Causal factors of strategic direction
Beginning in 1950, old companies found themselves with more profitability while new lucrative activities appeared. From a commercial point of view, the markets began to saturate and the promotional instruments were no longer so effective, it was increasingly difficult for companies to place their production because the market was saturated for this type of traditional goods. At this time, the company's management focused on the development and coordination of its functional areas.
The change arose from 1973 (oil crisis), which plunged the economy into a stage of stagnation and inflation, prices became unstable, new competitors were born and the centers of power and influence moved from the Mediterranean and the Atlantic to be located in the Pacific, Southeast Asia.
There were also changes in social values, healthier life, respect for the environment and animals. The company has no choice but to adapt, going from the previous way of directing companies to a strategic direction of their activities.
The strategic planning of the company.
All companies must observe the following stages when planning.
a) Define its mission, understanding it as a combination of the history of the company, the managers' preferences, the market environment, its resources and its competitive advantages. To define it, the following aspects must be taken into account:
- The areas or sectors where you are going to carry out your activity and the objectives you want to achieve. Who will be the target audience; that is, the market. The degree of vertical integration or level of satisfaction of self-sufficiency needs. Its relations with the market. The geographical area to carry out its activities.
b) Identification of the strategic business units. A UEN is defined by:
- The target market you serve or want to serve The needs you meet The technology you use.
c) Valuation of the product portfolio. Companies must take into account the life cycle of the product; it is necessary to carry out one or several investigations in each phase of the product, and we must make two investigations in the output of a new product; one before launching and one after.
d) Valuation of new businesses. Companies must identify opportunities and for this it is necessary to analyze the market. Intensive growth consists of developing opportunities within current activities, creating similar new products and penetrating new markets. This growth requires research that provides information on the acceptance of the product in the market. Integrated growth is related to the acquisition of suppliers, distributors, competitors:
- Backward Forward Horizontal
We also have diversified growth, which is finding opportunities outside of today's business. We must bear in mind at all times that the detection of new opportunities involves investigating the market.
The planning of the UEN
Planning stages.
- Definition of the mission of the Strategic Business units Analysis of the external environment Analysis of the internal environment Formulation of objectives Formulation of strategies Program formulation Control
Definition of the UEN's mission.
Each Strategic Business Unit must define its mission within the company determining:
- The segment of the market to which it is addressed Types of needs to be covered Level of vertical integration Geographical area of the market The objectives and policies to be developed.
Objectives are concrete goals to be achieved. Policies are general principles that motivate the activity of the company.
Analysis of the external environment.
The forces of the external environment that can affect the company must be assessed, from the macro environment, with demographic, economic, political-legal, socio-cultural and technological aspects, and from the micro-environment the forces are determined by customers, suppliers, competitors and the distributors.
These forces create opportunities and threats for companies that, logically, have a series of strengths and weaknesses and, based on these concepts, the Strategic Business Units of companies can be classified as IDEAL, SPECULATIVE, MATURE, and PROBLEMS.
| IDEAL
greater opportunities lower threats |
SPECULATIVE
Threats = Opportunities |
| MATURE
few opportunities few threats |
PROBLEMS
few opportunities many threats |
Analysis of the internal environment.
The opportunities and threats come from outside the company and to face them we must study different aspects of the Marketing, finance, production and human resources departments to assess their strengths and weaknesses. It is necessary to evaluate in advance the qualification of our employees.
The formulation of objectives.
The objectives must be quantified and referred to a time frame, for example maximum profitability, achieving market share, quality, innovation, etc. These must be realistic and feasible as well as consistent and compatible. Companies should prioritize their objectives if they want to achieve several of them assuming they are compatible.
Strategy formulation.
The strategies are the development of the actions that the UEN or the companies have to carry out, to achieve their objectives. The types of generic strategies are:
- Cost leadership Differentiation Segment specialization
Formulation of Programs.
Once the strategies are defined, the companies formulate their programs or set of actions to carry them out.
Control.
Companies must carry out regular controls of their activities and the environment in order to control the objectives, these must be quantifiable and for their best control, the responsible centers must be previously defined and the benchmarks must be set.
Coordination between strategic management and strategic marketing.
Marketing planning
Companies find needs, wants and demands in the markets. Needs are shortages of basic goods, wants are specific shortages. Demands are wishes for specific products.
Nowadays, companies must act towards consumers, they must detect existing needs, and create the offer that meets them, that is why Marketing is a system of thought and at the same time a system of action, which constitutes the link between The company and the market.
