Strategy Selection

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Strategy Selection

• Chapter 9

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Topics Chapter 9

• Product/Market Strategy
• SBU Strategy
• Strategy Evaluation

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Product/Market Strategy Procedure

• 1. Start with the present. Predict momentum of
  the business over the planning period.
• 2. Forecast environment.
• 3. Modify prediction of momentum in light of the
  forecast of the environment.

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Product/Market Strategy Procedure

• 4. Stop if predicted performance satisfies
  objectives, otherwise continue procedure.
• 5. Measure strengths and weaknesses of firm.

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Product/Market Strategy Procedure

• 6. Evaluate difference between yours and
  competitive marketing strategies.
• 7. Conceive more effective marketing strategies.

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Product/Market Strategy Procedure

• 8. Evaluate risks, competitive response,
  potential payout of new marketing strategy.
• 9. Stop if new strategy appears satisfactory.

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Product/Market Strategy Procedure

• 10. Otherwise broaden definition of present
  business and repeat steps 7, 8, 9. Look at other
  products that can be supplied to market.

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Product/Market Strategy Procedure

• 11. Continue step 10 until
• knowledge of new area becomes thin
• cost of studying new area becomes too expensive
• prospects of finding a competitive opportunity
  become remote.

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Product/Market Strategy Procedure

• 12. Lower the objectives, if necessary.

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Product/Market Strategy Procedure

• Three tasks
• Information analysis
• Strategy formulation
• Implementation

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Product/Market Strategy Procedure

• Procedure speeds up strategy development, analyze
  information systematically, and change strategy.

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Product/Market Strategy Procedure

• Resolve conflict between objectives and
  capabilities.
• Analytical process rather than intuitive.

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Momentum

• The companys state of affairs into the future,
  assuming the environment and the strategy remain
  the same.

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Predict Momentum

• First step in developing product/market plans.

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Measuring the Momentum Techniques

• Forecasting
• Modeling
• Simulation

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Gap Analysis

• The Gap is the difference between the expected
  state of the firm and the accomplishing the
  desired objectives over the planning period.

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Filling The Gap

• Issue assessment
• Common issues
• Identification of key variables
• Strategy selection

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Issue Assessment

• Evaluate competitive standing in view of present
  and expected conditions.

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Issue Assessment Factors

• Product/market segment maturity
• Market growth avenues
• Cyclical trends in industry

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Issue Assessment Factors

• Competitive factors change
• Inflation impact
• New regulation

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Issues Competitive Position

• Maturity of product line
• Cost position
• Performance
• Marketing capability

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Issues Competitive Position

• Customers criticism
• Distribution channels
• Technology lead
• New product introduction

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Common Issues Profit Economic Analysis

• How product costs are physically generated
• Where economic leverage lies

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Common Issues Profit Economic Analysis

• Contribution of products to fixed costs and
  profits
• Profit sensitivity to variations in price,
  volume, costs

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Common Issues Market Segmentation Analysis

• Alternative ways of segmenting market
• Finding segments not cultivated
• Project determinants of demand

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Common Issues Market Segmentation Analysis

• Pricing patterns
• Relative market shares
• Determinants of profitability

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Common Issues Competitor Profiling

• Product features performance
• Pricing
• Costs
• Profitability
• Service

• Facilities
• Efficiency
• Technology
• Product development
• Basic strategy

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Common Issues Competitor Profiling

• Sources of Information
• Sales literature
• Industry association
• Shared customers
• Former employees

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Identify Key Variables

• Perform factors exceptionally well to win
• Avoid factors leading to failure

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Identify Key Variables

• Competitive strengths
• Risk of product obsolescence
• Methods to increase sales
• Techniques to increase market share

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Identify Key Variables

• Cost reduction
• Points of profit leverage
• Key recurring decisions in functional areas

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Identification Of Key Variables

• Impact on profits of a decision
• Competitive advantage

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Strategy Selection

• Examine key variables
• Refer to current status of product/market
• Define alternative strategies

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Strategy Selection Alternative Strategies

• Evaluate
• Profit payoff
• Investment costs
• Feasibility
• Risk
• Choose preferred strategy

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Core Marketing Strategies

• Operational excellence
• Product leadership
• Customer Intimacy

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Core Marketing Strategies

• Combines one or more areas of the marketing mix.
• Supporting strategies may be used.

