Strategic Marketing: Models and Plans

Strategic Marketing: Models and Plans

Noel Doherty (St. John’s University, USA) and F. Victor Lu (St. John’s University, USA)
DOI: 10.4018/978-1-4666-0077-5.ch024
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Abstract

Strategies and planning tools are explained from the product and market perspective. The principal growth and sustainability strategies of market penetration, market development, product development, and diversification are explained and illustrated. The meaning and importance of segmentation, targeting, and positioning are also explained.
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Introduction

Strategic Planning refers to the process by which an organization develops plans to achieve a set of goals consistent with its resources and cognizant of a consistently changing environment. The theoretical ground work for modern business strategy was largely developed by Peter Drucker, Theodore Levitt and Thomas Peters. Drucker emphasized that there is only one valid definition of business purpose: to create a customer. According to Drucker, there two critical business activities are: marketing and innovation (which comes from changing needs or a better way to satisfy needs). Levitt argued that many businesses make a fundamental mistake by defining their business too narrowly (i.e., in terms of products or markets rather than consumer needs). Peters through intensive case studies showed that long term success was achieved by companies that were close to their customers and their changing needs. For example, top executives at IBM spend considerable time on customer premises to better understand customer problems and needs. Strategic Management refer to the actions taken at the corporate and division (company) levels to develop long-run strategies for growth and survival (see Figure 1). A primary objective is to design the corporate structure in such a manner that it consists of enough profitable businesses to maintain the corporation’s viability even if some of its businesses are not performing well.

Figure 1.

The planning process in corporations

Strategic Marketing refers to the actions taken at the product and market levels involving the marketing mix (price, product, place, and promotions) and the allocation of scarce resources to viable markets.

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Strategic Business Units (Sbu)

Large corporations are generally composed of different businesses that require separate mission statements and planning. In the 1960’s, General Electric (GE) introduced the concept of Strategic Business Units (SBU) to identify and separate for planning purposes its separate businesses. The major distinguishing characteristics of an SBU are:

  • 1.

    Single business or collection of similar businesses;

  • 2.

    Distinctive mission;

  • 3.

    It has its own competitors;

  • 4.

    It has a separate manager;

  • 5.

    It can be planned independently (although it may have synergistic properties with other SBUs) of the other businesses.

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The Bcg Matrix

Bruce Henderson, founder of the Boston Consulting Group (BCG) integrated the concept of SBU with the now famous BCG growth/share matrix depicted in Figure 2.

Figure 2.

Boston consulting group (BCG) portfolio matrix

In the BCG matrix the two major determinants of profitability are (1) industry growth rate; and (2) market share (defined as the ratio of the SBU’s sales to the sales of its next largest competitor).

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