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Strategic Marketing Management

Dr. Hesham O. Dinana

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Stage One

Where Are We Now?

Strategic Analysis

Stage Two

Where Do We Want To Be?Strategic Direction and Strategy

formulation

Stage Three

How Might We Get There?Strategic Choice

Stage Four

Which Way Is Best?Strategic Evaluation

Stage Five

How Can We Ensure Arrival?Strategic Implementation and Control

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Identify StrategicFramew ork

Assess Enterprise

Environment and Inte rnalCapabilities

Formulate Strategic Plan

Update PerformanceMeasure Score Cards

Monitor and EvaluatePerformance

Implemet Strategic Plan

Strategic Planning Process

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Stage One

Where Are We Now?Strategic and Marketing Analysis

Approaches to

Customer

Analysis

Approaches to

Competitor

Analysis

Segmental,

Productivity

&

Ratio

Analysis

Marketing

Auditing

&

SWOT

Analysis

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Stage Two

Where Do We Want To Be?Strategic Direction and Strategy

formulation

Market Segmentation,

Targeting

and

Positioning

Missions

and

Objectives

The

Formulation

of

Strategy

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Stage Three

How Might We Get There?Strategic Choice

The Distribution

Plan

The

Promotional

Plan

Pricing

Policies

and

Strategies

Product and

Service

Strategies

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Stage Four

Which Way Is Best?Strategic Evaluation

Criteria

of

Choice

Modeling

Approaches

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Stage Five

How Can We Ensure Arrival?

Strategic Implementation and Control

Problems

to

Overcome

Management

Control

Measurement

System

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Stage One

Where are We Now?

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Strengths and Weaknesses Analysis

Strengths

Performance Importance

Fundamental strength

Marginal

strength

Neutral

Marginal

weakness

Fundamental

weakness

High Medium Low

Marketing Factors

Financial Factors

Manufacturing Factors

Organizational Factors

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MARKERTING FACTORSMARKERTING FACTORS

1-relative market share 9-product quality 17-after sales services

2-reputation 10-programme of product

modification

18-manufacturing costs

3-previous performance

11-new product program

19-manufacturing flexibility

4-competitive stance 12-distribution costs 20-raw material advantage

5-customer base 13-dealer network 21-pricing

6-customer loyalty 14-dealer loyalty 22-advertising

7-breadth of product range

15-geographical coverage

23-unique selling propositions

8-depth of product range

16-sales force 24-structure of competition

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Financial FactorsFinancial Factors

25.25. Cost of capitalCost of capital

26.26. Availability of capitalAvailability of capital

27.27. ProfitabilityProfitability

28.28. Financial stabilityFinancial stability

29.29. MarginsMargins

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Manufacturing factorsManufacturing factors

30.30. Production facilitiesProduction facilities

31.31. Economies of scalesEconomies of scales

32.32. FlexibilityFlexibility

33.33. WorkforceWorkforce

34.34. Technical skillTechnical skill

35.35. Delivery capabilitiesDelivery capabilities

36.36. Supplier sourcing flexibilitySupplier sourcing flexibility

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Organizational factorsOrganizational factors

37.37. CultureCulture

38.38. LeadershipLeadership

39.39. Managerial capabilitiesManagerial capabilities

40.40. WorkforceWorkforce

41.41. FlexibilityFlexibility

42.42. Adaptability Adaptability

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The TOWS Matrix

Internal elements

External elements

Organizational strengths

Organizational weaknesses

Strategic options

Environmental opportunities (and risks)

SO: Strengths can be used to capitalize or build upon existing or emerging opportunities

WO : The strategies developed need to overcome organizational weaknesses if existing or emerging opportunities are to be exploited

Environmental threats

ST : Strengths in the organization can be used to minimize existing or emerging threats

WT : The strategies pursued must minimize or overcome weaknesses and as far as possible cope with threats

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The TOWS framework

Step 1. Prepare a profile of the enterprise which embraces (a) the type of business: (b) its geographic domain: (c) the competitive situation; and (d) the preoccupations and culture of the senior management team

Step 2 : Identify and evaluate the economic, social, political, demographic, products and technology, and market/competitive environments.

Step 3 : Prepare a forecast, make predictions and assess the future

Step 4 : Prepare a detailed strengths and weaknesses audit of (a) the management and organization; (b) operations; (c) finance, (d) marketing; and (e) the other parts of the organization.

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Step 5 : Identify the strategic choices facing the organization.

Step 6 : Make the strategic choices.

