Where are we?
You are finding answers re:
How the market is segmented & the
Consumers
Competitors
relevant criteria that influence
consumers use in their purchasing
decisions
The nature & magnitude of the
competition
Conditions
Existing & emerging Economic &
Technological trends that will impact
demand, pricing, product design &
positioning
Situation/SWOT
Analysis
Strategic
Planning
Functional
Integration
Performance
Assessment
NEXT STEP
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
st
1
Big Q
How good
are your
goods…
Next Big Q
How good
are you in
making
your
goods…
Key Financial Q’s:
1.
2.
3.
4.
5.
6.
7.
8.
Are You Making Enough Profit?
Liquidity? Enough Money on hand to run/grow your co.
Leverage? ideally proportioned betw. Debt & Equity?
How effectively are you utilizing your assets? A/T
R U providing your investors an Adequate Level of Return?
How close are you to Bankruptcy?
How’s those Bond Ratings?
Do you have Adequate Levels of Investment in your
Company's Plant, People & Processes?
Situation/SWOT
Analysis
Strategic
Planning
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Functional
Integration
Marketing
Performance
Assessment
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
3 Levels of Strategic MGT
Corporate-Level : In what business should we compete?
Corporation
Business-Level : How should we compete?
Sensors Unit
Nano-Tech Unit
Cons.Elec. Unit
Functional-Level : How do we coordinate?
Finance
HR / R&D
Production
Marketing
Level 1-Corporate Strategy
In which businesses do we compete?
Sensors Unit
Corporation
Nano-Tech Unit
STRATEGIC
STRATEGIC
BUSINESS
BUSINESS
UNIT #1
#1
UNIT
COMPETITOR
COMPETITOR
B
B
STRATEGIC
BUSINESS
UNIT #3
STRATEGIC
BUSINESS
UNIT #2
MARKET
COMPETITOR
COMPETITOR
A
A
Consumer
Security Services
COMPETITOR
COMPETITOR
C
C
COMPETITOR
D
COMPETITOR
E
?
MARKET
MARKET
COMPETITOR
F
COMPETITOR
G
COMPETITOR
H
COMPETITOR
I
Decide what
business(es)
want to be in …
what Products to
compete with…
What Markets to
compete in…
Growth Strategy
Growth Strategies
Present
Products
Present
Markets
New
Markets
New
Products
Market
Penetration-
Product
Development
Increase share
among existing
customers.
Create new
products for
present markets
Market
Development
Diversification
Attract new
customers
to existing
products
new products…
new markets…
new alliances
Next Level of Strategic MGT
Corporate-Level : In what business should we compete?
Corporation
Business-Level : How should we compete?
Sensors Unit
Nano-Tech Unit
Cons.Elec. Unit
Functional-Level : How do we coordinate?
Finance
HR / R&D
Production
Marketing
Business Unit Strategy: How do we Compete?
Focus?
Quality?
Price?
STRATEGIC
BUSINESS
UNIT
MARKET
COMPETITOR
A
COMPETITOR
B
COMPETITOR
C
What Advantage
can we create &
sustain against
our competitors?
& w/in which
Market Segments
should we compete?
M A RKETING
M G T.
Strategic Thinking- the ten big ideas
S I M U LA T I ON
6. Resource allocation
models –
• Porter: strategic choices are
set of basic generic strategies
• (low cost, differentiation,
market focus)
•
Porter “What is Strategy”
“If you don’t know
where you are
going
any road will get
you there.”
Lewis Carroll,
-- Chapter 6, Alice in Wonderland
You can Formulate Strategy based on
what Competitive advantage you
focus on:
Cost:
Design, produce,
market more
efficiently than
competitors
Differentiation:
Deliver unique &
superior value in
terms of product
quality, features,
service
You can also Formulate Strategy by:
Competitive Scope/ MARKET FOCUS
Number & Nature of segments compete w/in-
& You can also Formulate Strategy
by-Riding a Products Life Cycle

Adjust
Marketing Mix
according to
natural Drift of
products w/in
segments-
Number & nature of
segments compete
w/in #2
Compete Broad Market
on:
Cost
#1
Product
Quality
Niche Mrkt
Ride Product
LifeCycle
#3
Evolving Mrkt
Competitive Strategy
Matrix
Competitive Strategy Matrix
Broad Mrkt
Compete
on:
Cost
Product
Quality
Niche Mrkt
Evolving Mrkt
Overall Cost Cost LeaderLo -Tech
Leader
Cost Leader -
Differentiator- Differentiator
Differentiator-
Focus
Hi- End Focus
PLC
Lo+Trad+Hi
PLC
Lo+Trad+Hi
Strategic Choice: Cost Leadership
Overriding goal = increased
efficiency & lower costs relative
to rivals
 Minimize costs (Marketing, R&D &

Production..)

