect to magnitude and time.

Most business units pursue a mix of objectives, including profitability, sales growth, market share
improvement, risk containment, innovation, and reputation. The business unit sets these objectives and then
manages by objectives (MBO).

For an MBO system to work, the unit’s objectives must meet four criteria:

1. They must be arranged hierarchically, from most to least important. The business unit’s key
objective for the period may be to increase the rate of return on investment. Managers can increase
profit by increasing revenue and reducing expenses. They can grow revenue, in turn, by increasing
market share and prices.

2. Objectives should be quantitative whenever possible. The objective “to increase the return on
investment (ROI)” is better stated as the goal “to increase ROI to 15 percent within two years.”

3. Goals should be realistic. Goals should arise from an analysis of the business unit’s opportunities
and strengths, not from wishful thinking.

4. Objectives must be consistent. It’s not possible to maximize sales and profits simultaneously.

Q-10. Assume that, you are the marketing executive of Nestle Bangladesh Ltd. and want to
achieve your organizational goal by designing an effective strategy. How Porter’s Generic
strategies can help you in this regard? Explain.

 Strategy formulation:

Goals indicate what business unit wants to achieve; strategy is a game plan for getting there.

Every business must design a strategy for achieving its goals.

Michael Porter has proposed three generic strategies that provide a good starting point forstrategic thinking:
overall cost leadership, differentiation, and focus.

• Overall cost leadership:Firms work to achieve the lowest production and distribution costs so they can
under price competitors and win market share. They need less skill in marketing. The problem is that other
firms will usually compete with still-lower costs and hurt the firm that rested its whole future on cost.
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• Differentiation:The business concentrates on achieving superior performance in an important customer

benefit area valued by a large part of the market. The firm seeking quality leadership, for example, must
make products with the best components, put them together expertly, inspect them carefully, and effectively
communicate their quality.

• Focus:The business focuses on one or more narrow market segments, gets to know them intimately, and
pursues either cost leadership or differentiation within the target segment.

According to Porter, firms directing the same strategy to the same target market constitute a strategic group

The firm that carries out that strategy best will make the most profits.

Porter defines strategy as “the creation of a unique and valuable position involving a different set of
activities.” A company can claim it has a strategy when it “performs different activities from rivals or
performs similar activities in different ways.”

Q-11. How McKinsey’s 7S framework helps marketers for successfully implementing their
strategies? Explain.

 Program Formulation and Implementations:

Ever a great marketing strategy can be sabotaged by poor implementation.

Once they have formulated marketing programs, marketers must estimate their costs.

Today’s businesses recognize that unless they nurture other stakeholders—customers, employees, suppliers,
distributors—they may never earn sufficient profits for the stockholders.

A dynamic relationship connects the stakeholder groups. A smart company creates a high level of employee
satisfaction, which leads to higher effort, which leads to higher-quality products and services, which creates
higher customer satisfaction

According to McKinsey and company, strategy is only one of several elements on successful business
practices; Strategy,Structure, System,Style,Skill,Staff, and Shared values.

The first three ---Strategy, Structure, and System are considered the “Hardware” to success next four
---Style, Skills, Staff, and Shared values are the “Software”.

Style ---Means that company employees share a common way of thinking and balancing.

Skills ---- Means employees have the skills needed to carry out the company‘s strategy.

Staffing --- Means the company has hired able people, trained them well and assigned them to the right jobs.

Shared value--- Means employees share the same guiding values.

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When these elements are present, companies are usually more successful at strategy implementation.

Q-12. Suppose that, you are the product manager of a multinational company and assigned
to develop a marketing plan for one of its product. How will your plan look like? What will it
contain? Explain.

 Product Planning: The nature and contents of a marketing plan.

Working within the plans set by the levels above them, product managers come up with a marketing plan for
individual products, lines, brands, channels, or customer groups. Each product level, whether product line or
brand, must develop a marketing plan for achieving its goals.

A marketing plan is a written document that summarizes what the marketer has harder about the
marketplace and indicates how the firm plans to reach its marketing objectives.

It contains tactical guidelines for the marketing programs and financial allocations over the planning period.

More limited in scope than a business plan, the marketing plan documents how the organization will achieve
its strategic objectives through specific marketing strategies and tactics, with the customer as the starting
point.

Although the exact length and layout varies from company to company, most marketing plans cover one year
in anywhere from 5 to 50 pages. Smaller businesses may create shorter or less formal marketing plans,
whereas corporations generally require highly structured documents. To guide implementation effectively,
every part of the plan must be described in considerable detail.
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Contents of marketing plan:

A marketing plan usually contains the following sections.

1. Executive summary and table of contents: The marketing plan should open with a table of contents
and brief summary for senior management of the main goals and recommendations.
2. Situation analysis:This section presents relevant background data on sales, costs, the market,
competitors, and the various forces in the macro environment. How do we define the market, how big
is it, and how fast is it growing? What are the relevant trends and critical issues? Firms will use all
this information to carry out a SWOT analysis.

3. Marketing strategy:Here the marketing manager defines the mission, marketing and financial
objectives, and needs the market offering is intended to satisfy as well as its competitive positioning.
All this requires inputs from other areas, such as purchasing, manufacturing, sales, finance, and
human resources.

4. Financial projections:Financial projections include a sales forecast, an expense forecast, and a

break-even analysis. On the revenue side is forecasted sales volume by month and product category,
and on the expense side the expected costs of marketing, broken down into finer categories. The
break-even analysis estimates how many units the firm must sell monthly (or how many years it will
take) to offset its monthly fixed costs and average per-unit variable costs.

5. Implementation and control:The last section outlines the controls for monitoring and adjusting
implementation of the plan. Typically, it spells out the goals and budget for each month or quarter, so
management can review each period’s results and take corrective action as needed. Some
organizations include contingency plans.

Evaluating a marketing plan:

Here are some questions to ask in evaluating a marketing plan:

1. Is the plan simple? Is it easy to understand and act on? Does it communicate its content clearly and
practically?

2. Is the plan specific? Are its objectives concrete and measurable? Does it include specific actions and
activities, each with specific dates of completion, specific persons responsible, and specific budgets?

3. Is the plan realistic? Are the sales goals, expense budgets, and milestone dates realistic? Has a frank
and honest self-critique been conducted to raise possible concerns and objections?

4. Is the plan complete? Does it include all the necessary elements? Does it have the right breadth and
depth?