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RSM250H1 (18)
Chapter 2

RSM250H1 Chapter 2 (Pages 42-50 and 53-58) Notes
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Department
Rotman Commerce
Course
RSM250H1
Professor
Mengze Shi
Semester
Fall

Description
RSM250H1 Textbook Notes Chapter 2 Pages 42 – 50  Strategic planning: the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. o SWOT  Steps in strategic planning: o Defining the company mission o Setting company objectives and goals o Designing the business portfolio  What businesses and products is right and how much support to be given to each. o Planning marketing and other functional strategies  Within each department (i.e. each business/product).  Mission statement: a statement of the organization’s purpose – what it wants to accomplish in the larger environment. o Guides people within an organization. o Should be market-oriented not myopically (product-) oriented.  I.e. not “We sell tools and home improvement items” but “We offer products and services to meet the everyday needs of Canadian families”. o Should focus on customers and the customer experience the company seeks to create.  Each manager should have objectives, relating to fulfilling the company’s mission statement, and be responsible for reaching them.  McDonald’s lost touch with it’s customer focused goal with it’s initial mission of “being the world’s best quick-service restaurant” so it created the Plan to Win which refocused the company on customers and detailed how it planned to be successful once again.  Business portfolio: the collection of businesses and products that make up the company. o The best one is one that best fits the company’s strengths and weaknesses to opportunities in the environment.  Two steps in business portfolio planning: o Analyze current business portfolio  Determine which businesses should receive more, less, or no investment.  Portfolio analysis: the process by which management evaluates the products and businesses that make up the company.  Strategic business units (SBU’s): key businesses that make up the company.  Can be an entire division, product line, or simply a product.  SBU’s are evaluated on two important dimensions:  Attractiveness of the SBU’s market or industry  Strength of the SBU’s position in that market or industry o Develop strategies for growth and downsizing  Growth allows a company to compete more effectively, satisfy their stakeholders, and attract top talent.  Objective must be “profitable growth” not growth itself.  Marketing needs to identify, evaluate, and select market opportunities and establish strategies for capturing them.  Product/market expansion grid: a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.  Growth-share matrix: a portfolio planning method that evaluates a company’s SBUs in terms of its market growth rate (attractiveness of market) and relative market share (strength in the market). o Four types of SBUs:  Stars  High-growth, high-share businesses or products.  Heavy investments needed to finance their rapid growth.  Growth will slow and it will become a cash cow.  Cash Cows  Low-growth, high-share businesses or products.  Less investment needed thus producing a lot of cash for the company to invest in other SBUs.  Question Marks  High-growth, low share businesses or products.  A lot of investment needed to hold market share.  Management need to carefully decide which ones to turn into stars and which to phase out.  Dogs  Low-growth, low-share businesses or products.  May produce enough cash to maintain themselves but are not large sources of cash.  Four different strategies a company may employ with an SBU: o Invest more in the business unit to build its share. o Invest just enough to hold the SBU’s share at the current level. o Harvest the SBU to milk its short-term cash flow regardless of the long-term effects. o Divest the
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