strategic planning - setting objectives

Introduction
Objectives set out what the business is trying to achieve.

Objectives can be set at two levels:
(1) Corporate level
These are objectives that concern the business or organisation as a whole

Examples of “corporate objectives might include:

• We aim for a return on investment of at least 15%

• We aim to achieve an operating profit of over Rs.10 million on sales of at least Rs.100 million

• We aim to increase earnings per share by at least 10% every year for the foreseeable future

(2) Functional level- e.g. specific objectives for marketing activities
Examples of functional marketing objectives” might include:

• We aim to build customer database of at least 250,000 households within the next 12 months

• We aim to achieve a market share of 10%

• We aim to achieve 75% customer awareness of our brand in our target markets

Both corporate and functional objectives need to conform to the commonly used SMART criteria.
The SMART criteria (an important concept which you should try to remember and apply in exams) are summarised below:
Specific - the objective should state exactly what is to be achieved.
Measurable - an objective should be capable of measurement – so that it is possible to determine whether (or how far) it has been achieved
Achievable - the objective should be realistic given the circumstances in which it is set and the resources available to the business.
Relevant - objectives should be relevant to the people responsible for achieving them
Time Bound - objectives should be set with a time-frame in mind. These deadlines also need to be realistic.

What role does the mission statement play in marketing planning?

In practice, a strong mission statement can help in three main ways:

• It provides an outline of how the marketing plan should seek to fulfil the mission

• It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?

• It provides an incentive to implement the marketing plan

Mission

A strategic plan starts with a clearly defined business mission. Mintzberg defines a mission as follows:
“A mission describes the organisation’s basic function in society, in terms of the products and services it produces for its customers”.

A clear business mission should have each of the following elements:
(1) A Purpose
Why does the business exist? Is it to create wealth for shareholders? Does it exist to satisfy the needs of all stakeholders (including employees, and society at large?)

(2) A Strategy and Strategic Scope
A mission statement provides the commercial logic for the business and so defines two things:
- The products or services it offers (and therefore its competitive position)- The competences through which it tries to succeed and its method of competing
A business’ strategic scope defines the boundaries of its operations. These are set by management.
For example, these boundaries may be set in terms of geography, market, business method, product etc. The decisions management make about strategic scope define the nature of the business.

(3) Policies and Standards of Behaviour
A mission needs to be translated into everyday actions. For example, if the business mission includes delivering “outstanding customer service”, then policies and standards should be created and monitored that test delivery.
These might include monitoring the speed with which telephone calls are answered in the sales call centre, the number of complaints received from customers, or the extent of positive customer feedback via questionnaires.

(4) Values and Culture
The values of a business are the basic, often un-stated, beliefs of the people who work in the business. These would include:
• Business principles (e.g. social policy, commitments to customers)
• Loyalty and commitment (e.g. are employees inspired to sacrifice their personal goals for the good of the business as a whole? And does the business demonstrate a high level of commitment and loyalty to its staff?)
• Guidance on expected behaviour – a strong sense of mission helps create a work environment where there is a common purpose

Competitive Advantage

Definition
A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

Competitive Strategies

Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of a businesses' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry.

Strategy - Differentiation
This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products.

Strategy - Cost Leadership
With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. If the achieved selling price can at least equal (or near)the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.

Strategy - Differentiation Focus
In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.

Strategy - Cost Focus
Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".

Strategic Choice

This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options

Strategic Analysis

This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:

PEST Analysis - a technique for understanding the "environment" in which a business operates
Scenario Planning - a technique that builds various plausible views of possible futures for a business

Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users

Directional Policy Matrix - a technique which summarises the competitive strength of a businesses operations in specific markets

Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a businesses' overall competitive position

Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed

SWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.

Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

strategy - what is strategy?

