CHAPTER 12 STRATEGIC PLANNING, IMPLEMENTING AND CONTROLLING IN INDUSTRIAL MARKETING INDUSTRIAL MARKETING: Chapter 12 1 Understand the characteristics of market – oriented organization Know the role of marketing in strategic planning Examine the strategic planning process at business unit level Understand preparation implementation and control of industrial (or business )marketing plan. INDUSTRIAL MARKETING: Chapter 12 2 CHARACTERISTICS OF MARKET – ORIENTED ORGANISATIONS Firms achieve market – orientation by managing the following factors. (i) Shared values (ii) Organization structure, policies and culture (iii) Strategic Planning (iv) Needs or expectations of stakeholders INDUSTRIAL MARKETING: Chapter 12 3 Hierarchy of Strategies Before understanding the role of marketing in strategic planning, we shall first examine hierarchy of strategies. Organisational Organisational Strategy hierarchy Levels Structure (Type of Management) Corporate Corporate Divisional/ Office Business Strategy Divisional / (Strategic Business Unit Management) / SBU SBU SBU SBU I II III Functional Strategy Functional (Operations Production Marketing Finance Management) INDUSTRIAL MARKETING: Chapter 12 4 The earlier figure shows hierarchy of strategies and organization structure of a large company. Strategic management gives a direction to the firm and focuses on developing strategies to achieve long – term objectives & goals A Strategic business unit (SBU) consists of an independent business or related business that has its own competitors and specific markets. In some large companies there are (product ) divisions and each division has a divisional plan. Each SBU is headed by a manager who is responsible for strategic planning and performance of the SBU. Operational Management maintains the direction given by strategic management, and concentrates on day-to-day issues of costs, revenue and profits. INDUSTRIAL MARKETING: Chapter 12 5 ROLE OF MARKETING IN STRATEGIC PLANNING IN A FIRM Company Formal Role of Marketing Level Name To give information on markets and Corporte Corporte to ensure customer orientation, for Marketing corporate strategy development. Company Formal Role of Marketing Level Name Corporte To give information on markets and Corporte Marketing to ensure customer orientation, for corporate strategy development. To carry out customer & competition analysis, for developing business Divisional / Strategic strategy, including competitive Business Marketing Unit level advantage, segmenting, targeting, and positioning strategies. To develope short - term marketing Marketing plan and strategy, coordination, and Funcitonal Management To carryresource allocation. out customer & competition Divisional / analysis, for developing business Strategic Business strategy, including competitive Marketing Unit level advantage, segmenting, targeting, and positioning strategies. To develop short - term marketing Marketing Functional plan and strategy, coordination, and Management resource allocation. INDUSTRIAL MARKETING: Chapter 12 6 STRATEGIC PLANNING PROCESS AT CORPORATE LEVEL The major steps involved are: • Deciding corporate mission and objectives • Establishing strategic business units ( SBUs) • Allocation of resources to SBUs • Developing corporate strategies ALLOCATION OF RESOURCES TO SBUs Two widely used models /tools are : (i) Boston Consulting group (BCG) model, called Growth –share matrix, (ii) General electric (GE) model, called Business Screen matrix. INDUSTRIAL MARKETING: Chapter 12 7 Market Growth Rate BCG Model : Growth Slow Rapid 3 1 Cash Cow Cash Relative Market RelativeMarket Share Large Stars INDUSTRIAL INDUSTRIAL MARKETING: Chapter 12 5 2 – Question marks Question 6 Share Share Matrix Small Dogs 8 7 4 8 GE Model : Business Screen Matrix Business Strength 5 High Medium Low 1 Selectivity / Earnings High Invest / Grow Medium Low Harvest / Divest 1 INDUSTRIAL MARKETING: Chapter 12 9 Major Business Strength factors: Market share, product quality, unit costs, R&D performance, brand reputation, share growth. Major Market Attractiveness factors : Overall market size, annual market growth rate, historic profit margin, competitive intensity, technological requirements. INDUSTRIAL MARKETING: Chapter 12 10 DEVELOPING CORPORATE STRATEGIES Strategic planning gap. It is the gap between future (5 years) desired sales and the projected sales (of all SBUs ) of a company. Desired Sales A s Strategic e l a Planning gap S B C Projected Sales 0 