Chapter 2.docx

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2320A/B
Professor
Gail Robertson
Semester
Summer

Description
Chapter 2: Company and Marketing Strategy – Partnering to Build Customer Relationships COMPANYWIDE STRATEGIC PLANNING: DEFINING MARKETING’S ROLE  Strategic Planning: the process of developing and maintaining a strategic fit between the organizations goals and capabilities and its changing marketing opportunities o Sets the stage for the rest of the planning:  Annual & Long-range plans: the company’s current businesses and how to keep them going  Strategic plans: adapting the firm to take advantage of opportunities in its constantly changing environment o Steps in strategic planning: Defining a Market-Oriented Mission:  Mission Statement: a statement of the organizations purpose - what it wants to accomplish in the larger environment o Act as an “invisible hand”: guides people in the organization o Good statements = better organizational and financial performance o Should be:  Market oriented and defined in terms of satisfying basic customer needs  Meaningful and specific  Motivating – employees need to feel their work is significant and contributes to people’s lives  Emphasize the company’s strengths and distinct competencies in the marketplace  Workable guidelines o Should not be:  Stated as making more sales or profits  Myopic Setting Company Objectives and Goals:  Mission statements are turned into detailed supporting objectives for each level of management o Each management should be responsible for reaching the assigned objectives  Hierarchy of objectives: o Business objectives:  Build profitable customer relationships  Invest in research  Improve profits o Marketing objectives: marketing strategies & programs must be developed to support the marketing objectives and then defined in greater detail  Increase market share  Create local partnerships  Increase promotion Designing the Business Portfolio:  Business portfolio: the collection of business and products that make up the company o Ideal portfolio: best fits a firm’s strengths & weaknesses to opportunities in the environment o Two step process: 1. Analysis of current business portfolio to decide degree of investment each business receives  Portfolio analysis: evaluation of the products and businesses the makeup the company  Put strong resources into its more profitable businesses and phase or drop its weaker ones  Steps: i. Identify the strategic business units  Strategic Business Unit (SBU): a unit of the company that has a separate mission and objectives that can be planned separately from other company businesses  Company division  Product line within a division  Single product or brand ii. Assess the attractiveness of various SBUs iii. Decide how much support each deserves  Important to add and support SBUs that fit closely with the firm’s core philosophy & competencies  Boston Consulting Group Approach: best known portfolio-planning method o Growth-Share Matrix: a portfolio-planning method that evaluates a company’s strategic business units in term of its market growth rate and relative market share  Market growth rate: provides a measure of SBU’s market attractiveness  Relative market share: a measure of SBU’s strength in the market  Stars: high-growth & high-share  Cash Cows: low-growth, high-share  need heavy investment  Need less investment to hold market  growth will eventually slow and turn share into cash cows  Produce a lot of cash needed to pay the bills and support other SBUs that need investment  Question Marks: low-share & high-  Dogs: low-growth & low-share growth  Do not promise to be large sources of  Require lots of cash cash  Need to assess which question marks will turn into stars o Problems with matrix approaches:  Difficult to define SBU & measure market share/growth  Time consuming  Expensive to implement  Focus on current business but neglect future planning o Today strategic planning: decentralized approach through cross-function teams with division managers who are close to their markets (i.e. Walt-Disney) 2. Shape the future portfolio by developing strategies for growth and downsizing  One of four strategies can be pursued for each SBU: o Invest more to build share o Invest just enough to hold at the current level o Harvest short-term cash flow regardless of long-term effect o Divest by selling it or phasing it out to use the resources elsewhere  SBUs change their position in growth-share matrix as time passes o Question marks  star category, if successful o Star  cash cows o Cash cows  dog (at end of product life cycle)  Manage “profitable growth”: focus on finding potential SBUs for the future while making sure growth itself isn’t an objective – mainly marketing’s responsibility o Product/market expansion grid: a portfolio-planning tool for identifying company growth opportunities through market penetration, market developing production development and diversification  Market penetration: works to open a critical mass of outlets in a predefined geographic region and supports them with advertising (easiest task)  Goal: increase awareness & build brand equity  Market Development: identifying and developing new markets for its current products (i.e. new demographic market, geographic segments)  Product Development: offering modified or new products to current markets  Diversification: start-up or buy businesses outside of its current products/markets  Risk of diversifying too broadly into unfamiliar products or industries can lose market focus  Riskiest due to delegation of two variables  market & product o Downsizing: abandoning products or markets due to  Changing market environment  Firms grown too fast  Entered area where it lacks experience (resulting from lack of research or lack of superior value)  Dying SBUs PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS  Major functional departments (marketing, finance etc.) should work together to accomplish strategic objectives  Marketing’s key role in strategic planning: o Philosophy: strategy = building profitable customer relationships with important consumer groups o Input: Identify attractive market opportunities & asses firm’s potential to take advantage of them o Designs strategies for reaching objectives & carries them out profitably  Marketing is a leading partner in customer relations Partnering with Other Company Departments:  Value Chain: carries out value-creating, activities to design, produce, market, deliver, and support the firm’s products o Dependent on how well the various departments coordinate their activities o A company is only as strong as its weakest link o marketing’s objective (customers) may interfere with other departments’ objectives & strategies o Goal: get all departments to “think consumer” and develop a smoothly functioning value chain Partnering with Others in the Marketing System:  To create customer value: firms need to look into the value chains of its suppliers, distributors and ultimately consumers (McDonalds)  Value Delivery Network: made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve performance of the entire system (Toyota)  Competition takes place between the entire value delivery networks, no longer amongst individuals MARKETING STRATEGY AND THE MARKE
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