Approach to Strategy Development EXTERNAL ANALYSIS Customer Analysis Competitor Analysis Market Analysis Environment Analysis INTERNAL ANALYSIS Performance Analysis Determinants of Strategic Options Opportunities Threats Trends Uncertainties Strengths Weaknesses Problems Constraints STRATEGY IDENTIFICATION & SELECTION

Internal Analysis

Financial Performance Sales & Market Share Profitability ROA = profits / assets Shareholder Value: ROA > Cost of Capital

Beyond Financials Brand Loyalty – 3 out of 6 purchase occasions – Causes for High Loyalty / Low Loyalty – Delight drivers for the loyalists – Exit interview the disloyal customers – Monitor size of loyal customers – Compare it with key competitors

Beyond Financials Brand Associations – What do they think about the brand? – Perception: Innovative? Expensive? – Strength of each association – Understanding through projectives in FGDs

Beyond Financials Product Quality / Service Quality – Customer Expectation – Competitor Delivery – Key Performance Indicators – Perceived Quality (Product / Service)

Beyond Financials New Product Activity – Does R&D deliver on concepts? – Is the process of innovation well managed? – Track record of past launches – Average time-to-market

Beyond Financials Employee Capability / Performance – People with required capability – Can the human resources deliver on plans? – Are resources well managed? – What is their attitude?

Beyond Financials Relative Cost OUR COMPONENT IS… INFERIORSUPERIOR MORE EXPENSIVE LESS EXPENSIVE De-emphasise Upgrade Emphasise Leave alone Raise Price Cost Reduction Change Design Change Process

Strength-Weakness Analysis Profiling the Company in the areas of – Marketing – Finance – Manufacturing – R&D – Human Resources Ref. Marketing Management by Ramaswamy & Namakumari, 3 rd Edn. (page , Chart 10.4)

Example: Bajaj Motorcycles Strengths – Strong brand presence / growth in sales – Nationwide distribution / service network – Strong financial support of corporate – Strong imagery of Pulsar Weaknesses – Product Mix: Overdependence on Pulsar – No presence in fuel efficient / cruiser categories – Weak R&D: Last 4-5 launches a failure

Determinants of Strategic Options Past & Current Strategies [YAMAHA] Consumer Perception [TATA & INDICA] Organisational Capabilities – Marketing [HUL] – Finance [RELIANCE] – Human Resources [GOOGLE] – R&D [INTEL] – Manufacturing [TATA]

From Analysis to Strategy EXTERNAL ANALYSIS Customer Analysis Competitor Analysis Market Analysis Environment Analysis INTERNAL ANALYSIS Performance Analysis Determinants of Strategic Options Opportunities Threats Trends Uncertainties Strengths Weaknesses Problems Constraints STRATEGY IDENTIFICATION & SELECTION

MARKET NEEDS / ATTRACTIVENESS COMPETITORS STRENGTHS / WEAKNESSES ORGANISATIONAL STRENGTHS / WEAKNESSES 1.Strategic Investment 2.Value Proposition 3.Creating the Value Proposition 4.Communicating the Value Proposition

Strategic Investment

For Market Attractiveness Size of market Market rate of growth Customer Needs / Satisfaction Levels Competition: Quantity, Position Profitability Sensitivity to economic trends Environmental impact

For Competitive Position Market share Management profile R & D Quality of products and services Customer Loyalty Margins Distribution Marketing Flexibility