Strategic Planning Process for Industrial Marketing

In this article we will discuss about the strategic planning process for industrial marketing.

Stage-1 – Defining the Organization’s Mission:

A company’s mission reflects the business domain or framework within which the firm will operate. The business domain of the organisation consists of the customer groups that will be served, basic products that will be offered and the technology involved.

A well- defined business mission statement should provide a view of what an organisation seeks to accomplish and the markets and customers it seeks to pursue now and in the future. It defines the very purpose of the existence of the organisation.

Too often it is believed that a company’s mission is obvious or “goes without saying”. However, it may be obvious only to top management without it permeating the organisation to generate shared company values and style.

A properly constructed mission statement, one which considers the many dimensions of a company’s relationships with its stakeholders and which includes time, purpose and direction, should be the definitive statement of why the company is in business how it intends to remain in business and with what resources the business will be managed. A mission statement should also specify the business domain (or market) in which the organisation will operate.

Stage-2 – Strategic and Marketing Analysis:

This stage consists of three steps:

(a) Marketing Audit and SWOT Analysis:

Marketing audit is a true starting point for strategic planning, since it is through the audit that the strategist arrives at a measure of both environmental opportunities and threats and of the capability of the organization.

The three major elements of a marketing audit are:

(i) The analysis of the external environment and internal situation.

(ii) The evaluation of past performance and present activities and

(iii) The identification of future opportunities and threats.

SWOT analysis is one of the ways in which marketing audit can be performed. Here the manager prepares two lists, an SW list describing the company and the main strength and weakness of the product and an OT list describing the chief opportunities and threats.

SW describes factors internal to the company; OT describes forces external to the company. The manager should begin with the OT list. What are the attractive opportunities facing the firm?

The aim here is to determine the market potential for own products in terms of needs that are not being fully satisfied.

The opportunities can be of three kinds:

(i) Additive

(ii) Complementary and

(iii) Breakthrough

An additive opportunity more fully exploits already existing business resources. It does not change the character of the business. The paper manufacturer who extends his marketing from the commercial printer to the office reproduction field is one such example.

Additive opportunities should not be allowed to take resources away from complementary or breakthrough opportunities.

The complimentary opportunity will change the structure of the business. It offers something new which, when combined with the present business, results in new total larger than the sum of its parts. The breakthrough opportunity changes the fundamental economic characteristics and capacity of business.

The story of Xerox Corporation is a breakthrough story. The process was developed for office reproduction (i.e., photo copying) and offered for many large and good companies, who turned it down saying it was too risky and too expensive to develop.

The Haloid Corporation (as Xerox was then called) was a very small organisation which identified the opportunity and the rest is history.

Likewise the organisation must detail the threats faced. A company that does not see any trouble ahead is headed for real trouble.

A threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive action, to deterioration in sales or profit.

For Example – For the polyester and fiber manufacturer Indo Rama, the threats it could face are:

(i) Widespread dumping by polyester manufacturers in Korea, Taiwan and Indonesia.

(ii) Depressing margins.

(iii) High interest pay-outs and

(iv) High taxes, inhibiting demand growth.

Next is the SW (i.e.) internal environmental analysis. This analysis is performed so that the opportunities that have been identified have to be evaluated if they can be used by the company on the basis of S W.

All identified opportunities would not match all organisations. Infosys identifies its strength as systems and processes. Any repetitive task is de-skilled and automated and hence less risk or failure and mistakes.

An industrial organisation also faces weakness. The weakness could be that the departments of the organisation are unable to work as a team. Weaknesses cannot be totally eliminated, but must be identified and minimized.

(b) Competitor Analysis:

Today’s market environment is characterized by:

(i) Higher levels and an increasing intensity of competition.

(ii) Organisations search for a competitive edge.

(iii) Pace of innovation speeding up.

(iv) Strategic alliances becoming more frequent and

(v) Geographic sources of competition are becoming wider.

The industrial market environment and how different factors affect the firms doing industrial marketing. The implications of these changes are that, the industrial organisation needs to have more understanding of who is competing against their capabilities.

Competitive analysis can be defined as a set of activities which examines the comparative position of competing enterprises within a given strategic sector.

(c) Customer Analysis:

Strategic planning is ultimately driven by the marketing perception of the strategist as to how and why customers behave as they do and how they are likely to respond to various elements of the marketing mix. In the majority of markets, buyers differ enormously in terms of their buying dynamics.

In industrial markets, differences are exhibited in the goals, criteria employed by those involved in the buying process, the formality of purchasing policies and the constraints that exist in the form of delivery dates and expected performance levels.

In the customer analysis, the planner has to examine the following details of the customer:

(i) The buying roles within the decision-making unit,

(ii) Type of buying behaviour,

(iii) The decision process,

(iv) Type of purchasing (centralized vs. decentralized) and

(v) Factors influencing the buying behaviour.

Stage-3 – Strategic Directions and Strategy Formulation:

This stage consists of three steps.

They are:

(a) Goals and Objectives:

Lewis Carroll’s writing in “Alice in Wonderland” came up with a maxim along the lines “if you don’t know where you’re going, any road will do”.

It is too simple but less than helpful in a practical sense. The strategist who says only that our objective is to make as much profit as possible’ is merely stating a self-fulfilling prophesy. To be useful, an objective must be to have a degree of formality.

Having developed a mission statement the strategist needs to establish corporate objectives, which are typically influenced by several issues including:

(i) The nature of the business (products, markets and technology);

(ii) External factors (societal values, pressure groups, government and legislation);

(iii) Organisation culture and;

(iv) Individuals and groups within the organisation.

Having identified the objectives the strategist must ensure that the four most significant criteria are satisfied, they are:

(i) Objectives are hierarchically arranged,

(ii) Objectives are quantitatively expressed,

(iii) Objectives are realistic and,

(iv) Objectives have internal consistency.

