Chapter 3: The Role of Marketing in Strategic Planning

If you do not know where you are going, any road will take you there!

Chapter Objectives
Explain companywide strategic planning

Understand the concepts of stakeholders, processes, resources, and organization.

Explain the four planning activities of corporate strategic planning Understand the process involved in defining a company mission and setting goals and objectives. Discuss how to design business portfolios and growth strategies Explain the steps involved in the business strategy planning process.

Strategic Planning
Market-Oriented Strategic Planning is the
process of developing and maintaining a feasible fit between the organizations objectives, skills, and resources and its changing marketing opportunities.

The Aim of Strategic Planning

Strategic planning helps an organization select and organize its business in a way that keeps the organization healthy despite unexpected upsets occurring in any of its specific business or product lines.

WE MADE IT!

Reasons for Planning

The essence of strategic planning is the consideration of current decision alternatives in the light of their probable consequence over time.
The future is unpredictable but it is not a random walk.

If we do not know where we are going any road will take us there.

Three Key Ideas for Strategic Planning

1. Managing a companys business as an investment portfolio.

2. Assessing accurately the future profit potential of each business by considering the markets growth rate and the companys competitive position and fit. 3. Underlying strategic planning is that of strategy and developing a game plan for achieving long-run objectives.

Four Major Organizational Levels

Corporate Level: Corporate strategic plan to guide the whole enterprise.

Division Level: Division plan allocates funds to each SBU.

Business Unit Level: Business unit strategic plan. Product Level: Marketing plan.

Nature of High Performance Business

Stakeholder: Satisfy the minimum expectations of each stakeholder group, such as customers, employees, suppliers and distributors. Processes: Build cross-functional teams that manage core business processes to be superior competitors (Example: Las Vegas Hilton) Resources: More companies decide to outsource less critical resources (personnel, material, machines, information) Organization: Companies align their organizations structure, policies, and culture to changing requirements of business strategy.

Corporate Strategic Planning

Corporate headquarters has the responsibility for setting into motion the whole planning process.

The hospitality industry faces the need for

greater empowerment of employees The H&T industries are international and multicultural in nature

Corporate Strategic Planning

Four planning activities undertaken by corporate headquarters:

1. Defining the corporate mission. 2. Establishing strategic business units. 3. Assigning resources to each SBU. 4. Developing growth strategies

Strategic Management Model

Perform external analysis to identify key opportunities & threats Functional-Level Strategy Design organization structure

Identify current mission, objectives, and strategies

SWOT, Strategic choice

Business-Level Strategy
Global Strategy Corporate-Level Strategy

Match strategy, structure, and controls

Manage strategic change

Perform internal analysis to identify key strengths & weaknesses

Design control systems

Hierarchy of Strategy
Corporate Headquarters

Corporate Strategy Global Strategy

Strategic Business Unit

Strategic Business Unit

Strategic Business Unit

Business Strategy

Operations

Finance

Marketing

Research & Development

Human Resources

Functional Strategy

Corporate Mission
What business are we in?

What businesses should we be in?

What do we do best? What are the values/ethics of the firm?

What are the target markets of the firm?

Define business by need rather than product. - Lodging vs. hotel

- Quick service restaurants vs. fast food hamburgers.

http://www.skyinet.net/~four-seasonhotel/mission.htm http://www.sedctourism.com/hik/mission.html

http://www.omnihotels.com/corporate/?topic=mission

Mission Statements: Major competitive scopes

Industry scope
e.g., hotels/resorts & airlines.

Market-segment scope
e.g., upscale vs. budget roadside.

Products and
applications scope e.g., AA (Sabre, YM but not airport management). Competencies scope (technological/core competencies).

Vertical scope
Channel levels from raw material to final product (amount of vertical integration).

Geographical scope
(geographic market coverage).

Mission Statement
A mission statement provides employees of the organization with a shared sense of purpose, direction, and opportunity. Mission statements should . . . serve as a guide for what the organization wants to accomplish. be market-oriented rather than productoriented. be neither too narrow, nor too broad. be motivating.
Mission statements guide the development of objectives and goals.

Mission Statement Examples

Wal-Mart: To offer all consumers in our territories all of their household needs in a manner in which they continue think of us fondly. McDonalds: To offer the fast food customer food prepared in the same high quality manner world wide, tasty and reasonable priced, delivered in a consistent, low-key decor and friendly atmosphere.