Strategic marketing refers to which markets or segments the company will target, with which products and how it will position itself in them; It has a qualitative dimension in the medium and long term.
Operational marketing is shaped by the tactics that companies must formulate for prices, communication and distribution products that allow them to survive in existing markets in the short term.
For all these reasons, the strategic direction of the company is related to strategic and operational marketing; the process would be as follows:
Marketing collects and analyzes the information, after which it makes its recommendations to the management of the company that proceeds to develop a strategic planning process that sets objectives and allocates resources. Marketing plans are then prepared and operational marketing takes action. Finally, the results are evaluated and the process is restarted.
From a strategic marketing point of view companies will decide:
- What segments will you serve (what market) How will you position yourself in that market
Market segmentation. Strategies.
In consumer goods markets, segments are identified according to the following criteria.
Objective criteria.
Geographical criteria. The segmentation is fixed taking into account the territorial inequalities to explain the behaviors. Example: Coca-Cola does not taste the same worldwide.
Demographic criteria. It is set according to sex, age, and the phase of the family life cycle.
Socioeconomic criteria. Attention is paid to behavior, social class understood by income level, and the professional status of consumers. Currently, this segmentation is losing predictive value as the homogenization of consumption forms is increasing.
Subjective criteria.
Criteria based on benefits or advantages sought. This way of segmenting the market is not descriptive. It is based on the fact that consumers find different advantages in products and therefore consume them. It is possible to investigate the market to isolate groups that in the same product look for different benefits in different situations and who react unequally to marketing actions.
Example: Diesel cars in Extremadura. In a place where cities are very distant from each other, it is necessary to have a car that consumes little (diesel).
Segmentation by lifestyle.
It has been verified that very different people from socioeconomic or demographic perspectives can have very similar behaviors in terms of consumption.
Lifestyle discovers the way of being and behaving of individuals and is defined by their activities, interests and opinions. Consumer behavior trends help identify business opportunities. And in this sense, Commercial Research is key.
Segmentation by situation.
Sometimes the way of consuming a product depends on the circumstances of a certain moment.
Segmentation by behavior.
They can be attended from different points of view. The use and consumption of certain products is not evenly distributed; For companies, identifying large consumers is essential insofar as Commercial Research allows us to consolidate or increase market share by creating specific products that meet their needs.
The user condition.
According to it we can distinguish different types of user:
- Potential users Non-users First users Regular users Irregular users.
The objective of the companies is that the potential market becomes a consumer and that those who are already become loyal, for this they will use marketing.
Each of these segments must be treated differently.
Sensitivity to marketing actions. Consumers may be sensitive to some marketing variables such as price, distribution channel etc.
Selection of the Segmentation Criteria
To proceed to a correct segmentation, the market must be investigated. Commercial Research provides qualitative instruments and techniques to isolate groups with different needs. However, each problem advises the use of variables that are considered adequate to resolve the situation. There are 6 groups of variables
Variables to understand the market. Practical example: American cars imported to the Canary Islands.
- Benefits sought or perceived by consumers. Ways of buying and using the product. Consumer needs. Brand loyalty and changes to it. A combination of the above variables.
Variables to carry out positioning studies.
- Product uses: intensity and frequency. Preference for certain products. Benefits sought or perceived by consumers. A combination of the above.
Variables to conceive new products and / or introduce them.
- Reaction to new concepts, such as purchase intention, brand preferences, stocks, etc. Benefits sought or perceived by consumers.
Variables to make pricing decisions.
- Sensitivity to price. Preferences by type of establishment. Price sensitivity to ways of buying and using products.
Variables to decide on advertising issues.
- Use of the media or communication made by consumers. Lifestyle.
Variables to make distribution decisions.
- Image of the establishment Loyalty to the applicant establishment Benefits sought in the selection of the establishment
Positioning. Strategies
Once we know which market to serve, the company must position itself in it, so that consumers can identify and differentiate their offer from the rest. Once the marking has been investigated, the following strategies can be used:
Generic strategies:
- Positioning focused on the consumer. It consists of associating the product with the characteristics suggested by its image, thus the product adapts to the segment for which it is intended. Positioning based on competition. It consists of emphasizing the advantages (price, quality, service, etc.) that the product has over the competitors. Social positioning of the company. It consists of taking into account the social values that prevail at all times for the promotion or design of products. The company, at a social level, has a certain position from which it starts.
Specific strategies.
