Strategy
Strategic Planning Process
Session 2
Jan 21, 2010 Salma Rahman
Strategy
 Strategy means making clear-cut choices about how
to compete. – Jack Welch
 A strategy is a commitment to unde...
Strategy
A company’s strategy is all about HOW…
 How to grow the business, how it will build a loyal
clientele and outcom...
Strategy – „hows of the strategy‟
Sustainable competitive advantage
 A company achieves SCA when an attractive
number of ...
Strategy – „hows of the strategy‟
Low cost leadership
 e.g. Wal-Mart, Southwest Airlines
Differentiation
 e.g. Harley-Da...
What is Strategic Planning
Managing Investment Portfolio of businesses
Analysis of each business and establishing fit
A ga...
Marketing Productivity chain
Company View Point Level Who cares?
We do stuff Marketing actions Customers
Customers do stuf...
1. What is Strategy?
Strategy Performance
Competitive
Advantage
Shareholder
Value
Firm
• Strategy: goal and set of policie...
Strategic Planning Process
Environmental
Conditions &
Trends
Opportunities
and
Threats
External Analysis
Inventory of
Dist...
Basic Concept
Strategy
Formulation
Set of processes involved in
creating or determining the
strategies of org. Focus is on...
assess
environmental
factors
assess
organizational
factors
Identify
Current
Mission
and
Strategic
Goals
Conduct
Competitiv...
Environmental Analysis
Marketing Environment
 Macroenvironment
 PEST ANALYSIS
 Political
 Legislation regulating business
 Growth of public ...
Marketing Environment
 Macroenvironment
 PEST ANALYSIS
 Social
 Changing age structure of a population
 Changing fami...
External Environment
Porter‟s five forces model
To evaluate the attractiveness of your
industry Power of
Buyers
Power of
S...
External Environment
Porter‟s five forces model
To evaluate the attractiveness of your
industry
STEPS
 Outline your key b...
Porter‟s five forces model
Power of Buyers
Buyers are the customers who demand and purchase
your products and services.
ST...
Porter‟s five forces model
Power of Buyers
Determinants Defining Question Assess the power of buyers
Circle one of the fol...
Porter‟s five forces model
Power of Buyers
Determinants Defining Question Assess the power of buyers
Circle one of the fol...
Porter‟s five forces model
Power of Suppliers
Suppliers provide labor, materials, financial capital, or
equipment to your ...
Porter‟s five forces model
Power of Suppliers
Determinants Defining Question Assess the power of buyers
Circle one of the ...
Porter‟s five forces model
Power of Suppliers
Determinants Defining Question Assess the power of buyers
Circle one of the ...
Porter‟s five forces model
Power of Rivals
Rivals are firms that make similar products to yours and
are in direct competit...
Porter‟s five forces model
Power of Rivals
Determinants Defining Question Assess the power of buyers
Circle one of the fol...
Porter‟s five forces model
Power of Rivals
Determinants Defining Question Assess the power of buyers
Circle one of the fol...
Porter‟s five forces model
Power of Rivals
Determinants Defining Question Assess the power of buyers
Circle one of the fol...
Porter‟s five forces model
Power of New Entrants
New entrants in an industry are today‟s new players
who may become tomorr...
Porter‟s five forces model
Power of New Entrants
Determinants Defining Question Assess the power of
buyers
Circle one of t...
Porter‟s five forces model
Power of New Entrants
Determinants Defining Question Assess the power of buyers
Circle one of t...
Porter‟s five forces model
Power of New Entrants
Determinants Defining Question Assess the power of buyers
Circle one of t...
Porter‟s five forces model
Power of Substitutes
A substitute is a different product or service from the
one you make that ...
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  • The reason that there are a variety of answers to the question: What is marketing? could be that marketing is a philosophy as well as a tactical functional activity .
  • MF Strategic Marketing strategy n strategic planning process

    1. 1. Strategy Strategic Planning Process Session 2 Jan 21, 2010 Salma Rahman
    2. 2. Strategy  Strategy means making clear-cut choices about how to compete. – Jack Welch  A strategy is a commitment to undertake one set of actions rather than another – Sharon Oster
    3. 3. Strategy A company’s strategy is all about HOW…  How to grow the business, how it will build a loyal clientele and outcompete rivals, how each functional piece of the business will be operated, how performance will be boosted.
