CHAPTER 2: DEVELOPING MARKETING STRATEGIES & PLANS

Question 1

How does marketing
affect customer value?

Answer 1

Marketing affects customer value through several critical components, including the value delivery process, the value chain, core competencies, and strategic planning. Here’s how these elements interact to enhance customer value:

1. Value Delivery Process:

• The value delivery process involves three key steps: choosing the value, providing the value, and communicating the value.
• Choosing the value requires marketers to segment the market, identify target audiences, and determine the value positioning of products. This ensures that what is offered aligns with customer desires.
• Providing the value involves developing products that meet the defined value proposition, including selecting features, pricing, and effective distribution channels.
• Communicating the value is vital for informing potential customers about the product’s benefits and how it meets their needs. Effective communication strategies can significantly enhance perceived value and influence consumer decisions.

2. Value Chain:

• The value chain represents a series of activities that companies engage in to deliver products to the market effectively. It consists of nine strategically relevant activities grouped into primary and support activities.
• Primary activities like inbound logistics, operations, outbound logistics, marketing, and service all contribute to the creation of value for customers.
• Support activities such as procurement, technology development, human resource management, and firm infrastructure enable and enhance the efficiency of primary activities, ultimately leading to a better value proposition for customers.
• By analyzing and optimizing the value chain, companies can identify areas for improvement, leading to cost savings or enhanced service delivery that directly increases customer value.

3. Core Competencies:

• Core competencies refer to the unique strengths and capabilities of a company that distinguish it from competitors. These competencies can include expertise in technology, strong brand recognition, superior customer service, or specialized knowledge.
• Marketing leverages these core competencies to emphasize the unique value that companies offer, enabling them to effectively communicate their advantages to customers and thereby enhance perceived value. A clear focus on core competencies helps in developing products and services that resonate deeply with target audiences.

4. Central Role of Strategic Planning:

• Strategic planning is crucial for aligning marketing efforts with the overall business objectives and market opportunities. It involves analyzing the market, setting clear goals, and defining the marketing mix (product, price, promotion, and place).
• By undertaking strategic planning, organizations can ensure that their marketing activities effectively position the company in the market, maximize customer value, and respond dynamically to changing market conditions.
• A well-defined marketing plan lays the groundwork for executing marketing strategies that contribute to delivering value, ensuring all departmental efforts are coordinated towards achieving the same goals.

In conclusion, marketing plays a pivotal role in affecting customer value through the value delivery process, enhancing the value chain, emphasizing core competencies, and driving strategic planning efforts. Together, these elements work to create better products and services that meet customer needs and expectations, leading to increased satisfaction and loyalty.

Question 2

How is strategic planning carried out at the corporate and divisional levels?

Answer 2

Certainly! Here’s a detailed explanation strictly following the content outlined in the document:

1. Defining the Corporate Mission:

• The first step in corporate and division strategic planning is defining the corporate mission. This involves articulating the fundamental purpose of the organization and what it strives to achieve. A clear mission statement should focus on a limited number of goals, stress major policies and values, and take a long-term view. It provides a shared sense of purpose and direction for the entire organization, ensuring that all stakeholders understand the overarching goals that guide the company’s actions and strategies.

2. Establishing Strategic Business Units (SBUs):

• The second step is to establish strategic business units. An SBU is characterized by three main features: it operates as a single business or a collection of related businesses, has its own distinct set of competitors, and includes a leader responsible for strategic planning and profit. The identification of SBUs is crucial as it allows the organization to develop separate strategies tailored to the specific competitive landscape of each unit and assign appropriate funding. This differentiation helps in optimizing resource allocation and ensures focused strategic direction for each unit.

3. Assigning Resources to Each Strategic Business Unit:

• After establishing SBUs, the next step is to assign resources to each unit. This is essential for empowering the SBUs to pursue their strategies effectively. Resources could include financial capital, human resources, technology, and operational support. Proper allocation is necessary to enhance each unit’s ability to compete in its market. By ensuring that resources are aligned with strategic priorities, the organization can maximize the performance and profitability of its SBUs while optimizing the overall business portfolio.

4. Assessing Growth Opportunities:

• The final step involves assessing growth opportunities for each strategic business unit. Companies should analyze the market’s growth rate and their position within those markets. This assessment helps in identifying potential avenues for expansion, innovation, and competitive advantage. Organizations look for growth opportunities through market analysis and strategic positioning to ensure that they can adapt to changing environments and capitalize on emerging trends. Thorough evaluation at this stage allows companies to strategize effectively for future development and sustaining their competitive edge.

These steps collectively guide the strategic planning process at both the corporate and divisional levels, ensuring a comprehensive approach to managing business units and maximizing their potential for growth and profitability.

Question 3

How is strategic planning carried out at the business unit level?

