Chapter 2: Strategic Marketing Planning

Introduction

Both individuals and companies need to establish strategies in order to reach their goals. For corporations, “strategy is establishing the fundamental purposes and goals of a corporation and determined methods to allocate necessary resources in order to achieve these goals.”

Strategic Planning and Its Role In Marketing Definition of Strategic Planning

Strategic planning is a participatory and flexible planning process. It allows corporations to create a prudential vision, a mission, long term goals and objectives and fundamental principles. It includes strategies to follow in order to reach the established goals, performance criteria, allocation of the resources and developing measurable indicators to monitor and evaluate the operations. Actually we can also dedine strategic planning as “the road map which shows how to get from the current position to the desired position.” Strategic planning sets stages for the rest of the planning in a company.

For companies, which are especially in the process of institutionalisation, the most important starting point is considered as planning the strategy and setting a road-map for the future. Corporations usually make strategic, longterm and short term plans. Strategic plan involves a company’s adaptation in order to turn chances that appear in an ever-changing environment into opportunities. Longterm planning includes all corporation-wide topics such as growth, markets and product lines. Short-term planning is the responsibility of middle and lower-level management and generally involves a timeline of a year or less.

Strategic planning requires participation from both upperlevel management and employees who are responsible for planning.

Levels of Planning

The planning of marketing strategies for a company is formed by considering three different levels of planning. These are: strategic business plan, strategic marketing plan and annual marketing plan.

Strategic business (corporate) plan establishes the mission, vision, values and long-term goals of a company and formulates strategies to accomplish those goals. Afterwards, company-wide goals and strategies provide a framework to plan different functional areas such as production, finances, human resources, research and development and marketing.

In strategic marketing plan upper-level marketing managers put forward goals and strategies for a company and its marketing efforts. A strategic marketing plan has to be in coordination with the company-wide plan.

Annual marketing plan generally comprises of a specific period which is usually annual in nature and prepared through taking a strategic marketing plan as a baseline. A strategic business plan comprises of four stages. These are:

• Defining the values, mission and vision of the company
• Situation analysis
• Establishing organizational goals
• Selecting strategies to reach those goals.

Situation analysis which constitutes the second level has a vital role in planning. Since the strategic plan is affected by many internal and external factors facing the company, information about these factors must be gathered and analyzed. Establishing corporate goals acts as a guideline for a company to accomplish its mission. At the last level where a company establishes a course of destination, suitable strategies are selected to define how the company will reach where it wants to go. Corporate strategies involve the fulfillment of a company’s mission and comprehensive plans of action to accomplish its goals.

Strategic Business ( Corporate) Plan

Strategic business plan includes a the mission, vision, values, long-term goals of the company, and formulates strategies to accomplish those goals.

Values are principles and shared beliefs that unite customers, business, managers and staff. Values must be expressed in a clear and concise fashion.

Mission explains the existential purpose of businesses. Usually, the purpose of their existence is to accomplish a specific mission in society. The mission of a business explains its task which serve as guidelines to make decisions for all related matters involved in business. The mission statements should be clear, short and less than two paragraphs. Once the mission is defined, the business should openly state its areas of activity, customers and current performance. Businesses can make changes in their mission statements in response to the changes over the course of time.

While a mission states the fundamental reason of existence of a business, vision reflects the businesses’ future. Vision establishes where a company wants to be in the future over a specific period of time and how it wants to appear. The future intentions and priorities of a business must be clearly stated. By establishing where the business is today, and where it will be 5 years from now, business managers and staff can better focus on strategic planning activitites. After defining values, mission and vision, a company should conduct a situational analysis that examines the micro and macro environment of the company

Goals and Objectives

Goals represent the future status that a business intends to reach. These goals are accomplished in line with established strategies and mission. Establishing goals is the duty of upper-level management. Managers and the Board decide which goals a business should aim to reach.

Objectives are short-term stages which are necessary to achieve goals. In addition, objectives have clearer and measurable properties. Although goals can be intangible, objectives have to be absolutely tangible and numeral. Businesses put forward their understanding and comprehension through values, their commitment through a mission and the direction of their commitment through their objectives. Therefore, objectives are born from missions and values. Another characteristic of objectives is the fact that they must be convertible to strategies and approaches.

Using the S.M.A.R.T. philosophy helps an institution to set better objectives. S.M.A.R.T. is an acronym that is used to guide the development of measurable goals. S is for specific, M is measurablei A is attainable, R is relevant and T is time based.

Specific answers the questions “what is to be done?”,“how will you know it is done?”, and describes the results (end product) of the work to be done.

Measurable answers the question of “how will you know it meets expectations?”, and defines the objective using quantifiable term.

Achievable answers the questions of “can the person do it?”, “Can the measurable objective be achieved by the person?”, “Does he/she have the experience, knowledge or capability to fulfill the expectation “Can it be done giving the time frame, opportunity and resources?”

