1 CHAPTER ONE Marketing and the Concept of Planning Three women and a goose make a marketplace. ITALIAN PROVERB and Strategy O ver the years marketers have been presented with a series of philosophical approaches to marketing decision making. One widely used approach is the marketing concept approach, which directs the marketer to develop the product offering, and indeed the entire marketing program, to meet the needs of the cus- tomer base. A key element in this approach is the need for information flow from the market to the decision maker.
Another approach is the systems approach, which instructs the marketer to view the product not as an individual entity but as just one aspect of the customer’s total need-satisfaction system. A third approach, the environmental approach, portrays the marketing decision maker as the focal point of numerous environments within which the firm operates and that affect the suc- cess of the firm’s marketing program. These environments frequently bear such labels as legal-political, economic, competitive, consumer, market structure, social, technological, and international. Indeed, these and other philosophical approaches to marketing decision making are merely descriptive frameworks that stress certain aspects of the firm’s role vis-à-vis the strategic planning process.
No matter what approach a firm fol- lows, it needs a reference point for its decisions that is provided by the strategy and the planning process involved in designing the strategy. Thus, the strategic planning process is the guiding force behind decision making, regardless of the approach one adopts. This relationship between the strategic planning process and approaches to marketing decision making is depicted in Exhibit 1-1. Planning perspectives develop in response to needs that arise internally or that impinge on the organization from outside.
During the 1950s and 1960s, growth was the dominant fact of the economic environment, and the planning processes developed during that time were typically geared to the discovery and exploitation of entrepreneurial opportunities. Decentralized planning was the order of the day. Top management focused on reviewing major investment pro- posals and approving annual operating budgets. Long-range corporate plans 2 1 2 Marketing and the Concept of Planning and Strategy CHAPTER 1 Marketing and the Concept of Planning and Strategy 3 EXHIBIT 1-1 Relationship between the Strategic Planning Process and Approaches to Marketing Decision Making were occasionally put together, but they were primarily extrapolations and were rarely used for strategic decision making.
Planning perspectives changed in the 1970s. With the quadrupling of energy costs and the emergence of competition from new quarters, followed by a reces- sion and reports of an impending capital crisis, companies found themselves sur- rounded by new needs. Reflecting these new management needs and concerns, a process aimed at more centralized control over resources soon pervaded planning efforts. Sorting out winners and losers, setting priorities, and conserving capital became the name of the game.
A new era of strategic planning dawned over cor- porate America. The value of effective strategic planning is virtually unchallenged in today’s business world. A majority of the Fortune 1000 firms in the United States, for instance, now have senior executives responsible for spearheading strategic plan- ning efforts. Strategic planning requires that company assets (i., resources) be managed to maximize financial return through the selection of a viable business in accor- dance with the changing environment.
One very important component of strate- gic planning is the establishment of the product/market scope of a business. It is within this scope that strategic planning becomes relevant for marketers.1 Thus, Marketing and the Concept of Planning and Strategy 3 4 PART 1 Introduction as companies adopted and made progress in their strategic planning capabilities, a new strategic role for marketing emerged. In this strategic role, marketing con- centrates on the markets to serve, the competition to be tackled, and the timing of market entry/exit. CONCEPT OF PLANNING Throughout human history, people have tried to achieve specific purposes, and in this effort some sort of planning has always found a place.
In modern times, the former Soviet Union was the first nation to devise an economic plan for growth and development. After World War II, national economic planning became a pop- ular activity, particularly among developing countries, with the goal of systematic and organized action designed to achieve stated objectives within a given period. Among market economies, France has gone the furthest in planning its economic affairs. In the business world, Henri Fayol, the French industrialist, is credited with the first successful attempts at formal planning.
Accomplishments attributed to planning can be summarized as follows: 1. Planning leads to a better position, or standing, for the organization. Planning helps the organization progress in ways that its management considers most suitable. Planning helps every manager think, decide, and act more effectively and progress in the desired direction.
Planning helps keep the organization flexible. Planning stimulates a cooperative, integrated, enthusiastic approach to organiza- tional problems. Planning indicates to management how to evaluate and check up on progress toward planned objectives. Planning leads to socially and economically useful results.
