The Relationship Between Strategic Management And Marketing Business Essay
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Published: Mon, 5 Dec 2016
In today’s industry, change is the only constant. All organisations are faced with fierce competition and need right direction of grasping new opportunities or conquering difficulties (Obeng and Ugboro, 2008; Daniel, 1992; Martinet, 2010; Ansoff, 1991). Hence, this report is concerned with an important problem in utilizing strategy and strategic planning in the areas of marketing and strategic management to benefit companies. Several questions are identified: what is strategy, strategic planning and strategic management, what is the linkage between strategic management and marketing, what are useful tools used in marketing planning process, and how strategic management benefits organisation. Because of understanding the marketing operating environment is very important for managers to establish effective marketing strategies (Kolter and Armstrong, 2010), this report illustrates several useful tools to support managers to scan the environment. A case study of Starwood Hotels & Resorts Worldwide, Inc. and its sub brand W Hotels are used to demonstrate how strategic planning and strategic management benefits the companies in the real world.
The Definition and Benefits of Strategy and Strategy Planning
Johnson, Scholes, and Whittington (2008) defined strategy as a long-term direction and scope to help organisation develop advantages in a changing environment by exploiting its resources and competences to satisfy stakeholder expectations. However, strategy is not equal to strategic planning (Piercy, 2009). Hellriegel, Jackson, and Slocum (2005:9) indicate that planning is ‘the determination of organisation goals and the means to reach them’. Daniel (1992) argued that effective strategic planning includes improving business financial performance, understanding the advantage of the company and increasing the ability to response inconsistent environment. Hellriegel, Jackson, and Slocum (2005) identified that strategic planning is the process to help organisations diagnose their overall environments, set up a vision and mission to develop comprehensive goals, create feasible strategies, and allocate resources. In other words, strategic planning focuses on developing strategies that lead the organisations dealing effectively with environmental opportunities and threats in relation to their strengths and weaknesses. Recent studies reported that strategic planning remains a valuable tool within diverse area (Ugboro et al., 2011; Obeng and Ugboro, 2008; Soteriou and Coccossis, 2010), also including hotel industry (Simonceska, 2010; Peters and Buhalis, 2004; Phillips et al., 1999; Phillips and Appiah-Adu, 1998), for companies to increase possibility of continuing survival and effectiveness in its constantly changing environment (Kotler and Armstrong, 2010).
Strategic Planning Steps
The company begins strategic planning with defining its overall mission, setting goal and objectives, and designing business portfolio (Kolter and Armstrong, 2010). Organisation with clear mission statement has better financial performance and organisational commitment (Åžentürk, 2012). For example, Starwood Hotels & Resorts Worldwide, Inc. claimed that:
To shareholders, our goal is to grow EBITDA at least 8-10% per year and EPS at least 15% per year; to customers, we want Starwood to be the easiest company with which to do business; and to employees, our commitment is to make Starwood a great place.
These statements convey the broad ideas of Regent group to its customers, employees and stakeholders and support them to set reachable goals. Business portfolio is identified as ‘the collection of business and products to make up the company’ to enable organisation analyzing its current and future developing strategies (Kotler and Armstrong, 2010:65). The Boston Consulting Group (BCG) Growth-Share Matrix, using market growth rate as vertical axis and relative market share as horizontal axis, is an efficient tool to evaluate the performance of company’s strategic business units (SBUs), which can be a company division, product, or brand, and develop strategies for growth or downsizing. For instance, Starwood Hotels & Resorts Worldwide, Inc. has nine hotel brands worldwide. Managers can analyze the performances of each subsidiary hotel based on their financial reports in the matrix. If the brand is located in the stars area, heavy investments will be needed to finance its rapid growth. Therefore, expansion is a considerable strategy in that region. The funds can be retrieved from other brands positioned in cash cows area, which operating stably and generating profits, or close hotels in question marks to reduce unnecessary costs.