Relevant answers the questions of “should it be done?”, “why?” and “what will be the impact?”

Time-Oriented answers the question “when will it be done?” It refers to the fact that an objective has end points and check points built into it.

Business Portfolio Design

After businesses’ mission and pertinent goals are established by management, the next stage involves identifying strategic business unit(s) that constitute the business and to perform a portfolio analysis in order decide the allocation of resources to different business units. The design of a solid business portfolio should be able to bring out the strengths of the business within the frame of environmental factors and turn weaknesses into oppurtunities.

Business portfolio planning is a two-stage process. In the first stage, the business decides which business fields should receive more or less investments by analyzing the present or current business portfolio. In the second stage, growth or downsizing strategies need to be developed which will be effective in shaping the future portfolio.

Portfolio Analysis is a process by which management evaluates the products and businesses making up the company. The BCG matrix which takes after the abbreviation of the Boston Consulting Group, is essentially a chart which was developed by the firm’s employee Bruce Henderson in 1970 to assisst businesses in examining their business units and product lines. BCG Matrix asserts that each strategic business unit is a profit center on its own, and each plan created for each business unit will create the business’ plan at the highest level. In this approach, all strategic business units (SBU’s) of a business with diverse products and investments is grouped in a 2x2 matrix called growth-market share matrix. Whereas the market growth rate in vertical axis (sales increase rate) exists to measure the attractability of the market; relative market share in the horizontal axis shows the power of the business against competitors in the market. All the profits and cash acquired from each of the strategic business units are considered to be connected with the market share of the product and high profit margin is related to high market share as a principle.

Due to the fact that portfolio analysis has begun by setting up growthmarket share matrix within the BCG matrix, initially each SBU or product sales are is divided by sales of the biggest competitor in order to calculate market share. Subsequently, year over year, the market growth rate or the sales rate of a product is calculated. As the market growth rate exists in the vertical axis, relative market share exists in the horizontal axis growing from right to left. In the matrix, the strong cash flow products are on then left; and the weak cash flow or negative cash flow products are on the right.

SBU’s are characterized in four quadrants such as Stars, Question Marks, Cash Cows and Dogs.

Stars are the products, brands or divisions that have a high growth rate and high market share. In order to support their rapid growth, heavy investment/cash usag is required.

Cash cows are the SBUs which have low market growth rate and high market share. These established and successful business units require less investment to keep their market share and fall within the lower-left corner of the matrix.

Question Marks or Problem Children are business units with a high growth rate yet low market share. Which of the products in this group have potential to become a Star is an important decision for the management.

Dogs are the products, brands or divisions with both low growth rate and low market share.

After deciding the position of each of the SBU’s in the matrix, the future role of each SBU has to be set. Managers may follow one of the four strategies called “build”, “hold”, “harvest”, “divest” according to the SBU’s situation. If the company decides to improve the stuation of an SBU it can allocate more budget or it can invest more to build the share of that business unit. If the company is happy about the current situation of the SBU and wants to keep it as it is, the company may only invest to hold the unit at that level. Sometimes a SBU may provide a lot of cash flow to the company and in harvesting strategy the company may use the cash coming from this unit to finance other units. Of course sometimes the companies follow divesting strategy especially for the question marks or dogs by selling this unit to another company.

Matrices have limitations or drawbacks. These matrices are difficult to apply, have a highcost and take time to be prepared. When defining SBUs, various hardships are encountered while measuring market share and growth. In addition, these approaches classify the present SBUs of the company but do not provide much of an insight regarding future plans.

Growth-share matrix is a portfolioplanning method that evaluates a company’s strategic business units in terms of their marketgrowth rate and relative market share.

Developing Growth and Downsizing Strategies

Businesses employ a variety of methods in order to achieve growth. Igor Ansoff states that the best ways to achieve growth lies within the product market vector.

Product/market expansion grid (Ansoff Matrix) is a portfolio planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification. In the Ansoff Matrix, markets including the businesses’ manufactured products are evaluated. The decisions are made while considering the present and newly manufactured products as well as new markets that are going to be penetrated.

In market penetration strategy a business continues its operations with the present products in its present markets. Therefore, the business can profoundly penetrate the market, in other words increase the sales of its existing products in its current market.

There are three options for a business that wants to penetrate the market.

• Increase the usage ratios of present Customers
• Attracting the customers of the Competitors
• Converting people who don’t use the product into customers

Market Development Strategy: In the growth matrix, the second strategy is market development strategy. Companies using this startegy to grow, search for new target markets for their current products. Alternative ways of market development:

• Get into additional geographical markets
  • Regional expansion
  • National expansion
  • International expansion
• Entering different market sections:
  • Developing product lines for different market sections
  • Entering other distribution channels
  • Increasing promotions

Product Development Strategy: Companies that follow product development strategy focus on developing new products or making changes in existing products to turn them into new products. The alternative ways of product development strategy are as follows:

• Getting people to adapt to new products
• and changes made
• Maximize, minimize, re-arrange and merge
• Developing products with different
• features
• Developing products in new models and sizes.

