Winning Markets Winning Markets Through Market-Oriented Through Market-Oriented Strategic PlanningStrategic Planningby Philip Kotlerby Philip Kotler

RCBC CampusJuly 19, 2006

Prof. Mundy GonzalezDe La Salle UniversityProfessional Schools, Inc

Philip KotlerPhilip Kotler

• S.C. Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg Graduate School of Management in Chicago

•Recipient of the Distinguished Marketing Educator of the Year Award of the American Marketing Association

•”The world's foremost expert on the strategic practice of marketing” - Mgmt. Centre Europe

Kotler on MarketingKotler on Marketing

It is more important It is more important to do what is to do what is strategically right strategically right than what is than what is immediately immediately profitableprofitable

•Professional wisdom is contemporary, relevant and practical

3 KEY AREAS OF 3 KEY AREAS OF STRATEGIC PLANNINGSTRATEGIC PLANNING

1.1. Managing a company’s Managing a company’s businesses as an investment businesses as an investment portfolio.portfolio.

2.2. Involves assessing each business’ Involves assessing each business’ strength by considering the strength by considering the market’s growth rate and the market’s growth rate and the company’s position and fit in that company’s position and fit in that market.market.

3.3. Establishing a strategy.Establishing a strategy.

STRATEGY as STRATEGY as defined…defined…

The words The words ‘strategy’‘strategy’ and and ‘tactics’‘tactics’ are are derived from ancient Greek – derived from ancient Greek – taktikos taktikos meaning meaning ‘fit for arranging or ‘fit for arranging or maneuvering’maneuvering’ and is referring to the and is referring to the art of moving forges in battle.art of moving forges in battle.

Strategos was the word for ‘general’.Strategos was the word for ‘general’.

Strategy was the ‘art of the general’ Strategy was the ‘art of the general’ or the art of setting up forces before or the art of setting up forces before the battle.the battle.

Same principle applies in Same principle applies in business …business …

““The objective of a good sales The objective of a good sales strategy is to get yourself in the strategy is to get yourself in the right place with the right people right place with the right people at the right time so that you can at the right time so that you can make the right tactical make the right tactical presentation”presentation”

4 ORGANIZATIONAL 4 ORGANIZATIONAL LEVELSLEVELS1.1. The Corporate Level The Corporate Level – responsible in – responsible in

designing a corporate strategic plan to guide designing a corporate strategic plan to guide the whole enterprisethe whole enterprise

2.2. The Division Level The Division Level – establishes a – establishes a division plan covering the allocation of funds division plan covering the allocation of funds to each business unit within the divisionto each business unit within the division

3.3. The Business Unit Level –The Business Unit Level – develops a develops a strategic plan to carry the business unit into strategic plan to carry the business unit into a profitable futurea profitable future

4.4. The Product Level –The Product Level – (product line, (product line, brand) within a business unit develops a brand) within a business unit develops a marketing plan for achieving its objectives in marketing plan for achieving its objectives in its product marketits product market

Strategic-Planning, Strategic-Planning, Implementation & Control Implementation & Control ProcessesProcesses

Corporate Planning

Division Planning

Business Planning

Product planning

Organizing

Implementing

Measuring Results

Diagnosing Results

TakingCorrective

action

PLANNIPLANNINGNG

IMPLEMEIMPLEMENTINGNTING

CONTROLCONTROLLINGLING

Planning new businesses, Planning new businesses, downsizing older downsizing older businesses…businesses…

SalesSales

Time (years)Time (years)

DiversificatioDiversification Growthn Growth

Integrative Integrative growthgrowth

Intensive Intensive growthgrowth

Desired Sales

Current Portfolio

StrategiStrategic-c-Planning Planning GapGap

The Growth-Share MatrixThe Growth-Share Matrix

StarsStars Question MarksQuestion Marks

? ? ?? ? ?

Cash CowCash Cow DogsDogs

Assigning resources to Assigning resources to SBUs:SBUs:Four strategies:Four strategies:1.1. Build Build – market share must grow if they are to – market share must grow if they are to

become stars.become stars.

2.2. Hold Hold – appropriate for strong cash cows if – appropriate for strong cash cows if they are to continue yielding large positive they are to continue yielding large positive cash flows.cash flows.

3.3. Harvest Harvest – to increase short-term cash flow – to increase short-term cash flow regardless of long-term effect.regardless of long-term effect.

4.4. Divest Divest – is likely to produce fairly good bids if – is likely to produce fairly good bids if the business is in relatively good shape and of the business is in relatively good shape and of more value to another firm.more value to another firm.

