What is a strategy

1
What is a strategy?
A strategy is a fundamental pattern of present
and planned objectives, resource developments,
and interactions of an organization with markets,
competitors, and other environmental
factors? Our definition suggests that a
strategy should specify (1) what (objectives to
be accomplished). (2) Where (on which industries
and product- markets to focus), and (3) how
(which resources and activities to allocate to
each product- market to meet environmental
opportunities and threats and to gain a
competitive advantage).
2
The Components of Strategy
A well- developed strategy contains five
components, or sets of issues

• Scope. The scope of an organization refers to
  the breadth of its strategic
• domain the number and types of industries,
  product lines, and market
• segments it competes in or plans to enter.
  Decisions about an organi-
• zations strategic scope should reflect
  managements view of the firms
• purpose or mission. This common thread among
  its various activities
• and product-markets defines the essential nature
  of what its business is
• and what it should be.
• Goals and objectives. Strategies also should
  detail desired levels of
• accomplishment on one or more dimensions of
  performance such as
• volume growth, profit contribution, or return on
  investment over
• specified time periods for each of those
  businesses and product- markets
• and for the organization as a whole.

3
The components of strategy contd 2..

• Resource deployments. Every organization has
  limited financial and
• human resources. Formulating a strategy also
  involves deciding how
• those resources are to be obtained and
  allocated, across businesses,
• product-markets, functional departments, and
  activities within each
• business or product- market.
• 4. Identification of a sustainable competitive
  advantage. One important
• part of any strategy is a specification of how
  the organization will
• compete in each business and product-market
  within its domain. How
• can it position itself to develop and sustain a
  differential advantage
• over current and potential competitors? To
  answer such questions,
• managers must examine the market opportunities
  in each business and
• product-market and the companys distinctive
  competencies or
• strengths relative to its competitors.
• Synergy Synergy exixsts when the firms
  businesses, product-markets,
• resource deployments, and competencies
  complement and reinforce one
• another. Synergy enables the total performance
  of the related businesses
• to be greater than it would otherwise be The
  whole becomes greater
• than the sum of its parts.

4
Key Components of Corporate, Business, And
Marketing Strategies
Strategy components Scope

• Corporate strategy
• corporate domain-
• which business
• should we be in?
• corporate develop-
• ment strategy
• conglomerate
• diversification
• (expansion into
• unrelated businesses)
• vertical integration
• Acquisition and
• divestiture policies

• Business strategy
• business domain
• which product-
• markets should we
• be in within this
• business or industry?
• business development
• strategy
• Concentric diversifi-
• cation (new products
• for existing customers
• or new customers for
• existing products)

• Marketing strategy
• Target market definition
• Product line depth and
• breadth
• Branding policies
• Product-market
• development plan
• Line extension and
• product elimination
• plans

5
Key Components of Corporate, Business, And
Marketing Strategies contd..2
Strategy components Goals and objectives

• Corporate strategy
• Overall corporate
• objectives aggregated
• across business
• Revenue growth
• profitability ROI
• (return on investment)
• earnings per share
• contributions to other
• stakeholders

Business strategy

• Marketing strategy
• Constrained by corporate
• and business goals
• Objectives for a specific
• product-market entry
• sales
• market share
• contribution margin
• customer satisfaction

• Constrained by
• corporate goals
• Objectives
• aggregated across
• product-market
• entries in the business
• unit sales growth new
• product or market
• growth profitability
• ROI cash flow
• strengthening bases
• of competitive
• advantage

6
Key Components of Corporate, Business, And
Marketing Strategies contd 3
Strategy components Allocation of resources
Corporate strategy
Business strategy
Marketing strategy

• Allocation across
• components of the
• marketing plan
• (elements of the
• marketing mix) for a
• specific product-
• market entry.

