STRATEGIC FOCUS MISSING LWK W MARKETING STRATEGY Rick Brown University of Bladford Management Ccntre Emm lane Bradford BD9 93R CrJ England O 'Telephone~ 027C12299 txt, 266 March 1987 Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 ABSTRACT STRAfCIC FOCUS · MISSING 1WK IN MARKETING STRATEGY Recent years have seen many interesting developments in the field of Strategic marketing; however, academics have often failed to point out how their strategic models and concepts can be turned into what the manager really seeks, an actionable marketing plan, The author's experience is that many managers, while accepting that strategic ideas are extremely interesting, are unable to link them to actionable plans, and consequently fall back on to the the traditional approach of starting the planning process with a budget, The strategy thus becomes driven by the budget, rather than vice versa, This article seeks to establish a clearer link between strategy and Ihe action plan, which would enable Rw~agtrs to see the budget as the end point, rather than the starting point of the planning process, A crucial stage in this process is the link between the intital resource allocation 4ecision and the selection of customer targets, and the author suggests the term "strategic locus" for this stage, Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 STKAIECR FOCUS:MISSING LINK IN MARKETING STRATEGY The la~ ten years have seen the early trickle of walk on strategic marketing turn into a torrent of both academic and popular writing. Many theories have been proposed and adopted as the definitive word on strategic planning, only to be dcbunkrd and direredited a lew years la~cr(t)rhe Boston tonsulting Cloup's powth- share matrix was a seminal idea in all this activity, but was itself an early victim of the debunking process, indeed, the whole concept of portfolio analysis has recently taken a back seat aJ the notion of competitive strategy has gained ascendency. Even the value of planning itself has been questioned by these who accuse formal strategic planning systems of inducing a "paralysis of analysis", deflecting the attention of management from the real issue of finding a sustainable competitive advantage, But despite all this activity, it is evident that academics are still unable to agree on what represents the real essence of strategic marketing planning, fhe rapid developments which have taken place have left academia confused and managers totally baffled, although there are still some who seem prepared to jump wholeheartedly on the latest strategic bandwagon, rejecting all 'ourCated' approaches, seemingly oblivious to previous disappointments While it may be intelluctually stimulating for academics to pursue claim and counter claim for one system or the other, they surely have a responsibility to managers to try to bring une order to the present confusion, indeed, it is for managersthat systems of strategic analysis are developed and unless managers make use of these elegant modeb, they have little value, This demands an earily understood fnmcvork that W brings together the various elements of strategic marketing planning in a sensible W way, Such a Iramework would also need to link stntgic planning with marketing 0\ action, because managers will relate to and accept much more readily systems N where there is a clear link between strategy and action, B Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 By ensuring that the marketing mix and budget is the cnd·point of the system, it is possible to demonstrate that strategic marketing planning is not merely an interesting exercise, but rather that it results in detailed marketing plans, capable of action and implementation, Many writers on strategy seem to miss this basic paint in failing to point out how their mbdejs can be turned into actionable plans, The approach discussed here ensures that the marketing mix arises directly out of the strategic assessment: this is in sharp contrast to the process often followed in 'real life', where freguently the budget is agreed fiat, and the rat follows on within the previously set financial constraints. Strategic marketing planning follows a seguence which starts with a definition of the firm's business mission, and concluder with the markdiog mix and budget tor ta(h productlbeinesr unit, A 3 six6tage approach to this is shown in Figure i. DEFINING tHE BUSINESS Most writers now sum to agree that the first stage in strategic planning is to define what business the firm is in, or more sharply, what is its business mission. This should sum up broadly in what market the firm intends to operate and what customers it intends to serve; in Day's words, "it establishes the boundaries of the business anivity'~2), In doing this, it is necessary to strike a balance between too broad a focus, which results in dilution of effort and resources, and too narrow a focus, which could result in missed opportunities, Abell has coined the term "buJinus domain" (3), uvhieh encompasses the customer groups that will be served, dn