Step 7 : Prepare the contingency plans.

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Strategic Audit Characteristics

• Comprehensive• Systematic• Independent• Periodic

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Market Audit

MarketingEnvironment

MarketingFunctions

Task Environment

DistributionDistribution

PromoPromoPricePrice

Sales ForceSales ForceProductsProducts

MarketsMarkets

PRPRAgenciesAgencies

SuppliersSuppliers

DealersDealersCompetitorsCompetitors

Macro Environment

Economic/Economic/Demog.Demog.

EcologicalEcological

Techno.Techno.

Social/Social/CulturalCultural

Political/Political/LegalLegal

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The Strategic Audit

• The Environment Audit• The Strategy Audit• The Organization Audit • The Systems Audit • The Productivity Audit• The Functions Audit

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• The Environment Audit– The Macro Environment

• Political/Legal/Fiscal• Economic/Demographic• Social/Cultural• Technological• Ecological

– The Task Environment• Markets• Competitors• Distributors/Dealers• Suppliers• Advertising/PR Agencies

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• The Strategy Audit– The business Mission– Corporate & Marketing Objectives– Marketing Strategy

• The Organization Audit– Organization– Functional Efficiency

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• The Systems Audit– Information Systems– Planning Systems– Control Systems– New Product Systems

• The Productivity Audit– Profitability Analysis– Cost-effectiveness Analysis

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• The Functions Audit– Products– Price– Distribution– Sales Force– Advertising & Promotion

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Summary of Key Financial RatiosSummary of Key Financial Ratios

Profitability ratios

Liquidity ratios

Leverage ratios

Activity ratios

1. Inventory turnover

2. Fixed-assets turnover

3. Total-assets turnover

4. Account receivable turnover

5. Average collection period

1. Debt to assets ratio

2. Debt to equity ratio

3. Long-term debt to equity ratio

4. Times-interest-earned (or coverage ratios)

5. Fixed-charge coverage

1. Current ratio

2. Quick ratio (or acid-test ratio)

3. Cash ratio

4. Inventory to net working capital

1. Gross profit margin

2. Operating profit margin

3. Net profit margin (or return on sales)

4. Return on total assets

5. Return on stockholders’ equity (or return on net worth)

6. Return on common equity

7. Earnings per share

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The Functions Audit Products/service

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Stage TwoStage Two

Where Do We Want to Be?

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Vision

Vision is the art of seeing things invisible

Jonathan Swift

The Best Way to Predict the Future is to Invent it

Dennis Gabor

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Vision

Goals

Objectives

(sub-goals)

Strategies

Mission

1-Market segment scope

2-Industry scope

3-Technology scope

4-Vertical scope

5-Geographical scopeHow to

achieve

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Focus/Niche

DifferentiationCost

Leadership

Porter’s three generic strategiesPorter’s three generic strategies

Middle of The road

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Porter’s three generic Porter’s three generic strategiesstrategies

Type of strategies

Ways to achieve the strategy

Benefits Possible problems

Cost Leadership

Size and economies of scale GlobalizationRelocating to low-cost parts of the worldModification/simplification of designsGreater labour effectivenessGreater operating effectivenessStrategic alliancesNew source of supply

The ability to: outperform rivals erect barriers to entry resist the five forces

Vulnerability to even lower cost operatorsPossible price warsThe difficulty of sustaining it in the long term

Focus Concentration upon on or a small number of a strong and specialist reputation

A more detailed understanding of particular segmentsThe creation of barriers to entryA reputation for specializationThe ability to concentrate efforts

Limited opportunities for sector growthThe possibility of outgrowing the marketThe decline of the sectorA reputation for specialization which ultimately inhibits growth and development into other sectors

Differentiation The creation of strong brand identitiesThe consistent pursuit of pursuit of those factors which customers perceive to be importantHigh performance in one or more of a spectrum of activities

A distancing from others in the marketThe creation of a major competitive advantageFlexibility

The difficulties of sustaining the bases for differentiationPossibly higher costsThe difficulty of achieving true and meaningful differentiation

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Different Strategies

ExitExit

M&AM&A

Special Special AdvantageAdvantage

OrganizationOrganizationDesignDesign

ProductionProductionImprovementImprovement

MarketingMarketingMix positioningMix positioning

MarketMarkettargetingtargeting

New productNew product

PRINCIPLES OF DEFENSIVE MARKETING WARFAREPRINCIPLES OF DEFENSIVE MARKETING WARFARE

1. ONLY THE MARKET LEADER SHOULD CONSIDER PLAYING DEFENSE.2. THE BEST DEFENSIVE STRATEGY IS THE COURAGE TO ATTACK.3. STRONG COMPETITIVE MOVES SHOULD ALWAYS BE BLOCKED.

