Lesson 11 strategic planning business mission, concept of
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  • 1. Marketing Management Unit 2 Scanning Marketing Opportunities Chapter 4 - Strategic Planning Lesson 11 - Strategic planning: business mission, concept of strategic business units (SBUs)Hello students! the context of a firm’s broader strategic business plan.We Indians believe a lot in planning thanimplementing-right? Now a day’s organizations In most large corporations, strategic planningare no longer talking about just planning but they takes place at four levels.are talking about strategic planning so it’s very The Corporate Level- corporate headquar-important for you all to understand these ters is responsible for designing a corporateconcepts which will be introduced to you in this strategic plan to guide the whole enterprise;lesson. The concepts that would be discussed are it makes decisions on the amount of resourcesstrategic planning its process where we shall be to be allocated to each division, as well as ondiscussing the mission, how it is to be formulated which businesses to start or eliminate.and what role it plays in further planning in the The Division Level- each division establishesorganization and the meaning of Strategic a division plan covering the allocation of fundsbusiness units (SBUs) to each business unit within the division. For example the marketing division would formu-In this chapter, we will try and lean the following late strategies as to how the various unitsconcepts: within it would work.1. To define strategic planning and consider The Business Level- each business unit de- its importance for marketing velops a strategic plan to carry that business2. To look at the different kinds of strategic unit into a profitable future. Eg. The units in plans and the relationships between the marketing division would be Sales, Ad- marketing and the other functional areas vertising, Promotions, Public Relations, Mar- in an organization ket Intelligence, etc.3. To describe thoroughly each of the steps The Product Level- each product line, brand in the strategic planning process within the business unit develops a market-4. To show how a strategic marketing plan ing plan for achieving its objectives in its prod- may be devised and applied. uct market.1.1 Strategic Planning Now, can any of you try to guess what would beHow would you define a strategic business plan the steps in the strategic planning process?and a strategic marketing plan? The strategic planning process consists of theA strategic business plan describes the overall seven interrelated steps shown in Figure — anddirection an organization will pursue within its described below.environment and also guides the allocation of re-sources. It provides the logic that integrates the This process is applicable for small and largeperspectives of functional departments and op- firms, consumer and industrial firms, goods anderating units, and points them all in the same di- services-based firms, domestic and internationalrection. firms, and profit-oriented and nonprofit-oriented organizations.A strategic marketing plan outlines the actionsnecessary, which is responsible, when and where The Strategic Planning Processthey will be completed, and how they will be co- The Strategic Planning, Implementation and Con-ordinated. A marketing plan is carried out within trol Process16.101G © Copy Right : Rai University 73
  • 2. Marketing ManagementStep1 Defining organizational mission Can any of you give me the full form of SWOT?I hope you would understand the vision and mis- SWOT analysis is the analysis of internal and external environment of an organization. Internal factors include: Strengths S Weaknesses W External factors include: Opportunities O Threats Tsion concepts for organizations. Defining the or- The SWOT analysis is a continuous review of aganizational mission refers to a long-term com- firm’s market position.mitment to a type of business and a place in themarket. It “describes the scope of the firm and More details of the SWOT analysis are coveredits dominant emphasis and values,” based on a in the next lesson.firm’s history, current management preferences,resources, and distinctive competence, and on When you are planning strategically with anyenvironmental factors. company—online or offline—it is useful to com- plete an analysis that takes into account not onlyStep 2 Establishing SBUs your own business, but your competitor’s busi-Have you ever heard of the term SBU? How nesses and the current business environment aswould you try and define an SBU? What is the well. A SWOT is one such analysis.full form of SBU? Completing a SWOT analysis helps you identifyA strategic business unit (SBU) is a self-con- ways to minimize the effect of weaknesses intained division, product line, or product depart- your business while maximizing your strengths.ment in an organization with a specific marketfocus and a manager with complete responsibil- Ideally, you will match your strengths againstity for integrating all functions into a strategy. market opportunities that result from your com- petitors’ weaknesses or voids.Step 3 Setting marketing objectives Basic SWOTWhat do you think are the marketing objectives? You can develop a basic SWOT analysis in aMarketing objectives establish the firm’s goals brainstorming session with members of your com-for each SBU. Objectives are described in both pany, or by yourself if you are a one-person shop.quantitative terms (dollar sales, percentage profit To begin a basic SWOT analysis create a four-growth, and market share), and qualitative terms cell grid or four lists, one for each SWOT com-(image, level of innovativeness, and industry lead- ponent:ership role). Then, begin filling in the lists.Without clearly identified objectives, firms often Strengths - Think about what your companyfail. does well. What makes you stand out from your competitors? What advantages do youStep 4 Performing situation analyses have over other businesses?The situation analysis is also known as SWOT · Weaknesses - List the areas that are aAnalysis struggle. What do your customers complain about? What are the unmet needs of your74 © Copy Right : Rai University 16.101G
