The Issues Involved In Strategic Planning Marketing Essay
They are stated in precise terms as quantitatively as possible. The emphasis on goals is on measurement of progress toward the attainment of objectives. Goals have the following structures they: 1. Are resulting from objects, 2. Offer a normal for measuring presentation, 3. Are articulated in concrete terms, 4. Are time-bound and work-oriented.
Advantages and Disadvantages:
It helps organizations do to satisfy a particular need of the society or to fulfill a particular deficiency in the society. There is always a deadline which sometimes is never meant by organizations.
Review the issues involved in strategic planning:
Businesses that succeed do so by creating and keeping customers. They do this by providing better value for the customer than the competition.
Marketing management constantly has to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”).
The main problem with this process is that the “environment” in which businesses operate is constantly changing. So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed. This process of adapting and decision-making is known as marketing planning.
Where does marketing planning fit in with the overall strategic planning of a business?
Strategic planning is concerned about the overall direction of the business. It is concerned with marketing, of course. But it also involves decision-making about production and operations, finance, human resource management and other business issues.
The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.
Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”.
Sometimes this is quite a straightforward task. For example, in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!).
However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products. How can such management keep control of marketing decision-making in such a complex situation? This calls for well-organized marketing planning.
What are the key issues that should be addressed in strategic and marketing planning?
The following questions lie at the heart of any marketing and strategic planning process:
• Where are we now?
• How did we get there?
• Where are we heading?
• Where would we like to be?
• How do we get there?
• Are we on course?
Why is marketing planning essential?
Businesses operate in hostile and increasingly complex environment. The ability of a business to achieve profitable sales is impacted by dozens of environmental factors, many of which are interconnected. It makes sense to try to bring some order to this chaos by understanding the commercial environment and bringing some strategic sense to the process of marketing products and services.
A marketing plan is useful to many people in a business. It can help to:
• Identify sources of competitive advantage
• Gain commitment to a strategy
• Get resources needed to invest in and build the business
• Inform stakeholders in the business
• Set objectives and strategies
• Measure performance
Advantages and Disadvantages:
Market planning delivers a means for actively involving personnel from all areas of the business in the management of the company and this participation improves the quality of the plans, with the participation of the staffs it enhances their overall understanding of the company’s objectives and goal. One of the disadvantages is costly to implement.
Explain different planning techniques:
Planning is a critical business responsibility that is often overlooked, particularly by smaller companies with limited time and personnel resources. However, the reason for this oversight is often the result of management's lack of planning techniques. Learning useful planning methods and factors eliminates this knowledge gap. Business planning is just as critical as having a map when traveling to an unfamiliar location. Without it you may never reach your destination.
Primary Planning Types
Business planning types come in various flavors depending on the company size and industry. However, there are three basic plans that apply to all businesses, large or small. Business, strategic and marketing plans are important to every for-profit and nonprofit organization. Understanding the goals and components of each offers businesses the tools to create effective plans using the most basic or sophisticated techniques.
Typically used for starting up or financing a company, business plans are the cornerstone of the planning function. Components of a business plan include an executive summary, market analysis, product/service descriptions and financial/operations projections for a minimum of three to five years. In start-up situations that need initial financing, creators should paint a vivid, yet conservative, picture of the founders and the rationale for believing the business will succeed. When seeking growth-financing, management should highlight past company performance and carefully project the impact of the new funding on improving net income. Always include debt service, which is the amount needed to repay the new loan, in income and expense projections.
Strategic plans should be created by business owners and/or senior management only. Unlike business plans, which are based on historical data and future projections, strategic plans are more conceptual. These plans should include defining your organizational goals, identifying your available options to achieve your objectives and considering new short-term opportunities you believe will exist to improve your business's results. You may want to incorporate specific industry trends into your planned strategy. Strategic plans are not long-term creations, but should address taking advantage of available opportunities in the next 12 to 24 months.
All the fabulous business and strategic plans ever devised will fail if you don't market and sell your product or service. A solid marketing plan will help you achieve gross income and sales goals. A SWOT (strengths, weaknesses, opportunities, and threats) analysis is an effective technique for creating a winning marketing plan. SWOT is also useful in strategic plan creation as a foundation technique. You can also combine a SWOT analysis with the four P's product, price, publicity, and place of effective marketing. Even if you have invented the "better mousetrap", you need a superior marketing plan to get results. These techniques will give you the ammunition you need.
SWOT analysis and marketing
A vital part of the planning process is looking at the existing position of an industry and trying to decide how factors external to the business may affect the business.
An organization can perform a SWOT analysis as a way of deciding which marketing plan to use. The organization performs an audit on the internal and external nature of the company looking at the current and future situation. An audit is a review of all the company’ s activities.