    4. 4. Strategy – „hows of the strategy‟ Sustainable competitive advantage  A company achieves SCA when an attractive number of buyers prefer its products or services over offerings of competitors and when the basis for this preference is durable.
    5. 5. Strategy – „hows of the strategy‟ Low cost leadership  e.g. Wal-Mart, Southwest Airlines Differentiation  e.g. Harley-Davidson, Rolex, Amazon Focusing on a narrow market niche  e.g. Starbucks, e-bay Developing expertise and resource strengths  FedEx – next day delivery, Walt Disney – theme park management and family entertainment
    6. 6. What is Strategic Planning Managing Investment Portfolio of businesses Analysis of each business and establishing fit A game plan or Business Model AIMED AT Good business performance
    7. 7. Marketing Productivity chain Company View Point Level Who cares? We do stuff Marketing actions Customers Customers do stuff Customers Reaction Advertising and Promotion specialis Stuff Happens Product Market Impact Product Managers and CMO Accounting happens Financial outcomes CMO and CFO* Wealth is affected Firms Value CFO and the CEO* *Chief Marketing, financial and executive officer Adapted from : Bolton, R.N. (2004), “Making Marketing Matter” JM Vol 68, pp 73-75
    8. 8. 1. What is Strategy? Strategy Performance Competitive Advantage Shareholder Value Firm • Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace • Competitive Advantage: ability to transform inputs into goods and services at a maximum profit on a sustained basis, better than competitors
    9. 9. Strategic Planning Process Environmental Conditions & Trends Opportunities and Threats External Analysis Inventory of Distinctive Competencies Strengths and Weaknesses Internal Analysis Identify & Evaluate Options Choose Strategy Strategy Formulation Strategy Implementation
    10. 10. Basic Concept Strategy Formulation Set of processes involved in creating or determining the strategies of org. Focus is on contents of strategy. Strategy Implementation Methods by which strategies are operationalized or executed with in org. Focus is on processes which achieve strategies.
    11. 11. assess environmental factors assess organizational factors Identify Current Mission and Strategic Goals Conduct Competitive Analysis: * Strengths * Weaknesses * Opportunities * Threats Develop Specific Strategies: * Corporate * Business * Functional Carry Out Strategic Plans Maintain Strategic Control STRATEGY IMPLEMENTATION STRATEGY FORMULATION TM 7-2
    12. 12. Environmental Analysis
    13. 13. Marketing Environment  Macroenvironment  PEST ANALYSIS  Political  Legislation regulating business  Growth of public interest groups  Increased emphasis on ethics and socially responsible actions  Economical  Income distribution and changes in purchasing power  Changing consumer spending patterns
    14. 14. Marketing Environment  Macroenvironment  PEST ANALYSIS  Social  Changing age structure of a population  Changing family structure  Rising number of educated people  Increasing diversity  Technological  Fast pace of technological change  High R&D budgets  Concentration on minor improvements  Increased regulation
    15. 15. External Environment Porter‟s five forces model To evaluate the attractiveness of your industry Power of Buyers Power of Substitutes Power of new entrants Power of Sellers Power of Rivals
    16. 16. External Environment Porter‟s five forces model To evaluate the attractiveness of your industry STEPS  Outline your key buyers, suppliers, rivals, new entrants and substitutes.  Determine the strength of the threat that each group poses to your company‟s potential profitability.
    17. 17. Porter‟s five forces model Power of Buyers Buyers are the customers who demand and purchase your products and services. STEPS  Make a list of your buyers. Name the major players and describe them by type (e.g. P&G – consumer goods manufacturer)  Assess the strength of buyer power by rating the features given in table 1.
