2 Strategic Marketing Process

Marketing Management Unit 2

Sikkim Manipal University 18

Unit 2 Strategic Marketing Process

Structure

2.1 Introduction

2.2. Strategic Planning

2.3. SWOT analysis

2.4. Developing the Marketing mix

2.5. Planning, Control and Implementation.

2.6. Summary

2.7. Terminal Questions

2.8. Answers to SAQs and TQs

2.1. Introduction.

Marketing strategies and programs in the organizations are derived from the companywide strategic

planning. Thus, you have to understand how organizations develop their strategic plans. After

analyzing the strategic plan, you should be able to relate these plans’ role in guiding the marketers,

and their application in serving the customers with the help of company’s employees as well as

intermediaries.

Learning Objectives

After studying this chapter you should be able to:

1. Understand the marketing mix exists in the company

2. Describe the companywide strategic planning.

3. Discuss how to design marketing planning models

4. Prepare marketing planning for the company.



2.2. Strategic Planning

Strategic planning is the process of defining the company mission, setting the long term and short

term objectives, designing an appropriate business portfolio and coordinating functional strategies of

the company.

Looking at the definition, you will be able to identify four important factors of the strategic planning.

They are

1. Defining the company mission.

2. Formulating the objectives

3. Designing an appropriate business portfolio

4. Coordination at business levels.

Now, we will discuss the above points and their relevance to the marketing plans.

2.2.1. Defining the company mission:

An organization mission explains who its customers are, how it satisfies their needs and what type of

products it offers.

Let me explain this concept by taking a mission statement of the Trends in Vogue, a family beauty

saloons chain from Cavin Kare, a well known fast moving consumer goods (FMCG) company in

India. The mission statement is

1. “To provide the customer an unparalleled service experience

2. To provide the customer the largest range of "natural" products and services

3. To be the first to introduce subformats and valueadded services

4. To be the most preferred family beauty salon chain for customers, employees and

Alliance partners.

5. To provide consistent profits to all stakeholders”

Trends in Vogue mission statement analysis:

a. Who its customer is? Mission statement 4 states “family who are going to beauty



saloons” as their customers.

b. How it satisfy their needs? Mission statement 1 and 2 describes the needs as unparalleled

service experience and offering largest range of natural products and services

c. What type of products it offers? The company offers natural products in their beauty

saloons.

2.2.2: Formulating the objectives.

Mission statement provides a general view of the company’s products and its method of satisfying

the customer. Mission statement is once again divided into specific objectives which are stated in

writing, can be measured quantitatively and fixed for particular time. Objectives may be business

oriented or market oriented. They help marketers to develop strategies and programs. You will come

to know how organizations deduce their mission into different objectives form the following example

of Bharat Electronics Limited (BEL), a public sector enterprise in the electronic field.

Mission: To be a customer focused globally competitive company in defence electronics and in other chosen areas of professional electronics, through quality, technology and innovation.

Objectives:

1. To be a customer focused company providing stateoftheart products & solutions at competitive prices, meeting the demands of Quality, delivery & service.

2. To generate internal resources for profitable growth. 3. To attain technological leadership in defence electronics through inhouse R&D, partnership with

defence/research laboratories & Academic institutions.

4. To give thrust to exports. 5. To create a facilitating environment for people to realize their full potential through continuous

learning & team work.

6. To give value for money to customers & create wealth for shareholders. 7. To constantly benchmark company’s performance with bestinclass internationally. 8. To raise marketing abilities to global standards. 9. To strive for selfreliance through indigenization 2.2.3: Designing an appropriate business portfolio.



After setting mission and objectives, management will develop its business portfolio.

Business portfolio is the right mix of businesses that company operates and products that offers to

customers.

Portfolio analysis is the process by which company analyze its products and businesses.

Company develops their business portfolio in two steps

a. Analyze the existing business portfolio and decide which business should receive more, less or

no investment.

b. Developing the new business portfolio for future to meet growth opportunities and eliminating the

unprofitable portfolios.

Analyzing the existing business portfolio:

The current business portfolio of the company is analyzed by the businesses in which it operates. To

make it clearer, let me take an example of ITC group. The company operates in FMCG, hotels, paper

boards, specialty papers and packaging and agribusiness. These businesses are independent from

each other and have their mission and objectives separately. These subsidiaries of organizations are

called as Strategic business units (SBU)

Strategic business unit: The unit of the company that has separate mission and objectives and that

can be planned independently from other businesses.

Characteristics of SBU.

