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Questions to Ask:

Are you committed to implementing a plan to move your company forward?

What are the names of the key people who need to buy in to the plan?
How will you communicate the plan throughout the company?
Will you commit money, resources, and time to support the plan?
Lally, R. !""#$. Aligning %alues with &trategies' (etting results for the Hands on )anager *ffice +dition,
pp. ,-"$.
.dentifying the specific definitions for an organi/ation0s formal values is often a fairly clean-cut task. )ost
companies include this information in their personnel handbook. Aligning the understanding of a
company0s informal values between e1ecutive management and many layers of subordinate employees
can prove to be a more challenging task. &o what are informal values? 23ou find them in 4uestions like,
2What does it take to get promoted,5 2What does it take to get fired56 2How late do . have to stay to be
recogni/ed as a hard-worker?5 Lally, !""#$. )any of these 4uestions can usually be answered by one0s
common sense. Although, it is most helpful to a company0s employee body, to understand clearly all
values, formal or informal. .t is the manager who is usually charged with the task of communicating formal
or informal values. How does this all relate to strategy? 2)anagers are good at creating strategies based
on market conditions, but they often stop there without considering whether elements underneath the
strategy7values, staff, and the rest7are aligned with it. .f they aren0t, the strategy fails5 Lally, !""#$. 8he
core idea is that regardless of how market conditions change, when the manager realigns his or her
strategy, other organi/ational elements must also change. 2)anagers must facilitate changes in
organi/ational structures, compensation, and the informal values so that they all line up with the
strategy5 Lally, !""#$. 8he manager should also work diplomatically with senior management in order to
facilitate certain changes that re4uire approval. *ften, the manager has to entertain both the employees
and senior management when working to accomplish strategy changes.
9lampitt, :., ;erk, ;. and Williams, ). <==!$. Leaders as &trategic 9ommunicators' .vey ;usiness
>ournal <nd +dition, pp. ?!-??$.
Among the important traits of a great leader, being a strategic communicator stands out as the most
important. &ome leaders are naturally strategic communicators, most of us however, could always be
much better. 8he difference between good and great is usually having a formula, a well thought out plan.
A <==< article, in the .vey ;usiness >ournal, outlines four steps to follow in order to be an effective
strategic communicator. 8he first step is to assess the conte1t. 2+ffective leaders assess those they seek
to influence. A proper assessment allows leaders to determine the group0s limits and possibilities. :ush
too slow and key initiatives never get traction. :ush too fast and they falter through sheer e1haustion5
9lampitt, ;erk, and Williams, <==<$. 8he second step is to craft a strategy. 8he leader must 2select
communication goals that are linked to the organi/ational goals6e1ecutives generally choose one of the
five basic communication strategies'
&pray @ :ray' +1ecutives shower employees with all kinds of information6
8ell @ &ell' +1ecutives communicate a more limited set of messages, first telling employees about
key issues, then selling them on the wisdom of their approach.
Anderscore @ +1plore' +1ecutives focus on developing a few core messages clearly linked to
organi/ational success, while actively listening for potential misunderstandings6
.dentify @ Reply' +1ecutives identify key employee concerns and then reply to them.
Withhold @ Aphold' +1ecutives withhold information until necessary.
Anderscoring a theme is not enough. 8o be effective, e1ecutives must play an active role in translating the
theme into corporate priorities and obBectives at each level of the organi/ation5 9lampitt, ;erk, and
Williams, <==<$. 8he third step is a simple one, the leader0s communication strategy must be clear. 8he
most important steps of this stage are 2repetition and redundancy6identify and utili/e opinion leaders6
select the right channels5 9lampitt, ;erk, and Williams, <==<$. 8he fourth and final step in this process is
to provoke dialogue. ;y obtaining feedback, a leader will be able to evaluate his or her own plan and
learn any additional insight that maybe useful in the future.
(alpin, 8. 29onnecting 9ulture to *rgani/ational 9hange5 HR )aga/ine )arch !"",,
29onnecting 9ulture to *rgani/ational 9hange5 from HR )aga/ine clearly communicates how
significantly difficult and comple1 it can be to accomplish this task. . e1tracted some ideas that seemed to
effectively simplify this process. 8hey are'
&et specific, numeric e1pectations6using this strategy allows people in the organi/ation to begin
Emeasuring the immeasurable.
Feep it simple6
;e creative6
.nvolve managers and employees in designing there own measures
Reward and recogni/e5 (alpin, !"",$.
.n addition to the preceding points it is essential to reward and recogni/e positive actions. *ther important
ideas include leading by e1ample and focusing on consistent positive behavior.
&ussland. W.A. <==<$. 9onnecting the planners and doers. Guality :rogress. %ol. H?,
.ssue ,, >une <==<. Retrieved April !, <==H from the World Wide Web'
9onnecting the :lanners and Joers, <==<$, appearing in the Bournal Guality :rogress presents the 8wo
Rings model developed by the author, &ussland to link business strategy to its implementation. 8he outer
ring of the model includes the key tasks of senior management which are to check, alert, plan and deploy
9A:J$, in that order. 8he inner ring includes the key tasks of line management which are to plan, do,
check and act :J9A$.
*n the outer ring, check refers to reviewing the strengths, weaknesses, opportunities and threats of the
organi/ation through 4ualitative and 4uantitative measures. Alert signifies initiating proactive changes and
developing contingency plans to respond to future trends. :lan refers to developing the strategic
obBectives and allocating resources to deploy the plan. &ussman describes deploy as linking 2doing the
right thing and doing it right5 p.,$.
When top-down deployment is complete, the process reverses direction. Line management takes over
and follows the inner ring processes of planning, checking, doing and acting. 8he process is complete
when roles and responsibilities have been assigned, and resources allocated. 8asks representative of
:J9A include the role of operations management to manage the actions planned, the use of resources,
processes deployed, products and services delivered and the value chain of customers and suppliers.
&uccessful linking of business strategy and its implementation results in connecting the internal and
e1ternal environments, connecting the past to the future and connecting all levels and functions of the
organi/ation. 8he 8wo Rings model is a systematic methodology to accomplish this linkage.
Implement Strategy
8he author found hundreds of articles on grand strategies, and for the most part they all dealt with military
or political issues. *ne would think that after two hours of searching, even someone who is poor at using
search strings would have stumbled upon more business related articles. 8he attached article was the
closest to 2useful5 that could be found. What caught the authors0 eye was the narrative approach of
putting the reader in the position of Bust having been promoted to an important position in a niche portion
of a large company, and then asking that person to take the somewhat ethereal big picture strategies of
the larger organi/ation and apply them in some workable manner. 8he gist of the message was one of
2marketing a process5, not a 2marketing process5.
Resource Management
8his proved to be an interesting site in that it took a flash card, or sound bit type of approach to discussing
leadership characteristics, and the connections with proper employee resource management. 8he author
especially liked the sections that contained 2myth v. reality5 comparisons. .t could be argued that this site
does not address a wide variety of resources other than personnel, but in the authors0 opinion, the people
are the most important resource. 8his site also included information on issues such as reward systems
and employee empowerment. .n retrospect, this site would probably be a more effective part of the tool kit
if it was split up and scattered throughout the tool kit.
How to achieve the targeted results
Action plans! how to get there"
28here are three kinds of companies' those that make things happen, those that watch things happen,
and the rest who wonder what happened.5 Anonymous
A successful business is about creating value for its customers, and the intent or plan should be to create
more value than the competitors. 8his process involves matching the firm0s resources and capabilities
with the opportunities and challenges of the marketplace. A successful business strategy matches the
firm0s strengths resources and capabilities$ with market opportunities to create a sustainable competitive
advantage by providing more value for its customers than competitors.
8hree ingredients are necessary for a business to successfully steer a strategic course through market
turbulence and become proactive in shaping events and competitive behavior to its advantage.
!. )ission 7 A strategic mission and vision that articulates the nature of the business and focuses
the energies of all parts of the organi/ation toward the task of outperforming the competition.
<. )arket 7 A market orientation in which the beliefs and values that pervade the organi/ation
emphasi/e the need to put the customer first.
H. )easurement 7 A process for formulating, choosing, and evaluating the best strategy Jay, p.
#H$%&H#S A'$%# S#RA#(&)
&uperior firm performance is generally attributed to its competitive advantage. 9ompetitive advantage
arises from leveraging a firm0s uni4ue skills and resources to implement value-creating strategy that
competitors cannot implement as effectively. A sustainable competitive advantage occurs when the
advantage is immune or not subBect to erosion by competitor0s actions.
8hus, a strategy is decisions and activities that enable a firm to achieve and sustain competitive
advantage and to improve its performance. .t is a game plan for moving the company into an attractive
business position and building a sustainable competitive advantage 8hompson, p.DH$.
&trategy is a directional statement that serves as a central theme guiding and coordinating integrated
actions in the pursuit of competitive advantage. .t is a compass, not a detailed road map Jay, p<!$.
&trategy is both
!. proactive intended$ deliberate and planned action
<. reactive adaptive$ as-needed reactions to unanticipated developments and fresh competitive
pressures. 8hompson, p."$
&trategy is a guide how to pursue the company0s mission and strategic vision and how to achieve it. A
competitive strategy specifies how a business intends to compete in the markets it chooses to serve Jay,
p?$. &trategy focuses on how to achieve performance targets, how to outcompete rivals, how to achieve
sustainable competitive advantage, how to strengthen the company0s long-term position, how to grow the
business, how to satisfy customers, how to respond to changing market conditions, 8hompson, p.!=, D<$.