There are different alternatives:
- Positioning on the specific characteristics of the product. It consists of associating the brand with a series of attributes that may be physical characteristics or benefits that it provides. Positioning according to the characteristics of the user, is achieved by adapting the product to the needs of a consumer segment. Positioning against another competitor, consisting of comparing the product with that of the competitor to remove customers or to provide a benchmark that allows the brand to be positioned. Positioning based on the detected market gaps. Positioning by cultural symbols, consisting of associating beliefs or social values to certain brands that will be directed at a segment of the population that is sensitive to them. Positioning based on distribution, in which several types are observed: exclusive, selective, intensive and extensive. Positioning based on the Quality - Price relationship.
| price /
quality |
TO | B | C |
| TO | First-rate strategy | Penetration strategy | Supergang strategy |
| B | Price strategy | Normal strategy | Bargain Strategy |
| C | Trash strategy | E. of imitation articles | E. of cheap items |
The marketing plan.
It is a management document that collects in a detailed, orderly and easily understandable way the set of actions that are intended to be carried out to achieve specific objectives in the market.
PHASES for its realization:
- Summary of the general objectives of the plan. Analysis of the situation and observed trends. Analysis of opportunities and threats. Formulation of objectives. Formulation of strategies. Assessment of strategies. Program of action. Budgeting and projection of results.
Information needs for strategic and marketing management in the company.
Companies need information to:
- Know and value the general and specific environments of your activities. Design your marketing strategies. Develop your marketing plans.
Information to know the environment:
The strategic direction of the company needs to know the general and specific environment that surrounds them.
GENERAL environment, in it we contemplate the following environments:
E. Economic, the most important parameters to know are:
- Conjuncture forecasts The production indices of the sector in which the company's activity is carried out and the purchasing power of consumers The evolution of prices, markets, interest rates, tax pressure, employment, credit supply, etc..
E. Demographic, the most significant indicators are:
- The absolute volume of the population, as this determines the market potential. The income of consumers, which is essential for the design of price strategies. Analysis of the population according to age and sex. The density or concentration of the markets.
E. Technological. Companies must be aware of technological development on the one hand because technology leaders occupy privileged positions and take advantage of the competitive advantages created and on the other because companies that do not innovate run the risk of becoming obsolete, an effect that causes a reduction of the phases of growth or maturity.
E. Political - legal. The legal system affects the activities of companies, being necessary to have information on different aspects such as:
- Products considered harmful, dangerous or unhealthy. Products whose use enhances the legislation. Legislation on commercial practices. Security legislation.
E. Socio-Cultural. This information is usually obtained with the help of expert analysts because it is totally unrelated to the company's activity.
Regarding the SPECIFIC ENVIRONMENT we need to know:
Customers, in terms of the product and the market in which they operate, being necessary to have knowledge of their
- NumberImportanceLinking to groupsPower of negotiation.Potential characterExperience with themThe degree of demand.Seriety in commitments, payments.Solvency
The competitors; the relevant aspects of knowing are the same as the previous ones, without forgetting that the competitors are not only those that offer the same product but those that cover the same need.
Distributors, we need to know about them:
- What markets do they operate in? Who are their main customers? What are their products? Their relationship with the company? Their antiquity? The margins they carry. Conflicts and solutions.
Microenvironment of the company, that is, an analysis of the power of the groups that comprise it and the situation of the company among them.
The company must have a thorough knowledge of sales, market share, the supply of goods and services, the markets in which it operates, its customers, suppliers, competitors, and distributors, and finally accounting and financial information, balance sheets, operating account, rate of return, structure ratios, etc…
To obtain this information, companies can create a MARKETING INFORMATION SYSTEM (SIM), which are databases that collect all kinds of information from employees, regulations, publications, reports, and company departments; These are very useful for evaluating the general and specific environments of the company.
INFORMATION FOR THE DESIGN OF MARKETING STRATEGIES.
The fundamental basis for marketing design is segmentation and positioning, so that companies can carry them out they need information about:
Regarding SEGMENTATION
- Valuation of the potential market of natural segments by age and sex. Estimate of the available market, for this it is necessary to know the characteristics of the consumers, age, income, etc… Sociodemographic databases are usually used. Segmentation by socio-economic criteria requires Own or external databases that allow to find consumer profiles by crossing variables that may be of interest. An effective segmentation based on the benefits or advantages sought is achieved by collecting information about products or brands in two directions; On the one hand, the aspects in which consumers are fixed or the advantages they find with their consumption (why they buy), on the other, the position of each brand or product with respect to the others.Segmentation by lifestyle requires knowing the profiles of consumers according to their activities, interests and opinions.