Reviews the business’ current strengths such as a good brand or strong sales performance
Can develop the strengths, perhaps in the way they promote the product, or wish to develop new products (Tesco have used their strong brand name to launch several products)
Reviews the business’ current weaknesses such poor response times to requests for information or late deliveries
Can implement strategies to eradicate these weaknesses e.g. more resources put into a better warehousing system for the dispatch of goods.
Reviews the business’ future opportunities e.g. new technology making it easier to manufacturer certain goods or new markets abroad
Can use strategies to take advantage of the potential opportunities e.g. developing new products to meet the potential increased demand
Reviews the business’ future threats, mostly from increased competition from other firms or from changes in the economic situation.
Can employ strategies to ward off these problems, e.g. setting lower prices or increasing promotion
Rational about the use of a SWOT analysis in measuring the influence of marketing to a business strategy;
Possible strengths in marketing might be:
Specialist marketing expertise
An innovative product or service
The location of the business – convenient for customers
The reputation of the brand – perhaps it is trusted or recognized as the highest quality
Likely weaknesses in marketing could include:
Lack of a clear product differentiation compared with competing products
Weak distribution compared with competitors
Inadequate online presence
Potential marketing opportunities could include:
The use of technology to develop new products
Growing demand from overseas markets (e.g. China & India)
The use of social media like Facebook and Twitter to reach new customers
A list of likely marketing threats might include:
Competitors introducing better products at lower prices
Changes in the economic environment which encourage customers to be less loyal to established brands
Changes in customer tastes and fashions
To make business planning come alive and succeed there are three simple practices that must be always be employed. First, set realistic, measurable goals. Second, understand and communicate with your customer base. Third, attract and retain the best employees your company can afford. Without these three components, your business planning, however sophisticated, risks failure on a massive scale. Using these three simple techniques, your business plans should deliver the results you want.
PIMS data can be described as a guide to help management describe the business a business situation and opportunity relative to the offerings of its competitors in two-dimensional space.
BE ABLE TO FORMULATE A NEW STRATEGY
Produce an organizational audit for a given organization
Tesco Marketing Audit:
The marketing audit is a fundamental part of the marketing planning process. It is conducted not only at the beginning of the process but also during and after the process completion. Marketing audit not only consider its own plan but also considers internal and external factor that affects marketing planning. Some important tools used by marketing audit are SWOT for internal and external environment where as PESTLE and Five Forces Analysis which focus only on the external environment.
It can be viewed as an ‘umbrella that covers efforts to assess customer needs and wants and to understand community patterns. The external environment is reviewed at micro and macro level.
The marketing Audit has been defined by Phillip Kotler strategic market auditing (1977) as a comprehensive, systematic, independent and periodic examination activities and resources in order to determine problem areas and opportunities and to recommend a plan of action.
As per the definition:
Marketing Audit is Comprehensive, systematic, independent and periodic features. In simple word marketing audit is the complete review of the environment that includes both internal and external environments of any organization. The marketing audit follows the following areas as components of marketing audit:
· Environmental Audit which includes Macro Environmental Audit and Micro Environmental Audit.
· Marketing Strategy Audit
· Marketing Organization Audit
· Marketing System Audit
· Marketing Productivity Audit
· Marketing Function Audit
Processes and techniques used for auditing the marketing auditing environment follows simple three steps are:
a) Agreement on objectives, scope and approach: Marketing auditor must prepare for the marketing audit by holding discussion with the CEO and the executive staff and briefly reviewing some financial and marketing data. Often objectives are discussed in the meeting such as determine how the market views the company and its competitors, recommending a pricing policy, determining sale activity. The audit would cover the marketing operations of the company as a whole.
b) Data collection: More time is spent on the gathering data. More auditors are involved when the project is large. Auditor has to spent time in deciding what question to be asked, who will be interviewed and so on so forth. Daily reports of the interviews are to be written up and reviewed.
c) Report preparation and presentation: When the data gathering is over, auditor prepares notes for a visual and verbal presentation to the company officer.
Techniques used for auditing the marketing environments are as follows.
1) SWOT Analysis: It is one of the most important tools of marketing audit. It helps a lot of help to the marketers and is used at the beginning of the marketing audit process. It has advantages as well as drawbacks. Some of the drawbacks are subjective and cannot be relied too much. Therefore it should be used as a guide in the marketing planning and not as a prescription to the process.
2) PESTLE Analysis: Various factors of the marketing is analyzed by PEST analysis that effects upon the marketing process. An organization that is carrying the analysis needs to study the environmental factors that are internal and external.
3) Five Force Analyses: This is an analysis that helps the marketers to have a clear picture of competitor's for the market. This analysis has some similarities with PEST analysis. In this analysis the marketer goes through five areas of concerns.