;asically the central thrust of business strategy is how to build and strengthen the company0s long-term
competitive position in the marketplace.
Steps to *ormulate a +ompetitive Strategy
&imply stated, strategy is an action plan that directs a firm in developing a competitive advantage. A
sustainable competitive advantage arises from leveraging a firm0s core competencies to create value for
the customer. Kor a strategy to be successful, it must be consistent with the firm0s missionIvision,
obBectivesIgoals, with its internal and e1ternal environment, and target market.
A pictorial representation of this process is as follows'
Kormulating a competitive strategy is based upon the steps we have done thus far' :orter, 1i1-11$
+ore +ompetencies
What customer needs is our company uni4uely 4ualified to meet?
What is the business doing now? What are our core competencies?
What is the current strategy?
Implied Assumptions
What assumptions about the company0s relative position, strengths and weaknesses,
competitors, and industry trends must be made for the current strategy to make sense?
What is our business and what are we trying to accomplish on behalf of our customers?
What will our business look like in ?-!= years from now?
(sta.lish $./ectives
.n what areas will our business continue being actively involved in the future?
What is happening internally and e1ternally?
What is happening in the environment?
.ndustry Analysis 7 What are the key factors for competitive success and the important industry
opportunities and threats?
9ompetitor Analysis 7 What are the capabilities and limitations of e1isting and potential
competitors, and their probable future move?
&trengths and Weaknesses 7 (iven an analysis of industry and competitors, what are the
company0s strengths and weaknesses relative to present and future competition?
1evelop &oals
What is to be accomplished?
(oals are developed after being filtered through a &W*8 analysis.
What are our specific, measurable targets?
Segment2#arget Market
What customers are we targeting?
How should the firm differentiate and position itself in the target market?
What should the business be doing?
What are the feasible strategic alternatives given the customer analysis?
Which alternatives best relates the company0s situation to e1ternal opportunities and threats?
Strategy 3 How to Achieve the #argeted Results
With these steps completed, we are now able to formulate a strategy to provide direction to the company.
A company0s strategy should be market-driven and customer-driven using outside-in strategic thinking
aimed at boosting customer satisfaction and achieving sustainable competitive advantage. 8he company
must study market trends, listen to customers, enhance the company0s competitiveness, and steer the
company in whatever new directions are dictated by market conditions and customer
preferences. revised 8hompson, p.!=$
A corporate planning director of a Kortune ?== )L9 observes that 2the process of strategic marketing is
coming to be defined as the management of competitive advantage 7 that is, as process of identifying,
developing, and taking advantage of opportunities that result in a tangible business advantage.5 )eeting
these challenges re4uires developing market-driven strategies. 8he process involves becoming market-
oriented, matching customer value opportunities with organi/ation0s distinctive capabilities, and
developing internal and e1ternal strategic relationships. 8he basic initiative for guiding market-driven
strategy begins by developing a market-oriented culture and processes in the organi/ation5 +1cerpt from'
29ompetitive Advantage in the (lobal )arketplace' a Kocus on )arketing &trategy,5 by 8homas Hult,
Javid 9ravens, and >agdish &hethM >ournal of ;usiness Research, v?!, <==!.$
Kormulating a business strategy that yields sustainable competitive advantage re4uires some of the
following actions' 8hompson p.!!,DC-D"$.
Actions to strengthen the company0s resource base and competitive capabilities
Actions to strengthen the company0s long-term competitive position and secure a competitive
advantage accelerate R @ J, to broadenInarrow the product line, improve product design, alter product
4uality or add new features, introduce new technologies, modify customer service, outcompete rivals on
the basis of superior resources and competitive capabilities.
Actions to respond to changing industry conditions and other emerging developments in the
e1ternal environment shifting customer preferences, new government regulations, the globali/ation of
competition, entry or e1it of new competitors$
Actions to capitali/e on new opportunities
Jefensive moves to counter the actions of competitors and defend against e1ternal threats
Actions to merge with or ac4uire a rival company or form strategic alliances and collaborative
+fforts to alter geographic market coverage and degree of vertical integration
)oves and approaches that define how the company manages key activities.
)oves to unite strategic initiatives in the various functional area of business manufacturing and
operationsM marketing, promotion, and distributionM R@J technologyM human resourcesM financial$ to build
competitively valuable resource strengths and capabilities to support the company0s competitive approach
and overall strategy.
Representative Strategies
A company0s competitive strategy consists of its business approaches and initiatives to attract customers
and fulfill their e1pectations, to withstand competitive pressures, and to strengthen its market
position 8hompson, p.!H?$. Having identified and evaluated its maBor competitors, the company must
design broad competitive marketing strategies by which it can gain competitive advantage by offering
superior customer value. 9ompetitive strategies have been classified to define marketing strategy in
terms of a single-minded pursuit of delivering superior value to customers.
An competitive advantage typically is based on'
!. lower costs
<. a differentiated product
H. a focused in-depth understanding of the consumer
+1amples of competitive advantages for'
!. Lower costs 7 Walmart
<. Jifferentiated product 7 .); provides technology products that many business consumers would
prefer to own. Harvard proves a business education that is truly uni4ue.
H. Kocused 7 Lordstroms provides products and services that e1hibit a uni4ue understanding of the
more affluent consumer.
+ach company must determine which strategy makes the most sense given its position in the industry, its
obBectives, opportunities, and resources Fotler, p.,C?$ 9ompanies that pursue a clear strategy are likely
to perform well. 8he firm that carries out that strategy best will make the most profits. Kirms that do not
pursue a clear strategy 7 2)iddle-of-the-roaders5 or stuck in the middle and do the worst Fotler, p.,C,$
&eneric +ompetitive Strategies
A generic business strategy classifies business strategies and approaches toward obtaining a sustainable
competitive advantage into groups with a common thrust. 8here are a host of strategic thrust available.
;eing innovative, global, entrepreneurial, information technology based, or manufacturing could drive a
8he basic differences among competitive strategies are'
!. whether a company0s market target is broad or narrow
<. whether it is pursuing a competitive advantage linked to low costs, product or understanding your
customer. Any comple1 strategy uses one of these as the basis. )ichel :orter, an influential strategy
researcher, has classified competitive positioning strategies' low cost, differentiation, and focus. 8he
difference among the three generic strategies are illustrated in the following chart' :orter, p.H"$.
8he following are the most basic strategies. We will be choosing one of these for each of your
segmentItarget markets.
$verall 4ow +ost 4eadership Strategy
8his strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost
provider of a product or service. *verall low cost does not refer solely to price. .t refers to the delivered
cost to the customer. 8he company works to achieve the lowest costs of production and distribution so
that it can price lower than its competitors and win a large market share Fotler, p.,C,$.
8his strategy is aimed at achieving low-cost leadership industrywide. .t is based on achieving a
sustainable cost advantage in some important element of the product or service Aaker, p.#$. A low-cost
provider is a powerful competitive approach in markets where many buyers are price sensitive. A low-cost
leader0s basis for competitive advantage is lower overall costs than competitors. &uccessful low-cost
leaders are e1ceptionally good at finding ways to drive costs out of their business 8hompson, p. !H?,
!H,$. +1. Jollar 8ree &tore, Walmart, Jell 9omputer
A low-cost leader has two options for achieving superior profit performance'
!. 8o use the lower-cost edge to under price competitors and attract price-sensitive buyers.
<. 8o refrain from price-cutting altogether, be content with the present market share, and use the
lower-cost edge to earn a higher profit margin on each unit sold, thereby raising the firm0s total profits and
overall return on investment 8hompson, p. !H,, !H#$
8he overall cost leadership position can be achieved through a high market share or through other
advantages, such as favorable access to raw materials or state-of-the-art manufacturing
e4uipment Aaker, p.#$. 8o achieve a cost advantage, a firm0s cumulative costs across its value chain
must be lower than competitors0 cumulative costs. Feys to success in achieving low-cost leadership is to
be proactive in restructuring the value chain, finding innovative ways to restructure processes and tasks,
cut out frills, and provide the basics more economically 8hompson, p. !HC, !D?$. A low cost strategy need
not always be associated with low prices, because lower cost could lead to enhanced profits or increased
advertising or promotion instead of reduced price Aaker, p.#$.
8he more price sensitive buyers are and the more inclined they are to base their purchasing decision on
which seller offers the best price, the more appealing a low-cost strategy becomes. A low-cost provider0s
product offering must always contain enough attributes to be attractive to prospective buyers. A low-cost
leadership strategy works best when'
!. :rice competition among rival sellers is especially vigorous.
<. 8he industry0s product is standardi/ed or readily available from other sellers.
H. 8here are few ways to achieve product differentiation, thereby making buyers very sensitive to
price differences.
D. )ost buyers use the product the same ways.
?. ;uyers incur low switching costs.
8hompson, p. !D,, !D#$
.mplementing overall low cost leadership strategy re4uire different resources and skills. .t also implies
differing organi/ational arrangements, control procedures, and inventive systems. &ome common
implications are as follows' :orter, p.D=$
1e,enses Against *ive +ompetitive *orces: :orter, p.H,, H#$
8he low-cost position protects the firm against all five competitive forces because bargaining can only
continue to erode profits until those of the ne1t most efficient competitor are eliminated.