N.mu .Ldr 18 will k ma, ud Ib ttehnolagy Ilut vill adlly Ihal gW needs. A fllrther dmtn~on is the organbatien'l distinctive competences, I~ sometimes also referred to as in cue skills, Although these parameters may be ~T\ C: I i I; PDF -!::!!::!!::!.f3 StlC.i: 0111 STRATEGIC FOCUS RECYQE BALANCE POSITIONING MARKETING MIX BUDGETS, TARGETS CONTROLS Fig, I ihe Stra~e~ie Matkniq Plvmin~ PrPce~l C: I i I; PDF -!::!!::!!::!.f3 StlC.i: 0111 _ too narrow and therefore impractical for a large diversified corporation to set its business mission, every organisatian needs a clear purpose, and needs to establish a set of suitable parameters to define that purpose, 'Motherhoad' statements like "our purpose is to make a profit" or even "our purpose is to achieve continued growth in earnings per share" are insufficient as they give no idea of the company's role in its environment · how it will make profits, from whom it will make them, and what special skills it will employ to do it, it is necessary, periodically, to review the business mission as both the company's skills and the environment in which it operates change and develop, Kotler summed this up neatly when he wrote: The Girl Scouts of America would rot get far in today's environment with their former purpose "to prepare young girls for motherhood and 9tiy duties" (Y) STRIZTECIC OBJECTIVES once lhe pvc;ali b~sinen mirrion has ban doiermined, the nert step is to def~e a strategy for each of the product/market units that make up the total business, This requires that the produc:lmarket units be defined, and it is citer that some flexibility is called for in doing this. Betrir and Hall argue that the strategic ~ business unit (SBU) concept is valid, provided a flexible rather than a dogmatic viewpoint is adopted: they also provide some useful practical guidelines (I), Use of the term productlmarket unit rather than SBU may help to provide support for the notion of flexibility in unit definition, although some companies may find SBU more appropriate, The need to define a strategy far each product/market unit also begs the guation O of what we mean by strategy, and numerous attempts have been made to provide a Vt definition. Perhaps a classic definition is that strategy is the means adopted to rU achieve an abjQive. U'hile this may be undeniable in one sense, it is hardly Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 adequate in business tulfir since the ehainnan't strategy may be the senior manager's objective, and his strategy may be the operating manager's objective, In turn, what if a mere lactic to the operating manager may be the number one overriding objective to the field salesman, The overlap between objective, strategies, plans and tactics has led to difficultia when seeking definitions, Day Ngsats that busines strategy could be thought of a "intlgrated actions in the pursuit of a sustainable competitive advantagcn (L) but goes on to say that this is somewhat insufficient, arguing that everything from the business definition through to tacticalprogrammes should be included in a statement of strategy, While it it appealing to include a company's entire mission, objectives, plans and tactics under a general eatch·all definition, this does not seem to communicate the essence of the concept of Strategy; although this broad definition is unchallengeable, it appears to g]oa over the central point, In pranice, the reason why managers find it so difficult to pursue a coherent Strategy is that it involves them in making choices about hew they allocate the resources at their disposal, Thus, while strategy clearly includes mission, objectives, plans and tactics, the real essence of a strategic decision is that rearer rcso~ees will be allocated to one project and denied to another, Resource allocation is therefore at the heart of the strategic planning process, and technique have been evolved to help managers do this, including various portfolio approaches, What all portfolio models have in common is that one axis represents the environment and the other represents the organisation's capability; even the most sophisticated portfolio models are only in reality descendants of good old. fashioned 'SWO~ analysis, In the orginai B,C,C, matrix, rare of market groath we used a a simplified surrogate for the otherwise hard to measure parameter of market attractiveness, while similarly, relative marker share was toed as a Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill RELAT IVE CO~PETITrVE CAPABILITY OVERALL MARKE'T STROFJG fiODERATE WEAK ATTRkCT IV ENESS 24~E 1 h HIGHLY ATTRACTIVE 20NE 3 i~00ER4TE1Y ATTRACTIVE zcf~E 2 RELATIVELY UNATTRACTIVE I zosl~ 20E~ S Fig. 2 Th! biness Screen Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 I surrogate for relative competitive strength, However, the genius of the portfolio idea was the appealing visual displays and immediate comparisons which it offered: the underlying concept of examining the organisation against its environment has always been recognised as the only rational way to make resource