Lecture 8

Market sensing and learning strategy Strategic market choices and targets Customer value strategy and positioning Strategic relationships and networks Strategic thinking and thinking strategically Strategic transformation and strategy implementation

 Customer relationships  Competitor and contingent relationships  Collaborator relationships  Co-worker relationships  The network of key relationships

 Do we know what we want the customer relationship to be?  Do we have that relationship or can we get it?  Can we deliver that relationship?  Do we understand the link between the strength of the customer relationship and the attractiveness of that customer’s business?

Customer relationship Customer attractiveness StrongWeak High Low Prime target customers - achieve synergy as we retain the “best” customers (we hope) Targets for conversion - are they attractive enough to be worth chasing? Sticky customers - they want us, we don’t want them, so what do we do? Mutual antipathy - they don’t want us, we don’t want them, end of discussion

 Some fundamental issues:  every organization has competitors  every company says “we know who our competitors are” and frequently get it wrong  most think that “competitors are in our industry” – see back to the Competitive Box to dispel that myth

 Really understanding the competition  conventional analysis develops a competitor response profile  the psychology of competition may be just as significant – e.g., how ugly are the competitors around here?

Competitor’s goals What are they trying to achieve in this market? Competitor’s strategy What is this company’s current strategic position? Competitor’s strategic assumptions - How does management look at the market? Competitor’s capabilities - What are their strengths and weaknesses Competitor’s response profile Is this competitor satisfied with its current position? What are the likely moves they may make? Where is this competitor most vulnerable? What is this competitor sensitive about, what is most likely to provoke a competitive reaction? Adapted from: Michael E. Porter, Competitive Strategy, New York: Free Press, 1980.

Competitive reaction to our move? Competitive aggression YesNo High Low Fight to the death Show disdain Weak counter- attack Ignore us

 Where is the competition coming from in this market?  can we predict the strategic moves of our competitors and maintain our competitive advantage?  do we recognise new potential competitors and new technologies?  does our value proposition give us a specific positioning thatb plays to our strengths and avoids head-on competition?

 Critical contingents:  shapers of opinion  regulators  recommenders  gatekeepers  suppliers  supply chain partners

 From outsourcing to alliances and networks  outsourcing  partnership  alliance  vertical integration

Short-term Long-termPermanent Joint venture Vertical integration Arm’s length Outsourcing Partnership Alliance Ownership Closeness of relationship Low High Nature of the relationship Purchase of goods and services from outside the company, possibly over the long term Short-term focus, but coordinated activities between partner companies Longer-term focus with integration of activities between partner companies “Permanent” arrangement with partner companies highly integrated Shared ownership in an operation with a collaborator company Full ownership of the activities or operations

 Advantages in collaboration:  cost efficiency  customer service  marketing advantage  strategic advantage  profit stability and growth

 Network organizations  a new organization form: the hollow or networked organization

Calyx & Corolla Customers Federal Express Flower growers 1. Customer orders from catalogue: phone, fax, mail, 2. C&C notifies order to Federal Express and the chosen flower grower by computer 3. Federal Express collects flowers 4. Federal Express delivers flowers

 Collaborations that crash  synergy or “ygrenys”  Managing partnerships and collaborations  corporate compatibility  management style and techniques  mutuality  symmetry

 Partnership-based strategy should consider time and cost in:  establishing the partnership  monitoring the partnership  strengthening the partnership  getting out of the partnership

 Can and will employees/managers in the company/alliance deliver the promise of the value proposition to the customer?  do not assume everyone will think our strategy is great and buy-in  be realistic about capabilities  Link to internal marketing strategy

 Relationships with customers, competitors, contingents, collaborators and co-workers are connected  Challenge is to test market choices and value propositions against the network’s capabilities

Competitors and contingents Virgin antagonism continues; low cost operators attacking through courts; European regulator investigates; no help from government Collaborators USAir alliance crashed; American Air alliance stalled; travel agents are hostile; Customers Customer satisfaction levels falling; premium passengers switching brands; higher service image weakened Co-workers Climate surveys go down; new branding is resisted; industrial action takes place and more is threatened BA Strategy

 The danger is developing and pursuing attractive strategies that rely on relationship network capabilities which do not exist