• Allocation among
• businesses in the
• corporate portfolio
• Allocation across
• functions shared by
• multiple businesses
• (corporate RD,
• MIS)

• Allocation among
• product-market
• entries in the
• business unit
• Allocation across
• functional depart-
• ments within the
• business unit

7
Key Components of Corporate, Business, And
Marketing Strategies contd4
Strategy components
Corporate strategy
Business strategy
Marketing strategy
Primarily through competitive strategy,
business units compe- tencies relative to
competitors in its industry
Primarily through effective product
positioning superiority on one or more
components of the marketing mix relative to
competitors within a specific product- market
Primarily through superior corporate financial
or human resources more corporate RD
better organizational processes or synergies
relative to competitors across all industries
in which the firm operates
Sources of competitive advantage

Sources of synergy

• Shared resources,
• technologies, or
• functional compe-
• tencies across business
• within the firm

• Shared resources
• (including favorable
• customer image) or
• functional competencies
• across product-markets
• within an industry

• Shared marketing
• resources, competencies
• or activities across
• product-market entries

8
GUIDELINES FOR MARKET-ORIENTED MANAGEMENT

• Create customer focus throughout the business
• Listen to the customer
• Define and nurture your distinctive competence.
• Define marketing as market intelligence.
• Target customers precisely
• Manage for profitability, not sales volume.
• Make customer value the guiding star
• Let thee customer define quality
• Measure and manage customer expectations
• Build customer relationships and loyalty
• Define the business as a service business
• Commit to continuous improvement and innovation
• Manage culture along with strategy and structure
• Grow with partners and alliances.
• Destroy marketing bureaucracy.

9
Factors that mediate Marketings Strategic Role

• Competitive conditions may enable a company to
  be successful in the short run
• without being particularly sensitive to
  customer desires.
• Different levels of economic development across
  industries or countries may
• favor different business philosophies.
• Firms can suffer from strategic inertia the
  automatic continuation of strategies
• successful in the past, even though current
  market conditions are changing.

10
DIFFERENCES BETWEEN PRODUCTION-ORIENTED AND
MARKET-ORIENTED ORGANIZATIONS
Business activity or function
Production orientation
Marketing orientation
Company makes what it can sell primary focus on
customers needs and market opportunities. Broad
. Based on perceived benefits provided. Market
research focus on identifying new
opportunities and applying new technology to
satisfy customer needs. Designed for customer
convenience a promotional tool. A customer
service a tool to attract customers. Emphasis
on product benefits and ability to satisfy
customers needs or Solve problems.
Product offering Product line Pricing Researc
h Packaging Credit Promotion
Company sells what it can make primary focus
on functional performance and cost. Narrow. Bas
ed on production and distribution
costs. Technical research, focus on product
improvement and cost cutting in the production
process. Protection for the product minimize
costs. A necessary evil minimize bad debt
losses. Emphasis on product features, quality
and price.
11
CATEGORIES OF E-COMMERCE
Consumer Business-to-Consumer (B2C)
Business Business-to-business (B2B)
Examples Examples

• E-tailers, such as ETrade, Amazon,
• Red Envelope
• Producers direct sales sites, such as Dell,
• American Airlines
• Websites of traditional retailers, such as
  Sears,
• Lands End

• Purchasing sites of ford, Oracle,
• Cisco
• Supply chain networks linking
• producers and distribution channel
• members, such as 3M and Wal-Mart

Business
Consumer-to-Business (C2B) Consumer-to-Consumer
(C2C)
Examples Examples

• Sites that enable consumers to bid
• on unsold airline tickets and other
• goods and services, such as
• priceline

• Auction sites, such as eBay, QXL

Consumer
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External environment
Corporate objective and strategy (chapter 2)
Business level objectives and strategy (Chapter
3)

• Market opportunity analysis
• Environmental and competitor analysis (Chapter
  4)
• Industry dynamics (Chapter 5)
• Marketing information (Chapter 6)
• Customer analysis, segmentation and targeting
• decisions (Chapter 7)
• Positioning decisions (Chapter 8)

• Formulating strategies for specific market
  situations
• Strategies for new market entries (Chapter 9)
• Strategies for growth markets (Chapter 10)
• Strategies for mature and declining markets
  (Chapter 11)
• Strategies for the new economy (Chapter 12)

