Where are we?

You are finding answers re: How the market is segmented & the relevant criteria that influence consumers use in their purchasing decisions The nature & magnitude of the competition Existing & emerging Economic & Technological trends that will impact demand, pricing, product design & positioning Consumers Competitors Conditions

NEXT STEP Company Consumers Competitors Conditions Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment NEXT STEP Company Consumers Competitors Conditions PEST Growth & Competitive Strategies Finance HR Production R&D Marketing Functional Integration Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

How good are your goods… 1st Big Q How good are your goods…

Next Big Q How good are you in making your goods…

Key Financial Q’s: 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?

But 1st Company Consumers Competitors Conditions Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment But 1st Company Consumers Competitors Conditions PEST Growth & Competitive Strategies Finance HR Production R&D Marketing Functional Integration Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

3 Levels of Strategic MGT Corporate-Level : In what business should we compete? Corporation Business-Level : How should we compete? Sensors Unit Cons.Elec. Unit Nano-Tech Unit Functional-Level : How do we coordinate? Finance HR / R&D Production Marketing

Level 1-Corporate Strategy In which businesses do we compete? Corporation Consumer Security Services Sensors Unit Nano-Tech Unit ?

Decide what business(es) want to be in … what Products to compete with… What Markets to compete in… Growth Strategy

Growth Strategies Present Products New Products Market Penetration- Increase share among existing customers. Product Development Create new products for present markets Present Markets Market Development Attract new customers to existing products New Markets Diversification 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 Cons.Elec. Unit Nano-Tech Unit Functional-Level : How do we coordinate? Finance HR / R&D Production Marketing

Business Unit Strategy: How do we Compete? STRATEGIC BUSINESS UNIT COMPETITOR A B C MARKET Focus? Quality? Price?

What Advantage can we create & sustain against our competitors? & w/in which Market Segments should we compete?

Strategic Thinking- the ten big ideas 6. Resource allocation models – Porter: strategic choices are set of basic generic strategies (low cost, differentiation, market focus)

“If you don’t know where you are going 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

Design, produce, market more efficiently than competitors 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-

Competitive Strategy Matrix Number & nature of segments compete w/in Ride Product LifeCycle #2 #3 Compete on: Broad Market Niche Mrkt Evolving Mrkt Cost Competitive Strategy Matrix #1 Product Quality

Competitive Strategy Matrix Broad Mrkt Niche Mrkt Evolving Mrkt Compete on: Overall Cost Leader Cost Leader- Lo -Tech Focus Cost Leader - PLC Lo+Trad+Hi Differentiator- Differentiator Hi- End Focus Differentiator- PLC Cost Product Quality

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

3rd Level of Strategy Functional Strategy Marketing Corporate Level Business unit Level Functional Strategy Information systems Research & development Manufacturing Finance Marketing Human resources

Situation/SWOT Analysis Performance Assessment The Big Picture Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment Company Consumers Competitors Conditions PEST Marketing Growth & Competitive Strategies Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap R&D Production HR Finance

INTERNAL STRATEGIC ALIGNMENT FINANCE 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 PRODUCTION MARKETING

Examples of Strategic Alignment NOTES:

Distinctive Competencies Distinctive Competencies 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 Competencies Distinctive Competencies

Distinct competencies needed to achieve selected competitive strategy Advantage* Distinctive Competencies *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 Production Automation - pursued early & aggressively Capacity improvements unlikely (may run overtime instead) Marketing Spend moderately on promotion & sales 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 Functional Alignment Production 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

How good are your goods… Now Evaluate How good are your goods…

Strategic Thinking- the ten big ideas 4. Portfolio theory- GE-(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/Market- Share Matrix Competitive Strategy

G.E Strategic Planning Model Business Strength Strong Average Weak High Low Industry Attractiveness Business Strength Index Industry Attractiveness Index * Market Share * Market size * Price Competitiveness * Market Growth * Product Quality * Industry Profit Margin * Customer Knowledge * Amount of Competition * Sales Force and Effectiveness * Seasonality * Geographic Advantage * Cost Structure

Boston Consulting Group’s Growth-Share Matrix STARS High PROBLEM CHILD Product-Market Growth (%) CASH COWS DOGS Low 10x 4x 2x 1.5x 1x .5x .2x .1x High Relative Market Share Low

R U Meeting Consumers’ Expectations?

Evaluate Your Company’s Marketing Situation & Develop Your Brand Plans

You’re will be responsible for: As MARKETING MANAGER You’re will be responsible for: Planning, implementing & controlling your marketing strategy Target & Position Product Place Promotion Price

Marketing Managers become one-w/ Relationships betw 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

As R&D Mgr Responsible for: Product Position Age & Quality Performance SIZE Responsible for: Product Position Age & Quality New product development High High Eight < < < Low Low One Quality Age Prdt Line

Drift Establish product positioning to meet customer demand Build quality & reliability (MTBF) into products Ensure age of product meets customer demands Create new products Drift