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Strategic Choices Strategic Decisions and Level Strategy

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Title: Strategic Choices Strategic Decisions and Level Strategy


1
Strategic ChoicesStrategic Decisions and
Level Strategy
2
Strategic Planning
Strategic planning is the process of developing
and maintaining a feasible fit between the
organizations objectives, skills, and resources
and its changing marketing opportunities.
3
Four Organizational Levels of Large Corporations
Corporate
SBU
Unit
Functional
4
The High-Performance Business
Stakeholders
Processes
Resources
Organization
5
Corporate Strategic PlanningFour Planning
Activities
  • Defining the corporate mission.
  • Establishing strategic business units.
  • Assigning resources to each SBU.
  • Developing growth strategies

6
Comprehensive Strategy-Formulation Framework.
Stage 1The Input Stage
Stage 2The Matching Stage
Stage 3The Decision Stage
7
Strategy-Formulation Analytical Framework
Internal Factor EvaluationMatrix (IFE)
Stage 1The Input Stage
External Factor EvaluationMatrix (EFE)
Competitive Profile Matrix(CPM)
8
Porters Five forces model Competition Model
Buyer power
9
Competitor Analysis Components
10
Competitor Analysis Strategic Groups
  • Sometimes it is useful to subdivide industries
    into strategic groups -- ie., groups of firms
    that pursue similar strategies with similar
    resources.

ChiChis, Olive Garden, Red Lobster
Country Kitchen, Dennys, Diners, Shoneys
Price
Arbys, Burger King, Dominos, Hardees,
McDonalds, Taco Bell, Wendys
Selection
11
Automobile Industry 1990
Toyota
1.5
Honda
1.0
.5
Core Capabilities relative capacity
General Motors
Chrysler
Ford
(.50)
(1.0)
(1.5)
Passive
Aggressive
Strategic Intent relative aggressiveness
Figure 5
12
Competitor Analysis
  • simply summarizes the main players and their
    central modes of competing (or their strengths
    and weaknesses, or other important dimensions)
    Competitor intelligence is the ethical gathering
    of needed information and data about competitors
    objectives, strategies, assumptions, and
    capabilities..

13
The Sustainable Competitive Advantage
  • The Way You Compete
  • Product strategy
  • Positioning strategy
  • Manufacturing strategy
  • Distribution strategy, etc.

SCA
  • Basis of Competition
  • Assets and competencies
  • What You Offer
  • Value Proposition
  • Where You Compete
  • Product-market selection
  • Competitor selection

Figure 8.1
14
Strategic Options
Quality
Being Global
Product Attribute
Product Design
Innovation
Strategic Options
Product Line Breadth
Focus
Value
Corporate Social Responsibility
Customer Intimacy
Brand Familiarity
Figure 8.3
15
.
  • Strategic Opportunism
  • Driven by a focus on the present.
  • Premise that environment is so dynamic and
    uncertain that it is not feasible to aim at a
    future target.
  • Strategic flexibility and willingness to respond
    to opportunities is necessary. Change is the
    norm.
  • Minimizes risk of missing emerging opportunities.
  • Reduces risk of strategic stubbornness.
  • Requires decentralized structure.
  • Needs entrepreneurial personnel.
  • Strategic Drift
  • Danger of Strategic Opportunism
  • Investment decisions are made incrementally
    instead of as part of a vision.
  • Can be an excuse to delay investment or divert
    resources from a core vision.
  • Causes of Strategic Drift
  • A short-lived, transitory force may be mistaken
    for one with enough staying power to make a
    strategic move worthwhile.
  • Opportunities to create immediate profits may be
    rationalized as strategic when they are not.
  • Synergies across business units may fail to
    materialize.

16
Vision versus Opportunism
Strategic Stubbornness
Strategic Vision
Strategic Opportunism
Strategic Drift
Figure 8.5
17
.
  • Strategic Intent
  • Couples strategic vision with a sustained
    obsession with winning at all levels of the
    organization (e.g., Canon, Honda).
  • Captures the essence of winning
  • Stretches an organization with a continuing
    effort to identify and develop new SCAs or to
    improve existing ones.
  • Often requires real innovation, a willingness
    to do things very differently.
  • Strategic Flexibility
  • The ability to adjust or develop strategies to
    respond to external or internal changes.
  • Ways it can be achieved
  • Participating in multiple product-markets and
    technologies.
  • Having resource slack.
  • Creating an organizational system and culture
    that supports change.