• Implementation and control
• Implementing business and marketing strategies
  (Chap 13)
• Controlling marketing strategies and programs
  (Chap 14)

13
The Marketing Plan A Blueprint for Action
A marketing plan is a written document detailing
the current situation with respect to
customers, competitors, and the external
environment and providing guidelines for
objectives, marketing actions, and resource
allocations over the planning period for
either an existing or a proposed product or
service.
14
CONTENTS OF A MARKETING PLAN
Contents Presents a short overview of the
issues, objectives, strategy, and actions
incorporated in the plan and their expected
outcomes for quick management
review. Summarizes relevant background
information on the market, competition and the
macroenvironment, and trends therein, including
size and growth rates for the overall market and
key segments. Examines the past performance of
the product and the elements of its marketing
program (e.g., distribution, promotions
etc.,). Identifies the main opportunities and
threats to the product that the plan must deal
with in the coming year, and the relative
strengths and weak- nesses of the product and
business unit that must be taken into account In
facing those issues. Specifies the goals to be
accomplished in terms of sales volume, market
share, and profit.
Section I. Executive Summary II. Current
situation and trends III. Performance
review (for an existing product or service
only) IV. Key issues V. Objectives
15
CONTENTS OF A MARKETING PLAN
contd. 2.
Section
Contents

• Summarizes the overall strategic approach that
  will be used to meet
• the plans objectives.
• This is the most critical section of the annual
  plan for helping to ensure
• effective implementation and coordination of
  activities across
• functional departments. It specifies
• The target market to be pursued
• What specific actions are to be taken with
  respect to each of the 4 Ps.
• Who is responsible for each action
• When the action will be engaged in
• How much will be budgeted for each action.
• Presents the expected financial payoff from the
  plan.
• Discuss how the plans progress will be
  monitored, may present contin-
• gency plans to be used if performance falls
  below expectations or the
• situation changes.
• Describes actions to be taken if specific threats
  or opportunities

• VI. Marketing strategy
• Action plans
• VIII. Projected profit-and-
• loss statement
• Controls
• X. Contingency plans

16
THE NEW MARKETING PLAN

• The target market
• The new product line and company brand
• Advertising and Promotion
• Distribution and Order Fulfillment
• Customer Feedback

17
Corporate Strategy Components and Issues
Strategy component Scope mission and
intend Objectives Development strategy
Key Issues

• What business(es) should the firm be in?
• What customer needs, market segments, and/or
  technologies
• should be focused on?
• What is the firms enduring strategic purpose or
  intent?
• What performance dimensions should the firms
  business units
• and employees focus on?
• What is the target level of performance to be
  achieved on each dimension?
• What is the time frame in which each target
  should be attained?
• How can the firm achieve a desired level of
  growth over time?
• Can the desired growth be attained by expanding
  the firms current
• businesses?
• Will the company have to diversify into new
  businesses or product-
• markets to achieve its future growth
  objectives?
• How should the firms limited financial
  resources be allocated
• across its businesses to produce the highest
  returns?
• Of the alternative strategies that each business
  might pursue, which
• will produce the greatest returns for the
  dollars invested?
• What competencies, knowledge, and customer-based
  intangibles
• (e.g. brand recognition, reputation) might be
  developed and shared

18
CHARACTERISTICS OF EFFECTIVE CORPORATE MISSION
STATEMENTS
Broad Specific
Functional Based on Customer needs
Long-distance transportation for large-volume
producers of low- value, low-density products
Transportation business
Long-haul, coal-carrying railroad
Physical Based on existing products or technology
Railroad business
19
COMMON PERFORMANCE CRITERIAL AND MEASURES THAT
SPECIFY CORPORATE, BUSINESS-UNIT, AND MARKETING
OBJECTIVES
Performance criteria
Possible measure or indexes