Risks: :orter, p.D?$
9ost leadership imposes severe burdens on the firm to keep up its position, which means reinvesting in
modern e4uipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being
alert for technological improvement. &ome of these risks are'
8echnological breakthroughs can open up cost reductions for rivals that nullify a low-cost leader0s
past investments, learning, and gains in efficiency.
Low-cost learning by industry newcomers or followers, through imitation or through their ability to
invest in state-of-the-art facilities.
.nability to see re4uired product or marketing change because of the attention placed on cost.
.nflation in costs that narrow the firm0s ability to maintain enough of a price differential to offset
competitors0 approaches to differentiation.
(etting carried away with overly aggressively price-cutting and ending up with lower, rather than
higher, profitability.
Lot emphasi/ing avenues of cost advantage that can be kept propriety. &ustaining its cost in
ways difficult for rivals to copy or match.
;ecoming too fi1ated on cost reduction. .t can be pursued so /ealously that a firm0s offering ends
up being too frills-free to generate buyer appeal.
1i,,erentiation Strategy
8his strategy concentrates on creating a highly differentiated productIservice line and marketing program
so that it is perceived to a broad spectrum of customers as being uni4ue. 8he company focuses on
superior performance by targeting an important customer benefit valued by a segment of market. )ost
customers would prefer to this productIservice line if its price is not too high Fotler, p.,C,$. +1. %ictoria
&ecret, )arriott, .;)
A differentiation strategy is one in which the product offering is differentiated from the competition by
providing value to the customer by product 4uality, perhaps by enhancing the performance, 4uality,
prestige, features, service backup, reliability, or convenience of the product Aaker, p.,,#$. .t seeks to
differentiate the company0s productIservice offering from rivals0 in ways that will appeal to
buyers. 8hompson, p. !H?$.
&ustainable differentiation usually has to be linked to uni4ue internal skills, core competencies, and
capabilities. As a rule, differentiation yields a long-lasting and more profitable competitive edge when it is
based on new product innovation, technical superiority, product 4uality and reliability, and comprehensive
customer service. &uch attributes are widely perceived by buyers as having value 8hompson, p. !DC$
8he competitive advantage for a differentiation strategy is either a productIservice offering whose
attributes differ significantly from the offerings of rivals or a set of capabilities for delivering customer
value. &uccessful differentiation strategy begins with a deep understanding of what customers need and
ends with building organi/ational capabilities to satisfy these needs better than rivals 8hompson, p.!D"-
1i,,erentiation strategies work .est in markets where: 8hompson, p.!?<$
!. 8here are many ways to differentiate the company0s offering from that of rivals and many buyers
perceive these differences as having value.
<. ;uyer needs and uses of the item or service are diverse.
H. Kew rival firms are following a similar differentiation approach.
D. 8echnological chance is fast-paced and competition revolves around evolving product features.
.mplementing differentiation strategy re4uire different resources and skills. .t also implies differing
organi/ational arrangements, control procedures, and inventive systems. &ome common implications are
as follows' :orter, p.D!$
1e,enses Against *ive +ompetitive *orces: 8hompson, p.!?!, !?<$
Jifferentiation results in enhanced buyer loyalty to a company0s brand or model and greater willingness to
pay more for it. .t creates a defensible position for coping with the five competitive forces.
Risks: :orter, p.D,$ 8hompson, p. !?<$
1i,,erentiation also involves a series o, risks:
8he cost differential between low-cost competitors and the differentiated firm becomes too great
for differentiation to hold brand loyalty. ;uyers thus sacrifice some of the features, services, or image
possessed by the differentiated firm for large cost savings.
*ver-differentiating so that price is too high relative to competitors or that the array of
differentiating attributes e1ceeds buyers0 needs
8rying to charge too high a price premium. 8he bigger the price differential the harder it is to keep
buyers from switching to lower-priced competitors. . ;uyers are satisfied with a basic product and don0t
think 2e1tra5 attributes are worth a higher price.
;uyers0 need for the differentiating factor falls.
8rying to differentiate on the basis of something that does not lower a buyer0s cost or enhance a
buyer0s well-being, as perceived by the buyer.
.mitation narrows perceived differentiation. Rapid imitation means that a firm never achieves real
Lot understanding or identifying what buyers consider as value.
*ocused Strategy
8his strategy concentrates on a narrow market segment by offering niche customers a customi/ed
product or service that meets their tastes and re4uirements better than rivals0 offerings. 8he company
focuses on targeting an important customer benefit valued by a narrow segment of the market could be a
particular buyer group, segment of the product line, or geographic market$. .t concentrates its effort on
serving a few market segments well rather than going after the whole market Fotler, p.,C,$. 8he entire
focus strategy is built around serving a particular target very well. +1. microbreweries, local bakeries, bed-
and-breakfast inns, bouti4ues
A focuser0s basis for competitive advantage is either
!. lower costs than competitors in serving the market niche
<. an ability to offer niche members something they perceive is better.
8his strategy works best when' 8hompson, p.!?,$
!. .t is costly or difficult for multisegment competitors to meet the speciali/ed needs of the target
market niche.
<. When no other rival is attempting to speciali/e in the same target segment.
H. When a firm doesn0t have the resources or capabilities to go after a bigger piece of the total
D. When the industry has many different niches and segments, allowing a focuser to pick an
attractive niche suited to its resource strengths and capabilities.
1e,enses Against *ive +ompetitive *orces: 8hompson, p.!??,!?,$
A focuser0s speciali/ed competencies and capabilities in serving the target market niche provide a basis
for defending against the five competitive forces.
Risks: :orter, p.D,$ 8hompson, p. !?,$
Kocus involves yet another set of risks'
8he cost differential between broad-range competitors and the focused firm widens to eliminate
the cost advantages of serving a narrow target or to offset the differentiation achieved by focus.
8he differences in desired products or services between the strategic target and the market as a
whole narrows.
9ompetitors find submarkets with the strategic target and out focus the focuser.
Stuck in the Middle Strategy
8his is a losing strategy. Kirms that do not pursue a clear strategy , called middle-of-the-roaders, do the
worst. Jo not be stuck in the 2middle5 trying to be successful at all three disciplines, because your firm will
generally end up not being good at any one. ;usiness that do not stand out as the lowest in cost, highest
in perceived value, or best in serving some market segment encounter difficulties. +1. &ears, Holiday .nn
Fotler, p.,C,$
Market5'ased &eneric Strategies
8hese are similar to :orter0s competitive two strategies, but market-based in their development. )arket
strategy has two fundamental obBectives'
!. 8o create superior customer value. 8his is similar to achieving competitive advantage, but with a
different emphasis. 8he superior customer value perspective, also known as market orientation, focuses
everyone in the organi/ation on customers0 needs that than on competitors0 products, thereby helping the
business act rather than merely react.
<. 8o create economic value for the owners of the business. &uperior economic performance is the
result of a strategy that creates superior customer value &later, p.H#$
.t is believed that companies gain leadership position by delivering superior value to their customers.
)ichael 8reacy and Kred Wiersema, in their book the Jiscipline of )arket Leaders, !""?, suggest three
generic market strategies 7 :roduct leadership, customer intimacy, and operational e1cellence &later,
p.H#$. 9ompanies can pursue any one of the market-based strategies for delivering superior customer
value. Kew firms can be the best at more than one of these disciplines. Leading companies focus on and
e1cel at a single market-based generic strategy, while meeting industry standards on the other
two. Fotler, p.,C,, <C#$. 8heir success depends more on how well each is e1ecuted and less on the
market environment of the business. 8he following is an e1planation of the market-based strategies'
$perational (6cellence
8his strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost
provider of a product or service because of the firm0s focus on efficiency. 8he company provides superior
value to their customers by offering them lowest total cost. .t works to reduce costs and to create a lean
and efficient value-delivery system. .t serves customers who want reliable, good-4uality products or
services, but who want them cheaply and easily. Fotler, p.,C,$. +1. Wal-)art, &outhwest Airlines, Jell
9omputer, and )cJonalds.
#wo operating characteristics common to these .usinesses are:
!. 9ommitment to standardi/ation and simplicity. +1.-)cJonald0s has developed a set of uniform
procedures that provide for easy employee training and efficient operations.
<. 8he use of information technology. +1. 7 Wal-)art0s competitive advantage is based on their
investment in information technology that has resulted in the creation of a superior logistics
capability &later, p.H"$.
+ustomer Intimacy
8his strategy concentrates on a narrow market segment by a deep understanding of its customer and his
perception of the value of the product or service offered. 8he company provides superior value by
precisely segmenting its markets and then tailoring its products or services to match e1actly the needs of
targeted customers. .t speciali/es in satisfying uni4ue customer needs through a close relationship with
and intimate knowledge of the customers. .t builds detailed customer databases for segmenting and
targeting, and empowers its marketing people to respond 4uickly to customer needs. .t serves customers
who are willing to pay a premium for a service, or special attention they receive Fotler, p.,C,$. +1.
Ama/on, Land0s +nd
9ustomer intimate business focuses on understanding the customer and his perception of the value of the
product or service offered. Accompanying this orientation is a focus on the lifetime value of a relationship.
