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MGMA01H3 (184)
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CH 2.doc

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Department
Management (MGM)
Course
MGMA01H3
Professor
Tarun Dewan
Semester
Fall

Description
CH 2: Company and Marketing Strategy: Partnering to Build Customer Relationships  Strategic Planning- The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.  Companies prepare annual plans, long-range plans, and strategic plans o Annual and long-range plans current business and how to keep them going o Strategic plan adapting the firm to take advantage of opportunities in its constantly changing environment.  Mission Statement- A statement of the organization’s purpose- what it wants to accomplish in the larger environment o Should be market oriented and defined in terms of satisfying basic customer needs o Emphasize the company’s strengths in the marketplace. o Profit are only a reward for creating value for customers o Translated in to a set of objectives for the current period marketing strategies and programs developed must support these.  Business Portfolio- The collection of businesses and products that make up the company. o Best one  fit with the company’s strengths and weaknesses to opportunities in the environment. o Business portfolio planning involves 2 steps: 1. Analyze its current business portfolio and decide which businesses should receive more, less, or no investment 2. Shape the future portfolio by developing strategies for growth and downsizing.  Portfolio Analysis- The process by which management evaluates the products and businesses that make up the company o Put strong resources into more profitable businesses and phase down or drop its weaker ones. o Step 1: • Identify the key business that make up the company (strategic business unit, SBUs) • SBU- company division, product line, single product or brand o Step 2: • Assess the attractiveness of its various SBUs and decides how much support each deserves. o Purpose: find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. o Evaluate SBU on 2 dimensions 1. attractiveness of the SBU’s market or industry 2. strength of the SBU’s position o Best-known portfolio-planning method was developed by Boston Consulting Group (leading management consulting firm) o Growth-share matrix- A 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 • Stars: high-growth, high-share businesses or products. Need heavy investments. Slow down to cash cows. • Cash cows: low-growth, high-share businesses or products. Established SBUS need less investment • Question marks: low-share business units in high-growth markets. Requires lots of cash. Think hard • Dogs: low-growth, low-share businesses or products. Generate enough cash to maintain themselves  4 Strategies that can be pursued for each SBU o Invest more in business unit to build its share o Invest just enough to hold the SBU’s share at the current level o Harvest, to gain short-term cash flow regardless of long-term effect o Divest by selling it or phasing it out  SBUs change positions over time and will die out so companies have to add new SBUs  Limitations: difficult, time consuming, costly to implement, difficult to classify, centralized o Focus on classifying current businesses, but provide little advice for future planning.  Becoming more decentralized cross-functional teams of divisional managers who are close to their markets  Company’s objective is to manage “profitable growth”  Product/market expansion grid- A portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.  Market Penetration- A strategy for company growth by increasing sales of current products to current market segments without changing the product. o Critical mass of outlets in a predefined geographic region, then support them with advertising o Increase awareness and building a strong brand equity franchise  Market Development- A strategy for company growth by identifying and developing new market segments for current company products. I.e. demographic and geographic  Product Development- A strategy for company growth by offering modified or new products to current market segments.  Diversification- A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets. o Companies that diversify too broadly into unfamiliar products or industries can lose their market focus.  Downsizing- Reducing the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy. o Reasons:  market environment might change  entered area where it lacks experience  enter international markets without proper research  product that do not offer superior customer value  products or business units simply age and die  Strategic Plan kinds of businesses to operate and the objectives of each (missions & goals)  Marketing key role in strategic planning 1. Guiding philosophy- marketing concept- suggests that company strategy should revolve around building profitable relationships with important consumer groups. 2. Inputs to strategic planners by helping to identify attractive mar
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