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The document discusses strategic planning and analysis for companies. It covers developing strategic plans at the corporate, business unit, and functional levels. Key aspects of strategy covered include scope, goals and objectives, resource deployment, competitive advantage, and synergy. Tools for strategic analysis discussed include SWOT analysis, Porter's five forces, competitor analysis of strengths and weaknesses, and evaluating a company's portfolio using the BCG matrix or GE stoplight chart. The strategic marketing process and conducting situation analyses with the three Cs (company, customers, competitors) is also summarized.

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1 Strategic Planning • The process of developing and maintaining a fit between a compan y’s goals and capabilities and its changing marketing opportunities • It involves: – Defining company vision/mission – Specifying objectives – Designing portfolio of products/businesses – Coordinating functional strategies Three Levels of Strategy in an Organization Business unit strategy • Mission • Business goals • Competencies Business unit strategy • Mission • Business goals • Competencies Corporate strategy • Vision • Corporate goals • Philosophy and culture Corporate strategy • Vision • Corporate goals • Philosophy and culture Research & development Information systems Finance Marketing Manufacturing Human resources Functional strategy
2 Components of Strategy • Scope • Breadth of strategic domain: number and types of industries, product lines, market segments. Reflects company mission and strategic intent (vs. Strategic fit) • MCI... Core business (long distance), Contiguous business (fastest growing sector - communications related products: wireless paging, Internet, local service), Content (invested $2 billion in News Corp): Vision of Bert Roberts, Chairman • MMM • PCL • EllisDon • Mattamy Components of Strategy • Goals and Objectives • Desired level of accomplishment on one or more performance dimensions and the growth vector • Resource deployments • Allocation of human, financial and other resources across businesses, markets, etc. • Identification of a sustainable competitive advantage • What are the distinctive competencies or strengths relative to competitors? • MMM • PCL • EllisDon • Mattamy • Synergy • Improving overall efficiency and effectiveness by exploiting syn ergies across businesses and product markets
3 Market Oriented Vision / Missions COMPANY PRODUCT-ORIENTED VISION/MISSION STATEMENTS MARKET-ORIENTED VISION/MISSION STATEMENTS Revlon We make cosmetics. Disney We run theme parks. Wal-Mart We run discount stores. We sell lifestyle and self expression; success and status; memories, hopes and dreams. We provide fantasies and entertainment -- a place where America still works the way it is supposed to. We offer products and services that deliver value to middle Americans. Market Oriented Vision / Missions COMPANY PRODUCT-ORIENTED VISION/MISSION STATEMENTS MARKET-ORIENTED VISION/MISSION STATEMENTS MMM PCL EllisDon Mattamy
4 The Strategic Marketing Process: 1. Situation and SWOT analysis 2. Market-product focus & goal setting 3. Marketing programs 1. Situation Analysis: The Three Cs Company Customers Competitors •Market Potential (size, growth rate) •Customer Behavior (wants and needs, segmentation, price sensitivity) •Market Potential (size, growth rate) •Customer Behavior (wants and needs, segmentation, price sensitivity) •Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes) •Competitor Response Profiles (capabilities, current and future actions) •Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes) •Competitor Response Profiles (capabilities, current and future actions) •Economic Analysis (costs, break-even, profitability) •Company Fit (strengths, weaknesses, resources, culture, goals) •Economic Analysis (costs, break-even, profitability) •Company Fit (strengths, weaknesses, resources, culture, goals)
5 Company considerations • History / Culture • Resources • Existing portfolio • Existing customer base – characteristics, esp. vis a vis future market – loyalty • Experience – with markets – with marketing Business Objectives • Maximize profits • Maximize shareholder returns • Maximize market share • Survival • Social responsibility
6 SWOT Analysis Strengths: Opportunities: Threats: Weaknesses: Favorable Unfavorable InternalExternal Strategic Issue Analysis Opportunities Threats Strengths Areas to Leverage Problems Weaknesses Chances lost Vulnerabilities
7 Strengths and Weaknesses Checklist…do this for every competitor Marketing 1. Company reputation -------- -------- --------- -------- -------- ---- ----- ---- 2. Marketshare -------- -------- --------- -------- -------- ---- ----- ---- 3. Customersatisfaction -------- -------- --------- -------- -------- ---- ----- ---- 4. Customer retention -------- -------- --------- -------- -------- ---- ----- ---- 5. Productquality -------- -------- --------- -------- -------- ---- ----- ---- 6. Service quality -------- -------- --------- -------- -------- ---- ----- ----- 7. Pricing effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 8. Distribution effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 9. Promotion effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 10. Sales force effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 11. Innovation effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 12. Geographical coverage -------- -------- --------- -------- -------- ---- ----- ---- Finance 13. Cost/availability of capital -------- -------- --------- --------- -------- ---- ----- ---- 14. Cash flow -------- -------- --------- --------- -------- ---- ----- ---- 15. Financial stability -------- -------- --------- --------- -------- ---- ----- ---- Manufacturing 16. Facilities -------- --------- --------- ---------- -------- ---- ----- ---- 17.Economiesofscale -------- --------- --------- ---------- -------- ---- ----- ---- 18. Capacity -------- --------- --------- --------- -------- ---- ----- ---- 19. Able, dedicated workforce -------- --------- --------- --------- -------- ---- ----- ---- 20. Ability to produce on time -------- --------- --------- --------- -------- ---- ----- ---- 21. Technical manufacturing skill -------- --------- --------- --------- -------- ---- ----- ---- Organization 22. Visionary,capable leadership-------- --------- --------- --------- -------- ---- ----- ---- 23. Dedicated employees -------- --------- --------- --------- -------- ---- ----- ---- 24. Entrepreneurial orientation -------- --------- --------- --------- -------- ---- ----- ---- 25. Flexible or responsive -------- --------- --------- --------- -------- ---- ----- ---- Performance Importance MAJOR MINOR NEUTRAL MINOR MAJOR HI MED LOW STRENGTH STRENGTH WEAKNESS WEAKNESS Opportunities and Threats 1 3 4 2 Success Probability High High Low Low Attractiveness Opportunities 1. ___________________ 2. ___________________ 3. ___________________ 4. ___________________ 1 3 4 2 Probability of Occurrence High Low Seriousness High Low Threats 1. ___________________ 2. ___________________ 3. ___________________ 4. ___________________
8 Designing the Business Portfolio • Fit company strengths and weaknesses to the opportunities in the environment – Analyze current SBU’s – Which SBU’s should receive more, less, or no investment? – Develop growth strategies 2. Identify SBUs • Single business standing alone from rest of company • Having own competitors to equal or surpass • Has own manager who is responsible for strategic planning and profit • Examples?