.t costs only about one-fifth as much to make an additional sale to an e1isting customer as it does to
attract and sell to a new one. 8hus the concepts of 2customer e4uity5 and 2customer share5 instead of
market share are central to the customer intimacy business &later, p.HC$
:roduct Leadership 7 8his strategy concentrates on creating an innovative productIservice line and
marketing program so that it is perceived to a broad spectrum of customers as being leading-edge
products or services. 8hey provide superior value by offering its customers a continuous stream of state-
of-the-art products or services. 8he company seeks to identify emerging opportunities and continuously
strive to develop and deliver new products. 8hey look for first mover advantages. .t is open to new ideas,
relentlessly pursues new solutions, and works to reduce cycle times so that it can get new products to
market 4uickly &later, p.HC, Fotler, p.,C,$. +1. &ony, )icrosoft, and Like
8hey key task for product leaders if to maintain an environment in which focused creativity can flourish. .t
re4uires a culture that encourages e1perimentation and risk-taking, one in which wee-developed plans
that fail are often celebrated rather than punished. :roduct leaders usually work in multifunctional teams
to shorten response times and development cycles. 8hey recogni/e the importance of developing
platform technologies and products that become the foundation for future products &later, p.H"$.
8he basic differences among competitive strategies are'
!. whether a company0s market target is broad or narrow
<. whether it is pursuing a competitive advantage linked to low costs, product, or understanding its
customer. Any comple1 strategy uses one of these as the basis.
8he following are the most basic strategies. We will be choosing one of these for each of your
segmentItarget markets.
+ost 4eadership Strategy 7 *perational$
8his strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost
provider of a product or service. *verall low cost does not refer solely to price. .t refers to the delivered
cost to the customer.
8he company works to achieve the lowest costs of production and distribution so that it can
price lower than its competitors and win a large market share.
Jollar 8ree &tore, )otel ,
$perational (6cellence 7 )arket Kocused$
8his strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost
provider of a product or service because of the firm0s focus on efficiency. 8he company provides superior
value to their customers by offering them lowest total cost. .t works to reduce costs and to create a lean
and efficient value-delivery system. .t serves customers who want reliable, good-4uality products or
services, but who want them cheaply and easily.
Wal-)art, &outhwest Airlines, Jell 9omputer, and )cJonalds, Kederal +1press
1i,,erentiation Strategy 7 *perational$
8his strategy concentrates on creating a highly differentiated product or service line and marketing
program so that it is perceived to a broad spectrum of customers as being uni4ue. 8he company focuses
on superior performance by targeting an important customer benefit valued by a segment of market. )ost
customers would prefer to this productIservice line if its price is not too high.
%ictoria &ecret, )arriott, .;)
7roduct 4eadership 7 )arket Kocused$
8his strategy concentrates on creating an innovative productIservice line and marketing program so that it
is perceived to a broad spectrum of customers as being leading-edge products or services. 8hey provide
superior value by offering its customers a continuous stream of state-of-the-art products or services. 8he
company seeks to identify emerging opportunities and continuously strive to develop and deliver new
&ony, )icrosoft, Like, >ohnson @ >ohnson
*ocused Strategy 7 *perational$
8his strategy concentrates on a narrow market segment by offering niche customers a customi/ed
product or service that meets their tastes and re4uirements better than rivals0 offerings. 8he company
focuses on targeting an important customer benefit valued by a narrow segment of the market buyer
group, segment of the product line, or geographic market$. 8he entire focus strategy is built around
serving a particular target very well.
)icrobreweries, local bakeries, bed-and-breakfast inns, bouti4ues.
+ustomer Intimacy 7 )arket Kocused$
8his strategy concentrates on a narrow market segment by a deep understanding of its customer and his
perception of the value of the product or service offered. 8he company provides superior value by
tailoring its products or services to match e1actly the needs of targeted customers. .t speciali/es in
satisfying uni4ue customer needs through an intimate knowledge of the customers. .t builds detailed
customer databases for segmenting and targeting, and empowers its marketing people to respond 4uickly
to customer needs.
Ama/on, Land0s +nd, 9able @ Wireless, Home Jepot
Low that you have a strategy for each customer group, make sure it is a winning strategy for your
company. A winning strategy must build a competitive advantage that can become sustainable, fits the
enterprise0s situation, and improves company performance. 8he following criteria are to be used as
thought proving 4uestions. .t is not necessary for your strategy to meet all these criteria. However, they
are presented for your consideration.
#ests o, a 0inning Strategy
A winning strategy must build sustainable competitive advantage, fit the enterprise0s situation, and
improve company performance. 8ests can be used to evaluate the merits of one strategy over another
and to gauge how good a strategy is. 8he soundness of a competitive strategy depends on how well it
can satisfy the following tests' 8hompson, p.,< and Jay, p.H?-H#, D!$
Sustaina.le +ompetitive Advantage #est
A good strategy leads to sustainable competitive advantage. 8he bigger the competitive edge that a
strategy helps build, the more powerful and effective it is.
Will the strategy create and maintain a competitive advantage through some combination of
lowest delivered costs, or superior customer value?
.s there an effective match of core competencies with opportunities and threats?
.s there a basis for a competitive advantage that is sustainable in light of probable competitive
Will the strategy put the business in a position to ward off known threats, e1ploit opportunities,
enhance current advantages, or provide new sources of advantages?
9an the strategy adapt to a broad range of foreseeable environments?
How difficult will it be for competitors to match, offset, or leapfrog the e1pected advantages?
Joes the strategy enhance the company0s competitive position for the long term?
Joes the build a company reputation and recogni/able industry position?
#he &oodness o, *it #est
A good strategy is tailored to fit the company0s internal and e1ternal situation. Without tight situational fit,
there0s real 4uestion whether a strategy appropriately matches the re4uirement for market success.
.s the strategy vulnerable to unacceptable environmental and internal uncertainties?
9an these risks be managed or avoided?
Joes the strategy play aggressive offense to build competitive advantage and aggressive
defense to protect it?
7er,ormance #est
A good strategy boosts company performance.
What are the gains in profitability?
What are the gains in the company0s competitive strength and long-term market position?
What are the prospects for successful implementation, feasibility, supportability, consistency?
+ompetitive Advantages 1o 1iminish &ource Jay, page <=,-$
)ost advantages are contestable as sustainability is only a matter degree. 9onsider a :rice Advantage. .t
is only a matter of time before a competitor can easily counter the price because it becomes known to the
marketplace. Jue to reverse-engineering abilities, most product innovation is 4uickly contested. As such,
a couple of mechanisms are at work in most markets to undermine the leaderM however these factors can
also benefit competitors seeking to attack.
:rotective barriers are weakened by technological and environmental changes. Lew technology
allows followers to either match or leapfrog the leader.
9ompetitors can 4uickly learn how to imitate the advantage sources of the leaders by researching
the leader0s mistakes, hiring key personnel, and conducting research to determine unfulfilled e1pectations
of customers or the leader0s channel.
8he following are situations when basically no competitive advantage is secure'
Highly turbulent environment.
Kew barriers to entering the industry.
Low asset intensity.
However, there can be some redemption in developing invisible assets. 8hese generally e1ist in the
superior skills of personnel, the training or information they ac4uired, and their commitment to the
organi/ation. Another is a uni4ue corporate culture such as a customer orientation$ and committed
employees. *ther invisible assets can e1ist outside the firm in a well-established brand name, e1clusive
sources of raw material, or in reliable channel relationships. 8he distinguishing features of invisible assets
!. 8hey are unattainable with money alone, meaning difficult to copy.
<. 8hey are time-consuming to develop.
H. (enerally they are capable of multiple uses.
Strategic Identi,ication Aakers, p.,, <C-H!$
8he identification of strategic alternatives is based on the determination of'
7roduct Market Investment Strategy
8he :roduct-market scope is defined by6
:roduct e1pansion 7 the products it offers and chooses not to offer.
)arket e1pansion 7 the markets it seeks to serve and not serve, the competitors it chooses to
compete with and to avoid.
%ertical e1pansion 7 its level of vertical integration.
&rowth directions
.n the following product-market matri1, four growth options are shown.
8o penetrate the e1isting product market. A firm may attempt to attract customers from
competitors or increase usage by e1isting customers.
8o :roduct e1pansion while remaining in the current market.
Apply the same products in new markets.
8o diversity into new product markets.
%ertical integration adds another dimension to the product-matri1
Investment strategies
Kor each product market four investment options are possible'
(row 7 invest to grow or enter the product market.
)aintain 7 invest only to maintain the e1isting position.
)ilk 7 )ilk the business by minimi/ing investment.
Withdraw 7 recover as many of the assets as possible buy li4uidating or divesting the business.
*unctional Area Strategies
8he development of a business strategy involves coordination of various function area'
:roduct line strategy
:ricing strategy
Jistribution strategy
9ommunication messaging strategy
)anufacturing strategy
.nformation technology strategy
&egmentation strategy
(lobal strategy
.nternet strategy
8he strategic assets or competencies that underlie the strategy and provide the sustainable competitive
&trategy formulation must consider the cost and feasibility of generating or maintaining asset or
competencies that will provide the basis for a sustainable competitive advantage.
Strategic 7ositioning
&trategic positioning specifies how the business is to be perceived relative to its competitors and market
by its customers and employeesIpartners. .t represents the essence of a business strategy Aakers$.
:ositioning is the way the productIservice is defined by consumers on important attributes. 8he place the
productIservice occupies in the consumer0s mind in relation to its competitors. F@A, p.<,"$
+riteria *or Strategy Selection Aaker, p.H=$
9onsider scenarios suggested by strategic uncertainties and environmental opportunitiesIthreats.
:ursue a sustainable competitive advantage.
+1ploit organi/ational strengths or competitor weaknesses.
Leutrali/e organi/ational weaknesses or competitor strengths.
;e consistent with organi/ational visionIobBectives.