18
Customer Analysis
The Strategic Planning Process
Business Mission Statement
Business Objectives
  • Segmentation
  • Who are the biggest customers? The most
    profitable? The most attractive potential
    customers? Do the customers fall into any logical
    groups based on needs, motivations, or
    characteristics? How could the market be
    segmented into groups that would require a unique
    business strategy?
  • .

Situation Analysis
Business Strategy
Target Market Strategy
Marketing Mix
Distribution
Product
Price
Promotion
Implementation Evaluation Control
19
Slide 4-7
Growth Strategies Product Market Matrix
Figure 4.3
Strategic Opportunity Matrix
PresentProducts
NewProducts
Products
Markets
Market Penetration (Arm Hammer)
Product Development (McDonalds Pizza)
PresentCustomers
Diversification (Mrs. Tea)
Market Development (Taco Bell)
NewCustomers
20
Portfolio Planning Models The BCG Growth-Share
Matrix
Earnings low, unstable, growing Cash flow
negative Strategy analyze to determine
whether business can be grown into a
star, or will
degenerate into a dog
Earnings high stable, growing Cash flow
neutral Strategy invest for growth
?
HIGH
Annual real rate of market growth ()
Earnings high stable Cash flow high
stable Strategy milk
Earnings low, unstable Cash flow
neutral or negative Strategy divest
LOW
HIGH
LOW
Relative market share
21
GE Portfolio Matrix
Slide 4-9
High
Market/Industry Attractiveness
Medium
Low
Medium
Strong
Weak
Business Strength/Position
Industry Attractiveness Criteria Business
Unit Position - Market size - Market
share (domestic, - Market growth global,
and relative) - Industry profitability -
Competitive position - Inflation recovery -
Relative profitability - Overseas sales ratio
22
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
Stage 2The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
23
SWOT Matrix
24
Matching Key Factors to Formulate Alternative
Strategies
Key Internal Factor
Key External Factor
Resultant Strategy
25
SPACE Factors
26
SPACE Factors
27
SPACE Matrix
FS
Conservative
Aggressive
6
5
4
3
2
1
CA
IS
-6
-5
-4
-3
-2
-1
1
2
3
4
5
6
-1
-2
-3
-4
-5
Defensive
Competitive
-6
ES
28
RAPID MARKET GROWTH
  • Quadrant I
  • Market development
  • Market penetration
  • Product development
  • Forward integration
  • Backward integration
  • Horizontal integration
  • Concentric diversification
  • Quadrant II
  • Market development
  • Market penetration
  • Product development
  • Horizontal integration
  • Divestiture
  • Liquidation

WEAK COMPETITIVE POSITION
STRONG COMPETITIVE POSITION
  • Quadrant IV
  • Concentric diversification
  • Horizontal diversification
  • Conglomerate diversification
  • Joint ventures
  • Quadrant III
  • Retrenchment
  • Concentric diversification
  • Horizontal diversification
  • Conglomerate diversification
  • Liquidation

SLOW MARKET GROWTH
29
The Role of Marketing
  • Marketers orient everyone in the organization
  • toward markets and customers.
  • Marketers analyze the current situation,
  • identify trends in the marketing environment,
  • and assess the potential impact of these trends.
  • Marketers development corporate, business,
  • and marketing strategic plans.

30
Organizational Levels
  • The Corporate Level is the
  • highest level in any organization.
  • The Functional Level includes all the
  • various functional areas within a business unit.

