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Chapter04 Chapter04 Presentation Transcript

  • Business Market Management 3 rd edition Crafting Market Strategy Chapter 4
  • Section II: Understanding Value Business Market Management, 3 rd edition Chapter 4-
  • Chapter 4: Crafting Market Strategy
    • Overview
      • Business Strategy as the Context for Market Strategy
      • Planning Market Strategy in Business Markets
      • Summary
    Business Market Management, 3 rd edition Chapter 4-
  • Overview
    • Crafting a Market Strategy:
      • Studying how to exploit a business’s resources to achieve short-term and long-term marketplace success
      • Deciding on a course of action
      • Flexibly updating it as learning occurs
    Business Market Management, 3 rd edition Chapter 4-
  • Crafting Market Strategy
    • Recognizes real-world complexity and interplay between deliberate and emergent strategies
    • Deliberate strategy: business decides on a course of action to pursue
    • Emergent strategy: marketplace activities have a pattern; business recognizes the pattern and acts in a coordinated way
    Business Market Management, 3 rd edition Chapter 4-
  • Business Market Management, 3 rd edition Chapter 4- How will we do it? What do we want to accomplish?
      • What do
      • we know?
    Market Strategy
    • Resources
    • Core Competencies
    • Capabilities
    • Partners’ resources
    • Fundamental Value-
    • Based Strategies
    • Product leadership
    • Customer intimacy
    • Operational excellence
    Business Strategy
    • Knowledge
    • Deliberate
    • Emergent
    Crafting Market Strategy Update Business Strategy Orderly advance Radical change Update Market Strategy Orderly advance Radical change
  • I. Business Strategy as the Context for Market Strategy Business Market Management, 3 rd edition Chapter 4-
  • What is Strategy?
    • Strategy: the creation of a unique and valuable position involving a different set of activities
    • Strategic Positioning: performing different activities from rivals’ or performing similar activities in different ways
    Business Market Management, 3 rd edition Chapter 4-
  • Strategy
    • Pursuing a course of action different from competitors
    • Providing superior value to particular market segments
    • Making choices of what the firm will do and will not do
    • Assembling activities that generate superior value in complementary and synergistic ways
    Business Market Management, 3 rd edition Chapter 4-
  • Strategy
    • Because a strategic position is a fundamental course of action that a firm commits itself to pursuing, it should provide a competitive advantage for
    • at least 10 years.
            • --Michael E. Porter
    Business Market Management, 3 rd edition Chapter 4-
  • Business Strategy Overarching Strategy Business Market Management, 3 rd edition Chapter 4- Sourcing Strategy
    • Specifies what the business should acquire from others
    • What it will produce itself
    Technology Strategy
    • The design knowledge and process know-how that transforms inputs to outputs of greater value
    Business Strategy
    • Provides the context for a dialogue among these constituent strategies with the intent of harmonizing them
    • Influences each strategy and the business strategies likewise influenced by them
  • Strategies
    • The distinction between business strategy, or simply strategy and market strategy is blurred
    Business Market Management, 3 rd edition Chapter 4- “ Deciding which target group of customers, varieties, and needs the company should serve is fundamental to developing a strategy.” --Michael E. Porter
  • A Resource-Based View
    • Companies are very different collections of physical and intangible assets and capabilities
      • No two companies are alike
        • Companies have different experiences
        • Companies acquire different assets and skills
        • Companies build unique organizational cultures
    Business Market Management, 3 rd edition Chapter 4-
  • Business Market Management, 3 rd edition Chapter 4- Resource-Based View Internal Perspective Core Competencies and Capabilities External Perspective Five-Forces Framework of Industry Analysis and Market-Based Assets
  • Resources: Building Blocks for Strategy Business Market Management, 3 rd edition Chapter 4- Five External Market Tests of a Resource’s Value
    • Inimitability
    • How difficult the resource is to copy
    • Length of time it will take competitor to replicate
    • Durability
    • How long a resource will last in providing value before being overtaken by innovation from within the industry or outside it
    • Appropriability
    • Extent other firms or individuals can capture the value that the resource creates
    • Substitutability
    • Ability of different resources to provide similar functionality or performance at the same or lower cost
    • Competitive Superiority
    • A market assessment of how a resource compares to those of the firm’s competitors
  • Resources
    • Resources are building blocks for strategy
    • Complementary building blocks
      • Core Competencies
      • Capabilities
    • Brands as a resource
    • Reliance on outside partners for resources
    Business Market Management, 3 rd edition Chapter 4-
  • Core Competencies
    • A complex harmonization of individual technologies and production skills
    • Determining firm’s core competencies:
      • Provide potential access to a wide variety of markets
      • Make significant contribution to the perceived customer benefits of the end-product
      • Difficult for competitors to imitate
    Business Market Management, 3 rd edition Chapter 4-