Analyze and evaluate the external environment of the organization by using PEST framework, Porter's Five Forces model and Product life cycle.
Tesco runs more than 2300 supermarkets and convenience stores in the UK, Ireland, Central Europe and Asia. It is operating in almost areas such as gasoline retail (Tesco Express) small urban stores (Tesco Metro) hypermarkets (Tesco Extra) and Financial service (Tesco Personal Finance). It covers up to 35% stake in US grocery. It is the leading online grocery store and is now expanding its business with a TV channel and a retail based education institution.
A) A PEST Analysis of the industry was then undertaken to examine the local, national and global influence of political, economic, social and technological factors to understand opportunities and threats well.
An assumption was made that most of these ( political, economic, social, legal and environmental ) factors would, to some extent apply to the retail industry in Sweden:
Political: Following the European Integration and Free Trade Agreements, the market has opened British Companies to invest in Eastern European. It has 60 stores in Hungary. Lidl is fighting hard to maintain its market share with an aggressive pricing strategy against Tesco.
Economic: Retail industry is fairly recession proof and also very sensitive to interest rate. Because of September 11 events, the world economy have suffered heavily, stocks were plummeting and prices are low all time. However the world economy is up after the September 11th attack. Consumers are optimistic and retail industry is once again boosting.
Social: There are changes in consumer taste and lifestyle present both opportunities and threats for the retail industry. There are alternative Sweden national retailers which poses additional threats to the Tesco while entering in the Sweden market industry.
Technical: Introduction of online shopping via internet is now a common place in retailing. IT system undertakes a paperless operation, the management and administration of the company which are monitored by the secured severs, it provides a flexible base for running the business. Sweden is at the forefront of technologically developed with national companies like Ericsson, hence Tesco gets an advantage of developed logistics and distribution channels already in place.
One other tool that will be used in these areas is Porter Five Forces. This model can be used to good analytic effect alongside other models such as the SWOT and PEST analysis tools.
Five Forces analyses five important in the determination of competitive power and these are:
· Buyer's power:
· Suppliers' power:
· Rivalry among competitors:
· Threat of new entrants:
· Threat of substitute product
Problems faced by Tesco can be explained by Porter's five forces including of the threat of substitutes from other supermarkets, buyer power, supplier power and the power of customer.
Buyer power also decides the prices in the market. If products are expensive in Tesco then they will purchase from Sainsbury. This mean market is disciplined which make the pricing is disciplined as well. This in turn stops them to destroy the market in a profit war.
Supplier power is an important part of this model. Supplier power is wielded by suppliers demanding that retailers should pay them certain price for their goods supplied.
There is always a threat of substitution, although Tesco tries to ensure brand image and quality by having the best value for the products.
Tesco acknowledges the fact that there have always been threats from the competitors and new entrants into the markets and therefore always plan to improve upon developments in its stores.
Carry out an environmental audit for a given organization:
PESTLE (Political, Economic, Social, Technological, Ecological, Legal and Environment)
Among the above PESTLE analysis Political, Economic, social and Technological factors are implemented as a technique for the auditing of the marketing environment.
An environment of marketing at any nation is affected due to the political reasons. There should be the management of change once there is a change in the political condition and situation. The system of nation keeps on changing if there is a lack of stability in politics and the organization should change the marketing strategies as per the changing environment so that the organization can exist in the changing environment.
Economics plays a vital role in the marketing environment audit. A country with weak economy cannot compete in the international market. To be successful in the marketing there should be a sound financial transaction of an organization. Some of the components of economic factors for environmental audit are: Interest rates, Business cycles, Investment policies. There should be good investment policies for the investment by the nation so that the interest of the investor in investment increases which helps to raise financial stability in the nation.
Social and cultural:-
Social and cultural refer to the tradition and costumes or belief of people living in a particular geographical region. Social value and norms sometimes becomes the barrier to the marketing environment. There is vast different in the culture and tradition of eastern and western societies as a result of it the culture of eastern may not be suitable for western and vice versa. The marketing depends upon the culture and tradition of any geographical area. S
In this competitive age technological changes plays a vital role in the marketing. All the developed countries have been successful due to the drastic changes in the technology and their capacity to cope with changing technology. Different technologies can be used for the auditing of the marketing environment.
SWOT analysis includes strength, weaknesses, opportunity and threats for an organization. Strength and opportunities are the positive aspect of an organization whereas weaknesses and threats are negative. Similarly strengths and weaknesses are internal environment whereas opportunity and threats are external.
Low cost of production and sales, good information about the market and sound finance of the organization are the strengths and lack of communication and low quality of goods are the weaknesses. Similarly lack of competition and expansion of the market is the opportunities whereas control from pressure groups, lack of political and system stability are the threats for any organization.