• Growth

Sales Unit sales Percent change in sales

• Competitive strength

Market share Brand awareness Brand preference

• Innovativeness

sales from new products Percentage of sales
from product-market entries introduced within
past five years Percentage cost savings from new
processes

• Profitability

profits Profits as percentage of
sales Contribution margin Return on investment
(ROI) Return on net assets (RONA) Return on
equity (ROE)
20
COMMON PERFORMANCE CRITERIAL AND MEASURES THAT
SPECIFY CORPORATE, BUSINESS-UNIT, AND MARKETING
OBJECTIVES contd 2
Performance criteria
Possible measure or indexes

• Utilization of resources

Percent capacity utilization Fixed assets as
percentage of sales

• Contribution to owners

Earnings per share Price/ earnings ratio
Price relative to competitors Product
quality Customer satisfaction Customer
retention Customer loyalty Customer lifetime value

• Contribution to customers

Wage rates, benefits Personnel development,
promotions Employment stability, turnover

• Contribution to employees

• Contribution to society

contributions to charities or community
institutions Growth in employment
21
ALTERNATIVE CORPORATE GROWTH STRATEGIES

• Market penetration strategies
• Increase market share
• Increase product usage
• Increase frequency of use
• Increase quantity used
• New applications

• Product development strategies
• Product improvements
• Product-line extensions
• New products for same market

• Market development strategies
• Expand markets for existing
• products
• Geographic expansion
• Target new segments

• Diversification strategies
• Vertical integration, Forward
• integration, Backward integration
• Diversification into related
• businesses (concentric diversification)
• Diversification into unrelated
• businesses
• (conglomerate diversification)

22
Limitation of the Growth-Share Matrix

• Market growth rate is an inadequate descriptor
  of overall industry attractiveness. Market
  growth is
• not always directly related to profitability or
  cash flow. Some high-growth industries have
  never
• been every profitable because low entry
  barriers and capital intensity have enabled
  supply to grow
• even faster, resulting in intense price
  competition. Also, rapid growth in one year is
  no guarantee
• that growth will continue in the following
  year.
• Relative market share is inadequate as a
  description of overall competitive strength.
  Market share
• is more properly viewed as an outcome of past
  efforts to formulate and implement effective
• business-level and marketing strategies than as
  an indicator of enduring competitive strength.
  If
• the external environment changes, or the SBUs
  managers change their strategy, the businesss
• relative market share can shift dramatically.
• The outcomes of a growth-share analysis are
  highly sensitive to variations in how growth and
  share
• are measured. Defining the relevant industry
  and served market (i.e. the target-market
  segments
• being pursued) also can present problems. For
  example, does Pepsi Cola compete only for a share
• of the cola market, or for a share of the much
  larger market for non-alcoholic beverages, such
  as
• iced tea, bottled water, and fruit juices?

23
Limitations of the growth-share Matrix
contd. 2

• While the matrix specifies appropriate
  investment strategies for each business, it
• provides little guidance on how best to
  implement those strategies. While the
• model suggests that a firm should invest cash
  in its question mark business, for
• instance, it does not consider whether there
  are any potential sources of competitive
• advantage that the business can exploit to
  successfully increase its share. Simply
• providing a business with more money does not
  guarantee that it will be able to
• improve its position within the matrix.
• The model implicitly assumes that all business
  units are independent of one another
• except for the flow of cash. If this assumption
  is inaccurate, the model can suggest
• some inappropriate resource allocation
  decisions. For instance, if other SBUs depend
• on a dog business as a source of supply or if
  they share functional activities, such
• as a common plant or salesforce, with that
  business harvesting the dog might increase
• the costs or reduce the effectiveness of the
  other SBUs.