  • 3. Marketing Management sales force? of business, opportunities arise to gain the Opportunities - Try to uncover areas where defunct business—customers. Customers of your strengths are not being fully utilized. Are bpl.net were ready customers for a company there emerging trends that fit with your called Data Access which was operating company’s strengths? Is there a product/ser- under the NOW brand. vice area that you could do well in but are not yet competing? You can also enhance a SWOT analysis through Threats. Look both inside and outside of your surveys. You can learn more about your own as company for things that could damage your well as competitor sites and businesses. business. Internally, do you have financial, Areas you can research include development, or other problems? Externally, 1) Customer awareness, interest, trial, and us- are your competitors becoming stronger, are age levels there emerging trends that amplify one of your weaknesses, or do you see other threats to 2) Brand, site, and/or company image your company’s success? 3) Importance of different site or product at- tributes to your customersAdvanced SWOT 4) Product and/or site performance.A more in-depth SWOT analysis can help youbetter understand your company’s competitive Whether using a basic or more advanced ap-situation. One way to improve upon the basic proach to SWOT analysis, you are sure to comeSWOT is to include more detailed competitor in- away with newfound insights. Use these to in-formation in the analysis. crease your company’s effectiveness and as in- put into your business or marketing plan.You can note the internet-related activities suchas trade organization participation, search engine Step 5 Developing a marketinginclusion, and outside links to the sites. This will strategybetter help you spot opportunities for and threats A marketing strategy outlines the way in whichto your company. the marketing mix is used to attract and satisfy the target market. Thus a marketing strategyYou can also take a closer look at the business would develop from two components i.e. theenvironment. Often, opportunities arise as a re- marketing mix, and the target market.sult of a changing business environment. Marketing mix, as you would study in detail inSome examples are: this course, consists of mainly the 4 Ps of mar- A new trend develops for which demand keting. The 4 Ps are Product, Price, Promotion outstrips the supply of quality options. For and Place. For services business, three additional example, early on, the trend toward healthy 3 Ps become important. They are People, Pro- eating coupled with an insistence on good- cess and Physical evidence. Some texts also re- tasting food produced a shortage of accept- fer to other Ps like Packaging, and Public Rela- able natural food alternatives. Tetra pack tions because of their importance. fruit juices like Real and Onus captured on a A marketing strategy outlines the way in nutritional drink opportunity. which the marketing mix is used to attract A customer segment is becoming more pre- and satisfy the target market(s) and achieve dominant, but their specific needs are not an organization’s goals. being fully met by your competitors. The In- A strategy should be as explicit as possible. dian rural markets have been experiencing this phenomenon in the recent years for many In planning its marketing strategy, a firm product categories. should consider these key factors for each A customer, competitor, or supplier goes out SBU: of business or merges with another company. The firm’s mission, resources, abilities, and With the demise of many pure-play dot-coms, standing in the marketplace. examples of this abound. As each went out16.101G © Copy Right : Rai University 75
  • 4. Marketing Management The status of the firm’s industry and the Organizational mission refers to a long-term com- product groups in it. mitment to a type of business and a place in the The domestic and global competitive market. situation. 1. It can be expressed in terms of the customer The environmental situation. group(s) served, the goods and services of- The best opportunities for growth. fered, the functions performed, and/or the technologies utilized.A separate strategy is necessary for each SBU. 2. It is considered implicitly when a companyThere are four strategic planning approaches seeks a new customer group or abandons anwhich are described later in the chapter: existing one, introduces a new product cat- Product/Market Opportunity Matrix egory or deletes an old one, acquires another Boston Consulting Group Matrix company or sells one of its own businesses, General Electric Business Screen performs more (or fewer) marketing func- Porter Generic Strategy Model tions, or shifts its technological focus.Step 6 Implementing tactical plans Definition of the organizational mission refers to a long-term commitment to a type of businessHow do you think that strategy is different from and a place in the market. It “describes the scopetactics? of the firm and its dominant emphasis and val-Strategy is for the long-term whereas tactics is ues,” based on a firm’s