1. Strategy Models G Shared Experience Models: PIMS G Portfolio Models

2. Strategy 2001 – 2 Strategy Process Three elements of strategy process— G Market opportunities/ Business strength analyses G Strategic marketing analyses G Strategy generation and evaluation

3. Strategy 2001 – 3 A Marketing Oriented Approach to Strategy Formulation and Evaluation b.Analysis of Business Strengths & Weaknesses a.Analysis of Market & Environmental Opportunities and Threats c. Segment by Positioning Analysis d. Opportunities/Strengths of Each of the Segments/Positionings e. Synergy Analysis f. Functional Requirement Analysis g. Portfolio Analysis j. Planning the Implementation & Control Programs i. Objectives & Strategy Evaluation—Including the Marketing Program h. Objective & Strategy Generation— Including the Marketing Program I. Market Opportunities— Business Strength Analysis II. The Added Strategic Marketing Dimension III. Objectives & Strategy Generation & Evaluation Process

4. Strategy 2001 – 4 The Shared Experience Approach—PIMS G The PIMS (profit impact of marketing strategy) project began in 1960 at the General Electric Company as an intra- firm analysis of the relative profitability of its businesses. G Concept: Pooled experiences from a diversity of successful and unsuccessful businesses will provide useful insights and guidance about the determinants of business profitability. G “Business” refers to a strategic business unit, which is an operating unit selling a distinct set of products to an identifiable group of customers in competition with a well defined set of competitors. G By mid 1980s (when data collection ended) the database of 100 data items per business included about 3,000 businesses from 450 participating firms.

5. Strategy 2001 – 5 Relative Quality, Market Share and Profitability—PIMS Superior 67 33 Inferior Small 13% 28% Large Relative Quality (percentile) Market Share ROI (%) 37 29 26 20 18 16 10

6. Strategy 2001 – 6 Some PIMS Principles G Some market characteristics associated with high profitability: u A growing market u Early life cycle u High inflation u Few suppliers u Small purchase levels u Low unionization u High exports/low imports G Some strategic factors associated with high profitability: u High market share u Low relative costs u High perceived quality u Low capital intensity u Intermediate level of vertical integration

7. Strategy 2001 – 7 A PIMS LIM Report This BusinessLosersWinners (%) (%) (%) Actual ROI18.05.926.2 Cash flow/investment–3.0–1.34.7 Total R&D/sales6.24.82.8 Total marketing/sales1.29.111.4 Relative % new products0.03.7–2.6 Fixed-capital intensity44.057.033.1

8. Strategy 2001 – 8 McKinsey/GE Approach G Two key strategic dimensions: 1.Industry attractiveness 2.Business strength G Decompose dimensions into key drivers u Evaluate SBUs by driver G Use “map” to drive strategy

9. Strategy 2001 – 9 Steps in McKinsey/GE Approach G Determine components of Strength and Attractiveness G Weight dimensions G Evaluate SBUs on each dimension G Multiply weights times ratings and sum. G Plot SBUs on Map, where size of circle reflects size of business opportunity

10. Strategy 2001 – 10 The McKinsey/GE Business- Assessment Array Medium Selective Growth Selectivity Harvest Industry Attractiveness High Investment & Growth Selective Growth Selectivity Low Selectivity Harvest Low Medium High Business Strengths

11. Strategy 2001 – 11 McKinsey/GE and Country Entry for Ford Tractors Industry (Country) Attractiveness Business Strength Increasing Attractiveness High Low Argentina Kenya Pakistan Brazil Spain Australia New Zealand

12. Strategy 2001 – 12 Application to Portfolio Analysis Exercise (pp 118-120) G What do you suggest to Antworth? G Comment on uses and limitations of models like GE and PIMS (or other benchmarking models). G What other Strategy tools might be helpful to you?