9 3. Evaluate your Current Portfolio • The Boston Consulting Group (BCG) Matrix • The General Electric (GE) Approach Portfolio Analysis: The BCG Matrix
10 Strategies Associated with the BCG Matrix • Business unit strategy: Manage your portfolio • Marketing/product strategy: Build Hold Harvest Divest Limitations of the BCG • Beyond growth rate: – Barriers to entry – Long term, stable consumer demand – High ROI relative to other options • Beyond market share: – Technological leadership – Related competencies • Distribution strength • Supplier relationships • Management skills • Leverage/extend brand equity
11 General Electric’s stoplight strategy chart Marketattractiveness Business position Strong Medium Weak High Medium Low Green band = “Go” signal = Build Yellow band = “Caution” signal = Hold Highoverallattractivenessoverall Low overallattractiveness M edium attractiveness B A C Red band = “Stop” signal = Divest Competitive Analysis • Market structure – Leader – Follower – Nicher • Defining competition – Industry Based Definition – Market Based Definition • Substitutes
12 Porter’s Five Forces Bargaining Power of Suppliers Bargaining Power of Buyers Intensity of Competitive Rivalry & Barriers to Exit Barriers to Potential Entrants Substitutes in Other Industries External environment • Political trends-- “politically correct,” partisan • Regulatory trends – what’s (il)legal • Economic trends: macro, micro • Social and Cultural trends – Changing family, immigration • Technological trends • Other: – Demographic trends – Natural resources
13 Agenda for Competitor Analysis • Introduction • Competitive Analysis – Strengths and Weaknesses – Behaviors • Competitive Strategy for dealing with competition – Game Theory – Porter’s 5 Forces Framework Competitive Analysis and Strategy • Competitive analysis answers … – What is driving competition in this industry or industries the firm may consider joining? – What actions are competitors likely to take, and what are the best responses? – How will the industry evolve? • … in order to set strategy, which answers – How should the firm be positioned to compete in the long-run?
14 Competitive Analysis Current position and strategy – Market share and sales – Target market and positioning – Marketing mix (4 P’s) – Manufacturing and R&D – Financial strength Capabilities: Ability to… – Design new products – Manufacture – Market – Finance – Manage Future Goals – Product portfolio – Share or profit – Product Differentiation or Cost Leadership Step 2: Market-product focus & goal setting 1. Set market & product objectives 2. Select target markets 3. Find points of difference 4. Position the product
15 Step 3: Marketing Programs Marketing MixMarketing Mix Target MarketTarget Market Product Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns Place Channels Coverage Assortments Locations Inventory Transport Price List Price Discounts Allowances Payment Period Credit Terms Promotion Sales Promotion Advertising Sales Force Public Relations Direct Marketing Current marketing situation (3 C’s) Opportunity and issue analysis (3 C’s) Objectives Marketing strategy (4 P’s) Action programs (4 P’s) Project profit-and- loss statement Background data on sales, costs, profits, market, competitors, distribution, and environment. Identifies the main opportunities/threats, strengths/weaknesses. Defines plan’s financial and marketing goals in terms of sales volume, market share, and profit. Presents the broad marketing approach that will be used to achieve the plan’s objectives. Presents the special marketing programs designed to achieve the business objectives. Forecasts the plan’s expected financial outcomes. The Marketing Plan - Integrating the 3 C’s and the 4 P’s - Adapted From: Philip Kotler, Marketing Management, pg. 89.
16 Ansoff Product-Market Expansion Grid Market Penetration Market Development Product Development Diversification Existing Markets New Markets Existing Products New Products Strategy: Porter’s Five Forces Model Industry Competitors Rivalry among existing firms Suppliers Potential Entrants Customers Substitutes Threat of new entrants Bargaining power of suppliers Bargaining power of customers Porter’s Five Forces Model - Each Force is a Threat Threat of substitute offerings
17 Existing Rivalry More Intense If: • Numerous or equally balanced competitors • Slow industry growth • High fixed costs • Low customer loyalties or switching costs • Added capacity comes in large increments • Diverse competitors • High strategic stakes • High exit barriers – Specialized assets, emotional barriers, government and social restrictions (e.g., concerns for job losses, etc) Threat of New Entry • Barriers to entry – Economies of scale – Brand loyalties – Capital requirements – Switching costs independent of loyalties – Access to distribution – Cost disadvantages independent of scale • Market Attractiveness
18 Expected Reactions of Firms • Conditions that signal strong retaliation – Firms with history of retaliation to entrants – Firms with substantial resources • Cash and unused debt and/or equity capacity • Excess productive capacity • High leverage with channels or customers – Firms with commitment to industry and high levels of idiosyncratic assets employed in it – Slow industry growth The Entry Deterring Price • Structure of prices that just balances ... – the potential rewards from entry that are forecast by the potential entrant with – the expected costs of overcoming structural barriers to entry and costs of retaliation • If prevailing prices exceed the entry deterring price, entry will occur
19 Bargaining Power of Customers • Customers compete for lower prices • Customers tend to be powerful when … – They represent a large portion of the firm’s sales – Offerings represent large portion of their expenditures – Offerings are undifferentiated – Switching costs are low – They pose a credible threat of backward integration – Quality of offerings is not important to them – They have full information • Big customers are attractive and dangerous (e.g., Walmart) Bargaining Power of Suppliers • Suppliers “compete” with the industry by trying toforce costs higher • Suppliers tend to be powerful when … – They are concentrated – There are few substitutes to their offerings – The industry is not an important customer of theirs’ – Their offerings are important inputs to the firm’s – Their offerings are differentiated or there are high switching costs – They pose a credible threat of forward integration – They have full information
20 Customer or Competitor Orientation? • Focus on competitors: Aggressive and alert for changes • Focus on customers: Align resources to customer needs • Which is better? • Which is more common? Porter’s 4 Generic Business Strategies Source of Competitive Advantage Broad Target Narrow Target Lower Cost Differentiation Differentiation Focus CompetitiveScope Cost Leadership Differentiation Cost Focus
21 Market Life Cycle High Price Low Low Cost-to-serve High *Selected products / selected markets *Problem solving emphasis *Customer needs knowledge *Product/Market expansion *Competitive activity *Knowledgeable customers *Product/market proliferation *Market volatility *Aggressive customer Changing the players • Bring in customers - Increase industry demand. • Educate consumers about your product • Pay customers (esp. early adopters) • Subsidize some customers, other full paying customers will follow (Initial discount to lower risk) • Become your own customer • Bring in suppliers • Bring in complementors • Do it yourself. • Encourage complementors to come (Banking) • Bring in competitors • License technology to make money, avoid complacency • Create a second source to encourage buyers to adopt technology
22 Changing the added value • Limit your supply • DeBeers and diamonds • Raise amount consumers are willing to pay • Policies that build loyalty (frequent flier miles) increase willingness to pay - GM / Ford credit cards; Intuit • Lower competitors’ value • Questions to ask: • What is your added value? • How can you increase value by changing supply, buyers, suppliers, complementors, or substitutorsin your value net? • What is the value added by other players? Should you be increasing or decreasing their added values? Changing the rules Questions to ask are: • Which rules are helping you? Which ones are hurting you? Rules can be for pricing, advertising, product variety, satisfaction, etc. • What kinds of contracts are you willing to write with your buyers and suppliers? Do you want Match Competition Clauses? What does this do for you? • Do you have the power to change the rules? Does someone else have the power to overturn them? • Can you signal your commitment credibly