The Business Level consists of units within the
overall organization that are generally managed
as self-contained businesses.
31
Types of Strategic Plans
Organizational Level Type of Strategic Plan Key
Strategic Decisions
Corporate Corporate strategic Corporate
vision plan Objectives resource
allocation Growth strategies Business Bus
iness strategic Market scope plan Competitiv
e advantage Marketing Marketing strategic
Target market plan Marketing
mix Product marketing Specific target
market plan Specific marketing
mix Execution action plan
32
The Strategic Planning Process
33
What is a Corporate Parent?
  • The corporate parent refers to the levels of
    management above that of the business units, and
    therefore without direct interaction with buyers
    and competitors.
  • Grand level strategies
  • - 1. Growth (a. concentration b.
    diversification)
  • - 2. Retrenchment
  • - 3. Stability (status quo)
  • 4. Combination (multiple strategies)
  • Strategic Directions

34
Corporate Vision
  • Corporate Vision
  • The basic values of an organization.
  • The vision specifies what the organization stand
    for, where it plans to go, and how it plans to
    get there.

35
What Comprises Corporate Vision?
  • Markets
  • Products and services
  • Geographic domain
  • Core competencies
  • Organizational objectives
  • Organizational philosophy
  • Organizational self-concept
  • Desired public image

36
Core Purpose A Companys Reason for Being
  • 3M To solve problems innovatively.
  • Hewlett-Packard To make technical contributions
    for the advancement and welfare of humanity.
  • Mary Kay Cosmetics To give unlimited opportunity
    to women.
  • Merck To preserve and improve human life.
  • Sony To experience the joy of advancing and
    applying technology for the benefit of the
    public.
  • Wal-Mart To give ordinary folks the chance to
    buy the same things as rich people.

37
Core Purpose
  • Core Competency
  • A bundle of skills that are possessed by
    individuals across the organization.

38
Questions Leading to an Effective Corporate Vision
  • Which customers will you be serving in the
    future?
  • Through which channels will you reach customers
    in the future?
  • Who will be your competitors in the future?
  • Where will your margins come from in the future?

39
Questions Leading to an Effective Corporate Vision
  • In what end-product markets will you participate
    in the future?
  • What will be the basis for your competitive
    advantage in the future?
  • What skills or capabilities will make you unique
    in the future?

40
Corporate Objectives and Resource Allocation
  • Corporate objectives specify the achievement of
    desired levels of performance during particular
    time periods.

41
Corporate Objectives and Resource Allocation
  • Corporate objectives and
  • resource allocation affect
  • marketers in 2 basic ways
  • Providing guidance
  • for the development
  • and Implementation of
  • marketing strategies.

1) In setting the objectives for different
organizational levels.
42
DIRECTIONAL STRATEGIES
Growth Concentration Vertical Growth
Horizontal Growth Diversification
Concentric Conglomerate
Stability Cautiously proceed Maintain Profit
Retrenchment Turnaround Divest/Sale Liquidation
43
Growth through
  • diversification branching out into new areas
  • i. horizontal integration expanding across
    the general industry (e.g. Coke acquires
    Minutemaid).
  • ii. vertical integration expanding into
    industries populated by suppliers/buyers (e.g.
    Ford buys steel plant).
  • iii. conglomerate diversification expanding
    into unrelated industries (e.g. GM buys
    Hersheys candy).
  • iv. joint venture expanding together with
    another company in order to diversity
    efficiently.
  • . concentration Strategic Directions (Ansoff
    Matrix)

44
Retrechment and stability
  • 2. Retrenchment\
  • Turnaround
  • downsizing existing company/divisions
  • ii. Divestiture selling off existing
    divisions/subdivisions
  • iii. Liquidation
  • 3. Stability - maintain status quo (e.g.
    continuous improvement)
  • 4. Combination multiple use of strategies

45
.
  • Generic or grand or basic strategies
  • Stability - better after sales service, modernize
    plant,
  • bulk discount, Improve
    performance to sustain
  • Expansion - Change in customer group, function,
  • technology
  • Retrenchment - Withdrawal - Customer group,
    function,
  • technology
    (unprofitable)
  • Combination
  • E.g. Wide variety of services to customers
    (stability)
  • - New products in product range (expansion)
  • DIMENSIONS OF GRAND/GENERIC STRATEGIES
  • I. Internal/External
  • - Independent of any other entity
  • - Association with other entity
  • II. Related/Unrelated
  • - To existing customer groups, existing
    customer function, technologies
  • III. Horizontal/Vertical
  • - Serving additional customer groups

