Chapter 2: Company and Marketing Strategy: Partnering

to Build Customer Relationships:

STRATEGIC PLANNING:
The process of developing and maintaining a strategic fit between the organizations goals and
capabilities and its changing marketing opportunities is called Strategic planning.
Steps in the Strategic Planning:

DEFINING THE COMPANY MISSION:

The Mission Statement:

A statement of the organizations purpose -what it wants to accomplish in
the larger environment.
Characteristics of the Mission statement.

The mission statement should be market oriented and defined in terms of the
customer needs.

The mission statement Should be realistic.

The mission statement should be specific.

The mission statement should fit the market environment.

The mission statement should be based on distinctive competencies.

The mission statement should be motivating.

The Pepsi Co Mission Statement:

"To be the world's premier consumer products company focused on convenient foods and
beverages. We seek to produce healthy financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive for honesty,
fairness and integrity."
DESIGNING THE BUSINESS PORTFOLIO
The business portfolio is the collection of businesses and products that make up the
company.
Guided by the companys mission statement and objectives, management must plan its
Business Portfolio. The best business portfolio is the one that best fits the companys
strengths and weakness to opportunities in the environment.
Business Portfolio planning involves two steps.
1. The company must analyze its current business portfolio and decide which business
should receive more, less or no investment.
2. The company must shape the future portfolio by developing strategies for growth and
downsizing.
Step I. Analyzing the Current Business Portfolio:
Portfolio Analysis: The process by which management evaluates the products and
businesses making up the company.
Managements first step is to identify the key businesses making up the company. These
can be called Strategic Business Units (SBUs).
A Strategic Business Unit (SBU) is a unit of the company that has separate mission and
objectives and that can be planned independently from other companys businesses.

An SBU can be a company division, a product line within a division, or sometimes a

single product or brand.

The next step in the business portfolio analysis calls for management to assess the
attractiveness of various SBUs and decide how much support each deserves.
The purpose of strategic planning is to find ways in which the company can best use its
strengths to take advantage of attractive opportunities in the environment.
The best known portfolio planning method was developed by the Boston Consulting
Group, a leading management consulting firm.
The BCG Growth Share Matrix:
A portfolio planning method that evaluates a companys strategic business units in terms
of their market growth rate and relative market share.
SBUs are classified as STARS, CASH COWS, QUESTION MARKS, or DOGS.
BCG Growth-Share Matrix

Stars

High share of low growth market.

Build into cash cow via investment.

Cash Cows

High share of low growth market.

Maintain or harvest for cash to build STARS.

Question Marks

Low share of high growth market.

Build into STAR via investment if warranted, or reallocate financing and let slip
into DOG status.

Dogs

Low share of low growth market. Maintain or divest.

BCG Growth-Share Matrix

Problems with Matrix Approaches

Can be difficult, time consuming, and costly to implement.

Difficult to define SBUs and measure market share and growth rate.

Focus is on current businesses; gives little help with future planning.

Can place too much emphasis on growth.

Step II. Developing strategies for growth and Downsizing

Marketing has the main responsibility for achieving profitable growth for the company.
Marketing must identify, evaluate, and select market opportunities and lay down strategies for
collecting them. One useful device for identifying growth opportunities is the Product/Market
Expansion Grid.

Product/Market Expansion Grid

EXAMPLE: Product/Market Expansion Grid Based on Starbucks

Market Penetration:

Review new demographic (seniors/ethnic consumers) or geographic

(Asian, European, Australian, & South American) markets.

Product Development: offering modified or new products to current markets.

Add new stores in current market areas; improve advertising, prices, menu, and
service.

Market Development: identify and develop new markets for current products.

make more sales to current customers without changing products.

Add food offerings, sell coffee in supermarkets, co-brand products.

Diversification: start up or buy businesses outside current products and markets.

Making and selling CDs, testing restaurant concepts, or branding casual clothing.

Downsizing:
Reducing the business portfolio by eliminating the products or business units that are not
profitable or that no longer fit the companys overall strategy.

MARKETING STRATEGY AND THE MARKETING MIX:

Marketing strategy: The marketing logic by which the business units hopes to achieve its
marketing objectives.
Customer centered marketing strategy:
Companies know that they cannot profitably serve all consumers in a given market-at least not
all consumers in the same way. There are too many different kinds of consumers with too many
different kinds of needs.
And most companies are in a position to serve some segments better than the others. Thus each
company must divide up the total market, choose the best segments, and design strategies for
profitably serving chosen segments. This process involves three steps.
1. Market Segmentation
2. Target Marketing
3. Market Positioning
I.

Market Segmentation

Market segmentation is the process of dividing a market into distinct groups of buyers
with different needs, characteristics, or behavior who might require separate products of
marketing programs.
A market segment consists of consumers who respond in a similar way to a given set of
marketing efforts.
II.

Target Marketing

Target Marketing involves evaluating each market segments attractiveness and selecting
one or more segments to enter.
Target segments that can sustain profitability.

 Alternatively, a company might choose to serve several related segments- perhaps those
with different kinds of customers but with same basic wants.

III.

Market Positioning:

Arranging for a product to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Process begins with differentiating the companys marketing offer so it gives consumers
more value.

The Marketing Mix

The set of controllable, tactical marketing tools (product, place, price, promotion) that the
firm blends to produce the response it wants in the target market.
Also called 4Ps of Marketing
Product:
Product means goods and services combination, the company offers to target market.
Product concept includes Variety, Quality, Design, Features, Brand name, packaging, services
etc.
Price:
Price is the amount of money customers have to pay to obtain the product.
Price includes List price of the product, discounts, allowances, payment period, credit terms
etc.
Place:
Place includes the company activities that make the product available to target customers.
Place includes Channels, Coverage, Locations, Inventory, transportation, logistics etc
Promotion:
Promotion means activities that communicate the merits of the products and persuade the
target customers to buy it.
Advertising, Sales promotion, personal selling, public relations etc are coming under the
Promotion concept.

SWOT ANALYSIS
An overall evaluation if the companys strength (S), weakness (W), Opportunities (O), and
Threats (T) is called SWOT analysis.