Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage s...
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Strategy

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Strategy

  1. 1. Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked. How a battle is fought is a matter of tactics: the terms and conditions that it is fought on and whether it should be fought at all is a matter of strategy, which is part of the four levels of warfare: political goals or grand strategy, strategy, operations, and tactics. Building on the work of many thinkers on the subject, one can define strategy as "a comprehensive way to try to pursue political ends, including the threat or actual use of force, in a dialectic of wills – there have to be at least two sides to a conflict. These sides interact, and thus a Strategy will rarely be successful if it shows no adaptability."<br />Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".<br />In other words, strategy is about:<br />* Where is the business trying to get to in the long-term (direction)* Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)* How can the business perform better than the competition in those markets? (advantage)?* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?* What external, environmental factors affect the businesses' ability to compete? (environment)?* What are the values and expectations of those who have power in and around the business? (stakeholders)<br />Strategy at Different Levels of a Business<br />Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it.<br />Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".<br />Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.<br />Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.<br />How Strategy is Managed - Strategic Management<br />In its broadest sense, strategic management is about taking "strategic decisions" - decisions that answer the questions above.<br />In practice, a thorough strategic management process has three main components, shown in the figure below:<br />Strategic Analysis<br />This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:<br />PEST Analysis - a technique for understanding the "environment" in which a business operatesScenario Planning - a technique that builds various plausible views of possible futures for a business Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industryMarket Segmentation - a technique which seeks to identify similarities and differences between groups of customers or usersDirectional Policy Matrix - a technique which summarises the competitive strength of a businesses operations in specific marketsCompetitor Analysis - a wide range of techniques and analysis that seeks to summarise a businesses' overall competitive positionCritical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeedSWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.<br />Strategic Choice<br />This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options.<br />Strategy Implementation<br />Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action.<br />Core competences<br />Introduction<br />Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required to undertake them. So the goal is for management to focus attention on competencies that really affect competitive advantage. <br />The Work of Hamel and Prahalad<br />The main ideas about Core Competencies were developed by C K Prahalad and G Hamel through a series of articles in the Harvard Business Review followed by a best-selling book - Competing for the Future. Their central idea was that over time companies may develop key areas of expertise which are distinctive to that company and critical to the company's long term growth.<br />'In the 1990s managers will be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible - indeed, they'll have to rethink the concept of the corporation it self.' C K Prahalad and G Hamel 1990<br />These areas of expertise may be in any area but are most likely to develop in the critical, central areas of the company where the most value is added to its products. <br />For example, for a manufacturer of electronic equipment, key areas of expertise could be in the design of the electronic components and circuits. For a ceramics manufacturer, they could be the routines and processes at the heart of the production process. For a software company the key skills may be in the overall simplicity and utility of the program for users or alternatively in the high quality of software code writing they have achieved. <br />Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.<br />Identifying Core Competencies<br />Prahalad and Hamel suggest three factors to help identify core competencies in any business:<br />What does the Core Competence Achieve?Comments / ExamplesProvides potential access to a wide variety of marketsThe key core competencies here are those that enable the creation of new products and services.Example: Why has Saga established such a strong leadership in supplying financial services (e.g. insurance) and holidays to the older generation?Core Competencies that enable Saga to enter apparently different markets:- Clear distinctive brand proposition that focuses solely on a closely-defined customer group- Leading direct marketing skills - database management; direct-mailing campaigns; call centre sales conversion - Skills in customer relationship managementMakes a significant contribution to the perceived customer benefits of the end productCore competencies are the skills that enable a business to deliver a fundamental