46
MODERNIZATION STRATEGIES
  • Developing new technology strategy i.e.
    technological upgradation as a strategy
  • - Increased production, lower cost, improve
    efficiency and productivity
  • - Extensively used by Indian organization -
    stability - prior to expansion diversification
  • If pace of modernization is low - internal
    stability strategy, high - internal expansion
    strategy
  • Merge with another company - for modern -
    external expansion strategy

47
  • DIVERSIFICATION AND INTEGRATION STRATEGIES
  • 1. Vertical Integration
  • - make new products to serve its own needs
  • - backward/forward integration
  • 2. Horizontal Integration
  • - Same product - more customer group
  • - merger similar companies
  • Spartek Ceramics takeover of Neyveli Ceramics
  • 3. Concentric diversification
  • Marketing technology related - rain coat
    manufacturer - rubber based items - gloves, shoes
  • Technology related- leasing company - hire
    purchase
  • Marketing related - Unrelated technology
    (cosmetic sewing machines - women)
  • 4. Conglomerate diversification
  • - Unrelated to customer groups, function,
    technology
  • ITC - Cigarette Hotel
  • TTK group - Chemicals, hosiery, contraceptives

48
  • MERGER, TAKEOVER AND JOINT VENTURE STRATEGIES
  • Diversification Integration
  • Merger ( Amalgamation)
  • A acquires B - B merged with A
  • A B C - Consolidated
  • Horizontal Concentric
  • Vertical Conglomerate
  • JOINT VENTURE
  • 2 firms in one industry
  • 2 firms across different industries
  • Indian foreign firm in India
  • Indian foreign firm in foreign country
  • Indian foreign firm in third country
  • Last two types are on increase now

49
TURNAROUND STRATEGIES
  • Reversing a negative trend
  • Retrenchment - internal/external - improve
    internal efficiency - Divestment/liquidation
  • Danger signs
  • Persistent negative cash flows
  • Negative profits
  • Declining market share
  • Deterioration in physical facilities
  • High turnover, low morale, Mismanagement
  • Uncompetitive products, sick company
  • Manging turnaround Existing team - support
    external consultant - if C.E - credibility - rare
  • Existing team - withdraws temporarily -
    turnaround specialist - employed
  • Replace existing team / C.E
  • Approaches
  • - Surgical
  • - Human approach
  • Analysis of product, market, production process,
    competition, market segment positioning
  • Clear thinking - market place production logic
  • Implementation of plans - target - setting,
    feedback, remedial action

50
  • Divestment
  • - (divestiture or cutback) - sale of or
    liquidation of a portion of business
  • - SBU or profit center
  • 1. Spinning it off - financially and managerially
    independent company with stake
  • 2. Sell a unit outright
  • Kelvinator India - spin-off - Avanti scooters -
    high production cost
  • LIQUIDATION
  • Rarely - large companies liquidate
  • Buyers rare for purchase of assets
  • Court, voluntary, subject to supervision of court
  • Combination strategies popular.

51
Criteria for strategic choice
  • Does strategy exploit the opportunities present
    in the environment?
  • Is it consistent with the resources of the firm,
    its competitive advantage core competence?
  • Is the chosen level of risk feasible?
  • Is it appropriate to the values aspirations of
    the firm?
  • Consider the Selection factor.
  • Nature of environment stable?
  • Firms internal realities
  • Ambition of CEO / owners
  • Company culture
  • Firms capacity to execute the st.Resource
    allocation.
  • Gap Analysis

52
.
  • Corporate-Level Strategy should allow a company,
    or one of its business units, to perform the
    value-creation functions at lower cost or in a
    way that allows for differentiation and premium
    price. Consider how changes in the industry and
    its products, technology, customers, and
    competitors will affect its current business
    model and future strategies
  • Corporate strategy is used to identify
  • Businesses or industries that the company should
    compete in
  • Value creation activities which the company
    should perform in those businesses
  • Method to enter or leave businesses or industries
    in order to
    maximize its long-run profitability

53
Types of Diversification
  • Related diversification
  • Entry into a new business activity in a different
    industry that
  • Is related to a companys existing business
    activity or activities and
  • Has commonalities between one or more components
    of each activitys value chain
  • Based on transferring and leveraging
    competencies, sharing resources, and bundling
    products
  • Unrelated diversification
  • Entry into industries that have no obvious
    connection to any of a companys value-chain
    activities in its present industry or industries
  • Based on using only general organizational
    competencies to increase profitability of each
    business unit