  • Distinctive Competence
    • Core Competence: Something a firm does particularly well
    • Distinctive Competence: Something a firm does better than its competitors
    Business Market Management, 3 rd edition Chapter 4-
  • Measure & Manage Core Competencies
    • A firm should carefully track its own and competitors’ performances
      • Look for unexpected successes or unexpected poor performances
    • Innovation is a core competency
    • Firms should study the record of innovation in its entire field during a given period
    Business Market Management, 3 rd edition Chapter 4-
  • Capabilities
    • A set of business processes strategically understood
    • Broadly based
    • Encompasses the entire value chain
    • Visible to the customer
    Business Market Management, 3 rd edition Chapter 4-
  • Distinctive Capabilities
    • “ The most defensible test of the distinctiveness of a capability is whether it makes a disproportionate contribution to the provision of superior customer value—as defined from the customer’s perspective—or permits the business to deliver value to the customers in an appreciably more cost-effective way.”
    • --George S. Day
    Business Market Management, 3 rd edition Chapter 4-
  • Brands as Resources
    • Brands: a means of identifying a particular supplier and its market offerings as well as differentiating them from other suppliers and their offerings
    • Brands have no inherent meaning; instead, they become endowed with meaning through:
      • Performance of the supplier
      • Its market offering over time
    Business Market Management, 3 rd edition Chapter 4-
  • Brands
    • Brands draw on visual and verbal element
      • name
      • logo
      • symbol
      • design
      • packaging
      • slogan
      • or combination
    • Brands serve as a shorthand descriptor of the:
      • technical,
      • economic,
      • service, and
      • social benefits
    • that an offering delivers to targeted market segments and customer firms
    Business Market Management, 3 rd edition Chapter 4-
  • Brand Equity
    • Capture the value of a brand
    • How customers regard a brand relative to competitor’s offering
    Business Market Management, 3 rd edition Chapter 4-
  • Brand Equity
    • Preferential actions or responses of present or prospective customers:
      • Greater willingness to sample or try the offering
      • Reduction in time to close the sale
      • Greater likelihood of purchasing
      • Willingness to award a larger share of purchase requirement
      • Willingness to pay a higher price
      • Greater unwillingness to switch competitor offerings after price increases
      • Less willingness to sample or try competitors’ offerings
    Business Market Management, 3 rd edition Chapter 4-
  • Branding Strategy
    • Firm identifies which brand elements a firm chooses to apply across the various products it sells
    Business Market Management, 3 rd edition Chapter 4-
  • Branding Hierarchy
    • Summarizing the branding strategy by displaying the number and nature of common and distinctive brand elements across the firm’s products, revealing the explicit ordering of the brand elements
      • Corporate brand
      • Family brand
      • Individual brand
    Business Market Management, 3 rd edition Chapter 4-
  • Reliance on Outside Partners for Resources
    • Collaborative relationship allows firms access to resources and to leverage their own resources
    • Business relationships and networks form to focus on specific market opportunities
    Business Market Management, 3 rd edition Chapter 4-
  • Reliance on Outside Partners for Resources
    • Firms increasingly rely on resources of outside logistics and transportation providers
    • Firms with complementary product lines may agree to co-market each other’s product line
    • A firm may look to pool its resources with one or more firms so all can pursue a strategy none could achieve alone
    Business Market Management, 3 rd edition Chapter 4-
  • Fundamental Value-Based Strategies Business Market Management, 3 rd edition Chapter 4- Product Leadership Customer Intimacy Operational Excellence
    • Value-Based Strategies
    • Mutually Exclusive
    • Firms that surpass competition in 2 areas have extraordinary advantage
  • Product Leadership
    • Offering customers leading-edge products and services
      • Relentless pursuit of innovation
      • Seeks external technologies to solve or enhance its offering’s performance
      • Seeks to obsolete its own product before competition can
      • Uses experience and learning to both speed up new offering realization process and lower its cost
    Business Market Management, 3 rd edition Chapter 4-
  • Customer Intimacy
    • Segmenting and targeting markets and tailoring offerings to match demands of those niches
      • Recognizes retaining customers over time tends to gain more profits from them
      • Maintaining close relationships with customers allows firms to anticipate changes and preferences of customers
      • Supplier’s share of the customer's business is a critical measure for gauging success of customer intimacy
    Business Market Management, 3 rd edition Chapter 4-
  • Operational Excellence
    • Providing customers with reliable products or services at competitive prices and delivered with minimal difficulty
      • Creative in the design and implementation of business processes
      • Continually search for ways to eliminate redundant activities
    • Perform different activities from competitors
    Business Market Management, 3 rd edition Chapter 4-
  • Strategy Making
    • Who makes strategy?