customer benefit - in other words: what is it that causes customers to choose one product over another? To identify core competencies in a particular market, ask questions such as "why is the customer willing to pay more or less for one product or service than another?" "What is a customer actually paying for?Example: Why have Tesco been so successful in capturing leadership of the market for online grocery shopping? Core competencies that mean customers value the Tesco.com experience so highly:- Designing and implementing supply systems that effectively link existing shops with the Tesco.com web site- Ability to design and deliver a "customer interface" that personalises online shopping and makes it more efficient- Reliable and efficient delivery infrastructure (product picking, distribution, customer satisfaction handling)Difficult for competitors to imitateA core competence should be "competitively unique": In many industries, most skills can be considered a prerequisite for participation and do not provide any significant competitor differentiation. To qualify as "core", a competence should be something that other competitors wish they had within their own business.Example:Why does Dell have such a strong position in the personal computer market?Core competencies that are difficult for the competition to imitate:- Online customer "bespoking" of each computer built- Minimisation of working capital in the production process- High manufacturing and distribution quality - reliable products at competitive prices<br />A competence which is central to the business's operations but which is not exceptional in some way should not be considered as a core competence, as it will not differentiate the business from any other similar businesses. For example, a process which uses common computer components and is staffed by people with only basic training cannot be regarded as a core competence. Such a process is highly unlikely to generate a differentiated advantage over rival businesses. However it is possible to develop such a process into a core competence with suitable investment in equipment and training.<br />It follows from the concept of Core Competencies that resources that are standardised or easily available will not enable a business to achieve a competitive advantage over rivals.<br />Competitive Advantage - Definition<br />A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.<br />Competitive Strategies<br />Following on from his work analysing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of a businesses' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.<br />The four strategies are summarised in the figure below: <br /> <br />The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry.<br />Strategy - Differentiation<br />This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products.<br />Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen<br />Strategy - Cost Leadership<br />With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. If the achieved selling price can at least equal (or near)the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.<br />Examples of Cost Leadership: Nissan; Tesco; Dell Computers<br />Strategy - Differentiation Focus<br />In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants. <br />Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume Shop); or specialist holiday operator (e.g. Carrier)<br />Strategy - Cost Focus<br />Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".<br />Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products.<br />Strategy - mission<br />A strategic plan starts with a clearly defined business mission. <br />Mintzberg defines a mission as follows:<br />“A mission describes the organisation’s basic function in society, in terms of the products and services it produces for its customers”.<br />A clear business mission should have each of the following elements:<br />Taking each element of the above diagram in turn, what should a good mission contain?<br />(1) A Purpose<br />Why does the business exist? Is it to create wealth for shareholders? Does it exist to satisfy the needs of all stakeholders (including employees, and society at large?)<br />(2) A Strategy and Strategic Scope<br />A mission statement provides the commercial logic for the business and so defines two things:<br />- The products or services it offers (and therefore its competitive position)- The competences through which it tries to succeed and its method of competing<br />A business’ strategic scope defines the boundaries of its operations. These are set by management.<br />For example, these boundaries may be set in terms of geography, market, business method, product etc. The decisions management make about strategic scope define the nature of the business.<br />(3) Policies and Standards of Behaviour<br />A mission needs to be translated into everyday actions. For example, if the business mission includes delivering “outstanding customer service”, then policies and standards should be created and monitored that test delivery. <br />These might include monitoring the speed with which telephone calls are answered in the sales call centre, the number of complaints received from customers, or the extent of positive customer feedback via questionnaires.