allocation decisions, One suspects that the intemperate attacks which have been made recently on portfolio technigues are more to do with academic fashion, rather than a criticism of any real substance about this underlying concept, Therefore, in the absence of any better concept or display system, it seems to make sense to continue to utilise a portfolio model to make the fundamental resource allocation decision, Of the several models available, the mast comprehensive is the approach variously attributed to Cmcral Electric, Shell and .HeKi~scy, a ninc·bax matrix contrasting an overall assessment of competitive capability against an overall assessment of market attractiveness, The best known version of this insets instructions in each of the nine boxes ·'double or ~uit','build selectively', Barat' and so on, However, as Hofer and Schendel point out 1711 for strategy formulation purposes, the matrix is more appropriately divided into diagonal zones rather than hotirontallvcrtical boxes, This idea is developed here, to give a five-tone business screen (Fig, 2), it is beyond the scope of this article to rehearse the well·known arguments for and against the adoption of a multi·factor approach to portlolio planning, this has been done adequately elsewhere (II) Suffice it to say li~at the pitfalls apply equally to thir lyaem, and that managers need to be selective in the choice of eriti#is which are important to their business, Again, flexibility and adaptation to individual company circumstance are required, rather than the slavish pursuit of a theoretically ideal model, kl Zone I ii where both market alaetivcnesr and competitive capability are high and the objective for productlburiness units which fall into this tone m~rt be to build: N manage loi growth in sales volume, accepting that profits may be modest and Cdlh O ilow if likely to be negative, Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill tone Z is where competitive capability is high, but attractiveness is lower owing to slower growth, more intense competition, and so on, ~he objective for productlbusincss units which fail into this zone should he to hold: manage for cash now while investing sufficiently to maintain market position, OI course, this is only valid u/hile the market remains viable; at some point market decline will set in and if will make seme ID start harvesting regardless of competitive strength Zone I is where both competitive capability and market attractiveness are low, The objective for productlbuinas units in this zone it to harvest; manage for cash flow, accepting that market share decline is likely as a consequence. This, of course, is provided there are sufficient tone i businesses to absorb the cash 3 generated, and that excessive harvesting does not lead to a crippling rc·allocation of overheads to remaining businesses. The uguments concerning the management of to-called Ldogl businesses have been ultll·aired elsewhere (9) and need not be rehearsed here, but they apply equally in this system as in others. In addition, as pointed out later, different rater ol harvesting may be employed depending on the circumstances, tone I is where both parameters are highly martracrive, and product/business units should be considered for termination when they lall into this Zone. Zone 3, where the market is attractive but competitive capability is low, is perhaps the most interesting Zone of all. The objective Ior productlbusiness units in this Zone could be to build, hold, or harvest depending on the circumstances, This is truly the question zone, and finding a resolution to this question is of critical importance to most organisatio~ using a portfolio system, Whereas it is fairly ,W easy to sec what abjtaive should he set for productlbusiness units in tones 1, 2, 1 and I, it is by no mem easy in lone 3. in addition, in molt oganirations, a Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 dispoporlionale number of products and businesses are likely to appear in lone 3, after all, most markets have only one leader, the rest art all followers. Therefore, in the next section of this article, particular attention will be devoted to methods of determining which objective should be applied to each of the many products and businesses likely to appear in the q:uestjon zone, Thus far, the proposed framework for rrnrtgic marketing planning is little changed from previous systems, Most writers agree that every business should start with a clearly defined business mission and that each oI the productlmarket units which make up the business should be set a clear objective which indicates whether it is to be a net cash use or a net cash generator. in principle, this is manifestly a sound idea; different units should perform different functions within the whole, depending on the circumstances. However, while words like 'build:'lb and Barvcstl may Le very meaningful to the theoretician, managers need to know how to turn them into price lists and advertising schedules. In red lift, it is surely inadepuale to give an operating manager a onc·word strategic objective: it must be belter management practice, through discussion and evaluation, to help him determine guidelines as to how this objective might be achieved. This is the crucial missing link in many strategic planning systems, the link between the basic resource allocation decision and the operating marketing plan. The arm 'srnicgie focus' encompasses a set ol ideas to help managers link resource allocation objectives to marketing action. S'TRA'IECIC FOCUS O The four basic strategic objectives outlined above are build, hold, harvest and terminate; these classify a company's constituent praductlmarket units into net N cash users and net cash generators, As a result of a resource allocation IV Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill assessment using the business screen approach, productlmarket units may be allocated to one of five zones which will indicate the strategic objcaivr for that unit, For each unit, it is next necessary to determine the specific focus of the strategy to be pursued or the means which will be adopted to meet the designated strategic objective, 'Strategic focus' seems to be a ~acful shorthand way of describing the function of this stage within the overall framework of strategic marketing planning, The ideas contained within the concept of strategic focus are drawn from a wide variety of sources and are variously referred to by other writers as strategies for growth, strategies for performance imp~ovcmcnt, offensiveldefensive strategies, and so on, The concept of strategic focus brings all these related ideas together, and may thus help to reduce the confusion experienced by many when confronted with strategic ideas by presenting a more unified picture, Strategic Focus for tone I A build strategy implies that the primary objective is growth in sales volume in order to retain leadership in a market which is highly attractive, Since these markets are likely to be characterised by rapid development and growth, profit is likely to be very much a secondary consideration and cash flow is likely to be negative, The portfolio appeach helps to ensure that profits and cash are contributed by other products being managed in a different way; the objective for a rone one proda is growth in wlume, there are two basic approaches to achieving this objective · expand the sire of the UI market or gain market share, The former can be achieved by converting non· h) users, developing new segments or increasing the usage rate (Fig, 3), The C~ Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 app~ach to thil may be sequential in a towing market, In the very early Ilages of an emerging market, the focus should be to convert non·uscrs, and the customer targets are innovators, Once the first segment is established, a new segment can be developed, usually at lower unit price but offering higher unit volume, At this stage, the cwtomcrtarget would change to encompass the new segment, Subsequently, established users may be prepared to use more of the product, As the market starts to mature, action should be taken to win competitors' customers, the shakeout observed in many maturing markets as the leaders put pressure on the smalle! competitors in order to sustain their own growth and market position as the market's inherent growth slows down, Strategic Focus for tone Z A hold Strategy involves managing a product for maximum profit and cash flow consistent with maintaining its market position, Clearly, the two are not s;tictly compatible · defending the position of a product requires sacrifice of profit and cash flow, particularly ii the product is under attack, In addition, there is normally little scope for raising real prices in mature markets, the defence of margins has to be primarily through constant attention to cost Control, rememScring the need to balance cost control with the defence of market position, An additional method of defending margins is vertical integration, by acquiring suppliers hndlor distribution channel members, This can add value and thereby defend margins and may also provide defence against external pressures by and against suppliers and distributors, However, these may be more than offset by the W difficulties of managing the Supplying and distributing businesses, so the Ir] integration option needs to be pursued with great eautiwn, Reducing invesr;oent C~ intensity, at its simplest level putting pressure on inventories and other items in N the asset base, is an approach which helps to defend return on investment P Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill r SALES VOLUME EXPAND GAIN MARKET ~I~ET SI~ARE ENTER WIN NOI- NEW USAGE COMPETITORS' USERS SEGMENTS RATE CUSTOMERS Fig. 3 Strategic Focus - Zone 1 HOLD DEFEND DEPEND SHARE ~Y(RGINS MAINTAIN MAINTAIN CONTINUING I IREDUCEI I REDUCE VEXTICA W CUSTOMER CO~ON· PRODUCT I COSTS1 (INVESTMENTI IINTEG- O VALUE fCATIONS IMPROVEHENTI (~NTENSTTY RATION C~ Fig, 4 Strategic focus · Zone 2 03 Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 performance, although again caution is necessary to avoid excessive restrictions on the scope of the business. Implicit in the "hold" approach is the need to defend market position, not merely to defend margins, and there will be times in every market where the latter has to take stand priority if market petition is to be maintained. while the specific means of defence are numerous, the manager mat ensure that customer value is maintained, that communications are adequate and that the product is kept up to date through regular improv~mcn~~, All this costs money, and the dilemma is that at the same time, margins need to be defended through cost control; dearly, the extent to which this is possible depends on the circumstances, particularly the prevailing level of compcti~ion (Fig, BJ, However the danger is that high eorP will continue to he incurred even when the level of competition is less intense, The over·fat 'cash cow', failing to yield as much cash as it might, should be not tolerated. At the same time, all farmers know that cows have to be fed and cared for as well as being milked, An additional way of looking at defensive strategies is to invoke the current vogue for pseudo-military terminology, Yaridus writers have described several forms of ' defence in such terms as prc.emptive, couoterollensive, mobile flanking, position and contraction, and more detailed guidance as to intcrptcration may be sought elstwherc(l0]. While it is relatively cary to understand the military cw~notadonr of such terms, it is not always entirely clear what the real distinctions are in business terms, Managers sometimes express difficulty with interpretation into W reality, although there is no doubt that this terminology an be thwghl·p~ovokinp YW in the broader sense. Nevertheless, conceptually they can all be seen to come v~ unda 1~ glrura~ hld4 ol Ilntlic Io.,: Ihy n 1II ~auu bl rhi~h b strategic objdve of holding position is put into effect, Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill re hr~de focus $I BPC1I id I A harvest strategy implies managing for alhdlor, although a iittie subtlety is required in the interpretation of this, ff the anticipated rate of market decline is ~4 or cash is required vtendy to support growing produftL the harvest can be rapid, I de ~~idy~d rate of market decline is de~ and cash is pot so urgently needed elsewhere, a slow harvest on be adopted, ~il an he achieved by reducing expenditure on dhetedonul items like advertising, by improving the sales mix through cmph~~ on hith·mlrlin models, or by rationalising onto key distribution pint~ A rapid harvet can he accomplished by eliminating discretionary expenditure and raising prices (Fil, ~~ ace harvesting has reached its conclusion, and the product is to be tc~Pin~lcd, again there is a choict between liquidation and divestment, depending on which has the greatest yield for the least effort (Fig, 6), 5tratel)ic focus for lent 3 While the lour basic strategic obiectives are build, hold, harvest and terminate, there is one one on ail portfolio analysis models where any of there may he appropriate, fhh is where the company faces an attractive market, but with a weak competitive position, and it may usefully be termed the question tone. ac key to rrarenhl this question is competitive analysis, in particular analysis of the strongest competitor in the market in guodoh ae competitor's strategic position and Itlcngt~ need to be analysed, but perhaps more importantly its psychology · how it is likely to respond to various competitive moves · needs to he understood, I the market leader is passive, slow or relatively weak, it is W susceptible to attack, An attack on the market leader may he termed a challenger strategy, and this consists of investing selectively to improve one's own N ClibPDF - v~~fastio.soni ~IICE LfDUCE EtIl~l~b ~fIOP~ISE ~rSE DISCPTIOYBI HIX DISTlnUT~ON PRICES EXPEPIalE EP~I~P Fil~ 5 STU~ICIC fOQS · TOlf 1 Ilpolurt InrEE R~I - mr I ClibPDF - v~~fastio.soni t- competitive strengths, Using pseudo-military terms, this could be characterised as a frontal, encirclement or flanking attack, The frontal attack means making a direct challenge on the leader, hoping it will crumple, and is potentially the most risky approach, unless of course the leader is indescribably vapid, The encirclement attack takes place on all fronts, better product, better service, better distribution and probably equal price, Obviously this is feasible only where the aggressor possesses demonstrably superior resources to the leader, and has been ascribed to some Japanese companies entering new foreign markets, The flank attack is more subtle, its purpose being to attack where the leader is weakest, A further alternative is aggregation of market share from smaller companies until large enough successfully to challenge the leader; this can be achieved by attacking smaller companies directly in the marketplace or by acquisition, Unfortunately, in many markets, there are few small competitors left, although in some cases this may be an opuon, While challenging the market leader may appear superficially attractive, it needs to he viewed with great circumspection where the leader is in a relatively strong position, responsive to competitive moves, known to act aggressively, and is determined to defend its position, Under these circumstances, a challenger ~ strategy would involve a heavy cost and an extremely uncertain outcome, Clearly, an alternative approach is called for, and management has a surprisingly wide range of options to chore from, The first is to be a follower, following the strategy of the leader withoUt overtly challenging it, in effect, to accept the number two position, One is trusting the leader tacitly to accept this also, but it is not wulual lor Icadsr !D be quite hap7y to have a nMlblr tuo whidh does not reek P. the boat too much, Some writers o~ar~ctcrise this ar rr~lting the leader's L~ ~ra:esmanrhip, lince i! indve~ the leader recogniling what is in hir own bat inncr~, Follorcr Itrategier again may be subdivided into lollov,ing elorely, Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill following at a distance and following selectively, although again, the rcal·Ofe interpretation of these terms can be problematical, An alterMtive to being a follower is the nicher strategy, which involves finding a small segment of the market in which the leader is not sufficiently interested to take retaliatory action, This can be a highly profitable strategy for a smaller competitor, which can effectively become the leader in itS own specialised niche, Potentially the most rewarding strategy is to be an innovator, This means identifying as yet unrecognised customer needs not presently met by the leader, and developing innovative custemcr·orientcd solutions, This may call for new product technology, a new service approach, or a similar cwtomcraientcd advancement, Innovators need to be careful when their innovations are relatively easy to copy, and the launch has to be made in such a way that the leader does not perceive it as a threat, and so does not react until the innovator has established credentials in the marketplace, Only on the relatively rare occasions that a real technology gap is established which will take a long time to close or which can be securely patented, can the need for Caution safely be compromised, An innovator strategy is analogous to the bypas attack of the military terminology, A further distinctive form of strategic focus for tone three products is well described by ruing Drucker's term "sleeper", T~s implies doing little or nothing, not investing in the product and not running it down, This is an option when the market is in the process of settling down prior to firm patterns of segmentation developing or where an u yet undeveloped opportunit)b thaught likely to emerge in the next few years. Vlaiting to see what happens should not be ~ed a an cxcwe tar delaying action, sleepers are not intended to be a Inout for lethargic tO management, Products should only be nominated as sleepers where there are O sound market reasons for a wait and see pcaturc. Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill A ~ LI I~· $I J~U *) Kw YP " ~1 ti r a $ $ u * P ~U kl I 1 a ·8 s~ P'U ~ I :I p; LL a wg C~I Ma, - -Icu~ O* YI I**r I Iw LZ 3tY UO a q: r* ~E a 01 A Y 3 rY U L g wCT O a I I$ ~C O yr U z uE L O cl I I (X PZ O Y Z *I IY~I a tY *,U I I 113 I I Ivl W rl I I Ir I i i I~ h C ul I IIL LI I I IW u u r( I M=' -'u =e U u fl I I I~ a a ZI IVl O ~I YC (I Yt O O Yw W r ~* (I UO ~1 ' "" O a L r IY L· r 43 4 1 u~ zl I I 1 ~ re rO xu 18 ClibPDF - v~~fastio.soni An alternative to all the is the diversion strategy, In a price conscious market, a given level of price cut costs a company with a ten per cent market share only a fifth as much profit as a company with a fifty per cent share, If the leader can he driven into defending its share by matching a price cut, its profit and cash flow will he severely damaged, This will starve the leader's growth products of the cash they need, At the same time, the competitor which initiated the price war is losing much less cash as a result, and has the opportunity to invest in its own growth products while denying the leader the opportunity to do the same, This somewhat Machiavellian approach is analogous to the guerilla attack of the military terminology, A classic guerilla attack involves a series of ~expeetcd assaults on various parameters, not only on price, However what distinguishes it is that the objective of the aggressor is not seriously to challenge the leader's position, it is to keep the leader guessing, to divert his time, energy and resources into defending against attacks which cart the attacker little, Finally, ii none of these strategies seems appropriate, possibly because of a very weak competitive position, the option to harvest and finally terminate the p~odacr/businesr unit, is still open, Again, harvesting may be slow or rapid, depending on the circumstances, The tink &tv,een Strategic Focus and Positioning Determining the strategic Locus for a producl/buJinul unit will help in determining what customer targets are appropriate, For example, a challenger or follower strategy involves pursuing identical elatomer targets to the ]esdu, whereu a V~ nicher 4rategy involver a completely different segment in which the leader is not iniaulcd, An innovator strategy may well involve a limilu segment to the r; leader, but the specific customer targets will be innovators who are prepared to r~ Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill pay a high price for a new product or service but which, numerically, may be of marginal interest to the leader in the early stages, Alternatively there may be a different customer segment as yet wnrecognised and inadequtely served by the leader, which will form the initial customer target for the innovator, Similarly, in the case of tone onc,'builb, the customer targets will change as the market develops through successive segments during its growth phase, Thus, as the strategic foucs for tone one products changes according to the stage in the growth process, so the customer targets will change accordingly. In the case of rone four, 'harvestl, the customer targets for a slow harvest will be initially broader than those for a rapid harvest strategy, Thus, a definition of the strategic focus is essential before rational decisions about the most appropriate customer targers can be made, Sdcction of customer targets is, of course, an essential element of the positioning decision, POSiilON1Nt Oetamining the position of a product in its market vis a vis its competitors is a fundamental pre·rcgubite to planning the right marketing mix, Positioning may be defined as a combination of market segmentation, which determines where a firm shall compete and competitive advantage, which determines how it shall compete, This can only be assessed in the light of the offerings of competitors, Positioning is thus an interplay of the three major factors indicated in Figure g. While it is dear that no rational decision can be made about specific customer I~ targets until the strategic ioclls has been determined, it is also clear that the W competitive advantage offered m~rt be sustainable, or the position taken up will O\ not be defensible, The means by which a firm creates a sustainable competitive Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 CUSTOMER CDNPETI~ORS' WCETS OFFERINGS POSrfrONINC COHPBI~IVf bDV~NT~CE lig, B THE IIIYENS~ONS OF POSITIONING Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 advantage are inherent in the organisation; they cannot be created out of thin air, Ithpl(~ OI cBm4 they can be built ever 1RL nereen, the hn~don of customer targets md competitive advantage is to 1 certain extent an iterative poenq and both may be implicit in broad terms within the statement of business mission, But this does not subvert the logic of determining positioning after determining resource aloation and strategic k·l lome writers seem to suggest that the source of competitive advantage comes first and the rat of the plan flows from th~~ to plan in this way restricts the ability to think strategically and to develop the firm's competitive advantage a internal and external changes occu~ THE OPERATIHC PLAN The marketing mix loSicl~y follows directly from the positioning decision, the marketing mix represents the total oiler made to the c~loma and the compeddve advantage, the reason to buy, implicit in that offer. its variables communicate, support and enhance that advantage, This is the day to day business of marketing management · what price to charge, what kind of advertising to rr, and ail the other clancntl of 1 practicable marketing plan, But ail of these decisions arise from the positioning selected, the chosen combination of market segmentation and competitive advantage, Only opec the positioning has been determined an rational decisions be made about prodcq price, promotion and place of sale, Then in turn, budgets can be drawn up, but only once the marketing mix has been specified an this sensibly be dr. After ail, it is impossible to r,ar dr Eoa and retwnr oi a marketing Can until be plan hp been Ipdlel Henb, the final talc d the strategie marketing Planning Proeus h to draw up bPdldb lup~ and coardr ClibPDF - v~~fastio.soni A fundamental problem is likely to arise at this stage, Given that each productlbusinas unit has drawn up an ideal marketing plan in the light of its strategic objective and focus, it is unlikely that the resources called for in these plans will exactly match the resources available, The first point is to remember that the product portfolio is not a closed system: cash can flow into the system from borrowings or new equity, eqwlly, cash can flow out in the form of increased dividends to the stockholders or investments in other areas, This will, to some extent, permit any cash imbalance to be corrected, however it is still pwsibre that there will be a shortfall in cash available over cash required, The solution to this problem often adopted in practice is to make