The Definition of Strategic Management
Strategic management is a broad scope of strategic planning which deals with contemplates strategy implementation, grasps emerging bottom-up strategies, connect strategies, structures and management systems and try to balance economical calculus with power and political processes in and around the ¬rm (Ansoff, 1974; Martinet, 2010). Ansoff (1974) indicates that strategic management is a systemic approach rather than analytical reduction and positivism and focus on future-oriented real-time integrative management. Johnson et al (2008:11) argues that strategic management is concerned with ‘complexity arising out of ambiguous and non-routine situations with organisationwide rather than operation-specific management.’ Three stages are involved in strategic management: strategic analysis/strategic position, strategic choice, and strategic implementation (Johnson and Scholes, 1988; Johnson et al, 2008). Strategic position focuses on the how an organisation will react when environment changes to satisfy its stakeholders by reallocating its resources. Strategic choice directs a firm to generate and evaluate strategies and select appropriate options to compete with rivals by grasping new opportunities or conquering difficulties. Strategic implementation facilitates managers to transform decision into action.
The Relationship between Strategic Management and Marketing
Since Kolter and Keller (2012) identify marketing as the process of creating value for customers and construct long-turn relationship with customers, strategic management enables managers to convert strategies into practice and collect information in the complex and non-routine marketing environments in a systematic way. Marketing environments are recognized as the ‘catch-all expression for anything outside the control of the firm which will affect its ability to achieve its marketing objectives’ (Brennan, 1995:7); it can divide into macro-environment and micro-environment. In the first stage of strategic management, the several tools can help marketing managers scan the marketing macro-environment to diagnose the external opportunities and threats outside the company. The PESTEL (political, economic, social, technological, environmental, and legal) framework is an interrelated tool to analyze the uncontrollable macro-environment trend of the firm (Johnson et al, 2008). Politics represents the governmental policy; Economics refers to the macro-economic factors, for example exchange rates, inflation rate and economic growth; Social factors involve changing cultures and demographics, Jews forbid to eat pork; Technological factors stands for technological aspect such as R&D activity and Internet; Environmental include ecological and environmental aspects especially for green issues; and finally Legal influences highlight legislative restrictions or modifications that will affect companies’ operating strategies. The W brand decided to enter in Taiwan market is a good illustration of political factor. Taiwan government published tourism policy to attract more tourists from China in 2009. Due to China is considered as the largest tourism sources in the world, this promising policy will benefits hotel industry in Taiwan.
Porter’s five forces framework helps companies identify their potential ultimate profit in microenvironment, which close to the company that affects it ability to serve its customers (Kotler and Armstrong, 2010). Five forces, consisting of (1) the threat of entry, (2) the threat of substitutes to the industry’s products or services, (3) the power of customers, (4) the power of suppliers and (5) the extent of rivalry between competitors in the industry (Porter, 1979), are examined to understand competitive intensity of the industry and therefore develop opportunities for business. The threat of entry refers to the barriers of entering the industry. Developing economic scale, monopolizing distribution channel and differentiation are common barriers for existing competitors to create advantages to prevent new entries. The threat of substitutes is considered as the alternatives providing similar function to customers from outside the incumbents’ industry. Alternatives providing lower price or better value might change customers’ original choice and reduce the demand of particular products they supposed to buy. Powerful suppliers and buyers may capture the company’s potential profits because they have the ability to bargain the products’ price. Competitive rivals offering similar products or service in the same competing sector or industry will decrease organisations’ profits. Thus, high entry barriers and powerful buyers’ bargaining power enable the company to prevent competitors. For example, since the entire hotel industry will benefit from the Chinese-attracting tourism policy, W Taipei faces lots of potential five-star hotel competitors as the threat of entry; or substitutes, such as other ranks of hotels, B&B, or private hotels, might take over the market share.
To conclude, strategic planning is the analytical thinking aligns the strategies with the organisation’s goals and capabilities and its changing marketing environments (Kolter and Armstrong, 2010). Strategic management, otherwise, is the ability of a firm’s management to ‘properly align itself with the forces driving change in the environment in which it competes (Åžentürk, 2012)’ in a systematic manner. Several tools, such as BCG matrix, PESTEL framework, and Porter’s five forces framework, facilitate marketing managers to scan the environmental change and create more efficient strategies and practical plan to achieve organisation’s mission. Hence, it is crucial for managers to take advantage of those tools to establish right strategies in right circumstances for company’s sustainability.
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