Download Feb. 5

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