Chapter 2 - Business Planning: Composing the Big Picture

1. Chapter 2 - Business Planning:Composing the Big Picture • Business Planning:Ongoing process of making decisions that guide the firm both in the short term and for the long term • Identifies/builds on a firm’s strengths • Helps managers make informed decisions • Develops objectives before action is taken

2. Ethics and Marketing Planning • Unethical marketing decisions damage the firm, society, and various stakeholders • Business ethics: • Rules of conduct for an organization • Code of ethics (code of conduct): • Written standards of behavior to which everyone in the organization must subscribe

3. Three Levels of Business Planning

4. Level 1- Strategic Planning • Match firm’s resources and capabilities to market opportunities for long-term growth (5 – 10 years) and survival • Top management defines firm’s purpose and objectives • Example: increase firm’s total revenues by 20% over next five years • Strategic Business Units (SBUs) • Self-contained divisions • P&L (Profit-and-loss) responsibility

5. Level 2 - Functional Planning • Accomplished by various functional areas of a firm, such as marketing • Typically includes: • A broad 2 to 5-year plan to support the strategic plan • A detailed annual plan • Example: marketing plan objective: to gain a 40% share of a particular market with three new products during coming year • CWLC Example: increase enrollment by 5% (with simultaneous 10% reduction in marketing budget)

6. Level 3 - Operational Planning • First-line managers focus on day-to-day execution of functional plans • Such planning includes detailed annual, semiannual, or quarterly plans • Example:an objective may be set in terms of units of a product a particular salesperson needs to sell per month (sales quota) • Example: an objective to drive inquiries up by x% during key 6 week enrollment period

7. All Business Planning Is an Integrated Activity • Strategic, functional, and operational plans must work together to benefit the whole firm • Marketers must fully understand how they fit with the organization’s overall direction and resources

8. Level 1 - Strategic Planning: Frame the Picture • Very large multiproduct firms may have divisions called strategic business units (SBUs) • SBUs operate like separate businesses with their own mission, business objectives, resources, managers, and competitors • Example: ARAMARK –SBUs included Entertainment, Food Services, Uniform Services, AER • Strategic planning is done at both the corporate and SBU levels • For a small company/organization, strategic planning is done for the company as a whole

9. Strategic Planning Step 1: Define the Mission • Answer three key questions: • What business are we in? • What customers should we serve? • How do we develop firm’s capabilities and focus its efforts? • Mission statement: • A formal document that describes the firm’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources

10. Mission should not be too broad, too narrow/ shortsighted • “Marketing Myopia” : defining the mission too narrowly in terms of a specific product offering • Better to define the mission in terms of what customer needs are satisfied • Example: Railroad vs. transportation • Example: Childcare vs. Education - or- Childcare vs. Family Care

11. Step 2: Evaluate the Internal and External Environments • Situational analysis (business review) • An assessment of a firm’s internal and external environments • Internal environment: Controllable elements inside of an organization • External environment: Uncontrollable elements outside of an organization that may affect its performance either positively or negatively

12. Internal Environment • Controllable elements inside a firm that influence how well the firm operates include: • people (human capital) – asset or liability? • physical facilities – sufficient, superior, inhibiting growth? • financial stability – supports or inhibits growth? • corporate reputation – good, neutral, poor? (why?) • quality products – are they truly of high quality? • strong brands – are they truly strong brands? • technologies – moving company forward or holding company back? • These elements represent key strengths and weaknesses of the firm (working for or against you?)

13. External Environment (See supporting detail in Ch. 3) • Elements outside the firm that may affect it either positively or negatively: • Economic, competitive, technological, legal / political / ethical, regulatory, and sociocultural trends • Trends manifest as opportunities or threats • Firm cannot directly control external factors but can respond to them via planning Visit Trendwatching.com & Google.com/trends

14. External Environment Example: Texas Lottery • Effects of economy – sales up or down • Competition – will adjacent state riverboat gambling affect border sales of lottery tickets? • Technology – effects on current/future games • Legal/political/ethical – effects of revenues directed to TX General Fund vs. Education • Regulatory – what if lobbyists succeed in introducing gaming machines into state? • Socio cultural – how might green movement affect the Lottery?