<br />(4) Values and Culture<br />The values of a business are the basic, often un-stated, beliefs of the people who work in the business. These would include:<br />• Business principles (e.g. social policy, commitments to customers) <br />• Loyalty and commitment (e.g. are employees 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?) <br />• Guidance on expected behaviour – a strong sense of mission helps create a work environment where there is a common purpose <br />What role does the mission statement play in marketing planning? <br />In practice, a strong mission statement can help in three main ways:<br />• It provides an outline of how the marketing plan should seek to fulfil the mission• It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?• It provides an incentive to implement the marketing plan <br />Major Marketing Activities and Decisions<br /><ul><li>Strategic PlanningSocial responsibilityResearch and AnalysisDeveloping competitive edgeMarketing Strategy decisions.Implementation and ControlDeveloping and maintaining Customer Relationships.The Strategic Planning ProcessIn today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.A simplified view of the strategic planning process is shown by the following diagram:The Strategic Planning ProcessMission &      Objectives        Environmental  ScanningStrategy    Formulation     Strategy Implementation        Evaluation      & ControlMission and ObjectivesThe mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.Environmental ScanThe environmental scan includes the following components:Internal analysis of the firmAnalysis of the firm's industry (task environment)External macroenvironment (PEST analysis)The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysisAn industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.Strategy FormulationGiven the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which the firm can choose.Strategy ImplementationThe selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives.The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.Evaluation & ControlThe implementation of the strategy must be monitored and adjustments made as needed.Evaluation and control consists of the following steps:Define parameters to be measuredDefine target values for those parametersPerform measurementsCompare measured results to the pre-defined standardMake necessary changesStrategy: Values and visionValues form the foundation of a business’ management style. Values provide the justification of behaviour and, therefore, exert significant influence on marketing decisions.Consider the following examples of the stated "visions" of well-known firmsKraft Foods: " We’ve set our sights on becoming a global snacks powerhouse and unrivaled portfolio of brands people love "Starbucks: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time BSkyB - "We believe in better. We strive to be the best for our customers and our people, and to make a positive contribution to life in the UK and Ireland. We’re always looking for ways to improve. That spirit has made us what we are today, and it will drive us to become what we want to be tomorrow.  Why are values important?Many Japanese businesses have used the value system to provide the motivation to make them global market leaders. They have created an obsession about winning that is communicated at all levels of the business that has enabled them to take market share from competitors that appeared to be unassailable.For example, at the start of the 1970’s Komatsu was less than one third the size of the market leader – Caterpillar – and relied on just one line of smaller bulldozers for most of its revenues. By the late 1980’s it had passed Caterpillar as the world leader in earth-moving equipment. It had also adopted an aggressive diversification strategy that led it into markets such as industrial robots and semiconductors.If “values” shape the behaviour of a business, what is meant by “vision”?To succeed in the long term, businesses need a vision of how they will change and improve in the future. The vision of the business gives it energy. It helps motivate employees. It helps set the direction of corporate and marketing strategy.What are the components of an effective business vision? Davidson identifies six requirements for success:- Provides future direction- Expresses a consumer benefit- Is realistic- Is motivating- Must be fully communicated- Consistently followed and measured </li></ul>Strategy: objectives<br />What is an objective? A good definition is:<br />"Objectives are statements of specific outcomes that are to be achieved"<br />As we shall see, objectives are set at various levels in a business - from the top (corporate) and through the layers underneath (functional and unit).<br />Objectives are often set in financial terms.  That means that the objective is expressed in terms of a financial outcome that is to be achieved. Those could include:<br />Desired sales or profit levels<br />Rates of growth<br />Amount of cash generated<br />Value of the business or dividends paid to shareholders<br />However, it is incorrect to say that objectives have to be expressed in money terms, or that they have to be able to be measured. Some objectives are hard to measure, but are often important.  For example, an objective to be:<br />An innovative player in the market<br />A leading in the quality of customer service<br />A popular way to look at objectives is to see them as part of a hierarchy of forward-looking terms which help set and shape the strategy of a business.  That hierarchy can be summarised as follows:<br />Corporate objectives<br />Corporate objectives are those that relate to the business as a whole.  