3. • “instead of emphasizing making and selling, companies now see
themselves as part of value creation and delivery process”
• it starts much more before there is product/service and continues
through development and after launch
• THE PROCESS:- assessing market opportunities choosing the
value designing the value delivering value communicating
value grown and sustained
THE VALUE CHAIN
• Primary activity
• Secondary activity
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The value delivery process
4. • “Core Competencies are not seen as being fixed. Core Competencies
should change in response to changes in the company's environment. They
are flexible and evolve over time. As a business evolves and adapts to new
circumstances and opportunities, so its Core Competencies will have to adapt
and change”
• The main ideas about Core Competencies were developed by C K Prahalad
and G Hamel through a series of articles in the Harvard Business Review
followed by a best-selling book - Competing for the Future. Their central
idea was that over time companies may develop key areas of expertise
which are distinctive to that company and critical to the company's long
term growth
3 Distinctive capabilities being market driven
• market sensing
• customer linking and
• channel bonding
4
Core competencies
5. Difficulty for competitors to imitate
• Why does Dell have such a strong position in the personal computer
market?
• Core competencies that are difficult for the competition to imitate:
• - Online customer "bespeaking" of each computer built
• - Minimisation of working capital in the production process
• - High manufacturing and distribution quality - reliable products at
competitive prices
Makes a significant contribution to the perceived customer benefits of
the end product
• fundamental customer benefit - what is it that causes customers to choose
one product over another? To identify core competencies in a particular
market, ask questions such as "why is the customer willing to pay more or
less for one product or service than another?" "What is a customer actually
paying for?
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EXAMPLE: 1
6. Core Competency Example: Wal-Mart
The core competency of Wal-Mart can be said to be “Groceries at a low cost”.
Criteria Yes/No
Yes. The customer gets their goods cheaper than
Customer benefit?
anywhere else
Yes. A company would require huge scale to
Difficult to imitate? replicate, and that is obviously not an easy thing to
achieve.
Yes. Walmart sells all kinds of goods using the
Can be leveraged?
same model
Yes, I think in the US at least, most consumers
Uniquely identifies the organization? would identify Walmart as being amongst the
cheapest in this space.
6
Yes – it‟s scale, but also supply chain management,
Difficult to pin down?
and high inventory turnover etc.
7. Core Competency Example: Apple
The core competency of Apple can be said to be “making user friendly user
interfaces and design”
Criteria Yes/No
Yes. The customer clearly benefits from
Customer benefit?
great user interfaces
Yes. Companies have been trying for
Difficult to imitate?
years and not yet succeeded.
Yes. This core competency has been
Can be leveraged? rolled out to the iPod, the iPhone, and
most recently, the iPad.
Uniquely identifies the organization? Yes
Yes – it‟s not just design, but marketing, 7
Difficult to pin down?
software, hardware etc.
8. • corporate headquarters is responsible for designing a corporate
strategic plan to guide the whole enterprise; it makes decisions on the
amount of resources to allocate to each division, as well as on which
businesses to start or eliminate
• Strategic planning is the process of developing and maintaining a
strategic fit between the organization‟s goals and capabilities and its
changing market opportunities.
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Role of strategic planning
10. • DEFINING THE CORPORATE MISSION
• ESTABLISHING STRATEGIC BUSINESS UNIT
• ASSIGNING RESOURCES TO EACH STRATEGIC
BUSINESS UNIT
• ASSESSING GROWTH OPPORTUNITIES
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CORPORATE & DIVISIONAL PLANNING PROCESS
11. • Defining a Market-Oriented Mission
• Many organizations develop formal mission statements. A mission
statement is a statement of the organization‟s purpose – what it wants
to accomplish in the larger environment
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DEFINING THE CORPORATE MISSION : step-1
12. CORPRORATE PLANNING
• What is a vision?
A vision is a clear, comprehensive „photograph‟ of an organization at some
point in the future. It provides direction because it describes what the
organization needs to be like, to be successful within the future.
A company‟s mission can be defined as:
• An operation intended to carry out specific program objectives
• A higher calling or meaning, a reason for being. Often this is the
reason the company was first created – to fill a need in the
marketplace or society.
• A concise statement of business strategy developed from the
customer’s perspective and it should be aligned with the company‟s
vision.
• The mission should answer three key questions:
• What is it that we do?
• How do we do it?
• For whom are we doing it?
13. • Vision and Mission are
different
A mission statement concerns what an enterprise is all
about.
A vision statement is what the enterprise wants to become.
Strategic planning is a systematic process whose purpose is
to map out how the enterprise should get from where it is
today to the future it envisions.
• Goals are an expected or desired outcome of a planning
process. Goals are usually broad, general expressions of the
guiding principles and aspirations of a community.
• Objectives are precise targets that are necessary to achieve
goals. Objectives are detailed statements of quantitatively or
qualitatively measurable results the plan hopes to accomplish
14. A business portfolio is the collection of businesses and products that make up
the company.
• The best portfolio is the one that best fits the company‟s strengths and
weaknesses to opportunities in the environment.
• The major activity in strategic planning is business portfolio analysis,
whereby management evaluates the products and businesses making up the
company
• A business can define itself in terms of three dimensions:
customer groups (TV serial)
customer needs (Electricity)
technology (TELEVSION SET)
SBU‟s features:
• single business
• own set of competitors 14
ESTABLISHING SBU (STRATEGIC BUSINESS UNIT): step-2
17. What Is Customer Equity?
• Customer equity is the total combined customer lifetime values of
all of the company‟s current and potential customers.
• Clearly, the more loyal the firm‟s profitable customers, the higher the
firm‟s customer equity.