54
Entry Strategies to Implement
Multibusiness Model
Various entry strategies may be employed based on
the companys competencies and capabilities
  • Internal New Ventures
  • Company has a set of valuable competencies in its
    existing businesses.
  • Competences leveraged or recombined to enter new
    business areas.
  • Acquisitions
  • Company lacks important competencies to compete
    in an area.
  • Company can purchase an incumbent company that
    has those competencies at a reasonable price.
  • Joint Ventures
  • Company can increase the probability of success
    by teaming up with another company with
    complementary skills.
  • Joint ventures are preferred when risks and costs
    of setting up a new business unit are more than
    company can assume.

55
Strategy Implementation
  • Evolve a systematic procedure to implement the
    strategy chosen
  • Procedural implementation plan
  • Proper resource allocation plan
  • Structural implementation plan
  • Functional implementation plan
  • Behavioural implementation plan
  • Evaluate and control through strategic and
    operational control measures
  • Success of a strategy is very much dependent on
    how the strategy is executed

56
Seven S Model of Implementation
STRATEGY
SKILLS
STRUCTURE
SHARED VALUES
SYSTEMS
STAFF
STYLE
57
Seven S Model
  • Strategy Plan or course of action leading to
    the allocation of firms resources to reach
    identified goals.
  • Structure The ways people and tasks relate to
    each other. The basic grouping of reporting
    relationships and activities. The way separate
    entities of an organization are linked.
  • Shared Values The significant meanings or
    guiding concepts that give purpose and meaning to
    the organization.
  • Systems Formal processes and procedures,
    including management control systems, performance
    measurement and reward systems, and planning and
    budgeting systems, and the ways people relate to
    them.
  • Skills Organizational competencies, including
    the abilities of individuals as well as
    management practices, technological abilities,
    and other capabilities that reside in the
    organization.
  • Style The leadership style of management and
    the overall operating style of the organization.
    A reflection of the norms people act upon and how
    they work and interact with each other, vendors,
    and customers.
  • Staff Recruitment, selection, development,
    socialization, and advancement of people in the
    organization.

58
Exhibit 7.2 Strategic Directions (Ansoff Matrix)
59
Diversification refers to a strategy by which
an organisation pursues new product offerings and
new markets. Levels and Types of Diversification
Figure 6.1
SOURCE Adapted from R. P. Rumelt, 1974,
Strategy, Structure and Economic Performance,
Boston Harvard Business School.
60
Figure 6.2
61
,
  • Challenges for Parental Developers
  • Identifying parent capabilities
  • Parental focus
  • The crown jewel problem
  • Sufficient feel
  • Portfolio Matrices

62
Exhibit 7.7 The Growth Share (BCG) Matrix
63
Exhibit 7.8 The Directional Policy (GE-McKinsey)
Matrix
64
Exhibit 7.9 Strategy Guidelines Based on
Directional Policy Matrix
65
Exhibit 7.10 The Parenting Matrix
66
Business-Unit Composition
  • Strategic Business Unit (SBU)
  • Focuses on a single product or brand, a line of
    products, or mix of related products that meets a
    common market need or a group or related needs,
    and the units management is responsible for all
    (or most) of the basic business functions

67
Business-Unit Composition
  • Companies often organize around competency-based
    SBUs to establish Sustained Competitive Advantage.

68
Business Strategy Decisions
  • The basic objective of a business strategy is to
    determine how the business unit will compete
    successfully.

69
Business Strategy Decisions
  • Dimensions of Strategy
  • Market scope.
  • How broadly the business views its target market.
  • Competitive advantage.
  • Competitive Advantage
  • The way a business tries to get consumers to
    purchase its products over those offered by
    competitors.

