Chapter two

 Dr. Shahzad Ahmad Khan
 Email: shahzad.ahmad@riphah.edu.pk

Riphah School of Leadership
Faculty of Management Sciences
Riphah International University
Islamabad
CHAPTER :2
Developing Marketing Strategies and Plans

Developing Marketing
Strategies and Plans
A strategy is a theory about how to gain competitive
advantages. A good strategy is a strategy that
actually generates such advantages.
Strategic Management is the process of specifying
an organizations objectives, developing policies and
plans to achieve these objectives, and allocating
resources so as to implement the plans.

Strategic Goals and Plans
Strategic Goals
 Where the organization wants to be in the future
 Pertain to the organization as a whole
 Strategic Plans
 Action Steps used to attain strategic goals
 Blueprint that defines the organizational activities
and resource allocations
 Tends to be long term
1-3

Developing Marketing Strategies
and Plans
Part 1: Marketing Value and Customer Value
1) The value delivery process
2) The value chain
3) Core competencies
4) A holistic marketing location
5) Customer value
6) The central role of strategic planning
Part 2: Corporate and Division Strategic Planning
1) Defining the corporate mission
2) Defining the business
3) Assessing growth opportunities
4) Organization and organizational culture

Marketing and Customer Value
 Marketing involves satisfying consumers' needs and wants.
 The task of any business is to deliver customer value at a profit.
 In a hypercompetitive economy with increasingly rational buyers
faced with abundant choices, a company can win only by fine-
tuning the value delivery process and choosing, providing, and
communicating superior value.
 The traditional view of marketing is that the firm makes something
and then sells it. In this view, marketing takes place in the second
half of the process.
 The company knows what to make and the market will buy
enough units to produce profits. Companies that subscribe to this
view have the best chance of succeeding in economies marked
by goods shortages where consumers are not fussy about quality,
features, or style—for example, with basic staple goods in
developing markets. 1-5

 The traditional view of the business process, however,
will not work in economies where people face
abundant choices.
 The smart competitor must design and deliver offerings
for well-defined target markets.
 This belief is at the core of the new view of business
processes, which places marketing at the beginning of
planning.
1-6
The value delivery process

Nike
Critics of Nike often complain that its shoes cost almost
nothing to make yet cost the consumer so much.
True, the raw materials and manufacturing costs involved in
the making of a sneaker are relatively cheap, but
marketing the product to the consumer is expensive.
Materials, labor, shipping, equipment, import duties, and
suppliers' costs generally total less than $25 a pair.
Compensating its sales team, its distributors, its
administration, and its endorsers, as well as paying for
advertising and R&D, adds $15 or so to the total.
Nike sells its product to retailers to make a profit of $70. The
retailer therefore pays roughly $47 to put a pair of Nikes on
the shelf. When the retailer's overhead (typically $30
covering personnel, lease, and equipment) is factored in
along with • a $10 profit, the shoe costs the consumer
over $80.

The Japanese have further refined this view with the following
concepts:
 Zero customer feedback time. Customer feedback should be
collected continuously after purchase to learn how to improve the
product and its marketing.
 Zero product improvement time. The company should evaluate all
improvement ideas and introduce the most valued and feasible
improvements as soon as possible.
 Zero purchasing time. The company should receive the required
parts and supplies continuously through just-in-time arrangements
with suppliers. By lowering its inventories, the company can reduce
its costs.
 Zero setup time. The company should be able to manufacture any
of its products as soon as they are ordered, without facing high
setup time or costs.
 Zero defects. The products should be of high quality and free of
flaws.

2) The Value Chain
Michael Porter of Harvard has proposed the value chain
as a tool for identifying ways to create more customer
value.
According to this model, every firm has combination of
activities performed to design, produce, market, deliver,
and support its product.
The value chain identifies nine strategically relevant
activities that create value and cost in a specific
business.
These nine value-creating activities consist of five
primary activities and four support activities.
1-10

2) The Value Chain
The primary activities cover the sequence of:
1) bringing materials into the business (inbound
logistics),
2) converting them into final products
(operations),
3) shipping out final products (outbound
logistics),
4) marketing them (marketing and sales), and
5) servicing them (service).
1-11

1-12
2) The Value Chain
The support activities:
1) technology development,
2) human resource management,
3) firm infrastructure—are handled in certain
specialized departments, as well as
elsewhere.
4) Procurement and hiring

2) The Value Chain
Core Business Processes Include:
1) The market sensing process. Identifying the new market
or target market
2) The new offering realization process. All the activities
involved in researching, developing, and launching new high-
quality offerings quickly and within budget.
3) The customer acquisition process. All the activities
involved in defining target markets and prospecting for new
customers.
4) The customer relationship management process.
5) The fulfillment management process. All the activities
involved in receiving and approving orders, shipping the goods on
time, and collecting payment.
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Sony In May 2009, Sony announced it would cut its
number of suppliers in half over the
next two years (to 1,200), increasing the volume of
parts and materials from each and thus reducing
unit costs and overall procurement spending. Some
stock analysts received the news positively
as evidence of the company’s commitment to
restructuring. Others were less optimistic, such as
Mizuho Investors Securities analyst Nobuo Kurahashi:
“I’m not sure how effective this is because
it’s just operational streamlining and wouldn’t simply
push up earnings or bear fruit immediately.

3) Core Competencies
To be successful, a firm also needs to look for competitive
advantages beyond its own operations, into the value
chains of suppliers, distributors, and customers.
Value delivery network also called A supply Chain
To carry out its core business processes, a company needs
resources.
Many companies today have partnered with specific
suppliers and distributors to create a superior value
delivery network also called a supply chain.

3) Core Competencies
 To carry out its core business processes, a company needs
resources—labor power, materials, machines, information,
and energy.
 Traditionally, companies owned and controlled most of the
resources that entered their businesses, but this situation is
changing.
 Many companies today outsource less critical resources if
they can be obtained at better quality or lower cost.
 Frequently, outsourced resources include cleaning
services, landscaping, and auto fleet management.
 Kodak even turned over the management of its data
processing department to IBM.

4) What is Holistic Marketing?
Holistic marketing sees itself as integrating the value
exploration, value creation, and value delivery
activities with the purpose of building long-term,
mutually satisfying relationships and co prosperity
among key stakeholders.

4) What is Holistic Marketing?

Holistic Marketing Framework
The holistic marketing framework is designed to
address three key management questions:
1. Value exploration - How can a company identify
new value opportunities?
2. Value creation- flow can a company efficiently
create more promising new value offerings?
3. Value delivery- How can a company use its
capabilities and infrastructure to deliver the
new value offerings more efficiently?

A Holistic Marketing Orientation
And Customer Value

A Holistic Marketing Orientation And Customer Value
VALUE EXPLORATION
VALUE EXPLORATION Because value flows within and
across markets that are themselves dynamic and
competitive, companies need a well-defined strategy for
value exploration. Developing such a strategy requires an
understanding of the relationships and interactions among
three spaces:
(1) the customer's cognitive space;
(2) the company's competence space; and
(3) the collaborator's resource space. The customer's cognitive
space reflects existing and latent needs and includes
dimensions such as the need for participation, stability,
freedom, and change

A Holistic Marketing Orientation And Customer Value
VALUE CREATION
To exploit a value opportunity, the company needs value-
creation skills. Marketers need to:
1) identify new customer benefits from the customer's
view;
2) utilize core competencies from its business domain;
and
3) select and manage business partners from its
collaborative networks.
• To craft new customer benefits, marketers must
understand what the customer thinks about, wants,
does, and worries about.
• Marketers must also observe who customers admire,
who they interact with, and who influences them

VALUE DELIVERY
Delivering value often means substantial investment in
infrastructure and capabilities.
The company must become proficient at customer
relationship management, internal resource management,
and business partnership management.
Customer relationship management fallows the company
to discover who its customers are, how they behave, and
what they need or want.
It also enables the company to respond appropriately,
coherently, and quickly to different customer opportunities.