1. It may be brand, or a product line or separate division of the company.

2. It is having distinct mission and objectives.

3. It is managed by separate executive team.

Strategic planning models used in assessing the existing businesses:

1. BCG matrix ( Boston Consultancy Group)

2. GE matrix ( General electric)

BCG matrix: This model is used to identify company’s SBU’s position in the market. This model

identifies the SBU’s strength, weaknesses, opportunities and threats on the basis of market growth

rate and relative market share. This model is also known as growth share matrix.



Figure 2.1.

STAR

Question Mark

COW DOG

High Low

Relative Market Share

Axis components:

1. Market growth rate: The rate at which market is growing

2. Relative market share: Market share of the SBU divided by the market share of the largest

competitor.

Model components:

Star: This category represents the high market share and high industry growth. SBU’s in this

category require large investment to defend their position. SBU will turn as cash cow after some

time.

Cash cows: This category represents the low growth rate and high market share which is the

characteristic of SBU operating in mature industry. Here company needs less investment to hold their

position. Hence it generates more cash or in management terms we say cash cow can be milked.

Question Mark: This category represents high market growth and low market share. SBU’s in this

category has two options, either to invest heavily and bring them to star position or divest / liquidate

from that position.

Market g

rowth ra

te

Low

High



Dogs: SBU’s in this category generates less cash for the company as it operates in low growth and

low market share. Usually companies will not invest in this category and try to liquidate or divest.

BCG matrix for ITC

1. SBU: FMCG

Industry growth rate: 24% (AC Nielson retail audit report 2007)

Company growth rate: 50% (the Hindu business line 19 th January 2008)

Company’s market share : 8% (outlook business)

Largest competitor share: HUL: 54% (outlook business)

Relative market share= 0.14

2. SBU: Paper board

Industry growth rate: 7.2% (the Hindu business line 27 th May 2007)

Company growth rate: 11% (the Hindu business line 19 th January 2008)

Company’s market share: 55%

Largest competitors share: BILT 35%

ITC’s FMCG segment analysis shows that though it is market leader in some categories their overall

relative market share is 0.14. Company is in the high growth low relative market share area i.e.

question mark position. ITC should invest heavily to convert its SBU position into star.

ITC’s Paperboard industry is in low growth and high market share category i.e. in cash cow segment.

It should plan for investing the cash generated from this position into other businesses.

GE matrix:

1 Management can use the GE business matrix to classify SBU’s on the basis of two factors

a. Market attractiveness: Market size, entry barriers, competitors, technology and

profit margin are some factors used to analyze the market attractiveness.

b. Business position can be determined on the basis of market share, SBU size, R&D capabilities

and cost controls

Each cell in the model represented by the particular strategy namely, invest strategy, protect

strategy, harvest strategy and divest strategy



2 Invest strategy: In this position SBU

a. Should receive ample resources

b. Should support by well financed marketing efforts.

3 Protect strategy: SBU’s in this position should

a. Allocate the resources selectively.

b. Develop strategies which help in maintain its market position.

c. Generate cash needed by other SBU’s.

Business position

High Medium Low

Invest Invest Protect

Invest Protect Harvest

Protect Harvest Divest

Figure 2.2

4. Harvest strategy: SBUs should not receive substantial new resources and if required, sell them.

5. Divest strategy: SBUs which falls into this category should not receive any resources and sell i or shut it as early as possible.

Developing the new business portfolios

After analyzing the existing business of the company, let us discuss company’s future plans i.e.

growth or downsizing. Company adopts growth strategies to become more competitive in the market,

Market attractiveness

Low M

edium High



tap new opportunities and become preferred employer. Downsizing is used when the product or

market became unattractive to it. The Ansoff ProductMarket Growth Matrix is a marketing tool

created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard

Business Review (1957). The matrix allows marketers to consider ways to grow the business via

existing and/or new products, in existing and/or new markets.

Ansoffs model of product/ market expansion.

Figure 2.3.

a. Market penetration: A strategy used in increasing the sales of company’s existing products without

modifying it in the existing market.

Characteristics of market penetration.

1. Serve customer with existing products by opening new stores.

2. Increase the promotion activities to increase the consumption.

3. Improve the service offerings.

Café coffee day a reputed coffee chain in south India, started its operation in brigade road,

Bangalore, in the year 1996. It offers different varieties of the coffee to its existing customers. Today

it is having 100 stores in Bangalore.

b. Market development: In this strategy company identifies the new markets to sell their existing

products.

http://en.wikipedia.org/wiki/Igor_Ansoff



In case of market development company identifies and develops new markets for its existing

products

Café coffee day, enthused by the success of offering a worldclass coffee experience, has opened a

Café in Vienna, Austria and is planning to open other Cafes in the Middle East, Eastern Europe,

Eurasia, Egypt and South East Asia in the coming months.

(Source: www.cafécoffeeday.com)

c. Product development: In this strategy, company identifies new product and sells them existing

markets.