history, current manage-for the short-term. ment preferences, resources, and distinctive com- petence, and on environmental factors.A tactical plan refers to the short-run actions (tac-tics) that a firm undertakes in implementing a Core Core Values Purposegiven marketing strategy. It has three basic ele-ments: Specific Tasks Time Frame Resource AllocationStep 7 Monitoring resultsAs you all will have understood by now, the finalstep is monitoring of results. It compares the ac- Visionary Goalstual performance of a firm, SBU, or productagainst the planned performance for a specifiedperiod. In practice, a strong mission statement can help in three main ways: It provides:Successful companies often employ the follow- An outline of how the marketing plan shoulding strategies to assure success: seek to fulfill the mission Continuous monitoring of performance A means of evaluating and screening the Regular use of proper strategy adjustments marketing plan Maintenance of a customer-oriented focus An incentive to implement the marketing plan Stressing positive written and oral communi- cation among employees and channel mem- The mission statement might be published in sev- bers. eral places (e.g. at the front of an annual report and accounts, on promotional material, in the board1.1 Business Mission room and on the factory floor).Can anyone describe the business mission? There is no standard format for a mission state-A mission statement is a formal description of ment. However, an effective mission statementthe mission of a business. should contain the following characteristics:76 © Copy Right : Rai University 16.101G
  • 5. Marketing Management Brief – it should be easy to understand and For example, these boundaries may be set in terms remember of geography, market, business method, product Flexible – it should be able to accommodate etc. The decisions management make about stra- change tegic scope define the nature of the business. Distinctive – it should make the business stand out (3) Policies and Standards of Behavior A mission needs to be translated into everydayImportance of mission actions. For example, if the business mission in- cludes delivering “outstanding customer service”,A strategic marketing plan starts with a clearly then policies and standards should be created anddefined business mission. monitored that test delivery.Mintzberg defines a mission as follows: These might include monitoring the speed with which telephone calls are answered in the sales“A mission describes the organization’s basic call center, the number of complaints receivedfunction in society, in terms of the products from customers, or the extent of positive cus-and services it produces for its customers”. tomer feedback via questionnaires.A clear business mission should have each of the (4) Values and Culturefollowing elements: The values of a business are the basic, often un- stated, beliefs of the people who work in the busi- ness. These would include: Business principles (e.g. social policy, com- mitments to customers) Loyalty and commitment (e.g. are employ- ees inspired to sacrifice their personal goals for the good of the business as a whole? And does the business demonstrate a high level of commitment and loyalty to its staff?) Guidance on expected behavior – a strong sense of mission helps create a work envi- ronment where there is a common purposeTaking each element of the above diagram in turn, Some examples of mission statementswhat should a good mission contain? Mission and Vision of Samsung(1) A Purpose ElectronicsWhy does the business exist? Is it to create wealth Vision of SAMSUNG Electronics is “Leading thefor shareholders? Does it exist to satisfy the Digital Convergence Revolution” and their mis-needs of all stakeholders (including employees, sion to carry out this vision is “Digital-eand society at large)? Company.There are two parts of being a “Digi- tal-e Company”, and the first is clearly about being(2) A Strategy and Strategic Scope “Digital” producing not just digital products, butA mission statement provides the commercial products that inspire digital integration across ourlogic for the business and so defines two things: entire company. The second part of being a “e” The products or services it offers (and there- is to use e-Processes connecting R&D, produc- fore its competitive position) tion, and marketing to customers, partners, and The competences through which it tries to the market-disciplined approach is the way we succeed and its method of competing bring value to every part of our supply chain, in- cluding products data to and customer relation-A business’ strategic scope defines the bound- ship through Enterprise Resource Planningaries of its operations. Management sets these. (ERP).16.101G © Copy Right : Rai University 77
  • 6. Marketing ManagementMission of Lands’ End 3. Control over its resourcesLands’ End, a leading international direct 4. Its own marketing strategymerchant of traditionally styled, casual clothing 5. Clear-cut competitionfor men, women, and children, as well as soft 6. Distinct differential advantagesluggage and products for the home, offersproducts through regular mailings of its primary Examples of SBUsand specialty catalogs and via the Internet. It is At General Electric (GE), every SBU mustknown for providing products of exceptional qual- have a unique purpose, identifiable competi-ity at prices representing honest value, enhanced tors, and all of its major functions within theby a commitment to excellence in customer ser- control of that SBU’s manager.vice. GE units that are not performing up to ex- pectations are constantly reviewed and, ifMission of Coca-Cola necessary, consolidated