23 Changing tactics Questions to ask are: • How do other players perceive the game? How do these perceptions affect the play of the game? • Which perception do you want to keep, which to change? • Do you want the game to be transparent or opaque? When do you want to send signals that benefit you? When do you want to preserve the fog? • To establish credibility (clear the fog) – Accept a pay-for-performance contract – Offer guarantees or advertise – Ask others to demonstrate their credibility to you • To preserve the fog – Create complexity (long distance calling rates) – Bluff: Ask yourself whether you will be believed and under what circumstances – Ask what others stand to gain by preserving the fog, and what they could be bluffing about Changing tactics • Competitive stances that can be used to clear / add to the fog Top Dog Fat Cat Puppy Dog Lean & Hungry Being Big Being Small Appear Tough Appear Soft
24 • Fishbowl. This exercise brings everybody with an ax to grind on a given issue together in one room, with advocates of certain points of view in the center of the • Red team / blue team. assign managers to teams representing major competitors and have them plan the strategies they would use to beat us. • Future mapping. This is a fancy name for a way of looking at different scenarios for the future. We look at several alternative futures, or "end states," for our business, assign a probability to each one, and identify the forces that will determine whether that scenario will happen. The Strategy Game Strategic objectives for share leaders • Typically the pioneer or initial entrant • Share maintenance objectives • Retain current customers by: – Maintaining and improving loyalty – Encourage / simplify repeat purchase – Reduce attractiveness of switching • Stimulate selective demand among later adopters – Head-to-head positioning against competition – Differential positioning against competition
25 Strategic choices for share leaders Competitor or potential competitor Flanker strategy: Proactive / Reactive Confrontation Strategy Proactive / Reactive Market Expansion Contraction / Strategic withdrawal Fortress / Position defense Leader Fortress or position defense Primary objective • Increase satisfaction, loyalty, repeat purchase • Build on strengths to keep current customers; use same tactics to appeal to late adopters Market characteristics • Relatively homogeneous market • Strong preference for leader’s product in the largest segment Competitors’ characteristics • Current / potential competitors have limited resources and competencies Firm’s characteristics • High awareness and preference for leader’s product • Marketing and R&D resources exceed competition’s.
26 Flanker strategy Primary objective • Protect against loss of specific segment • Develop a second “filler” entry • Attract customers in the segment Market characteristics • Two or more major segments with distinct needs and purchase criteria Competitors’ characteristics • One or more current or potential competitors • Have resources to implement a differentiation strategy Firm’s characteristics • Current product weak on at least one attribute for a major segment • Firm has resources to develop and launch a second offering for disaffected segment Confrontation strategy Primary objective • Protect loss of share among current customers • Meet/beatcompetitive offerings head-on • Get new customers who may be attracted to competitors Market characteristics • Relatively homogeneous market • Little preference for leader’s product in the largest segment Competitors’ characteristics • One or more potential competitors • Sufficient resources and competencies to implement head-to-head strategy Firm’s characteristics • Current product suffers from low awareness, preference, loyalty in a major segment • Firm has resources (R&D, marketing) comparable or greater than competitor
27 Market expansion strategy Primary objective • New products or line offerings • Aimed at new applications / users • Improve ability to retain customers as market fragments Market characteristics • Heterogeneous market • Multiple product uses requiring different product or service attributes Competitors’ characteristics • Current / potential competitors have limited resources / competencies in R&D and marketing Firm’s characteristics • No offerings in one or more application segments • Firm has relative competencies in R&D and marketing Contraction strategy Primary objective • Increase ability to attract new customers in selected high growth segments • Withdraw from slower growing segments to conserve resources Market characteristics • Heterogeneous market • Segments with different growth potential • Multiple product uses requiring different product / service attributes Competitors’ characteristics • One or more current / potential competitors with resources to mount a strong challenge in growth segments Firm’s characteristics • Current product suffers from low awareness, preference, loyalty in one or more major growth segment • Firm’s resources limited vis-a-vis one or more competitor
28 Strategic objectives for followers • Capture repeat / replacement purchases from current customers of the leader or other target competitor by: • Head-to-head positioning against competitor’s offering in primary target market (athletic footwear, PCs) • Technological differentiation from target competitor’s offering in a primary target market • Stimulate selective demand among later adopters by: • Head-to-head positioning against target competitor’s offering in established market segments • Differentiated positioning focused on untapped or underdeveloped segments Strategic choices for challengers Target competitor Challenger Flanking attack Frontal Attack Leapfrog strategy Encirclement strategy Guerrilla attacks
29 Who should a follower attack? • Attack the share leader within its primary target market • Most to lose, but also most likely to retaliate - in a few geographic markets? • Attack another follower who has an established position within a major market segment • Attack one or more smaller competitors who have only limited resources • Avoid direct attacks on any established competitor Frontal attack Primary objective • Capture substantial repeat / replacement buyers from target competition • Attract new customers from later adopters via better price / features Market characteristics • Homogeneous market • Little preference or loyalty for existing brands Competitors’ characteristics • Vulnerable to direct attack • Few R&D and marketing resources Firm’s characteristics • Stronger R&D, marketing resources than target competitor and / or • Lower operating costs
30 Leapfrog Primary objective • Induce current buyers to switch to a superior product offering • Attract new customers via superior benefits Market characteristics • Relatively homogeneous w.r.t. customer needs and purchase criteria • Some needs or criteria are currently unfulfilled Competitors’ characteristics • One or more current competitors has strong marketing competencies but relatively weaker R&D capabilities Firm’s characteristics • Firm has proprietary technology • Has necessary marketing and production resources to stimulate and meet primary demand for next generation products Flank attack Primary objective • Attract share of new customers in market segments where needs are different from those of early adopters Market characteristics • Two or more segments with distinct needs • Needs of at least one segment not currently met Competitors’ characteristics • Strong target competitor able to withstand direct attack Firm’s characteristics • Resources limited but sufficient to penetrate and serve at least one major market segment
31 Encirclement Primary objective • Attract share of new customers in several smaller, specialized segments whose needs are different from those of early adopters Market characteristics • Heterogeneous • Some segments not currently served Competitors’ characteristics • Strong competitors capable of withstanding direct attack Firm’s characteristics • Decentralized and adaptable management structure • Resources to serve several small segments Guerrilla attack Primary objective • Capture modest share of repeat, replacement purchases in several market segments or territories • Attract a share of new customers in a number of existing segments Market characteristics • Heterogeneous market, several segments • Needs of most currently being satisfied by competition Competitors’ characteristics • Number of strong competitors capable of direct attack Firm’s characteristics • Limited resources • Decentralized and adaptable management structure
