Strategy

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Strategy Decision Tools

• David Forlani
• University of Colorado at Denver and Health
  Sciences Center

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Outline

• Overview of Strategy
• Defined
• Levels and Components
• Focus on Business Unit Strategy
• Determining competitive advantage
• Decision Tools for Strategy Making

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What is Strategy

• A Plan for Deploying Resources to Achieve
  Organizational Goals

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Strategies Exist At Multiple Levels

• Corporate
• Business Unit (SBU)
• Product Market (Marketing Area)

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A Strategys Key Components

• Scope Addresses the Issue of Domain?
• What businesses (industries) should we be in?
• In which Markets should we compete?
• How should we compete in the chosen markets?

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A Strategys Key Components

• Goals Objectives Addresses the Issue of
  Purpose. If a strategy is implemented what
  outcomes should we expect?
• Correspondence with level e.g., Share
  Price--Corporate, Profits--SBU,
  Revenues--Marketing
• Type Adaptability, Effectiveness, Efficiency
• Format S.M.A.R.T. (Specific, Measurable,
  Attainable, Relevant, Time Frame)

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A Strategys Key Components

• Source of Competitive Advantage Addresses how
  our goals will be met and why we can have
  confidence in this happening. By level
• we hire the best people in the industry
• we can make it for less
• we are the best at understanding users wants

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A Strategys Key Components

• Resource Allocation Decisions Addresses the
  Issue of Who Gets the Money. E.g., if we have 3
  SBUs/Brands/Lines, how much money should each
  get to pursue its objectives?

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A Strategys Key Components

• Synergy Addresses the Issue of Scope
  Efficienciesgetting more out of a given asset.
  E.g., Can we combine operations, computer
  systems, distribution networks, or introduce
  under the same brand to improve cost/benefit
  ratios?

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A Strategys Components

• Scope, Goals, Competitive Advantage, Resource
  Allocations and Synergy form the foundation of
  strategies at all levels.
• The better the integration of the components
  within and across levels, the better its fit,
  the more likely the strategy will be successfully
  implemented and the more likely it will be
  effective.

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How Do Firms (BUs) Compete?

• Michael Porters Competitive Dimensions
• Differentiation make it fancier
• Cost Leadership make it for less
• Focus make it for a small section of the market

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How Do Firms (BUs) Compete?

• Miles and Snow Typology
• Prospectors close to market, induce change
• Defenders big, hate change
• Analyzers big, profit from change
• Reactors lack a proactive strategy

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Integrating Porter with Miles Snow
Emphasis on market growth
Heavy emphasis
No emphasis
Prospector
Analyzer
Defender
Reactor
Units with strong core bus. actively seeking to
expand into rel. prod-mkts with differentiated
offerings
Units primarily concerned with maintaining a
differentiated position in mature markets
Differentiation
Units primarily concerned with attaining growth
through aggressive pursuit of new product-market
opportunities
Units with no clearly defined product-market
development or competitive strategy
Emphasis on production / product
Units with strong core bus. actively seeking to
expand into rel. prod-mkts with low-cost
offerings
Units primarily concerned with maintaining a
low-cost position in mature markets
Cost leadership
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SBU Types by Strategy Component

• Component
• Scope
• Goals and obj. Adaptability (new product success)
  Effectiveness (inc. mrkt share)
  Efficiency (ROI)
• Resource deployment
• Synergy

Prospector Broad/dynamic domains tech. and cust.
segments not well-established Extensive Large L
ow Need cash for product dev. (? or ) Danger in
sharing operating fac. and programs - better to
share tech./mktg skills
Analyzer Mixture of defender and prospector
strategies Mix. of defender prospector
strats. Mix. of defender prospector
strats. Mix. of def. prosp. strats Need cash
for prod. dev. but lt prospectors Danger in
sharing operating fac. and programs - better to
share tech./mktg. skills
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SBU Types by Component

• Component
• Scope
• Goals and obj. Adaptability (new product success)
  Effectiveness (inc. mrkt share)
  Efficiency (ROI)
• Resource deployment
• Synergy

Low-cost defender Mature/stable/well-defined
domain mature tech.and cust. segments Very
little Little High Generate excess cash (cash
cows) Need to seek operating synergies to achieve
efficiencies
Differentiated defender Mature/stable/well-defined
domain mature tech.and cust.
segment Little Little High Generate excess
cash (cash cows) Need to seek operating synergies
to achieve efficiencies
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What about Competitive Advantage?

• It should be reflected In Strategy the firm (BU)
  is following.
• A firms Competitive Advantage should determine
  how it competes in a given market.

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Decision Tools for Strategy Making

• The Expanded 5 W model
• Ansoffs Growth Matrix
• Market Targeting Grid
• BCGs Growth-Share Matrix

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Decision Tools The Expanded 5W Model

• Who are our customers?
• What do they do with our product?
• Where is it purchased?
• When is it purchased?
• Why is ours the selected product?
• Why is ours NOT the selected product?

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Decision Tools Ansoffs Growth Model
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Decision Tools Position-Attractiveness Matrix
COMPETITIVE POSITION
1Invest 2Maintain 3Harvest
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Decision Tools BCG Growth-Share Matrix