In diversification strategy, business focuses on developing new products and selling these products to new markets. This strategy involves both product and market diversification. It focuses on growing the business by finding new industry branches which are alluring in terms of sales and profitability and becoming successful in new products and new markets.

Diversification is a strategy for a company’s growth through starting up or acquiring businesses outside the company’s current products and markets.

Downsizing strategy is employed as savings or partial/complete liquidation.24 The fundamental purpose of the downsizing strategy is increasing efficiency. Downsizing strategies are employed either by changing the business field or without making a change in the business area.

Planning is identifying goals and deciding which tasks that will be performed and the resources will be utilized for attaining these goals.

Strategic Marketing Plan

Situation Analysis

Situational analysis shows the current situation of the marketing program and involves analyzing of the external environmental factors, business functions out of marketing as well as company’s customers, marketing strategies used to satisfy them and marketing performances. SWOT analysis is a process which enables companies to improve their strong points and recognize weaknesses while seizing opportunities and eliminating threats coming from the environment. The term SWOT stands for Strength, Weakness, Opportunity and Threat.

Strengths: Superiority means that a business is stronger compared to its rivals by being more effective and efficient. Strengths are the things that the business can perform well, an important feature which brings talent and superiority, namely all the means that a business has.

Weaknesses: For a business, weakness represents less effective and efficient aspects and activities compared to its competitors.

Threats: Some environmental factors make up “threats” for a business. These threats are tendencies or developments which may worsen the situation of the company in the market.

Opportunities: The opportunities are used to identify untapped markets or emerging business opportunities that a company can leverage.

SWOT analysis must be customer focused in order to achieve maximum profitability. A strength only matters and becomes a power if it is beneficial for customer satisfaction. Strenghts and weaknesses are related to internal environment, opportunities and threats are related to external environment of companies.

Marketing Goals and Objectives

The second step in strategic marketing planning is establishing marketing goals and objectives. The goals and objectives identified by going through this process may act as a guidelines for strategies to be followed as well as standards to monitor the achievement. Therefore, marketing strategies and programs should be developed to support marketing goals and objectives.

Positioning and Differentation

The third stage of strategic marketing plan requires decision-making on two topics: (1) how the product will be positioned in the market, (2) how to differentiate the product from rival products. Positioning creates the product’s image among other products of the same sector as well as rival products. Differentation is thestate of being advantageous over rival products by being different and packed with a feature that brings advantage over others, when the product is compared to rivals. Differentation can be applied to all goods and services ranging from businesses to retailers.

Target Market and Market Demand

Target markets are market sections in which businesses focus their efforts. It is essential that marketing management picks specific parts or a specific section of the market instead of all the consumers in a market and then concentrate marketing strategies and efforts on these parts. Market segmentation is dividing a market into distinct groups of buyers who have different needs, characteristics, or behavior and who might require seperate products or marketing programs. Market demand is the demand of all possible customers for a particular product or service over a particular period of time in a particular market.

Marketing Mix

Marketing mix is a set of controllable tactical marketing tools- product, price, place and promotion- that a firm blends to produce desired response in target market. While programming the marketing mix strategies, it is important to be aware of the points mentioned below:

• Identification of tasks; the identification of specific tasks related to the marketing mix variables.
• Identification of responsibilities; deciding who will be a part of the marketing organization. Timing; the decision of when the specific tasks will be done. In other words, setting the order of consecutive tasks.
• Determination of costs and decision of budgeting: The costs related to the marketing mix components have to be established that may help with the budgeting decision. When programming the marketing mix variables, budgeting decision follows a two-stage process. Primarily, the total amount which will be allocated to the marketing department should be established. Followin, from that total marketing budget, the amount which will be allocated for the marketing mix components should be established.

Annual Marketing Plan

Annual marketing plans are detailed plans which are prepared for specific products or a specific organizational department. Annual marketing plans serve several purposes. These are:

• They illustrates the strategy and tactics which will be used to reach specific goals in the coming year. Therefore, they serve as a “how-to” guideline to the marketing managers and other marketing employees.
• They include what needs to be done during the application and evaluation stages that concern marketing program management.
• Additionally, the plan should include when each activity takes place, who will handle it and how much time and money will be spent for the effort.

Contents of Annual Marketing Plan

These are manager summary, situational analysis, goals, strategies, tactics, financial plans, time and evaluation procedures.

The Implementation and Evaluation of Plans

At the last stage of the marketing management process, there is the application of marketing programs, the evaluation of these programs and organization of marketing sources. Marketing managers generally have two fundamental tasks. One of these tasks is coordinating all marketing personnel within the marketing department. The other is working in harmony with department managers of the finance, production, research and development and purchasing departments in order to achieve coordination in business efforts and customer satisfaction.