70
General Business Strategies
Market Scope
Focused
Broad
  • Easyjet
  • Jet Blue
  • Southwest

Low price
Competitive Advantage
  • Conair
  • Alaskan Airlines
  • Midwest
  • American
  • Delta
  • United Jet Blue

Differentiation
71
Exhibit 10.4 Strategic Options
72
Business level
  • Michael Porter - Three type of generic strategies
  • - Overall cost leadership strategy
  • - Differentiation strategy
  • - Focus on niche market

73
Customer Acquisition vs. Retention Strategy
Strategy
Acquisition
Retention
Increase
Expand
Switching
Customer
Market Share
Market Size
Barriers
Satisfaction
Quality
Advertising
New channels
Frequent flyer
Improvement
Promotion
Export
Monopoly
Service
Complaint
Pricing
Handling
Image/Good will
74
Marketing Strategy Decisions
  • A Marketing
  • Strategy Addresses
  • Selection of a
  • target market.
  • Development of a
  • marketing mix.

Functional strategies are at the business-unit
level.
  • Operating strategies
  • are at the product level.

75
Business Product Marketing Strategies
Decision Area Business Marketing Strategy Product
Marketing Strategy
Target market Segmented or mass approach Specific
definition of target market Product Number of
different products Specific features of each
product Price General competitive price
level Specific price Distribution General
distribution policy Specific distributions Marke
ting communications General emphasis
on marketing Specific marketing communications
tools communications program
76
International Marketing Strategies
  • Entry Strategy
  • The approach used to market products in an
    international market.
  • The Basic Options
  • Exporting
  • Joint Ventures
  • Direct Investment

77
International Marketing Strategies
Standardized Marketing Strategy The same
product, price, distribution, promotion
programs in all international markets.
Customized Marketing Strategy A different
marketing mix for each target market country..
78
GROWTH MARKETING
STRATEGIES
Growth in Existing Product Markets
Increasing Market Share
Increasing the Quantity Used
Find New applications
Product Development
Add product features
Product refinement
Expand Product Line
Develop new Products
Market Development
Expand Geographically
Target New Market Segments
79
Ansofs matrix
80
LOW COST MARKETING STRATEGIES
No Frills Product
Product Design
Captive Raw Material Source
Government Subsidy
Location
Production Innovation
Experience Curve
81
PIONEER MARKETING STRATEGIES
Firms have first choice of Market Segments and
Positions
The Pioneer brand establishes the rules of the
game
Pioneer brands incur distribution advantages
Economies of Scale and Experience is gained first
High switching costs for early Adopters
Facilitates control over scarce resources and
suppliers
82
MARKET FOLLOWER STRATEGIES
Ability to profit from Pioneers mistakes
Ability to take advantage of latest technology
Ability to take advantage of Pioneers limited
resources
83
PREEMPTIVE MARKETING
STRATEGIES
Supply Systems
Announcing New Product
Gain Customer commitment
Distribution/Service
84
COMPETITIVE ADVANTAGE
TECHNOLOGICAL
LOW COST
BROAD
COST
DIFFERENTIAL
ADVANTAGE
LEADERSHIP
Business
Scope
FOCUSED
FOCUSED
COST
DIFFERENTIATION
ADVANTAGE
NARROW
85
BCG MATRIX
Market
Growth
STARS
QUESTION MARKS
Rate
F




























G
30
A
20
C
B
E
10
H
D
0
CASH COWS
DOGS
10
1.0
0.1
RELATIVE MARKET SHARE
86
Industry Attractiveness
High
Business
Medium
Position
Low
High
Medium
Low
Invest/Grow
Selective Investment
Harvest/Divest
87
Ways to Compete
Product Strategy
Positioning Strategy
Manufacturing Strategy
Sustainable
Basis of Competition
Competitive
Skills and Assets
Advantage
Core Competences
Where to Compete
Market Segment
Who do you compete against
Competitor Selection
88
New product ADOPTION PROCESSand factors
  • Stages Awareness-Interest Evaluation-Trial-Adop
    tion
  • Customer types in adoption
  • Innovators- 2
  • Early adopters-13
  • Early majority-34
  • Late majority-34
  • Laggards-17

89
Product strategy
  • 5 levels- CO-B-E-A-T PRODUCTS
  • PRODUCT CLASSISIFICATION-
  • durability durable / non
  • Tangibility- gods/ services
  • Buyers- consumer / business

90
Product mix strategies
  • Product line- new / modernization/featuring/
    pruning
  • Product line length- stretch / contract/filling
  • Product line width
  • Product line depth
  • Product line consistency
  • Branding decision
  • Packaging and aveling

