strategic business planning for marketers- intro “no matter how good your product is-you are...

Strategic Business Planning for Marketers- intro

“No matter how good your product is-you are always exactly 18 months away from complete

failure.” Nathan Myhrvold, CTO Microsoft

Prepared by: Geoff Linton

Fall ’06 Week 1&2

Course Outcomes

• Business Planning

• Critical Thinking

• Team Work

Course shows the ultimate big company approach which is very different than small companies.

Strategic Management Defined

• Set of managerial decisions and actions which determine the long-run performance of a firm.

• NOT ALL DECISIONS ARE STRATEGIC!• Criteria:

– Rare– Consequential– Directive

Customers

Relationships

Environmental Forces

Shareholders(owners)

The OrganizationSociety Society

Suppliers

Social RegulatoryTechnologicalEconomic Competitive

OtherOrganizations

Alliances

Partnerships

Ownership

An Organization Involves Many People, Stakeholders, Groups, and Forces

HumanResources

Researchand

Development

InformationSystems

Manufacturing

Finance Marketing

Management& Owners

Mission

MarketOpportunity

Segmentsand Targets

EnvironmentalAssessment

SW OTAnalysis

Chasm &PLC

MarketResearch

ProspectProblems

BalancedScorecardand KeyMetrics

BusinessModel

(topline)

Market Sizing

SalesAnalysis

ProductProfitability

QuantitativeAnalysis

W in/LossAnalysis

SCA or CoreCompetence

FinancialProjections

ElevatorPitch

TargetAudience

Profile

ReferencableCustomers

Business Case

Buy, Build orPartner

Pricing

ThoughtLeaders

StrategicPlanning

MRD

ProductDefinition

(topline sol'n& workflow)

ProductPositioning

(FFB , s tm t, grid , 1m essage)

SalesProcess

Roll-outProcess"Launch"

IntegratedM arketing

Communication

ProductContract

Requirements

Marketing Mix

M arketingPlan plus

Comm Plan

Brand W heel

MarketingProject Plan

& Briefs

PublicRelations &

PressPublicity

SpeakingEngagements

Direct Mail

ProductPositioning

Presentation

KeyDeliverables/Milestones

ResponsibilityMatrix/ Scorecard

Core SkillsRequired

Org ChartPresent &

Future

"Bridge" SkillsSets

JobDescriptions

ScreeningTools

Cross SkillsMix

SellingTools

Testimonials

W hite Papers

CostJustification

News Flash

CompetitiveW rite-up

W eb Cast/W ebinar

CompetitiveProfiles &

Intelligence

Sales Plan

ExecDeliverables

IndustryPositioning

TechnologyAssessment

IndustryForces

CompetiitiveReview

BestPractices

Audit

Barriers toEntry

ValueProposition

Key Pillarsand

Milestones

Critical FactDeck and

Trends

FundingSources

Financial andOther

Benchmarks-industry

ReleaseMilestones

ProductRoadmap

Bulletins

Partners,Alliances &

Stakeholders

Demonstration

PrintedCollateral

ElectronicCollateral

W eb Site

EmailMarketing

lettersnewsletters

lifecycleSeminars andTrade Shows

ModelsCasesProof

Telephone

Face to Face

SalesTraining

SalesReadiness

Basic SalesProcess (8s teps , se ll cyc le)

SalesBlueprint

ProspectingLead

Generation(Target List)

Meetings

Selling Style

CustomerCare

E W ebE-Mail

PhoneSupport

ServiceSnapshots(Bulletins,

Templates)

ContingencyPlan 3T 's -risks and

issues

ManagementExperience

FinancialTrack Record

Financing

SalesTraining

Documentation

Proposals

Closing

FunnelManagement

(top 20 c lub, funnelveloc ity, c lose loop)

ChannelSupport

SpecialCalls

CorporateVisit

Innovation

Product MarketGrids

Objections

ProductPositioning

Stmt (30, 60& 150 word)

E-Support(know ledgeba

se, w eb, e-m ail)

HumanResources

M arketAssessment

ProductPlanning

BusinessPlan

Governance

GatingProcess

(mktg & tech)

STPSummary

Cust. BuyingProcess

ElectronicMktg &

Collateral

CompetitiveW rite-up

GatingProcess

(mktg & tech)

Course Introduction

Week 1

What is Strategy?

