Marketing,.Planning.And.Strategy.pdf

CHAPTER ONE

Three women and

a goose make

a marketplace.

I TALIAN P ROVERB

Marketing and the

Concept of Planning

and Strategy

approaches to marketing decision making. One widely used approach is the

marketing concept approach , which directs the marketer to develop the product

offering, and indeed the entire marketing program, to meet the needs of the cus-

tomer base. A key element in this approach is the need for information flow from

the market to the decision maker. Another approach is the systems approach , which

instructs the marketer to view the product not as an individual entity but as just

one aspect of the customer’s total need-satisfaction system. A third approach, the

environmental approach , portrays the marketing decision maker as the focal point

of numerous environments within which the firm operates and that affect the suc-

cess of the firm’s marketing program. These environments frequently bear such

labels as legal-political, economic, competitive, consumer, market structure,

social, technological, and international.

Indeed, these and other philosophical approaches to marketing decision

making are merely descriptive frameworks that stress certain aspects of the firm’s

role vis-à-vis the strategic planning process. No matter what approach a firm fol-

lows, it needs a reference point for its decisions that is provided by the strategy

and the planning process involved in designing the strategy. Thus, the strategic

planning process is the guiding force behind decision making, regardless of the

approach one adopts. This relationship between the strategic planning process

and approaches to marketing decision making is depicted in Exhibit 1-1.

Planning perspectives develop in response to needs that arise internally or

that impinge on the organization from outside. During the 1950s and 1960s,

growth was the dominant fact of the economic environment, and the planning

processes developed during that time were typically geared to the discovery and

exploitation of entrepreneurial opportunities. Decentralized planning was the

order of the day. Top management focused on reviewing major investment pro-

posals and approving annual operating budgets. Long-range corporate plans

O ver the years marketers have been presented with a series of philosophical

Marketing and the Concept of Planning and Strategy

CHAPTER 1 Marketing and the Concept of Planning and Strategy

EXHIBIT 1-1

Relationship between the Strategic Planning Process and Approaches to Marketing

Decision Making

were occasionally put together, but they were primarily extrapolations and were

rarely used for strategic decision making.

Planning perspectives changed in the 1970s. With the quadrupling of energy

costs and the emergence of competition from new quarters, followed by a reces-

sion and reports of an impending capital crisis, companies found themselves sur-

rounded by new needs. Reflecting these new management needs and concerns, a

process aimed at more centralized control over resources soon pervaded planning

efforts. Sorting out winners and losers, setting priorities, and conserving capital

became the name of the game. A new era of strategic planning dawned over cor-

porate America.

The value of effective strategic planning is virtually unchallenged in today’s

business world. A majority of the Fortune 1000 firms in the United States, for

instance, now have senior executives responsible for spearheading strategic plan-

ning efforts.

Strategic planning requires that company assets (i.e., resources) be managed

to maximize financial return through the selection of a viable business in accor-

dance with the changing environment. One very important component of strate-

gic planning is the establishment of the product/market scope of a business. It is

within this scope that strategic planning becomes relevant for marketers. 1 Thus,

Marketing and the Concept of Planning and Strategy

PART 1 Introduction

as companies adopted and made progress in their strategic planning capabilities,

a new strategic role for marketing emerged. In this strategic role, marketing con-

centrates on the markets to serve, the competition to be tackled, and the timing of

market entry/exit.

CONCEPT OF PLANNING

Throughout human history, people have tried to achieve specific purposes, and in

this effort some sort of planning has always found a place. In modern times, the

former Soviet Union was the first nation to devise an economic plan for growth

and development. After World War II, national economic planning became a pop-

ular activity, particularly among developing countries, with the goal of systematic

and organized action designed to achieve stated objectives within a given period.

Among market economies, France has gone the furthest in planning its economic

affairs. In the business world, Henri Fayol, the French industrialist, is credited

with the first successful attempts at formal planning.

Accomplishments attributed to planning can be summarized as follows:

1. Planning leads to a better position, or standing, for the organization.

2. Planning helps the organization progress in ways that its management considers

most suitable.