32 Rubbermaid’s growth strategy Objectives for the 1990s 1. Corporate objective is to increase sales, earnings, and EPS 15% a year, while achieving a 20% return on shareholders’ equity 2. Pay approx. 30% of current year earnings as dividends to shareholders while using the remainder to fund future growth 3. Each year, 30% of sales are projected to come from new products introduced over the past 5 years. It is planned to enter an entirely new market every 12 to 18 months 4. The objective for customers and consumers is to offer the best value possible. Highest quality products at a reasonable price, a continuous flow of new products, and exceptional service to customers 5. Treat all constituents fairly and consider the interests of associates as individuals 6. Aim to be an environmentally responsible corporate citizen Rubbermaid’s growth strategy • Incremental growth • Focus on growth within the company’s businesses that was responsive to customer needs and in turn, provided value to these customers • Leap growth • High visibility and high vulnerability • Win big or lose big
33 Rubbermaid’s incremental growth strategy • To increase the value of Rubbermaid’s existing products. The key to this growth area was in providing value to dealers, distributors, and consumers. The key to value is providing quality, low cost and service • To upscale existing products to meet today’s consumer and new design preferences. Upscaling includes introducing new colors to existing lines • To extend existing lines to capitalize on product successes, increase retail shelf space, and boost sales volume • To expand Rubbermaid’s international business as a significant growth opportunity during the 1990s Rubbermaid’s leap growth strategy • To develop new products. Goal is to have at least 30% of annual sales coming from new products introduced during the past 5 years • To hone product lines and optimize the number of stock units retained to keep the lines manageable and provide proper customer service le vels • To enter entirely new markets. This is consistent with the corporate objective to enter a new market every 18-24 months • To engage in joint ventures or acquisitions to enter new markets by combining the capabilities of a strong outside partner with themany strengths of Rubbermaid
34 Implications High Price Low Low Cost-to-serve High C B D A Value axis Power axis 1 2 4 3 Growth markets • Share gains are easier. Due to • Gaps or undeveloped segments in the market • Lower risk of retaliation from share leader given growth » Problem: Leader has higher expectations given growth • Share gains are worth more • Based on the expectation that earnings produced by each share point expands as market expands. This depends critically upon » Changes in technology and other success factors » Competitive structure (large number of new entrants: PC) » Market fragmentation • Price competition less intense? • Early entry necessary to maintain technical expertise
35 Marketing strategies for mature markets Maintain current market share • Maximize flow of profits over the remaining life which (could be several decades) • Need to maintain repeat purchases via customer satisfaction • For large players – Use fortress defense to » improve customer satisfaction and loyalty » encourage and simplify repeat purchasing – Expand product line or launch flanker brands • For small players – Avoid prolonged direct confrontation with the “big guys” – Niche strategy Extend volume growth....(later) Marketing strategies for mature markets Extend volume growth • Sales depend upon (1) Number of persons buying product (2) Number of units purchased per person (3) How often the product is purchased • So, one of the following strategies can be used – Increased penetration strategy – Increased frequency of use – Wider variety of uses • Market expansion strategy – Underdeveloped domestic markets (BDI / CDI analysis) – New customer or application segments – Produce private labels – Global expansion via sequential strategies
36 Marketing strategies for mature markets • Assess the relative attractiveness of declining markets • Conditions of demand – speed of decline, certainty of decline, existence of pockets of enduring demand, extent of product differentiation in market, price stability • Exit barriers – reinvestment requirements, amount of excess capacity, age of assets, resale market for assets, extent of facilities shares with other SBUs, extent of vertical integration, number of single product competitors • Intensity of future competitive rivalry – bargaining power of customers, customer switching costs, diseconomies of scale Marketing strategies for mature markets.... • Divestment or liquidation • Strategies for remaining competitors • Harvesting • Maintenance • Profitable survivor • Niche
37 Problem • Not easy to tell when a market has reached maturity • Variations in brands, marketing programs, and customer groups can mean that different brands and segments reach maturity at different times • Industry stability also affected by threats and opportunities • Customer preferences can shift • Product substitutes may appear • Raw material costs may increase • Changes in government regulation • Entry of low-cost foreign producers • Mergers and acquisitions • Product improvements • Process technology improvements • Other environmental factors Strategic issues • Shakeout • declining growth rate • potential for overestimating future demand, hence over capacity • competition intensifies as volume increases needed to cover fixed costs • weaker businesses fail, withdraw or acquired • Maturity • volume stabilizes • replacement sales dominate • continued satisfaction and loyalty of existing customers key • not all segments and all brands reach maturity simultaneously • possibility of extending life via new uses, applications or creative marketing • Decline • divest, liquidate or hang-on? • consolidation
38 Shakeout • Excess capacity • More intense competition • Difficulty in maintaining differentiation • Distribution problems • Pressures on prices and profits Strategic traps during shakeout • Failure to recognize events signaling the beginning of a shakeout ...hence optimistic forecasts • Stuck without a clear strategic advantage during shakeout • Failure to recognize declining importance of product differentiation and increasing importance of price and / or service • Giving up market share in favor of short term profits ...hence priced out of the market
39 Strategies to beat the commodity magnet • Pro-active strategies • Value-added strategy • Process innovation strategy • Reactive strategies • Market focus strategy • Service innovation strategy • Demand side: Value added & Market focus • Supply side: Process innovation & Service innovation International Marketing Strategy • Strategic Alliances • Global Companies – International Firm • Take our domestic practices overseas – Multinational firm • Customize strategies to each market – Global firm • Standardize strategy globally
40 Global Market Entry Strategies • Exporting • Licensing • Joint Venture • Direct Investment International Environment Trends • Political: stability, sentiment • Regulatory: trade regulations, tariffs, quotas • Economic: exchange rates • Social and Cultural: ethnocentrism
41 The NewProd Scoring Model Very Good (10) Good (8) Average (6) Poor (4) Very Poor (2) Sub-factor Sub-factor Weight EP EV EP EV EP EV EP EV EP EV TOTAL EV Sub-factor Evaluation Product Superiority 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4 Unique features for users 1 .1 1 .2 1.6 .4 2.4 .2 0.8 .1 0.2 6.0 6.0 Reduce customer costs 3 .3 3 .4 3.2 .2 1.2 .1 0.4 - - 7.8 23.4 Higher quality than competitors 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4 Does unique task for user 2 .5 5 .4 3.2 .1 0.6 - - - - 8.8 17.6 Priced lower than competition 2 - - .2 1.6 .5 3.0 .3 1.2 - - 5.8 11.6 10 TOTAL 71.4 • To help evaluate ideas generated Steps in the Design Process Opportunity Definition Refinement • Marketing • R&D • Engineering • Production Evaluation Customer Measurement 1. Qualitative measurement to identify issues 2. Quantitative measurement for input to models Summary of Customer Perception Segments Product Features Preference Choice “What-if” Forecasts 1. Aggregate Individuals 2. Awareness & Availability

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Strategy web

  • 1.