They are usually set by the top management of the business and they provide the focus for setting more detailed objectives for the main functional activities of the business. <br />This can be illustrated as follows:<br />Corporate objectives tend to focus on the desired performance and results of the business. It is important that corporate objectives cover a range of key areas where the business wants to achieve results rather than focusing on a single objective.  Peter Drucker suggested that corporate objectives should cover eight key areas:<br />Area Examples Market standing Market share, customer satisfaction, product range Innovation New products, better processes, using technology Productivity Optimum use of resources, focus on core activities Physical & financial resources Factories, business locations, finance, supplies Profitability Level of profit, rates of return on investment Management Management structure; promotion & development Employees Organisational structure; employee relations Public responsibility Compliance with laws; social and ethical behaviour <br />Functional objectives<br />A well-established business will divide its activities into several business functions.  These traditionally include areas such as:<br />Finance & administration<br />Marketing & sales<br />Production & operations<br />Human resource management<br />Whilst each of these functional areas requires specialist expertise, their activities are not carried out in isolation from the rest of the business. It is vital in your studies to consider the ways in which the functional activities are connected to each other.However, it is common for each functional area to be set its own objectives, which should be consistent with the higher-level corporate objectives.So, functional objectives are:Set for each major business function and are designed to ensure that the corporate objectives are achievedConsider some example objectives for the marketing function. Examples of functional marketing objectives” might include:<br />We aim to build customer database of at least 250,000 households within the next 12 months<br />We aim to achieve a market share of 10%<br />We aim to achieve 75% customer awareness of our brand in our target markets <br />SMART objectives<br />Many business textbooks suggest that both corporate and functional objectives need to conform to a set of criteria referred to as an acronym SMART.The SMART criteria are summarised below:<br />SpecificThe objective should state exactly what is to be achieved.MeasurableAn objective should be capable of measurement – so that it is possible to determine whether (or how far) it has been achievedAchievableThe objective should be realistic given the circumstances in which it is set and the resources available to the business.RelevantObjectives should be relevant to the people responsible for achieving themTime BoundObjectives should be set with a time-frame in mind. These deadlines also need to be realistic<br /> strategic planning - the link with marketing<br />Introduction<br />Businesses that succeed do so by creating and keeping customers. They do this by providing better value for the customer than the competition. <br />Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”). <br />The main problem with this process is that the “environment” in which businesses operate is constantly changing. So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed. This process of adapting and decision-making is known as marketing planning.<br />Where does marketing planning fit in with the overall strategic planning of a business?<br />Strategic planning is concerned about the overall direction of the business. It is concerned with marketing, of course. But it also involves decision-making about production and operations, finance, human resource management and other business issues. <br />The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.<br />Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”. <br />Sometimes this is quite a straightforward task. For example, in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!). <br />However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products. How can such management keep control of marketing decision-making in such a complex situation? This calls for well-organised marketing planning.<br />What are the key issues that should be addressed in strategic and marketing planning?<br />The following questions lie at the heart of any marketing and strategic planning process:<br />• Where are we now?• How did we get there?• Where are we heading?• Where would we like to be?• How do we get there?• Are we on course?<br />Why is marketing planning essential?<br />Businesses operate in hostile and increasingly complex environment. The ability of a business to achieve profitable sales is impacted by dozens of environmental factors, many of which are inter-connected. It makes sense to try to bring some order to this chaos by understanding the commercial environment and bringing some strategic sense to the process of marketing products and services. <br />A marketing plan is useful to many people in a business. It can help to:<br />• Identify sources of competitive advantage• Gain commitment to a strategy• Get resources needed to invest in and build the business• Inform stakeholders in the business• Set objectives and strategies• Measure performance <br />MARKETING PLAN<br />A marketing plan may be part of an overall business plan.<br />Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.<br />Marketing process can be realized by the marketing mix. In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead.<br />To be most effective, the plan has to be formalized, usually in written form, as a formal "marketing plan." The essence of the process is that it moves from the general to the specific, from the vision to the mission to the goals to the corporate objectives of the organization, then down to the individual action plans for each part of the marketing program. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages, and is amended.<br />Marketing planning aims and objectives<br />Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lie the "corporate mission," which in turn provides the context for these corporate objectives. In a sales-oriented organization, the marketing planning function designs incentive pay plans to not only motivate and reward frontline staff fairly but also to align marketing activities with corporate mission.<br />This "corporate mission" can be thought of as a definition of what the organization is, of what it does: "Our business is ...". This definition should not be too narrow, or it will constrict the development of the organization; a too rigorous concentration on the view that "We are in the business of making meat-scales," as IBM was during the early 1900s, might have limited its subsequent development into other areas. On the other hand, it should not be too wide or it will become meaningless; "We want to make a profit" is not too helpful in developing specific plans.<br />Abell suggested that the definition should cover three dimensions: "customer groups" to be served, "customer needs" to be served, and "technologies" to be used. Thus, the definition of IBM's "corporate mission" in the 1940s might well have been: "We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology]."<br />Perhaps the most important factor in successful marketing is the "corporate vision." Surprisingly, it is largely neglected by marketing textbooks, although not by the popular exponents of corporate strategy — indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their "Superordinate Goals." "In Search of Excellence" said: "Nothing drives progress like the imagination. The idea precedes the deed." If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent and will be supported by its staff at all levels. In this context, all of IBM's marketing activities were underpinned by its philosophy of "customer service," a vision originally promoted by the charismatic Watson dynasty. The emphasis at this stage is on obtaining a complete and accurate picture.<br />A "traditional" - albeit product-based — format for a "brand reference book" (or, indeed, a "marketing facts book") was suggested by Godley more than three decades ago:<br />Financial data—Facts for this section will come from management accounting, costing and finance sections.<br />Product data—From production, research and development.<br />Sales and distribution data — Sales, packaging, distribution sections.<br />Advertising, sales promotion, merchandising data — Information from these departments.<br />Market data and miscellany — From market research, who would in most cases act as a source for this information. His sources of data, however, assume the resources of a very large organization. In most organizations they would be obtained from a much smaller set of people (and not a few of them would be generated by the marketing manager alone).<br />It is apparent that a marketing audit can be a complex process, but the aim is simple: "it is only to identify those existing (external and internal) factors which will have a significant impact on the future plans of the company." It is clear that the basic material to be input to the marketing audit should be comprehensive.Accordingly, the best approach is to accumulate this material continuously, as and when it becomes available; since this avoids the otherwise heavy workload involved in collecting it as part of the regular, typically annual, planning process itself — when time is usually at a premium.Even so, the first task of this annual process should be to check that the material held in the current facts book or facts files actually is comprehensive and accurate, and can form a sound basis for the marketing audit itself.The structure of the facts book will be designed to match the specific needs of the organization, but one simple format — suggested by Malcolm McDonald — may be applicable in many cases. This splits the material into three groups:<br />Review of the marketing environment. A study of the organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering developing trends, as well as the current situation.<br />Review of the detailed marketing activity. A study of the company's marketing mix; in terms of the 7 Ps - (see below)<br />Review of the marketing system. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies. The last of these is too frequently ignored. The marketing system itself needs to be regularly questioned, because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system, and `garbage in, garbage out' applies with a vengeance.<br />Portfolio planning. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio.<br />80:20 rule. To achieve the maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20 percent of products or services, and on the 20 percent of customers, that will account for 80 percent of the volume and 80 percent of the profit.<br />7 Ps: Product, Place, Price and Promotion, Physical Environment, People, Process. The 7 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.