Strategic Marketing Planning as an Essential Marketing Tool - Essay Example

? Strategic Marketing Planning as an Essential Marketing Tool Introduction Strategy is long-term actions of the company that when effectively executed leads to superior performance. It is drafted in a marketing plan that includes information about the competitors, target market, and other forces from the environment. All level managers brainstorm on the proper strategy to be included based on the market research. This paper aims to analyse and discuss the strategic marketing planning as an essential tool to marketing strategies of an organisation. It focuses on the model developed by Porter as generic competitive strategies. Strategic Marketing Planning Strategic marketing plan is a “management process leading to a marketing plan” (McDonald, 2008, p.7). It is a systematic approach by managers that includes the written or detailed plan of the current status of the company, its goals, and how to attain it. The company obtains information about the mission statement and corporate objectives; analyses the financial performance of the company through the marketing audit; reviews the strength, weaknesses, opportunities, and threats; forecasts the marketing impact; sets marketing objectives and strategies; estimates the anticipated outcome; classifies alternative plans and mixes; and projects the budget needed. Marketing planning is essential for business establishments that aim to gain competitive advantage, which is limited to establish brand, build, defend, and maintain. To achieve competitiveness, firms must employ techniques or models such as Porter’s generic competitive strategies. Generic Competitive Strategies Porter’s Model was developed to encourage the firm to gain competitive advantage through following the suggested strategies. The famous hypothesis of Porter is “stuck in the middle” when firms failed to utilise one of the strategies such as differentiation, cost leadership, focus, or combination as illustrated in Figure 1 below. The model of Porter is determined by the forces in the environment that have a direct influence to the firm’s competitive position. These are “threat of new entry, intensity of rivalry among existing firms, pressure from substitute products, bargaining power of buyers, and suppliers” (Ormanidhi & Stringa, 2008, p.57). Porter argues that companies must examine its competitive position so that they will know their strength and weaknesses that would form into strategies for defensive or offensive actions. Figure 1 Porter’s Model * Grant 1998 cited in Kossowski, 2003, p.6 Differentiation This is one of the business strategies that Porter identifies in the framework. Differentiation is the firm’s strategy to produce “unique products or services” (Allen, 2006, p.434). This strategy is essential when the companies’ objective is to build customer’s loyalty because it satisfies the customer’s needs and preferences. The product or service is designed based on the customers’ wants; hence, it produces satisfaction. The customers are concerned with the product quality, features, or after-sales support that increases their value. It results to the positive perception of customer regarding the quality of services the company rendered. Due to additional expenses caused by differentiating products, the company must charge a premium price to return its investment. Regardless of this, perceptive customers prefer quality in terms of delivery system, product, and services. Thus, this strategy is limited to customers who are willing to pay despite the higher price. However, product differentiation is relevant in establishing a brand name for its recall. The differentiated products influence the customers’ perception of the firms’ dissimilarity with their competitors. In addition, it eliminates price conscious consumers by focusing on unique products. The research literature is interested with the widely accepted and used model designed by Porter. Akan, et al. (2006, p.45) include the tactics that managers must utilise in applying this strategy that will alleviate the firm’s performance. For an instance, companies can use innovation marketing through technology and methods, which is similar with the tactic employed by Land Rover Ltd. To increase their sales, the company organises a special marketing that invites the car owners for an event. Through the database system, the company has enabled to identify and select customers. Therefore, differentiated strategy aids marketers to design short-term tactics that improve financial performance. Innovation is the key term in differentiated strategy because it allows firms to be flexible. This is quite similar with the growth strategy of Ansoff. This matrix has implied that marketers must develop products to “update existing customers” (Waters, 2006, p.275). Product innovation also requires creativity from the members of the team. The danger of innovation is when the loyal customers reject the new product. That’s why extensive planning and research must be integrated to lessen the risk. Tide perceived that the reason for the decline of market share was the lack of innovation and creativity. Its initial response was to lower prices, but it failed. The company innovates product through modification and improvement of its features and quality, which rebuild its brand name. Cost Leadership This strategy aims to be a low cost market leader to gain competitive advantage. They are conscious with the outcome of their activities, whether they gain profits or not. When the companies have known that they are losing profits, they are eager to stop their business activities. Hence, the company must have a low-cost leadership strategy, low-cost manufacturing process, and the conformation of employees with the company’s objectives to achieve success. Allen (2006, p.435) enumerates the method of attaining cost leadership strategy by “mass production, mass distribution, economies of scale, technology, product design, input cost, capacity utilisation of resources, and access to raw materials.” This strategy is applicable when competitors have more efficient designs of business, produces, and markets than the other companies; hence, it activates stiff competition. The only way to compete with better competitors is to be a cost leader. Allen (2006) adds that the demand is increasing when the company offers lower prices to customers that boost their market share. In relation to the BCG matrix, market share and market growth are two factors that matter in the business operations because of the clarification on the competitive status of the company. Furthermore, cost leadership strategy obstructs new entrants because it would require large capital to penetrate in the market. However, this strategy endangers customer loyalty because of catering to lower prices that would attract them. The loyalty of customers will easily be transferred to companies that offer much lower price. Thus, when the company competes and lowers price, it will cost profit loss. Price strategy is evident in the retailing sector; however, it can be copied instantly (Morschett, et al., 2006). Retailers lower prices to attract more consumers that are price conscious, but building a relationship based on the price level is not sustainable. To avoid deficit, the company can obtain raw materials from direct suppliers to minimise cost. Furthermore, Kim, et al. (2004, pp.574-575) examine the applicability of Porter’s model to e-business. They found out that price sensitive consumers are attracted with low prices, but the result is moderate customer loyalty and few barriers to entry. It is rooted from the intangibility of interaction between customers and organisations, although the internet is an effective tool to reduce cost. Focus Strategy Focus strategy is narrowing the scope of the company’s market such as selecting a group of customers, product range, geographical area, or service line. The objective of this strategy is to limit competition with the competitors because it penetrates on niche market (Allen, 2006, p.436). The company that prefers less competition must use this strategy. In addition, Allen (2006) asserts that when customers have definite preferences, which the competitors have not observed, this strategy is more suited. In effect, the company has a large market share. Focus strategy can be combined with other strategies such as focus/cost leadership strategy or focus/differentiated strategy. According to Akan, et al. (2006, pp. 50-52), the focus/low-cost strategy generates advantages for the firm such as improve customer service, efficient operation, standard quality of products and services, and comprehensive training of personnel. It lessens customers’ complaints, which negate the impact on customer loyalty as one of the weaknesses of cost leadership. Moreover, focus/differentiation strategy enables competitive advantage through the tactics involved in offering specialised products and services, and develop products catered to high price market segment. Significance to Managers Ashill, et al., (2003, p.430) affirm that “planning and managing process have become more important as a means of coping with a turbulent business environment.” This statement asserts that planning and managing signify the managers’ role in a company. Planning enables the company to prepare and design strategy that would lessen uncertainty in the environment. It is evident that the environment is constantly changing; hence, the forecasting method will mitigate the risk of losing the battle. The definition of strategic marketing planning explains that marketing plan is developed by managers. It allows managers to critically analyse and implement strategies to leverage company’s performance. Through marketing plan, they have gained knowledge on the structure of external and internal environment that is necessary in formulating an effective marketing plan. Moreover, the model developed by Porter allows managers to foresee the impact of certain strategies to the operation and modifies plan when necessary. Conclusion Strategic marketing planning is an important element that includes the detailed report on the structure of the business environment. Managers must possess this skill to be efficient and effective in implementing strategies. The model used as the marketer’s basis is the generic competitive strategies that are linked to achieve competitive advantage. It highlighted the three strategies such as differentiation, cost leadership, focus, or combination. References Akan, O. Allen, R.S. Helms, M.M. & Spralls, S.A., 2006. Critical tactics for implementing Porter’s generic strategies. Journal of Business Strategy, 27 (1), pp.43-53. Allen, R.S., 2006. Linking strategic practices and organizational performance to Porter’s generic strategies. Business Process Management, 12 (4), pp.433-454. Ashill, N.J. Frederikson, M. & Davies, J., 2003. Strategic marketing planning: a grounded investigation. European Journal of Marketing, 37 (3), pp.430-460. Kim, E. Nam, D. & Stimpert, J.L., 2004. The applicability of Porter’s generic strategies in the digital age: assumptions, conjectures, and suggestions. Journal of Management, 30 (5), pp.569-589. Kossowski, A., 2003. 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