chapter  2
29 Pages

The Virtuous Circle of Analysis, Planning and Control

Overview Strategic management is normally regarded as an integrated management approach drawing together all the individual elements, including the critically important marketing strategy, involved in planning, implementing and controlling a business strategy. Thus it clearly requires an understanding of the mission and/or vision of the

organisation (the ‘why’ it exists statement) and of its long-term goals and objectives (‘where’ it wants to go). There must also be a comprehensive analysis of the environment in which the business both is currently and will, in the future, be operating (‘where it is’). This analysis process must include all the internal operations and resources (both existing and potential) of the organisation but, equally importantly, must cover the external aspects of its environment. This includes competitors, suppliers, customers, the economy, governmental impacts, as well as legal and other regulatory changes. The combination of ‘where the organisation is’ and ‘where it wants to go’

will normally identify the need for a series of co-ordinated actions to bridge the gaps between the two, or even merely to maintain its current position if the external environment is changing adversely. These business ‘strategies’ must be developed in the context of the internal and external environments so as to ensure that they are practical; if not the goals and objectives will remain a distant theoretical ‘wish list’ rather than an achievable plan for the business. A key element in achieving this is that the planning process must explicitly

consider the responses of those stakeholders significantly impacted by the proposed strategies; particularly those competitors, customers and/or suppliers that are adversely affected. For many large organisations it is also important that business strategies are

developed at the appropriate levels within the organisation; thus an overall corporate strategy is needed for the organisation in total, with separate but linked competitive strategies for each subdivision of the business which is directly competing for identified customer groups with a specified product range against known competitors. However so far these business strategies are

only plans, and the full process of strategic management includes the implementation of the selected strategies. Some of the goals and objectives are long term, and the relevant strategies

will be implemented in a dynamic and continually changing external environment. Therefore it is most unlikely that all the predicted outcomes from these action plans will be achieved. There is a need for a feedback process of evaluation, control and, where necessary, modification. Many such modifications will result in changes to those selected strategies that are not working effectively but, in some circumstances, the organisation may be forced to accept that its original goals and objectives are not attainable in the actual external environment or with its available set of resources. Thus strategic management is a continual, iterative process of analysis,

planning and control. Marketing finance must therefore follow a similar process if it is to contribute positively towards the sustainable creation of shareholder value. However marketing strategies are also specifically tailored to the competitive

environment in which each particular business is operating. The marketing finance process should be equally tailored to fit the environment and the ensuing marketing strategy. There are widely differing strategies that can be implemented, even in the same industry at the same time, and these differing strategies require suitably tailored control processes and performance measures. There is a need for a hierarchy of both economic and managerial performance measures for all businesses, but it is critical that some of these performance measures incorporate indications of how well the business is doing in terms of its long-term objectives. It is particularly important that the performance measures are tailored to

the key strategic thrusts of the business; if these change, the marketing finance process may need to be changed as well. One common strategic marketing thrust is to develop strong brands as a sustainable source of differential advantage. A branded strategy requires a good brand evaluation process if the resulting high brand expenditures are to be properly financially evaluated and controlled. Brands can be based on either customers or products, but other types of marketing strategy can be either customer led or product based. In a customer-led strategy, the long-term customer relationship should be

regarded as a critical asset of the business; thus, development expenditure is invested to win the customer, and maintenance expenditure is needed to retain the relationship for its full potential economic life. Life cycle customer account profitability analysis is therefore important in such a relationship marketing-oriented business. Similar issues occur with product-based strategies and a suitably tailored

response is required. Product life cycle costing is now quite a well-developed technique in some industries, using the dynamic cost reducing relationship of

the experience curve to justify setting prices below the current level of costs in order to develop a sustainable cost advantage.