    • Defining purpose…
    • Strategy as orderly advances punctuated by radical change!
    Business Market Management, 3 rd edition Chapter 4-
  • Who Makes Strategy?
    • Conventional view: top management
    • Recent research: middle management plays
    • a critical role
    Business Market Management, 3 rd edition Chapter 4-
      • Role of Middle Management is Strategy Making
    Often has value-adding entrepreneurial ideas that they are able and willing to realize Far better than senior executives at leveraging the information networks resulting in substantive, lasting change Stays attuned to employees’ moods and emotional needs, ensuring that the change initiative’s momentum is maintained
    • Can manage the tension between continuity and change. They keep the organization from falling into extreme inertia or extreme chaos.
  • Who Makes Strategy?
    • Iconoclastic view: Promote broader involvement of managers throughout the firm
    • Emergent view: Imaginative thinking exists in many places as a result of experience, mistakes, and learning
    Business Market Management, 3 rd edition Chapter 4-
  • Who Makes Strategy?
    • Democratic process for strategy making:
      • Senior management actively seeks out revolutionary thinkers
        • Youthful perspectives
        • Geographic periphery of the firm
        • Newcomers with fresh perspectives
    Business Market Management, 3 rd edition Chapter 4-
  • Defining Purpose
    • Mission or Vision Statement expresses a strategic direction
    • Strategic Intent expresses a desired leadership position and establishes the criterion the organization will use to chart progress
    • Purpose of the firm engages employees to develop, refine, and renew the organization’s ambition
    Business Market Management, 3 rd edition Chapter 4-
  • Strategy as Orderly Advances Punctuated by Radical Change
    • “ Strategy as Revolution”
    • “ Strategy as Stretch and Leverage”
      • Concentrate resources
      • Accumulate resources
      • Complement resources
      • Conserve resources
      • Recover resources
    Business Market Management, 3 rd edition Chapter 4-
    • “ Clear periods of stability and change can usually be distinguished in any organization: while it is true that particular strategies may always be changing marginally, it seems equally true that major shifts in strategic orientation occur only rarely.”
    • -- Mintzberg, “Crafting Strategy,” Harvard Business Review
    Business Market Management, 3 rd edition Chapter 4-
  • II. Planning Market Strategy in Business Markets Business Market Management, 3 rd edition Chapter 4-
    • “ Chance favors the
    • prepared mind.”
        • --Louis Pasteur
  • Planning Market Strategy in Business Markets
    • Planning is a mechanism for learning
      • Market View: mental model that simplifies representations of the market and how it works
      • Institutional Learning: management teams change the shared mental models of their company, markets, and competitors
    Business Market Management, 3 rd edition Chapter 4-
    • What do we know?
    • What do we want to accomplish?
    • How will we do it?
    Planning Market Strategy in Business Markets Business Market Management, 3 rd edition Chapter 4-
  • What Do We Know ?
    • To construct a market strategy, managers must distinguish among:
      • what they know
      • what they believe
      • what they want to believe
    • And must:
      • willing to change what they think they know
      • ask themselves how they know
    Business Market Management, 3 rd edition Chapter 4-
    • “ To be conscious
    • that you are ignorant
    • is a great step to
    • knowledge.”