5) The Central Role of Strategic Planning
Companies should have the capabilities to:
1) understanding customer value,
2) creating customer value,
3) delivering customer value,
4) capturing customer value, and
5) sustaining customer value.
Developing Marketing Strategies and Plan

5) The Central Role of Strategic Planning
Only a handful of companies stand out as master marketers:
Procter & Gamble, Southwest Airlines, Nike, Disney, Nordstrom,
Wal-Mart, McDonald's, Marriott Hotels, and several Japanese
(Sony, Toyota, Canon) and European (IKEA, Club Med, Bang &
Olufsen, Electrolux, Nokia, Lego, Tesco) companies
These companies focus on the customer and are:
1)organized to respond effectively to changing customer needs.
2)have well-staffed marketing departments, and
3) all their other departments—manufacturing, finance, research and
development, personnel, purchasing—also accept the concept
that the customer is king.

1-27
2) Defining the business
3) Assessing growth opportunities
4) Organization and organizational culture

1-28
What is Strategic Planning?
 It is the managerial process that helps toIt is the managerial process that helps to
develop a strategic and viable fit betweendevelop a strategic and viable fit between
the firm’s objectives, skills, resourcesthe firm’s objectives, skills, resources
with the market opportunities available.with the market opportunities available.
 It helps the firm deliver its targetedIt helps the firm deliver its targeted
profits and growth through itsprofits and growth through its
businesses and products.businesses and products.

1-29
Strategic Planning calls for
Action in three key areas?
1.1. managing a company's businesses asmanaging a company's businesses as
an investment portfolio.an investment portfolio.
2.2. assessing each business's strength byassessing each business's strength by
considering the market's growth rateconsidering the market's growth rate
and the company's position and fit inand the company's position and fit in
that market.that market.
3.3. establishing a strategy For eachestablishing a strategy For each
business.business.

Understanding Marketing Management
To understand marketing management, we mustTo understand marketing management, we must
understand strategic planning.understand strategic planning.
Most large companies consist of four organizationalMost large companies consist of four organizational
levels:levels:
1)1) the corporate level,the corporate level,
2)2) the division level,the division level,
3)3) the business unit level, andthe business unit level, and
4)4) the product levelthe product level.

Understanding Marketing
Management
Corporate headquarters is responsible for designing a
corporate strategic plan to guide the whole enterprise; it
makes decisions on the amount of resources to allocate
to each division, as well as on which businesses to start
or eliminate.
Each division establishes a plan covering the allocation of
funds to each business unit within the division.
Each business unit develops a strategic plan to carry that
business unit into a profitable future.
Finally, each product level (product line, brand) within a
business unit develops a marketing plan for achieving its
objectives in its product market.

Part 2: Corporate and Division Strategic
Planning
A marketing plan is the central
instrument for directing and
coordinating the marketing effort.
It operates at a strategic and
tactical level.

1-33
planning, implementation, and control cycle

1-34
How to go about it?
 Defining the corporate missionDefining the corporate mission
 Establishing SBUsEstablishing SBUs
 Allocating resources for SBUsAllocating resources for SBUs
 Planning for new businessPlanning for new business

1-35
Corporate Mission
 This seeks to embody the entire goalsThis seeks to embody the entire goals
of the organization and the objective ofof the organization and the objective of
its existence.its existence.
 It seeks to provide a sense of purpose,It seeks to provide a sense of purpose,
direction and opportunitydirection and opportunity

Defining the Corporate Mission
According to Peter Drucker, it is time to ask
some fundamental questions. What is our
business? Who is the customer? What is of
value to the customer?
 What will our business be? What should
our business be? Successful companies
continuously raise these questions and
answer them thoughtfully and thoroughly.

1-37
5 questions that the firm must
ask itself
 What is our business?What is our business?
 Who is our customer?Who is our customer?
 What does our customer need?What does our customer need?
 What will our business be?What will our business be?
 What should our business be?What should our business be?

1-38
Organizations develop mission statements to
share with managers, employees, and (in many
cases) customers.
A clear, thoughtful mission statement provides
employees with a shared sense of purpose,
direction, and opportunity.
The statement guides geographically dispersed
employees to work independently and yet
collectively toward realizing the organization's
goals.

1-39
Mission statements are at their best when they
reflect a vision, an almost "impossible dream"
that provides a direction for the company for the
next 10 to 20 years.
Good mission Statements
For Example: Hashmi wanted to deliver mail
anywhere in the Pakistan before 10:30 A.M.
the next day, so he created TCS.

