2. Strategic Planning
Markets today are a far cry from the days of Henry Ford, Sr.
(“They can have it any colour, so long as it is black”).
A key factor that decides the success or failure of business at
the marketplace is the competitive edge it enjoys over its
competitors. This calls for careful planning.
Dr. B. K. Mukherjee 2
Why plan?
To take advantage of opportunities.
Anticipate the keys for solving future problems.
Develop courses of action (Strategies and Tactics).
Computerize the risks of various options.
Foster organizational learning.
Impose odds of attaining goals (Probability, Productivity,
Innovation, Change, etc.)
3. Competitive Strategy
NOTES ON MICHAEL PORTER’S COMPETITIVE
STRATEGIES
(‘Competitive Strategy: Techniques for Analyzing Industries and
Competitors’, 1980)
Competitive advantage grows fundamentally out of value a firm
is able to create for its buyers that exceeds the firm’s cost of
creating it. Value is what buyers are willing to pay, and superior
value stems from offering lower prices than competitors for
equivalent benefits or providing unique benefits that more than
offset a higher price. There are thus two basic types of
competitive advantage: Cost leadership and Differentiation.
Goals indicate what a business unit wants to achieve.
Strategy is a game plan for getting there, eg. Marketing strategy,
Technology strategy, Sourcing strategy, and so on.
Dr. B. K. Mukherjee 3
4. Porter’s Generic Strategies
Prof. Michael Porter has suggested three Generic strategies:
Overall Cost Leadership: The business works hard to achieve the
lowest costs in production & distribution, service, R&D, etc. so it can
price lower than its competitors and win large market share. Firms must
be good at Engg., Purchasing, Mfg, and physical Distribution. However,
problem is that other firms will compete with still lower costs (eg. FDC).
Product Differentiation: The firm comes up with a unique product in
the market. Concentrates on achieving Technological superiority/
Specialized skills/Innovations that enables it to offer superior
performance in an important customer benefit area valued by a large
part of the market. Quality leadership by using best components, put
them together expertly, inspect them carefully and effectively,
communicate their quality, eg. Intel Corp (Microprocessors) and NOKIA
(Cell phones) introducing new products at breakneck speed.
Focus: On one or more narrow market segments. The firm gets to
know these segments intimately and pursues either cost leadership or
differentiation within the target segment (eg., Pet foods/Pet products/
Pet parlours).’Pedigree’/’Nutripet’(standard),‘Propac’/’Purine’(premium),
‘Royal Canin’/’Eucanoba’(super premium).
Dr. B. K. Mukherjee 4
5. The Competitive edge
In order to succeed, companies need:
a. Excellence: Thomas J. Peters & Robert H. Waterman, Jr., “In search of
Excellence: Lessons from America’s best run Cos.”
Eight Characteristics of Excellent Management Practice
1. Bias for Action – Do it, Fix it, Try it. (Dynamism)
2. Closeness to the customer – listen intently and regularly to the
customer and provide quality, service and reliability in response to
customer needs.
3. Autonomy and Entrepreneurship – innovation and risk-taking as an
expected way of doing things, rather than conformity and conservatism.
4. Productivity through people – employees are seen as the source of
quality and productivity.
5. Hands-on, Value driven – the basic philosophy of the organization is
well-defined and articulated.
6. Stick to the knitting – stay close to what you can do well.
7. Simple form, lean staff – structural arrangements and systems are
simple, with small headquarters staff.
8. Simultaneous loose-tight properties – centralized control of values,
but operational decentralization and autonomy.
Dr. B. K. Mukherjee 5
6. The Competitive edge (contd.)
b. Innovation: Strong R&D efforts, leading to innovative products,
processes and operations. This will help in both Cost leadership as well
as Differentiation.
c. Anticipation: Effective forecasting and efficient Market Research,
enabling the company to know in advance the emerging market trends
and future customer preferences.
BUSINESS DRIVERS:
In order to enjoy the competitive edge companies have to be good in any
Dr. B. K. Mukherjee 6
or all of the following:
Operational Excellence – eg, case of the Toyota ‘zeros’.
Product Leadership – through leading edge Technology and Innovation,
eg, 3M Corp.with more than 3000 new products introduced every year.
NOKIA comes out with average one new model a week!
Customer intimacy – closeness to the customer that fosters brand
loyalty, eg, Colgate, Amul.
7. Business Strategic Questions
Dr. B. K. Mukherjee 7
Question
What to sell
and where
Why will people
buy?
How will you be
a Market
Leader?
What makes
your business
hum?
Issue
Products/Risks
/ Markets
Competitive
advantage
Core
Competence
Leading
Drivers of
business
Model
Igor Ansoff matrix
Michael Porter’s
Generic strategies
Porter’s Value
Chain
Noel Tracy & Fred
Wiesen – Value
driven
