What is the difference between a plan and a strategy?

 

 Is the difference related to the topic concerned (plan = internal problems, strategy = external problems): as Ansoff (1965) mentions “The study of strategy is the part of the study of decision making which is "primarily concerned with external, rather than internal, problems of the firm”
Is it related to a temporal distance (plan = short or medium term, strategy = long term)
Or is it related to the distance towards the subject (plan = concrete, strategy = abstract): "Planning is a formalized procedure to produce an articulated result, in the form of an integrated system of decisions. (Mintzberg, 1993)

 

- A strategy should raise the probability that its employer will reach (B) in good form. It does so mostly by creating conditions that favor success. For example, a strategy can be that you will only support businesses where you can be a first or second tier player, where your objective (B) is to build a product solutions portfolio that fits that defined nature. Building a portfolio of first or second tier only product solutions is what you want to do. It is a solution to a problem associated with running a type of business that you determined third or less tier product solutions will not support. Your strategy does not specifically say how you will arrive at this end. That is where your plan comes in.

 

- A plan is how you will move from (A) to (B). As such it should support your strategy by providing a way to reach (B) that provides an acceptable balance of risk and reward. So your strategy is what you want to do and your plan is how you will do it. For example, you may decide as a strategy that you need to acquire lots of patents in an area to help you maintain freedom of operation, and then your plan is how specifically you will do that…R&D, acquisition, license, etc. This is, of course, oriented on the level of organization you are dealing with. Company, divisional, team, and personal plans and strategies take place simultaneously, which creates issues of alignment that we can cover in a future post.

 

 

Marketing plans are vital to marketing success. They help to focus the mind of companies and marketing teams on the process of marketing i.e. what is going to be achieved and how we intend to do it. There are many approaches to marketing plans.

 

AOSTC (Analysis, Objective, Strategy, Tactics and Control)

 

Stage One - Situation Analysis (and Marketing Audit).

• Marketing environment.
• Laws and regulations.
• Politics.
• The current state of technology.
• Economic conditions.
• Sociocultural aspects.
• Demand trends.
• Media availability.
• Stakeholder interests.
• Marketing plans and campaigns of competitors.
• Internal factors such as your own experience and resource availability.

 

The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the internal environment, the microenvironment and the macroenvironment. Why are they important? Well marketers build both internal and external relationships. Marketers aim to deliver value to satisfied customers, so we need to assess and evaluate our internal business/corporate environment and our external environment which is subdivided into micro and macro.

 

Internal Environment

The internal environment has already been touched upon by other lessons on marketing teacher. For example, the lessons on internal marketing and also on thefunctions within an organization give a good starting point to look at our internal environment. A useful tool for quickly auditing your internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Here is a really quick example using British Airways. Looking internally at men, British Airways employees pilots, engineers, cabin crew, marketing managers, etc. Money is invested in the business by shareholders and banks for example. Machinery would include its aircraft but also access to air bridges and buses to ferry passengers from the terminal to the aircraft. Materials for a service business like British Airways would be aircraft fuel called kerosene (although if we were making aircraft materials would include aluminium, wiring, glass, fabric, and so on).Finally markets which we know can be both internal and external. Some might include a sixth M, which is minutes, since time is a valuable internal resource.

 

Let's look at an example of how the internal environment would impact a company such as Walmart. We are looking at the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Walmart is famous.

 

Microenvironment

The microenvironment is made from individuals and organizations that are close to the company and directly impact the customer experience. Examples would include the company itself, its suppliers, other marketing input from agencies, the markets and segments in which your business trades, your competition and also those around you (which public relations would call publics) who are not paying customers but still have an interest in your business. The Micro environment is relatively controllable since the actions of the business may influence such stakeholders.

 

Walmart’s Micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Walmart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.

 

Macroenvironment

The macroenvironment is less controllable. The macro environment consists of much larger all-encompassing influences (which impact the microenvironment) from the broader global society. Here we would consider culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others.

 

Again for Walmart the wider global macro environment will certainly impact its business, and many of these factors are pretty much uncontrollable. Walmart trades mainly in the United States but also in international markets. For example in the United Kingdom Walmart trades as Asda. Walmart would need to take into account local customs and practices in the United Kingdom such as bank holidays and other local festivals. In the United Kingdom 2012 saw the 60th anniversary of Queen Elizabeth II’s reign which was a national celebration.

 

The United States and Europe experience different economic cycles, so trading in terms of interest rates needs to be considered. Also remember that Walmart can sell firearms in the United States which are illegal under local English law. There are many other macroeconomic influences such as governments and other publics, economic indicators such as inflation and exchange rates, and the level nature of the local technology in different countries. There are powerful influencers such as war (in Afghanistan for example) and natural disasters (such as the Japanese Fukushima Daiichi nuclear disaster) which inevitably would influence the business and would be out of its control.