    1 Strategic Planning • Theprocess of developing and maintaining a fit between a compan y’s goals and capabilities and its changing marketing opportunities • It involves: – Defining company vision/mission – Specifying objectives – Designing portfolio of products/businesses – Coordinating functional strategies Three Levels of Strategy in an Organization Business unit strategy • Mission • Business goals • Competencies Business unit strategy • Mission • Business goals • Competencies Corporate strategy • Vision • Corporate goals • Philosophy and culture Corporate strategy • Vision • Corporate goals • Philosophy and culture Research & development Information systems Finance Marketing Manufacturing Human resources Functional strategy
  • 2.
    2 Components of Strategy •Scope • Breadth of strategic domain: number and types of industries, product lines, market segments. Reflects company mission and strategic intent (vs. Strategic fit) • MCI... Core business (long distance), Contiguous business (fastest growing sector - communications related products: wireless paging, Internet, local service), Content (invested $2 billion in News Corp): Vision of Bert Roberts, Chairman • MMM • PCL • EllisDon • Mattamy Components of Strategy • Goals and Objectives • Desired level of accomplishment on one or more performance dimensions and the growth vector • Resource deployments • Allocation of human, financial and other resources across businesses, markets, etc. • Identification of a sustainable competitive advantage • What are the distinctive competencies or strengths relative to competitors? • MMM • PCL • EllisDon • Mattamy • Synergy • Improving overall efficiency and effectiveness by exploiting syn ergies across businesses and product markets
  • 3.
    3 Market Oriented Vision/ Missions COMPANY PRODUCT-ORIENTED VISION/MISSION STATEMENTS MARKET-ORIENTED VISION/MISSION STATEMENTS Revlon We make cosmetics. Disney We run theme parks. Wal-Mart We run discount stores. We sell lifestyle and self expression; success and status; memories, hopes and dreams. We provide fantasies and entertainment -- a place where America still works the way it is supposed to. We offer products and services that deliver value to middle Americans. Market Oriented Vision / Missions COMPANY PRODUCT-ORIENTED VISION/MISSION STATEMENTS MARKET-ORIENTED VISION/MISSION STATEMENTS MMM PCL EllisDon Mattamy
  • 4.
    4 The Strategic MarketingProcess: 1. Situation and SWOT analysis 2. Market-product focus & goal setting 3. Marketing programs 1. Situation Analysis: The Three Cs Company Customers Competitors •Market Potential (size, growth rate) •Customer Behavior (wants and needs, segmentation, price sensitivity) •Market Potential (size, growth rate) •Customer Behavior (wants and needs, segmentation, price sensitivity) •Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes) •Competitor Response Profiles (capabilities, current and future actions) •Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes) •Competitor Response Profiles (capabilities, current and future actions) •Economic Analysis (costs, break-even, profitability) •Company Fit (strengths, weaknesses, resources, culture, goals) •Economic Analysis (costs, break-even, profitability) •Company Fit (strengths, weaknesses, resources, culture, goals)
  • 5.
    5 Company considerations • History/ Culture • Resources • Existing portfolio • Existing customer base – characteristics, esp. vis a vis future market – loyalty • Experience – with markets – with marketing Business Objectives • Maximize profits • Maximize shareholder returns • Maximize market share • Survival • Social responsibility
  • 6.
    6 SWOT Analysis Strengths: Opportunities: Threats: Weaknesses: FavorableUnfavorable InternalExternal Strategic Issue Analysis Opportunities Threats Strengths Areas to Leverage Problems Weaknesses Chances lost Vulnerabilities
  • 7.
    7 Strengths and WeaknessesChecklist…do this for every competitor Marketing 1. Company reputation -------- -------- --------- -------- -------- ---- ----- ---- 2. Marketshare -------- -------- --------- -------- -------- ---- ----- ---- 3. Customersatisfaction -------- -------- --------- -------- -------- ---- ----- ---- 4. Customer retention -------- -------- --------- -------- -------- ---- ----- ---- 5. Productquality -------- -------- --------- -------- -------- ---- ----- ---- 6. Service quality -------- -------- --------- -------- -------- ---- ----- ----- 7. Pricing effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 8. Distribution effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 9. Promotion effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 10. Sales force effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 11. Innovation effectiveness -------- -------- --------- -------- -------- ---- ----- ---- 12. Geographical coverage -------- -------- --------- -------- -------- ---- ----- ---- Finance 13. Cost/availability of capital -------- -------- --------- --------- -------- ---- ----- ---- 14. Cash flow -------- -------- --------- --------- -------- ---- ----- ---- 15. Financial stability -------- -------- --------- --------- -------- ---- ----- ---- Manufacturing 16. Facilities -------- --------- --------- ---------- -------- ---- ----- ---- 17.Economiesofscale -------- --------- --------- ---------- -------- ---- ----- ---- 18. Capacity -------- --------- --------- --------- -------- ---- ----- ---- 19. Able, dedicated workforce -------- --------- --------- --------- -------- ---- ----- ---- 20. Ability to produce on time -------- --------- --------- --------- -------- ---- ----- ---- 21. Technical manufacturing skill -------- --------- --------- --------- -------- ---- ----- ---- Organization 22. Visionary,capable leadership-------- --------- --------- --------- -------- ---- ----- ---- 23. Dedicated employees -------- --------- --------- --------- -------- ---- ----- ---- 24. Entrepreneurial orientation -------- --------- --------- --------- -------- ---- ----- ---- 25. Flexible or responsive -------- --------- --------- --------- -------- ---- ----- ---- Performance Importance MAJOR MINOR NEUTRAL MINOR MAJOR HI MED LOW STRENGTH STRENGTH WEAKNESS WEAKNESS Opportunities and Threats 1 3 4 2 Success Probability High High Low Low Attractiveness Opportunities 1. ___________________ 2. ___________________ 3. ___________________ 4. ___________________ 1 3 4 2 Probability of Occurrence High Low Seriousness High Low Threats 1. ___________________ 2. ___________________ 3. ___________________ 4. ___________________
  • 8.
    8 Designing the BusinessPortfolio • Fit company strengths and weaknesses to the opportunities in the environment – Analyze current SBU’s – Which SBU’s should receive more, less, or no investment? – Develop growth strategies 2. Identify SBUs • Single business standing alone from rest of company • Having own competitors to equal or surpass • Has own manager who is responsible for strategic planning and profit • Examples?
  • 9.
    9 3. Evaluate yourCurrent Portfolio • The Boston Consulting Group (BCG) Matrix • The General Electric (GE) Approach Portfolio Analysis: The BCG Matrix
  • 10.
    10 Strategies Associated withthe BCG Matrix • Business unit strategy: Manage your portfolio • Marketing/product strategy: Build Hold Harvest Divest Limitations of the BCG • Beyond growth rate: – Barriers to entry – Long term, stable consumer demand – High ROI relative to other options • Beyond market share: – Technological leadership – Related competencies • Distribution strength • Supplier relationships • Management skills • Leverage/extend brand equity
  • 11.