91
Business Function Orientations
Function Basic Orientation
Marketing To attract and retain
customers Production To produce products at
lowest cost Finance To keep within
budgets Accounting To standardize financial
reports Purchasing To purchase products at
lowest cost RD To develop newest
technologies Engineering To design product
specifications
92
Strategy-Formulation Analytical .Framework
Quantitative StrategicPlanning Matrix(QSPM)
Stage 3The Decision Stage
93
QSPM
Strategic Alternatives
94
Exhibit 10.1 Strategy Methods and Evaluation
95
STRATEGIC METHODS
  • Organic development is where strategies are
    developed by building on and developing an
    organisations own capabilities.
  • Reasons for Using Organic Development
  • Highly technical products
  • Knowledge and capability development
  • Spreading investment over time
  • Minimising disruption
  • Nature of markets
  • A merger is a mutually agreed decision for joint
    ownership beween organisations
  • An acquisition is where an organisation takes
    ownership of another organisation

96
Exhibit 10.3 Types of Strategic Alliance
97
Success Criteria of Strategic Options
Feasibility
Suitability
Acceptability
98
  • Principle of choice
  • Describes acceptability of a solution approach
  • Normative Models
  • Optimization
  • Effect of each alternative
  • Rationalization
  • More of good things, less of bad things
  • Courses of action are known quantity
  • Options ranked from best to worse
  • Suboptimization
  • Decisions made in separate parts of organization
    without consideration of whole
  • Models
  • Simulations
  • What-if scenarios
  • Cognitive map
  • Narratives
  • Evaluate with heuristics
  • Outcome measured by goal attainment

99
Evaluation Tools for strategy choice
  • Assessing Suitability
  • TOWS Matrix
  • Relative suitability of options
  • Ranking strategic options
  • Decision trees
  • Scenarios
  • Assessing Acceptability
  • Return
  • Profitability- Payback Period, Return on Capital
    Employed, Discounted Cash Flow NPV , IRR
  • Cost-benefit
  • Real options
  • Shareholder value analysis
  • Risk
  • Financial ratios
  • Sensitivity analysis
  • Stakeholder reactions

100
Exhibit 10.10 Measures of Shareholder Value
101
PIMS , Profit Impact of Market Strategy
  • PIMS looks at many dimensions of strategy and the
    market environment
  • It uses a database to determine how strategies
    affect results under different circumstances
  • We can relate business strategies to performance
    by studying past experience
  • PIMS claim that there are NO formulas, easy
    wins, precise laws of strategy BUT There are
    principles that can help

102
Primary Linkages Among Relative Quality, Market
Share, and Profitability
Production/operations efficiency
Served market(s) selection
Product/service conception and design
Relative quality of products/ services
Relative Value
Relative Costs
Relative Prices
Market Share
Relative Scale
Profit Margins
103
Assessing Strategic Potential
Impact on Par ROI
-

Competitive Position Market Share
Relative Share Relative Quality Capital
Production Structure Investment Intensity
Investment Mix Operating Effectiveness Capacity
Utilisation Value Added Market Characteristics
Real Market Growth Customer
Power Customer Logistics Innovation Industry
Concentration
0
Weak
Strong
Inferior
Superior

Heavy
Light
Working
Fixed
High
Low
Full
Low
High
Low
Growth
Decline
Small
Large
Simple
Complex
Moderate
None
Rapid
Concentrated
Fragmented
Par ROI PIMS Mean ROI sum of impacts
104
Business Strategy Planning (cont.)
  • Program formulation. A company must develop
    hiring, training, advertising, and other programs
    to support its strategy.
  • Implementation. A firm must communicate its
    strategy to its employees and it must have the
    resources to carry out its strategy.
  • Feedback and control are absolutely necessary to
    track results and monitor new developments in the
    environment.

