Chapter 2 – company and marketing strategy: partnering to build
customer engagement, value and relationships
Strategic planning – the process of developing and maintaining a strategic fit
between the organisation’s goals and capabilities and its changing marketing
opportunities.
Defining a market-oriented mission
An organisation exists to accomplish something, and this purpose should be clearly
stated. Mission statement is a statement of the organization’s purpose – what it
wants to accomplish in the larger environment.
Mission statements should be:
- Market oriented
- Defined in terms of satisfying basic customer needs
- Meaningful
- Specific
- Motivating
- Emphasize the company’s strength in the marketplace
- Should not be stated as making more sales or profits
- Customers and the customer experience the company seeks to create
Setting company objectives and goals
The company needs to turn its mission into detailed supporting objectives for each
level of management.
Designing the business portfolio
Business portfolio – the collection of businesses and products that make up the
company. The best business portfolio is the one that best fits the company’s
strengths and weaknesses to opportunities in the environment.
Business portfolio planning involves 2 steps: first, the company must analyse its
current business portfolio and determine which businesses should receive more,
less, or no investment. Second, it must shape the future portfolio by developing
strategies for growth and downsizing.
Analysing the current business portfolio
The major activity in strategic planning is business portfolio analysis, whereby
management evaluates the products and businesses that make up the company.
Management’s first step is to identify the key businesses that make up the company,
called strategic business units (SBUs). The company next assesses the
attractiveness of its various SBUs and decides how much support each deserves.
The best-known portfolio-planning method was developed by the Boston Consulting
Group, the growth-share matrix – a portfolio planning method that evaluates a
company’s SBUs in terms of market growth rate and relative market share.
,On the y-axis, the vertical axis, market growth rate provides a measure of market
attractiveness. On the x-axis, the horizontal axis, relative market share serves as a
measure of company strength in the market.
The matrix defines 4 types of SBUs:
1. Stars – high-growth, high-share businesses or products. They often need
heavy investments to finance their rapid growth. Eventually their growth will
slow down, and they will turn into cash cows.
2. Cash cows – low-growth, high-share businesses or products. Need less
investment to hold market share. They produce a lot of the cash that the
company uses to pay its bills and support other SBUs that need investment
3. Question marks – low-share business units in high-growth markets. Require a
lot of cash to hold on to share. Management has to think hard about which
question marks it should try to build into stars and which should be phased out
4. Dogs – low-growth, low-share businesses and products. May generate
enough cash to maintain themselves but do not promise to be large sources of
cash
Strategies:
Invest more in a SBU to build its share
Invest just enough to hold a SBU’s share at the current level
Harvest a SBU, milking its short-term cash-flows regardless of the long-term
effect
Divest a SBU by selling it or phasing it out and using the resources elsewhere
SBU Strategy
Question mark Divest or build
Star Build (invest) or hold
Cash cow Hold or harvest (cost leadership strategy)
Dog Harvest or divest
, Challenges the BCG matrix needs to be adapted to:
Difficult, time-consuming, costly
Difficult to define SBUs and measure market share and growth
These approaches focus on classifying current businesses but provide little
advice for future planning
The world is changing and markets are quite turbulent. Technology is
developing at a rapid pace, and hence, business models get outdated quite
quickly. Therefore, it is more difficult to hold market share and there are a
fewer cash cows.
Market share is not an exclusive predictor of sustained performance
Developing strategies for growth and downsizing
Beyond evaluating current businesses, designing the business portfolio involves
finding businesses and products the company should consider in the future.
Marketing has the main responsibility for achieving profitable growth for the
company. One useful device for identifying growth opportunities is the
product/market expansion grid (Ansoff matrix) – a portfolio-planning tool for
identifying company growth opportunities through market penetration, market
development, product development, or diversification.
Market penetration – company growth by increasing sales of current products to
current market segments without changing the product, spur growth through
marketing mix improvements.
Market development – company growth by identifying and developing new market
segments for current company products.
Product development – company growth by offering modified or new products to
current market segments.
Diversification – company growth through starting up or acquiring businesses
outside the company’s current products and markets.