Rubbermaid Commercial Products, Inc.
“Our vision is to be the Global Market Share
Leader in each of the markets we serve. We
will earn this leadership position by
providing to our distributor and end-user
customers innovative, high-quality, cost-
effective and environmentally responsible
products. We will add value to these products
by providing legendary customer service
through our Uncompromising Commitment
to Customer Satisfaction.”

Motorola
“The purpose of Motorola is to honorably
serve the needs of the community by providing
products and services of superior quality at a
fair price to our customers; to do this so as to
earn an adequate profit which is required for
the total enterprise to grow; and by doing so,
provide the opportunity for our employees and
shareholders to achieve their personal
objectives.”

eBay
“We help people trade anything on earth.
We will continue to enhance the online
trading experiences of all—collectors,
dealers, small businesses, unique item
seekers, bargain hunters, opportunity
sellers, and browsers.”

Good Mission Statements
1. focus on a limited number of goals. The
statement, "We want to produce the highest-quality products, offer the most
service, achieve the widest distribution, and sell at the lowest prices" claims too
much.
2. stress the company's major policies and
values.
3. define the major competitive spheres
within which the company will operate

Major Competitive Spheres
 Industry
 Products
 Competence
 Market segment
 Vertical channels
 Geographic

Defining the Business
Companies often define their businesses in
terms of products:
They are in the "auto business" or the
"clothing business."

Defining the Business
A business must be viewed as a customer-
satisfying process, not a goods-producing
process.
Transportation is a need: the horse and
carriage, the automobile, the railroad, the
airline, and the truck are products that
meet that need.

Dimensions that Define a Business
 Customer groups
 Customer needs
 Technology

Table 2.2
Product Orientation vs. Market Orientation
Company Product Market
Missouri-Pacific
Railroad
We run a railroad We are a people-
and-goods mover
Xerox We make copying
equipment
We improve office
productivity
Standard Oil We sell gasoline We supply energy
Columbia Pictures We make movies We entertain
people

1-49
Strategic Business Units
The purpose of identifying the company's
strategic business units is to develop separate
strategies and assign appropriate funding.

1-50
SBU has three characteristics:
1. It is a single business or collection of related
businesses that can be planned separately
from the rest of the company.
2. It has its own set of competitors.
3.It has a manager who is responsible for
strategic planning and profit performance and
who controls most of the factors affecting profit.

1-51
Assessing Growth Opportunities
1.market-penetration strategy The
company first considers whether it could gain
more market share with its current products
in their current markets .
2.market-development strategy the
company considers whether it can find or
develop new markets for its current products.
3.product-development strategy the
company considers whether it can develop
new products of potential interest to its
current markets
4.diversification strategy the company will
also review opportunities to develop new
products for new markets.

27
Four market-product strategies: alternative ways to expand
sales revenues for Ben & Jerry’s

1-53
Business Unit Strategic Planning
 Strategic planning:Strategic planning:
 Developing a strategic fit betweenDeveloping a strategic fit between
 organizational goals and capabilities, andorganizational goals and capabilities, and
 changing marketing opportunitieschanging marketing opportunities

34
Ben & Jerry’s: a SWOT analysis to get it growing again

Business Portfolio Analysis
 Cash Cows – SBU’s that have a high
market share of a low sales growth
market.
 Stars – SBU’s that have a high market
share of a high sales growth market.
 Question marks – SBU’s that have a low
market share of a high sales growth
market.
 Dogs – SBU’s that have a low market
share of a low sales growth market.

What is Corporate Culture?
Corporate culture is the shared
experiences, stories, beliefs, and norms
that characterize an organization.

Goal Formulation
 Unit’s objectives must be hierarchical
 Objectives should be quantitative
 Goals should be realistic
 Objectives must be consistent
Once the company has performed a SWOT analysis, it can proceed to
develop specific goals for the planning period.

1) Porter’s Generic Strategies
 Overall cost leadership
 Differentiation
 Focus
Strategic Formulation
2) Strategic Alliances
1)Exporting
2)Licensing
3)Joint Venture
4)Direct Investment

Chapter two

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Chapter two