      • --Benjamin Disraeli
  • Assessing What Do We Know
    • Review recent performance
    • Gather essential market information
    • Construct scenarios under uncertainty
    Business Market Management, 3 rd edition Chapter 4-
  • Review Recent Performance
    • Compare recent performance with plan’s objectives
    • Accurate explanation of past performance requires managers to “think backward”
    • Review of past performance connects planning market strategy with performance review
    Business Market Management, 3 rd edition Chapter 4-
  • Improving Management’s Backward Thinking Abilities Business Market Management, 3 rd edition Chapter 4- Step 1 Experiment with several metaphors as explanations, each of which might add to their understanding Step 2 Recognize that an event or outcome may have more than one cause Step 3 Because a defining characteristic of insights is that they take us by surprise, managers should go against what appear to be more probable causes to consider their opposites Step 4 Assess candidate causal chains by the number and strength of their links; longer chains generally are less probable Step 5 Generate and test alternative explanations rather than simply settling on the first or seemingly most likely one
  • Gather Essential Market Information Business Market Management, 3 rd edition Chapter 4- Market Information Essentials for Strategic Market Planning in Business Markets
    • Alternative ways of segmenting the market that give the firm some leverage
    • Estimates of the value of the product offering and the value of augmenting services for each market segment
    • Estimates of the size and growth of each market segment presently and potentially served
    • Two or three strengths/ weaknesses where actionable improvements would significantly affect customer’s perceptions of the firm’s performance
    • The distribution of estimates of the firm’s share of customer's business for each market segment
    • Knowledge of the firm’s most- and least-profitable products, and most- and least-profitable customer groups
  • Market Strategies
    • Defensive Market Strategy:
      • Aim to retain present customers
      • Strengthen what are already strengths
    • Offensive Market Strategy
      • Aim to gain new customers
      • Focus on weaknesses that have kept firms from doing business with them in the past
    Business Market Management, 3 rd edition Chapter 4- Alternative Strategy: Craft a strategy that represents a composite of both
  • Decision Making
    • Slow Decision Makers:
      • Rely on planning and futuristic information
      • Spend time tracking the likely path of technologies, markets, competitors’ actions, and then develop a plan
    • Fast Decision Makers:
      • Look to real time information
        • Current operations and current environment
      • Prefer indicators such as bookings, backlog, margins, engineering, milestones, cash, scrap and work-in-progress
    Business Market Management, 3 rd edition Chapter 4-
  • Situation Assessment
    • Pulls together market information and internal knowledge
      • Market place (customers and environment)
      • Competitors
      • Internal resources and capabilities
    Business Market Management, 3 rd edition Chapter 4- Situation assessment must be based on market data and information, not simply managers’ beliefs and opinions, to be worthwhile
  • Construct Scenarios
    • Market uncertainty tool
    • Scenario: a plausible representation of a firm’s possible future
    • Scenario analysis should cause managers to challenge their market views
      • Specify critical milestones or signposts, that signal whether a given scenario likely will, or will not occur
      • Scenario analysis to spur institutional learning: Use of scenarios as written cases in management games, where managers are challenged to explore: “What will we do if this happens?”
    Business Market Management, 3 rd edition Chapter 4-
  • What Do We Want to Accomplish ?
    • Three- to five-year planning horizon
    • Plan updated yearly
    • Work through multiple alternatives simultaneously
      • Promotes faster decision making
      • Sharpens preferences
      • Builds confidence that superior alternatives have not been overlooked
      • Provides better fallback position
    Business Market Management, 3 rd edition Chapter 4-
  • How Teams Argue but Still Get Along Business Market Management, 3 rd edition Chapter 4- Tactic
      • Strategy
    • Base discussion on current, factual information
    • Develop multiple alternatives to enrich the debate
      • Focus on issues, not personalities
    • Rally around goals
    • Inject humor into the decision-making process
      • Frame decision as collaborations aimed at achieving the best possible solutions for the company
    • Maintain a balanced power structure
    • Resolve issues without forcing consensus
      • Establish a sense of fairness and equity in the process
  • Setting Goals and Objectives
    • Goals: longer-term, strategic directions
      • often imprecisely stated and qualitative
    • Objectives: near-term, more measurable standards
      • milestones that enable the firm to chart its progress in attaining its goals
    • Balanced Scorecard: assesses customer, financial, internal business process, as well as learning & growth performance, as a mechanism to accomplish this
    Business Market Management, 3 rd edition Chapter 4-
  • Positioning in Business Markets Business Market Management, 3 rd edition Chapter 4- Positioning: Establishing and (sustaining) an intended meaning for a market offering in the minds of targeted customers Target: Succinctly characterizes the specific type of customers for the market offering that are of most interest to the supplier Offering Concept: Specifies the essential attributes of the market offering for the selected target, out of the potentially larger set of attributes that an offering might possess
  • Customer Value Propositions Business Market Management, 3 rd edition Chapter 4- Value Proposition: All Benefits Favorable Points-of-Difference Resonating Focus Consist of: All benefits customers receive from a market offering All favorable points-of-difference a market offering has relative to the next-best alternative The one or two points-of-difference (and, perhaps, a point-of-parity) whose improvement will deliver the greatest value to the customer for the foreseeable future Answers the customer question: “ Why should our firm purchase your offering?” “ Why should our firm purchase your offering instead of your competitor’s?” “ What is most worthwhile for our firm to keep in mind about your offering?” Requires: Knowledge of own market offering Knowledge of own market offering and next best alternative offering Knowledge of how own market offering delivers superior value to customers, compared to next-best-alterative offering Has the potential pitfall: Benefit assertion Value presumption Requires customer value research
  • Building Brands in Business Markets
    • How does the brand strategy support our business strategy?