Answer 3

Certainly! Here’s a detailed explanation of the Business Unit Strategic Planning Process, strictly following the content and structure as outlined in the document:

1. The Business Mission

The foundation of the Business Unit (BU) Strategic Planning Process is the business mission. Each business unit needs to clearly define its specific mission within the broader corporate mission. This mission statement encompasses:

• Purpose: It articulates the reason for the BU’s existence, detailing the specific needs it aims to meet in the market.
• Direction: The mission serves as a guiding light for the BU’s activities, ensuring that all strategic efforts align with the overall objectives of the corporation. For example, a business unit focused on sustainable energy might state its mission as “to meet society’s energy needs in ways that are economically, socially, and environmentally viable”.

2. SWOT Analysis

The next step in the strategic planning process is conducting a SWOT analysis. This analytical tool helps the business unit assess its internal strengths and weaknesses along with external opportunities and threats:

• Strengths: Identifies the unique resources and capabilities that provide a competitive advantage.
• Weaknesses: Recognizes areas of the business that could hinder performance.
• Opportunities: Explores external factors that could be leveraged for growth and advantage in the market.
• Threats: Identifies external challenges that could negatively impact the business unit’s success.

The insights gained from the SWOT analysis inform the subsequent steps in the planning process, particularly in goal formulation and strategic decision-making.

3. Goal Formulation (MBO)

After the SWOT analysis, the business unit proceeds to goal formulation, often utilizing a Management by Objectives (MBO) framework. This process includes:

• Hierarchical Structuring: Objectives must be organized hierarchically, where high-level strategic goals are broken down into specific, actionable sub-goals that units can work toward.
• Quantitative Metrics: Goals should be measurable, facilitating evaluation and accountability regarding performance.
• Realism and Achievability: Goals must be realistic, considering the unit’s resources and constraints, which ensures they are attainable and inspiring rather than discouraging.
• Consistency: It’s essential that the objectives align with one another, promoting a coordinated effort towards achieving the overall mission and strategic targets.

By formulating precise goals following the SWOT analysis, the business unit prepares a clear action plan for the planning period.

4. Strategic Formulation

Following goal formulation, the next phase is strategic formulation, which encompasses the development of strategies to achieve the set objectives. This can include:

• Porter’s Generic Strategies: Business units must decide on a competitive strategy based on Michael Porter’s framework, which includes:
• Cost Leadership: Becoming the lowest-cost producer in the industry, allowing the BU to offer lower prices than competitors.
• Differentiation: Offering unique products or services that provide added value, allowing a premium pricing strategy.
• Focus Strategy: Targeting a specific segment of the market, whether by cost focus or differentiation focus.

These strategies guide the business unit in positioning itself in the marketplace and determining how to compete effectively against its rivals [T8].

• Strategic Alliances: In some cases, forming strategic alliances with other companies can enhance competitive advantages. These alliances may involve partnerships that allow sharing resources or capabilities, thereby broadening market reach or innovating product offerings [T8].

5. Feedback and Control

The final component of the Business Unit Strategic Planning Process is the establishment of mechanisms for feedback and control:

• Performance Monitoring: Regular evaluation of the business unit’s performance against set objectives is essential. This monitoring involves assessing both qualitative and quantitative metrics.
• Responsiveness: The business unit must remain agile and responsive to market changes and internal performance metrics. Adjustments may be necessary based on feedback to stay aligned with its goals.
• Addressing Inertia: Large organizations often find it challenging to change due to inertia. The feedback and control system should recognize the need for change and facilitate rapid adaptations to strategies or operations as necessary.

This ongoing feedback loop is crucial for ensuring that the business unit can continuously improve and adjust its strategies based on real-time data and changing market conditions, ultimately driving sustained success [T9].

Question 4

What does a marketing plan include?

Answer 4

A marketing plan is a comprehensive document that outlines an organization’s marketing strategies and activities aimed at achieving specific business goals. The contents of a marketing plan typically include the following key components:

1. Executive Summary

The executive summary provides a high-level overview of the entire marketing plan. It encapsulates the key findings, strategies, and recommendations, allowing readers to quickly understand the main points. This section should be concise and compelling, highlighting the importance of the marketing initiative and summarizing the contents of the plan.

2. Table of Contents

The table of contents serves as a roadmap for the marketing plan, presenting a structured outline of all the sections included. It enables readers to easily navigate through the document and locate specific information efficiently. A well-organized table of contents reflects the professionalism and clarity of the marketing plan.

3. Situation Analysis

The situation analysis assesses the current market landscape and the organization’s position within it. This section typically includes:

• Market Overview: A review of the overall market conditions, including trends, opportunities, and threats.
• Customer Analysis: Insights into target audiences, their behaviors, needs, and preferences.
• Competitor Analysis: Identification of key competitors and an evaluation of their strengths and weaknesses.
• Internal Analysis: An examination of the company’s resources, capabilities, and core competencies that can be leveraged for marketing efforts.

This thorough analysis provides the foundation for developing effective marketing strategies.

