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2. Strategic Planning for Competitive Advantage

Learning Outcomes

  • Understand the importance of strategic planning.

  • Define strategic business units (SBUs).

  • Identify strategic alternatives and understand the basic outline for a marketing plan.

2-1. The Nature of Strategic Planning

  • Definition: Strategic planning is the managerial process of creating and maintaining a fit between the organization’s objectives, resources, and evolving market opportunities.

  • Goals: The primary goals are long-term profitability and growth. Strategic decisions carry long-term resource commitments, with potential risks if errors occur.

    • Example: If the March of Dimes had only focused on polio, it would have ceased to exist as the disease became less prevalent. Instead, it successfully pivoted to fighting birth defects.

  • Key Questions in Strategic Marketing Management:

    1. What is the organization's main activity at a given time?

    2. How will it reach its goals?

2-2. Strategic Business Units (SBUs)

  • Definition: SBUs are distinct businesses within a larger organization, each with its own mission, target market, and strategy.

  • Each SBU is responsible for its own performance, allowing for flexibility and adaptability in response to market changes.

    • Different business that the large company manage

  • Characteristics of an SBU:

    • Distinct mission with a specific target market.

    • Control over its resources.

    • Competitors unique to the SBU.

    • Independent planning and strategies.

2-3. Strategic Alternatives

  • Tools for Strategic Direction:

    • Ansoff’s Strategic Opportunity Matrix.

    • Boston Consulting Group Model.

    • General Electric Model.

  • Philosophies for Profit Expectation: Decisions can be based on either immediate profits or long-term market share growth.

2-3a. Ansoff’s Strategic Opportunity Matrix

  • Options:

    • Market Penetration: Focus on increasing market share among existing customers. Example: JCPenney’s partnership with InStyle.

    • Market Development: Attract new customers for existing products. Example: McDonald’s international expansion.

    • Product Development: Introduce new products for current markets. Example: Danone’s introduction of milk-free products.

    • Diversification: Enter new markets with new products. Example: Lego's partnership with Tencent for online games.

2-3b. The Innovation Matrix

  • Critique of Ansoff’s Matrix: Some argue that businesses grow fluidly based on their capabilities rather than in defined sectors.

  • Levels:

    • Core Innovation: Improvements using existing assets.

    • Adjacent Innovation: Leveraging existing capabilities into new markets.

    • Transformational Innovation: New markets and products requiring new assets.

2-3c. The Boston Consulting Group Model

  • Purpose: Balances and categorizes SBUs based on growth potential and relative market share.

  • Categories:

    • Stars: High growth leaders needing considerable cash.

    • Cash Cows: Generate more cash than needed for market share maintenance.

    • Problem Children: High growth but low market share; require investment.

    • Dogs: Low growth and low market share; often eliminated.

2-3d. The General Electric Model

  • Dimensions: Market attractiveness vs. company strength; evaluates both quantitative and qualitative factors for decision-making.

  • Strategies: Focus investments in high attractive markets while avoiding low ones.

2-3e. The Marketing Plan

  • Definition: A formal document guiding marketing activities based on the organization’s strategies.

  • Importance: Ensures aligned efforts, provides benchmarks for performance, and enhances market awareness.

2-4. Defining the Business Mission

  • Role: The mission statement guides resource allocation, profitability, and strategy decisions. It should be market-focused, avoiding marketing myopia.

2-5. Conducting a Situation Analysis

  • SWOT Analysis: Identify internal strengths, weaknesses, and external opportunities and threats.

  • Environmental Scanning: Collection of external information to inform strategic decisions, regarding macroenvironmental factors like social, economic, technological, etc.

2-6. Competitive Advantage

  • Definition: Unique features perceived as superior by target markets.

  • Types:

    • Cost Competitive Advantage: Achieved through efficient operations and management practices.

    • Product/Service Differentiation: Unique offerings that stand out in the market.

    • Niche Competitive Advantage: Targeting specific market segments effectively.

2-7. Setting Marketing Plan Objectives

  • Importance: Objectives guide, motivate, and form a control basis for assessing marketing success. They must be realistic, measurable, time-specific, and benchmarked.

2-8. Marketing Strategy

  • Definition: Involvement of selecting and describing target markets and developing tailored marketing mixes.

  • Market Opportunity Analysis (MOA): Describes market potentials and competitor assessments.

2-9. The Marketing Mix

  • Components: Product, Place (Distribution), Promotion, and Price (the Four Ps).

2-9a. Product Strategy

  • Definition: Includes all elements such as packaging, service, brand, and warranty.

2-9b. Place Strategy

  • Focus: Ensures product availability when and where customers need them.

2-9c. Promotion Strategy

  • Role: Involves all communications used to market the product, integrating methods to achieve customer engagement.

2-9d. Pricing Strategy

  • Importance: Pricing influences potential market success and must balance profitability while being competitive.

2-10. Implementation, Evaluation, and Control

  • Importance of Follow-Up: Necessary for successful execution of marketing plans. Evaluation assesses achievement of objectives and guides future strategy adjustments.

2-11. Effective Strategic Planning

  • Continuous Process: Requires consistent management attention and creativity, supported by top management efforts to adapt and innovate.