PORTER'S five forces model:-
It consists of five main points that are listed below: -
Bargaining power of the customers: -
It is found in the open or the competitive market where the customer has the advantage over the suppliers or the sellers. A consumer has the choice of quality and the rate and if the supplier fails to fulfil the satisfaction of the consumer there is the chance of the customer to walk away from the suppliers. In this case the buyer has every right to complain and the seller need to hear it and recover so that the buyer did not leave the consumption of the commodity..
Bargaining power of the supplier: -
We normally find it in the monopoly market where there is the presence of only one market. Here the supplier has the advantages over the customers. A seller can fix the price of his own and sell low quality products as a result of it buyer couldn't get enough facilities. As only one marker is available the customers are forced to buy goods from the same shop and have no choice. For an illustration, if one city has only one market the people living there have to purchase the commodities from the same market no matter what the price and quality is because they don't have a second option. In this case the supplier has their own choice of marking prices. Such type of business brings profit motive rather than service motive.
Threat of new entrants: -
When there is the presence of new product or the new supplier the old products and the old supplier gets affected. A customer of particular supermarket gets diverted to next one, if the new supplier gives him new schemes ad facilities. Threat from the substitute product: -
It provides the facilities to the consumers as the consumers have enough choices for the commodities to use. The customers won't feel bored of using same product again and again.
Rivalry among the competitors: -
Rivalry begins where there is the presence of competitive market or when two similar types of goods are present in the market. It gives advantages to the customers. When there is rivalry among competitors' consumers receives the benefits.
Apply organizational and environmental auditing techniques in a given situation.
As for the project work I have chosen Tesco which deals with retail sales of food and household products. They use PESTEL analysis for the purpose of marketing environment audit.
Under political it uses the monopoly system, taxation policies, rules of employing the staffs and government stability as a method of evaluating political environment.
Under the economic sector the interest rates, inflation and business cycles are evaluated for the purpose of environmental marketing audit.
There are different cultures of the particular area. The marketing of Tesco has been influenced due to the social cultural factors as well. The different elements under socio cultural which can affect the marketing audit of the organization are demography, distribution of income of the people and their lifestyle.
Technology plays a vital role during upgrade any organization. In this competitive age no organization can ever think of improvement in the absence of technology. The factors influencing technology in an organization can be the development of new technologies, rate of technology transfer and investment on the research of technology.
Positioning of Ansoff matrix:
For any decision to be taken at the business level, you need the right strategic tools. Ansoff matrix is one of them. Ansoff matrix helps a company decide their market growth as well as product growth strategies. The 2 questions which the Ansoff Matrix can answer is “How can we grow in the existing markets” and “What amends can be made in the product portfolio to have better growth”.
From the above two questions, it is clear that the Ansoff matrix deals with the business external market scenario as well as the product portfolio which the company has. The matrix is divided into two quadrants. The product quadrant and the market quadrant. The Product quadrant on the X axis is further divided into Existing products and New products. The market scenario on the Y axis is divided into existing markets and new markets. Thus the Ansoff matrix divides a firm on the basis of the products it has existing products or new products, as well as the markets it is in existing markets or new markets.
Explain the significance of stakeholder analysis:
What is Stakeholder Analysis?
Stakeholder Analysis (SA) is a methodology used to facilitate institutional and policy reform processes by accounting for and often incorporating the needs of those who have a ‘stake’ or an interest in the reforms under consideration. With information on stakeholders, their interests, and their capacity to oppose reform, reform advocates can choose how to best accommodate them, thus assuring policies adopted are politically realistic and sustainable.
Although Stakeholder Analysis originated from the business sciences, it has evolved into a field that now incorporates economics, political science, game and decision theory, and environmental sciences. Current models of SA apply a variety of tools on both qualitative and quantitative data to understand stakeholders, their positions, influence with other groups, and their interest in a particular reform. In addition, it provides an idea of the impact of reform on political and social forces, illuminates the divergent viewpoints towards proposed reforms and the potential power struggles among groups and individuals, and helps identify potential strategies for negotiating with opposing stakeholders.
Who Are Stakeholders
A stakeholder is any entity with a declared or conceivable interest or stake in a policy concern. The range of stakeholders relevant to consider for analysis varies according to the complexity of the reform area targeted and the type of reform proposed and, where the stakeholders are not organized, the incentive to include them. Stakeholders can be of any form, size and capacity. They can be individuals, organizations, or unorganized groups. In most cases, stakeholders fall into one or more of the following categories: international actors (e.g. donors), national or political actors (e.g. legislators, governors), public sector agencies (e.g. MDAs), interest groups (e.g. unions, medical associations), commercial/private for-profit, non-profit organizations (NGOs, foundations), civil society members, and users/consumers.