 

To summaries, controllable factors tend to be included in your internal environment and your microenvironment. On the other hand less controllable factors tend to be in relation to your macro environment. Why not list your own controllable versus uncontrollable factors for a business of your choice?

 

Also there are tools for internal/external audit:

• SWOT
• PEST
• Porter's Five Forces

SWOT Analysis:

SWOT analysis is a tool for auditing an organization and its environment. SWOT analysis is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal SWOT factors. Opportunities and threats are external SWOT factors. A strength is a positive internal factor. A weakness is a negative internal factor. An opportunity is a positive external factor. A threat is a negative external factor.

 

We should aim to turn our weaknesses into strengths, and our threats into opportunities. Then finally, SWOT will give managers options to match internal strengths with external opportunities. SWOT is that simple. The outcome should be an increase in 'value' for customers which hopefully will improve our competitive advantage.

 

The main purpose of SWOT analysis has to be to add value to our products and services so that we can recruit new customers, retain loyal customers, and extend products and services to customer segments over the long-term. If undertaken successfully, we can then increase our Return On Investment (ROI).

In SWOT, strengths and weaknesses are internal factors.

For example:

A SWOT strength could be:

• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds value to your product or service.

A SWOT weakness could be:

· Lack of marketing expertise.

· Undifferentiated products or services (i.e. in relation to your competitors).

·Location of your business.

·Poor quality goods or services.

·Damaged reputation.

 

In SWOT, opportunities and threats are external factors.

For example a SWOT opportunity could be:

• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer improved profits.
• A new international market.
• A market vacated by an ineffective competitor.

 

A SWOT threat could be:

• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product or service.
• Competitors have superior access to channels of distribution.
• Taxation is introduced on your product or service.

 

Simple rules for successful SWOT analysis.

• Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
• SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
• Keep your SWOT short and simple. Avoid complexity and over analysis
• SWOT analysis is subjective.

 

The Real SWOT

SWOT as taught is today’s business schools is little more than Scientific Wild Ass Guess (SWAGs) according to Cranfield’s Professor Malcolm McDonald. He makes the point that many threats are the same regardless of the business environment that is being audited. For example, common-all-garden threats would include the weather, competitors, changes in technology, regulation and deregulation, and the impacts of competing countries. In strengths you’ll get good products – but that could mean anything. Under weaknesses you get equally general and vacuous points such as the price is too high. This type of SWOT analysis is too general and is not much use to marketing managers. SWOT needs to be segment specific. SWOT should look at groups of customers and their perception of your brand, what price they will pay, the place where they buy it, the products that they buy and so on. Otherwise your SWOT analysis is averaged and not specific.

 

SWOT analysis should be focused upon a segment of the market. Then you can ask –what are the Critical Success Factors(CSFs) that are pivotal to the buyer decision process – in that segment? Then you need to weight the CSFs so that you can separate those drivers that are most important. When considering strengths and weaknesses, in true marketing fashion you need to take the consumers’ perspective when completing the SWOT. You also must factor in the customers’ view of your business in relation to the competition i.e. relative to competitors. So you can match key CSFs to opportunities. You can rank those opportunities that are most profitable or sustainable. Then you need to factor in the impact of threats. Finally you should dovetail SWOT with the rest of your strategic thinking.

 

PEST Analysis

It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning.

The organization's marketing environment is made up of:

• The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
• The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
• The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.

Political Factors.

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.

 

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1.How stable is the political environment?

2.Will government policy influence laws that regulate or tax your business?

3.What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

 

Economic Factors.

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics.

More specifically you'll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

1. Interest rates.

2. The level of inflation Employment level per capita.

3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

 

Sociocultural Factors.

The sociocultural environment embodies everything which is social and cultural within a nation or society.

In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

1.What is the dominant religion?

2.What are attitudes to foreign products and services?

3.Does language impact upon the diffusion of products onto markets?

4.How much time do consumers have for leisure?

5.What are the roles of men and women within society?

6.How long are the population living? Are the older generations wealthy?

7.Do the population have a strong/weak opinion on green issues?

 

Technological Factors.

Technological factors are a multifaceted influencer. Let's just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.

 

Technology also surrounds business processes. As we saw from our lesson on the functions within an organization all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

 

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

 

Stage Two - Set marketing objectives (SMART objectives.

• Specific - Be precise about what you are going to achieve.
• Measurable - Quantify you objectives.
• Achievable - Are you attempting too much?
• Realistic - Do you have the resource to make the objective happen (men, money, machines, materials, minutes)?
• Timed - State when you will achieve the objective (within a month? By February 2010?).

SMART objectives are simple and quick to learn. The objective is the starting point of the marketing plan. Once environmental analyses (such as SWOT, Five Forces Analysis, and PEST) and marketing audit have been conducted, their results will inform SMART objectives. SMART objectives should seek to answer the question 'Where do we want to go?'. The purposes of SMART objectives include:

• To enable a company to control its marketing plan.
• To help to motivate individuals and teams to reach a common goal.
• To provide an agreed, consistent focus for all functions of an organization.

Some examples of SMART objectives follow:

1. Profitability Objectives

To achieve a 20% return on capital employed by August 2019.

2. Market Share Objectives

To gain 25% of the market for sports shoes by September 2018

3. Promotional Objectives

To increase awareness of the dangers of AIDS in France from 12% to 25% by June 2017.

To increase trail of X washing powder from 2% to 5% of our target group by January 2019.

4. Objectives for Survival

To survive the current double-dip recession.

5. Objectives for Growth

To increase the size of our Brazilian operation from $200,000 in 2017 to $400,000 in 2018.

6. Objectives for Branding

To make Y brand of bottled beer the preferred brand of 21-28 year old females in North America by February 2017.

 

There are many examples of SMARTobjectives. Be careful not to confuse objectives with goals and aims. Goals and aims tend to be more vague and focus on the longer-term. They will not be SMART. However, many SMART objectives start off as aims or goals and therefore they are of equal importance.

If you don't make your objective SMART, it will be too vague and will not be realized. Remember that the rest of the plan hinges on the objective. If it is not correct, the plan may fail.

 

Stage Three - Describe your target market.

• Which segment? How will we target the segment? How should we position within the segment?
• Why this segment and not a different one? (This will focus the mind).
• Define the segment in terms of demographics and lifestyle. Show how you intend to 'position' your product or service within that segment.

Segmentation:

Segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior. The world is made up of billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'. Think of your market as an orange, with a series of connected but distinctive segments, each with their own profile.

Of course you can segment by all sorts of variables. The diagram above depicts how segmentation information is often represented as a pie chart diagram - the segments are often named and/ or numbered in some way.

Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:

• Is the segment viable? Can we make a profit from it?
• Is the segment accessible? How easy is it for us to get into the segment?
• Is the segment measurable? Can we obtain realistic data to consider its potential?

There are many ways that a segment can be considered. For example, the auto market could be segmented by: driver age, engine size, model type, cost, and so on. However the more general bases include:

• by geography - such as where in the world was the product bought.
• by psychographics - such as lifestyle or beliefs.
• by socio-cultural factors - such as class.
• by demography - such as age, sex, and so on.

A company will evaluate each segment based upon potential business success. Opportunities will depend upon factors such as: the potential growth of the segment the state of competitive rivalry within the segment how much profit the segment will deliver how big the segment is how the segment fits with the current direction of the company and its vision.

The Segmentation Matrix Business Battle map is a useful segmentation tool. There are two bases for segmentation. Here we use beer brand versus ages groups. The various products are then plotted on the matrix.

 

Targeting:

Targeting is the second stage of the SEGMENT "Target" POSITION (STP) process. After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them. Resources and effort will be targeted at the segment.

The first is the single segment with a single product. In other word, the marketer targets a single product offering at a single segment in a market with many segments. For example, British Airway's Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed.

Secondly the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. This is typical in 'mass marketing' or where differentiation is less important than cost. An example of this is the approach taken by budget airlines such as Go.

Finally there is a multi-segment approach. Here a marketer will target a variety of different segments with a series of differentiated products. This is typical in the motor industry. Here there are a variety of products such as diesel, four-wheel-drive, sports saloons, and so on.

 

Positioning:

The third and final part of the SEGMENT - TARGET - POSITION (STP) process is 'positioning.' Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market.

Remember this important point. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.

Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy).

The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer?

Trout and Ries suggest a six-step question framework for successful positioning:

1. What position do you currently own 

2. What position do you want to own?

3. Whom you have to defeat to own the position you want.

4. Do you have the resources to do it?

5. Can you persist until you get there?

6. Are your tactics supporting the positioning objective you set?

 

Stage Four - Marketing Tactics.

 Convert the strategy into the marketing mix (also known as the 4Ps). These are your marketing tactics. 

• Price Will you cost plus, skim, match the competition or penetrate the market?
• Place Will you market direct, use agents or distributors, etc?
• Product Sold individually, as part of a bundle, in bulk, etc?
• Promotion Which media will you use? e.g sponsorship, radio advertising, sales force, point-of-sale, etc? Think of the mix elements as the ingredients of a 'cake mix'. You have eggs, milk, butter, and flour. However, if you alter the amount of each ingredient, you will influence the type of cake that you finish with.

 

Stage Five - Marketing Controls.

Remember that there is no planning without control. Control is vital.

• Start-up costs.
• Monthly budgets.
• Sales figure.
• Market share data.
• Consider the cycle of control.

 Finally, write a short summary (or synopsis) which is placed at the front of the plan. This will help others to get acquainted with the plan without having to spend time reading it all. Place all supporting information into an appendix at the back of the plan.

 

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