Chapter 2: Company and Marketing Strategy -
Partnering to Build Customer Relationships
Companywide Strategic Planning: Defining Marketing’s Role
Strategic planning: process of developing and maintaining a strategic fit between the organization’s goals and
capabilities and its changing marketing opportunities
Companies start planning by defining purpose and mission
Headquarters decides what portfolio of businesses/products is best for company
Marketing planning occurs at business-unit, product, and market levels
Steps in strategic planning:
a) Corporate level:
i) Defining the company mission
ii) Setting company objectives and goals
iii) Designing the business portfolio
b) Business unit, product and market level
i) Planning marketing and other functional strategies
Defining a Market-Oriented Mission
What is our business? Who is our customer? What do consumers value? What should our business be?
o Questions are continuously raised in successful companies
Mission statement: statement of the organization’s purpose – what it wants to accomplish in the larger
environment
o Acts to guide people in organization
o Firms with better mission statements perform better
Myopic mission statements = in product or technology terms
o Ex: We make and sell furniture
Should be market-oriented = in terms of satisfying customer needs
o Ex: Canadian Tire “to offer products and services to meet everyday needs of Canadian families – today
and tomorrow”
o Ex: eBay “to provide a global trading platform where practically anyone can trade practically anything”
Should be meaningful, specific yet motivating – emphasize strengths in marketplace
Simultaneously inspirational, achievable ,and completely graspable
Make employees’ work feel significant, therefore not sales/profit-oriented
Setting Company Objectives and Goals
Turning broad mission into detailed supporting objectives
Ex: BASF (chemical company) turns broad mission into many objectives, include business and marketing ones
o Invests in R&D, improving profits, local partnerships, etc.
o Targeted Chinese farmers by forming relationships with Chinese research organizations
Designing the Business Portfolio
Business portfolio: collection of businesses and products that make up the company Best business portfolios fit company’s strengths and weaknesses to opportunities in environment
2 steps in planning a business portfolio:
o Analyze current business portfolio
o Shape future portfolio by developing strategies for growth and downsizing
Analyzing the Current Business Portfolio
Portfolio analysis: process by which management evaluates the products and businesses that make up the
company
o Strong resources into profitable businesses, and phase down/drop weaker ones
First step: identify key businesses that make up company called Strategic Business Units (SBUs)
o SBUs can be company divisions, product lines, or single products
o Assess attractiveness of SBUs, decide how much support each deserves
2 dimensions: attractiveness of SBU’s market/industry and strength of SBU’s position in that market/industry
Boston Consulting Group Approach (BCG) growth share matrix: portfolio-planning method that evaluates a
company’s strategic business units in terms of its market growth rate and relative market share. SBUs are
classified as stars, cash cows, question marks or dogs
o
o Stars: high-growth, high-share
Need heavy investments to finance rapid growth.
Eventually, growth slows down turn into cash cows
o Cash cows: low-growth, high-share
Need less investment to hold market share
Product lots of cash for company – supports other SBUs
o Questions marks: high-growth, low-share
Require a lot of cash to hold share
Management has to decide whether to build into stars or phase out
o Dogs: low-growth, low-share
Generate enough cash to maintain themselves
Don’t promise to be large source of cash
o SBUs are placed on matrix in circles – size of circle is proportional to SBUs dollar sales
o 4 strategies for deciding SBUs’ futures:
Build its share
Hold its share Harvest – milking short-term cash flow regardless of long-term effect
Divest – selling, phasing out and using resources elsewhere
o SBUs change their positions in matrix with time
Problems with matrix approaches:
o Difficult, time consuming, and costly to implement
o Hard to define SBUs and measure market share/growth
o Focus on current businesses, little advice for future planning
o Centralized approach – requires decentralized planning cross-functional teams
o Ex: Walt Disney Company in 1980s set up centralized strategic planning group which was successful
got too big, now has to manage in decentralized functions
Developing Strategies for Growth and Downsizing
Objective is to manage profitable growth
Marketing: identify, evaluate and select market opportunities
Product/market expansion grid: portfolio-planning tool for identifying company growth opportunities through
market penetration, market development, product development or diversification.
o Market penetration: strategy for company growth by increasing sales of current products to current
market segments without changing product
Ex: Tim Hortons routinely upgrades and refurbishes outlets, adds drive-thrus and creates outlets
in hospitals and retail stores bringing restaurant to the consumer
o Market development: strategy for company growth by identifying and developing new market
segments for current company products
Ex: Tim Hortons could target new demographic markets (ethnic, seniors), or geographic markets
(US)
o Product development: strategy for company growth by offering modified or new products to current
market segments
Ex: Tim Hortons introduced cappuccinos, bagels, sandwiches, etc.
o Diversification: strategy for company growth through starting up or acquiring businesses outside the
company’s current products and markets
Ex: Tim Hortons could add gas bars to complement drive-thrus (related), or develop sportswear
line (unrelated)
Downsizing: reducing business portfolio by eliminating products or business units that are not profitable or no
longer fit the company’s overall strategy.
o Reasons for downsizing: environment changes, lack experience, went in without proper research, new
product that didn’t turn out as expected, or mature market
Planning Marketing: Partnering to Build Customer Relationships
Marketing plays key role in company’s strategic planning by:
o Providing guiding philosophy/marketing concept about building profitable relationships with important
consume groups
o Provides inputs to strategic planners defining market opportunities
o Designed strategies for reaching objectives
Must work with partners to develop effective value chain that serves customer
Work with other companies to form a value delivery network Partnering with Other Company Departments
Value chain: series of departments that carry out value-creating activities to design, produce, market, deliver,
and support a firm’s products
o Departments must be well-coordinated
o Ex: Walmart – marketers learn what customers want and stock store shelves, prepare advertising and
merchandising programs. Also needs help from suppliers to get lowest cost. IT department provides
information about which products are selling. Operations people provide effective, low-cost
merchandise handling.
A company’s value chain is only as strong as its weakest link
o Ex: if suppliers can’t supply low prices, Walmart can’t offer low prices to its consumers
Marketing thinks in terms of consumer, but not every other department “thinking consumer” could mean
disrupting production schedules, increasing inventories, etc
Partnering with Others in the Marketing System
People go to McDonald’s because of the system itself, not just its products
o Its standards are called QSCV – quality, service, cleanliness and value
o “Others” in marketing system = franchisees, suppliers
Value delivery network: network made up of company, suppliers, distributors, and, ultimately, customers who
“partner” with each other to improve the performance of the entire system
o Ex: Toyota builds close relationships with suppliers
US competitors set annual cost targets and do anything to reach them - suppliers are hurt
In contrast, Toyota works with suppliers to meet expectations – can rely on suppliers to improve
quality, redu
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