24
Corporate Branding Strategy When Does a
strong Corporate Brand Make Sense?

• The corporate brand (typically the companys own
  name and logo) might serve as the brand
• name of all or most of the firms products in
  markets around the world, as is the case with
• many high-tech (e.g.Cisco systems, Siemens, IBM,
  Caterpillar) and service (e.g. British
• Airways, Amazon.com, McDonalds, Hilton hotels)
  companies.
• The firm might adopt a dual branding strategy in
  which each offering carries both a corpo-
• rate identifier and an individual product brand.
  Examples include Microsoft software
• products (e.g Microsoft Windows, Microsoft
  word, etc.) and Ford automobiles (Ford
• Taurus, Ford Explorer, etc.)
• Finally, each product offering might be given a
  unique and identity perhaps even
• different brands across different global markets
  while the identity of the source company
• is de-emphasized or hidden. This is the
  strategy pursued by Procter and Gamble and
• many other consumer package goods firms.

25
How Should Strategic Business Units Be Designed?

• A homogeneous set of markets to serve with a
  limited number of related technologies.
• Minimizing diversity across an SBUs
  product-market entries enable the units manager
• to better formulate and implement a coherent
  and internally consistent business strategy.
• A unique set of product-markets, in the sense
  that no other SBU within the firm completes
• for the same customers with similar products.
  Thus, the firm avoids duplication of effort
• and maximizes economies of scale within its
  SBUs.
• Contact over those factors necessary for
  successful performance, such as production, RD
• and engineering, marketing and distribution.
  This does not mean an SBU should not share
• resources, such as a manufacturing plant or a
  salesforce, with one or more other business
• units. But the SBU should determine how its
  share of the joint resource is used to
• effectively carry out its strategy.
• Responsibility for their own profitability.

26
How Should Strategic Business Units Be Designed?
What criteria should managers use to decide how
product-markets should be clustered into a
business unit? The three dimensions that define
the scope and mission of the entire corporation
also define individual SBUs

• Technical compatibility, particularly with
  respect to product technologies
• and operational requirements, such as the use of
  similar production
• facilities and engineering skills.
• Similarly in the customer needs or the product
  benefits sought by
• customers in the target markets.
• Similarly in the personal characteristics or
  behavior patterns of
• customers in the target markets.

27
DEFINITIONS OF MILES AND SNOWS FOUR BUSINESS
STRATEGIES
Prospector

• Operates within a broad product market domain
  that undergoes periodic redefinition.
• Values being a first mover in new product and
  market areas, even if not all of these
• efforts prove to be highly profitable.
• Response rapidly to early signals concerning
  areas of opportunity, and these responses often
• lead to new rounds of competitive actions.
• Competes primarily by stimulating and meeting
  new market opportunities, but may not
• maintain strength over time in all markets it
  enters.

Defender

• Attempts to locate and maintain a secure
  position in relatively stable product or service
  areas.
• Offers relatively limited range of products or
  service compared with competitors.
• Tries to protect its domain by offering lower
  prices, higher quality, or better service than
• competitors.
• Usually not at the forefront of technological/
  new product development in its industry
• trends to ignore industry changes not directly
  related to its area of operation.

28
DEFINITIONS OF MILES AND SNOWS FOUR BUSINESS
STRATEGIES
Analyzer

• An intermediate type makes fewer and slower
  product-market changes than prospectors,
• but is less committed to stability and
  efficiency than defenders.
• Attempts to maintain a stable, limited line of
  products or services, but carefully follows a
• selected set of promising new developments in
  its industry.
• Seldom a first mover, but often a second or
  third entrant in product-markets related to its
• existing market base often with a lower cost
  or higher-quality product or service offering.

Reactor

• Lacks any well-defined competitive strategy.
• Does not have as consistent a product-market
  orientation as its competitors.
• Not as willing to assume the risks of new
  product or market development as its competitors.
• Not as aggressive in marketing established
  products as some competitors.
• Responds primarily when it is forced to by
  environmental pressure.