4. Marketing Strategy

The marketing strategy outlines how the organization intends to achieve its marketing objectives based on the insights gained from the situation analysis. It encompasses:

• Target Market Selection: Identifying specific segments of the market to focus marketing efforts on.
• Value Proposition: Defining what makes the company’s offerings unique or superior in the eyes of the target audience.
• Positioning: Establishing how the brand will be perceived in the marketplace relative to competitors, ensuring that it resonates well with the target market.

This section is crucial as it sets the direction for all marketing activities.

5. Marketing Tactics

The marketing tactics detail the specific actions and initiatives that will be employed to implement the marketing strategy. This includes:

• Promotion: Outlining advertising, public relations, promotions, and events planned to reach the target audience.
• Product Features: Describing enhancements or changes to products or services.
• Pricing Strategy: Strategies for pricing products appropriately based on market demand, cost, and competition.
• Sales Channels: Identifying the distribution methods used to deliver products to customers, such as retail, online, or direct sales.
• Service: Detailing customer service policies and support to enhance customer satisfaction.

Together, these tactical elements ensure that the strategic vision of the marketing plan is effectively executed.

6. Financial Projections

This section presents detailed forecasts related to the financial implications of the marketing plan. It typically includes:

• Sales Forecasts: Projections of revenue generated from marketing activities over a specified period.
• Budgeting: A breakdown of expected expenditures related to marketing initiatives, including advertising, promotions, and other costs.
• ROI Analysis: An evaluation of the return on investment anticipated from the marketing efforts, helping stakeholders understand the financial viability of the plan.

Clear financial projections are essential for assessing the feasibility and potential outcomes of the marketing strategies implemented.

7. Implementation Controls

Implementation controls outline the processes and metrics that will be put in place to monitor the execution of the marketing plan. This section typically includes:

• Performance Metrics: Key performance indicators (KPIs) to evaluate the effectiveness of marketing activities against set objectives.
• Timeline: A schedule that details when various parts of the plan will be implemented.
• Responsibilities: Assignments of specific roles and responsibilities to team members responsible for executing the plan.

These controls are critical for ensuring accountability and allowing for adjustments as needed throughout the implementation phase.

Question 5

Discuss the assessment of growth opportunities.

Answer 5

The assessment of growth opportunities is a strategic process that enables businesses to identify and capitalize on avenues for expansion, enhance performance, and maintain competitiveness in the market. The document outlines four major categories within this assessment: intensive growth, integrative growth, diversification growth, and downsizing and divesting older businesses.

1. Intensive Growth

Intensive growth focuses on maximizing the potential of existing products and markets. This can be achieved through several strategic avenues:

• Market Penetration: This strategy aims to increase market share for current products within existing markets. Companies may implement aggressive marketing campaigns, optimize pricing strategies, or enhance customer loyalty programs to attract customers from competitors.
• Market Development: This avenue explores opportunities for introducing existing products into new markets. It can involve targeting different geographic regions or demographic segments where the products previously were not offered, thereby expanding the customer base.
• Product Development: This strategy centers on creating new products for existing markets. It involves innovation and enhancement of existing offerings to meet evolving consumer needs or preferences. By investing in research and development, companies can leverage their current market knowledge to introduce new solutions effectively.
• New Markets for New Products: Businesses may also consider developing entirely new offerings aimed at new markets, which requires a careful assessment of market needs and potential for profitability.

2. Integrative Growth

Integrative growth involves expanding the business through various forms of integration within the industry, allowing companies to enhance efficiency and market presence:

• Backward Integration: This strategy entails acquiring or merging with suppliers, which can help companies gain greater control over their supply chain, reduce costs, and ensure quality of inputs.
• Forward Integration: This approach focuses on gaining control over distribution channels. Companies may choose to acquire retailers or distributors to secure a more favorable position in the marketplace, allowing them to capture more profit from the sales process.
• Horizontal Integration: This strategy consists of acquiring or merging with competitors to enhance market share and reduce competition. By consolidating resources and eliminating rivals, businesses can achieve increased operational efficiency and market power.

3. Diversification Growth

Diversification growth is a strategy that makes sense when lucrative opportunities exist outside the company’s current business lines. This can involve:

• Entering New Markets: Businesses can expand into different sectors that complement existing capabilities or resources. This allows companies to spread risk across various revenue streams, potentially stabilizing overall performance.
• Developing New Products: Companies may innovate new products that cater to new market segments. This requires a thorough understanding of market trends and customer preferences to create successful offerings that meet demand.

4. Downsizing and Divesting Older Businesses

The process of downsizing and divesting older businesses is crucial for reallocating resources effectively within a company. This involves:

• Pruning: Organizations may choose to eliminate underperforming sectors or product lines that are not contributing positively to the overall strategy. This act of “pruning” helps free up capital and operational resources for investment in growth areas.
• Harvesting Old Businesses: By systematically reducing investments in declining divisions, companies can extract maximum value from these entities before completely phasing them out, thus ensuring that resources are available for more promising opportunities.
• Divestiture: In some cases, companies may fully divest from certain businesses to streamline operations and focus on core competencies. This decision should be guided by a thorough analysis of market conditions, financial performance, and strategic alignment with future goals.