PRINCIPLES OF OFFENSIVE MARKETING WARFAREPRINCIPLES OF OFFENSIVE MARKETING WARFARE

1. THE MAIN CONSIDERATION IS THE STRENGTH OF THE LEADER’SPOSITION2. FIND WEAKNESS IN THE LEADER’S STRENGTH AND ATTACK AT THAT POINT.3. LAUNCH THE ATTACK ON AS NARROW A FRONT AS POSSIBLE.

PRINCIPLES OF FLANKING MARKETING WARFAREPRINCIPLES OF FLANKING MARKETING WARFARE

1. A GOOD FLANKING MOVE MUST BE MADE INTO AN UNCONTESTED AREA.2. TACTICAL SURPRISE OUGHT TO BE AN IMPORTANT ELEMNT OF THE PLAN.3. THE PURSUIT IS AS CRITICAL AS THE ATTACK ITSELF.

PRINCIPLES OF GUERRILLA MARKETING WARFAREPRINCIPLES OF GUERRILLA MARKETING WARFARE

1. FIND A SEGMENT OF THE MARKET SMALL ENOUGH TO DEFEND.

2. NO MATTER HOW SUCCESSFUL YOU BECOME, NEVER ACT LIKE THE LEADER.

3. BE PREPARED TO BUGOUT AT A MOMENT’S NOTICE.

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Choosing a Specific Positioning

•Best quality•Best performance•Most reliable•Most durable•Safest•Fastest•Best value for the money•Least expensive•Most prestigious•Best designed or styled•Easiest to use•Most convenient

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Choosing a Value Positioning

• More for More.Example : Mont Blanc, Gucci apparel, Haagen-DazsExample : Mont Blanc, Gucci apparel, Haagen-Dazs

• More for the Same.Example: Lexus automobileExample: Lexus automobile

• The Same for Less.Example: Arrow shirts, Goodyear tires, Panasonic TVExample: Arrow shirts, Goodyear tires, Panasonic TV

• Less for Much Less.Example: VCRs offering fewer featuresExample: VCRs offering fewer features

• More for LessExample: Toys ‘R’ Us, Wal-Mart store Example: Toys ‘R’ Us, Wal-Mart store

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VALUE DISCIPLINESOPERATIONAL EXCELLENCE

PRODUCT LEADERSHIP

CUSTOMER INTIMANCY

Core Business Processes that….

Sharpen distribution systems and provide no hassle service

Nurture ideas, translate them into products, and market them skillfully

Provide solutions and help customers run their businesses

Structure that…. Has strong, central authority and a finite level of empowerment

Acts in an ad hoc, organic, Loosely knit, and ever-changing way

Pushes empowerment close to customer contact

Management System that….

Maintain standard operating procedures

Reward individuals’ innovative capacity and new product success

Measure the cost of providing service and of maintaining customer loyalty

Culture that… Acts predictably and believes “one size fits all”

Experiments and thinks “out-of-the-box”

Is flexible and thinks “have it your way”

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Pricing strategies

• Payment method (strategy)• Quantity discount (strategy)• Seasonal pricing effects

(strategy)• Channel pricing (strategy)

• Pricing Methods:• Cost plus (add profit % over the COGS)company

prospective• Market based (competitor prospective)Market based (competitor prospective)• Value based (customer prospective and not usually Value based (customer prospective and not usually

used in egypt as it is based on market research)used in egypt as it is based on market research)• Regulated price (done by governments)Regulated price (done by governments)

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Stage ThreeStage Three

How might We Get There?

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Product Change Options

We are More

Expensive

We are Cheaper

We are Better

We are Inferior

No Excuses•Value Engineering•Switch to Competitor’s Parts

•Closer Examination•Reconsider Price or Promotion•Value Engineering

•Leave it Alone•Cover it Up•Upgrade•No Change

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Product Component Model

• Repairand

maintenance

SUPPORT SERVICESCOMPONENT

CORECOMPONENT

• Installation

• Instructions

• Other related services

• Deliveries

• Warranty

• Spareparts

• Legal

• Trademark

• Brandname

• Legal

• Product platform

• Design features

• Functional features

• Legal

PACKAGINGCOMPONENT

• Price

• Quality

• Package

• Styling

© The McGraw-Hill Companies, Inc., 1999

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Nine Ways to Build Demand

Products

Existing Modified New

Existing Sell more of our existing products to our existing types of customers. (Market penetration)

Modify our current products and sell more of them to our existing customers. (Product modification)

Design new products that will appeal to our existing customers. (New product development)

Markets Modified

Enter and sell our products in other geographical areas. (Geographical expansion)

Offer and sell modified products to new geographical markets.