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Core Marketing Strategies

• Reflects the strengths of the firm.
• Formulated around the critical variables for each
  segment.

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Core Marketing Strategies

• Searching for new ways to compete
• Operational excellence
• Product leadership
• Customer Intimacy

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Core Marketing Strategies Operational Excellence
Strategic Direction Distribution No-hassle service
Corporate Culture Predictable One-size-fits-all
Organization Central authority Finite empowerment
Systems Standard operating procedure
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Core Marketing Strategies Product Leadership
Strategic Direction Ideas to Products Skillful
marketing
Corporate Culture Experimental Out of box thinking
Organization Ad hoc, Organic Flexible, Changes
Systems Rewards innovation New product success
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Core Marketing Strategies Customer Intimacy
Corporate Culture Flexible Have it your way
Strategic Direction Provide solutions Improve
customers business
Systems Measures cost of service Customer loyalty
Organization Empowerment Close to customer
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Successful Strategies Firm Characteristics

• Informed opportunism
• Direction and empowerment
• Friendly fact, congenial controls
• Different mirror

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Successful Strategies Firm Characteristics

• Teamwork, trust, politics, power
• Stability in motion
• Attitudes and attention
• Causes and commitment

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Industry Attractiveness Life Cycle Stage

• Embryonic
• Growth
• Maturity
• Aging

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Life Cycle Stage Determining Factors

• Growth rate
• Industry potential
• Product line
• Number of Competitors

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Life Cycle Stage Determining Factors

• Market share stability
• Purchasing patterns
• Ease of entry (not due to capital considerations)
• Technology

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Embryonic Stage

• Rapid sales growth
• Changing technology
• Fragmented and shifting Market shares

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Embryonic Stage

• High investments
• Not profitable
• Gaining position in developing market

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Growth Stage

• Rapid growth in sales
• Customers, shares, technology gaining recognition
• Easy entry
• Capital borrowers
• Low to good earnings

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Maturity Stage

• Low volatility of market shares
• Competitors, technology, customers established
• Growth close to GNP
• High earnings
• Produce cash

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Aging Stage

• Falling demand, limited growth
• Shrinking number of competitors
• Little product line variety
• Little investment

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Strategic Competitive Positions

• Dominant
• Strong
• Favorable

• Tenable
• Weak
• Nonviable

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Dominant

• Controls strategy and/or behavior of competitors
• Has wide range of strategic options
• Is independent of competitors actions

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Strong

• Take independent stance or action
• Acting does not endanger long-term position
• Can maintain long-term position in face of
  competitors actions

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Favorable

• Strengths that are exploitable
• Higher than average ability to improve position
• If in a niche, holds commanding position
  relatively secure from attack

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Tenable

• Sufficient potential and strengths to warrant
  continuation in business
• Unlikely to improve position
• Marginally profitable
• In a niche, is profitable, but vulnerable

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Weak

• Unsatisfactory performance
• Strengths that may lead to improvement
• Has characteristics of stronger position, but
  suffers from past mistakes or current weaknesses
• Short-term--must change

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Nonviable

• Currently unsatisfactory performance
• Few strengths that may lead to improvement
• May take years to die

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Strategic Thrusts

• Competitive Position and Stages of Industry
  Maturity Grid suggests strategies associated with
  each position

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Strategy Evaluation

• Suitability
• Validity
• Feasibility
• Internal consistency

• Vulnerability
• Workability
• Timing

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Strategy Evaluation

• Suitability Is there a sustainable competitive
  advantage?
• Validity Are assumptions realistic?
• Feasibility Does firm have the skills,
  resources, and commitments?

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Strategy Evaluation

• Internal consistency Does strategy hang
  together?
• Vulnerability What are the risks and
  contingencies?

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Strategy Evaluation

• Workability Can we retain our flexibility?
• Timing What is the appropriate time horizon?