Achieve a long-term return on investment.
;e compatible with visionIobBectives
;e feasible.
Leed only available resources.
;e compatible with the internal organi/ation.
9onsider the relationship to other strategies within the firm.
Koster product portfolio balance.
9onsider fle1ible.
+1ploit synergy.
+ompetitive Strategies - ;ased on 9ompetitive :ositions
8here are different competitive strategies based on the different competitive position the firm plays in the
target market. ;ased upon the company0s competitive position, there are specific marketing strategies.
8he following are strategies for market leaders, challengers, followers, and nichers' Fotler, ,C#-,C" and
8hompson, p.<==-<=#$
Strategy ,or Market 4eader
8he firm in an industry with the largest market share. .t usually leads another firms in price changes, new
product introductions, distribution coverage, and promotion spending.
+1pand total market
:rotect market share
+1pand market share
Market +hallenger
A runner-up firm in an industry that is fighting hard to increase its market share.
Kull frontal attack
.ndirect attack
Market *ollower
A runner-up firm in an industry that wants to hold its share without rocking the boat.
Kollow closely
Kollow at a distance
Market 8icher
A firm in an industry that serves small segments that other firms overlook or ignore. 8he firm knows the
target customer group so well that it meets their needs better than other firms that casually sell to this
niche. 8he nicher can charge a substantial markup over costs because of the added value. An ideal
market niche is big enough to be profitable and has growth potential.
;y customer, market, 4uality-price, service
)ultiple niching
Additional +ompetitive Strategies
Kirst-)over &trategiesI :reemptive &trategy 7 8hompson, p.!#=$ 7 A preemptive strategic move is the
pioneering implementation of a strategy into a business area that, because it is first, generates an asset
or competency that forms the basis of an sustainable competitive advantage. Kor a preemptive move to
create 2first-mover advantages,5 competitors must be inhibited pr prevented from duplicating or countering
it Aaker, p.#$.
Synergy Strategy - Aaker, p.C$ &ynergy strategy occurs when a business has an advantage
because it is linked to another business within the same firm or division. 8he two businesses, may be able
to share a sales force, office, or warehouse and thus reduce costs or investment. 8hey may be able to
Bointly offer a customer a combination of coordinating products.
#actical Issues and 7rogram *ormulation
&tudies have shown that a ?N increase in customer loyalty can produce profit increases up to
C?N. :eppers @ Rogers (roup Lewsletter 7 *ct. <, <==<$
2)arketing is the process of planning and e1ecuting the conception, pricing, promotion, and distribution of
ideas, goods, and services to create e1changes that satisfy individual and organi/ational
obBectives.5 American )arketing Association, !"C?$ 8his is not based on customer actions, but firm
+onnecting with +ustomers through Segmenting! #argeting! and 7ositioning
&egmenting' determining distinct groups of buyers segments$ with different needs,
characteristics, andIor behaviors. 9an0t serve all profitably.
8argeting' process of evaluating each segments attractiveness and selecting.
:ositioning' arranging for a product to occupy a clear, distinctive, desirable place in target0s mind
relative to competitors.
:robably a critical aspect for marketers in future will be to focus on Liches.
&hifting aging demographics
+ntertainment e1plosion
High income consumers
Lew media
.mportance of brands
Guality, pricing, and service
9ause-related marketing
1evelop the 7ositioning through Marketing Mi6 or 9 7s
8he )arketing )i1 D :s$ is a set of marketing toolsItactics that the firm uses to pursue its obBectives.
:roduct 7 goods @Ior service combination that a company offers a target marketM
defined as an offering not Bust physical characteristics
:rice 7 amount of money consumers have to pay to obtain the product
:romotion 7 activities that persuade target customers to buy the product
:lace 7 activities that make the product available
8actics are the specific actions that lead to implementing your strategies. 8he tactics are broken down in
to four areas product, price, promotion, distribution$ and will provide the framework for creating action
items to accomplish your strategic market obBectives of reaching your target market. 8ogether, they are a
set of tools that the firm blends to produce a response it wants in the target market. 8here are different
tactical positions for each functional area based on the selected strategy. 8he tactical positions reinforce
your strategy.
*rom a product5,ocused approach! the ,our areas are de,ined as:
:roduct' 8he product or service you are offering to your target market
:rice' 8he amount of money customers have to pay to obtain your product.
:romotion' 8he activities that communicate the merits of the product and persuade target
Jistribution' 8he company0s activities that make the product available to target consumers.
*rom a customer5,ocused approach! the ,our areas are de,ined as:
9ustomer Leed
9ustomer 9ost
+ach tactical area contains numerous considerations and issues firms need to be aware of, and
sometimes address, when implementing strategies. 8his section addresses the considerations at a high
level and is meant to provoke further research if an issue pertains to your company. We will provide you
with a list of resources for each area.
What is a product? A product is anything that can be brought to the market, which will provide satisfaction.
A product is more than Bust a physical obBect, which is why we refer to a product as an offering. .t includes
physical obBects, services, events, persons, places, organi/ations, ideas, and any combination of these.
Are you offering a product or a service?
What is your customer 2really buying5 when heIshe ac4uires your product?
+onsiderations ,or product2service identi,ication
Why do consumers buy productsIservices?
Attributes- products are a 2bundle5 of attributes, which include 4uality, features, and style @
;randing- some type of designation that identifies the market or seller. ;rand e4uity management
is critical for <!st century marketers.
:ackaging- it is used not Bust to contain the product, but has promotional value as well.
Labeling- at least product identification, but can e1tend to in-depth descriptions and promotion.
:roduct support services 7 activities that augment the actual product.
7roduct li,e5cycle strategies
:roduct life-cycle 7 estimation of a product0s revenues and profits over the course of its life. 8his is
another 2tool5 to assist a marketer in productIservice strategies. :rovides a perspective to understand the
aspects of the product. 8he five stages are'
:roduct development begins when the company finds a new product. &ales are O= and heavy
.ntroduction provides a period of slow growth with none1istent profits due to e1tensive
promotional costs.
(rowth is a period of rapid market acceptance and developing profits.
)aturity is a period of slow growth, level profits, and increasing marketing e1penditures to defend
the product0s position against competitors.
Jecline is a period of falling sales and profits.
Why is price important?
:rice is one of the maBor factors affecting buyer choice and needs to be cohesive with the strategy you
picked. :rice is the only element of the four tactics that produces revenues as the other areas represent
cost areas. 9ommon pricing mistakes include'
8oo cost-oriented rather than customer value-oriented.
Lot revised often enough to reflect market changes.
Lot taking the other H tactics into consideration.
Lot varying enough for different products in the mi1$, market segments, or purchase occasions.
+onsiderations ,or 7ricing 1ecisions
8here are both internal and e1ternal factors to consider when setting prices.
Internal ,actors include
Looking at your strategic market obBectives and associated goals
Looking at the benefits you are providing your customer. 9ustomers typically seek out products
and services that provide the best value in terms of benefits received.
9onsider your costs for 2production.5 9osts generally set the floor for pricing considerations.
Assess your company and decide who should set the price.
(6ternal ,actors include
Reviewing your &W*8 analysis. 8he nature of market demand will generally set the upper limit
for pricing considerations.
9onsidering how price sensitive your customers are.
o 9ustomer are not price sensitive when product is high in 4uality, prestige or e1clusiveness. &ubstitutes
are hard to find. :roduct price is low compared to customer0s income.
o 9ustomer are price sensitive when products are commodities, similar across companies, and the
market is flooded with substitutes.
:rices need to be set somewhere between product costs and market demand.
7ricing Strategies27lans
8here are three ways to look at pricing decisions !$ costs, <$ value, H$ competition.
9ustomers do not distinguish between messages sources about a company and its products, thus the
necessity to manage the total promotional program and ensure it is sending a unified consistent message.
8his idea is called 2integrated marketing communications.5
Jefinition' 9oncept for carefully integrating and coordinating a company0s many communication channels
to deliver a clear, consistent and compelling message.
+onsiderations ,or 7romotional 1ecisions
8o deliver the message, a mi1 of the following well-known communication tools are used'
Advertising 7 Any paid form of nonpersonal presentation and promotion of ideas, goods or services
through print and broadcast ads, packaging outer and inserts, motion pictures, brochures, booklets,
posters, leaflets, directories, billboards, display signs, pop displays.
1irect Marketing 7 Ase of mail and telephone to communicate with or solicit a response from customers
by using catalogs, mailings, telemarketing, electronic shopping, 8% shopping
Sales 7romotion 7 &hort-term incentives to encourage trial or purchase of a product or service through
contests, games, premiums, samplings, trade shows, e1hibits, demonstrations, coupons, rebates, low-
interest financing, trade-in allowances, stamps
7u.lic Relations 7 A variety of programs designed to promote andIor protect a company0s image or its
individual products through the use of press kits, speeches, seminars, annual reports, charitable donation,
sponsorships, publications, community relations, lobbying events.
7ersonal Selling 7 Kace-to-face interaction with one or more prospective purchasers for the purpose of
making sales by using sales presentations, sales meetings, incentive programs, samples, fairs and trade
Here are the si1 steps using the above tools to creating an effective communication plan.
&tep *ne 7 .dentify the target audience. .n this plan you determined the customer segments, which are
your target audience.
&tep 8wo 7 Jetermine the communication goals. 3our strategic market goals have been identified, but
you may consider adding a goal here that directly relates to this communications plan and segment.