To achieve Stakeholders objective an organization should be able to separate their interest from each other and as such act according to the power they exert in the organization.
Employees of M&S
Have a welfare department established in 1930.
Financial interest safeguarded - bonuses
Job performance appraises and financial incentive
Benefit package - interest free loans granted, Buy as you earn shares, bonus or right issue
Always used UK based suppliers, ensuring consistent quality
Relationship to build reliance on suppliers
Mutual dependability respects the specification and standard.
Strong tradition of CSR
Sponsorship of Charities.
Community development efforts
Government social projects.
Removed artificial color and flavoring from its entire food and soft drinks range-April 2008
Launched school wears made from recycled plastic bottle
Despite tough economic conditions Mark and Spencer stick to Plan A, as it gives them brand and differentiation.
AL Gore said “a sustainable business can be profitable one”
Reviewed the tools and processes established to ensure we have the capability to protect our people, the brand, property and profit at all times;
Received plans for all locations both nationally and internationally;
Discussed plans for the Olympics and the Queen's Diamond Jubilee;
Full medical and security package introduced for all business travelers;
Travel tracker system introduced both nationally and internationally;
A group training awareness program launched; and
Evacuation pack and welfare response.
The External International Advisory Board established, comprising academics and advisors, extending our reach to reflect the countries we operate in and source from;
Discussed progress in reducing carbon emissions, improvements in fuel and energy efficiency, reduction in waste and packaging, improvements in recycling and the M&S/Oxfam clothes exchange;
An update on work with suppliers to set up 12 Ethical Model factories in Bangladesh and three in India;
Review of commitments against plan;
Overview of discussions with UNICEF outside the UK on social development programs linked to the garment industry; and
Overview of what we believe will be benchmarked as industry leading positions across a number of key areas.
General Merchandise ethical sourcing
Reviewed how we manage the ethical risks across our supply chain outlining our ethical trading approach across 1.7 million workers, spread over 1,448 sites in over 77 countries with 55 different languages;
Considered the key ethical issues including: excessive working hours, poor health and safety, terms and conditions of employment, migrant labour, and low wages;
Discussed the team and the independent ethical trading division based in our regional offices in China, India, Vietnam, Sri Lanka, Bangladesh, Turkey and the UK.
M&S was the first UK retailer to create a clear set of labour values in 1998 known as our Global Sourcing Principles. Each trader must agree to and sign our terms and conditions, which include these Values. M&S has been a founding member of the Moral Trading Inventiveness since 1998 and we have recognized moral policies on key issues. They have a clear factory approval process which is self-governing from our purchasing departments.
International business development
Focused on the risks to our international growth – each risk was highlighted and discussed, alongside the relevant mitigating action which was either recently taken or in progress;
Discussed the team and its integration – the presentation also covered the performance of our partly-owned businesses, franchise operations, ethical reputation and the importance of having an aligned approach across the business.
Apprises relating to our investment in IT security, structure of the new retail website platform and the move from the current platform reinforced by Amazon. International activities, user access and the controls around the protection of individual data. Strategies were reviewed as was the staffing of resource and the skill sets these individuals bring to M&S.
Stockholder influences on the organization: Sources: www.qualitydigest.com.
Analyze possible alternative strategies relating to substantive growth, limited growth or retrenchment:
Product market mix:
Hands-off 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
Here we market our existing products to our existing customers.
This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.
Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.
This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.
This is where we market completely new products to new customers. There are two types of diversification Related diversification means that we remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry or market experience. For example a soup manufacturer invests in the rail business.
Diversification and Synergy:
Synergy occurs when the combined results produce a better return than would be achieve by the same resources used independently.
Marketing synergy – Use of common marketing facilities –Distribution channel
Operating synergy- better use of operational facilities, personnel, bulk purchasing.
Investment synergy – Wider use of common investment in fixed assets, working capital and research.
Management synergy-Management skills gained for current operations are easily transferred to new operations.
It is the selling off part of a firm’s operation or pulling out of certain product market areas. Reason for:
Company’s business buy and sell businesses
Merging with another company provides the opportunity to increase market share and expand into new geographies and sectors. Suveen Sahib, Group COO and CEO, Americas of EBS Worldwide, a marketing and technology company, merged his company that had a premerger value of $7 million to create a company valued at $15 million. Sahib says, “EBS Worldwide started in India and now has a footprint in the U.S., allowing for its global clients to benefit from our strong position in these regions and our large suite of services.”
Methods of growth (Domestic market).