Time (Years) 5 INDUSTRIAL MARKETING: Chapter 12 11 The strategic planning gap can be filled by three alternative strategies : (A) Diversification growth, (B) Integrative growth, (C) Intensive growth (C) Intensive Growth Strategy. Corporate management should first review existing business, using Ansoff’s product-market expansion grid, shown hereafter : Current Products New Products Current Market Penetration Product development Markets Strategy Strategy New Market development ( Diversification Markets Strategy Strategy ) INDUSTRIAL MARKETING: Chapter 12 12 (B) Integrative Growth Strategy includes increase in a firm’s sales and profits by integrating backward, forward, or horizontally within that industry. (A) Diversification growth strategy is considered when (B) & (C) strategies are inadequate to achieve desired growth and also good opportunities are found outside the present businesses. INDUSTRIAL MARKETING: Chapter 12 13 STRATEGIC PLANNING PROCESS AT BUSINESS UNIT LEVEL The following steps are followed by the business – unit head. Defining the business unit’s mission Scanning the external environment (O.T. Analysis) Analyzing the internal environment (S.W. Analysis) Developing objectives and goals Formulating strategies (See hereafter) Preparing programme or action – plan Implementing strategies and action plan Feedback and control INDUSTRIAL MARKETING: Chapter 12 14 * PORTER’S Generic Strategies Framework for Business unit Strategic Advantage Uniqueness Perceived Low - cost position by customer Industry Overall cost Differentiation wide leadership Particular segment only Focus INDUSTRIAL MARKETING: Chapter 12 15 Marketing Planning Process The head of marketing prepares the marketing plan (short-term up to one year) after going through “Marketing Planning Process”, which includes the following steps : (i) Analyzing marketing opportunities (ii) Segmenting and selecting target market segments (iii) Developing marketing strategies (iv) Implementing and controlling the marketing plan The head of marketing now prepares the writhen document, called marketing plan, with the following steps. INDUSTRIAL MARKETING: Chapter 12 16 Business ( Industrial ) Marketing Plan Situational analysis: Market, competitive, product, and macro – environmental analysis. SWOT and Issues analysis Marketing Objectives and goals Marketing Strategy: Selection of target market segments, positioning, marketing mix, customer service and marketing research. Action plans / Tactics Marketing Budget Implementation and control: Building marketing organization and control process. Contingency plan INDUSTRIAL MARKETING: Chapter 12 17 IMPLEMENTATION OF MARKETING PLAN It is a process that turns marketing plans into action plans and ensures that the tasks or activities of action plan are executed in as manner that achieves the marketing objectives and goals. For this the necessary organization structure and people are selected. Marketing resource management (MRM) software will help marketers to improve their decisions, and also in implementation and controls. Control Process includes (a) setting goals, (b) measuring actual performance, (c) comparing goals and actual performance, (d) analyzing causes of deviations, if any (e) taking corrective actions, if needed. Types of controls : (i) Strategic control , (ii) annual plan control (iii) efficiency control , (iv) profitability control. INDUSTRIAL MARKETING: Chapter 12 18 SUMMARY OF CHAPTER 12 Marketing orientation is achieved by firms by managing shared values, organization structure, policies and cultures, strategic planning, needs and expectations of stakeholders. Before understanding the role of marketing in strategic planning, it is necessary to examine hierarchy of strategies. Major role of marketing is at business unit and functional levels, and less at corporate level. Strategic planning process at corporate level includes corporate mission & objectives, establishing and allocation of resources to SBUs and developing corporate strategies. INDUSTRIAL MARKETING: Chapter 12 19 Strategic planning process at SBUs level includes mission, SWOT analysis, objectives and goals, strategies, action plan, implementation and control. The marketing head should go through marketing planning process, before preparing the marketing plan. Implementation and control of marketing plan are important for achievement of marketing objectives and goals. INDUSTRIAL MARKETING: Chapter 12 20 INDUSTRIAL MARKETING: Chapter 12 21.