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Summary question 2.3 and 2.4

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C H A P T E R Strategic marketing: an overview

2 About this chapter

Strategic planning aims to integrate and coordinate activity and give focus to the organization. Recognizing that strategic decisions have behavioural, organizational and analytical elements enables many of the barriers to successful implementation to be overcome.

After reading this chapter, you will understand:

The difference between corporate and marketing plans.

Strategic and tactical approaches to marketing.

The reason for, and barriers to, successful planning.

Analytical, behavioural and organizational dimensions of planning.

Structure of a typical strategic marketing plan.

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Translate corporate strategy into marketing objectives (Feedback)

Corporate planning

Objectives

Corporate planning

Marketing strategy

Objectives

Strategy

Marketing tactics Objectives

Actions

Other functional strategies e.g.

Finance HRM

Strategic marketing: an overview

2 . 1 C o r p o r a t e a n d m a r k e t i n g p l a n s

Marketing managers plan in order to complete tasks on time and without exceeding pre-set resource limits. It is likely that objectives, targets and budget will be set as part of the overall corporate planning and budgeting process. The task is to translate these factors into a workable marketing plan.

When developing a plan, the process involves choosing certain courses of action and ruling out other possible options. Planning should be system- atic, structured and involves three key components: (1) objectives – what has to be achieved; (2) strategy (or actions) – defining how the objectives are to be achieved; and (3) resource implications – the resources required to implement the strategy.

Clearly, it is important to understand the interface between marketing and corporate strategy. This is best illustrated by considering the hier- archical structure of an organization. Senior management formulates objectives and strategy for the entire organization (or a strategic business unit – SBU). Managers in various functional areas, such as marketing, contribute to the process by developing specific functional strategies and ultimately tactics to achieve these corporate objectives. Effectively, the process involves a hierarchy of plans, with strategy at one level becoming the objective(s) at the next. Additionally, this process pro- vides feedback on the success/failure of any strategy. Figure 2.1 illustrates the concept.

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Figure 2.1 Corporate and marketing planning hierarchy

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2 . 2 C o r p o r a t e p l a n n i n g

The corporate plan will define objectives for the entire business and should coordinate the various functional strategies (e.g. Marketing, Operations, Human Resource Management, Finance, etc.) to deliver the overall corporate objectives. It is important that functional strategies are interrelated (see Figure 2.1). For example, if the marketing strategy focused on developing high levels of customer service in order to retain key customer groups, both the operations and human resource manage- ment functions would have a role to play in delivering this. Corporate strategy can be summarized as being:

Integrative The process coordinates functional activity towards a common goal and takes a ‘whole organization’ view of the corporation. By defining corporate targets, normally in financial terms, collective tar- gets are set for the functional groups.

Provide focus Strategy defines the scope of the business – general nature of activities and markets served. This strategic direction allows functional areas to develop appropriate strategies and tactics.

Importance By its very nature, corporate strategy is the process of making major business decisions. It defines business direction over the long term and is critical in setting the overall resource profile available to the organization.

Matching There is a need to match the organization’s activities and resource base to the current and future business environment.

A useful summation of corporate strategy management is provided in Figure 2.2. This model takes a top-down view of the overall strategy process. It identifies the five components vital in achieving corporate success:

1 Vision Senior management and other stakeholders must establish an overall vision of what the corporation should be. This defines the basic need they fulfil and establishes the generic direction of the business.

2 Corporate objectives and strategy Collective goals and strategy define the ‘benchmarks’ for success and ways of achieving success. This level coordinates corporate activity and initiates activities to achieve desired results.

3 SBU/functional objectives and strategy Corporate strategy trans- lates into objectives and plans for individual elements of the business. This may take the form of SBUs (Strategic Business Units – divisions within a company) or functional activities. For example, a hotel chain could divide its business into three SBUs – accommodation, food and beverage and conferences and leisure.