3. Planning helps every manager think, decide, and act more effectively and

progress in the desired direction.

4. Planning helps keep the organization flexible.

5. Planning stimulates a cooperative, integrated, enthusiastic approach to organiza-

tional problems.

6. Planning indicates to management how to evaluate and check up on progress

toward planned objectives.

7. Planning leads to socially and economically useful results.

Planning in corporations emerged as an important activity in the 1960s. Several

studies undertaken during that time showed that companies attached significant

importance to planning. A Conference Board survey of 420 firms, for example,

revealed that 85 percent had formalized corporate planning activity. 2 A 1983 survey

by Coopers & Lybrand and Yankelovich, Skelly, and White confirmed the central

role played by the planning function and the planner in running most large busi-

nesses. 3 Although the importance of planning had been acknowledged for some

time, the executives interviewed in 1983 indicated that planning was becoming

more important and was receiving greater attention. A 1991 study by McDonald’s

noted that marketing planning is commonly practiced by companies of all sizes,

and there is wide agreement on the benefits to be gained from such planning. 4 A

1996 survey by the Association of Management Consulting Firms found that busi-

ness persons, academics, and consultants expect business planning to be their most

pressing management issue as they prepare to enter the next century. 5

Some companies that use formal planning believe that it improves profits and

growth, finding it particularly useful in explicit objective setting and in monitor-

ing results. 6 Certainly, the current business climate is generating a new posture

Marketing and the Concept of Planning and Strategy

CHAPTER 1 Marketing and the Concept of Planning and Strategy

among executives, with the planning process being identified by eight out of ten

respondents as a key to implementing the chief executive officer’s (CEO) chosen

strategy. 7 Today most companies insist on some sort of planning exercise to meet

the rapidly changing environment. For many, however, the exercise is cathartic

rather than creative.

Growth is an accepted expectation of a firm; however, growth does not

happen by itself. Growth must be carefully planned: questions such as how much,

when, in which areas, where to grow, and who will be responsible for different

tasks must be answered. Unplanned growth will be haphazard and may fail to

provide desired levels of profit. Therefore, for a company to realize orderly

growth, to maintain a high level of operating efficiency, and to achieve its goals

fully, it must plan for the future systematically. Products, markets, facilities, per-

sonnel, and financial resources must be evaluated and selected wisely.

Today’s business environment is more complex than ever. In addition to the

keen competition that firms face from both domestic and overseas companies, a

variety of other concerns, including environmental protection, employee welfare,

consumerism, and antitrust action, impinge on business moves. Thus, it is desirable

for a firm to be cautious in undertaking risks, which again calls for a planned effort.

Many firms pursue growth internally through research and development.

This route to growth is not only time-consuming but also requires a heavy com-

mitment of resources with a high degree of risk. In such a context, planning is

needed to choose the right type of risk.

Since World War II, technology has had a major impact on markets and mar-

keters. Presumably, the trend of accelerating technological change will continue

in the future. The impact of technological innovations may be felt in any industry

or in any firm. Therefore, such changes need to be anticipated as far in advance

as possible in order for a firm to take advantage of new opportunities and to

avoid the harmful consequences of not anticipating major new developments.

Here again, planning is significant.

Finally, planning is required in making a choice among the many equally

attractive alternative investment opportunities a firm may have. No firm can

afford to invest in each and every “good’’ opportunity. Planning, thus, is essential

in making the right selection.

Planning for future action has been called by many different names:

long-range planning, corporate planning, comprehensive planning, and formal

planning. Whatever its name, the reference is obviously to the future.

Definition of

Planning

Planning is essentially a process directed toward making today’s decisions with

tomorrow in mind and a means of preparing for future decisions so that they may be

made rapidly, economically, and with as little disruption to the business as possible.

Though there are as many definitions of planning as there are writers on the

subject, the emphasis on the future is the common thread underlying all plan-

ning theory. In practice, however, different meanings are attached to planning.

A distinction is often made between a budget (a yearly program of operations)

and a long-range plan . Some people consider planning as something done by

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