    • What is our inspirational brand identity, and what do we need to do to get there?
    • What value proposition is most valuable to our customers?
    • How do I align my organization to make the brand and value proposition a reality?
    Business Market Management, 3 rd edition Chapter 4-
  • Business Market Management, 3 rd edition Chapter 4- Building Brands in Business Markets
    • Adopt a corporate or family branding strategy and create a well-defined brand hierarchy
    • Link non-product-related imagery associations
    • Employ a full range of marketing communication options
    • Leverage equity of other companies that are customers
    • Segment markets carefully and develop tailored branding and marketing programs
    Source: Keller, Strategic Brand Management
  • How Will We Do It?
    • Develop an Action Plan
    • Develop a Sales and Marketing Program
    • Take Stock of Implementation Skills
    • Learn and Adapt
    Business Market Management, 3 rd edition Chapter 4-
  • Develop an Action Plan
    • Translates the market strategy into the coordinated activities and specific resources the firm will use to attain what it wants to accomplish
      • Gain input from each functional area
      • Each objective or set of objectives is associated with a program or programs
      • Coordinate various market activities
    Business Market Management, 3 rd edition Chapter 4-
  • Marketing and Sales Programs
    • A set of connected activities that consumes resources to produce results in pursuit of some objective
      • External
        • Objectives or related objectives
        • Measure of feedback
      • Internal
        • Actions to be taken
        • Responsibilities defined
        • Timing
        • Budget
    Business Market Management, 3 rd edition Chapter 4-
  • Take Stock of Implementation Skills Business Market Management, 3 rd edition Chapter 4- Interaction Skills A manager’s behavioral style of relating to others inside and outside the firm. Captures how a manager works together with others, uses influence strategies, and negotiates. Allocation Skills A manager’s expertise in budgeting time, people, and money. Monitoring Skills Manager’s ability to stay informed about what matters and to recognize when to intervene in ongoing activities. Organizing Skills Captures manager’s proficiency at drawing upon or circumventing the formal organizational structure to bring together the resources to accomplish a market task.
  • Learning and Adapting
    • Gain early feedback before or just after implementing parts of the market strategy
      • Customer Advisory Board
      • Pilot programs: learning by doing
    • Disseminate what was learned throughout the organization
      • Best Practices
    • Support a culture that values systematic market experiments
    Business Market Management, 3 rd edition Chapter 4-
  • IV. Summary Business Market Management, 3 rd edition Chapter 4-
  • Summary
    • Crafting market strategy is the process of studying how to exploit a business’s resources to achieve short-term and long-term marketplace success
    • Crafting market strategy requires significant participation from many functional areas
    • Crafting market strategy recognizes real-world complexity and the interplay between deliberate strategy and emergent strategy
    • Business strategy provides the context for market strategy
    • Through planning market strategy, members of the management team compare, revise, and update their individual market views
    • To construct a market plan, managers must distinguish between what they know, what they believe, and what they want to believe
    Business Market Management, 3 rd edition Chapter 4-
  • Business Market Management, 3 rd edition Chapter 4- All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall