PORTFOLIO ANALYSIS

principles of marketing  PORTFOLIO ANALYSIS

A. MARKETING PROCESS

Analyzing the Current Business Portfolio We have discussed in last Lesson that in order to analyze the current business portfolio, the company must conduct portfolio analysis (a tool by which management identifies and evaluates the various businesses that make up the company). Two steps are important in this analysis:

1). The first step is to identify the key businesses (SBUs). The strategic business unit (SBU) is a unit of the company that has a separate mission and objectives and which can be planned independently from other company businesses.

2). The SBU can be a company division, a product line within a division, or even a single product or brand.

3). The second step is to assess the attractiveness of its various SBUs and decide how much support each deserves.

d. The best-known portfolio planning method is the Boston Consulting Group (BCG) matrix:

1). Using the BCG approach, where a company classifies all its SBUs according to the

growth-share matrix.

a). The vertical axis, market growth rate, provides a measure of market attractiveness.

b). The horizontal axis, relative market share, serves as a measure of company strength

in the market.

2). Using the matrix, four types of SBUs can be identified (Discussed in detail in last Lesson)

a). Stars

b). Cash Cows

c). Question Marks

d). Dogs

Once it has classified its SBUs, a company must determine what role each will play in the future.

The four strategies that can be pursued for each SBU are:

1). The company can invest more in the business unit in order to build its share.

2). The company can invest enough just to hold at the current level.

3). The company can harvest the SBU.

4). The company can divest the SBU.

As time passes, SBUs change their positions in the growth-share matrix. Each has its own life cycle. The growth-share matrix has done much to help strategic planning study; however, there are problems and limitations with the method.

1). They can be difficult, time-consuming, and costly to implement.

principles of marketing  PORTFOLIO ANALYSIS

2). Management may find it difficult to define SBUs and measure market share and growth. 3). They focus on classifying current businesses but provide little advice for future planning. 4). They can lead the company to place too much emphasis on market-share growth or

growth through entry into attractive new markets. This can cause unwise expansion into hot, new, risky ventures or giving up on established units too quickly. In spite of the drawbacks, most firms are still committed to strategic planning. Based upon this analysis company designs the growth strategies:

Developing Growth Strategies

Companies should always be looking to the future. One useful device for identifying growth opportunities for the future is the product/market expansion grid. The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through:

1). Market Penetration—making more sales to present customers without changing products in any way. Market penetration means trying to increase sales of a firm’s present products in its present markets probably through a more aggressive marketing mix. The firm may try to strengthen its relationship with customers to increase their rate of use or repeat purchases, or try to attract competitors’ customers or current nonusers. New promotion appeals alone may not be effective. A firm may need to add a home page on the Internet to make it easier and faster for customers to place an order. Or, it may need to add more stores in present areas for greater convenience.

2). Market Development—a strategy for company growth by identifying and developing new markets for current company products (example, demographic markets). Market development means trying to increase sales by selling present products in new markets. Firms may try advertising in different media to reach new target customers. Or they may add channels of distribution or new stores in new areas, including overseas.

3). Product Development—a strategy for company growth by offering modified or new products to current markets. Product development means offering new or improved products for present markets. By knowing the present market’s needs, a firm may see new ways to satisfy customers. Computer software firms like Microsoft boost sales by introducing new versions of popular programs.

4). Diversification—a strategy for company growth by starting up or acquiring businesses outside the company’s current products and markets. Diversification means moving into totally different lines of business perhaps entirely unfamiliar products, markets, or even levels in the production-marketing system.

Planning Cross-Functional Strategies The final step in the strategic planning process is planning functional strategies. 1). Once the strategic plan is in place, more detailed planning must take place within each business unit.

2). Each department (such as marketing, finance, et cetera) provides information for strategic planning. Marketing plays a key role in the company’s strategic planning process by: 1). Providing a guiding philosophy.

2). Providing inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them.

3). Within individual business units, marketing designs strategies for reaching the unit’s objectives.

4). Marketers are challenged to find ways to get all departments to “think customer.”

Strategic Planning, Implementation, and Control Process

The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. It relies on developing a clear company mission, supporting objectives, a sound business portfolio and coordinated functional strategies. Business plans are more customers and competitor-oriented and better reasoned and more realistic than they were in the past. The plan is variously called a “business plan,” a “marketing plan,” and sometimes an

“operating plan.” Most marketing plans cover one year, but some cover a few years. The plans vary in their length from under ten pages to over 50 pages. Some companies take their plans very seriously, while others see them as only a rough guide to action. The most frequently cited shortcomings of current marketing plans, according to marketing executives, are lack of realism, insufficient competitive analysis, and a short-run focus. IMPLEMENTING THE MARKETING PLAN: Planning good strategy is only the start – it counts very little if the organization fails to implement it correctly. Main reasons for the poor implementation are isolated planning, Some organizations employ ‘professional planners’ while others leave the task of developing strategic plans to top management and leaving the details of implementation to lower-level managers can spell poor or no implementation at all. Marketing strategy and marketing performance are linked by an implementation system consisting of five related elements. Finally marketing control involves evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are attained. It then measures its performance in the marketplace and evaluates the causes of any differences between expected and actual performance. Finally, management takes corrective action to close the gaps between its goals and its performance.

principles of marketing  PORTFOLIO ANALYSIS principles of marketing  PORTFOLIO ANALYSIS

Marketing Strategy Planning Process

Whenever performing the marketing function company needs courses of the action known as the strategies. Marketing strategies and the planning process are based on the It is based on the SWOT analysis. SWOT analysis means to analyze the threats and opportunities that are part of external environment and strengths and weaknesses of the organization, which are part of the internal the environment. Based on this environmental analysis company formulates the strategies to find out the target customers designs objectives and mission statements to fulfill the needs of the target customers and strategies to respond to the competitive environment. After conducting SWOT analysis companies decides strategies about the marketing mix i.e. 4Ps (Product, Price, Place and Promotion) .

Marketing Process The marketing process is the process of analyzing market opportunities, selecting target markets, developing the marketing mix, and managing the marketing effort. This process has following main steps:

1.  Analyzing marketing opportunities

2.  Selecting target markets

3.  Developing the marketing Mix

4.  Managing the marketing effort

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