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Chapter 12
Organizing and Planning for Effective
Implementation
I. “Electrolux—Organizing to Rule the World of Household Appliances” discusses the
strategies adopted by Electrolux, the Swedish household appliances giant, to become a visible
brand in the global market.
II. Strategic Challenges Addressed in Chapter 12
This chapter examines several questions related to the second aspect of strategic fit—the
issue of organizational fit—the fit between a business’s competitive and marketing
strategies and the organizational structures, policies, processes, and plans necessary to
effectively implement those strategies.
oFor companies with multiple business units or product lines, what is the appropriate
administrative relationship between corporate headquarters and the individual SBUs?
oWithin a given business unit, whether it is part of a larger corporation or a
one-product entrepreneurial start-up, what organizational structures and coordination
mechanisms are most appropriate for implementing different competitive strategies?
oHow should organizational structures and policies be adjusted, if at all, as an
organization moves into international markets?
Given the importance of formal plans as tools to aid implementation and control, the last
part of this chapter returns to the planning framework introduced briefly in Chapter 1.
The chapter also examines the content of effective marketing plans in detail and reviews
the strategic decisions involved in formulating that content.
III. Designing Appropriate Administrative Relationships for the Implementation of
Different Competitive Strategies
The three aspects of the corporate-business unit relationship that can affect the SBU’s
success in implementing a particular competitive strategy are:
oThe degree of autonomy provided each business unit manager
oThe degree to which the business unit shares functional programs and facilities with
other units
oThe manner in which the corporation evaluates and rewards the performance of its
SBU managers
A. Business-Unit Autonomy
Prospector business units are likely to perform better on the critical dimensions of
new product success and increases in volume and market share when organizational
decision making is relatively decentralized and the SBU’s managers have
substantial autonomy to make their own decisions.
oHowever, one caveat attached to the preceding generalization is that, high
levels of autonomy and independence can lead to coordination problems
across business units.
Low-cost defender SBUs perform better on ROI and cash flow by giving their
managers relatively little autonomy.
The relationship between autonomy and the ROI performance of differentiated
defenders is more difficult to predict.
B. Shared Programs and Facilities
Some firms attempt to avoid the trade-off between efficiency and adaptability by
designing relatively small, narrowly focused business units, but then having two or
more units share functional programs or facilities.
Sharing resources can be a problem for prospector business units.
oHowever, functional independence usually facilitates good performance for
prospector businesses.
The increased efficiencies gained through sharing functional programs and facilities
often boost the ROI performance of low-cost defender SBUs.
The impact of shared programs on the performance of differentiated defenders is
more difficult to predict because they often must modify their products and
marketing programs in response to changing market conditions to maintain their
competitive advantage over time.
C. Evaluation and Reward System
Increasingly, companies around the world are adopting some form of
pay-for-performance compensation scheme.
oThe question is: Which dimensions of performance should be rewarded?
For defender businesses in relatively mature markets, particularly those competing
as low-cost defenders, operating efficiency and profitability tend to be most
important objectives.
In prospector businesses, evaluation and reward systems that place relatively more
emphasis on sales volume, market share objectives, or on the percentage of volume
generated by new products may be more appropriate.
IV. Designing Appropriate Organizational Structures and Processes for Implementing
Different Strategies
Successful implementation of a given strategy is more likely when the business has the
functional competencies demanded by its strategy and supports them with substantial
resources relative to competitors; is organized suitably for its technical, market, and
competitive environment; and has developed appropriate mechanisms for coordinating
efforts and resolving conflicts across functional departments.
A. Functional Competencies and Resource Allocation
Competence in marketing, sales, product R&D, and engineering is critical to the
success of prospector businesses because those functions play pivotal roles in new
product and market development and thus must be supported with budgets set at
larger percentage of sales than their competitors.
oThe bottom-up strategic planning systems are particularly well-suited to
prospector businesses operating in unstable environments.
In low-cost defender businesses, the functional areas most directly related to
operating efficiency play the most crucial roles in enabling the SBU to attain good
ROI performance.
