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The Big Picture Situation/SWOT Analysis Strategic Planning •Company •Consumers •Competitors •Conditions • PEST Growth & Competitive Strategies Functional Integration Marketing R&D Production HR Finance Performance Assessment Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap Strategic Planning Forces you to make choices on what you will & won’t do What makes a decision strategic? Multi- functional in scope & consequences Requires choice & trade-offs, integration & alignment Growth Strategies Present Products Present Markets New Markets New Products Market Penetration- Product Development Increase share among existing customers. Create new products for present markets Market Development Diversification Attract new customers to existing products new products… new markets… new alliances • Porter “What is Strategy” “If you don’t know where you are going any road will get you there.” Lewis Carroll, -- Chapter 6, Alice in Wonderland M A RKETING M G T. Strategic Thinking- the ten big ideas S I M U LA T I ON 6. Resource allocation models – • Porter: strategic choices are set of basic generic strategies • (low cost, differentiation, market focus) What Advantage can we create & sustain against our competitors? & w/in which Market Segments should we compete? You can Formulate Strategy based on what Competitive advantage you focus on: Cost: Design, produce, market more efficiently than competitors Differentiation: Deliver unique & superior value in terms of product quality, features, service Strategic Choice: Cost Leadership Overriding goal = increased efficiency & lower costs relative to rivals Minimize costs (Marketing, R&D & Production..) Advantages – A cost leader able to charge lower prices – Even at same price- greater profitability Strategic Choice: Differentiation Create a product that customers perceive as distinct/unique & offer superior quality/service Advantage Customers expect & willing to pay premium prices Strategic Choice: Differentiation Will have significant expenditures in R&D & production…. want/need to make high quality/highly desirable product Significant expenditures in marketing… develop greater brand equity —thru increased awareness of product quality Greater Equity = Greater loyalty = Less price sensitivity You can also Formulate Strategy by: Competitive Scope/ MARKET FOCUS Number & Nature of segments compete w/in- & You can also Formulate Strategy by-Riding a Products Life Cycle Adjust Marketing Mix according to natural Drift of products w/in segments- Broad Cost Niche Cost low -Tech Focus Cost – PLC Broad Niche Differentiation Differentiation Hi -Tech Focus Differentiation - PLC Lo+Trad+Hi match customers ideal criteria for positioning, age, and reliability. Put them all together &… 1. 2. 3. Cost/Quality Differentiation Number & nature of segments compete w/in Riding the Product Life Cycle Number & nature of segments compete w/in #2 Compete Broad Market on: Cost #1 Product Quality Niche Mrkt Ride Product LifeCycle #3 Evolving Mrkt Competitive Strategy Matrix Competitive Strategy Matrix Broad Mrkt Compete on: Cost Product Quality Niche Mrkt Evolving Mrkt Overall Cost Cost LeaderLo -Tech Leader Cost Leader - Differentiator- Differentiator Differentiator- Focus Hi- End Focus PLC Lo+Trad+Hi PLC Lo+Trad+Hi Select one of the Six Basic Strategies rd 3 Level of Strategy Corporate Level Business unit Level Functional Strategy Information systems Research & development Finance Manufacturing Marketing Human resources INTERNAL STRATEGIC ALIGNMENT Achieved when : All Decisions made by & within all functional areas are in sync w/ one another, As well as with the overall strategic direction of the firm FINANCE PRODUCTION MARKETING M A RKETING M G T. Marketing S I M U LA T I ON R&D HR Production Finance Examples of Strategic Alignment When all decisions made by & within all functional areas are in sync w/ one another, As well as w/ your overall strategic direction -- you achieve… Distinctive Distinctive Competencies Competencies Distinct competencies needed to achieve selected competitive strategy Distinctive Competencies Competitive Advantage* *Achieved when you sustain profits above Industry Average Areas in which you can develop “Distinct Competencies” MARKETING: Awareness & Accessibility R&D: Product innovation & design PRODUCTION: Plant Automation & utilization Human Resources: Worker Expertise & Training Achieving Competitive Advantage thru Cost-Focused Strategy Allows for good profit margins on sales while keeping prices low especially in price-sensitive segments… Functional Alignment Automation - pursued early & aggressively Production Capacity improvements unlikely (may run overtime instead) Spend moderately on promotion & sales Marketing R&D Spend minimally on R&D Differentiator Seeks to create maximum awareness & brand equity. Wants to be well known as a maker of high quality/highly desirable products Production Functional Alignment Less likely to invest in increased automation or production capacity Marketing Spend heavy on advertising & sales to create maximum awareness & accessibility Prices tend to be higher R&D High R&D spending - keep products fresh