marketing - sept. 30 notes

Strategic Planning Process

• Introduction to Strategic Planning Process

  • The strategic planning process consists of four key steps:

    1. Mission Statement

       • Develop a clear and effective mission statement for the organization.

    2. Identification of Strategic Business Units (SBUs)

       • Recognize and categorize the organization's strategic business units.

       • Example: Walt Disney Corporation has various strategic business units.

       • Not all units may be listed, but understanding the scope is crucial.

    3. Resource Allocation

       • Learn techniques for allocating resources to the identified strategic business units.

    4. Evaluation and Control

       • Continuously evaluate the effectiveness and efficiency of the strategic plan.

Third Step: Resource Allocation

• Importance of Resource Allocation

  • When managing multiple SBUs, effective resource allocation is vital to ensure growth and success.

• Analogy

  • Example: Comparison between two families with different numbers of children (Amelia with nine children and Sydney with one child) to illustrate resource allocation.

    • Amelia has multiple children with various needs that require prioritization of resources (financial and managerial).

    • Sydney has a simpler situation with only one child, simplifying resource decisions.

Managerial Resources vs. Financial Resources

• Understanding Resources

  • Resources encompass more than just financial assets; they also include:

    • Managerial Attention

      • Critical for nurturing and developing SBUs.

      • Parents must allocate their time, just as managers must allocate their managerial efforts.

BCG Matrix

• Introduction to the BCG Matrix

  • Named after the Boston Consulting Group, a historical model for portfolio management.

  • Although not widely used today, it serves as a foundation for understanding more complex models.

  • Many modern matrix-based portfolio models stem from the principles of the BCG matrix.

Structure of the BCG Matrix

• Matrix Overview

  • A two-by-two matrix:

    • Horizontal Axis: Competitive Strength of the Business within its Industry

      • Example: How strong is Disneyland in the theme park industry?

      • Other examples include Disney World, Marvel Studios, ESPN, etc.

    • Vertical Axis: Attractiveness of the Industry

      • Determines how appealing the industry is, based on metrics like market growth.

Measuring Market Attractiveness and Business Strength

• Market Attractiveness

  • Measured by Market Growth Rate:

    • Determines the overall growth rate of the industry.

    • Important to assess how fast industries like theme parks, movies, or cruises are growing.

• Business Strength

  • Measured using Relative Market Share:

    • Market share relative to the largest competitor.

    • Example: Three manufacturers and their respective market shares (Jewel, Jody, Mia).

      • Jewel: $50,000,000

      • Jody: $30,000,000

      • Mia: $20,000,000

    • Calculation of Mia's market share relative to Jewel:

      • Mia: 20%

      • Jody: 30%

      • Jewel: 50%

      • Mia's relative market share: $ rac{20}{50} = 40\%$

      • Jody's relative market share: $ rac{30}{50} = 60\%$

      • Jewel's relative market share: $ rac{50}{30} = 166.6\%$

Industry Structure: Fragmented vs. Consolidated

• Understanding whether the industry is fragmented (many competitors) or consolidated (few competitors) is vital for appropriate analysis.

• Comparative Analysis:

  • Relative market share allows for meaningful comparisons across different industries.

Questions on Market Share

• Market Share Characteristics

  • Market share cannot be negative: sales revenue can't be negative.

  • Market share is limited to 100% since all competitors' market shares sum to 100%.

  • Relative Market Share: Can exceed 100%.

Practical Application of the BCG Matrix

• Identifying SBUs

  • Employees at organizations like Walt Disney Corporation must assess each SBU's relative market share and market growth rate.

• Plotting on the BCG Matrix

  • Positioning each SBU on the graph according to strength and industry attractiveness.

• Visualization

  • Circles representing revenue for each SBU should be drawn proportionately to their revenue size.

Conclusion

• Important Considerations

  • Understand resource allocation's complexity, including both financial and managerial elements.

  • The BCG matrix provides a fundamental framework, serving as a basis for understanding more sophisticated models in strategic management that will be discussed in future sessions.