Setting of Marketing Objectives

To be effective, a strategic marketing system must be goal driven. The setting of marketing objectives is therefore a key step in the strategic marketing process. In terms of its position within the overall planning process, objective setting can be seen to follow on from the initial stage of analysis and, in particular, the marketing audit. By setting marketing objectives, the planner is attempting to provide the organization with a sense of direction.

In addition, objectives provide a basis for motivation as well as a benchmark against which performance and effectiveness can subsequently be measured. The setting of objectives is thus at the very heart of the strategic marketing planning process and is the prelude to the development of marketing strategies and detailed marketing plans.

This process of moving from the general to the specific should lead to a set of marketing objectives which should be attainable within any budgetary constraints may exist, and be compatible with marketing environmental conditions as well as organizational strengths and weakness. It follows from this that the process of setting marketing objectives should form what is often referred to as an internally consistent and mutually reinforcing hierarchy.

Objectives, strategies and plans:

The interrelationship between marketing objectives, marketing strategies and marketing plans has been spelled out by Davidson who is discussing BMW’s recovery efforts in Germany in the 1960s, commented: In 1960 BMW was on the verge of bankruptcy. It was producing motorcycles for a dwindling market, and making a poor return on its bubble cars and six-cylinder saloons.

A takeover bid by Daimaler-Benz, the makers of Mercedes, was narrowly avoided, and the group was rescued by a Bavarian investment group. Paul G. Hanemann, Opel’s top wholesale distributor, was appointed chief executive. His first objective was obviously to get BMW back on an even keel, where it was sufficiently profitable to survive in the long-term.

Having got there, he would then move to a more ambitious objective of challenging Mercedes for leadership of the market for high-quality executive cars. He was convinced that there was an unexplored market for a sporty saloon car, which Mercedes was not tapping. As Paul G. Hanemann pointed out, ‘If you were a sporty driver and German, there was no car for you.

The Mercedes is big, black and ponderous. It’s for parking, not driving.’ Consequently, he evolved a strategy for production of a range of high-quality cars with better performance and a sportier image than any other saloon. This strategy has remained broadly unchanged since. But the plans for executing it have evolved and been refined.

Establishing the corporate mission:

In practice just after environmental and business analysis, the development of a mission statement is the next step for both corporate and strategic marketing planning since it represents a vision of what the organization is or should attempt to become.

The mission statement should be capable of performing a powerful integrating function, since it is in many ways a statement of core corporate values and is the framework within which individual business units prepare their business plans, something which has led to the corporate mission being referred to as an ‘invisible hand’ which guides geographically scattered employees to work independently and yet collectively towards the organization’s goal.

A similar sentiment has been expressed by Ouchi who suggests that the deliberate generality of the mission statement performs an integrating function of various stakeholders over a long period of time. In developing the mission statement for a company, Critical Success Factors need to be taken into account: these include the preference, values and expectations of managers, stakeholders, regulators and; environmental and economic factors, and in particular the major opportunities and threats that exist and are likely to emerge in the future as the one we are witnessing in 2009 (with lack of demand due to liquidity cruneh and recession.

Distinctive competence:

While opportunities may exist in a particular market, it would not necessarily make sense for an organization to enter the market if it would not be making the fullest use of its areas of distinctive competence. An effective mission statement should, for example, focus upon distinctive values rather than upon every opportunity that is likely to exist.

A statement that includes comments on producing the highest-quality products, offering the most service, achieving the widest distribution network, and selling at the lowest price is both unrealistic and too ambitious.

More importantly, it fails to provide the sort of guidelines needed when trade­offs are necessary. Equally, the mission statement must define what we can refer to as the competitive domain within which the organization will operate.

This competitive domain can be classified by a series of statements on scope:

1. Industry scope:

This is the range of industries that are of interest to the organization. Some organizations, for example, will operate in just one industry sector (e.g. IOCL) while others are willing to operate in a series (Reliance Industries or Essar group).

2. Geographical scope:

The geographical breadth of operations in terms of regions, countries or country groupings is again part of the mission statement, and varies from a single city right through to multinationals like PepsiCo, which operate in virtually every country of the world.

3. Market segment scope:

This covers the type of market or customer that the company is willing to serve. For a long-time, for example, Johnson & Johnson aimed its range of products only at the baby market. Largely because of demographic shifts, the company redefined its market segments and, with considerable success, moved into the young adult market and is now focusing on mothers too.

4. Vertical scope:

This refers to the degree of integration within the company. Thus Ford, as part of its car manufacturing operations, also owns rubber plantations, glass manufacturing plants and several steel foundries. Others, by contrast, buy in everything and simply act as middlemen.

Influences on objectives and strategy:

Having developed the mission statement, the marketing strategist is then in a position to turn to objectives and strategy. It has long been recognized that any organization represents a complex mix of cultural and political influences, all of which come to bear in some way on the objectives that are pursued.

According to Johnson and Scholes, there are a number of cultural factors in an organization’s environment which will influence the internal situation. In particular the values of society at large and the influence of organized groups need to be understood.