&tep 8hree 7 Jesign the message. A good message gets a customer0s attention, holds interest, arouses
desire, and obtains action. A message must have content, structure, and a format.
&tep Kour 7 &elect the communication tools, as listed above.
&tep Kive 7 .dentify the message source. How is the message being communicated and is the source
credible for the message being delivered?
&tep &i1 7 +valuate the results. Jid the message have the intended impact on the target audience?
)easure the behavior of the target audience.
7romotion Strategies27lans
8here are two basic promotion strategiesIplans'
Jistribution channels are ways and the process of making a product or service available to the customer.
Kor many years, distribution was not given much priority within company strategies. However, in the past
decade distribution decisions have risen in importance because channel activities impact all other
marketing and promotional activities. 9ompanies or people in your distribution channels in many
instances provide greater efficiency in making goods and services available to your target markets
because of contacts, e1perience, speciali/ation, and scale of operation.
+onsiderations ,or 1istri.ution 1ecisions
9ompanies and people in your marketing channel perform many key functions. &ome help to complete
transactions through'
.nformation 7 (athering and distributing market research and intelligence information about forces in the
marketing environment needed for planning and aiding e1change.
:romotion 7 Jeveloping and spreading persuasive communications about an offer or your company.
9ontact 7 Kinding and communicating with your customers.
Legotiation 7 Reaching an agreement on price andIor other terms of the offer so that ownership or
possession can be transferred.
:hysical distribution 7 8ransporting and storing goods
Kinancing 7 Ac4uiring and using funds to cover the costs of the distribution
&tructure follows strategy.
Alfred 9handler, >r.
8hose that implement the plans must make the plans.
:atrick Hagerty, 8e1as .nstruments
A strategic plan will provide a business with the roadmap it needs to pursue a specific strategic direction
and set of performance obBectives. However, this is Bust a planM it does not guarantee that the desired
performance obBectives will be reached any more than having a roadmap guarantees the traveler will
arrive at the desired destination ;est, p.H<?$.
8he real strategy in strategic planning rests with turning your tactic into a strategy for your company.
Joing this re4uires effective implementation. .mplementation is the process that turns strategies and
plans into actions in order to accomplish strategic obBectives. .mplementation involves activities that
effectively put the plan to work. Whereas the strategic plan addresses the what and why of activities,
implementation addresses the who, where, when, and how. .mplementation of the tactic drives the
strategy of the company Fotler, p.#! and ;est, p.H<?$.
While the strategy itself is important, the ability to e1ecute it is the only thing that counts. &trategy is a
word that is thrown around liberally in most organi/ations. 8ask forces are formed, consultants are hired,
and e1tensive plans are written. 3et, still "=N of organi/ations are unable to implement what they have
spent so much time, effort, and money for planning. According to a cover story in Kortune maga/ine, nine
out of ten organi/ations fail to do so due to the fact that' Faplan @ Lorton promotional brochures$
*nly ?N of the workforce understand their company0s strategy
*nly !?N of e1ecutive teams spend more than one hour per month discussing strategy
*nly <?N of managers have incentives linked to strategy.
*nly D=N of organi/ations link budgets to strategy.
,=N of organi/ations do not link strategy to budgeting
#?N of organi/ations do not link middle management incentives to strategy
C,N of e1ecutive teams spend less than one hour per month discussing strategy
"?N of a typical workforce does not understand their organi/ation0s strategy
the source of value has shifted from tangible to intangible assets, such as human and information
capital, that today comprise C?N of the market value of a typical company.
*rgani/ations need a strategic management process that puts strategy at the center of what they do.
8o achieve business goals and obBectives, a business needs not only a good strategic plan, but also a
well-e1ecuted implementation of the plan ;est, p.H<?$. .t is believed that implementation is as important,
or even more important, than strategy. 8he fact is that both are critical to success. Actually, companies
can gain competitive advantage through implementation if done effectively Fotler, p.#!$. 8here are three
maBor forces that contribute to the successful implementation of a strategic plan' *wning the :lan,
&upporting the :lan and Adapting the :lan ;est, p.H<?$.
$wning the 7lan
8he most common reason a plan fails is lack of ownership. .f people do not have an ownership stake and
responsibility in the plan, it will be business as usual for all but as frustrated few. *wnership of a plan can
be enhanced with detailed action plans, a champion and ownership team, compensation based on
performance metrics, and top management involvement ;est, p.H<,$.
1etailed Action 7lan
8he development and use of a detailed action plan may be the single most effective practice in
determining the success of a strategic plan. A detailed action plan involves each aspect of the strategy,
but in greater detail with respect to specific actions that have to occur for the plan to be implemented. As
shown in the e1ample below, for each action items specified, an individual is assigned a specific
responsibility, a measure or goal is delineated, and a time frame within which the action item should be
completed is agreed upon. .n this way individuals have ownership, understand their roles and
responsibilities, and are accountable for implementing a portion of the significant elements of the strategic
plan ;est, p.H<#$.
+hampion and $wnership #eam
+ven though assigning individual responsibilities in the detailed action plan is a way to get people
involved in implementation, every successful strategic plan has a champion andIor ownership team. A
champion is a person who is devoted to the successful implementation of the strategy and plan. ;etter yet
is the creation of an ownership team, who can leverage the uni4ue talents of multiple people and e1ert
more organi/ational leverage than a single champion ;est, p.H<#$.
8he only way your tactics will be implemented is if everyone in the organi/ation understands your plan
and is driven to make it happen. 3ou must inform, sell, and rally your plan internally. Let people know why
the plan will make a difference for the company and for them. +ncourage their input on how to most
effectively implement the tactics. Let these people tell you how they can make the company better and
help facilitate the success of the plan 9ook, p.!=?$.
Management Involvement
;usiness owners or managers must stay committed to their involvement with the strategic plan and
review its progress. When owners or management lessen the time available to review the plan and
performance, they send an implicit signal of lack of interest and support. 8his signal weakens the
motivation of the ownership team and the chance for successful implementation ;est, p.H<C$.
Supporting the 7lan
8he support of a strategic plan are influenced by five key organi/ational components'
!. :eople 7 re4uired competencies and skills of people, strategic leadership
<. Resources allocation 7 personnel, money, and time
H. &tructure 7 re4uired structural capabilities
D. &ystems 7 communication, information, operating, planning, measurement and rewards
?. 9ulture
All must be in sync with each other and with the business strategy Aaker, p.<CC, H=?$.
8he figure below illustrates a conceptual framework showing how e1ternal analysis and internal analysis
provides a link to the strategy. 8he strategy in turn must successfully match and interact with the five
organi/ational components and organi/ational performance. 9onsideration of organi/ational components
can help a business identify actual and potential implementation problems, as well as determine how its
organi/ation would adapt to a new strategy. .nteractions between organi/ational components should be
considers, such as' Aaker, p.<CC$
Jo the systems fit the structure?
Jo the people fit the structure?
Joes the structure fit the culture?
Re4uired 9ompetencies and &kills of :eople
A strategy is generally based on an organi/ational competency that, in turn, is based on people. :eople
profiles and their motivation provide the bases of competencies needed to support sustainable
competitive advantage. &trategies re4uire certain types of people Aakers, p.<"<, H=?$. .n addition to the
type and 4uality of people, the motivation level can affect strategy implementation. )otivation is enhanced
if employees are empowered to accomplish their goals and are linked to the corporate culture and
obBectives. 9ompanies can accomplish these links in part by providing titles, such as 2host5 Jisney$,
2partner5 &tarbucks, and 2associate5 >.9. :enny$ Aakers, p.<"D$
.t is key to match the competencies in your organi/ation to the needs of implementing your
strategy 9ook, p.!=,$. 8he following 4uestions will help you focus on your organi/ational needs to
Jo people implementing the plan have the re4uired competencies to effectively implement the
At all levels, people who have the needed skills, motivation, and personal characteristics must staff the
company. .dentify what competencies are needed and then e4uip and train your people to deliver them.
Kor e1ample, a bank wanting to improve customer satisfaction and retention may have to do some
training to communicate new policies and customer-oriented employee attitudes ;est, p.H<"$. .f a gap
e1ists, it may be necessary to hire people who already possess the skills needed.
Joes your strategy re4uire skills of key management personnel in order for it to be effectively
)embers of the management team may need additional training to successfully implement the strategic
plan. Kor e1ample, a business implementing a program to get more new product sales may need to
provide some management training on the new product.
Strategic 4eadership
While your tactic is market driven, your company strategy to support it must be top-down driven. 3ou need
to e1ert the leadership to make it happen. As the owner, or one of the key e1ecutives in your company,
your actions send a message to your employees, which in turn set the tone for the company. 9onsider the
impact of your actions and the changes you may want to make in the following areas' 9ook, p.!=C$
&haping values,
)olding culture,
+nergi/ing personnel,
:romoting innovation,
+ncouraging responsiveness,
:romoting opportunism,
;uilding consensus.
Resource Allocation
&uccessful implementation re4uires that the resources needed are fully committed to support
implementation of the strategic plan. &ufficient resources should be allocated with respect to personnel
and funding. .f the resources needed are not systematically determined in the planning process, most
likely the plan will be underresourced. 8hus, you need to focus personnel and money toward effective
tactic implementation ;est, p. H<C$. 8he following 4uestions will help you structure your thoughts and
actions' 9ook, p.!=#$.
.n order to effectively implement the plan, the business is dependent on your e1isting organi/ation and
resource capabilities 9ook, p. !=D$.
