“Business has only two basic functions - marketing and innovation.” - Peter Drucker

What is Strategy?

“Strategy is a framework which guides those choices that determine the nature and direction of an organization.” -Benjamin B. Tregoe & John W. Zimmerman “Top Management Strategy”

“Strategy is the creation of a unique and valuable position, involving a different set of activities.” -Michael Porter “What is Strategy?” Harvard Business Review

“In terms of the three key players (competitors, customers, company) strategy is defined as the way in which a corporation endeavors to differentiate itself positively from its competitors, using its relative corporate strengths to better satisfy customer needs.” -Kenichi Ohmae “The Mind of the Strategist”

A Business Strategy Where to Compete The product-market investment decision How to Compete ValueAssets &Function area proposition competencies strategies and programs Figure 1.1 A Business Strategy

The Product-Market Investment Decision Invest to grow (or enter a product market) Invest only to maintain the existing position Milk the business by minimizing investment Recover as many of the assets as possible by liquidating or divesting the business

The Customer Value Proposition Perceived benefit to customer: Functional Emotional Social Self-Expressive

Customer Value Proposition Examples A good value Excellence on an important product or service attribute The best overall quality Product line breadth Innovative offerings A shared passion for an activity or a product Global connections and prestige

Assets and Competencies Strategic Competency: What a business unit does exceptionally well Has strategic importance to the business Based on knowledge or a process Strategic Asset: A resource

Functional Strategies and Programs Manufacturing strategy Distribution strategy Brand-building strategy Communication strategy Information technology strategy Global strategy Segmentation strategy Quality program Customer relationship program

THE EIGHT QUESTIONS OF MARKETING STRATEGY We can use a strategic framework to address the feasibility of any strategic initiative: Company Strengths and Weaknesses Customers’ Needs What are we good at? Can we do this? What do customers want? Will they value this? Corporate Objectives Market Characteristics Where do we want to go? Will this get us there? What is the market like? Will the market support this? Not only do we get a Go/No Go answer, we identify leverage points.

THE ELEMENTS OF MARKETING STRATEGY AT THE CORPORATE LEVEL Strategy as a marketing process  Let’s not do anything that will not be valued by the marketplace  Let’s not attempt to do anything for which we do not have the skills (or cannot get the skills) Company Strengths Customer Needs

MARKETING STRATEGY IS THE PROCESS OF MATCHING OUR STRENGTHS TO THE MARKET’S NEEDS Market Needs Market Characteristics Company Strengths and Weaknesses Company Objectives and Imperatives Elements of Market Attractiveness It also involves us choosing the markets which best fit our company objectives Critical Success Factors

STRENGTHS AND WEAKNESSES What are the things we do well? What are our weak points? How should we use this analysis? Strengths _____________________________ Weaknesses _____________________________

TYPICAL STRENGTHS AND WEAKNESSES OF MAJOR CORPORATIONS StrengthsWeaknesses Financial RobustnessDiscourage Innovation Strong Customer BaseLack of Understanding of Market Opportunities Good Distribution and Competitive Relationship Market Powerwith Channels Strong Brand EquityAd Hoc Product Extension Strategy Good Technical CapabilityPoor Quality Control Well-Trained StaffPoor Industrial Relations Highly-Empowered SeniorLack of Strategic Direction and Vision Management

COMPANY CRITERIA FOR EVALUATING MARKET OPPORTUNITIES To evaluate market opportunities we have to answer the question “What features do we value in a market?” (i.e., What do we want from a market?) For our organization, what features would be considered desirable for a new or existing market opportunity? This could be at a product or account, an SBU or a segment.

EXAMPLES OF DESIRABLE MARKET CHARACTERISTICS –Large market size / Segment size –High Growth –Low Seasonality; Stability; Cyclicality –Low price sensitivity –Low strength of trade; Good supplier relations –Highly differentiated; Aids innovation; Enhances reputation –Long life cycles –Interaction with core businesses; Synergy; Fits profile –Strong category growth; Low cannibalization –High contribution / Profit; Cash flow –High barriers to entry; –Adds to market coverage

Customer Needs Customers What do we have to do well to be a good company from a customers’ perspective? What do customers need and what are the critical success factors in meeting those needs? Competition

CRITICAL SUCCESS FACTORS TO MEETING NEEDS Typical Elements of Competitive Capability Market Related –Customer Base and Reach –Product Quality (Perceived and Actual) –Market Image –Degree of Innovation –Control of Channel –Market and Competitor Intelligence Internal Skills –Marketing and Other Staff –Production Capability –Cost Efficiency –Technology –Financial Resources

MARKET CHARACTERISTICS What are some of the ways, qualitative and quantitative that we would use to describe the markets in which we compete?

ELEMENTS OF MARKET CHARACTERISTICS  Customers – Size and Nature of Market – Segmentation & Product Life Cycle – Price Sensitivity  Competitors – Market Structure (Market Shares) – Level of Competitive Rivalry – Sources of Competitive Advantage  Channels of Distribution – Concentration – Market Power – Strategic Alliances – Sophistication  Climate – Regulatory – Environmental – Technology – Related Industries