with other units, sold,Coca-Cola’s mission is to maximize shareholder or closed down.value over time. It creates value by a strategy At Hindustan Lever (HLL) also the sameguided by six beliefs: guiding principle for the SBUs would apply. Consumer demand drives everything it does. Some SBUs of HLL would be its foods busi- Brand Coca-Cola is the core of its business ness, detergents business and ice creams It will serve consumers a broad selection of business. Its portfolio of SBUs is constantly nonalcoholic ready-to-drink beverages reviewed according to present viability and It will do excellent job marketing expected future returns. It will think and act locally Example of SBUs by Goodyear It will lead as a model corporate citizen. Goodyear: Strategic Business UnitsHoliday break plc Goodyear strategic business units are organizedHoliday break is the UK’s leading operator of to meet customer requirements around the world.specialist holiday businesses. Group com-panies retain a distinctive identity whilstsharing expertise and exploiting op-portunities in areas of common interest.Our aim is to achieve continuingprofitable growth by developing our ex-isting businesses and market leadingbrands in the UK and European holidaymarkets and through acquisitions withinthe travel sector.Easy Internet cafeTo be the world’s leading Internet caféchain that is the cheapest way to getonline1.1 Concept of an SBUA Strategic Business Unit (SBU) hasbeen defined above in the strategic plan-ning process.Each of a firm’s Strategic Business Units(SBU) has six attributes:1. A specific target market2. Its own senior marketing executive78 © Copy Right : Rai University 16.101G
  • 7. Marketing ManagementOptimum Number of SBUs salespeople, product managers, advertising The proper number of SBUs depends on or- people, and other marketing areas. ganizational mission, resources, and the will- In the top-down approach, senior managers ingness of top management to delegate au- centrally direct planning. thority. A combination approach could be used if A small or specialized firm can have as few senior executives set overall goals and policy as one SBU; a diversified one, up to 100 or and marketing personnel form plans for car- more. rying out marketing activities.For example, A TOTAL QUALITY APPROACH TO WD-40 Company has 3 SBUs, STRATEGIC PLANNING GE has 23 SBUs 1. When devising strategic plans, any firm should Johnson & Johnson has 190+ SBUs. adopt a total quality perspective. Total qual- PepsiCo has spun off its restaurant SBUs to ity is a process- and output-related philoso- concentrate on carbonated beverages, snack phy, whereby a firm strives to fully satisfy foods, and non-carbonated beverages. customers in an effective and efficient man- ner.GOALS of SBUs 2. To flourish, a total quality program needs a1. A firm needs overall marketing objectives, customer focus; top management commit- as well as goals for each SBU. ment; an emphasis on continuous improve-2. Objectives should be stated in both quantita- ment; and support from employees, suppli- tive and qualitative terms. ers, and distribution intermediaries:3. As an example, these are the key goals for Process-related philosophy: Total quality is Paradigm Group (a Florida-based residential based on all the activities that create, develop, real-estate firm that owns, develops, and market, and deliver a good or service to the manages multiunit housing): customer. To expand outside Florida, become a force Output-related philosophy: Although process- in the Southeast, and then establish a national related activities give a good or service its presence. value, the consumer usually can only judge To take customer service to a new level. the total quality of the finished product that he or she purchases.4. Small firms’ goals are often less ambitious, 3. Customer satisfaction: To the consumer, to- but no less important. tal quality refers to how well a good or ser- vice performs.KINDS OF STRATEGIC PLANS 4. Effectiveness: To a marketer, this involves1. Strategic plans can be categorized by their how well various marketing activities are re- duration, scope, and method of development. ceived by consumers. They range from short run, specific, and de- 5. Efficiency: To a marketer, this involves the partment generated to long run, broad, and costs of various marketing activities. A firm management generated. Many firms, such as is efficient when it holds down costs, while Canon, rely on a combination. offering consumers the appropriate level of2. The scope of strategic plans also varies. quality. There may be separate marketing plans for 6. Customer focus: With a total quality view- each of a firm’s major products; a single, in- point, a firm views the consumer as a part- tegrated marketing plan encompassing all ner and seeks input from that partner. products; or a broad business plan with a 7. Top management commitment: Senior execu- section devoted to marketing. tives must be dedicated to making the pro-3. Strategic plans may be developed via a gram work. bottom-up, top-down, or combination 8. Continuous improvement: Today’s total qual- approach. ity will become tomorrow’s sub optimal quality. In bottom-up planning, there is input from 9. Employee support and involvement: Employ-16.101G © Copy Right : Rai University 79
  • 8. Marketing Management ees must “buy into” a total quality program in order for it to work.10. Supplier and distributor support and involve- ment: Due to their involvement in creating total quality, suppliers and resellers can greatly affect it. Points to remember80 © Copy Right : Rai University 16.101G
  • 9. Marketing Management16.101G © Copy Right : Rai University 81