How can you focus the individual0s performance of tasks on effectively implementing and supporting the
tactic, rather than Bust carrying out his or her duties?
Assign and delegate responsibilities and have accountability.
Kor each step in your implementation, be sure you have a point of responsibility and accountability. 8his is
so you can go to the source to correct any problems that crop up 9ook, p.!="$
Jon0t stretch your resources too thin.
Kor each new responsibility you assign to someone0s plate, check to see that they do not feel
overloaded 9ook, p.!="$.
What financial resources do you need to complete actions in support of the strategy? 9ook, p.!=#$
8he time to succeed, along with market metrics that signal progress, are important aspects of
commitment to the marketing plan and successful implementation. 8ime to succeed will depend on the
marketing strategy and the nature of the market opportunity. A share penetration strategy in an e1isting
market should take less time to succeed than a strategy to enter a new market that is undeveloped. With
meaningful market metrics, a business a business can track why or why not the plan is working ;est,
*rgani/ational structure defines lines of authority and communication and specifies the mechanism by
which organi/ational tasks and programs are accomplished. &tructure can vary in the degree of
centrali/ation and formality of communication channels 8he following are various types of business
structures' Aakers, p.<CC$.
+entrali:ation versus 1ecentrali:ation $rgani:ation
*ne key structural dimension is the degree of centrali/ation Aaker, p.<C"$.
9entrali/ed functional organi/ation 7 consists of speciali/ed groups in marketing, sales,
production, engineering, R@J, personnel, and administration. 9entrali/ation will ma1imi/e the scale and
synergies across the organi/ation.
Jecentrali/ed organi/ation 7 consists of autonomous business units based on product or market
groups with the ability to develop strategies in response to the needs of the markets they serve.
Jecentrali/ation places the business strategists close to the market and allows innovation with a
minimum of bureaucracy. However, the economies of scale and synergies across the organi/ation are
often difficult to achieve and inefficiencies and duplications are created.
Kunctional organi/ation 7 consists of units organi/ed by product or market.
)atri1 organi/ation 7 is one in which a manager reports to two or three other managers
responsible for the product line.
'orderless $rgani:ation
;orderless organi/ations find ways to bread down boundaries within the firm. 9ross-functional
management organi/es around missions that involve a variety of functions to communicate across
organi/ational units such as divisions or country operating units. %arious approaches include task forces,
best practices conference, and to set up coordination committees Aaker, p.<"=$.
Alliance 8etworks
)arkets and competitors can change significantly and it is import to be able to respond 4uickly. 8here
may not be time to develop needed assets and competencies, and responses that re4uire large
commitments to new technologies and distribution channels. *ne solution is to form a network of
alliances and Boint ventures with suppliers, customers, distributors, and competitors. With such a network,
needed assets can be made available instantly Aakers, p.<"=$.
-irtual $rgani:ation
A virtual corporation is a team of people and organi/ations suppliers, customers, and competitors$
specifically brought together for a particular client or Bob. 8he people might include contract workers who
are hired only for the specific proBect. 8he core of the team is likely to be located in a single building.
Whereas some team members will be connected via computer workstations. 8hus, clients do not have to
wait for an agency with the optimal set of characteristics. Kor e1ample' Aakers, p.<"=$.
Advertising agency 7 form teams tailored to the needs of particular clients. )embers of the team
my come from firms speciali/ing in design, packaging, direct marketing, promotion, brochures, and the
.t is key to match the structure in your organi/ation to the needs of implementing your strategy. Kor
e1ample' Joes your strategy re4uire certain structural efficiencies if you are differentiating on' 9ook,
&peed of delivery 7 be sure that your delivery organi/ation can satisfy the customer.
:roduct reliability 7 be sure that your manufacturing operation strives for /ero defects.
+1tended billing arrangements 7 be sure that your financial organi/ation can track customer data
and bill accurately and at the proper time.
)anagement systems can all influence strategy implementation.
+ommunication System
8he strategic intent of the plan must be aggressively communicated internally within the company.
Although business owners, management, and champion teams fully understand the logic and tactics of
the plan, others in sales, customer support, manufacturing, and finance, may not understand the strategic
obBectives and strategy being implemented. As a result, these employees, who may play key roles in
successful implementation, will continue in a business-as-usual mode of operation. .t is important to
facilitate communication and understanding of strategic obBectives, goals, and strategy.
How can you improve organi/ational communication and effectiveness as it pertains to
implementing your strategy?
In,ormation System
8he information system and the technology, databases, and models on which it is based can affect
strategy. Kor e1ample, manufacturers and retailers are affected by information technology. Lew systems
control inventory, ordering, pricing, and promotions. 8he ability to control information generated by retail
scanners can be key to their strategies.
8he following 4uestions will help you structure your thoughts and actions'
Jo your personnel have all the information they need to effectively implement the strategy?
.s customer information readily accessible to service personnel?
Jo salespeople have the proper promotional material to present the strategy effectively?
$perating System
:olicies, procedures, information, and controls should support implementation. 8he following 4uestions
will help you focus on these support issues' 9ook, p.!=#$
:olicies and :rocedures 7 8o effectively implement the tactic, are there any policy changes
needed within the company?
&hould you drive down the organi/ation decision authority?
Jo you need to alter credit approval procedures to speed up order processing time?
&hould you strengthen 4uality control policies to drive towards /ero defects?
9ontrols 7 Jo your controls keep implementation on course and not slow it down? Jo your
control procedures facilitate customer satisfaction or hinder it? 9ook, p.!=#$
7lanning System
:lans are nothing, planning is everything. +isenhower
A scheduled strategic planned time for is key. Workshops and retreats are often crucial elements in
dedicating 4uality time to planning. 9reative, out-of-the bo1 think, aided by formal creative-thinking
e1ercises is a vital part of any planning system.
:lanning should not be separated from the values, culture, and energy of the organi/ation.
According to Henry )int/berg 2)anagers with a committing style engage people in a Bourney. 8hey lead
in such a way that everyone on the Bourney helps shape its course.5 2&trategies only take on value as
committed people infuse them with energy. 5 As a result enthusiasm builds. Aakers, p.<"<$.
Measurement and Rewards Systems
)easurement can drive behavior and thus directly affect strategy implementation. 8he key to strategy is
often the ability to introduce appropriate performance measurements that are linked to the reward
structure Aakers, p.<"<$. )ost people respond to financial rewards. 8ying the compensation of those
principally responsible for implementation of the plan to performance metrics increases the incentive to
successfully implement the strategic plan. 8he overall goals of compensation tied to market metrics is to
create motivation and responsibility ;est, p.H<#, H<C$.
A concern in designing measurement and reward systems is to balance the short-term and long-term
perspectives. *ne approach is to use measures that have long-term hori/ons. Another approach is to link
the performance measurement to the nature of the business. Kor e1ample' Aakers, p.<"<$
A manager might be compensated if a loyalty measure or distribution goal is met three years in
the future.
Kirm can use stock options.
A high-growth &;A could be measured on the basis of market share and customer satisfaction.
A low-growth &;A could be measured on R*A and cash flow.
.t is important to create and nurture a strategy supportive work environment and corporate culture. 8he
reality is that people make a difference. )anagement has to create an environment that connects
employees to the organi/ation0s mission, and motivates their creativity, commitment and passion. Jobni,
p.D=!$. 8he most successful companies have almost cultlike cultures built around strong, market-oriented
missions. At companies such as Walmart, )icrosoft, Walt Jisney, employees share a strong
vision Fotler, p. #<$.
*wners and managers must understand what behavior they are trying to develop and reinforce with
respect to the goals of the organi/ation and the competitive realities. .deas should be canvassed from
employees. )ost employees can suggest what would be more effective for achieving higher performance.
After all, they are often closer to the customer and realities of competition. Also involving them in the
process will give them a clear ideal of what is e1pected of them and help them buy into any changes that
may be re4uired Jobni, p.D=!$.
*rgani/ational culture provides the key to strategy implementation because it is such a powerful force for
providing focus, motivation, and norms. ;ecause organi/ational culture is difficult to change, the fit
between culture and strategy is important. *rgani/ation culture involves three elements' Aakers, p.<"D,
Shared -alues
&hared values or dominant beliefs define an organi/ation0s priorities. &hared values can have a variety of
foci. Kor e1ample'
A key asset or competency that is the essence of a firm0s competitive advantage' We will be the
most creative advertising agency
An organi/ational output' We will deliver /ero defects or !==N customer satisfaction
A management style' 8his is an informal, flat organi/ation that fosters communication and
encourages unconventional thinking.
A belief' 8he importance of people as individuals.
8o make a real difference, the culture must be strong enough to develop norms of behavior 7 informal
rules that influence decisions and actions throughout an organi/ation by suggesting what is and is not
appropriate. 8he fact is that strong norms can generate much more effective control over what is actually
done or not done in an organi/ation than a very specific set of obBectives and measures. Lorms
encourage behavior consistent with shared valued. Kor e1ample, sloppy work affecting 4uality would be
informally policed by fellow workers, without reliance on a formal system Aaker, p.<"?$.
Sym.ols and Sym.olic Action
9ultures are developed and maintained by the use of consistent, visible symbols and symbolic action. A
few symbols and actions are as follows' Aakers, p.<",$
A firms uni4ue roots, including the personal style and e1perience of its founder, can provide
e1tremely potent symbols.
