CHAPTER 4
Market-Oriented Strategic Planning
PERSPECTIVES OF THE FIRM
Objective of the firm is to:Maximize profits - EconomistMaximize shareholder value – Financial typeCreate customer-satisfying value at a profit -
MarketingBalance the interest of shareholders, customers,
employees, suppliers, and the community – Management type.
These perspectives shape the strategic planning process within the firm.
THE FIRM AS A SYSTEM
The following are performed:Coordination, integration, Mutual
Purpose, An ObjectiveObjective of superior customer value at
reduced cost provides guidance and direction
Market realities drive the firm
MARKET ORIENTATION
There are three behavioral components:Customer OrientationCompetitor OrientationInter-functional CoordinationThere are two Decision Criteria:Long-Term FocusProfitability
STRATEGIC PLANNING
Developing a game plan for achieving long-run objectives based upon existing opportunities and resources.
Strategy should ensure long-run survival and growth
The aim of strategic planning is to develop a Sustainable Competitive Advantage (Low Cost, Focus, Differentiation, Preemptive Move, Synergy).
Porter’s Generic Competitive Strategies
Porter’s Competitive Strategies
Cost Leadership:– Low-cost competitive strategy
– Aimed at broad mass market
– Aggressive construction of efficient-scale facilities
– Cost reductions
– Cost minimization
Porter’s Competitive Strategies
Differentiation:– Broad mass market
– Unique product or service
– Charge premiums
– Lower customer sensitivity to price
Porter’s Competitive Strategies
Cost focus:
– Low cost competitive strategy
– Focus on particular buyer group or market
– Niche focused
– Seek cost advantage in target market
Porter’s Competitive Strategies
Differentiation focus:– Focus on particular group or geographic
market– Seek differentiation in targeted market
segment– Serve special needs of narrow target market
Stuck in the middle:– No competitive advantage– Below-average performance
STRATEGIC MARKET PLANNING
With Strategic Planning There Are THREE Key Questions:
1.) Where is the firm now?2.) Where does the firm want to be in a specified
time-frame?3.) What is the best way to get there (what actions
should we take and what are the risks and rewards?
This process provides ideas, enable managers to evaluate opportunities, develop and implement plans, and monitor results.
Basic Model of Strategic Management
FOUR BASIC ELEMENTS
STRATEGIC PLANNING PROCESS
Plan (Corporate, Business, Product)
Implement (Organize, Implement)
Control (Measure results Analyze, Take
Corrective Actions).
Mission >>> Objectives & Goals >>> Portfolio Plan >>> Business Plan
STRATEGIC PLANNING PROCESS
Mission – clear statement providing a sense of opportunity and direction in terms of customer needs, groups and technologies
Objectives & Goals – Actionable quantitative and realistic restatement of the mission
Portfolio Plan – Analysis of each business unit of analysis in terms of profitability, market share, attractiveness or other relevant measures (BCG Growth/Share Matrix, GE Multifactor Matrix).
STRATEGIC PLANNING GAP
Kotler identifies the firm’s Strategic Planning Gap as the difference between the actual and desired or expect sales.
For change to occur, the gap must be large enough to move the firm to strategic action.
Once the gap is recognized management can move to fill the gap (Intensive Growth – action within present product-market scope, Integrative Growth opportunities within firm’s market system, Diversification
opportunities outside firm’s marketing system)
GROWTH STRATEGIES
Market Penetration (Present markets & Products)
Product Development - (Present Markets, New Products)
Market Development - (Present Products, New Markets)
Diversification (New Products, New Markets)Vertical Integration