Summary
Highlights
This chapter focuses on partnering to build customer engagement, value, and relationships. It introduces three core learning objectives: understanding company-wide strategic planning and its four steps, designing business portfolios using the BCG matrix, and designing business portfolios using the product/market expansion grid. Strategic planning is defined as developing and maintaining a strategic fit between an organization's goals, capabilities, and changing market opportunities.
The four steps in strategic planning are: defining the company mission, setting company objectives and goals, designing the business portfolio, and developing marketing and other functional strategies. Mission statements should outline the organization's purpose, what it aims to achieve, and who its customers are. They must be meaningful, specific, motivational, emphasize company strengths, and avoid being myopic or solely focused on sales and profit figures.
Business objectives are closely linked to marketing objectives. Business objectives can include building profitable customer relationships, investing in R&D, or improving profits. Marketing objectives then support these by outlining how to achieve them, such as increasing market share, fostering local partnerships, or boosting promotions.
A business portfolio is the collection of businesses and products that make up a company. Portfolio analysis involves evaluating these to determine their strategic fit. A strategic business unit (SBU) can be a company division, a product line, a single product, a brand, or even a person (like an athlete sponsored by a brand). The process involves identifying SBUs, assessing their attractiveness, and deciding on the level of support each SBU deserves.
The BCG matrix classifies SBUs based on market growth rate and relative market share, using four categories: Dogs (low market share, low growth), Cash Cows (high market share, low growth – profitable now but not growing fast), Question Marks (low market share, high growth – uncertain future but potential), and Stars (high market share, high growth – leaders in growing markets). Companies decide whether to build, hold, harvest, or divest each SBU. Challenges of the BCG matrix include difficulty in defining SBUs and measuring market share/growth, being time-consuming and expensive, and focusing more on current business than future planning.
This grid is another tool for designing business portfolios, considering existing and new products, and existing and new markets. It identifies four strategies: Market Penetration (existing products, existing markets – increasing sales to current customers), Market Development (existing products, new markets – finding new demographic or geographic markets), Product Development (new products, existing markets – offering modified or new products to current markets), and Diversification (new products, new markets – starting or acquiring businesses beyond current products and markets, often the riskiest). An example of diversification is Under Armour acquiring fitness apps to target a new market segment with a new product.
The chapter concludes by reiterating the importance of the four steps in strategic planning: defining the mission, setting objectives, designing the business portfolio (using either the BCG matrix or product/market expansion grid), and planning marketing and other functional strategies. These concepts will be further explored in subsequent chapters.