Design new products for prospects in new geographic areas.

New Sell our existing products to new types of customers. (Segment invasion)

Offer and sell modified products to new types of customers.

Design new products to sell to new types of customers. (Diversification)

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Using the Consumption Chain to Find New OpportunitiesUsing the Consumption Chain to Find New Opportunities

1. How do people become aware of their need for your products or service?

2. How do consumers find your offering?

3. How do consumers make their final selections?

4. How do consumers order and purchase your product or service?

5. How is your product or service delivered?

6. What happens when your product or service is delivered?

7. How is your product installed?

8. How is your product or service paid for?

9. How is your product stored?

10. How is your product moved around?

11. What is the customer really using your product for?

12. What do customers need help with when they use your product?

13. What about returns or exchanges?

14. How is your product repaired or serviced?

15. What happens when your product is disposed of or no longer used?

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Advertising Sales Promotion Public Relations

Sales Force

Direct Marketing

Print and broadcast ads

Contests, games, sweep

Press kits Sales presentations

Catalogs

Packaging-outer Stakes, lotteries Speeches Sales meetings

Mailings

Packaging inserts Premiums and gifts Seminars Incentive programs

Telemarketing

Motion pictures Sampling Annual reports Samples Electronic shopping

Brochures and booklets

Fairs and trade shows

Charitable donations

Fairs and trade shows

TV shopping

Posters and leaflets Exhibits Sponsorships Fax mail

Directories Demonstrations Publications E-mail

Reprints of ads Coupons Community relations

Voice

Billboards Rebates Lobbying

Display signs Low-interest financing

Identity media

Point-of-purchase Entertainment Company magazine

Displays Trade-in-allowances Events

Audio-visual material Continuity programs

Symbols and logos Tie-ins

Videotapes

Examples of Different Promotion Tools

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Advertising Objectives - AIDA

Awareness/Attention

Interest,

Desire, or

Action

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Advertising Objectives - AIDAAdvertising Objectives - AIDA

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P = publications

E = events

N = news

C = community

I = identity media

L = lobbying activity

S = social responsibility

Public Relations

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Channel & Partner Management Channel Design

Traditional Distribution Channel Alternatives

Broker /Agent

Wholesaler WholesalerManufactu-rer's Branch

Broker /Agent

Retailer Own Store Retailer Retailer Retailer BrokerIndustrial Distributor

Industrial Distributor

Consumer Consumer Consumer Consumer Consumer Consumer Industrial Industrial Industrial IndustrialSegment 1 Segment 2 Segment 3 Segment 4 Segment 5 Segment 6 Segment 1 Segment 2 Segment 3 Segment 4

Manufacturer /Vendor

End Users

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Decision area 1Formulating the channel strategy

Decision area 2Designing the channel structure

Decision area 3Selecting the channel members

Decision area 4Motivating the channel members

Decision area 5Coordinating channel strategy with the

marketing mix

Decision area 6Evaluating the channel member

performance

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Stage FourStage FourWhich Way is Best?

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GE Evaluation Criteria

• Alternative strategies should be evaluated based on their impact on the following:1. Financial Results2. Market Position3. Productivity4. Product leadership5. Employee Attitude6. Personnel Development7. Community Impact8. S/T vs L/T

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Stage FiveStage FiveHow to Ensure Arrival?

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For aGiven set of Goals and strategy

IsLeadershipSuitable?

Are there procedures for implementing monitoring and

evaluating ?

Are Functional

PoliciesAppropriate?

AreCorporate and

FunctionalResources

appropriate?

Can Leadership

BecomeSuitable?

Can cultureBecomeCapable?

Is newSuitable

LeadershipObtainable

?

CanAppropriate

Resources be madeAvailable?

CanOrganizational

Structure becomeAppropriate?

Implementstrategy

Amend

Goals and

strategy

Install

procedures

IsCulture

Suitable?

IsOrganizational

StructureAppropriate?

Can Functional

Policies becomeAppropriate?

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Measurement Score Cards

• Financial Score Card• Marketing Score Card• Stakeholder Score Card