Strategy Chs 2 and 10

8/3/2019 Strategy Chs 2 and 10

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Strategy & Decision Tools

David ForlaniUniversity of Colorado at Denverand Health Sciences Center


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Forlani, MKTG MGT, UCDHSC 2

Outline

Overview of Strategy

Defined

Levels and Components

Focus on Business Unit Strategy

Determining competitive advantage

Decision Tools for Strategy Making


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What is Strategy

A Plan for Deploying Resources to AchieveOrganizational Goals


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Strategies Exist At Multiple Levels

Corporate

Business Unit (SBU)

Product Market (Marketing Area)


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A Strategys Key

Components

Scope: Addresses the Issue of Domain?

What businesses (industries) should we be in?

In which Markets should we compete?

How should we compete in the chosen markets?


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A Strategys Key

Components

Goals & Objectives: Addresses the Issue ofPurpose. If a strategy is implemented whatoutcomes should we expect?

Correspondence with level: e.g., Share Price--Corporate, Profits--SBU, Revenues--Marketing

Type: Adaptability, Effectiveness, Efficiency

Format: S.M.A.R.T. (Specific, Measurable, Attainable,Relevant, Time Frame)


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A Strategys Key

Components

Source of Competitive Advantage: Addresseshow our goals will be met and why we can haveconfidence in this happening. By level:

we hire the best people in the industry

we can make it for less

we are the best at understanding users wants


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A Strategys Key

Components

Resource Allocation Decisions: Addresses theIssue of Who Gets the Money. E.g., if we have 3SBUs/Brands/Lines, how much money should

each get to pursue its objectives?


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A Strategys Key

Components

Synergy:Addresses the Issue of ScopeEfficienciesgetting more out of a given asset.E.g., Can we combine operations, computer

systems, distribution networks, or introduce underthe same brand to improve cost/benefit ratios?


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A Strategys Components

Scope, Goals, Competitive Advantage, ResourceAllocations and Synergy form the foundation ofstrategies at all levels.

The better the integration of the componentswithin and acrosslevels, the better its fit, themore likely the strategy will be successfully

implemented and the more likely it will beeffective.


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How Do Firms (BUs) Compete?

Michael Porters Competitive Dimensions:

Differentiation: make it fancier

Cost Leadership: make it for less Focus: make it for a small section of the market


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How Do Firms (BUs) Compete?

Miles and Snow Typology:

Prospectors: close to market, induce change

Defenders: big, hate change Analyzers: big, profit from change

Reactors: lack a proactive strategy


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Integrating Porter with Miles & Snow

Differen

tiation

Cost

leadership

Emphasis on market growth

Heavy emphasis No emphasisProspector Analyzer Defender Reactor

Units primarilyconcerned withattaining growth

throughaggressive

pursuit of newproduct-marketopportunities

Units with strongcore bus.;

actively seekingto expand intorel. prod-mkts

withdifferentiated

offeringsUnits with strong

core bus.;actively seekingto expand intorel. prod-mktswith low-cost

offerings

Units primarilyconcerned with

maintaining adifferentiated

position inmature markets

Units primarilyconcerned withmaintaining a

low-costposition in

mature markets

Units with noclearly definedproduct-marketdevelopment or

competitivestrategy

Emphasison

production/p

roduct


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SBU Types by Strategy Component

Component Scope

Goals and obj.

Adaptability (newproduct success)Effectiveness (inc.mrkt share)Efficiency (ROI)

Resource

deployment Synergy

ProspectorBroad/dynamicdomains; tech. andcust. segments notwell-established

Extensive

Large

LowNeed cash for product

dev. (? or *)Danger in sharingoperating fac. andprograms - better toshare tech./mktg skills

AnalyzerMixture of defender andprospector strategies

Mix. of defender &prospector strats.

Mix. of defender &prospector strats.

Mix. of def. & prosp. stratsNeed cash for prod. dev.

but < prospectorsDanger in sharingoperating fac. andprograms - better toshare tech./mktg. skills


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SBU Types by Component

Component Scope

Goals and obj.

Adaptability (newproduct success)Effectiveness (inc.mrkt share)Efficiency (ROI)

Resource

deployment Synergy

Low-cost defenderMature/stable/well-defined domain;mature tech.andcust. segments

Very little

Little

HighGenerate excess cash

(cash cows)Need to seekoperating synergiesto achieveefficiencies

Differentiated defenderMature/stable/well-defined domain;mature tech.andcust. segment

Little

Little

HighGenerate excess cash

(cash cows)Need to seek operatingsynergies to achieveefficiencies


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What about Competitive Advantage?

It should be reflected In Strategy the firm(BU) is following.

A firms Competitive Advantage shoulddetermine how it competes in a givenmarket.


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Decision Tools for Strategy Making

The Expanded 5 W model

Ansoffs Growth Matrix

Market Targeting Grid

BCGs Growth-Share Matrix

D i i T l


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Decision Tools:The Expanded 5W Model

Who are our customers?

What do they do with our product?

Where is it purchased?

When is it purchased?

Why is ours the selected product?

Why is ours NOT the selected product?

D i i T l


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Decision Tools:Ansoffs Growth Model

Current PRODUCTS New

Existing

MARKETS

New

Market

Penetration

Product Development

Market

Development

Diversification

D i i T l


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Decision Tools:Position-Attractiveness Matrix

INDUSTRY ATTRACTIVENESS

High Medium Low

High

Medium

Low

1 1 2

1 2 3

2 3 3

COMPET

ITIVEPOSITION

1=Invest; 2=Maintain; 3=Harvest

D i i T l


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Decision Tools:BCG Growth-Share Matrix

High Relative Market Share Low

High

MarketGrowthRate

Low

Star ?

Cow Dog

Documents

Strategy Chs 2 and 10