Definition:
Johnson and Scholes define strategy as follows:
"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

In other words, strategy is about:
* Where is the business trying to get to in the long-term (direction)
* Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)
* How can the business perform better than the competition in those markets? (advantage)?
* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?
* What external, environmental factors affect the businesses' ability to compete? (environment)?
* What are the values and expectations of those who have power in and around the business? (stakeholders)

ansoff's product / market matrix

Introduction
The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.
The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below:

Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.

Market penetration seeks to achieve four main objectives:
• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemesA market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Market development
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:
• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels
• Different pricing policies to attract different customers or create new market segments

Product development
Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

Diversification
Diversification is the name given to the growth strategy where a business markets new products in new markets.
This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

Some latin terms

Abatement = Removal or stopping of a nuisance.
Ab initio = Latin phrase meaning ‘from the beginning’.
Abjure = To swear not to bear allegiance to another country.
Abscond = To go away without permission or not to return to the court after being
released on bail or to escape from prison.
Actus Reus= Latin phrase meaning ‘Guilty Act’, Act which is forbidden by the Criminal
Law, one of the two elements of a crime.
Ad Idem = Latin phrase meaning ‘in Agreement.’
Adjourn = To stop a meeting for a period, to put off a legal hearing to the later date.
Ad Litem = Latin phrase meaning ‘referring to the case at Law’
Guardian ad Letem = Person who acts on behalf of a minor who is a
defendant in a court case.
Ad valorem = Latin phrase meaning ‘according to value’.
Alieni Juris= Latin phrase meaning ‘of another’s right’. A person (such as minor) who
has a right under the authority of a guardian.
Amicus Curiae = Latin phrase meaning ‘friend of the court’: Lawyer who does not
represent a party in a case but who is called upon to address the court
to help clear up a difficult legal point or to explain something which is
in the public interest.
Ante = Latin adverb meaning ‘which has taken place earlier’ or ‘before’.
Status Quo Ante = the situation as it was before.
A posteriori = Latin phrase meaning ‘from what has been concluded afterwards’.
A posteriori argument = Argument based on observation.
Affidavit = written statement which is signed & sworn before a solicitor and which can
then be used as evidence in court hearings.
Animus = Intention.
Animus cancellandi = the intention to cancel.
Animus Furandi = Intention to steal.
Animus Manendi = Intention to stay (in a place)
Animus Revocandi = Intention to revoke (A will)
Annul = To cancel or to stop something having a legal effect.
Appeal = Asking a higher court to change a decision of a lower court.
Arson = Notifiable offence of setting fire to a building.
Audi Alteram Partem = Latin phrase meaning ‘Hear the other side’: A rule in natural
justice that everyone has the right to speak in his own defence
and to have the case against him explained to him.
Automatism = Defence to a criminal charge whereby the accused states he acted
involuntarily.
Autopsy = Examination of a dead person to see what was the cause of death.
Autrefois Acquit = French phrase meaning ‘previously acquitted’. Plea that an accused
person has already been acquitted of the crime with which he is
charged.
Autrefois Convict = French phrase meaning ‘previously convicted’. Plea that an accused
person has already been convicted of the crime with which he is now
charged .
Aver = To make a statement or an allegation in pleadings.
Attorn = To transfer.
Asylum = Hospital for people who are mentally ill.
Arm’s length = Not closely connected, to deal with someone at arm’s length = To deal
as if there were no connections between the parties.
Appurtenant = To or belonging to.
Antedate = To put an earlier date o a document.
Amnesty = Pardon, often for political crimes, given to several people at he same
time.
Alimony = Money which a court orders a husband to pay regularly to his separated or
divorced wife.
Adjoin = To touch another property.
Accretion = Enlargement of a piece of land by natural causes.
Accredited = (Agent) who is appointed by a company to act on its behalf.
Alienation = Transfer of property to someone else.
A fortiori = Latin phrase meaning ‘for a stronger reason
Affray = Public fight which frightens other people

Aggrieved = Who has been damaged/ harmed by a defendant’s actions
Autarchy = Situation where a state has total power over itself & rules itself without
outside interference
Autarky = Situation where a state is self-sufficient & can provide all its needs without
outside help.