Building up new businesses – from scratch and developing them
Acquisition – existing business from their current owners
Merger- of two or more separate businesses
Joint ventures- Spreading the costs and risks and with other forms of cooperation.
Methods of growth (International market).
The organization produces their product in their home market and then sells them to customers overseas.
The organizations sell their product to a third party who then sells it on within the foreign market.
Less risky market entry methods. Licensor will grant an organization in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment.
The organization puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to overseas investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets.
The manufacturer of the product will contract out the production of the product to another organization to produce the product on their behalf. Clearly contracting out saves the organization exporting to the foreign market.
To establish a manufacturing plant in the host country. There may be tax incentive as the host government wish to attract inward investment to help create employment for their economy.
Two organizations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of the company; of course profits will have to be shared.
Select an appropriate future strategy for a given organization:
Following a wide-ranging and detailed strategic review of its business, the Board of M&S announced in March 29 of 2001 significant changes to the Group strategy and structure. The highlights of this new plan are:
a) Total focus on UK retail
The Company will return to selling only own brand products and brands exclusive to M&S so it can guarantee customers the quality, value and service they have come to expect. Central to the recovery plan is the delivery of significant improvements in product appeal, availability and value thereby rebuilding the relationships with core M&S customers.
Recovery plan for Clothing
The Company has plans to regain the confidence of its customers in the quality
and fit of its clothing. It will sharpen pricing by rebalancing the price architecture, extending the range of entry-price merchandise and communicating this clearly to customers.
Expansion in growing product areas such as Food, Home and Beauty
M&S Foods continues to perform well and has earned customers' trust for providing quality, innovation and convenience. The business is a key platform for future growth and the Company is considering opportunities to expand its reach through new locations and selling channels.
The Home business is growing strongly, with home furnishings and gifts the fastest growing product areas. Beauty, albeit relatively small, is also growing rapidly. Both of these areas offer promising opportunities for development and will be expanded.
Acceleration of store renewal program
Accelerate Store Renewal Program: M&S will accelerate the rollout of the successful elements of its new concept format under a plan to refurbish more stores faster and at lower cost. Two-thirds of its retail space (120 stores) will be completed by the end of the coming financial year, benefiting the majority of M&S's customers.
More intensive use of space
Selling space will be reallocated to higher growth product areas to maximise returns per square foot. In total, 600,000 sq ft will be reallocated within the year to areas such as the new Clothing range supplied by George Davies, Home, 50 new Beauty Shops, and 30 new Coffee Shops.
Being closer to the customer
In order to be more customer oriented, some stores in big cities will be open 24 hours per day. By other hand, 125 stores in the UK will be modernized in order to create a more attractive, easy-to-shop environment for our customers. These stores represent two thirds of total UK stores. Modernization investments will amount £100 million.
With all changes, the company expects to raise the operating profit in the UK by 10% approximately (£40 million) per year.
b) Value realization, cost cutting measures and closure of loss-making businesses
In order to focus all its efforts on the recovery of the UK business, Marks & Spencer intends to divest or close non-core businesses and assets, subject to consultation with its employees.
Intention to close Continental European subsidiaries except the Irish ones
The Company intends to close its loss-making business in Continental Europe (France, Germany, Belgium, The Netherlands, Luxembourg and Spain), affecting some 3,350 jobs. That business was not a success. In the last three years it has lost nearly £100 million, with a loss of £34 in the last 12 months. The stores were too big and the company hadn’t properly understood the markets before investing in them.
The Company's business in the Republic of Ireland is growing fast and profitably (£22,6 million in profits in 2001), therefore Marks & Spencer remain firmly committed to this business.
The budget of the sales price of these sales is £450 million, without considering the exceptional charges of the restructuring, which have been included in the P&L of 2001. By other hand, during the year 2002 there will be some additional exceptional charges (£26,4 million) in connection with the discontinued operations.
Sale of profitable Brooks Brothers and Kings Super Markets in the US
The company also intends to dispose of its two profitable United States businesses, Brooks Brothers and Kings Super Markets. These operations do not provide an appropriate platform for future international expansion by Marks & Spencer.
The budgeted price of these sales are £550 million and £275 million respectively.
Franchising of business in Hong Kong
The Company's 10 stores in Hong Kong will be sold to become a franchise. The budget of the sale amounts to £110 million. The franchise business, spanning 30 countries and operating with appropriate formats and strong local partners, continues to be successful.
Intention to close Direct catalogue business in the UK
Marks & Spencer intends to close its loss-making catalogue business including a dedicated call center and fulfillment center, with about 690 jobs affected in total. Although the joint Clothing and Home catalogue will be discontinued, Marks & Spencer is committed to maintaining its e-commerce web site: www.marksandspencer.com, as well as a Home brochure and a range of services including flower delivery. Last year losses of the direct catalogue unit have amounted £38,6 million. The budgeted cost of closing this unit is £35,5 million and has been included in the P&L of 2001.