Café coffee day added quick bites and icecream in their menu to cater to the needs of customers.

d. Diversification: A strategy for company growth through starting up or acquiring businesses

outside the company’s current products and markets.

Café coffee day started offering tea and cold drinks in its highway café retail outlets. These highway

café outlets offer excellent service to the travelers on the high way.

Downsizing: Eliminating the unprofitable products of the company from its product line

In the year 2000 M.S. Banga then chairman of Hindustan Unilever limited (HUL), used power

branding strategy to improve the sales and productivity. He reduced HUL’s number of products from

110 to 35.

2.2. 4. Coordination at business levels

1. Organization’s strategies exist in three different levels. They are corporate level, business level and operation level.

2. Corporate level:

a. High risk and greater profit

b. Greater need for flexibility exists.

c. Long term planning



d. Choice of businesses, dividend policies, sources of longterm financing, and priorities for growth

3. Operation level strategies

a. Implement the overall strategy formulated at the corporate and business levels

b. Involve actionoriented and operational issues

c. Relatively short range and low risk

d. Modest costs: depend upon available resources

e. Relatively concrete and quantifiable

4. Business level strategies

a. Acts as a bridge between decisions at the corporate and functional levels

b. Less costly, risky, and potentially profitable than corporatelevel decisions

c. More costly, risky, and potentially profitable than functionallevel decisions

d. Include decisions on plant location, marketing segmentation, and distribution

In the strategic plan, company brings the synergy between all the three levels. To make it more

clearer, company’s marketing strategy are different from HR strategies but it should bring

coordination between both to meet organization’s objectives. Company should bring the coordination

between its growth plans and segmentation then only the operation strategy works well.

1.3. SWOT analysis

S W O T represents strengths, weaknesses, opportunities and threats. SWOT analysis helps

company to implement its strategies by leveraging strengths, overcoming from weaknesses, tapping

the opportunities and minimizing the threats

1) Strengths:

Following are the list of strengths that company should have



i. Valuable competencies or knowhow

ii. Valuable physical assets

iii. Valuable human assets

iv. Valuable organizational assets

v. Valuable intangible assets

vi. Important competitive capabilities

2) Weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage.

Resource weaknesses relate to inferior or unproven skills, expertise, or intellectual capital and

Lack of important physical, organizational, or intangible assets.

3) Opportunities: Opportunities are those which match with its financial and organizational

resources, can generate profits for long term and become strength in future.

4) Identifying External Threats

i. Improved technology

ii. Improved products by competitors

iii. Dumping of materials

iv. Unfavorable political situation

v. Potential of a hostile takeover

vi. Change in the demography

SWOT helps marketer to understand the current position of the company. It also helps to leverage its

strengths to improve the performance and tap the opportunity that exists. Weaknesses and threats

analysis helps company to overcome from them and become more agile.

Self Assessment Questions 1:



1. explains who its customers are, how it satisfies their needs and what type of products it offers.

2. Growth share matrix is also known as 3. Cash cow in BCG matrix represents 4. High market growth and high relative market share 5. High market growth and low relative market share 6. Low market growth and high relative market share 7. Low market growth and low relative market share 8. Product market growth model was developed by 9. A strategy for company growth through starting up or acquiring businesses outside the it’s

current products and markets is known as

1.4. Developing the marketing mix.

Marketing mix: The product, its price, promotion and distribution blended together to get favorable

response from the customer.

This is also called as 4P’s of Marketing or Market assortment.

1. Product: It is a good, service, idea, place or person that offered to customer to satisfy his/her

need. The attributes of product are variety, quality, warranty, design, packaging, and service

For example, Marico, a FMCG company offers hair oil in two brand names i.e. parachute and

nihar. The brand nihar, offered in two types of packaging i.e. Sachets and bottles and offered in

two qualities i.e. coconut oil and perfumed hair oil.

2. Price: the value at which customer is willing to purchase the product.

For example, BSNL offers prepaid service recharge coupons in Rs175, Rs335, Rs500, Rs 1000,

Rs2000 and Rs 5000 denominations.



Figure 2.4.

The marketing mix

3. Place: Distribution of goods from the factory to the target customer. It includes distributors,

stockiest and retailers. To illustrate, Zenith computers uses authorized distributor to sell laptops

and desktops to the target customers.