Planning in corporations emerged as an important activity in the 1960s. Several studies undertaken during that time showed that companies attached significant importance to planning. A Conference Board survey of 420 firms, for example, revealed that 85 percent had formalized corporate planning activity.2 A 1983 survey by Coopers & Lybrand and Yankelovich, Skelly, and White confirmed the central role played by the planning function and the planner in running most large busi- nesses.3 Although the importance of planning had been acknowledged for some time, the executives interviewed in 1983 indicated that planning was becoming more important and was receiving greater attention. A 1991 study by McDonald’s noted that marketing planning is commonly practiced by companies of all sizes, and there is wide agreement on the benefits to be gained from such planning.4 A 1996 survey by the Association of Management Consulting Firms found that busi- ness persons, academics, and consultants expect business planning to be their most pressing management issue as they prepare to enter the next century.5 Some companies that use formal planning believe that it improves profits and growth, finding it particularly useful in explicit objective setting and in monitor- ing results.6 Certainly, the current business climate is generating a new posture 4 Marketing and the Concept of Planning and Strategy CHAPTER 1 Marketing and the Concept of Planning and Strategy 5 among executives, with the planning process being identified by eight out of ten respondents as a key to implementing the chief executive officer’s (CEO) chosen strategy.7 Today most companies insist on some sort of planning exercise to meet the rapidly changing environment.
For many, however, the exercise is cathartic rather than creative. Growth is an accepted expectation of a firm; however, growth does not happen by itself. Growth must be carefully planned: questions such as how much, when, in which areas, where to grow, and who will be responsible for different tasks must be answered. Unplanned growth will be haphazard and may fail to provide desired levels of profit.
Therefore, for a company to realize orderly growth, to maintain a high level of operating efficiency, and to achieve its goals fully, it must plan for the future systematically. Products, markets, facilities, per- sonnel, and financial resources must be evaluated and selected wisely. Today’s business environment is more complex than ever. In addition to the keen competition that firms face from both domestic and overseas companies, a variety of other concerns, including environmental protection, employee welfare, consumerism, and antitrust action, impinge on business moves.
Thus, it is desirable for a firm to be cautious in undertaking risks, which again calls for a planned effort. Many firms pursue growth internally through research and development. This route to growth is not only time-consuming but also requires a heavy com- mitment of resources with a high degree of risk. In such a context, planning is needed to choose the right type of risk.
Since World War II, technology has had a major impact on markets and mar- keters. Presumably, the trend of accelerating technological change will continue in the future. The impact of technological innovations may be felt in any industry or in any firm. Therefore, such changes need to be anticipated as far in advance as possible in order for a firm to take advantage of new opportunities and to avoid the harmful consequences of not anticipating major new developments.
Here again, planning is significant. Finally, planning is required in making a choice among the many equally attractive alternative investment opportunities a firm may have. No firm can afford to invest in each and every “good’’ opportunity. Planning, thus, is essential in making the right selection.
Planning for future action has been called by many different names: long-range planning, corporate planning, comprehensive planning, and formal planning. Whatever its name, the reference is obviously to the future. Definition of Planning is essentially a process directed toward making today’s decisions with Planning tomorrow in mind and a means of preparing for future decisions so that they may be made rapidly, economically, and with as little disruption to the business as possible. Though there are as many definitions of planning as there are writers on the subject, the emphasis on the future is the common thread underlying all plan- ning theory.
In practice, however, different meanings are attached to planning. A distinction is often made between a budget (a yearly program of operations) and a long-range plan. Some people consider planning as something done by Marketing and the Concept of Planning and Strategy 5 6 PART 1 Introduction staff specialists, whereas budgeting is seen to fall within the purview of line managers. It is necessary for a company to be clear about the nature and scope of the planning that it intends to adopt.
A definition of planning should then be based on what planning is supposed to be in an organization. It is not necessary for every company to engage in the same style of comprehensive planning. The basis of all planning should be to design courses of action to be pursued for achieving stated objectives such that opportunities are seized and threats are guarded against, but the exact planning posture must be custom-made (i., based on the decision-making needs of the organization). Operations management, which emphasizes the current programs of an orga- nization, and planning, which essentially deals with the future, are two intimately related activities.
Operations management or budgeted programs should emerge as the result of planning. In the outline of a five-year plan, for example, years two through five may be described in general terms, but the activities of the first year should be budgeted and accompanied by detailed operational programs. A distinction should also be made between planning and forecasting. Forecasting considers future changes in areas of importance to a company and tries to assess the impact of these changes on company operations.
Planning takes over from there to set objectives and goals and develop strategy. Briefly, no business, however small or poorly managed, can do without plan- ning. Although planning per se may be nothing new for an organization, the cur- rent emphasis on it is indeed different. No longer just one of several important functions of the organization, planning’s new role demands linkage of various parts of an organization into an integrated system.
The emphasis has shifted from planning as an aspect of the organization to planning as the basis of all efforts and decisions, the building of an entire organization toward the achievement of des- ignated objectives. There is little doubt about the importance of planning. Planning depart- ments are key in critiquing strategies, crystallizing goals, setting priorities, and maintaining control;8 but to be useful, planning should be done properly. Planning just for the sake of it can be injurious; half-hearted planning can cause more problems than it solves.