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Strategic marketing: an overview

Figure 2.2 The strategic process

Vision

Corporate objectives and

strategy

SBU/functional objectives and strategy

Resources

How will success be defined and how will it be achieved?

Plans for individual business elements

Aligning resources and organizational structure with strategic intent

What sort of business?

Structure

Illustrative example 2.1 Torex: marketing strategy and the ‘drivers’ of change

Rather than trying to cover all possible users, information technology company Torex has two distinct areas of operation – retailing and health care. Having adopted a clear segmentation and targeting strategy, Torex is able to establish a distinct competitive position, setting it apart from more general IT providers. A PEST analysis demonstrates how the organization can benefit from the ‘drivers’ of change. Consider the following statement in terms of Political, Economic, Social and Technological factors.

The UK government’s commitment to modernize the health service (political ) is excellent news for specialist information technology provider Torex. Growing demand for health care (social ) will gener- ate a need to modernize existing health service systems with special- ized health service/care technology. As a provider of computer technology to the medical profession, Torex is well placed to benefit from increased government expenditure (economic). The company is also reported to be working on the ‘Gpnet’ project (technological ) – an electronic information system which links doctors together.

4 Resources For a given strategy, the need exists to match resources to strategic intent. This process normally involves annual budgeting.

5 Structure Management must develop the appropriate organiza- tional and staffing structures to facilitate success.

Successful businesses ensure these factors are aligned in order to turn strategic intent into business reality.

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Consider Torex (see Illustrative example 2.1) in the context of Figure 2.2. Torex aims to achieve strategic success by focusing on two market seg- ments – retail and health care. Given the changing business environment (see PEST), health care would seem to offer huge potential. The company needs to align its resources with government spending plans.

2 . 3 M a r k e t i n g p l a n s : s t r a t e g y o r t a c t i c s ?

There are two types of marketing plan – strategic and tactical. This dis- tinction generates much confusion and debate; is it a strategy or a tactic? This question may be academic when faced with the reality of the busi- ness world, as the distinction between the two will vary from organization to organization and manager to manager. However, much of the confu- sion can be removed if characteristics common to strategic plans and tac- tical plans can be identified.

Strategic marketing Takes a longer-term time frame and broadly defines the organization’s marketing activities. The process seeks to develop effective responses to a changing business environment by analysing markets, segmentation and evaluating competitors’ offerings. Strategy focuses on defining market segments and positioning products in order to establish a competitive stance. Marketing strategy tends to embrace all of the mix, or significant components of the mix (e.g. distribution strategy, communications strategy, etc.). Problems in this area tend to be unstructured and require external, often specula- tive, data.

Tactical marketing This takes a shorter-term time frame and con- cerns day-to-day marketing activities. It translates strategy into specific actions and represents the on-going operational dimension of marketing strategy. Tactical marketing tends to deal with individual components of the marketing mix elements (e.g. sales promotion, advertising, etc.). Problems are often repetitive and well structured, with data being inter- nally generated.

Table 2.1 examines the differences between strategic and tactical marketing.

2 . 4 W h y d o e s p l a n n i n g m a t t e r ?

The organization needs a strategic marketing plan in order to adapt to a changing business environment. Given the basic business premise of success through effectively meeting customer needs, it is clear organizations must continually adapt and develop to remain successful. Strategic marketing

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Strategic marketing Tactical marketing

Time frame Long-term Short-term Focus Broad Narrow Key task(s) Defining market and Day-to-day

competitive position marketing activity Information and Unstructured, Structured, internal, problem-solving external, speculative repetitive Example New product Price discounting

development Table 2.1 Strategic and tactical marketing

facilitates this process and provides robust solutions in an increasingly competitive world. Essentially, the plan should provide a systematic framework with which to analyse the market place and supply a well- defined way to pursue strategic goals.

However, the truly successful plan goes further than the simple process of planning. It is a vehicle to communicate, motivate and involve staff in fundamental business activities. Too often planning is viewed as a restric- tive process based on programming events and generating paperwork. Remember, plans need employee commitment and ‘ownership’ to achieve results.