Product

• Variety

• Quality

• Features

• Brand name

• Packaging

• Services

Price

• List price

• Discounts

• Allowances

• Credit period

• Credit terms

Promotion

• Advertising

• Sale promotion

• Public relation

• Publicity

• Personal selling

Place

• Channels

• Coverage

• Assortments

• Locations

• Inventory

• Transportation

Customers and

Intended positioning



4. Promotion: communicating product features and its uses to target customers through different

Medias. For example, Bharati group promotes its cellular services (AIRTEL) through TV, Radio

and news paper. 1.5. Planning, control and implementation. 2.5.1 Marketing planning:

Though strategic plan exists in the organization but it is very essential to have functional plans to

coordinate departmental activities. For example, the marketing plan guides the sales and distribution

activities of the organization. Therefore it is essential to know what the contents of a marketing plan

are.

Contents of marketing plan

a. Executive summary: Brief summary of plan, which help busy executives to go through the points

very quickly.

b. Analyzing the current market situation: The following factors should be answered in this section.

1. What is the intended market and market segment?

2. What is the consumer buying behavior process for particular category of products?

3. How conducive is the marketing environment to do the business? 4. Whether company got right marketing mix for intended target customer?

5. Who are major competitors and what are their marketing strategies?

c. PEST analysis: In this section, the external environment of the company is analyzed to find

opportunities and threats.( for detail see UNIT 3)

d. Objectives and issues: This part of the marketing plan should discuss marketing objectives that

company would like to achieve in particular period and issues that may affect them.

e. Marketing strategy: This section should highlight on

1. Identifying the segmentation, target customer and positioning strategy 2. 4P’s of marketing 3. Planned activities: the following factors should be discussed in this section 4. What are the programs that company plans to undertake?

5. Who are responsible to monitor these programs?

6. How much time it takes to complete the program? 7. How much will it cost?



8. Marketing Budget 9. Control: Any program implemented need to be controlled to check its performance. Hence

organization should take periodic auditing by a review committee. The control process for the

plan should be discussed in this section.

2.5.2 Marketing Implementation and control.

Marketing implementation: The process in which marketing strategies and plans are converted in to proper marketing actions to achieve the objectives.

Marketing implementation depends on the following factors:

1. Organization structure

2. Organization culture

Marketing control: The process of evaluating marketing performance and taking corrective actions.

Marketing control involves four steps. They are

a. Set specific marketing goals.

b. Measure the marketing performance

c. Evaluate the market performance against objectives

d. Take corrective actions

Marketing control is divided into two parts. They are operation control and strategic control.

Operation control involves assessing the current activities against annual plan and taking corrective

actions. Strategic control is used to assess whether existing strategic plans of the company meets

the opportunities exist for it. Marketing audit is used as a strategic control tool.

According to Philip Kotler “marketing audit is comprehensive, systematic, independent and periodic

examination of a company’s environment, objectives, strategies and activities to determine problem

areas and opportunities and to recommend a plan of action to improve the company’s marketing

performance”.

Characteristics of marketing audit:

1. Comprehensive.



2. Systematic

3. Independent

4. periodic

Components of marketing audit:

1. Marketing environment audit

2. Marketing strategy audit

3. Marketing organization audit

4. Marketing systems audit

5. Marketing productivity audit.

6. Marketing function audit

Self assessment questions2:

f. Example of strategic control is

ii. Marketing implementation depends on and .

iii. Marketing mix is also known as and

iv. Which of the following does not belong to the marketing control?

1. Set specific marketing goals. 2. Measure the marketing performance 3. Evaluate the market performance against objectives 4. Understand the organization culture

5. PEST analysis helps to identify company’s and

2.6. Summary:

1. Strategic planning process involves defining the company mission, formulating the objectives, designing an appropriate business portfolio and coordination among functional strategies.

2. BCG and General electric models are used to analyze existing market situation of SBU. 3. SBU’s growth and downsizing strategies are determined by Ansoff model of product market

growth matrix.

4. Marketing mix or 4Ps of marketing is the assortment of product, place, price and promotion.



5. Marketing implementation depends on organization structure and its culture. 6. Marketing Audit is used as strategic control tool.

Terminal questions:

1. Explain how organization defines its mission..

2. Discuss the models used to analyze the existing business portfolio of the company.

3. Explain the Ansoff ‘s product market growth matrix

4. What is marketing mix? Explain its components.

5. Briefly explain the contents of marketing planning.

Answers to Self Assessment Questions: Self Assessment Questions 1:

1. Mission 2. BCG 3. C. Low market growth and high relative market share 4. Igor Ansoff 5. Diversification.

Self Assessment Questions 2

1. Marketing audit 2. Organization stricture and organization culture 3. 4P’s of marketing and market assortment. 4. D. understanding the organization culture 5. Opportunities and threats.

Answers to Terminal Questions:

1. Refer 2.2.1

2. Refer 2.2.3

3. Refer 2.2.3

4. Refer 2.3

5. Refer 2.4

Documents

2 Strategic Marketing Process