sem 1 i-topic-7-str pla

STRATEGIC PLANNING IN THE MARKET PROCESS

CORPORATE/DIVISIONAL STRATEGIC PROCESS

• DEFINING CORPORATE MISSION• ESTABLISHING SBUs• RESOURCE ALLOCATION TO EACH SBU• PLANNING NEW BUSINESS• EXITING OLD ONES

• DEFINING CORPORATE MISSION• A CLEARLY DEFINED MISSION STATEMENT SPELLS OUT THE

BASIC OBJECTIVE FOR WHICH COS EXIST• MUST SPELL OUT WHO ARE THE CUSTOMERS VALUE

PROPOSITION IN MIND FOR THEM

THE FACTORS EFFECTING MISSIONS • HISTORY/BACKGROUND• CURRENT TRENDS• RESOURCES• BASIC DISTINCT STRENGTH

• THE MISSION STATEMENT SHOULD BE COMMUNICATED DOWN THE LINE. IT SHOULD FOCUS ON

• I)CLEARLY DEFINED LIMITED GOALS• II)POLICIES• III)DEFINE COMPETITIVE SCOPE PARAMETES WITHIN WHICH

IT WILL OPERATE

COMPETITIVE SCOPE

• -RANGE OF INDUSTRIES• -PRODUCTS RANGE/APPLICATION• -RANGE OF COMPETENCIES• -MARKET SEGMENT SCOPE• -GEOGRAPHICAL SCOPE

• MISSION STATEMENTS SHOULD NOT BE REVISED EVERY FEW YEARS IN RESPONSE TO ECONOMIC UPS/DOWNS

• IF, HOWEVER,THE MISSION HAS OUTLIVED ITS CREDIBILITY OR CANNOT DEFINE AN OPTIMAL COURSE FOR THE CO, THEN IT NEEDS TO BE REVISED.

ESTABLISHING STRATEGIC BUSINESS UNITS

• AN SBU HAS THE FOLLOWING CHARACTERISTICS• -COLLECTION OF SINGLE BUSINESS/COLLECTION OF

RELATED BUSINESS GENERALLY PLANNED SEPARATELY FROM REST OF THE CO

• -IT HAS ITS OWN SET OF COMPETITORS

• -HAS AN INDEPENDENT MANAGER WHO IS ACCOUNTABLE FOR PERFORMANCE&PROFITS

• RESOURCE ALLOCATION TO SBUs • THE PURPOSE OF MAKING SBUs IS TO IDENTIFY

SUCCESSFUL STRATRGIES FOR EACH SBU AND ALLOCATE RESOURCES ACCORDINGLY.

BCG MATRIXMARKET GROWTH /SHARE MATRIX

(Hold)

STARS

(Build)

QUESTION MARKS

CASH COWS

(Harvest)

DOGS (Divest)

Market Growth Rate

High

Low

MARKET SHARE

High Low

• This framework assumes that increase in market share leads to an increase in cash due to experience curve.

• Another assumption that growing market needs additional cash to expand its capacity.

• THUS THE POSITION ON BCG INDICATES ITS CAPACITY TO GENERATE CASH

• BCG matrix reasons that cash for business can be obtained from other businesses

• By investing in a growing market the co can become a market leader by virtue of experience curve.

• Question Marks• Have low market share/ high growth rate. Because of high

growth rate consume a lot of cash. Because of low market share produce low cash. Hence, cash consumption is high. Often referred to as “problem child”

• Stars• Have high growth rate/ market share.

• Cash Cows• A leader in mature market, cash cows give a return higher on

assets than market growth rate.Such business should be “milked” with as little investment as possible.

• Dogs• With low market share in a low growth , they do not

generate any cash. They are basically cash traps.

GE MATRIX

High Medium Low

High

Medium

Low

Business Unit Strength

Mar

ket

Att

ract

iven

ess

High Medium Low

High Protect

Position

Invest To

Re-build

Build

Selectively

Medium

Build

Selectively

Selectivity Ltd

Expansion/Harvest

Low Protect/

Refocus

Manage For

earnings

Divest

GE MATRIX-Contd/-

• The GE model is more sophisticated than BCG in three major aspects• a) Market Attractiveness replaces growth rate

• b) Competitive Strength replaces market share

• C) GE is a 3X3 grid while BCG is a 2X2 grid.