Advantages
– A cost leader able to charge
lower prices
– Even at same price- greater
profitability
Strategic Choice: Differentiation
Create a product that
customers perceive as
distinct/unique & offer
superior quality/service
Advantage
Customers expect &
willing to pay
premium prices
Strategic Choice: Differentiation

Will have significant
expenditures in R&D &
production…. want/need to
make high quality/highly
desirable product

Significant expenditures in
marketing… develop greater
brand equity —thru
increased awareness of
product quality
Greater Equity =
Greater loyalty =
Less price sensitivity
rd
3
Level of Strategy
Corporate Level
Business unit Level
Functional Strategy
Information
systems
Research &
development
Finance
Manufacturing
Marketing
Human
resources
The Big Picture
Situation/SWOT
Analysis
Strategic
Planning
•Company
•Consumers
•Competitors
•Conditions
• PEST
Functional
Integration
Performance
Assessment
Marketing
Growth
&
Competitive
Strategies
R&D
Production
HR
Finance
 Profits
 Mrkt Share
 ROA
 ROS
 ROE
 Asset T/O
 Stock
 Mrkt Cap
INTERNAL STRATEGIC
ALIGNMENT
Achieved when :
All Decisions made by &
within all functional
areas are in sync w/
one another,
As well as with the
overall strategic
direction of the firm
FINANCE
PRODUCTION
MARKETING
Examples of
Strategic Alignment
When all decisions made by &
within all functional areas are
in sync w/ one another,
As well as w/ your overall strategic
direction -- you achieve…
Distinctive
Distinctive
Competencies
Competencies
Distinct competencies needed to
achieve selected competitive
strategy
Distinctive
Competencies
Competitive
Advantage*
*Achieved when you sustain
profits above Industry
Average
Areas in which you can develop
“Distinct Competencies”




MARKETING: Awareness &
Accessibility
R&D: Product innovation & design
PRODUCTION: Plant Automation &
utilization
Human Resources: Worker Expertise
& Training
Achieving Competitive Advantage thru
Cost-Focused Strategy

Allows for good profit margins
on sales while keeping prices
low especially in price-sensitive
segments…
Functional Alignment
Automation - pursued early &
aggressively
Production Capacity improvements unlikely (may
run overtime instead)
Spend moderately on promotion & sales
Marketing
R&D
Spend minimally on R&D
Differentiator


Seeks to create maximum awareness & brand
equity.
Wants to be well known as a maker of high
quality/highly desirable products
Production
Functional Alignment
Less likely to invest in increased automation or
production capacity
Marketing
Spend heavy on advertising & sales to create
maximum awareness & accessibility
Prices tend to be higher
R&D
High R&D spending - keep products fresh
Select one of the
Six
Basic Strategies
Now Evaluate
How good
are your
goods…
Strategic Thinking- the ten big ideas
4. Portfolio theoryGE-(three-by-three matrix, using
business strength & market
attractiveness as variables).
The Boston Consulting Group
(BCG) introduced its two-by-two matrix(invest in the stars, divest the dogs, milk the
cows, and solve the question marks)
Portfolio Analysis
Which Brands should
receive more/ less/ no
investment-Based on:




Product Position/
Potential
Profitability/ Margins
Market-Growth/MarketShare Matrix
Competitive Strategy
G.E Strategic Planning Model
Business Strength
Strong
Average
Weak
High
Industry
Attractiveness
Low
Business Strength Index
Industry Attractiveness Index
* Market Share
* Price Competitiveness
* Product Quality
* Customer Knowledge
* Sales Force and Effectiveness
* Geographic Advantage
* Market size
* Market Growth
* Industry Profit Margin
* Amount of Competition
* Seasonality
* Cost Structure
Boston Consulting Group’s
Growth-Share Matrix
STARS
Product-Market
Growth (%)
High
Low
PROBLEM
CHILD
CASH COWS
10x
4x
High
DOGS
2x 1.5x 1x
Relative
Market Share
.5x
Low
.2x .1x
R U Meeting Consumers’ Expectations?
Evaluate Your Company’s
Marketing Situation & Develop
Your Brand Plans
M A N A G E M E N T
As MARKETING MANAGER
S IM U L A T I O N
You’re will be responsible for:
Planning, implementing & controlling
your marketing strategy
Product
Place
Target
&
Position
Price
Promotion
Marketing Managers
become one-w/
Relationships betw
M A N A G E M E N T
S IM U L A T I O N
• Price & demand
• Price & margin
• Promotion budget &
awareness
• Sales budget &
accessibility
• A/R policy & demand
•Marketing also
selects media
vehicles &
message weights
• AND
determines
composition of
sales/distribution
staff ..and
allocation of
their efforts by
segment & Brand
M A N A G E M E N T
As R&D
Mgr
S IM U L A T I O N
A
SIZE
B
Performance
Responsible for:
Product Position
Age & Quality
New product
development
High
High
Eight
<
<
<
Low
Quality
Low
Age
One
Prdt Line

Establish product positioning to meet customer demand
M A RKETING
M G T.

S I M U LA T I ON


Build quality & reliability (MTBF)
into products
Create new products
Ensure age of product meets customer demands
Drift