MKTG 302 Ch 2 Strategic Planning for Competitive Advantage.docx

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Strategic Planning The term strategic has two components, a macro-level orientation and a long term outlook. An operational or a tactical plan on the other hand, has a narrower focus and has more of a short-term horizon and is often defined within the confines of a strategic plan. Strategic plan is more of an overall plan and serves as a guide for major decisions with long-term initiatives. There are several frameworks for evaluating strategic alternatives available to organizations. Like all frameworks, they help the decision makers in a more systematic manner. Three of the more widely used frameworks are Ansoff strategic opportunity matrix, the Boston consulting group matrix, and the General Electric Model. We will discuss Ansoff in this segment and the other two in following segments. Named after its author, Igor Ansoff, this framework creates a two by two matrix using the nature of the product, new and existing, and the market, new and existing. As you can see, this results in four combinations, each offering a unique opportunity. Market penetration: in this case, the organization maintains its existing product in the existing market, but tries to increase its sales and profits. In other words, it tries to penetrate deeper into the same market with the same product. This is accomplished by tweaking or adjusting the four P’s of marketing. As such, the organization may increase or decrease price, change the channels of distributions, modify its promotion, or adjust its product offering. For example, McDonalds may decrease the prices of its offerings in the hopes of generating more sales and higher overall profits. Similarly, it may offer a larger size if it believes it can be more appealing to its customers and strengthen its position in the market. Market Development: as the name suggests, the company is developing a new market while maintaining its existing product. The most common form of market development is going to new geographic markets. This is especially true for the rapidly globalized world today. Domestic markets may be saturated. Markets in other countries on the other hand, may provide tremendous opportunity for growth. For example, McDonalds is now operating in several countries. However, market development doesn’t have to be new geographic markets only. It can also be, for example, new demographic markets. For example, Lego which had predominantly marketed its toys to boys expanded its market to cater to young girls too. Product Development: here a new product is developed to cater to the same market. Since companies are already familiar with their markets, they may want to increase revenue by developing new products. McDonald’s for example, expanded its product offering to include coffee. Similarly, it started offering healthier options like yogurt parfaits, entrée salads, and fruits to its customers.
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