Companies must not only develop strategies for growing their business portfolios but
also strategies for downsizing them – reducing the business portfolio by eliminating
products or business units that are not profitable or that no longer fit the company’s
overall strategy.
customer engagement, value and relationships
Strategic planning – the process of developing and maintaining a strategic fit
between the organisation’s goals and capabilities and its changing marketing
opportunities.
Defining a market-oriented mission
An organisation exists to accomplish something, and this purpose should be clearly
stated. Mission statement is a statement of the organization’s purpose – what it
wants to accomplish in the larger environment.
Mission statements should be:
- Market oriented
- Defined in terms of satisfying basic customer needs
- Meaningful
- Specific
- Motivating
- Emphasize the company’s strength in the marketplace
- Should not be stated as making more sales or profits
- Customers and the customer experience the company seeks to create
Setting company objectives and goals
The company needs to turn its mission into detailed supporting objectives for each
level of management.
Designing the business portfolio
Business portfolio – the collection of businesses and products that make up the
company. The best business portfolio is the one that best fits the company’s
strengths and weaknesses to opportunities in the environment.
Business portfolio planning involves 2 steps: first, the company must analyse its
current business portfolio and determine which businesses should receive more,
less, or no investment. Second, it must shape the future portfolio by developing
strategies for growth and downsizing.
Analysing the current business portfolio
The major activity in strategic planning is business portfolio analysis, whereby
management evaluates the products and businesses that make up the company.
Management’s first step is to identify the key businesses that make up the company,
called strategic business units (SBUs). The company next assesses the
attractiveness of its various SBUs and decides how much support each deserves.
The best-known portfolio-planning method was developed by the Boston Consulting
Group, the growth-share matrix – a portfolio planning method that evaluates a
company’s SBUs in terms of market growth rate and relative market share.
,On the y-axis, the vertical axis, market growth rate provides a measure of market
attractiveness. On the x-axis, the horizontal axis, relative market share serves as a
measure of company strength in the market.
The matrix defines 4 types of SBUs:
1. Stars – high-growth, high-share businesses or products. They often need
heavy investments to finance their rapid growth. Eventually their growth will
slow down, and they will turn into cash cows.
2. Cash cows – low-growth, high-share businesses or products. Need less
investment to hold market share. They produce a lot of the cash that the
company uses to pay its bills and support other SBUs that need investment
3. Question marks – low-share business units in high-growth markets. Require a
lot of cash to hold on to share. Management has to think hard about which
question marks it should try to build into stars and which should be phased out
4. Dogs – low-growth, low-share businesses and products. May generate
enough cash to maintain themselves but do not promise to be large sources of
cash
Strategies:
Invest more in a SBU to build its share
Invest just enough to hold a SBU’s share at the current level
Harvest a SBU, milking its short-term cash-flows regardless of the long-term
effect
Divest a SBU by selling it or phasing it out and using the resources elsewhere
SBU Strategy
Question mark Divest or build
Star Build (invest) or hold
Cash cow Hold or harvest (cost leadership strategy)
Dog Harvest or divest
, Challenges the BCG matrix needs to be adapted to:
Difficult, time-consuming, costly
Difficult to define SBUs and measure market share and growth
These approaches focus on classifying current businesses but provide little
advice for future planning
The world is changing and markets are quite turbulent. Technology is
developing at a rapid pace, and hence, business models get outdated quite
quickly. Therefore, it is more difficult to hold market share and there are a
fewer cash cows.
Market share is not an exclusive predictor of sustained performance
Developing strategies for growth and downsizing
Beyond evaluating current businesses, designing the business portfolio involves
finding businesses and products the company should consider in the future.
Marketing has the main responsibility for achieving profitable growth for the
company. One useful device for identifying growth opportunities is the
product/market expansion grid (Ansoff matrix) – a portfolio-planning tool for
identifying company growth opportunities through market penetration, market
development, product development, or diversification.
Market penetration – company growth by increasing sales of current products to
current market segments without changing the product, spur growth through
marketing mix improvements.
Market development – company growth by identifying and developing new market
segments for current company products.
Product development – company growth by offering modified or new products to
current market segments.
Diversification – company growth through starting up or acquiring businesses
outside the company’s current products and markets.
Companies must not only develop strategies for growing their business portfolios but
also strategies for downsizing them – reducing the business portfolio by eliminating
products or business units that are not profitable or that no longer fit the company’s
overall strategy.