B. Additional Considerations for Service Organizations
Service organizations—and manufacturers that provide high levels of customer
service as part of their product offering—often need some additional functional
competencies because of the unique problems involved in delivering quality
service.
Competence in human resource development is crucial for service businesses
pursuing prospector strategy—and perhaps also for defenders and analyzers who
differentiate their offerings on the basis of good service—than for those focused
primarily on efficiency and low cost.
C. Organizational Structures
Three structural variables are important in shaping both a SBU’s and its marketing
department’s performance within the context of a given competitive strategy:
oFormalization—degree to which formal rules and standard policies and
procedures govern decisions and working relationships
oCentralization—location of decision authority and control within an
organization’s hierarchy
oSpecialization—division of tasks and activities across positions within the
organizational unit
Prospector business units and their marketing departments are likely to perform
better when they are decentralized, have little formalization, and are highly
specialized.
Differentiated defenders perform best when their organizational structures
incorporate moderate levels of formalization, centralization, and specialization.
Several common organizational designs incorporate differences in both the
structural variables—formalization, centralization, and specialization—and the
mechanisms for resolving interfunctional conflicts.
Functional Organizations
oAt the SBU level, managers of each functional department report to the
general manager.
oBecause top managers perform their coordination activities across all
product-markets in the SBU, there is little specialization by product or
customer type.
oThese characteristics make the functional form simple, efficient, and
particularly suitable for companies operating in stable and slow-growth
industries where the environments are predictable.
Thus, the form is appropriate for low-cost defender SBUs attempting to
maximize their efficiency and profitability in mature or declining
industries.
oThe simplicity of the functional organization also makes it the most common
organizational form among entrepreneurial start-ups.
Product Market Organizations
oWhen a company or SBU has many product-market entries, the simple
functional form of organization is inadequate.
oThis form adds an additional layer of managers to the marketing department,
for example, usually called product managers, brand managers, or marketing
managers, each of whom has the responsibility to plan and manage the
marketing programs and to coordinate the activities of other functional
departments for a specific product or product line.
oA product management structure decentralizes decision making while
increasing the amount of product specialization within the SBU.
oIt is more appropriate for businesses pursuing differentiated defender and
analyzer strategies, particularly when they operate in industries with complex
and relatively unstable market and competitive environments.
oProduct management organizations have a number of advantages:
The ability to identify and react quickly to threats and opportunities
individual product-market entries face
Improved coordination of functional activities within and across
product-markets
Increased attention to smaller product-market entries that might be
neglected in a functional organization
oA product management organization also has shortcomings:
The major one is the difficulty of obtaining the cooperation necessary to
develop and implement effective programs for a particular product
given that a product manager has little direct authority.
The environment facing product managers is changing drastically.
Market Management Organizations
oIn some industries, a SBU may market a single product to a large number of
markets where customers have different requirements and preferences.
oThe intermediaries and marketing activities involved in selling to different
markets are so different that it makes sense to have a separate marketing
manager in charge of each market.
Matrix Organizations
oA business facing an extremely complex and uncertain environment may find
a matrix organization appropriate.
oThe matrix form brings together two or more different types of specialists
within a participative coordination structure.
oThe matrix form of organization particularly suits prospector businesses and
the management of new product development projects within analyzer or
differentiated defender businesses.
D. Recent trends in Organizational Design
Organizations will increasingly emphasize the managing of business processes in
contrast to functional areas.
Managing processes will make the organization essentially horizontal—flat and
lean versus a vertical or hierarchical model.
The use of self-managing teams is increasing.
oRegardless of the form of worker self-management, all are based on the
concept of empowerment—the theory that those doing the work should have
the means to do what it takes to please the customer.
In the future, many companies will use teams as the basis for collaborative
networks that link thousands of people together with the help of a variety of new
technologies.
Not all collaborative networks are successful, especially those involving joint
ventures.