“Strategy is the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”

Source: tutor2u Pattern of decisions

What is the Strategy?

• Identify competitive approach– Low-cost leadership– Differentiation– Focus on a particular market niche

• Determine competitive scope– Stages of industry’s production/distribution

chain– Geographic coverage– Customer base

• Identify functional strategies• Examine recent strategic moves

Virgin Atlantic & Samuel Adams beer

2.4 Hierarchy of Strategy – Strategic Alignment

Corporate StrategyStrategic

(Grow Internationally)

Business(Division Level)

Tactical(grow via M and A - which co to buy,

which parts to keep)

FunctionalStrategy

Operational

(Make Payments, Who to fire/hire)

3 Scopes of Strategies (p8)

1. Corporate Strategy• “Overall direction of the company & Mgmt of businesses”

– Mission & vision– attitude toward growth– portfolio analysis– parenting

2. Business Strategy• “Competitive and Cooperative strategies”

– business unit– Competitive & cooperative focus Objectives, Strategies, Policies

3. Functional Strategies• “Maximize Resource Productivity”

Programs, Budgets, Procedures

Results of strategy formulation

• Vision and mission

• Objectives

• Policies

• Programs

• purpose and reason for existence

• quantifiable end results of planned activity

• broad guidelines

• steps needed to accomplish plan

Each Functional Area Has a Number of Sub-Strategies & Tactics

PlaceOutletsChannelsCoverageTransportationStock level

PlaceOutletsChannelsCoverageTransportationStock level

PromotionAdvertisingPersonal sellingSales promotionPublic Relations

PromotionAdvertisingPersonal sellingSales promotionPublic Relations

PriceList priceDiscountsAllowancesCredit itemsPayment period

PriceList priceDiscountsAllowancesCredit itemsPayment period

ProductFeaturesBrand namePackagingServiceWarranty

ProductFeaturesBrand namePackagingServiceWarranty

Marketingmanager

Marketingmanager

Cohesive marketing mix

PromotionPlace

Price

PromotionPlaceProduct

What is a Strategic Plan?

Where firm is headed -- Strategic Vision (what you are capable of becoming) and business Mission (main pillars)

Action approaches to achieve targeted results -- A comprehensive strategy

Short and long term performance targets -- Strategic and financial objectives

Tests of a Winning Strategy

• GOODNESS OF FIT TEST

– How well is strategy matched to firm’s situation?

• COMPETITIVE ADVANTAGE TEST

– Does strategy lead to sustainable competitive advantage?

• PERFORMANCE TEST

– Does strategy boost firm performance?

Unit 2 – The Process

Basic Concepts of Strategic Management

2.1 Strategic versus Functional

• What market to be in?• Open a new production facility?• # people to schedule for tonight’s shift?• Buy a new workstation PC?• Buy SAP system?• Change benefit program design?

2.1 Triggering Events

• Unlikely to be regular, scheduled process today• Triggering event stimulates a change or review of

strategy and new decisions:– New CEO– External Intervention– Change of Ownership– Performance Gap– Inflection Point (new technology, regulatory change,

customer values or preferences change)

2.2 Three Phases of Planning

• (1) Scanning and Analysis – (units 1,2,3,4)

• (2)Formulation and Choice – (units 5,6,7,8)

• (3) Implementation and (4) Follow-up – (units 9,10)

Each component must be executed well in order for the entire process to be successful!