The key reasons for planning are summarized as follows:

Adapting to change Planning provides an opportunity to examine how changes in the business environment have/will effect the organiza- tion. It enables management to focus on strategic issues as opposed to day-to-day operational problems.

Resource allocation Planning allows us to deploy resources to effectively meet opportunities and threats. No plan can succeed without appropriate resources. When a strategic perspective is taken, organiza- tions are better placed to marshal the resources required to meet strategic ‘windows of opportunity’. Doyle (1994) defines strategic windows of opportunity as changes that have a major impact in the market place. Strategic windows include factors such as: (1) new technology, (2) new market segments, (3) new channels of distribu- tion, (4) market redefinition – where the nature of demand changes, (5) legislative changes and (6) environmental shocks – sudden unex- pected economic or political change. Essentially, the process involves aligning marketing activities with opportunities in order to generate competitive advantage.

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Consistency By providing a common base to work from (e.g. techniques and assumptions) the overall decision-making process can be enhanced. Additionally, common methods and formats should improve internal communication.

Integration As a strategic process, planning should facilitate the inte- gration and coordination of the marketing mix. By providing a strategic focus it should be possible to generate synergy from the individual ele- ments of the marketing mix.

Communication and motivation The plan should clearly commu- nicate strategic intent to employees and other stakeholders. Clear objec- tives and an understanding of the individual, or group, contribution to the process serves to generate ‘ownership’ and motivation.

Control All control activities are based on some predetermined plan. The planning process should set meaningful targets, thus defining the criteria by which success is measured.

To illustrate the above points, consider Illustrative example 2.2: Sainsbury. The company will need to adapt to change and have effective resource allocation if it is to reverse the downturn in its fortunes.

Illustrative example 2.2 Sainsbury: strategic return to core values

Major strategic decisions have to be made if Sainsbury is to regain its former glory. The UK’s second biggest food retailer is looking to establish a more upmarket position, in order to reverse the recent downturn in fortunes. A new ‘flagship’ Sainsbury’s store in London will feature new luxury product ranges. These include: a juice bar, upmarket bakery counter, a premium wine merchant – ‘The Cromwell Cellar’ – and a seasonal produce counter. The move sees the group attempting to return to its core competencies (see Figure 1.1) of being a top-quality food retailer. Sainsbury’s traditional strength is not price, but rather quality, with the above developments aiming to position the company upmarket. Sainsbury struggled to compete in a price war with larger groups such as Asda and Tesco. Previous Sainsbury campaigns (e.g. ‘Value to shout about’ – featuring actor John Cleese) promoted price competitiveness, not something traditionally associated with the company. It is now committed to offering the highest quality food at the most competitive prices. This focus gives the group strategy a consistency of approach.

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2 . 5 B a r r i e r s t o s u c c e s s f u l p l a n n i n g

Few would argue with the concept of planning. In any activity, a plan provides a fundamental basis for success. Marketing plans should offer exactly what is required – optimizing the use of marketing techniques and resources in order to make the most of marketing opportunities. However, even the most charitable of marketing managers would view this state- ment as naive and unlikely to be fully achieved. If managers view planning as ‘fine in theory’ but failing, in practice, to deliver its full potential – where does it go wrong?

Clearly, barriers must exist to successful planning. Often, these barriers are more to do with the human aspects of the business management. They involve people, politics, skills and culture to a greater degree than formal systems, methodology and data.

Common barriers to successful planning are:

Culture The prevailing culture may not be amenable to marketing plans. If the fundamental principles of marketing are not accepted by the organization, any move towards being market-led and customer-orientated could be dismissed as ‘not the way we do it’. Often we see considerable resistance to change and gradual regression back to old work practices.

Power and politics All organizations are subject to internal politics. The development of strategic planning becomes a battlefield where vested interests fight each other’s proposals and squabble over status and resources. This process absorbs much management time and can result in ill-advised compromise and unnecessary delay.