    11 General Electric’s stoplightstrategy chart Marketattractiveness Business position Strong Medium Weak High Medium Low Green band = “Go” signal = Build Yellow band = “Caution” signal = Hold Highoverallattractivenessoverall Low overallattractiveness M edium attractiveness B A C Red band = “Stop” signal = Divest Competitive Analysis • Market structure – Leader – Follower – Nicher • Defining competition – Industry Based Definition – Market Based Definition • Substitutes
  • 12.
    12 Porter’s Five Forces Bargaining Powerof Suppliers Bargaining Power of Buyers Intensity of Competitive Rivalry & Barriers to Exit Barriers to Potential Entrants Substitutes in Other Industries External environment • Political trends-- “politically correct,” partisan • Regulatory trends – what’s (il)legal • Economic trends: macro, micro • Social and Cultural trends – Changing family, immigration • Technological trends • Other: – Demographic trends – Natural resources
  • 13.
    13 Agenda for CompetitorAnalysis • Introduction • Competitive Analysis – Strengths and Weaknesses – Behaviors • Competitive Strategy for dealing with competition – Game Theory – Porter’s 5 Forces Framework Competitive Analysis and Strategy • Competitive analysis answers … – What is driving competition in this industry or industries the firm may consider joining? – What actions are competitors likely to take, and what are the best responses? – How will the industry evolve? • … in order to set strategy, which answers – How should the firm be positioned to compete in the long-run?
  • 14.
    14 Competitive Analysis Current positionand strategy – Market share and sales – Target market and positioning – Marketing mix (4 P’s) – Manufacturing and R&D – Financial strength Capabilities: Ability to… – Design new products – Manufacture – Market – Finance – Manage Future Goals – Product portfolio – Share or profit – Product Differentiation or Cost Leadership Step 2: Market-product focus & goal setting 1. Set market & product objectives 2. Select target markets 3. Find points of difference 4. Position the product
  • 15.
    15 Step 3: MarketingPrograms Marketing MixMarketing Mix Target MarketTarget Market Product Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns Place Channels Coverage Assortments Locations Inventory Transport Price List Price Discounts Allowances Payment Period Credit Terms Promotion Sales Promotion Advertising Sales Force Public Relations Direct Marketing Current marketing situation (3 C’s) Opportunity and issue analysis (3 C’s) Objectives Marketing strategy (4 P’s) Action programs (4 P’s) Project profit-and- loss statement Background data on sales, costs, profits, market, competitors, distribution, and environment. Identifies the main opportunities/threats, strengths/weaknesses. Defines plan’s financial and marketing goals in terms of sales volume, market share, and profit. Presents the broad marketing approach that will be used to achieve the plan’s objectives. Presents the special marketing programs designed to achieve the business objectives. Forecasts the plan’s expected financial outcomes. The Marketing Plan - Integrating the 3 C’s and the 4 P’s - Adapted From: Philip Kotler, Marketing Management, pg. 89.
  • 16.
    16 Ansoff Product-Market ExpansionGrid Market Penetration Market Development Product Development Diversification Existing Markets New Markets Existing Products New Products Strategy: Porter’s Five Forces Model Industry Competitors Rivalry among existing firms Suppliers Potential Entrants Customers Substitutes Threat of new entrants Bargaining power of suppliers Bargaining power of customers Porter’s Five Forces Model - Each Force is a Threat Threat of substitute offerings
  • 17.
    17 Existing Rivalry MoreIntense If: • Numerous or equally balanced competitors • Slow industry growth • High fixed costs • Low customer loyalties or switching costs • Added capacity comes in large increments • Diverse competitors • High strategic stakes • High exit barriers – Specialized assets, emotional barriers, government and social restrictions (e.g., concerns for job losses, etc) Threat of New Entry • Barriers to entry – Economies of scale – Brand loyalties – Capital requirements – Switching costs independent of loyalties – Access to distribution – Cost disadvantages independent of scale • Market Attractiveness
  • 18.
    18 Expected Reactions ofFirms • Conditions that signal strong retaliation – Firms with history of retaliation to entrants – Firms with substantial resources • Cash and unused debt and/or equity capacity • Excess productive capacity • High leverage with channels or customers – Firms with commitment to industry and high levels of idiosyncratic assets employed in it – Slow industry growth The Entry Deterring Price • Structure of prices that just balances ... – the potential rewards from entry that are forecast by the potential entrant with – the expected costs of overcoming structural barriers to entry and costs of retaliation • If prevailing prices exceed the entry deterring price, entry will occur
  • 19.
    19 Bargaining Power ofCustomers • Customers compete for lower prices • Customers tend to be powerful when … – They represent a large portion of the firm’s sales – Offerings represent large portion of their expenditures – Offerings are undifferentiated – Switching costs are low – They pose a credible threat of backward integration – Quality of offerings is not important to them – They have full information • Big customers are attractive and dangerous (e.g., Walmart) Bargaining Power of Suppliers • Suppliers “compete” with the industry by trying toforce costs higher • Suppliers tend to be powerful when … – They are concentrated – There are few substitutes to their offerings – The industry is not an important customer of theirs’ – Their offerings are important inputs to the firm’s – Their offerings are differentiated or there are high switching costs – They pose a credible threat of forward integration – They have full information
  • 20.
    20 Customer or CompetitorOrientation? • Focus on competitors: Aggressive and alert for changes • Focus on customers: Align resources to customer needs • Which is better? • Which is more common? Porter’s 4 Generic Business Strategies Source of Competitive Advantage Broad Target Narrow Target Lower Cost Differentiation Differentiation Focus CompetitiveScope Cost Leadership Differentiation Cost Focus
  • 21.
    21 Market Life Cycle High Price Low Low Cost-to-serve High *Selectedproducts / selected markets *Problem solving emphasis *Customer needs knowledge *Product/Market expansion *Competitive activity *Knowledgeable customers *Product/market proliferation *Market volatility *Aggressive customer Changing the players • Bring in customers - Increase industry demand. • Educate consumers about your product • Pay customers (esp. early adopters) • Subsidize some customers, other full paying customers will follow (Initial discount to lower risk) • Become your own customer • Bring in suppliers • Bring in complementors • Do it yourself. • Encourage complementors to come (Banking) • Bring in competitors • License technology to make money, avoid complacency • Create a second source to encourage buyers to adopt technology
  • 22.
    22 Changing the addedvalue • Limit your supply • DeBeers and diamonds • Raise amount consumers are willing to pay • Policies that build loyalty (frequent flier miles) increase willingness to pay - GM / Ford credit cards; Intuit • Lower competitors’ value • Questions to ask: • What is your added value? • How can you increase value by changing supply, buyers, suppliers, complementors, or substitutorsin your value net? • What is the value added by other players? Should you be increasing or decreasing their added values? Changing the rules Questions to ask are: • Which rules are helping you? Which ones are hurting you? Rules can be for pricing, advertising, product variety, satisfaction, etc. • What kinds of contracts are you willing to write with your buyers and suppliers? Do you want Match Competition Clauses? What does this do for you? • Do you have the power to change the rules? Does someone else have the power to overturn them? • Can you signal your commitment credibly
  • 23.