29
COMBINRF TECHNOLOGY OG BUSINESS-LEVEL COMPETITIVE
STRATEGIES
Heavy emphasis
No emphasis
Reactor
Prospector
Analyzer
Defender
Units with strong core business actively
seeking to expand into related product-
markets 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
Competitive strategy
Units with strong core business actively
seeking to expand into related product-
markets with low-cost offerings
Units primarily concerned with maintaining a
low-cost position in mature markets
Cost leadership
30
HOW DO COMPETITIVE STRATEGIES DIFFER FROM ONE
ANOTHER?
HOW BUSINESS STRATEGIES DIFFER IN SCOPE,
OBJECTIVES, RESOURCE DEPLOYMENTS, AND SYNERGY
Differentiated defender
Prospector
Analyzer
Dimensions
Low cost defender
Mature/stable well-defined domain mature
technology and customer segments
Mixture of defender and prospector strategies

• Scope

Mature/stable well-defined domain mature
technology and customer segments
Broad/dynamic domainstechno- logy and
customer segments not well- established

• Goals and
• objectives
• adaptability
• (new product
• success)

Mixture of defender and prospector strategies
Very Little
Little
Extensive
Little
Effectiveness
Little
Large
Mixture of defender and prospector strategies
(increase in market share)
31
HOW DO COMPETITIVE STRATEGIES DIFFER FROM ONE
ANOTHER? Cont.. 2
HOW BUSINESS STRATEGIES DIFFER IN SCOPE,
OBJECTIVES, RESOURCE DEPLOYMENTS, AND SYNERGY
Differentiated defender
Prospector
Analyzer
Dimensions
Low cost defender
Mixture of defender and prospector strategies
Efficiency (ROI)
High
High
Low
Need cash for pro- duct development (question
marks or stars)
Need cash for product development but less so
than do prospectors

• Resource
• deployment

Generate excess cash (cash cows)
Generate excess cash (cash cows)
Need to seek operating synergies to achieve
efficiencies
Need to seek operating synergies to achieve
efficiencies

• Synergy

Danger in sharing operating facilities and
programs- better to share technology/
marketing skills
Danger in sharing operating facilities and
programs better to share technology/
marketing skills
32
Differences is Goals and Objectives

• Effectiveness. The success of a businesss
  products and programs relative to those
• of its competitors in the market.
  Effectiveness is commonly measured by such items
• as sales growth relative to competitors or
  changes in market share.
• Efficiency. The outcomes of a businesss
  programs relative to the resources used in
• implementing them. Common measures of
  efficiency are profitability as a percent of
• sales and return on investment.
• Adaptability The businesss success in
  responding over time to changing conditions
• and opportunities in the environment.
  Adaptability can be measured in a variety of
• ways, but the most common ones are the number of
  successful new products
• introduced relative to those competitors or the
  percentage of sales accounted for by
• products introduced within the last five years.

33
ENVIRONMENTAL FACTORS FAVORABLE TO DIFFERENT
BUSINESS STRATEGIES
External factors
Prospector
Analyzer
Differentiated defender
Low cost defender
Industry in introductory or early growth
stage of life cycle many potential customer
segments as yet unidentified and/or
undeveloped.
Industry in late growth or early maturity
stage of life cycle one or more product
offerings currently tar- geted at major
customer segments, but some potential segments
may still be undeveloped.
Industry in maturity or decline stage or life
cycle current offerings targeted at all
major segments sales primarily due to repeat
purchases/ replacement demand.
Industry in maturity or decline stage or life
cycle current offerings targeted at all
major segments sales primarily due to repeat
purchases/ replacement demand.
Industry And market
34
ENVIRONMENTAL FACTORS FAVORABLE TO DIFFERENT
BUSINESS STRATEGIES
Cont.. 2.
External factors
Prospector
Analyzer
Differentiated defender
Low cost defender
Basic technology fully developed and stable
few major modifications or improvements
likely.
Basic technology well developed but still
evolving product modi- fications and
improvements- as well as emer- gence of new
competing technologies still likely.
Newly emerging technology many appli- cations
as yet undeveloped.
Basic technology fully developed and stable
few major modifications or improvements
likely.
Technology
35
ENVIRONMENTAL FACTORS FAVORABLE TO DIFFERENT
BUSINESS STRATEGIES
Cont.. 3.
External factors
Prospector
Analyzer
Differentiated defender
Low cost defender
Small to moderate number of well- established
com- petitors industry structure stable,
though acquisitions and consolidation possible
maturity of markets means relative shares of
competitors tend to be reasonably stable over
time.
Small to moderate number of well- established
com- petitors industry structure stable,
though acquisitions and consolidation possible
maturity of markets means relative shares of
competitors tend to be reasonably stable over
time.
Few established competitors industry
structure still emerging single compe-
titor holds commanding share of major market
segments.
Large number of competitors, but future shake-
out likely industry structure still evolving
one or more competitors hold large shares in
major segments but continuing growth may
allow rapid changes in relative shares.
Competition
36
ENVIRONMENTAL FACTORS FAVORABLE TO DIFFERENT
BUSINESS STRATEGIES
Cont.. 4.
External factors
Prospector
Analyzer
Differentiated defender
Low cost defender
SBU (or parent) has strong RD, product
engineering, and marketing research and
marketing capabilities.
SBU (or parent) has good RD, product enginee-
ring, and marketing research capa- bilities,
but not as strong as some competitors has
either low-cost position or strong sales,
marketing, distribution, or service
capabilities in one or more segments.
SBU has no outstanding strength in RD or
product engineering costs are higher than at
least some competi- tors SBUs out- standing
strengths are in process engineering and
quality control and/or in marketing, sales,
distribution, or customer services.
SBU (or parent) has superior sources of supply
and/or process engineering and production
capabilities that enable it to be low- cost
producer RD, product engineering, marketing,
sales or service capabilities may not be as
strong as some competitors.
Business relative strengths
SBU (or parent)
37
STEPS IN CONSTRUCTING A MARKET- ATTRACTIVENESS/
COMPETITIVE- POSITION MATRIX FOR EVALUATING
POTENTIAL TARGET MARKETS.

• Choose criteria to measure market
• attractiveness and competitive position

• Weigh market attractiveness and competitive
• position factors to reflect their relative
  importance

• Assess the current position of each potential
• target market on each factor

• Project the future position of each market based
• on expected environmental, customer,
• and competitive trends.

• Evaluate implications of possible future
• changes for business strategies and
• resources requirements.

38
FACTORS UNDERLYING MARKET ATTRACTIVENESS AND
COMPETITIVE POSITION
Market attractiveness factors
Competitive-position factors
Customer needs and behavior
Opportunity for competitive advantage

• Are there unmet or underserved needs we
• can satisfy?

• Can we differentiate?
• Can we perform against critical success factors?
• Stage of competing products in product life
  cycle is the
• timing right?

Market or market segment size and growth rate
Firm and competitor capabilities and resources

• Market potential in units, dollars, number of
• prospective customers
• Growth rate in units, dollars, number of
• prospective customers
• Might the target segment constitute a platform
• for later expansion into related segments in
• the market as a whole?

• Management strength and depth
• Financial and functional resources marketing
  distribution
• manufacturing, RD, etc.
• Brand image
• Relative market share

Macro trends Are they favorable, on balance?
Attractiveness of industry in which we would
compete

• Threat of new entrants
• Threat of substitutes
• Buyer power
• Supplier power
• Competitive rivalry
• Industry capacity
• Driving forces are they favorable, on balance?

• Demographic
• Sociocultural
• Economic
• Political/ legal
• Technological
• Physical

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MARKET ATTRACTIVENESS/ COMPETITIVE POSITION MATRIX
Market Attractiveness
High (8-10)

Moderate (4 7)
Low (0-3)
Low (0-3)
Moderate (4- 7)
High (8-10)
Companys Competitive Position

• Market attractiveness and competitive position
  of distance runners segment in 1964

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GENERIC COMPETITIVE STRATEGIES
Competitive Advantage
Lower Cost
Differentiation
Broad target
Cost leadership Strategy
Differentiation Strategy
Competitive Scope
Focus Strategy
Focus Strategy (Cost- Based)
Narrow target
(Differentiation- Based)
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COMPARISON OF PHYSICAL AND PERCEPTUAL POSITIONING
ANALYSES
Perceptual positioning
Physical positioning

• Consumer orientation
• Perceptual attributes
• Perceptual measures
• Need for marketing research
• Perceptual brand positions and positioning
• intensities
• Limited number of dimensions
• Represents impact of product specs and
• communication
• RD implications needs to be interpreted

• Technical orientation
• Physical characteristics
• Objective measures
• Data readily available
• Physical brand properties
• Large number of dimensions
• Represents impact of product specs and price
• Direct RD implications

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PREPARING THE FOUNDATION FOR MARKETING
STRATEGIES THE POSITIONING PROCESS
Step 1 Identify a Relevant Set of Competitive
Products
Step 2 Identify Determinant Attributes

• Features are often used in physical product
  positioning and hence, with industrial products.
  An
• example of its use with a consumer good is
  Jenn-Airs claim. This is the quietest dish
  washer
• made in America. Amazon.com has a unique
  I-click ordering system.
• Benefits, like feature, are directly related to
  a product. Examples here include Volvos
  emphasis
• on safety and durability and Norelcos
  promising a close and comfortable shave.
• Usage includes end use (If youve got in the
  kitchen, it probably goes with pork a
  versatility
• claim) demographic (just because kids will be
  kids doesnt mean you cant have knock-down,
• gorgeous floors Congoleum) psychographic or
  behavioral (Ellesse positioning itself as
• producing a fashionable upscale active-wear
  line) and popularity (Hertz as the biggest
  rental
• car company in the world).
• Parentage includes who makes it (bottled by a
  French vintner At Fidelity, youre not just
  buying
• a fund, a stock, or a bond youre buying a
  better way to manage it) and prior products
  (Buying
• a car is like getting married. Its a good
  idea to know the family first. followed by a
  picture
• of the ancestors of the Mercedes- Benz S class
  model).

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Step 2 Identify Determinant Attributes cont..
2.

• Manufacturing process is often the subject of a
  firms positioning efforts. An example is
• Jaeger- LeCoultres statement about its
  watches We know its perfect, but we take
  another
• 1,000 hrs just to be sure.
• Ingredients as a positioning concept is
  illustrated by some clothing manufacturers saying
  
• their sports shirts are made only of pure
  cotton.
• Endorsements are of two types those by experts
  (Discover why over 5,000 American doctors
• and medical professionals prescribe this
  Swedish mattress Tempor-Pedic) and those via
• emulation as with Michael Jordan using Nike
  shoes.
• Comparison with a competitors product is common
  (Tests prove Pedigree is more nutritious
• than IAMS, costs less than IAMS, and tastes
  great, too- Pedigree Mealtime).
• Proenvironment positioning seeks to portary a
  company as a good citizen (Because we recycle
• over 100 million plastic bottles a year,
  landfills can be filled with other things, like
  land, for
• instance Phillips Petroleum).
• Product class as when freeze-dried coffee was
  introduced as a new and different product type

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Step 3 Collect Data about Customers
Perceptions for Products in the Competitive Set
Step 4 Analyze the Current Positions of
Products in the Competitive Set Building a
Positioning Grid Marketing Opportunities to Gain
a Distinct Position Constraints Imposed by an
Intense Position Limitations of Product
Positioning Analysis
Step 5 Determine Customers Most Preferred
Combination of Attributes Step 6 Consider Fit
of Possible Positions with Customer Needs
and Segment Attractiveness Step 7 Write
Positioning Statement or Value Proposition to
Guide Development of Marketing Strategy
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POSITIONING STATEMENT AND VALUE PROPOSITION FOR
VOLVO AUTOMOBILES IN THE UNITED STATES
Positioning statement
Value proposition
For upscale American families, Volvo is the
automobile that offers the utmost in safety
and durability.

• Target market Upscale American
• families
• Benefits offered Safety, durability
• Price range 20 premium over
• similar cars

46
HOW NEW IS NEW?