Establishing Strategic Business Units

A business must be viewed as a customersatisfying process, not a goods-producing process. Companies should define their business in terms of customer needs, not products. Companies have to identify those of its businesses that they must manage strategically (Example: Holiday Inns, Trailways
and Delta Steamship Experience).

Characteristics of a Strategic Business Unit (SBU)

Companies have to identify those of its businesses that they must manage strategically. These businesses are called strategic business units. 1. It is a single business or collection of related businesses that can be planned for separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profits.

Assigning Resources to each SBU

Analytical tools are needed for classifying businesses by profit potential, for decisions on whether to build, maintain, harvest, or divest individual SBUs.

One well-known business portfolio evaluation models is the Boston Consulting Group (BCG) growth/share matrix.

BCG Growth/Share Matrix

Example: Company with 10 SBUs
20%

Star

Question Mark

Market Growth Rate

High

Build or Harvest

Low

Cash Cow
0%
Circle size = dollar volume size of SBU

Hold 1.0

Dog Low

Divest or Harvest

High

Relative Market Share

Analyzing Current SBUs: Boston Consulting Group Approach

Stars
Market Growth Rate High Low
High growth & share Profit potential May need heavy investment to grow

Question Marks

High growth, low share Build into Stars or phase out Require cash to hold market share

Cash Cows
Low growth, high share Established, successful SBUs Produce cash

Dogs
Low growth & share Low profit potential

High Relative Market Share

Low

BCG Growth/Share Matrix

What objective, strategy and budget to assign to each SBU. Four alternative objectives can be pursued for each SBU: Build: Increase SBUs market share. Hold: Preserve SBUs market share.

Harvest: Increase short-term cash flow.

Divest: Sell or liquidate.

Developing Growth Strategies

Ansoff product-market expansion grid

Figure 3-5: Market opportunity identification through the product-market expansion grid

Developing Growth Strategies

Intensive growth opportunities
Identify further opportunities to achieve growth within the companys current business. Market penetration strategy
(increase in existing market + with existing products)

Market developing strategy

(look new markets with current products).

Product development strategy

(Grow in existing market with modified or new products)

Developing Growth Strategies

Diversification growth opportunities
Identify opportunities to add attractive businesses that are unrelated to the companys current businesses. Concentric diversification strategy: Company seeks new products that have technological and/or marketing synergy with existing product lines, even though the product may appeal to a new class of customers.

Developing Growth Strategies

Horizontal diversification strategy: Company searches for new products that could appeal to its current customers though technologically unrelated to its current product line. (Ex. Selling perfume, T-shirts) Conglomerate diversification strategy: New business with no relationship to the current technology, products, or markets. (Ex: selling retirement homes).

Developing Growth Strategies

Integrative growth opportunities Backward integration: A hotel company acquiring one of its suppliers. (Ex: Marriott Restaurant Distribution System) Forward integration: A hotel company acquiring tour wholesaler or travel agents. Horizontal integration: A hotel company acquiring one or more competitors, provided the government does not bar the move.

Integration Growth
VERTICAL INTEGRATION Toward the Source of Supply Backward

HORIZONTAL INTEGRATION

Similar Businesses Acquired Forward Toward the Customer

Business Strategy Planning Steps

1. Business mission
Specific mission of each SBU

2. SWOT Analysis

3. Internal environment analysis

(strengths and weaknesses)

Business Strategy Planning

4. External environment analysis
(opportunities and threats) Key macroenvironmental forces

Significan Microenvironmental forces

Goals should arise from business analysis, not from wishful thinking. Measurable goals Profitability, sales growth, market share

5. Goal Formulation (What do we achieve?)

Business Strategy Planning

6. Strategy Formulation (How do we get there?)
Every business must tailor a strategy for achieving its goals Michael Porters three generic types of strategy: Overall cost leadership Differentiation Focus on narrow market segments
Strategic Alliances: partnership with domestic or multinational companies that complement or leverage their capabilities and resources to achieve leadership nationally or globally.

Business Strategy Planning

7. Program formulation. A company must
develop hiring, training, advertising, and other programs to support its strategy.

8. Implementation. A firm must communicate its

strategy to its employees and it must have the resources to carry out its strategy.

9. Feedback and control are absolutely necessary

to track results and monitor new developments in the environment.

Next Chapter 4 The Marketing Environment