Analysis not action Much time and energy can be wasted by the process of analysing data and developing rationales for action, as opposed to simply acting. While a rigorous process is commendable, it should not displace action. This ‘paralysis-by-analysis’ barrier tends to substitute information gathering and processing for decision-making. Perhaps surprisingly, many planning systems do not promote action and are more concerned with reviewing progress and controlling activity, rather than tackling strategic issues.

Resource issues In any planning situation, the potential exists to negotiate over resources. Indeed, a major aspect of the process is to match resources to strategic aims. Managers must take a realistic view of the resource position and endeavour to ensure resources are not over- committed or needlessly withheld.

Skills In some instances, managers do not have the skills (e.g. project management, forecasting, etc.) required to make the best use of the planning process. Here, planning takes on a ritual nature – a meaningless

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but ‘must-do’ annual task. Often, planning is reduced to incremental increases/decreases in annual budget and fails to examine opportunities for business development.

Many of these barriers relate to the implementation of plans rather than the planning process itself. Chapter 12 deals with the issue of implemen- tation in detail. However, the sound management practice would advo- cate the inclusion of implementation as part of the planning process. Indeed, Piercy (1997) suggests a multidimensional model of planning. This considers the analytical dimension, the behavioural dimension and the organizational dimension of any plan. Figure 2.3 summarizes the model.

Analytical dimension Analytical tools, techniques and models are important, as they provide a framework to tackle issues and identify/solve problems. While formalized planning systems have the advantage of offer- ing a common (corporate-wide) systematic approach, to be truly effective they must address behavioural and organizational issues.

Behavioural dimension Here we focus on the people aspects of the planning process. Plans only become successful because of the support, participation, motivation and commitment of people. There is a need to understand and fully communicate the strategic assumptions under- pinning the strategy. Plans must address behavioural factors in order to gain the support so vital to smooth implementation.

Organizational dimension Strategic planning takes place within the context of a given organization. Therefore, it will be influenced by organi- zational factors, such as culture and style of management. Remember, organizational structures determine the flow of information, as well as defining responsibilities and reporting lines. Major strategic initiatives may require radical organizational changes.

- Techniques - Procedures - Systems - Planning models

- Participation - Motivation - Commitment - Strategic assumptions

- Structure - Information - Management style - Culture

Analytical dimension

Behavioural dimension

Organizational dimension

Planning process

Figure 2.3 A multidimensional model of marketing planning (Source: Piercy, 1997)

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By taking this ‘multidimensional’ approach to planning and actively considering behavioural and organizational issues within the planning process, it is possible to enhance the overall likelihood of success.

2 . 6 T h e s t r u c t u r e o f a s t r a t e g i c m a r k e t i n g p l a n

What does a strategic marketing plan look like? While the answer to this question will vary from organization to organization (in terms of structure and presentation), marketing plans perform a common function and have common components. Indeed, McDonald (1999) views marketing plan- ning as a systematic way of identifying, selecting, scheduling and costing activities in order to achieve objectives. Such definitions focus on the purpose, as opposed to the structure, of planning.

Regardless of precedent and planning formats, strategic plans tend to have common elements. Marketing managers would expect a strategic plan to cover: (1) industry analysis, (2) internal analysis, (3) opportunity identifi- cation, (4) objective setting, (5) formulation of strategy, (6) proposed marketing programmes and actions and (7) implementation and control – including financial forecasts.

Figure 2.4 presents an annotated example of a strategic marketing plan. Note, Figure 2.4 does not attempt to portray the definitive marketing plan. It merely illustrates the component parts common to such plans.

Strategic marketing plans take on many different guises. The content, structure and complexity of a plan will vary. While planning formats and conventions are largely a matter of historic precedent within the organization, the key imperative is to generate action. Plans should address critical issues in a way that is relevant to the organization. For example, promoting decisive marketing initiatives within a limited time-scale.