<br />It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins. This next stage in marketing planning is indeed the key to the whole marketing process.The "marketing objectives" state just where the company intends to be at some specific time in the future.James Quinn succinctly defined objectives in general as: Goals (or objectives) state what is to be achieved and when results are to be accomplished, but they do not state "how" the results are to be achieved. They typically relate to what products (or services) will be where in what markets (and must be realistically based on customer behavior in those markets). They are essentially about the match between those "products" and "markets." Objectives for pricing, distribution, advertising and so on are at a lower level, and should not be confused with marketing objectives. They are part of the marketing strategy needed to achieve marketing objectives. To be most effective, objectives should be capable of measurement and therefore "quantifiable." This measurement may be in terms of sales volume, money value, market share, percentage penetration of distribution outlets and so on. An example of such a measurable marketing objective might be "to enter the market with product Y and capture 10 percent of the market by value within one year." As it is quantified it can, within limits, be unequivocally monitored, and corrective action taken as necessary.<br />The marketing objectives must usually be based, above all, on the organization's financial objectives; converting these financial measurements into the related marketing measurements.He went on to explain his view of the role of "policies," with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur."Simplifying somewhat, marketing strategies can be seen as the means, or "game plan," by which marketing objectives will be achieved and, in the framework that we have chosen to use, are generally concerned with the 8 P's. Examples are:<br />Price — The amount of money needed to buy products<br />Product — The actual product<br />Promotion (advertising)- Getting the product known<br />Placement — Where the product is located<br />People — Represent the business<br />Physical environment — The ambiance, mood, or tone of the environment<br />Process — How do people obtain your product<br />Packaging — How the product will be protected<br />(Note: At GCSE the 4 Ps are Place, Promotion, Product and Price and the "secret" 5th P is Packaging, but which applies only to physical products, not services usually, and mostly those sold to individual consumers)<br />In principle, these strategies describe how the objectives will be achieved. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. However, they are not the only framework, and may divert attention from the real issues. The focus of the strategies must be the objectives to be achieved — not the process of planning itself. Only if it fits the needs of these objectives should you choose, as we have done, to use the framework of the 7 Ps.The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the major options chosen.<br />One aspect of strategy which is often overlooked is that of "timing." Exactly when it is the best time for each element of the strategy to be implemented is often critical. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is, therefore, an essential part of any plan; and should normally appear as a schedule of planned activities.Having completed this crucial stage of the planning process, you will need to re-check the feasibility of your objectives and strategies in terms of the market share, sales, costs, profits and so on which these demand in practice. As in the rest of the marketing discipline, you will need to employ judgment, experience, market research or anything else which helps you to look at your conclusions from all possible angles.<br />Detailed plans and programs<br />At this stage,you will need to develop your overall marketing strategies into detailed plans and program. Although these detailed plans may cover each of the 7 Ps (marketing mix), the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 7 Ps around each of its products. A market or geographically oriented company will concentrate on each market or geographical area. Each will base its plans upon the detailed needs of its customers, and on the strategies chosen to satisfy these needs. Brochures and Websites are used effectively.<br />Again, the most important element is, indeed, that of the detailed plans, which spell out exactly what programs and individual activities will take place over the period of the plan (usually over the next year). Without these specified — and preferably quantified — activities the plan cannot be monitored, even in terms of success in meeting its objectives.It is these programs and activities which will then constitute the "marketing" of the organization over the period. As a result, these detailed marketing programs are the most important, practical outcome of the whole planning process. These plans must therefore be:<br />Clear - They should be an unambiguous statement of 'exactly' what is to be done.<br />Quantified - The predicted outcome of each activity should be, as far as possible, quantified, so that its performance can be monitored.<br />Focused - The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. The 80:20 Rule applies in this context too.<br />Realistic - They should be achievable.<br />Agreed - Those who are to implement them should be committed to them, and agree that they are achievable. The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan. If the marketing plan is to work, every exception to it (throughout the year) must be questioned; and the lessons learnt, to be incorporated in the next year's .