Corporate and Division Corporate and Division Strategic PlanningStrategic Planning

All corporate headquarters undertake All corporate headquarters undertake four planning activities:four planning activities:

1.1. Defining the corporate missionDefining the corporate mission

2.2. Establishing strategic business Establishing strategic business units (SBUs)units (SBUs)

3.3. Assigning resources to each SBUAssigning resources to each SBU

4.4. Planning new businesses, Planning new businesses, downsizing, or terminating older downsizing, or terminating older businessesbusinesses

DEFINING THE DEFINING THE CORPORATE MISSION…CORPORATE MISSION…

Mission Statements define which Mission Statements define which competitive scopes the company competitive scopes the company will operate in:will operate in:Industry scopeIndustry scopeProducts and applications scopeProducts and applications scopeCompetence scopeCompetence scopeMarket-segment scopeMarket-segment scopeVertical ScopeVertical ScopeGeographical scopeGeographical scope

Corporate and Division Strategic Planning

•Competitive company: well defined mission

•Mission = goals, strategy, policy

•Decentralization: empowerment, freedom of business units

Organizational leader visibility•Well defined mission statement provides connection

•Mission = purpose, direction and opportunity

•One goal knits the people together (cohesion)

Establishing strategic business Establishing strategic business units: units: Product-Oriented vs Market-Product-Oriented vs Market-Oriented Definitions of a BusinessOriented Definitions of a Business

CompanyCompany Product DefinitionProduct Definition Market DefinitionMarket Definition

Missouri-Pacific Missouri-Pacific RailroadRailroad

We run a railroad.We run a railroad. We are a people-We are a people-and-goods mover.and-goods mover.

XeroxXerox We make copying We make copying equipment.equipment.

We help improve We help improve office productivity.office productivity.

Standard OilStandard Oil We sell gasoline.We sell gasoline. We supply energy.We supply energy.

Columbia PicturesColumbia Pictures We make movies.We make movies. We market We market entertainment.entertainment.

Encyclopedia Encyclopedia BritannicaBritannica

We sell We sell encyclopedias.encyclopedias.

We distribute We distribute information.information.

CarrierCarrier We make air We make air conditioners and conditioners and furnaces.furnaces.

We provide climate We provide climate control in the control in the home.home.

Timely marketing strategy

• Receive timely information about market, competition

• Act decisively, time does not wait, so does the competitor

• Untimely decision = obsolete decision

Kotler says…“A company must study its competitors as

well as its actual and potential customers. Companies need to identify competitors’ strategies, objectives, strengths, weaknesses, and reaction patterns. Managers should be able to receive timely information about competitors. “

Market Niche/Product differentiation strategy

•Niche Marketing caters to narrowly defined group typically of small market where needs are not that well served;

•Target specific market and develop product and marketing programs best fit for the product;

•Instead of scattering their market or concentrating on fad items that eventually die down, focus on Niche Marketing

Sales people motivation• Pay and fulfillment

• When you’re “down”, go up, when you’re “up”, go down.

Aggressive Strategies

“A market leader has the largest market share in the relevant product market. To remain dominant, the leader looks for ways to expand total market demand, attempts to protect its current market share, and perhaps tries to increase its market share.”

Market Leader

A Market challenger attacks the market leader and other competitors in an aggressive bid for more market share. It can attack the market leader, firms of its own size that are not doing the job and under financed, and  small local and regional firms”

Market Challenger

Market challenger strategy•Benchmarking approach

•Raise the bar, innovate

Market challenger strategy•Which markets to defend, which to leave alone, which to drop?

•Defensive strategy: (i) reduce; (ii) divert; (iii) lessen intensity

•Defense is as much reaction as it is anticipation

“POSITION DEFENSE:

The basic defense is to build an impregnable fortification around one’s territory. Although defense is important, leaders under attack would be foolish to put all their resources into only building fortifications around their current product.”

“Counteroffensive Defense:

Most market leaders, when attacked, will respond with a counterattack. The leader cannot remain passive in the face of a competitor’s price cut, promotion blitz, product improvement, or sales-territory invasion. In a counteroffensive, the leader can meet the attacker frontally or hit his flank or launch pincer movement.”

PREEMPTIVE DEFENSE-

This is to attack before the enemy starts its offense. It can wage guerilla action across the market – hitting one competitor here, another there – and keep everyone off balance. Or it can try to achieve a grand market envelopment or it can send out market signals to dissuade competitors from attacking. Market leaders with strong resources may even choose to entice opponents into costly attacks.

Geographical Flank Attack

, the challenger spots areas where the opponent is under performing. It can also serve uncovered market needs. A flanking strategy is another name for identifying shifts in market segments that are causing gaps to develop, then rushing in to full the gaps and develop them into strong segments.”

“MOBILE DEFENSE :

the leader stretches its domain over new territories that can serve as future centers for defense and offense. It spreads through market broadening and market diversification. Market broadening involves the company in shifting its focus from the current product to the underlying generic need. The company gets involved in R&D across the whole range of technology associated with that need.”

GUERILLA WARFARE –

consists of waging small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds. It uses both conventional and unconventional means of attack. The smaller firm launches a barrage of short promotional and price attacks in random corners of the larger opponent’s market in a manner calculated to weaken the opponent’s market power gradually

Focus of company’s marketing attack

**Good versus bad competition

•Support good

•Attack bad

PricePrice

PromotionPromotion

HighHigh

HighHigh

Rapid-skimmingstrategy

LowLowRapid-

penetrationstrategy

LowLow

Slow-skimmingstrategy

Slow-penetration

strategy

Market Penetration StrategiesMarket Penetration Strategies