Chapter 3


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Chapter 3

  1. 1. Copyright © 2005 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein. Part Two Strategic Analysis
  2. 2. External and Customer Analysis Chapter Three
  3. 3. “ To be prepared is half the victory.” - Miguel Cervantes
  4. 4. The Role of External Analysis External Analysis <ul><li>Strategic Decisions </li></ul><ul><li>Where to compete </li></ul><ul><li>How to compete </li></ul><ul><li>Analysis </li></ul><ul><li>Information-need areas </li></ul><ul><li>Scenario analysis </li></ul><ul><li>Identification </li></ul><ul><li>Trends/future events </li></ul><ul><li>Threats/opportunities </li></ul><ul><li>Strategic uncertainties </li></ul>Figure 3.1
  5. 5. External Analysis <ul><li>Should be Directed and Purposeful </li></ul><ul><li>Should NOT be an End In Itself </li></ul><ul><li>Should be Motivated by a Desire to Affect Strategy, Generate, Evaluate and Select Strategic Options </li></ul><ul><li>Should Contribute to the Investment Decision </li></ul><ul><li>Is an Exercise in Creative Thinking from the Perspectives of Customer, Competitor, Market and Environment </li></ul><ul><li>Often Needs to be Continuous </li></ul>
  6. 6. Investment Decision <ul><li>Should existing business area be liquidated, milked, maintain, or a target for investment? </li></ul><ul><li>What growth directions should receive investment? </li></ul><ul><li>Should there be market penetration, product expansion, or market expansion? </li></ul><ul><li>Should new business areas be entered? </li></ul>
  7. 7. Strategic Options <ul><li>What are the value propositions? </li></ul><ul><li>What are the key success factors (KSF)? </li></ul><ul><li>What assets and competencies should be created, enhanced or maintained? </li></ul><ul><li>What strategies and programs should be implemented in functional areas? </li></ul><ul><li>What should be the positioning strategy, segmentation strategy, distribution strategy, brand-building strategy, etc. </li></ul>
  8. 8. Strategic Uncertainties <ul><li>Focus on specific unknown elements that will affect the outcome of strategic decisions. </li></ul><ul><li>Most strategic decisions will be driven by a set of these strategic uncertainties. </li></ul><ul><li>“ On what does that depend?” will usually generate additional strategic uncertainties. </li></ul>
  9. 9. Strategic Uncertainties What will the future demand? <ul><li>Performance improvements? </li></ul><ul><li>Competitive technological developments? </li></ul><ul><li>Financial capacity of health care industry? </li></ul>
  10. 10. Strategic Uncertainties vs. Strategic Decisions <ul><li>Strategic Uncertainties </li></ul><ul><li>Will a major firm enter? </li></ul><ul><li>Will a tofu-based dessert product be accepted? </li></ul><ul><li>Will a technology be replaced? </li></ul><ul><li>Will the dollar strengthen against an off-shore currency? </li></ul><ul><li>Will computer-based operations be feasible with current technology? </li></ul><ul><li>How sensitive is the market to price? </li></ul><ul><li>Strategic Decisions </li></ul><ul><li>Investment in a product market </li></ul><ul><li>Investment in a tofu-based product </li></ul><ul><li>Investment in a technology </li></ul><ul><li>Commitment to off-shore manufacturing </li></ul><ul><li>Investment in a new system </li></ul><ul><li>A strategy of maintaining price parity </li></ul>
  11. 11. Customer Analysis <ul><li>Segmentation </li></ul><ul><li>Who are the biggest customers? The most profitable? The most attractive potential customers? Do the customers fall into any logical groups based on needs, motivations, or characteristics? </li></ul><ul><li>How could the market be segmented into groups that would require a unique business strategy? </li></ul>Figure 3.2
  12. 12. Judging a Segmentation Strategy <ul><li>Can a competitive offering be developed and implemented that will be appealing to the target segment? </li></ul><ul><li>Can the appeal of the offering and the subsequent relationship with the target segment be maintained over time despite competitive responses? </li></ul><ul><li>Is the resulting business from the target segment worthwhile, given the investment required to develop and market an offering tailored to it? </li></ul>
  13. 13. How Should Segments be Defined? <ul><li>Customer Characteristics </li></ul><ul><li>Geographic </li></ul><ul><li>Type of organization </li></ul><ul><li>Size of firm </li></ul><ul><li>Lifestyle </li></ul><ul><li>Sex </li></ul><ul><li>Age </li></ul><ul><li>Occupation </li></ul>Figure 3.3
  14. 14. How Should Segments be Defined? <ul><li>Product-Related Approaches </li></ul><ul><li>User type </li></ul><ul><li>Usage </li></ul><ul><li>Benefits sought </li></ul><ul><li>Price sensitivity </li></ul><ul><li>Competitor </li></ul><ul><li>Application </li></ul><ul><li>Brand loyalty </li></ul>Figure 3.3
  15. 15. The Loyalty Matrix: Priorities Low Loyalty Moderate Loyalty Loyal Customer Non-customer Medium Low to Medium High Highest Zero High Figure 3.4
  16. 16. Customer Analysis <ul><li>Customer Motivations </li></ul><ul><li>What elements of the product/service do customers value most? </li></ul><ul><li>What are the customers’ objectives? What are they really buying? </li></ul><ul><li>How do segments differ in their motivation priorities? </li></ul><ul><li>What changes are occurring in customer motivation? In customer priorities? </li></ul><ul><li>Are there any “Hot Buttons” whose salience and impact on the market are significant and growing? </li></ul>Figure 3.2
  17. 17. Customer Motivation Analysis Identify Motivations Group and Structure Motivations Assess Motivation Importance Assign Strategic Roles to Motivations Figure 3.6
  18. 18. The Customer as Active Partner <ul><li>Encourage Active Dialogue </li></ul><ul><li>Mobilize Customer Communities </li></ul><ul><li>Manage Customer Diversity </li></ul><ul><li>Co-creating Personalized Experiences </li></ul>
  19. 19. Customer Analysis <ul><li>Unmet Needs </li></ul><ul><li>Why are some customers dissatisfied? Why are some changing brands or suppliers? </li></ul><ul><li>What are the severity and incidence of consumer problems? </li></ul><ul><li>What are the unmet needs that customers can identify? Are there some of which consumers are unaware? </li></ul><ul><li>Do these unmet needs represent leverage points for competitors? </li></ul>Figure 3.2
  20. 20. Identifying Unmet Needs <ul><li>Conduct Market Research </li></ul><ul><li>Use The Ideal Experience </li></ul><ul><li>Use Creative Thinking </li></ul><ul><ul><li>Separate ideation from evaluation. </li></ul></ul><ul><ul><li>Approach the problem from different mental and physical perspectives. </li></ul></ul><ul><ul><li>Have a mechanism to take the most promising ideas and improve them until they turn into potential winners worth trying. </li></ul></ul>
  21. 21. Key Learnings <ul><li>External analysis should influence strategy by identifying opportunities, threats, trends, and strategic uncertainties. The ultimate goal is to improve strategic choices – decisions as to where and how to compete. </li></ul><ul><li>Segmentation (identifying customer groups that can support different competitive strategies) can be based on a variety of customer characteristics, such as benefits sought, customer loyalty, and applications. </li></ul><ul><li>Customer motivation analysis can provide insights into what assets and competencies are needed to compete, as well as indicate possible SCAs. </li></ul><ul><li>Unmet needs that represent opportunities (or threats) can be identified by projecting technologies, by accessing lead users, and by systematic creative thinking. </li></ul>