    18. 18. Porter‟s five forces model Power of Buyers Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Concentration Are the buyers fragmented or highly concentrated (i.e. do a few monopolize the market)? If they are few and concentrated, then buyer bargaining power is typically high 1 2 3 4 5 NA Product cost vs. total purchases Does your product buyer‟s purchase represent a significant fraction of the buyer‟s costs? If so, buyer bargaining power is typically high. 1 2 3 4 5 NA Product Differentiation Is the buyer‟s product or service a commodity? Is branding critical for success? Is there an actual vs. a perceived difference? If the products are standard or undifferentiated, buyers typically have high bargaining power. 1 2 3 4 5 NA Switching Costs Are switching costs high or low? If buyers face few switching costs, their bargaining power is typically high. 1 2 3 4 5 NA Profits Do buyers earn low profits? If so, they are typically more likely to bargain hard. 1 2 3 4 5 NA
    19. 19. Porter‟s five forces model Power of Buyers Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Backward integration Can they make what you make themselves? Is there a threat of backward integration? If so, the threat is typically high. 1 2 3 4 5 NA Impact on Quality/ Performance Is the product you offer important to the quality of the buyer‟s products or services? If not, buyer power is typically high. 1 2 3 4 5 NA Buyer Information Does the buyer have complete information on the product he may purchase? If so, buyer power is typically high. 1 2 3 4 5 NA (Harvard Business School, 2005)
    20. 20. Porter‟s five forces model Power of Suppliers Suppliers provide labor, materials, financial capital, or equipment to your firm. STEPS  Make a list of your suppliers. Name the major players and describe them by type.  Assess the strength of supplier power by rating the features given in table 2.
    21. 21. Porter‟s five forces model Power of Suppliers Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Concentration Are your suppliers fragmented or highly concentrated (i.e. do a few monopolize the market)? If an industry is dominated by a few companies, the suppliers are typically high powerful. 1 2 3 4 5 NA Presence of substitute inputs Are there any substitutes for your suppliers‟ products? If not, suppliers are typically powerful. 1 2 3 4 5 NA Importance relative to customer Is your industry an important customer of the supplier group? If not, suppliers are typically powerful. 1 2 3 4 5 NA Impact on Quality/ performance Is your supplier‟s product essential to the quality or performance of your business? If so, suppliers are typically powerful. 1 2 3 4 5 NA Product Differentiation Is the supplier‟s product or service a commodity? Is branding critical for success? Is there an actual vs. a perceived difference? Suppliers with differentiated products typically have more bargaining power than suppliers selling commodities. 1 2 3 4 5 NA
    22. 22. Porter‟s five forces model Power of Suppliers Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Switching costs How costly is it for you to switch from the supplier‟s product? If switching costs are high, suppliers are typically more powerful. 1 2 3 4 5 NA Forward Integration Can the supplier produce the product you make? Is there a threat of forward integration? If so, suppliers are typically powerful. 1 2 3 4 5 NA (Harvard Business School, 2005)
    23. 23. Porter‟s five forces model Power of Rivals Rivals are firms that make similar products to yours and are in direct competition with you. STEPS  Make a list of your rivals. Name the major players and describe them by type.  Assess the threat of rivalry by rating the features given in table 3.