• Factors effecting Market Attractiveness• Mkt size• Mkt growth rate• Mkt profitability• Pricing trends• Competitive intensity/rivalry• Overall risk of return in the industry• Entry barriers• Opportunity to differentiate products/services

• Demand variability• Segmentation• Distribution• Technological development

• Factors effecting Competitive Strength of A SBU• Strength of assets/competencies• Relative brand strength• Mkt Share• Mkt share growth• Customer loyalty• Relative cist position• Relative profit margin• Production capacity/Distribution strength• Technological development• Quality• Access to finance/invest resources• Management strength

PLANNING NEW BUSINESS

• INTENSIVE GROWTH

• INTEGRATIVE GROWTH

• DIVERSIFICATION

• DOWNSIZING OLDER BUSINESS

INTENSIVE GROWTH

• IN THIS STRATEGY THE CO EXAMINES ALL THE POSSIBLE GROWTH AREAS

• -INCREASING MKT SHARE WITH EXISTING PRODUCTS

• -DEVELOPING MORE MKTS FOR EXISTING PRODUCTS

• -DEVELOPING NEW PRODUCTS FOR ITS EXISTING MKTS

• -ADDING ATTRACTIVE BUSINESSES UNRELATED TO ITS PRESENT BUSINESS

INTEGRATIVE GROWTH

• INTEGRATING WITH OTHER BUSINESS TO INCREASE THE COS EARNINGS

• -FORWARD INTEGRATION

• -BACKWARD INTEGRATION

• -HORIZONTAL INTEGRATION

DIVERSIFICATION

• DIVERSIFICATION IS DESIRABLE WHEN MORE ATTRATIVE OPPORTUNITIES EXIST OUTSIDE THE PRESENT BUSINESS

• -THE INDUSTRY SEGMENT BEING PLANNED TO ENTER MUST HAVE GROWTH POTENTIAL

• -THE CO MUST HAVEEXPERTISE IN THE AREA

• A CO CAN DIVERSIFY BY• i) OFFERING NEW PRODUCTS TO EXISTING CUSTOMERS• ii) OFFERING NEW PRODUCTS TO NEW CUSTOMERS• iii) VENTURING INTO TOTALLY UNRELATED AREAS

DOWNSIZING OLDER BUSINESS

• THE CO SHOULD LEARN TO EXIT FROM UNPROFITABLE BUSINESS AS IT CAUSES A DRAIN ON ITS EFFORTS

• EXITTING RELEASES RESOURCES WHICH CAN BE USED PRIODUCTIVELY ELSEWHERE

• POINTLESS TRYING TO SALVAGE LOSING BUSINESS

SWOT ANALYSIS

• OPPORTUNITIES

• EXTERNAL ANALYSIS

• THREATS

• STRENGTHS• INTERNAL ANALYSIS• WEAKNESSES

• GOAL FORMATION • THE PROCESS BY WHICH SPECIFIC OBJECTIVES ARE SPELT OUT

WITH RESPECT TO TIME AND MAGNITUDE.

STRATEGIC FORMULATION• Strategies are game plan for achieving results

• According to Michael Porter the generic strategies can be classified into three categories:

• a) Cost Leadership

• b) Differentiation

• c) Focus Strategy

THE MARKETING PROCESS

• VALUE DELIVERY SEQUENCE

• MANAGEMENT SEGMENTATION

• TARGET MARKET

• CREATE VALUE PROPOSITION

• DEVELOP MARKET STRATEGIES

• PLANNING MARKET PROGRAM

• MANAGING THE MARKET EFFORT

EXECUTING THE MARKET PLAN

• SALES TARGETS

• BUDGETS

• TRAINING SALES PERSONNEL

• DECIDING THE MARKETING CHANNEL

• ORGANISING PROMOTIONS

BCG MATRIX