Release value of almost half the property portfolio
To reduce the dilution from the relatively low returns from property investment, M&S intends to release value from almost half of its extensive property portfolio (78 stores). That means that the company will rent instead of owning the property in which it operates. They are going to use the sale and lease back type of financing. Ownership of stores in prime locations will be retained to maintain maximum operational flexibility as well as capturing future increases in capital value. The budgeted price of these sales is £348 million.
To reduce the costs of goods sold using less suppliers and using foreign suppliers, mainly from Asia. At present UK suppliers represent 70% of total purchases. This % will be reduced till 25%. This measure will allow to reduce sales price and to increase profits.
To reduce general and administrative costs at the headquarters, where 350 jobs will be reduced.
With all this cost cutting measure, M&S plans to increase the operating profit by £100 per year.
c) Improved capital structure
Working capital reduction
Another set of measures will pursue to reduce the investment in inventories by 10%. That means a reduction of £90 million.
Return £2 billion of cash to shareholders by the end of March 2002
To create a more efficient capital structure and improve the potential for a faster rate of earnings growth Marks & Spencer intends to return £2 billion to shareholders by the end of March 2002. The release of value from almost half the company’s property portfolio and the sale of international subsidiaries will finance this decision. Following the return of cash to shareholders, Marks & Spencer will retain the financial strength and flexibility to fund future growth.
The benefits to trading profit from the closure of the European subsidiaries and the changes to Direct will be about £50m in a full year. These measures will give rise to exceptional charges in the current year of £250 m to £300 m, in addition to the £42m already announced at the company’s Interim results for the cost of satellite closures in the UK. Some two thirds of the £250 to £300 m will be cash items covering closure costs and future trading losses.
Explain how you would implement a chosen strategy:
The original strategy employed by M&S was to build its brand. The company’s resources included the St Michael logo, the policy of using mainly British suppliers, and good customer relations. Quality control was achieved by working closely with suppliers, and the M&S management system focused on a top-down approach that became standard in all stores. Customer satisfaction and loyalty was secured and there was steady growth in market share and profit until the 1990s, when competition at the top and bottom end of the market rendered this strategy obsolete. The top-down management approach caused M&S to become vulnerable to market changes so new resources were created, including a department with a remit to seek out new business opportunities; more autonomy for store managers; different procedures for buying. M&S began to look overseas for suppliers. The Simon Marks’ management style was directly linked to this strategy.
Restructuring was designed to reposition M&S at the market’s core and to restore and enhance some of its key resources. The close working relationship between suppliers, employees, management and loyal customers was enhanced. New customers were attracted by campaigns featuring Twiggy and younger models so M&S could widen the appeal of its clothing range. The techniques of broadening its appeal, responding to customer preferences and introducing new products in food and finance have assisted M&S towards recovery.
The development of the quality food market has been a particularly successful new resource. Using designers to create unique food areas M&S has continued to sustain consumer interest in its food range.
Recovery Plan – Mark & Spencer:
1) Putting together the right team – the values that the founder instilled into this Company.
2) The Strategic Review and Selling the Plan- quality, value, service and innovation, drawing on strengths which still exist to inspire trust in our customers. Plan: 1- Focus the entire organization on our UK business
100% Own Brand – sell only M&S brand
Improved Segmentation of Clothing- satisfy the aspirations and traditional demands
Build on Success in Foods- fast-growing sectors as ready meals and prepared foods
Accelerate Store Renewal Programmed- under a plan to refurbish more stores faster and at lower cost.
More Intensive Use of Space:
Improve the Supply Chain - direct relationships with our suppliers
Financial Services –Developing M&S store card
Plan: 2 - Sell or Close loss-making businesses:
No longer afford to support non-core activities
Stop subsidizing loss-making businesses
To divest or close non-core businesses and assets
10 stores in Hong Kong will be sold to become a franchise
Direct - to close its loss-making catalogue business, a dedicated call centre and fulfillment center
Plan: 3 - Change the Capital Structure
To reduce the dilution from the relatively low returns from property investment Tesco's Strategy
Strategy of cost leadership-
Lowest cost - products and services to a broad market at the lowest prices
Ability to control their operating costs and price their products competitively.
Able to generate high profit margins- significant competitive advantage
Market Development Strategy:
Joint developments and Strategic alliance
Entering new markets like China and Japan
Key growth driver for revenues and expansion strategy
Asian markets - increase in consumer spending and trend towards retailing.
New markets demographically high opportunity markets
International alliances with the local retailers in Asian markets.
