Strategic Planning: Chapter 11

Overview of Planning

Many companies operate without formal plans. In new companies, managers are sometimes too busy for planning. In small companies, managers may think that only large corporations need planning. In mature companies, many managers argue that they have done well without formal planning, so it cannot be very important. They may resist taking the time to prepare a written plan. They may argue that the marketplace changes too fast for a plan to be useful - that it would end up collecting dust.

Yet formal planning can yield many benefits for all types of companies, large and small, new and mature. It encourages systematic thinking. It forces the company to sharpen its objectives and policies, leads to better coordination of company efforts, and provides clearer performance standards for control. The argument that planning is less useful in a fast-changing environment makes little sense. The opposite is true: sound planning helps the company to anticipate and respond quickly to environmental changes, and to prepare better for sudden developments. The best-performing companies plan but plan in a way that does not suppress entrepreneurship.

Companies usually prepare annual plans, long-range plans, and strategic plans:

• The annual plan is a short-term plan that describes the current situation, company objectives, the strategy for the year, the action program, budgets, and controls.

• The long-range plan describes the primary factors and forces affecting the organization during the next several years. It includes the long-term objectives, the main marketing strategies used to attain them, and the resources required. This long-range plan is reviewed and updated each year so [that the company always has a current long-range plan. The company's annual and long-range plans deal with current businesses and how to keep them going.

• The strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment. It is the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities.

 

 

Strategic planning sets the stage for the marketing plan. It starts with its overall purpose and mission. These guide the formation of measurable corporate objectives. A corporate audit then gathers information on the company, its competitors, its market, and the general environment in which the firm competes. A SWOT analysis gives a summary of the strengths and weaknesses of the company together with the opportunities and threats it faces. Next, the headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one. This helps to provide the strategic objectives that guide the company's various activities. Then each business and product unit develops detailed marketing and other functional plans to support the companywide plan. Thus marketing planning occurs at the business unit, product, and market levels. It supports company strategic planning with more detailed planning for specific marketing opportunities. For instance, Nestle, the world's largest food manufacturer, develops an overall strategic plan at its headquarters in Vevey, Switzerland. Below that, each strategic group, such as confectionery, develops subordinate strategic plans. These feed into the strategic plan's national operations. At each level, marketing and other functional plans will exist. At the final level, brand plans cover the marketing of brands such as Kit Kat, Lion, and Quality Street in national markets

The Planning Process 

Putting plans into action involves four stages: analysis, planning, implementation, and control. The figure shows the relationship between these functions that are common to strategic planning, marketing planning, or the planning for any other function. 

ANALYSIS.

Planning begins with a complete analysis of the company's situation. The company must analyze its environment to find attractive opportunities and avoid environmental threats. It must analyze company strengths and weaknesses, as well as current and possible marketing actions, to determine which opportunities it can best pursue. Analysis feeds information and other inputs to each of the other stages.

Marketing's Impact on Other Businesses
 


PLANNING.

Through strategic planning, the company decides what it wants to do with each business unit. Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. Marketing, product, or brand plans are at the center of this.

IMPLEMENTATION

Implementation turns strategic plans into actions that will achieve the company's objectives. People in the organization that works with others both inside and outside the company implement marketing plans. 

CONTROL. 

Control consists of measuring and evaluating the results of plans and activities and taking corrective action to make sure objectives are being achieved. The analysis provides information and evaluations needed for all the other activities.

The Strategic Plan

The strategic plan contains several components: the mission, the strategic objectives, the strategic audit, SWOT analysis, portfolio analysis, objectives, and strategies. All of these feed on and feed into marketing plans.

 

 

The Mission

A mission states the purpose of a company. Firms often start with a clear mission held within the mind of their founder. Then, over time, the mission fades as the company acquires new products and markets. A mission may be clear but forgotten by some managers. Extreme ease of this was the Anglican Church Commissioners, who thought they had the 'Midas touch' when they started speculating on the international property market. They found out that markets go down as well as up and lost a third of the Church's ancient wealth in the process. Other problems can occur when the mission may remain clear, but no longer fits the environment. The Levi preview shows that company struggling with this problem. When an organization is drifting, the management must renew its search for purpose. It must ask: What business are we in? What do consumers value? What are we in business for? What sort of business are we? What makes us special? These simple-sounding questions are among the most difficult that the company will ever have to answer. Successful companies continuously raise these questions and answer them. Asking such basic questions is a sign of strength, not uncertainty

Many organizations develop formal mission statements that answer these questions. A mission statement is a statement of the organization's purpose - what it wants to accomplish in the larger environment, A clear mission statement acts as an 'invisible hand' that guides people in the organization, so that they can work independently and yet collectively towards overall organizational goals. Traditionally, companies have defined their business in product terms ('we manufacture furniture'), or in technological terms ('we are a chemical-processing firm'). But mission statements should be market-oriented.

WllAT BUSINESS ARE WE IN? Asking this question helps. Market definitions of a business are better than product or technological definitions. Products and technologies eventually become outdated, but basic market needs may last forever. A market-oriented mission statement defines the business based on satisfying basic customer needs. Thus Rolls-Royce is in the power business, not the aero-engine business. Visa's business is not credit cards but allows customers to exchange value - to exchange assets, such as cash on deposit or equity in a home, for virtually anything, anywhere in the world. Creative 3M does more than just make adhesives, scientific equipment, and healthcare products; it solves people's problems by putting innovation to work for them.

 

Business Actions Towards Socially Responsible Marketing
 

WHO ARE OUR CUSTOMERS? 

This is a probing question. Who are the customers of Rolls-Royce's new Trent aero-engine? At one level it Is the airframers, like Boeing and European Airbus. If Rolls-Royce can get an airframer to launch a new aircraft with a Rolls-Royce engine, this saves development costs and makes early orders likely. Is it the airline or leasing companies that eventually buy the engines? They will certainly have to sell to them as well. Is it (the pilot, the service crew, or even the passenger? Unlike the competition, RollsRoyce has a brand name that is synonymous with prestige and luxury.

WHAT ARE WE IN BUSINESS FOR? 

This is a hard question for non-profitmaking organizations. Do universities exist to educate students or to train them for the industry? Is the pursuit of knowledge by the faculty the main reason for their existence? If so, is a good research of economic value or is pure research better?

WHAT SORT OF BUSINESS ARE WE? 

This question guides die strategy and structure of organizations. Companies aiming at cost leadership seek efficiency. These firms, like Aldi or KwikSave, run simple, efficient organizations with careful cost control. These contrast with differentiators, like Sony, who aim to make profits by inventing products, such as the Walkman, whose uniqueness gives a competitive edge. Focused companies concentrate upon being the best at serving a well-defined target market. They succeed by tailoring their products or services to customers they know well. In Britain, Coutts & Co., a National Westminster Bank subsidiary, does this by providing 'personal banking' to the very wealthy. Michael Porter4 describes a fourth option that occurs if firms do not define how they are to do business: stuck in the middle. Management should avoid making its mission too narrow or too broad. A lead pencil manufacturer that says it is in the communication equipment business is stating its mission too broadly. A mission should be:

 

 

• Realistic. Singapore International Airlines is excellent, but it would be deluding itself if its mission were to become the world's largest airline.

• Specific. It should fit the company and no other. Many mission statements exist for public-relations purposes, so lack specific, workable guidelines. The statement 'We want to become the leading company in this industry by producing the highest quality products with the best service at the lowest prices' sounds good, but it is full of generalities and contradictions. Such motherhood statements will not help the company make tough decisions.

• Rased on distinctive competencies. Bang & Olufsen has the technology to build microcomputers, but an entry into that market would not take advantage of its core competencies In style, hi-fi, and exclusive distribution.

• Motivating. It should give people something to believe in. It should get a 'Yeah!', not a yawn or a 'Yuek!', A company's mission should not say 'making more sales or profits' - profits are only a reward for undertaking a useful activity. A company's employees need to feel that their work is significant and that it contributes to people's lives. Contrast the missions of the two computer giants IBM and Apple. When IBM sales were £50 billion, president John Akcrs said that IBM's goal was to become a $100 billion company by the end of the century. Meanwhile, Apple's long-term goal has been to put computer power into the hands of every person. Apple's mission is much more motivating than IBM's

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