2 . 7 A p p r o a c h e s t o m a r k e t i n g p l a n n i n g

The development of a marketing plan is a significant and time-consuming activity. All planning is essentially objective-driven – objectives are trans- lated into actions. A number of ‘schools of thought’ exist as to how the task is best approached. The standard approaches to planning are:

Top-down Senior managers develop objectives and strategy. Managers at an operational level are then required to implement these strategies. This approach is said to encourage professionalism and promote a cor- porate strategic view of marketing activity.

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1 Executive summary 1.1 Current position 1.2 Key issues

2 Corporate strategy 2.1 Corporate mission/objectives 2.2 Summary of overall position and corporate strategy

3 External and internal analysis 3.1 Overview of market 3.2 Competitor analysis 3.3 Future trends 3.4 SWOT

4 Marketing objectives 4.1 Financial objectives 4.2 Marketing objectives

5 Marketing strategy 5.1 Market segmentation 5.2 Competitive advantage 5.3 Marketing strategy 5.4 Specific marketing programmes

- product - place - promotion - price

6 Implementation 6.1 Schedule of key tasks 6.2 Resource allocation 6.3 Budgets 6.4 Contingency

7 Control and forecasting 7.1 Assumptions made 7.2 Critical success factors

- Benchmarks established - How measured

7.3 Financial forecasts - Costs - Revenue

Improves communication and staff involvement by summarizing key aspects of the plan

Provides a link to overall strategy and illustrates marketing’s contribution to achieving corporate goals

A picture of the competitive environment is developed. Internal factors (strengths and weaknesses) need to address external factors (opportunities and threats)

There is a need to define financial targets and translate these into specific measurable marketing objectives (e.g. market share, sales volume, customer retention)

The overall strategic direction of marketing policy is defined. The strategy may vary according to market segment

Decisions are made relating to specific aspects of the mix. These may generate additional plans for each element of the mix

Specific programmes are broken down into lists of activities. These are scheduled and given a time scale. Responsibility is assigned for each activity. A contingency (e.g. funds or time) may be set to cover any unforeseen problems

A clear understanding of the assumptions underpinning the control process is required (e.g. projected market growth). The benchmarks measuring success must be assigned to critical activities. Profit and loss accounts may be forecast for the planning period

Figure 2.4 Illustrative example of a strategic marketing plan

Bottom-up Here, authority and responsibility for formulation and implementation of strategy is devolved. Senior marketing managers approve, and then monitor, agreed objectives. It can be claimed that this approach encourages ownership and commitment.

Hybrid systems are also common, where objectives are ‘top-down’ and responsibility for the formulation/implementation of strategy is devolved.

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2 . 8 e - M a r k e t i n g p e r s p e c t i v e

e-Marketing is basically an interactive activity which is conducted via on-line systems. Virtually unheard of a decade ago, e-marketing has seen rapid growth and is quickly becoming central to much marketing planning. e-Marketing brings together a range of technologies: Internet, e-mail, electronic data/payment interchange and short message service (SMS) applications. The fusion, and wide adoption, of such technologies means marketers now have alternatives to traditional communications campaigns based on the mass media. It provides a mechanism to target and interact with key groups or individuals (see Illustrative example 2.3).

As a major driving force in future marketing activities, marketing planners need to consider the advantages and disadvantages of this new medium. Brennan, Baines and Garneau (2003) summarize these as follows:

Advantages:

Global reach Customers can now ‘shop the world’, with transactions being conducted across geographic boundaries. This provides much greater access to customers. Even small companies can now compete on a global basis. Additionally, e-marketing enables the targeting of groups who previously did not respond to traditional communications methods (e.g. teenagers).

Speed and flexibility The Internet is available ‘24/7’ – all-day and everyday. Potential customers are not constrained by the availability of staff or shop opening hours. Buyers can conduct business when it is convenient to them.