    23 Changing tactics Questions toask are: • How do other players perceive the game? How do these perceptions affect the play of the game? • Which perception do you want to keep, which to change? • Do you want the game to be transparent or opaque? When do you want to send signals that benefit you? When do you want to preserve the fog? • To establish credibility (clear the fog) – Accept a pay-for-performance contract – Offer guarantees or advertise – Ask others to demonstrate their credibility to you • To preserve the fog – Create complexity (long distance calling rates) – Bluff: Ask yourself whether you will be believed and under what circumstances – Ask what others stand to gain by preserving the fog, and what they could be bluffing about Changing tactics • Competitive stances that can be used to clear / add to the fog Top Dog Fat Cat Puppy Dog Lean & Hungry Being Big Being Small Appear Tough Appear Soft
  • 24.
    24 • Fishbowl. Thisexercise brings everybody with an ax to grind on a given issue together in one room, with advocates of certain points of view in the center of the • Red team / blue team. assign managers to teams representing major competitors and have them plan the strategies they would use to beat us. • Future mapping. This is a fancy name for a way of looking at different scenarios for the future. We look at several alternative futures, or "end states," for our business, assign a probability to each one, and identify the forces that will determine whether that scenario will happen. The Strategy Game Strategic objectives for share leaders • Typically the pioneer or initial entrant • Share maintenance objectives • Retain current customers by: – Maintaining and improving loyalty – Encourage / simplify repeat purchase – Reduce attractiveness of switching • Stimulate selective demand among later adopters – Head-to-head positioning against competition – Differential positioning against competition
  • 25.
    25 Strategic choices forshare leaders Competitor or potential competitor Flanker strategy: Proactive / Reactive Confrontation Strategy Proactive / Reactive Market Expansion Contraction / Strategic withdrawal Fortress / Position defense Leader Fortress or position defense Primary objective • Increase satisfaction, loyalty, repeat purchase • Build on strengths to keep current customers; use same tactics to appeal to late adopters Market characteristics • Relatively homogeneous market • Strong preference for leader’s product in the largest segment Competitors’ characteristics • Current / potential competitors have limited resources and competencies Firm’s characteristics • High awareness and preference for leader’s product • Marketing and R&D resources exceed competition’s.
  • 26.
    26 Flanker strategy Primary objective• Protect against loss of specific segment • Develop a second “filler” entry • Attract customers in the segment Market characteristics • Two or more major segments with distinct needs and purchase criteria Competitors’ characteristics • One or more current or potential competitors • Have resources to implement a differentiation strategy Firm’s characteristics • Current product weak on at least one attribute for a major segment • Firm has resources to develop and launch a second offering for disaffected segment Confrontation strategy Primary objective • Protect loss of share among current customers • Meet/beatcompetitive offerings head-on • Get new customers who may be attracted to competitors Market characteristics • Relatively homogeneous market • Little preference for leader’s product in the largest segment Competitors’ characteristics • One or more potential competitors • Sufficient resources and competencies to implement head-to-head strategy Firm’s characteristics • Current product suffers from low awareness, preference, loyalty in a major segment • Firm has resources (R&D, marketing) comparable or greater than competitor
  • 27.
    27 Market expansion strategy Primaryobjective • New products or line offerings • Aimed at new applications / users • Improve ability to retain customers as market fragments Market characteristics • Heterogeneous market • Multiple product uses requiring different product or service attributes Competitors’ characteristics • Current / potential competitors have limited resources / competencies in R&D and marketing Firm’s characteristics • No offerings in one or more application segments • Firm has relative competencies in R&D and marketing Contraction strategy Primary objective • Increase ability to attract new customers in selected high growth segments • Withdraw from slower growing segments to conserve resources Market characteristics • Heterogeneous market • Segments with different growth potential • Multiple product uses requiring different product / service attributes Competitors’ characteristics • One or more current / potential competitors with resources to mount a strong challenge in growth segments Firm’s characteristics • Current product suffers from low awareness, preference, loyalty in one or more major growth segment • Firm’s resources limited vis-a-vis one or more competitor
  • 28.
    28 Strategic objectives forfollowers • Capture repeat / replacement purchases from current customers of the leader or other target competitor by: • Head-to-head positioning against competitor’s offering in primary target market (athletic footwear, PCs) • Technological differentiation from target competitor’s offering in a primary target market • Stimulate selective demand among later adopters by: • Head-to-head positioning against target competitor’s offering in established market segments • Differentiated positioning focused on untapped or underdeveloped segments Strategic choices for challengers Target competitor Challenger Flanking attack Frontal Attack Leapfrog strategy Encirclement strategy Guerrilla attacks
  • 29.
    29 Who should afollower attack? • Attack the share leader within its primary target market • Most to lose, but also most likely to retaliate - in a few geographic markets? • Attack another follower who has an established position within a major market segment • Attack one or more smaller competitors who have only limited resources • Avoid direct attacks on any established competitor Frontal attack Primary objective • Capture substantial repeat / replacement buyers from target competition • Attract new customers from later adopters via better price / features Market characteristics • Homogeneous market • Little preference or loyalty for existing brands Competitors’ characteristics • Vulnerable to direct attack • Few R&D and marketing resources Firm’s characteristics • Stronger R&D, marketing resources than target competitor and / or • Lower operating costs
  • 30.
    30 Leapfrog Primary objective •Induce current buyers to switch to a superior product offering • Attract new customers via superior benefits Market characteristics • Relatively homogeneous w.r.t. customer needs and purchase criteria • Some needs or criteria are currently unfulfilled Competitors’ characteristics • One or more current competitors has strong marketing competencies but relatively weaker R&D capabilities Firm’s characteristics • Firm has proprietary technology • Has necessary marketing and production resources to stimulate and meet primary demand for next generation products Flank attack Primary objective • Attract share of new customers in market segments where needs are different from those of early adopters Market characteristics • Two or more segments with distinct needs • Needs of at least one segment not currently met Competitors’ characteristics • Strong target competitor able to withstand direct attack Firm’s characteristics • Resources limited but sufficient to penetrate and serve at least one major market segment
  • 31.
    31 Encirclement Primary objective •Attract share of new customers in several smaller, specialized segments whose needs are different from those of early adopters Market characteristics • Heterogeneous • Some segments not currently served Competitors’ characteristics • Strong competitors capable of withstanding direct attack Firm’s characteristics • Decentralized and adaptable management structure • Resources to serve several small segments Guerrilla attack Primary objective • Capture modest share of repeat, replacement purchases in several market segments or territories • Attract a share of new customers in a number of existing segments Market characteristics • Heterogeneous market, several segments • Needs of most currently being satisfied by competition Competitors’ characteristics • Number of strong competitors capable of direct attack Firm’s characteristics • Limited resources • Decentralized and adaptable management structure
  • 32.