105
Marketing Strategy
  • Hierarchy of goals and objectives
  • Porters Economic Theory of Profits
  • Barriers to Entry
  • Competition
  • Substitutes
  • Customers
  • Suppliers

106
Marketing Strategy
  • Generic Marketing Strategies
  • Cost Leadership
  • Lower costs of production and distribution
  • Differentiation
  • Unique product or brand
  • Focus
  • Focus on customer needs in a few segments

107
Marketing Strategy
  • What business are you in?
  • Statement of marketing strategy
  • Mission statement
  • Indicates product, market scope
  • Shows growth factor
  • Shows differential advantage
  • Shows management orientation

108
Marketing Strategy
  • Product Mix Strategies
  • Market penetration versus market skimming

Premium Goods
Penetra- tion
Super Bargain
High
Quality
Over- Pricing
Average Quality
Bargain
Medium
Hit and Run
Shoddy Goods
Cheap Goods
Low
High
Medium
Low
Price
109
Marketing Strategy
  • Product Market Growth Strategies Ansoffs matrix

Market Penetration (increase usage)?
Product Development (new uses)?
Old
Markets
Market Development (new users)?
Diversification (new users, new uses)?
New
Old
New
Products
110
Marketing Strategy
  • Boston Consulting Group Strategy
  • Relative Market Share
  • Market Growth Rate
  • Problems with BCG Approach
  • Difficult to estimate relative market share in
    rapidly growing markets

111
Marketing Strategy
  • BCG Matrix

22
Stars Some cash use Future cash cow
? High cash use ? Is to build or not
Market Growth Rate
10
Cash Cows Generate cash for ?, Stars
Dogs Low or no cash use When to divest
0
10x
1..5x
.1x
(log scale)?
Relative Market Share
112
Marketing Strategy
  • Market Leader Strategies
  • Increase Size of Total Market
  • Product-Market Growth Strategies
  • Protect Market Share
  • Fortification
  • Assortment of brands, sizes
  • Innovation
  • Best defense is a good offense
  • Counteroffensive

113
Marketing Strategy
  • Market Leader Strategies (cont.)?
  • Increase Market Share
  • BCG
  • Antitrust constraints

100
Market Share
Marketing Effort ()?
114
Marketing Strategy
  • Market Challenger Strategies
  • Frontal Attack
  • Out-innovate leader
  • Tough to do, easier to defend
  • Flanking/Bypass Attack
  • Attack where leader is not looking
  • Find a new market segment
  • Price Discount Strategy
  • Buyers are sensitive to price
  • Works if leader does not cut price

115
Marketing Strategy
  • Market Challenger Strategies (cont.)?
  • Cheaper Goods Strategy
  • Lower quality but much lower price
  • Vulnerable to still cheaper goods
  • Prestige Goods Strategy
  • Increase both quality and price

116
Marketing Strategy
  • Market Follower Strategies
  • Conscious Parallelism
  • Similar products, prices
  • Avoid unprofitable segments
  • Market Niche
  • Specialize in a very small group of customers
  • Concentrated segmentation strategy
  • Differential versus Absolute Advantage..

117
Marketing Strategy
Encirclement
Flanking Defense
Preemptive Defense
Attacker (smaller)?
Contraction Defense
Defender (bigger)?
Frontal
Attack
Position Defense
Counteroffensive
Guerilla Attack
Mobile Defense
Flank Attack
Bypass
118
eMarketing
Is eMarketing anything new? or just an
adaptation of existing strategy? Addressability
ability to identify customer prior to
purchase Marketers could always do this. So
why is web different? Is it more
efficient? only if you do not delete your
cookies? or they keep extensive files on
you
119
eMarketing
Interactivity customers can express their needs
and wants directly to the firm Marketers
could always do this too. So what is
new? another efficiency argument? Memory
ability to access individual customer profiles
and purchase histories This is probably
valid. Information existed before but was hard
to access
120
eMarketing
Control customers ability to control flow and
sequence of information Pull versus push
mediumweb versus television. Who controls the
flow? Definitely an eMarketing characteristic,
but a two-edged sword. Why? Customers control
the flow Accessibility ability to obtain
information.. Retrieving info from the
Internet is like trying to drink from a fire
hose. You could always do this, web may be
easier for some users.
121
eMarketing
Digitilization can the product or benefits be
represented digitally? Does the media match the
products attributes? a problem for all
media? So, does eMarketing exist? Maybe, or
maybe it is just another information
flow/distribution system to use in designing a
marketing strategy to meet customer needs(and
maximize profits).
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