)odern heroes and role models help communicate, personali/e, and legitimi/e values and
An ownersIe1ecutive0s use of time. +1. An owner who spends one week a month looking at
customer service.
:atterns of consistent reinforcement activities 7 +1. -firm that recogni/es cost-saving
8ype of 4uestion continually asked by top e1ecutives
8raditions 7 work life, celebration, retirement
Adapting the 7lan
8he strategic plan needs to be adaptive to survive changing or unanticipated conditions. Kactors that
contribute to the adaptive nature of the plan are adaptive roll-out, persistence, feedback metrics, and
continuous improvement ;est, p. HH=$.
Adaptive Roll5$ut
.t is best to roll-out the marketing plan in a controlled manner to work out the kinks, both internally and
e1ternally to ensure success. 8here are many benefits to a regional roll-out as opposed to a nationwide
launch' ;est, p.HH!$.
Kewer resources are re4uired in a small-scale regional launch than in a nationwide launch.
:roblems with distributors, marketing communications, and product positioning can more readily
be addressed and corrected on a small scale.
.f the plan is more effective than planned, additions can be made to production capacity without
the potential of stockout and the loss of opportunities to capture customers.
Additional marketing insights will results that can be opportunistically integrated into the
marketing plan as full marketing plan implementation is pursued.
8he financial metrics generated from a successful roll-out signal long-run profit potential and can
be used to help fund the full introduction.
&uccessful implementation re4uires a high degree of ownerImanagement persistence, particularly when
aspects of the strategic plan need to be modified. .t is interesting to note that adaptive persistence has
been attributed to the success of many >apanese strategies. *ne of >apanese management0s greatest
assets is their inherent ability to adapt and persist throughout the implementation of the plan. 8hey remain
committed to the strategic obBectives and persist by adapting their plans. .t is their determination to make
them work that underlies the secret of their market success ;est, p.HH=$.
*eed.ack Metrics
An essential element of any adaptive system is feedback. Fey process metrics that provide leading
signals as to the success of the strategic market and implementation include'
9ustomer awareness, interest, intentions to buy, trial, and repeat purchase.
.ntermediary market coverage, interest, support, and motivation.
;usiness responsiveness to customer in4uiries and problems.
+ach of these market metrics has to reach an effective level of performance before financial metrics, such
as sales, market share, total contribution, and net profit can begin to perform ;est, p.HH=$.
8he importance of market metrics is twofold'
!. 8hey provide an early signal as to the progress of the marketing plan.
<. 8hey provide a signal as to which aspect of the marketing plan is not working i.e. channel
system, communications strategy, product-price positioning strategy$ ;est, p.HH=$.
+ontinuous Improvement 3 'est 7ractices
A business must be fle1ible in modifying its strategic plan to adapt to the changing market conditions.
While the strategic plan sets the direction and provides the initial roadmap, once it is in place, the
fle1ibility to adapt is an important aspect of continuous improvement.
9ontinuous improvement involves evaluating the results of strategies and plans and taking corrective
action to ensure that obBectives are attained. (raphically continuous improvement looks like the
following' Fotler, p.#H$
Assessing 7lan Implementation
A good strategic plan, market strategy, and improved level of implantation effort will enable your business
to achieve a market success well beyond planned performance, and in a much shorter time than
e1pected. Lo one factor presented will make or break the successful implementation of the strategic plan.
However, when the sum of these factors is ade4uately addressed, the chances for successful
implementation are greatly improved ;est, p.HH!$.
Sustaining Implementation
.t is important to understand why some organi/ations have failed in attempts to develop sustainable
implementation conte1ts. 8hree primary reasons are'
!. &trategies supporting a product or service focus product, price, promotion, place$ are no longer
the differentiators they used to be. 8hey have become generic and are easily copied.
<. ;rilliant strategies often succumb to not so brilliant implementation processes. 8here is an
inability to move strategy out of the boardroom and into the playing-field. (reat intentions outlined in an
elo4uently written strategic plan is supported by a poor, fragmented or sometimes non-e1istent
implementation plan.
H. 8here is often a failure to recogni/e the contributions that employees can have on strategy
implementation Jobni, p.D==$.
8he difference between average and top performing organi/ation that have maintained a sustainable
competitive advantage lies in the ability of the later to provide superior customer value on a continual
basis. %alue differentiation and superior performance is sustained through distinctive capabilities
possessed by employees. 8he organi/ations0 culture is the interface between the employees and the
environment that fosters the internal behaviors necessary to develop a continuous cycle of innovation,
and e1ternal relationships necessary to build sustainable customer loyalty and commitment Jobni,
&tudies reveal that the aggregate behaviors of the organi/ation0s employees are responsible for the
implementation of company intentions. &trategy implementation fosters a competitive position by
leveraging on the distinctive skills and capabilities of employees and then selectively directing these
competencies as a basis to compete in the marketplace. .n fact, employee behaviors are much harder for
the competition to understand and duplicate than generic marketing actions, a piece of e4uipment,
location of a firm, or access to a distribution channel Jobni, p.D=#$.
Assessment o, Strategic 7lan Implementation ;est, p.HH<$
Implementation #echni;ues
8he following are some helpful implementation techni4ues'
:ost-it :lanning :rocess
8he :ost-it :lanning process is a simple way to organi/e a complicated proBect into a comprehensive
strategy which anyone can follow. All you need are some small post-it notes and news print or a white
!. .dentify a goal or obBective to be accomplished.
<. ;rainstorm important milestones to be achieved in order to fulfill the goal. Write each one down
on a post-it note in the past tense.
H. Arrange milestones in a logical se4uence on a poster board, adding other milestones as you find
gaps andIor missing tasks. Jraw lines to show the relationships. &ome tasks can be accomplished
simultaneously. *ther tasks are se4uential.
D. *ne task must be accomplished before beginning the ne1t activity. )any are interdependent.
&ometimes <-H tasks must be finished before accomplishing the another key milestone.
?. Rearrange milestones in a time se4uence, maintaining the logical relationships. 9omplete reality
checks' Logical se4uence? Realistic schedule? Ade4uate personnel? &ufficient resources? (aps
Summari:e the 7lan o, Action
&ummari/e the plan of action you intend to take in a few sentences by answer the following 4uestions'
What do you intend to accomplish through this plan?
What are the specific steps you will need to take?
What assumptions or events about which you do not have certain information may affect your
plan as it unfolds?
What resources do you have or will you need to carry out your plan?
What limitations or barriers do you face in carrying out your plan? Which of these barriers can be
weakened or eliminated?
What steps need to be taken according to what schedule to put your plan in action?
*ield #est and (valuate
*ne of the reasons for failure to reach goals is starting too big. ;egin by developing a trial run to test the
validity of goals and action plans without e1hausting resources. Reasons to run a pilot proBect'
.t allows the leader to test hisIher own ability in handling the proBect.
&mall wins will build confidence in ability to accomplish greater things.
&mall wins can be used to generate support for larger vision.
A pilot proBect can reveal where a plan needs adBusting in order to prevent failure.
A pilot proBect allows an idea to fail without total devastation to all involved.
+stablish standards to measure effectiveness' what to measure, how to measure, when to
(valuation a,ter Implementing
After every structured event, discuss what people learned. &imply ask three 4uestions and e1pect to get
different responses.
What Bust happened?
Why do you think it happened?
What can we learn from this?
#eam (valuations
.mplementing a successful plan is a process which includes developing and maintaining good
relationships and individual growth toward personal goals. :rovide coaching and support for leaders.
9ontinue decision making and problem solving as you implement. +valuate periodically and make
adBustments &ome helpful keys to effective evaluations are the following'
&chedule evaluation times into your strategic planM otherwise, people may not slow down enough
to reflect upon their effectiveness.
+veryone involved in the proBect needs to be included in the evaluation in some way. A thorough
evaluation will include evaluating the people involved as well as evaluating the process of the proBect.
Lothing replaces face to face communication whether that is in a group or one-on-one. 8imes of
evaluation can be very intense.
Kind ways to give people a break in the intensity as needed.
Re,lection ;uestions ,or evaluation are the ,ollowing:
What measurable progress has been made toward achieving your goals?
Have resources been ade4uately assessed? .s the proBect within budget?
How are members of the team being cared for and being motivated? .s an ade4uate effort being
made in each area?
How has each team member contributed toward the effort? .s each person in their most effective
How do the achievements reflect the vision and mission of the organi/ation?
What obstacles have been encountered? Are adBustments needed in the process?
How are people0s lives being changed for the better?
Are there others who need to 2buy in5 to the plan?
$.taining In,ormation A.out $rgani:ational +ompontents Aakers, p.<""$
What are the skills, knowledge, and e1perience of the firm0s employees?
What is their depth and 4uality?
What are the employees0 e1pectations?
What are their attitudes toward the firm and their Bobs?
What is the organi/ation0s structure? How decentrali/ed is it?
What are the lines of authority and communication?
What are the roles of task forces, committees, or similar mechanisms?
How are budgets set?
What is the nature of the planning system?
What are the key measures used to evaluate performance?
How does the accounting system work?
How do product and information flow?
Are their shared values that are visible and accepted?
What are these shared values and how are they communicated?
What are the norms of behavior?
What are the significant symbols and symbolic activities?
What is the dominant management style?
Where would the new strategy fit into the organi/ation?
Would the new strategy fit into the strategic plan and be ade4uately funded?
Would the systems and culture support the new strategy?
What organi/ational changes would be re4uired for the new strategy to succeed?
What impact would these changes have? Are they feasible?