Method of development - exploit current resources and competence
Entering into joint ventures or partnerships, to gain larger economy of scale and larger market presence.
Extensive local knowledge and operating expertise of the partner.
Sustainability - strategy addresses the circumstances in which the company is operating.
Acceptability- expected return from the strategy, the level of risk and the likely reaction of stakeholders.
Feasibility - whether Tesco has the resources and competence to deliver the strategy.
Diversification, expanding and diversifying the Tesco's product mix
To implement internal development when new products are developed.
The nature and the extent of diversification
The changing needs of the customers Tesco can introduce new product lines
Require more attention to R&D, leading to additional spending.
Also develop different store types in Eastern European and Far Eastern markets
Value added by the uniqueness will eventually lead Tesco to command a premium price
The management of technological innovation is increasingly involved in strategic decision-making. Tesco has to exploit their internal strengths and minimize their internal weaknesses in order to achieve sustained competitive advantage. From the above comparison it is very clear why Tesco is dominating the retail market. The success of the Tesco shows how far the branding and effective service delivery can come in moving beyond splashing one's logo on a billboard. It had fostered powerful identities by making their retailing concept into a virus and spending it out into the culture via a variety of channels: cultural sponsorship, political controversy, and consumer experience and brand extensions. Tesco's strategy at a corporate level defines the businesses in which Tesco will compete, in a way that focuses resources to convert distinctive competence into competitive advantage
Evaluate resource requirements to implement a new strategy for a given organization
Building on our knowledge and understanding to provide exactly what our customers want.
Satisfy aspirations and traditional demands.
Consolidate and developed sectors as ready meals and prepared foods.
The changes will extend to around two-thirds of our space, so most of our customers will notice the difference.
More Intensive Use of Space
Develop the distribution channel
Nurture our brand names
Recruit top talent to strengthen the team, by recruiting qualified individuals.
The values that the founder instilled into this Company.
Quality, value, service and innovation, drawing on strengths which still exist to inspire trust in our customers
Leadership and management synergy
Leaders focus on the ends; Managers focus on the means both together reach more.
The leader provides vision; Managers provide execution. Both together achieve more by working together to achieve a single goal.
The allocation should be efficient and effective by allocating more capital to the most needed departments
Should be wisely invested and monitored to increase profit
Discuss targets and timescales for achievement in a given organization to monitor a given strategy:
Focus the entire organization on our UK business -100% Own Brand – sell only M&S brand:
Envisioning – need to be communicated at different levels of the organization
Activating - Share the vision and ensure others support
Supporting – Leaders need to support subordinates particularly in times of change
Installing – Developed detailed plans to enact and control the strategy.
Documents the responsibilities – of divisions, departments and individual managers
Prepare responsibility charts –for managers at divisional, departmental and subordinate level
Manager’s major objective
Manager’s general performance for achieving that objective
Critical assumptions underlying the objectives and the performance.
Prepare activity schedules- for managers at divisional, departmental and subordinate level
Controlling - Control process to ensure work is done and deadlines achieved.
Recognizing - those contributed to success of the organization.
Management by objectives - is setting objectives for managers and subunits, rather than imposing detailed planning specifications on them.
It implies an organization hierarchy:
It empowers managers.
To assume objectives are not in conflict but can be reconciled easily
Assumes that senior management and junior managers to cooperate if they are equal.
Business Communication Defined:
Business communication is any communication used to build partnerships, intellectual resources, to promote an idea, a product, service, or an organization – with the objective of creating value for your business.
Communication of corporate vision tragedy, plans, corporate culture shared value
Guiding principles, employee motivation, and cross-pollination of ideas.
Branding, marketing, advertising, selling, customer relations, public relations, media relations, business negotiations. The main objective is to create business awareness, identifying core competence and adding value to the business.
In a rapidly changing business environment with a high competitors' pressure Tesco have to adopt new expansion strategies. To sustain its leading market position in an already established retailing market Tesco need to continuously identify, select, implement and execute their goals and objectives. Tesco already has an integrated HRM approach and a very strong brand which will support to formulate strategy and implement them instantaneously. Tesco image and brand has fostered powerful identities by making their retailing concept into a virus.
This assignment has helped me in developing and implementing strategic planning, I have been able to understand that strategic planning controls where a business is going over the next year or more, how it's successful to get there and in what way it'll know if it got there or not. The emphasis of a strategic plan is usually on the entire business, while the emphasis of a business plan is usually on a specific product, service or program. There is a diversity of viewpoints, models and methods used in strategic planning. The way that a strategic plan is developmentally depends on the nature of the establishment's leadership, culture of the business, the difficulty of the group environment, the size of the business and skills of the planners. These ideas would contribute to my ability to undertake any strategic planning control in my carrier.