    32 Rubbermaid’s growth strategy Objectivesfor the 1990s 1. Corporate objective is to increase sales, earnings, and EPS 15% a year, while achieving a 20% return on shareholders’ equity 2. Pay approx. 30% of current year earnings as dividends to shareholders while using the remainder to fund future growth 3. Each year, 30% of sales are projected to come from new products introduced over the past 5 years. It is planned to enter an entirely new market every 12 to 18 months 4. The objective for customers and consumers is to offer the best value possible. Highest quality products at a reasonable price, a continuous flow of new products, and exceptional service to customers 5. Treat all constituents fairly and consider the interests of associates as individuals 6. Aim to be an environmentally responsible corporate citizen Rubbermaid’s growth strategy • Incremental growth • Focus on growth within the company’s businesses that was responsive to customer needs and in turn, provided value to these customers • Leap growth • High visibility and high vulnerability • Win big or lose big
  • 33.
    33 Rubbermaid’s incremental growthstrategy • To increase the value of Rubbermaid’s existing products. The key to this growth area was in providing value to dealers, distributors, and consumers. The key to value is providing quality, low cost and service • To upscale existing products to meet today’s consumer and new design preferences. Upscaling includes introducing new colors to existing lines • To extend existing lines to capitalize on product successes, increase retail shelf space, and boost sales volume • To expand Rubbermaid’s international business as a significant growth opportunity during the 1990s Rubbermaid’s leap growth strategy • To develop new products. Goal is to have at least 30% of annual sales coming from new products introduced during the past 5 years • To hone product lines and optimize the number of stock units retained to keep the lines manageable and provide proper customer service le vels • To enter entirely new markets. This is consistent with the corporate objective to enter a new market every 18-24 months • To engage in joint ventures or acquisitions to enter new markets by combining the capabilities of a strong outside partner with themany strengths of Rubbermaid
  • 34.
    34 Implications High Price Low Low Cost-to-serve High C B D A Value axis Power axis 1 2 4 3 Growthmarkets • Share gains are easier. Due to • Gaps or undeveloped segments in the market • Lower risk of retaliation from share leader given growth » Problem: Leader has higher expectations given growth • Share gains are worth more • Based on the expectation that earnings produced by each share point expands as market expands. This depends critically upon » Changes in technology and other success factors » Competitive structure (large number of new entrants: PC) » Market fragmentation • Price competition less intense? • Early entry necessary to maintain technical expertise
  • 35.
    35 Marketing strategies formature markets Maintain current market share • Maximize flow of profits over the remaining life which (could be several decades) • Need to maintain repeat purchases via customer satisfaction • For large players – Use fortress defense to » improve customer satisfaction and loyalty » encourage and simplify repeat purchasing – Expand product line or launch flanker brands • For small players – Avoid prolonged direct confrontation with the “big guys” – Niche strategy Extend volume growth....(later) Marketing strategies for mature markets Extend volume growth • Sales depend upon (1) Number of persons buying product (2) Number of units purchased per person (3) How often the product is purchased • So, one of the following strategies can be used – Increased penetration strategy – Increased frequency of use – Wider variety of uses • Market expansion strategy – Underdeveloped domestic markets (BDI / CDI analysis) – New customer or application segments – Produce private labels – Global expansion via sequential strategies
  • 36.
    36 Marketing strategies formature markets • Assess the relative attractiveness of declining markets • Conditions of demand – speed of decline, certainty of decline, existence of pockets of enduring demand, extent of product differentiation in market, price stability • Exit barriers – reinvestment requirements, amount of excess capacity, age of assets, resale market for assets, extent of facilities shares with other SBUs, extent of vertical integration, number of single product competitors • Intensity of future competitive rivalry – bargaining power of customers, customer switching costs, diseconomies of scale Marketing strategies for mature markets.... • Divestment or liquidation • Strategies for remaining competitors • Harvesting • Maintenance • Profitable survivor • Niche
  • 37.
    37 Problem • Not easyto tell when a market has reached maturity • Variations in brands, marketing programs, and customer groups can mean that different brands and segments reach maturity at different times • Industry stability also affected by threats and opportunities • Customer preferences can shift • Product substitutes may appear • Raw material costs may increase • Changes in government regulation • Entry of low-cost foreign producers • Mergers and acquisitions • Product improvements • Process technology improvements • Other environmental factors Strategic issues • Shakeout • declining growth rate • potential for overestimating future demand, hence over capacity • competition intensifies as volume increases needed to cover fixed costs • weaker businesses fail, withdraw or acquired • Maturity • volume stabilizes • replacement sales dominate • continued satisfaction and loyalty of existing customers key • not all segments and all brands reach maturity simultaneously • possibility of extending life via new uses, applications or creative marketing • Decline • divest, liquidate or hang-on? • consolidation
  • 38.
    38 Shakeout • Excess capacity •More intense competition • Difficulty in maintaining differentiation • Distribution problems • Pressures on prices and profits Strategic traps during shakeout • Failure to recognize events signaling the beginning of a shakeout ...hence optimistic forecasts • Stuck without a clear strategic advantage during shakeout • Failure to recognize declining importance of product differentiation and increasing importance of price and / or service • Giving up market share in favor of short term profits ...hence priced out of the market
  • 39.
    39 Strategies to beatthe commodity magnet • Pro-active strategies • Value-added strategy • Process innovation strategy • Reactive strategies • Market focus strategy • Service innovation strategy • Demand side: Value added & Market focus • Supply side: Process innovation & Service innovation International Marketing Strategy • Strategic Alliances • Global Companies – International Firm • Take our domestic practices overseas – Multinational firm • Customize strategies to each market – Global firm • Standardize strategy globally
  • 40.
    40 Global Market EntryStrategies • Exporting • Licensing • Joint Venture • Direct Investment International Environment Trends • Political: stability, sentiment • Regulatory: trade regulations, tariffs, quotas • Economic: exchange rates • Social and Cultural: ethnocentrism
  • 41.
    41 The NewProd ScoringModel Very Good (10) Good (8) Average (6) Poor (4) Very Poor (2) Sub-factor Sub-factor Weight EP EV EP EV EP EV EP EV EP EV TOTAL EV Sub-factor Evaluation Product Superiority 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4 Unique features for users 1 .1 1 .2 1.6 .4 2.4 .2 0.8 .1 0.2 6.0 6.0 Reduce customer costs 3 .3 3 .4 3.2 .2 1.2 .1 0.4 - - 7.8 23.4 Higher quality than competitors 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4 Does unique task for user 2 .5 5 .4 3.2 .1 0.6 - - - - 8.8 17.6 Priced lower than competition 2 - - .2 1.6 .5 3.0 .3 1.2 - - 5.8 11.6 10 TOTAL 71.4 • To help evaluate ideas generated Steps in the Design Process Opportunity Definition Refinement • Marketing • R&D • Engineering • Production Evaluation Customer Measurement 1. Qualitative measurement to identify issues 2. Quantitative measurement for input to models Summary of Customer Perception Segments Product Features Preference Choice “What-if” Forecasts 1. Aggregate Individuals 2. Awareness & Availability