Marketing

Class 02- Corporate & Division level Strategic Planning, Business unit strategic planning

Corporate & division strategic planning:

Define strategic planning: Strategic planning can be defined as the process of determining the basic long term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these objectives.

i) Defining corporate missionii) Establishing Strategic Business Units (SBU)iii) Assigning resource to each SBUiv) Planning new business and downsizing older business

A) Defining corporate mission:

Defining corporate mission helps to create a sense of direction and opportunity for the organization.

Example:

Corporate mission of prime finance: Be a leading, efficient customer oriented financial service provider in its selected market.

Good corporate mission statements focus on three characteristics:

i) Limited number of goals/objectivesii) Honor corporate policies and valuesiii) Define major competitive scopes in its selected market( e.g. industry , product &

application, competence, market segment, vertical, geographical scopes)

B) Establishing SBU

i) SBU must be planned separately from the rest of the company

ii) SBU has its own set of competitors

iii) SBU has a manager who is responsible for strategic planning

Example:

Beximco is now managing 22 business units at a time such as Beximco Pharmaceuticals, Textiles, Denim etc. Each of these units can be classified as SBU.

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Product and market definition of business:

Product Definition: Defining business in terms of product.

Market Definition: Defining business in terms of customer satisfying process.

Examples:

Products definition market definition

i) Xerox We make copying equipment We help improve office productivity

ii) Standard oil We sell gasoline We supply energyiii) movie co. We make movie We sell entertainmentiv) Garments Ind. We stitch clothes We sell fashion

C) Assigning resources to each SBU

When a company has a number of products in the market, not all of them are contributing equally, not all of them have equal opportunity for growth. Each of them has to be treated differently and budget allocation make separately.

Examples: Boston consulting group approach

i) Question marks- operate in high growth rate where there is already a market leader. Company has to pour more investment to stay competitive.

ii) Stars- a star is a market leader in high growth market-may not give sufficient revenue or profit

iii) Cash cows-when growth rate falls than 10% the stars becomes a cash cow provided it still has a very high market share and contributed significantly to the profitability of the company. Growth rate has slowed because the sector growth has slowed.

iv) Dogs-here the objective is to sell or liquidate the business because resource can be better utilized elsewhere.

D) Planning new business and downsizing older business:

Every company has plans for growth. When desired sales targets are not met, strategic planning needs to be re-examined. Growth is possible in three ways:-

a) Intensive Growth: Growth within the company’s current Business.

i) Market Penetration Strategy, (for current market, current product)Trying to increase market share in the current market (reducing price, offering free gift with the product)

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Example: RC cola has reduced the price of the can from TK 15 to TK 12.

ii) Product Development Strategy, (new product for current market)Audio cassette producer which is currently producing 60 min tape started to producing 90 min tape.Example: The introduction of prepaid card by the Grameen Phone.Lever Brothers has introduced mini soap and mini pack shampoo.

iii) Market Development Strategy, ( for new market, current product)Example: Virgin has introduced diet virgin for older peopleIgloo has introduced Diet ice cream for diabetic patient

Ansoff’s grid

Current product new product

Current market 1. Market penetration

2. Product development

New market 3. Market development

4. (Diversification)

b) Integrative growth: Growth opportunities in the businesses that are related to the company’s current businesses.

i) Backward integration-Acquiring one or more suppliers to gain controlExample: Levis Strauss and the company acquire Milliken and company for fabric supplier then it will be backward integration.

ii) Forward integration-Acquiring one or more whole sellers if they are more profitableExample: Levis Strauss and the company acquire its major retailers Sears then it will be a forward integration.

iii) Horizontal integration-Acquiring one or more competitorsExample: Standard and Chartered merged with Greenlays bank to acquire more market share.

c) Diversification growth: Opportunities in the businesses that are unrelated to the company’s current businesses.

i) Concentric diversification-Developing new product that has technological and marketing synergies with current product. Example: if an audio cassette tape manufacturer starts producing computer tape then it will be termed as concentric diversification strategy.

ii) Horizontal diversification-Developing new product that might appeal current customers but not related with current business.

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Example: if the audio cassette tapes producer start producing cassette holding trays for the current customers then it will be a horizontal diversification strategy.

iii) Conglomerate-Developing new business that has no relation with company’s technology, products or marketsExample: a leather goods manufacturer starts manufacturing electronics goods then it will be the conglomerate diversification strategy.

Business unit strategic planning:

1) Define business mission: Particular mission defined by a business unit within the broader corporate mission.Example: The mission of a particular TV studio lighting equipment company may be to target the major TV studios and be their number one choice by offering the most developed and reliable studio lighting arrangements. SWOTExternal: Opportunity & ThreatInternal: Strength & Weakness

2) Goal formulation:Characteristics of specified goals-

i. They are specific objectives with respect to magnitude and timeii. They facilitate management planning, implementation of plans, and control

iii. They help the company operate by Management by Objectives (MBO) The four criteria objectives must meet for an effective MBO system:

• Objectives must be arranged hierarchically• Objectives must be stated quantitatively• Objectives should be realistic• Objectives should be consistent

3) Strategic formulation-These are specific means to achieve objectivesThree types of strategies:

Overall Cost Leadership Differentiation Focus

Strategic Alliances: Being in co-operation with strategic partners

Example: Proton World International, the joint venture of American Express and Visa International

4) Programme formulation-Each program should be analyzed by the activity Based cost accounting to find out whether it will produce sufficient result and offset the costs

5) Implementation-Carrying out the programs to achieve the expected objectives6) Feedback & control-The process of tracking the results, monitoring developments in the

environments, and taking corrective actions when faced with major changes in the marketplace.

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