Once this has been done, it then becomes possible to begin the process of developing strategies that are to be used to achieve the agreed objectives.

(b) Market Segmentation, Targeting and Positioning:

A well-developed strategy of market segmentation, targeting and positioning contributes to effective marketing planning. A single product or marketing approach cannot appeal to the needs and wants of a group of potential customers. Hence, the strategist needs to categories buyers on the basis of both micro and macro variables.

Having segmented the market, the strategist should then be in a position to identify those segments which, from the organisation’s point of view represent the most attractive targets.

In deciding where to focus the marketing effort, the marketing strategist needs to give consideration to three elements:

(i) The size and growth potential of each segment,

(ii) The structural attractiveness of different segments and

(iii) The organization’s objectives and resources.

Once a decision has been made on the breadth of market coverage, the strategist then to consider how best to position the organisation, the product range, and brand within each target segment. A number of guidelines to target positioning.

A well-conceived and properly implemented strategy of segmentation, targeting and positioning can contribute to a truly effective marketing programme.

(c) The Formulation of Strategy:

Even though we are concerned with formulating a marketing strategy, it needs to be recognized that these strategies are dependent on business unit plans which in turn depend on the corporate strategies.

At the corporate level, the decisions made are concerned principally with the corporate strategic plans and how best to develop the long- term profile of the business.

This, in turn involves a series of decisions on the levels of resource allocation to individual business units according to the business unit strategies. Finally, marketing plans need to be developed at the product level.

The corporate management has four major dimensions of planning:

(i) Definition of the business mission;

(ii) Establishing the company’s SBU (Strategic business units);

(iii) Evaluating the existing business portfolio and;

(iv) Identifying new areas for the business to enter.

The business mission is already dealt with in the stage of strategic planning process. Once this is done, the strategist is then in a position to move on and identify the organisation’s Strategic Business Unit (SBU).

Many large companies have several businesses which businesses can be defined in terms of customers, product, market and technology.

For Example – IBP Co .Ltd. is the oldest oil company in the petroleum sector. IBP is armed with three business groups – petroleum, chemicals and engineering. Of these business units petroleum is the core activity.

ITC is a prominent tobacco major which has the following business units:

(i) Agro foods (edible oils, branded atta.)

(ii) ITC lnfo-tech

(iii) ITC lifestyle retailing (Wills Sport)

(iv) ITC Bhadrachalam (Paper & Paperboards) and

(v) ITC greeting cards (through expressions) and lately ITC has added another strategic business unit by entering into the Rs.800 crore matchbox markets.

Stage-4 – Strategic Choices:

This stage has four steps:

(a) Product and New Product Strategies:

In developing a product strategy recognition needs to be given to the three interrelated elements of the product:

(i) The product physical attributes including its performance, style and quality.

(ii) The benefits or ‘bundle of satisfactions’ that it delivers to the buyer.

(iii) The marketing support services such as delivery, installation and after-sales service.

An effective product policy is based on an understanding of two main concepts are the product life cycle and portfolio analysis.

In developing a product strategy, consideration needs to be given to past performance, environmental factors, organizational objectives, resources available and corporate capability.

For an organisation intent on improving its position in the market place, new product development should be continuously and seriously undertaken. In the majority of industries, there are two ways in which new products are added.

(i) Acquisition:

(a) The organisation can buy other firms.

(b) It can buy a license or franchise.

(c) It can buy patents.

(ii) Internal New Product Development:

This can be done in two ways:

(a) Products developed by in house R&D.

(b) Products developed by outside agencies.

(b) Pricing Policies and Strategies:

Pricing decisions are among the potentially most difficult that marketing managers are required to make.

Prices are influenced by some significant factors like:

(i) Corporate objectives

(ii) Competitive stance

(iii) Nature and structure of competition

(iv) Product life-cycle

(v) Customers and negotiations

(vi) Government regulations and

(vii) Industrial consortiums.

Because of its flexibility, price can be used in a variety of ways as a tactical weapon, including boosting short-term sales and reflecting geographical or segmentation differences.

(c) The Promotional Plan:

Marketing communications represent the most visible face of the organisation. The question of how the communications program is to be managed is therefore a fundamental part of the strategic marketing task.

In developing the communications plan, the marketing planner needs to begin by recognizing that the various tools of communication such as sales promotion, advertising, public relations and so on cannot be looked at and managed in isolation.

(d) The Distribution Plan:

A significant and increasing part of many organisations is expenditure that is incurred in keeping their products on the move through the channels of distribution. The distribution plan focuses on the set of decisions relating to the processes which are concerned with the flow of supplies, intermediaries and end users. The success of getting orders with determines the volume and hence influences distribution planning in a significant way.

Similarly, the level of customer satisfaction (which will be affected by the efficiency of distribution) will affect the placing of repeat orders. Major decision areas in channel management are formulating the channel strategy, designing the channel structure, selecting and motivating the channel members, co-ordinating channel strategy with the marketing mix and evaluating channel member performance.

Stage-5 – Strategic Evaluation:

In choosing between alternative courses of action or strategies, it is desirable to choose the best; but how is the best to be recognized? The best from the viewpoint of one interest group like stockholders may not be the best from another view point.

Specifying criteria by which choices are to be made among competing alternatives is a crucial step in working towards improved marketing performance.

State-6 – Strategic Implementation and Control:

Of the two operating functions, production and marketing, the latter is the most difficult area to plan and control since it is the source of sales forecasts and revenue estimates that can rarely be predicted accurately.

The pressures on marketing organisations have significant implications for marketing planning and control. The strategists must develop understanding, a commitment and skill to deal proactively with new situations.