Offensive Strategies Mktg 485 May 26, 2004

Schedule Wednesday (5-26) –Chapter 12 (Offensive Strategies) –Systemsoft Case Wednesday (6-2) – Chapter 13 (Defensive Strategies) – Intel Case – Course review Monday (6-7) – Final Exam (8:30)

Portfolio Analysis Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Portfolio Analysis Build Selectively (Flanker) Invest to Build (Challenger) Protect (Leader) Limited Expansion or Harvest (low risk expansion) Selectivity & Manage for Earnings (seek & protect profitable segments) Build Selectively (Protect against competition & seek profitability) DivestManage for Earnings (harvest?) Protect & Refocus (Manage for current earnings) Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Strategies ProtectInvest to hold a competitive position GrowInvest to grow a competitive advantage FocusSelectively narrow market focus to profitable segments

Strategies HarvestAdjust prices and marketing expenses to gradually exit a market EntryInvest to enter an attractive market DivestQuick divestment from a market when there are no short-term profits to be made

Portfolio Management Grow versus Harvest/Divest General Motors –Chevrolet, Pontiac, Oldsmobile, Cadillac, Buick, GMC, Saturn, Hummer, Saab, Opel Harvest Oldsmobile Grow Cadillac

Portfolio Analysis and Strategic Market Plan Business Performance – what will we end up with? Market Attractiveness – what do we need to succeed? Competitive Advantage – what resources do we have?

Snack Foods Market $ 32 billion / year Potato chips, pretzels, corn chips, popcorn, crackers, snack nuts, tortilla chips, party mix, meat snacks, etc. Major brands –Frito-Lay (Pepsi), Pringles (P&G), Nabisco, Keebler Trends –Healthier snacks –Sales in mass merchandise stores versus grocery stores –Fat free

Market Attractiveness 1.Market Forces 2.Competitive Intensity 3.Market Access

Market Attractiveness - 1 Market Forces Attractive- ness Market Size Growth Rate Buying Power Customer Loyalty

Market Attractiveness - 2 Competitive Intensity Attractive- ness Competitors Price Rivalry Ease of Entry Substitutes

Market Attractiveness - 3 Market Access Attractive- ness Customer Familiarity Channel Access Sales Requirements Company Fit

Offensive vs. Defensive Strategies Offensive? Defensive?

Portfolio Analysis Offense ( grow ) Offense ( grow ) Defensive ( protect ) Defensive ( protect ) Offense ( grow ) Defensive ( protect/harvest ) Offense ( grow ) Defensive ( protect/focus ) Defensive ( divest or harvest ) Market Attractiveness Competitive Advantage

Portfolio Analysis Offense (grow) ? Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Portfolio Analysis Defense Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Life Cycle Effects Offensive/ Defensive Defensive Offensive Emerging Market Rapid Growth Early Growth Late Growth Maturing Market Mature Market Declining Market Offensive/ Defensive

HP versus Dell

Offensive Strategies? Products Prices Distribution Promotion

Market Penetration Grow Market Share Grow Customer Purchases Enter New Market Segments Grow Market Demand

New Market Entry Related New Markets Diversified New Market Entry Enter New Emerging Market Develop New Market Potential

Amazon’s Efforts Attract More customers –Free Shipping on orders over $25 –Result – 3 rd quarter revenue increased 33% Lower Fulfillment Costs –Now 12% of revenue vs. 15% last year –How? Better inventory control at 6 warehouses –Reduce deliveries Free shipping has slower delivery dates Provides time to consolidate more orders Work with Postal Service By delivering books from warehouse to USPS depot get reduced rates

Expand Distribution Expand Offerings –New Clothing Store with items from The Gap and Nordstrom Amazon Marketplace –Provide services for other merchants –Fulfillment for Bertelsmann, Borders

Wall Street Likes Amazon Stock Performance –$12.2 in Jan 2002 –$21.3 in Jan 2003 –$54 end of Nov 2003 Market Capitalization –$21.6 billion for Amazon –$2.2 billion for Barnes & Noble ($5. 6 billion in sales & $132 million profit)

Why Wall Street Likes Amazon Tremendous Sales Growth –$3.1 billion (2001) –$3.9 billion (2002) –$5.0 billion est. (2003) Improving Net Income –(-$1.4 billion) in 2001 –(-$567 million) in 2002 –(-$149 million) in 2003

BMW’s Offensive Strategy Product Improvements Product Line Stretching Controlled production Financing