E. Organizational Adjustments as Firms Grow and Markets Change
There are five key drivers that help managers decide when the time has come to
restructure an organization, and what new structure should replace the old one:
oCustomer needs
oInformational requirements of the sales and marketing personnel charged with
meeting those needs
oAbility of a given structure to motivate and coordinate the kinds of activities
that market conditions require
oAvailable competencies and resources
oCosts
Growing firms or those serving rapidly changing markets are likely to need to
rethink—and perhaps change—the structure of their sales and marketing
organizations frequently.
F. Organizational Designs for Selling in Global Markets
Little or No Formal Organization
oEarly on in a firm’s international involvement, the structure ranges from the
domestic organization handling international transactions to a separate export
department.
oThe latter may be tied to the marketing department or may be a freestanding
functional department.
An International Division
oTo avoid discriminating against international customers in comparison with
domestic customers, an international division is often established to house all
international activities, most of which relate to marketing.
Global Structures
oThere are a variety of global types, of which the simplest replicates the firm’s
basic functional departments.
oBy far the most common global structure is one based on products, which
translates into giving SBUs worldwide control over their product lines.
oThe area structure is a popular global organization and is essentially
appropriate when there is considerable variance across markets regarding
product acceptance and marketing activities.
oSome companies use a hybrid organization typically is some combination of
the functional, product, or area types of structure.
Decision-Making and Organizational Structure
oOrganizational structures can be centralized or decentralized in terms of
decision making.
V. Marketing Plans: The Foundation for Implementing Marketing Actions
A. The Situation Analysis
Although many marketing plans start with a brief executive summary of their
contents, the situation analysis is typically the first substantive section in which the
marketing manager details his or her assessment of the current situation.
Based on these analyses, the manager may then call attention to one or more key
issues, major opportunities, or threats that should be dealt with during the planning
period.
Market Situation
oHere data are presented on the target market.
oTotal market size and growth trends should be discussed, along with any
variations across geographic regions or other market segments.
oMarketing research information also might be presented concerning customer
perceptions and buying-behavior trends.
Competitive Situation
oThis section identifies and describes the product’s major competitors in terms
of their size, market share, product quality, marketing strategies, and other
relevant factors.
oIt also should discuss the likelihood that other competitors will enter the
market in the near future and the possible impact of such entry on the
product’s competitive position.
Macroenvironmental Situation
oThis section describes broad environmental occurrences or trends that may
have a bearing on the product’s future.
Past Product Performance
oIf the plan is for an existing product, this part of the situation analysis
discusses the product’s performance on such dimensions as sales volume,
margins, marketing expenditures, and profit contribution for several recent
years.
Sales Forecast and Other Key Assumptions
oThe assessment of the current situation also typically includes estimates of
sales potential, sales forecasts, and other evidence or assumptions underlying
the plan.
oSuch market measurements are particularly critical as the foundation for
marketing plans for new goods or services where there is no past history to
draw on.
B. Key Issues
After analyzing the current situation, the product manager must identify the most
important issues facing the product in the coming year.
These issues typically represent either threats to the future market or financial
performance of the product or opportunities to improve those performances.
C. Objectives
Financial objectives provide goals for the overall performance of the brand and
should reflect the objectives for the SBU as a whole and its competitive strategy.
The financial goals must then be converted into marketing objectives that specify
the changes in customer behavior and levels of performance of various marketing
program elements necessary to reach the product’s financial objectives.
D. Marketing Strategy
The chosen strategy should fit the market and competitive conditions faced by the
product and its strategic objectives.
It also should incorporate all of the necessary decisions concerning the 4Ps.
E. Action Plans
The action plan is the most crucial part of the annual marketing plan for ensuring
proper execution.
The specific actions necessary to implement the strategy for the product are listed,
together with a clear statement of who is responsible for each action, when it will
be done, and how much is to be spent on each activity.
Specific timelines and milestones are also set forth.
F. Projected Profit-and-Loss Statement
The action plan includes a supporting budget that is essentially a projected
profit-and-loss statement.
Once approved, the product’s serves as a basis for the plans and resource allocation
decisions of other functional departments within the SBU.
G. Contingency Plan
The manager also might detail contingency plans to be implemented if specific
threats or opportunities should occur during the planning period.