    24. 24. Porter‟s five forces model Power of Rivals Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Industry Growth How slowly or quickly is the industry growing? If it is a slow growth industry, there is likely to be a more intense fight among rivals for market share. 1 2 3 4 5 NA Fixed costs Does your business have high fixed costs? If so, rivals will typically be tempted to cut prices to ensure sales, thus posing a significant threat. 1 2 3 4 5 NA Intermittent Overcapacity How frequently is there a problem of excess capacity in your industry? Are there periods when there is excess capacity? Overcapacity often leads to price cutting. If so, there is typically a threat. 1 2 3 4 5 NA Product differentiation Is your product a service or commodity? Typically, the closer a product is to being a commodity, the fiercer the intensity of rivalry. 1 2 3 4 5 NA Brand Identity Is branding critical for your rival‟s success? Is there an actual vs. a perceived difference? Brand identification by buyers reduces the threat of rivals. 1 2 3 4 5 NA
    25. 25. Porter‟s five forces model Power of Rivals Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Switching costs How costly is it for your buyers to switch between providers? Low switching costs typically increase rivalry. When a customer can freely switch from one product to another, companies must struggle to capture and retain customers. 1 2 3 4 5 NA Concentration and balance Are there a large number of firms of equal size and power, all chasing after the same customers? If so, rivalry is typically intense. 1 2 3 4 5 NA Diversity of competitors Are there competitors with different strategies and frames of reference? When competitors are diverse, it‟s more difficult to establish the rules of the game, so the threat from competitors is greater. 1 2 3 4 5 NA Corporate Stakes How high are the rivals‟ corporate stakes? What do rivals stand to lose (e.g. profits, decision making power)? Strategic stakes are high when several firms in an industry take great risks to expand, diversify, and gain market position. The intensity and volatility of the rivalry increases when firms select alternative strategies that may sacrifice short-term profitability 1 2 3 4 5 NA
    26. 26. Porter‟s five forces model Power of Rivals Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Exit Barriers Are exit barriers low or high? High exit barriers make it costly to abandon a product; for example, when an organization has specialized assets that cannot be easily sold off. 1 2 3 4 5 NA (Harvard Business School, 2005)
    27. 27. Porter‟s five forces model Power of New Entrants New entrants in an industry are today‟s new players who may become tomorrow‟s rivals. The threat of new entrants is directly related to whether the barrier to entry into an industry is high or low. STEPS  Assess the threat of new entrants by rating the features in Table 4 and following the given criteria:  If a barrier to entry is high, the threat from new entrants is weak; if a barrier is low, the threat of new entrants is strong.
    28. 28. Porter‟s five forces model Power of New Entrants Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Economies of Scale and Experience Does successful entry require that companies have significant economies of scale or experience? Barriers to entry are typically high when an aspiring company must cut costs in order to compete in a large-scale and/ or experienced market. 1 2 3 4 5 NA Product Differences Do new entrants need to differentiate by spending heavily on advertising , customer service, or product differences to overcome existing customer loyalty? Product differentiation is typically a barrier to entry. 1 2 3 4 5 NA Brand Identity Do new companies need to spend heavily on brand identification to gain customer loyalty? Brand identification is typically a barrier to entry. 1 2 3 4 5 NA Switching costs Does the buyer have to pay to switch from one supplier‟s product to another? High switching costs are typically a barrier to entry. 1 2 3 4 5 NA
    29. 29. Porter‟s five forces model Power of New Entrants Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Capital Requirements Does the new company need to invest large financial resources (relative to market size) in order to compete? Huge capital requirements are typically a barrier to entry. 1 2 3 4 5 NA Access to distribution Do newcomers have access to distribution channels for products or services? Difficult access can typically be a high barrier to entry. 1 2 3 4 5 NA Cost Advantages Established companies have cost advantages over new rivals because they may have already obtained proprietary product technology, access to raw materials, favorable locations and government subsidies. In addition, established companies may have passed a learning or experience curve. Such cost advantages are typically a barrier to entry for new entrants. 1 2 3 4 5 NA Government Policy Govt policies such as antitrust regulations, can help to preserve or limit competition. Such policies can typically create a barrier to entry 1 2 3 4 5 NA
    30. 30. Porter‟s five forces model Power of New Entrants Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Expected Retaliation New entrants may decide not to enter a new market if existing firms may have a history of retaliating, resources to fight back, a strong commitment to the industry, and illiquid assets employed in the industry. Also, if the industry is growing slowly, they may retaliate against new players who would threaten sales growth. 1 2 3 4 5 NA
    31. 31. Porter‟s five forces model Power of Substitutes A substitute is a different product or service from the one you make that competes for the same customers. Determinants Defining Question Assess the power of buyers Circle one of the following: 1=low, 5=high or NA if it doesn’t apply to your industry Price Performance Does the substitute offer a better price or performance? A substitute product or service is a threat to competition when it offers a higher performance at a given price or the same performance at a lower price 1 2 3 4 5 NA Switching costs Is it costly for buyers to switch to the substitute product or service? When buyers must pay more to switch to a substitute, the threat of substitutes is low. 1 2 3 4 5 NA

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