• Customer equity may be a better measure of a firm‟s performance
than current sales or market share.
Share of customer
• To increase share of customer, firms can offer greater variety to
current customers or create programs to cross-sell and up-sell in
order to market more products and services to existing customers
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19. The major objectives of a portfolio analysis of SBUs is to achieve the
following:
• Analyse its current SBU portfolio to decide which SBUs must receive
more or less investment
• Develop growth strategies for adding new SBUs
• Decide which SBUs must no longer be retained by the parent
organization
General Electric GE McKinsey Matrix model is a nine-cell matrix.
• Used to perform detailed analysis about a particular SBU of an
organization.
• Uses exhaustive analysis parameters like industry attractiveness and
business strength, therefore better than BCG model 19
24. • The Green Zone consists of the three cells in the upper left corner. If
your enterprise falls in this zone you are in a favourable position with
relatively attractive growth opportunities. This indicates a "green light"
to invest in this product/service.
• The Yellow Zone consists of the three diagonal cells from the lower
left to the upper right. A position in the yellow zone is viewed as
having medium attractiveness. Management must therefore exercise
caution when making additional investments in this product/service.
The suggested strategy is to seek to maintain share rather than growing
or reducing share.
• The Red Zone consists of the three cells in the lower right corner. A
position in the red zone is not attractive. The suggested strategy is that
management should begin to make plans to exit the industry
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25. • Planning new businesses
• downsizing
• terminating older business
• Simply this is refers to the gap between desired level of sales and
profit (performance) and the projected level of sales and profit if the
current strategy is followed
• So, to fill this strategic planning gap marketers are using three different
strategies.
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ASSESSING GROWTH OPPORTUNITIES : step-4
28. Three types of intensive strategies can be identified from the “Ansoff”
product/market expansion grid.
A. Market penetration
• Making more sales without changing its original product or market. It
could increases growth through marketing mix improvement. :
Adjustment to its product design, advertising, pricing and distribution
efforts. Ex: Attract the competitors‟ customers to switch to its brand by
charging low price.
B. Market development
• Identifying and developing new markets for its current products.
Acquire additional distribution channels in its present locations, or
search for new locations or search for new locations in foreign
markets.
C. Product development
• Offering modified or new products to current markets. Developing
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product features, developing different quality levels, use alternative
technologies
31. • This strategy is used to build or acquire businesses that are related to the
company‟s current business. There are also sub strategies used to have an
integrated growth.
Through diversification, companies can grow by starting up or buying
businesses outside their current products / markets or identifying growth
opportunities by adding attractive business that are unrelated to the current
business.
I. Concentric diversification strategy
• Companies could seek new product that have technologically and / or
marketing synergies with existing product lines, even though the product
may appeal to a new class of customers. Ex: jam sachets for Air lines
II. Horizontal diversification strategy
• Companies might search new products that could appeal to its current
customers through technology is unrelated to its current product line. Ex:
Cargill‟s acquiring centra chain
III. Conglomerate diversification strategy
• Companies might seek new businesses that have no relationship to the
company‟s current technology, product or market. Ex. TATA, ITC,
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33. DOWSIZING AND DIVESTING OLDER BUSINESSES
• Divestment usually involves eliminating a portion of a business. Firms
may elect to sell, close, or spin-off a strategic business unit, major
operating division, or product line. This move often is the final
decision to eliminate unrelated, unprofitable, or unmanageable
operations.
• Firms often acquired other businesses with operations in areas with
which the acquiring firm had little experience. After trying for a
number of years to integrate the new activities into the existing
organization, many firms have elected to divest themselves of portions
of the business in order to concentrate on those activities in which they
had a competitive advantage.
• Divestment is commonly the consequence of a growth strategy.
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34. • MARKET SHARE TOO SMALL: Firms may divest when their market share is
too small for them to be competitive or when the market is too small to provide the
expected rates of return
• AVAILABILITY OF BETTER ALTERNATIVES: Firms may also decide to
divest because they see better investment opportunities. Organizations have limited
resources. They are often able to divert resources from a marginally profitable line of
business to one where the same resources can be used to achieve a greater rate of
return.
• NEED FOR INCREASED INVESTMENT: Firms sometimes reach a point where
continuing to maintain an operation is going to require large investments in
equipment, advertising, research and development, and so forth to remain viable.
Rather than invest the monetary and management resources, firms may elect to divest
that portion of the business.
• LACK OF STRATEGIC FIT: A common reason for divesting is that the acquired
business is not consistent with the image and strategies of the firm. This can be the
result of acquiring a diversified business. It may also result from decisions to
restructure and refocus the existing business.
• LEGAL PRESSURES TO DIVEST: Firms may be forced to divest operations to
avoid penalties for restraint of trade. Service Corporation Inc., a large funeral home
chain acquired so many of its competitors in some areas that it created a regional
monopoly. The Federal Trade Commission required the firm to divest some of its
operations to avoid charges of restraint of trade.
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REASONS…………..
36. • STRATEGIC FORMULATION: 3 generic strategy
Superior profits through lower Creating a product or service that is
costs perceived as being unique "through out the
e.g.: Wal-Mart, big bazaar, Maruti industry” E.g.McDonald, FedEx
cars, splendour bike
Cost Focus means emphasizing cost-
minimization within a focused market aims to differentiate within just one or a
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small number of target market segments.
E.g. specialist holiday operator
38. Product or Service Alliances:
One co. license another to produce its products
Promotional Alliances:
One co. agrees to carry a promotion for another co. product/service
Logistics Alliances:
One co. offers logistical services for another co.
Pricing Collaborations:
One or more co.'s join in a special pricing collaborations such as
tourism& hospitality companies
Categories of Marketing Alliances