arbitrary cuts, to chop ten per cent oil everyone's budget to produce a balance, But the more rational approach is to return to the original portfolio plan and rcaefine the strategic objective for marginal units. Thus, a marginal 'build' may have to become a Bold', a marginal 'holb may have to become a'harvest' and to on, This is indicated in Figure 1 by the flow·line designated'teeyele to balance cash budget', COh'CLUSIO~S The Jix·stage approach to strategic marketing planning starts with the firm's business mission and leads through to a detailed marketing plan and budget for each productlbusiness unit, Molt practical marketing problems manifat themselves around some area of the marketing mix, for example, price or advertising, However, it is impossible to make a rational decision about advertising or pricing until the product's market position has been determined, It is impossible to W specify that until specific customer targets have been identified and this cannot be W done until the strategic focus has been determined, ThiJ, itself, depends upon the outcome of the resource allocation process which sets the strategic objcdivc, and [U all of this depends on the firm's business mission, However, while there is a logical Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 _· 6·e sequence from the mission to the budget, most companies in practice start with the budget and work backwards, The marketing planning process in real life begins by setting the year's budget, which then dictates the key parameters of the marketing mix, fat example, the type and extent of advertising which can be done depends on the money the manager has available to spend, rather than what it is necessary to de to achieve a desired objtctivc, Pricing is determined by the margins required in the marketing budget, not by reference to the desired market position, Thus, premature deeiJiens about the marketing mix determine the positioning rather than the other ray around, Once ·jle planning process has got this far, there is no hope of adopting a strategic approach; the strategy is the sum of the collective produetlbusinas unit plans, U'orse still, budgets are Ipually set by some rule of thumb technique baled on last year's results, or simply by the most resources going to the manager who makes the best presentation or has the highest implied status. While this may be a reality of organisational life, it must surely be sensible to move towards a system whereby prodalbilrinesr unit strategies are seen as interdependent, rather than relying on a competitive bidding system, where each unit is run as a separate small business, While not strictly within the scope of this article, it goes without laying tlu~ the reward system must reflect the fact that not ail managers are being asked to manage in the same way. Therefore it is appropriate to reward them using dilferent criteria, Thus, some managers will be rewarded for being safe and conservative, some for being rirk·tating and aggressive, some for yosing their W marks share, and others for generating cash, albeit at the expense of losing W market share. It is also apparent that different managers have dillerent psychological profiles, therefore some managers are more suited to products or N businesses requiring a custodial approach, whereas an entrepreneurial and Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill ·_ innovative manager would become highly Irustrated by being asked to manage a product or business in this way, Strategic marketing planning is nor merely an academie e~eleise conducted by a few highly qualified experts, it involves everybody and demands a substantial shift in traditional management attitudes and motivations in order to work eliectively, it will always be difficult for senior management to initiate the major shifts in a business that the laJt·changing modern environment demands, while operating managers continue to aim ai individual unit interest, rather than seeing their unit as a contributor to a coherent common mission, The planning framework proposed will help operating managers to see their unit in this light, and it will help senior managers to evaluate with them the means of fulfilling the mission, Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 IEFE~EHCB O) ~e*Lh P, 'RYI lpl BCe:Ncw Hlhas a FJa D1IP in Pn~6e Yar~e~q: ~ltc~e YlalllPcnt 30urnci, 1911 b) Dlh t, "5tratcgie Mlrkct Plcnninc i ~e Puodr of ~l·~t~t".~7~si~jlSI~U~i~S~;h~;l;3i~~ Akl~ D~ "Defining lhc Bgirst : The Stll~n! point of Pl~nn4: Prendce·~~~ b) lode~ P. 'YarkcdnlYa~eacnP. Preda·H~~ lm Eddo~ 1915 O) Lnh, R, nd H~~ I, Inc eurincl Po~lah llpprDlch.Whcrc it Rib Down in Pndkl: ~~ Rlale ~~meL 14 5 1911 (6) Day, C, op,cit, (7) Hofer, C, wd Schcndc~ O, 'faatcll formulation :Analytjcai Caccptd~ Ist Publishing Company, 1971. i FPI 1 1~1 ~JCVUi~ ef p4ramlten dnd wcishtinlI In: Horme~ L Strategic Yn~8cn~ Pn~~c·H~~ I~lt 0) hdlemeq H. a ~'~e Dog ~nn~: luh·r HPbPs, 215 nit ~0 lode~ R nd Bnl~ R.'Yr~tdnl Imirt in Ihe n10r, 3rrwi of Budnar StratcBYI 1911 ClibPDF - v~~fastio.soni