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