Download Strategic Alternatives

Strategic Alternatives
Review
• Components of a situation analysis
• SWOT Analysis
• Environmental Scan
• Identify a firms competitive advantage (Build one v. Mimic)
• Cost
• Experience Curves, Efficient Labor, No Frills, Govt. Subsidies, Product Design, Reengineering,
Production Innovation, New Methods of Service Delivery
• Product/Service Competitive Advantage
• Niche
Strategic Alternatives
Strategic Alternative
Goal of Alternative
Market Development
Increase Customers
Market Penetration
Increase Market Share
Product Development
Increase Products
Diversification
New Products + New Markets
Mission Statement
• Mission Statement is a statement of the firms business based on a careful
analysis of benefits sought by present and potential customers and an
analysis of existing and anticipated environmental conditions.
• Should focus on the market being served rather than the goods being
offered
• Too Narrow –
• Too Broad –
• Just Right –
Market Myopia (Defined in terms of products not benefits)
No Direction
Focus on Market & Benefits
Strategic Marketing
• Strategic Business Unit (SBU)
• A subgroup of a single business or a collection of related businesses within the larger
organization
• An SBU will have its own identity
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Distinct mission statement
A specific target market
Control over its resources
Its own competition
Marketing Plans separate from other SBU’s within a single corporation
• Goal is to find highest level of desired growth & balance it with acceptable
levels of risk.
SBU’s & Portfolio Matrix
• To determine the future cash contributions & cash requirements expected for
each SBU, managers can use the Boston Consulting Groups portfolio matrix
• Portfolio Matrix will classify each group by its present or forecasted growth
and market share.
• Assumption is that market share & profitability are linked
• Use relative market share formula to measure market share
• Ration between the company’s share & the share of the largest competitor
• Example: Firm A has 50% market share & its competitor has a 5% market share; ratio 10-1
• Example: Firm A has 10% market share & the largest competitor has 20%; ratio .5 – 1
Hypothetical Portfolio Matrix
• Star: A market leader & growing fast
• Usually have large profits
• Need a lot of cash to finance growth
• Best Marketing tactic is to protect existing market share by
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Reinvesting earnings in product improvement
Better distribution
More promotion
Production efficiency
• Management must strive to capture most of the new users as they enter the
market
Hypothetical Portfolio Matrix
• Cash Cows: An SBU that usually generates more cash than it needs to
maintain its market share
• Low growth market, but product has a dominate market share
• Examples: Personal computers & laptops are cash cows
• Strategy of a cash cow is to maintain market dominance by being the price leader
and making technological improvements in the product.
• Managers resist pressure to extend the basic line unless they can dramatically
increase demand
• Managers should allocate excess cash to the product categories where growth
prospects are the greatest
Cash Cow Example
• Clorex owns the following brands
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Clorex Bleach
Kingsford Charcoal
Glad brand of products
Fresh Step, Scoop Away, & other pet litters
Black Flag pest control
Brian water filteration systems
K.C. Masterpiece Barbeque Sauce
• Clorex’s cash cow has been its Clorex Bleach line so they invest the most in
its product growth
• Clorex 2 Bleach & Scented Bleach
Portfolio Matrix
• Problem Child is a question mark in the industry
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Shows rapid growth but poor profit margins
Low market share in a high growth industry
Need a great deal of cash
Without cash support they will become “dogs”
Strategy is to invest heavily to gain better market share, acquire competitors
to get the necessary market share, or drop the SBU
• Sometimes a problem child can be repositioned into stars
Hypothetical Portfolio Matrix
• Dogs have low growth potential and a small market share
• Most dogs eventually leave the market place
• Examples:
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Computer Mainframe Industry
Jack In The Box Shrimp dinners
Campbell’s Red Kettle soups
Stouffer’s cheese-filled snacks & Rumbles Granola Nuggets
• A dog will either harvest or divest
rategy
Definition
Portfolio Matrix
Build
Occurs when SBU has the potential to be a star (most likely a problem child).
• Once
a company
classifies
its products
cash
cow, star,
problem
Company
will sacrifice
short-term
profitsas
& ause
financial
resources
to achieve
child, or dog they will allocate future
resources for each
goal.
Hold
Company has a very successful cash cow, a key goal would surely be to hold or preserve market share so that the
Four strategies a organization
company
canuses
take advantage of the very positive cash flow
arvest
Divest
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Appropriate for all SBU’s except those classified as stars. The basic goal is to increase the short-term cash return
without too much concern for long-term effect. Most beneficial when money comes from a cash cow in an effort to
support longrun prospects
Getting rid of SBU’s with low shares of low-growth markets.
Problem Child and Dogs are most suitable for this option.
Basically eliminating products with poor market share in slow moving markets.
Target Market
• Target Market is a segmented group that shares one or more
characteristics
• Similar product needs
• Conduct a Market Opportunity Analysis (MOA)
• Describes and estimates the size and sales potential of market segments that
are of interest to the firm
• After conducting MOA these options exist
• Trying to appeal to the entire market with one marketing mix
• Concentrating on one marketing segment
• Appealing to multiple market segments using multiple mixes
The Marketing Mix
• Marketing Mix = 4 P’s
• Product
• Physical Unit, package, warranty, after-sale service, brand name, company image, value,
etc..
• Place
• Distribution factor that allows the product to be available when & where the consumer
wants them. Includes storing & transporting items.
• Promotion
• Advertising, PR, Sales promotions, & personal selling
• Pricing
• What the customer must give up in order to acquire the product
• Most flexible of the 4 P’s
Evaluation & Control
• Implementation means turning marketing plan into action assignments
• Evaluation entails gauging the extent to which marketing objectives have been
achieved during a specified time period.
• Reasons Marketing Objectives Fail
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Unrealistic Marketing Objectives
Inappropriate Marketing Strategies
Poor Implementation
Changes in the environment
• Control allows you to see if objectives are being met. Common to conduct a
marketing audit to accomplish this.