Many organizations spend too much time on 1 and 2 and not enough on 3 and 4

2.3 Four Phases of Strategic Management Development

• Stage 1 -Basic financial planning ($’s)– Improve $ but create negative long term impacts

• Stage 2 - Forecast-based planning (sales, production, manpower levels)– Inwardly focused and ignore changing reality

• Stage 3 - Externally-oriented planning (markets, industry, benchmarking)– Goals not attainable, ignore internal resources and ability

• Stage 4 – Full Strategic management (people, markets, numbers, industry, production . . .)– Combines external reality and internal resources to improve

financial position

2.3 Strategic Management

• Benefits of linking processes, systems, people together:– Clearer sense of strategic vision for the firm for

investors, shareholders, employees– Sharper focus on what is strategically important– Invest money on what is important– Clearer priorities for staff– Improved understanding of a rapidly changing

environment– Less likely to generate “busy work” via outdated

systems and processes

Evaluation and Control

and ControlStrategy Formulation

Strategy Implementation

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental

Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives Broad

guidelines for decision making

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

Evaluationand Control

2.4 Strategic Management Process Model

Two Approaches to Corporate Strategic Planning

• Emergent Approach• strategy simply evolves from a stream of decisions• deal with issues as they come up• from grass roots/bottom upwards• rely on spontaneity (don’t always make a plan for

everything)• managers learn as they go

• Deliberate Approach• proactively try to steer the organization with plans &

process• usually started from the top• use static strategic frameworks to allign (SBU’s) & plan

intended course• track, report & measure progress• good for mature businesses

2.5 Mintzberg’s Strategy Modes

• Entrepreneurial– One powerful individual, founding vision

• Adaptive– Reactive solutions to existing problems (emergent)

• Planning– Systematic info gathering, focus on analysis (deliberate)

• Logical Incrementalism– Top set goals, interactive process and continuous

learning

Execution … Where Companies Fall Down

Competent execution of a well-conceived strategy is the best test

of managerial excellence and a proven recipe for organizational

success!

Good Strategy + Good Strategy Execution = Good Management

2.7 Tips for making better decisions

• Use the 8 step process • Analyze current performance ROI and posture• Review corporate governance (role of board)• Do more detailed external scan (beyond

generalities) O and T• Do more detailed internal scan (S and W)• Really assess SWOT and make balanced decisions• Implement with programs, budgets and

procedures• Evaluate, feedback and control properly

– We will learn techniques for doing each one of these items in this course!

Geoff’s Approach to the Corporate Planning Process

External Situation Assessment (1a)•Environmental Analysis•Market/Industry Analysis•Competitor Analysis•Customer Analysis

Internal Situation Assessment (1b)•Portfolio Analysis•Performance Analysis•Capabilities•Sustainable Competitive Advantage•Resources

SWOT Summary (1c)Corporate Objectives

& Vision

Strategic Alternatives & Selection

•Levers & Thrusts •Four Market Product Strategies grid Deliverables, Action Plan, & Measurement

Unit 2 – Did You Get It?

1. Why has strategic management become so important to today’s organizations?

2. How does strategic management typically evolve in an organization?

3. In what ways could a typical organization’s strategic management process be improved ?

Why Do Strategies Evolve?

• There is always an ongoing need to react to– Shifting market conditions– Fresh moves of competitors– New technologies– Evolving customer preferences– Political and regulatory changes– New windows of opportunity– Crisis situations

Discussion Questions (cont’d)

4. How are strategic decisions different from other kinds of decisions?

5. When is the planning mode of strategic decision making superior to the entrepreneurial and adaptive modes?

6. What are common differences between functional and strategic actions and decisions?

32

Unit 1 – Generic Competitive Strategies

Competitive Strategies

– Focuses on improving the competitive position of a company’s or business unit’s products or services within the specific industry or market segment that the firm has CHOSEN to serve.