<br />Content of the marketing plan<br />A marketing plan for a small business typically includes Small Business Administration Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors<br />Description of the product or service, including special features<br />Marketing budget, including the advertising and promotional plan<br />Description of the business location, including advantages and disadvantages for marketing<br />Pricing strategy<br />Market Segmentation<br />Medium-sized and large organizations<br />The main contents of a marketing plan are: HYPERLINK "http://en.wikipedia.org/wiki/Marketing_plan" l "cite_note-Baker_08-3" [4]<br />Executive Summary<br />Situational Analysis<br />Opportunities / Issue Analysis - SWOT Analysis<br />Objectives<br />Strategy<br />Action Program (the operational marketing plan itself for the period under review)<br />Financial Forecast<br />Controls<br />In detail, a complete marketing plan typically includes: HYPERLINK "http://en.wikipedia.org/wiki/Marketing_plan" l "cite_note-Baker_08-3" [4]<br />Title page<br />Executive Summary<br />Current Situation - Macroenvironment <br />economy<br />legal<br />government<br />technology<br />ecological<br />sociocultural<br />supply chain<br />Current Situation - Market Analysis <br />market definition<br />market size<br />market segmentation<br />industry structure and strategic groupings<br />Porter 5 forces analysis<br />competition and market share<br />competitors' strengths and weaknesses<br />market trends<br />Current Situation — Consumer Analysis [5] <br />nature of the buying decision<br />participants<br />demographics<br />psychographics<br />buyer motivation and expectations<br />loyalty segments<br />Current Situation — Internal <br />company resources <br />financial<br />people<br />time<br />skills<br />objectives <br />mission statement and vision statement<br />corporate objectives<br />financial objective<br />marketing objectives<br />long term objectives<br />description of the basic business philosophy<br />corporate culture<br />Summary of Situation Analysis <br />external threats<br />external opportunities<br />internal strengths<br />internal weaknesses<br />Critical success factors in the industry<br />our sustainable competitive advantage<br />Marketing research <br />information requirements<br />research methodology<br />research results<br />Marketing Strategy - Product <br />product mix<br />product strengths and weaknesses <br />perceptual mapping<br />product life cycle management and new product development<br />Brand name, brand image, and brand equity<br />the augmented product<br />product portfolio analysis <br />B.C.G. Analysis<br />contribution margin analysis<br />G.E. Multi Factoral analysis<br />Quality Function Deployment<br />Marketing Strategy [6] - segmented marketing actions and market share objectives <br />by product,<br />by customer segment,<br />by geographical market,<br />by distribution channel.<br />Marketing Strategy - Price <br />pricing objectives<br />pricing method (e.g.: cost plus, demand based, or competitor indexing)<br />pricing strategy (e.g.: skimming, or penetration)<br />discounts and allowances<br />price elasticity and customer sensitivity<br />price zoning<br />break even analysis at various prices<br />Marketing Strategy - promotion <br />promotional goals<br />promotional mix<br />advertising reach, frequency, flights, theme, and media<br />sales force requirements, techniques, and management<br />sales promotion<br />publicity and public relations<br />electronic promotion (e.g.: Web, or telephone)<br />word of mouth marketing (buzz)<br />viral marketing<br />Marketing Strategy - Distribution <br />geographical coverage<br />distribution channels<br />physical distribution and logistics<br />electronic distribution<br />Implementation <br />personnel requirements <br />assign responsibilities<br />give incentives<br />training on selling methods<br />financial requirements<br />management information systems requirements<br />month-by-month agenda <br />PERT or critical path analysis<br />monitoring results and benchmarks<br />adjustment mechanism<br />contingencies (What if's)<br />Financial Summary <br />assumptions<br />pro-forma monthly income statement<br />contribution margin analysis<br />breakeven analysis<br />Monte Carlo method<br />ISI: Internet Strategic Intelligence<br />Scenarios <br />Prediction of Future Scenarios<br />Plan of Action for each Scenario<br />Appendix <br />pictures and specifications of the new product<br />results from research already completed<br />Measurement of progress<br />The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 percent by value of the market within two years) and into the corresponding strategies.<br />Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review — planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and — with attention focused on them so regularly — forces both the plans and their implementation to be realistic.<br />Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.<br />Tips for an effective marketing plan to give growth to the organization:<br />Plan ahead<br />Revise, then revise again<br />Be creative<br />Use common sense and Judgement<br />Think ahead to implementation<br />Update regularly<br />Communicate to others.<br />

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