Approach to Strategy Development

EXTERNAL ANALYSIS

• Customer Analysis

• Competitor Analysis

• Market Analysis

• Environment Analysis

INTERNAL ANALYSIS

• Performance Analysis

• Determinants of

Strategic Options

OpportunitiesThreatsTrends

Uncertainties

StrengthsWeaknesses

ProblemsConstraints

STRATEGY IDENTIFICATION & SELECTION

Internal Analysis

Financial Performance

• Sales & Market Share

• Profitability

• ROA = profits / assets

• Shareholder Value: ROA > Cost of Capital

Beyond Financials

• Brand Loyalty– 3 out of 6 purchase occasions– Causes for High Loyalty / Low Loyalty– Delight drivers for the loyalists– Exit interview the disloyal customers– Monitor size of loyal customers– Compare it with key competitors

Beyond Financials

• Brand Associations– What do they think about the brand?– Perception: Innovative? Expensive?– Strength of each association– Understanding through projectives in FGDs

Beyond Financials

• Product Quality / Service Quality– Customer Expectation– Competitor Delivery– Key Performance Indicators– Perceived Quality (Product / Service)

Beyond Financials

• New Product Activity– Does R&D deliver on concepts?– Is the process of innovation well managed?– Track record of past launches– Average time-to-market

Beyond Financials

• Employee Capability / Performance– People with required capability– Can the human resources deliver on plans?– Are resources well managed?– What is their attitude?

Beyond Financials• Relative Cost

OUR COMPONENT IS…

INFERIOR SUPERIOR

MORE EXPENSIVE

LESS EXPENSIVEDe-emphasise

Upgrade EmphasiseLeave alone

Raise PriceCost ReductionChange Design

Change Process

Strength-Weakness Analysis

• Profiling the Company in the areas of– Marketing– Finance– Manufacturing– R&D– Human Resources

Ref. Marketing Management by Ramaswamy & Namakumari, 3rd Edn. (page. 130-131, Chart 10.4)

Example: Bajaj Motorcycles

• Strengths– Strong brand presence / growth in sales– Nationwide distribution / service network– Strong financial support of corporate– Strong imagery of Pulsar

• Weaknesses– Product Mix: Overdependence on Pulsar– No presence in fuel efficient / cruiser categories– Weak R&D: Last 4-5 launches a failure

Determinants of Strategic Options

• Past & Current Strategies [YAMAHA]

• Consumer Perception [TATA & INDICA]

• Organisational Capabilities– Marketing [HUL]

– Finance [RELIANCE]

– Human Resources [GOOGLE]

– R&D [INTEL]

– Manufacturing [TATA]

From Analysis to StrategyEXTERNAL ANALYSIS

• Customer Analysis

• Competitor Analysis

• Market Analysis

• Environment Analysis

INTERNAL ANALYSIS

• Performance Analysis

• Determinants of

Strategic Options

OpportunitiesThreatsTrends

Uncertainties

StrengthsWeaknesses

ProblemsConstraints

STRATEGY IDENTIFICATION & SELECTION

MARKET NEEDS /

ATTRACTIVENESS

COMPETITORS

STRENGTHS /

WEAKNESSES

ORGANISATIONAL

STRENGTHS /

WEAKNESSES

1. Strategic Investment

2. Value Proposition

3. Creating the Value Proposition

4. Communicating the Value Proposition

Strategic Investment

For Market Attractiveness

• Size of market • Market rate of growth • Customer Needs / Satisfaction Levels• Competition: Quantity, Position• Profitability• Sensitivity to economic trends• Environmental impact

For Competitive Position

• Market share • Management profile • R & D• Quality of products and services • Customer Loyalty• Margins• Distribution• Marketing • Flexibility