Chap 1 marketing and the concept of planning and strategy

Chapter 1Marketing and the Concept of Planning and Strategy A.. Importance of Business Planning TM 1-2 B.. Steps to Make Strategic Planning Effective TM 1-6 3.. Scorecard for Measuring S

Chapter 1

Marketing and the Concept of Planning and Strategy

A Concept of Planning

1 Definition of Planning (TM 1-1)

2 Importance of Business Planning (TM 1-2)

B Concept of Strategy

1 Definition of Strategy (TM 1-3)

2 Importance of Strategy (TM 1-4)

C Concepts of Strategic Planning

1 Definition of Strategic Plan (TM 1-5)

2 Steps to Make Strategic Planning Effective (TM 1-6)

3 Scorecard for Measuring Strategic Planning Effort (TM 1-7)

4 Strategic Planning: Emerging Perspectives (TM 1-8)

D SBUs

1 What is an SBU? (TM 1-9)

2 Creation of SBUs (TM 1-0)

3 Characteristics of a Viable SBU (TM 1-11)

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DEFINITION OF PLANNING

A process directed toward making today’s

decisions with tomorrow in mind and a means of

preparing for future decisions so that they may be

made rapidly, economically, and with as little

disruption to the business as possible

IMPORTANCE OF BUSINESS PLANNING

 Leads to better standing for organization

 Helps organization progress in ways management considers suitable

 Helps manager think, decide, and act more

effectively

 Helps keep organization flexible

 Stimulates cooperative, integrated, enthusiastic

approach to problems

 Indicates how to evaluate progress toward planned objectives

 Leads to socially and economically useful results

DEFINITION OF STRATEGY

Strategy is a pattern of major objectives, purposes,

or goals and essential policies and plans for

achieving those goals, stated in such a way as to

define what business the company is in or is to be

in and the kind of company it is or is to be

IMPORTANCE OF STRATEGY

Any organization needs strategy when:

 Resources are finite

 There is uncertainty about competitive strengths and behavior

 Commitment of resources is irreversible

 Decisions must be coordinated between far-flung places and over time

 There is uncertainty about control of initiative

DEFINITION OF STRATEGIC PLAN

Strategic plan specifies the sequence and timing of

steps that alter competitive relationships

PLANNING EFFECTIVE

 Define goals clearly

 Develop rational plans

 Shape company into logical business units

 Demonstrate willingness to compensate line

managers on long-term achievements

 Develop at corporate level capacity to evaluate and balance competing requests from business units for funding

 Match shorter-term business unit goals to a long-term concept of the company’s evolution

SCORECARD FOR MEASURING STRATEGIC PLANNING EFFORT

 Is our planning really strategic?

— Do we try to anticipate change or only project from the past?

 Do our plans leave room to explore strategic alternatives?

— or do they confine us to conventional thinking?

 Do we have time and incentive to investigate truly important

things?

— or do we spend excessive planning time on trivia?

 Have we ever seriously evaluated a new approach to an old

market?

— or are we locked into the status quo?

 Do our plans critically document and examine strategic

assumptions?

— or do we not really understand the implications of the plans

we review?

 Do we consistently make an attempt to examine consumer,

competitor, and distributor responses to our programs?

— or do we assume that changes will not affect the

relationships we have seen in the past?

Source: Thomas P Hustad and Ted J Mitchell, “Creative Market Planning in a Partisan Environment,” Business

Horizons, March–April, 1982, p 64 Copyright, 1982, by the Foundation for the School of Business at

Indiana University Reprinted by permission.

EMERGING PERSPECTIVES

 Managing for competitive advantage

 Viewing change as an opportunity

 Managing through people

 Shaping the strategically managed organization

 Managing for focus and flexibility

 Managing fit across all functions

 Harnessing information

WHAT IS AN SBU?

An SBU is composed of a product or product lines

with identifiable independence from other products

or product lines in terms of competition, prices,

substitutability of product, style/quality, and impact

of product withdrawal It is around this configuration

of products that a business strategy should be

designed

CREATION OF SBUs

Strategic business units may be created by applying

a set of criteria consisting of price, competitors,

customer groups, and shared experience:

a Price—To the extent that price changes in a

product entail a review of the pricing policy of

other products, these products may have a

natural alliance

b Competitors—If various products/markets

of a company share the same group of

competitors, they may be amalgamated into an

SBU for the purpose of strategic planning

c Customers—Products/markets sharing a

common set of customers belong together

in different parts of the company having

com-mon R&D, manufacturing, and marketing

components may be included in the same SBU

CHARACTERISTICS OF A VIABLE SBU

 Have a unique business mission, independent of

other SBUs

 Have a clearly definable set of competitors

 Be able to carry out integrative planning relatively independent of other SBUs

 Be able to manage resources in all areas

 Be large enough to justify senior management

attention, but small enough to serve as a useful focus for resource allocation