– Firms make decisions about (1) how broadly or narrowly to define their target markets and (2) the basis on which they will compete

Porter’s Competitive Strategies

• Generic Competitive Strategies:– Lower cost strategy

• Design, produce, market more efficiently than competitors

– Differentiation strategy• Unique and superior value in terms of product

quality, features, service

Porter’s Generic Competitive Strategies

Porter’s Competitive Strategies

• Cost Leadership:– Low-cost competitive strategy– Aimed at broad mass market– Need to achieve:

• Aggressive construction of efficient-scale facilities• Cost reductions• Cost minimization

Porter’s Competitive Strategies

• Differentiation:– Broad mass market– Unique product or service– Need to:

• Charge premiums• Lower customer sensitivity to price by offering unique

features or benefits• Make it hard for competitors to copy your product

Porter’s Competitive Strategies

• Focused Cost Leadership:– Low cost competitive strategy– Focus on particular buyer group or market– Need to:– Stay focused on niche (don’t try to please all)– Seek cost advantage only in target market

Porter’s Competitive Strategies

• Focused Differentiation:– Focus on particular group or geographic

market– Seek differentiation in targeted market

segment– Serve special needs of narrow target market

Porter’s Competitive Strategies

• Stuck in the middle:– No competitive advantage (not cost, not

differentiation, no niche)– Will result in below-average performance

Risks of Cost Leadership

Cost leadership is not sustained:• Competitors imitate.• Technology changes.• Other bases for cost leadership erode.Proximity in differentiation is lost.Cost focusers achieve even lower cost in segments.

Risks of Differentiation

Differentiation is not sustained:• Competitors imitate.• Bases for differentiation become less important to buyers.Cost proximity is lost.Differentiation focusers achieve even greater differentiation in segments.

Risks of Focus

The focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.

Risks of Generic Competitive Strategies

Key Element? VALUE

• Defining, capturing and measuring VALUE – Shareholders – ROE, P/E, ROI . . .– Customers – relationship, delivery, image, price, product . . .– VALUE delivers above average returns within the industry (Ex. Unit 1

Chart)• You need to define and create VALUE

– Define the shareholder value gap– Define the customer value proposition– Establish objectives and time lines– Identify value creating processes– Create readiness within the organization– Fund the strategic initiatives (let some other things go!)

• Example: Allstate Insurance

One Page McKinsey handout

Assignment 1(Part A): Generic Strategies

Lower Cost DifferentiationN

arro

w T

arge

tB

road

Tar

get

Competitive AdvantageC

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Instructions: Place the leading athletic footwear companies on the matrix.

Names: ___________________________ ___________________________

___________________________ ___________________________

Assignment 1 (Part B): Describe Your Thinking

Company Why did you place it there on the matrix?

Chief Competitor

Assignment 2: 8-Step Strategic Decision-Making Process

• Based on the 8 step process (p. 14-15)– Form into your BSG-Online teams.– Outline the first steps of your company’s Strategic

Decision-Making process.• 1a. Evaluate current performance results• 1b. Determine your team’s MISSION, OBJECTIVES &

STRATEGIES (for 1st practice year)

– Put your full names on the sheet!– You have 20 minutes to complete the exercise.

Names: ___________________________ ___________________________

___________________________ ___________________________

Assignment 2: Strategic Decision-Making Process

tep 1 – Examine and Evaluate your current:

PerformanceResults

Mission

Objectives

Strategies

Appendix

Thinking Strategically:The Three Big Strategic Questions

1. Where are we now?

2. Where do we want to go?

– Business(es) to be in and market positions to stake out?

– Buyer needs and groups to serve?

– Outcomes to achieve?

3. How do we get there?

Note: Harvard formula case method

Types of Objectives Required

Outcomes focused on improving financial performance

Outcomes focused on improving long-term, competitive business position

Financial Objectives Strategic Objectives

$

Categorize the objectives on p7

Performance strategies Focus On “Bottom Line” Criteria

Profits Revenue

OtherCosts

Minus

=

UnitMargin

Unit SalesTurnover

Price

Product Cost

MarketShare

MarketSize

Times

Minus

Quotes to Keep in Mind...

• “Writing a business plan forces you into disciplined thinking if you do an intellectually honest job. An idea may sound great in your own mid, but when you put down the details and numbers, it may fall apart.” – Eugene Kleiner, Venture Capitalist

• “Talent comes from the non-conformists & rebels...”– David Ogilvy, Advertising Guru

• “but you also need a multi disciplined and aligned team!”

• “If your idea is such a great one why hasn’t someone else done this before?– Geoff Linton, “Marketing Coach”