The nature of the business, such as the market situation and the types of product and technology are important influences not only in a direct sense but also in the way they affect the expectations of individuals and groups. Most pervasive of all these general influences is the organizational culture itself.

At a more specific level, individuals will normally have shared expectations with one or more groups of people within the organization. These shared expectations may be concerned with undertaking the company’s tasks and reflecting the formal structure of the organization, e.g. departmental expectations.

However, collations also arise as a result of specific events, and can transcend the formal structure. Internal groups and individuals are also influenced by their contacts with external stakeholders—groups who have an interest in the operation of the company such as customers, shareholders, suppliers or unions.

For example, sales staff may be pressurized by customers to represent their interests within the company. Individuals or groups, whether internal or external, cannot influence an organization’s strategies unless they have an influencing mechanism. This mechanism is called power, which can be derived in a variety of ways.

Organizational objectives should be viewed as an important part of the strategic marketing equation, and open to amendment and change as marketing strategies develop. Marketing objectives tend to emerge as the wishes of the most dominant coalition, usually the management of the organization although there are notable expectations.

However, in pursuing these objectives the dominant group is very strongly influenced by its reading of the political situation, i.e. its perception of the power struggle. For example, it is likely to set aside some of its expectations in order to improve the chance of achieving others.

Primary and secondary objectives:

This issue of multiplicity of objectives has also been discussed by Peter Drucker who isolated eight areas in which organizational objectives might be developed and maintained:

i. Market standing

ii. Innovation

iii. Productivity

iv. Financial and physical resources

v. Managers’ performance and development

vi. Workers’ performance and attitude

vii. Profitability

viii. Public responsibility

The differences between Japanese and Western business objectives:

Major differences exist between the objectives of Japanese companies and their European and North American counterparts. Kotler, for example, has stated that US firms operate largely on a short-run profit maximization model, largely because their current performance is judged by stockholders who might lose confidence, sell their stock, and cause the company’s cost of capital to rise. Japanese firms operate largely on a market-share maximization model.

They need to provide employment for more than 100 million people in a resource poor country. Japanese firms have lower profit requirements because most of the capital comes from banks that seek regular interest payments rather than high returns at somewhat higher risks. As a result, Japanese firms can charge lower prices and show more patience in building and penetrating markets.

Thus, competitors who are satisfied with lower profits have an advantage over their opponents. A similar line of argument has been pursued by Doyle, et al. who, in a comparative investigation of Japanese marketing strategies in the British market, highlighted a variety of differences between Japanese and British companies.

Prominent among these were:

i. Market share versus short-term profitability: the marketing of western companies, they suggest, is oriented to profitability, that of the Japanese to market share;

ii. An emphasis upon fast market adaptation rather than innovation; y

iii. More aggressive marketing tactics on the part of the Japanese; and

iv. A greater orientation by Japanese firms towards environmental opportunities.

McKay’s idea of three principle marketing objectives has been taken several steps further by Guiltinan and Paul, who argue that there are six objectives which should be given explicit consideration:

i. Market share growth

ii. Market share maintenance

iii. Cash flow maximization

iv. Sustaining profitability

v. Harvesting and

vi. Establishing an initial market position

In many ways, the thinking underpinning both approaches can be seen to come together in Ansoff’s ideas of a product/market matrix. This is illustrated in Table 2.14.

This matrix, which focuses upon the product (what is sold) and to whom it is sold (the market), highlights four distinct alternatives open to a strategist:

i. Selling existing products to existing markets

ii. Extending existing products to new markets

iii. Developing new products for existing markets and

iv. Developing new products for new markets

Although in practice there are relative degrees of newness both in terms of products and markets, and hence the number of strategies open to the organization is infinite, Ansoff’s matrix is useful in that it provides a convenient and simple framework within which marketing objectives and strategies can be readily developed without much difficulty.

Ansoff’s matrix revised:

Against the background of Ansoff’s product/market matrix, a strategic marketer must decide on:

i. Existing products in existing markets

ii. New products in existing markets

iii. Existing products in new markets and

iv. New products in new markets

The general nature and direction of these decisions is influenced both by the product life cycle and the current shape of the company’s product portfolio. This in turn leads to a series of choices for each product/market condition, choices which can be expressed in terms of five types of strategy.

1. Maintenance of the current competitive position (e.g. SBI networks)

2. Improvement of the current competitive position (e. g Airtel and BSNL)

3. Harvesting which involves reducing or relinquishing the current competitive position in order to capitalize on short-term profit and to improve cash flow (e.g. ITC decided to start 16 SBUs to find an alternative way of doing business away from tobacco despite its leadership and dominance. It is estimated that the tobacco market is dwindling annually by 10 per cent and ITC holds a market share of above 75 per cent there.)

4. Existing typically occurs when a company is suffering from a weak competitive position or recognizes that the cost of staying in the market and/or improving upon the position is too high. As an example Sahara sold its loss making airline business to Jet Airways.

The decision to withdraw from this market was made after Sahara had experienced losses for five years, despite having made major attempts to improve the business including vigorous cost reductions and investment in new technology and aircraft.

5. Entry to a new sector (e. g Reliance entering the retailing business through Reliance Fresh supermarket chains).