Illustrative example 2.3 Heinz: using the Net as a strategic base

The recent creation of a consumer website for all its brands by Heinz is significant. This marks the increased importance attached to e-marketing by the company. HeinzOffers.co.uk will be pro- moted on packs and contain a series of promotional offers designed to be redeemed in-store. Consumers can register their details and receive a variety of customized promotions. The site aims to encour- age brand loyalty and encourage users to try other Heinz products. This Web initiative should allow Heinz to communicate to a younger audience who are difficult to target via traditional mass media communication vehicles such as TV.

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Low cost transactions Individual transactions tend to have a much lower unit cost. For example, potential customers can access a brochure on- line, which is much cheaper than mailing out the equivalent paper- based product.

Interactivity e-Marketing’s greatest advantage is its ability to develop interactive engagement of customers. The technology allows a two-way dialogue to be established. For example, Amazon recommends an additional book of interest, based on the customer’s previous buying habits.

Disadvantages:

Clutter and congestion There is an argument that states people are simply overwhelmed by the sheer scale/volume of e-marketing – too many e-mails, a vast number of websites, etc. Marketing planners need to consider how to make their e-marketing standout in a congested cyber world.

Anonymity By its very nature the Internet is anonymous. A Web presence may convey little about the actual provider. Traditional brand virtues – trust, loyalty and reputation – are far more difficult to convey in a virtual environment. Additionally, the question of security is ever- present. While websites are normally secure, they need to be perceived as secure.

Cost While (as stated above) transaction costs are generally low, Internet set-up, maintenance and facilitation costs can be prohibitively high. For example, the organization needs a fulfilment system, which hands billing, stock control, logistics and distribution.

Sensory limitation Sensory limitations do of course exist. A product can be viewed or described over the Internet, but cannot be touched, tasted or (generally) experienced. Moves towards broadband Internet connections will add improved sound, video capability etc.

Summary

Strategic planning offers a systematic and structured approach to choos- ing and implementing certain courses of action. Corporate plans define overall business objectives, while providing focus and coordinating func- tional activities. Such plans need to align the stakeholders’ vision to the objectives, strategy, resources and structure of the strategic business units.

There is a need to differentiate between marketing strategy and marketing tactics. Essentially, strategic marketing focuses on defining segments, establishing competitive positions and coordinating all the elements of

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Drummond, Graeme, and John Ensor. Introduction to Marketing Concepts, Taylor & Francis Group, 2005. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/csupomona/detail.action?docID=269900.

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Strategic marketing: an overview

the mix. Tactics translate strategies into action and deal with day-to-day marketing transactions.

Planning allows organizations to adapt to a changing business environment and provides a framework for resource allocation. Additionally, sound planning promotes a consistency of approach and facilitates integration of activity, communication, motivation and control of activities. In order to achieve these benefits, we must overcome the numerous barriers to suc- cessful planning. These include: culture, internal politics or lacking the requisite skills to make planning a successful activity. Truly successful plans make use of analytical techniques but also address the behavioural and organizational dimensions of the process.

The structure and content of a strategic marketing plan will vary. However, plans tend to have common elements – industry analysis, inter- nal analysis, opportunity identification, formulation of strategy, market- ing programmes/actions and implementation/control.

Formulating marketing plans can take a top-down, bottom-up or hybrid approach.

e-Marketing is now a major driver of marketing strategy. As such, mar- keting planners need to be aware of both the limitations and advantages of this new medium.

R e f e r e n c e s

Brennan, R., Baines, P. and Garneau, P. (2003) Contemporary Strategic Marketing. Palgrave.

Doyle, P. (1994) Marketing Management and Strategy, 2nd edn. Prentice Hall.

McDonald, M. (1999) Marketing Plans, 4th edn. Butterworth-Heinemann.

Piercy, N. (1997) Market-Led Strategic Change, 2nd edn. Butterworth-Heinemann.

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Drummond, Graeme, and John Ensor. Introduction to Marketing Concepts, Taylor & Francis Group, 2005. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/csupomona/detail.action?docID=269900.

Created from csupomona on 2020-08-20 20:24:06.

31

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