Regarding the POSITIONING of the products, it is necessary to obtain perceptual maps, especially when the brands are competitive. It is necessary to know the attributes perceived in the company's brands and those of the competition before making decisions about the products. To obtain the perceptual maps, companies treat the information obtained with multivariate techniques.
Marketing information and plans.
In preparing marketing plans we need to obtain information from many historical and current classes.
Some useful research for the strategic management of the company and marketing
Consumer studies.
The companies must know and analyze the following extremes:
The reasons for buying by consumers, because this can influence the design of the packaging, the prices and the location at the point of sale.
The reasons that can drive to buy a person can be their role, playful aspects or emotional situations.
- The age of consumers influences their behavior. Attitudes of consumers The typology of consumers The perceptions of consumers. The rules of decision, especially to optimize sales forces; which can be:
- Conjunctive Rule, is to choose that product that collectively collects a series of acceptable characteristics, this is applied to consumers who are not very demanding or who do not bother to collect a lot of information. They mark minimums. Lexicographical rules, establish a series of preferences or attributes that are hierarchized and consumers choose those brands that respect that hierarchy. Compensatory Rule, positive attributes compensate or balance others that are less so.
By studying what rules your customers follow you can assign certain groups of characteristic sellers:
| Buyers who apply the disjunctive rule | Competent sellers |
| Buyers who apply the lexicographic rule | Sellers with comprehensive knowledge of the product or brand |
| Buyers who apply the compensatory or conjunctive rule | Less qualified sellers |
Sales analysis
The company's strategic planning and marketing plans need to make sales forecasts. From the strategic point of view, companies must decide with which products they will go to the market, for this they can make qualitative forecasts, applying market analysis techniques, generally intertemporal technological comparisons, these consist of analyzing the advances that take place in a sector and try to guess how they will spread to other activities (war industry).
Research requires imagination and the creation of products, technological development capacity.
From the operational point of view, companies must evaluate their markets in quantitative terms, they must study the volume and composition of the population, their income level and purchasing power indices.
Product studies.
Companies create new products for different reasons, market, technological, legal, strategic, etc…
The goods launched on the market must have some differentiating tax, some competitive advantage that makes them interesting to consumers.
The creation of new products and repositioning mean giving it an initial positioning made through a market study, to detect gaps or shortcomings and take advantage of opportunities; However, the products are also eliminated and this decision may come from a positioning study after which a company could detect a negative and irreversible situation in its product or brand.
The companies that create products must begin the process with proofs of concept to find out what the market understands by this new idea, ultimately to know its acceptability; if these concepts are feasible, prototypes or pre-series products could be designed to meet the opinion of some consumers. Next, the goods created are usually subjected to market tests, at this stage the design of the packaging and brand strategies that are currently based on consumer opinion studies must be taken into account.
Price studies
Companies must set exchange values for their goods and services and for this they must sometimes investigate what prices the competition offers to distributors, other times they must evaluate them in terms of acceptability, this can be done empirically by calculating the acceptable price. Finally, companies want to measure the effect of price changes and for all this, commercial research is needed.
Communication and promotion
Communication activities require the market to be investigated in terms of audience estimation, pretest and communication effectiveness through experimental techniques or test markets and others expressly created for these purposes.
The distribution
Companies need to know their sales figure, assess their inventories, market shares, in one or in several territories for a product or for a whole line, or inventory turnover; This information is difficult to obtain, for this there are specialists like NIELSEN who prepare this information and sell it to their clients.
Other fundamental aspects for the company are, on the one hand, knowing the costs of the channels used to prepare the marketing plan and, on the other, knowing the image of the commercial establishments in order to choose the most suitable for the positioning of their products.
Commercial research in international markets.
The commercial investigation collaborates in making the business decision to act in foreign markets; In the first place, the company must ask itself why it wants to act outside its habitual territory, the reasons may be for:
- Look for competitive advantages in those markets To look for very favorable expectations for your business Be an outlet for companies because their markets are saturated or contracting Diversify risks
Once their motive is known, an analysis will be made of the different environments with similar characteristics to the one carried out in the usual territory, in the environments already mentioned above, such as: political environment, demographic environment, analyzing the population, age, sex, in order to determine the potential market and the size of the segments; the economic environment studying the economic structure of the country by sectors, income and its distribution, external debt, the inflation rate, the evolution of the exchange rate, prices, GDP, tariff barriers, etc…; Regarding the legal environment, monetary regulations, exchange controls, restrictions on the repatriation of foreign currency, various activity legislation, etc. are studied;Finally, regarding the socio-cultural environment, aspects such as the population's attitude towards foreign companies, the population's value system, attitudes towards work, etc. will be analyzed.
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