15. Recent sociocultural trends influencing food marketing stem from consumer desires for low fat, low carb, and organic foods. What is the CURRENT food trend? Trends Can Present Opportunities

16. SWOT Analysis • An analysis of an organization’s Strengths (S) and Weaknesses (W) and the Opportunities (O) and Threats (T) in the external environment • SWOT enables the firm to develop strategies that maximize strengths and capitalize upon opportunities

17. Step 3:Set Organizational or SBU Objectives • Organizational / SBU Objectives • What the firm hopes to accomplish with a long-range business plan • Good objectives:Must be specific, measurable, attainable, and sustainable • May relate to sales, profitability, product development, market share, productivity, ROI, customer satisfaction, or social responsibility

18. Step 4: Establish the Business Portfolio • Business portfolio: • The group of different products or brands owned by a firm and having different income-generating and growth capabilities • Portfolio analysis: • Assessing the potential of a firm’s SBUs • Helps make decisions regarding which SBUs should receive more or less of the firm’s resources • Example: ARAMARK Example: AER * Uniform services * Stand-alone centers * Food services * B&A programs * Recreation management * Summer programs * Educational services * Private schools

19. Boston Consulting Group (BCG) MatrixDo you build, hold, harvest, or divest? iPhone & Samsung Smartphones LG & Motorola Smartphones High $ ??? $ Sony Ericsson Cell Phones Nokia Cell Phones Lower $ ??? $

20. Step 5: Develop Growth Strategies Product-Market Growth Matrix • Orange Juice • Breakfast • Snack Bev • Reeces • PB Cups • Pieces • P Butter • Ice Cream • Baking Soda • Kitchen use • Other usesfor new mkts • Baby Shampoo • Babies • Oily Hair

21. Functional (Marketing) Planning • Accomplished by various functional areas of firm (operations, marketing, human resources, etc.) • Typically includes a broad 5-year plan to support strategic plan and a detailed annual plan • In this class (Marketing), we will focus on the marketing plan • Step 1: Perform a situation analysis • Builds on SWOT – identifies how environmental trends/external environment (ch. 3) affect the marketing plan

22. Marketing Planning: Step 1 • Perform a situation analysis • Builds on SWOT – identifies how environmental trends/external environment (ch. 3) affect the marketing plan

23. Marketing Planning: Step 2 • Set marketing objectives • Specific to the firm’s brands and other marketing mix-related elements • States what the marketing function must accomplish if firm is to achieve its overall business objectives

24. Marketing Planning: Step 3 • Develop marketing strategies to achieve marketing objectives • Select target market(s) where the firm’s offerings are best suited • Develop marketing mix strategies: • Marketing mix strategies:how marketing will accomplish its objectives in the firm’s target market by using product, price, promotion, and place (distribution)

25. Marketing Mix Strategies • Product strategies: • Include product design, packaging, branding, support services, and product variations and features • Pricing strategies: • Include setting prices for final consumers, wholesalers, and retailers based on costs, demand, or competitors’ prices

26. Marketing Mix Strategies • Promotion strategies: • Advertising, sales promotion, public relations, direct marketing, personal selling • Distribution (place) strategies: • How, when, and where the product is available to targeted customers

27. Marketing Planning Step 4: Implement and Controlthe Marketing Plan • Control: • Measuring actual performance, comparing performance to the objectives, making adjustments • Marketing metrics: • Return on marketing investment (ROMI)

28. Creating and Working with a Marketing Plan • Operational plans focus on the day-to-day execution of the marketing plan • Ex: TLC strategic planning process • Semi-annual, 2 day retreat • Involved key partners (ad agency, online game provider, scratch ticket manufacturer) • Determine objectives and options to accomplish • Evaluate what needs to be done by who by when and whether it is realistic to accomplish • Assign deadline dates and accountability

29. SBUs and the Strategic Plan

30. A firm’s corporate culture determines much of its internal environment—the values, norms, and beliefs that influence everyone in the firm i.e. The way employees dress reflects their organization’s corporate culture. Corporate Culture