McGraw-Hill/Irwin

Copyright 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 6

Market Strategy

ELEMENTS OF BUSINESS STRATEGY

1 Determining the product market to serve 2 (What markets do we serve with what products)

Determine partner relationship commitments

3 Determining the level of commitment to provide resources 4

(How do agreements impact choices)

(What level of investment in the product market are we willing to make) (What are the detailed aims and action plans)

Determining the objectives and plans for each functional area

6-3

CRITICAL ELEMENTS IN A STRATEGIC PLAN

Determining the product market to serve

2 Determining the level of commitment to provide resources

(What markets do we serve with what products)

(What level of investment in the product market are we willing to make) (What are the detailed aims and action plans)

Determining the objectives and plans for each functional area

6-4

STRATEGY PROCESS MODEL 1

EXTERNAL ANALYSIS SELF (INTERNAL ANALYSIS

Evaluate opportunities, threats and strategic questions

Evaluate strengths, weaknesses, problems, constraints, questions

STRATEGY IDENTIFICATION AND SELECTION

Exhibit 6-2
6-5

STRATEGY PROCESS MODEL 2

Update historical data Collect current situation data Data analysis Develop objectives, strategies, programs Develop financial documents Negotiate final plan Measure progress toward objectives
Exhibit 6-2

Audit
6-6

STRATEGY PROCESS MODEL 3

1. Track 1 Define mission Develop statement of operating principles and values Environmental scanning 2. 3. Define vision 4. Define goals Strategic planning foundation

Strategy development
Business strategy

5. Track 2

Define planning 6. Define total 7. Define 8. Select assumptions & leadership market & segments implications: requirements, most and define Develop consensus re: attractive assess long-term corporate & environment strengths & segments segment (customer/market, weaknesses in strategy competition, attractive segments suppliers, etc.) Strategy integration and capability development Gap analysis
Define capability 10. gaps by assessing strengths/ weaknesses against current capabilities & specific competitors in selected segments

9.

Track 3

Formulate 11. strategies that yield competitive advantage

Exhibit

Appraise, test 12. Modify & reconcile goals if strategy with required, set functional functional plans/ and needs business objectives 6-2

Strategy integration capability development

6-7

WANTS-GETS GRID
HIGH PERFORMANCE

Assistance in cost control

OVERACHIEVEMENT

Reliable delivery
Sales support

Consistent product quality and appearance

UNDERACHIEVEMENT

Fast order cycle Lead generation

Exhibit 6-5
6-8

Access to top management

HIGH IMPORTANCE

CONCEPTUAL MAP
Project managers competency
Hi NOVUS MAVUUS T3 Bad Reputation for Good Excellence CLARKE

Lo Exhibit 6-6
6-9

VALUE CHAIN ANALYSIS

Share of user $ Manufacturers 1 100 Specialty Wholesalers 120 Dealers 150 Users 300 2000 2005

40%

50%

Manufacturers 2 101

Distributors 130

Users 200

60% 100%

50% 100%

Total spending by users $10mm Exhibit 6-7

$15mm

6-10

FIVE FORCES OF COMPETITION

Threat of substitutes

Bargaining power of suppliers

Struggles between industry rivals

Bargaining power of customers

Threat of potential entrants

Exhibit 6-8
6-11

BARRIERS TO ENTERING A MARKET

PRODUCT DIFFERENTIATION ECONOMIES OF SCALE CAPITAL REQUIREMENTS ACCESS TO DISTRIBUTION CHANNELS COST DISADVANTAGES UNRELATED TO SIZE GOVERNMENT POLICY
Exhibit 6-9
6-12

ACTIONS TO MEET COMPETITIVE CHALLENGES

CHOOSE ITS COMPETITIVE BATTLEGROUND JUDICIOUSLY CHANGE THE COMPETITIVE STRUCTURE OF THE INDUSTRY ANTICIPATE AND EMPLOY CHANGE

6-13

Vision for disruption

Identifying and creating opportunities for temporary advantage through understanding Stakeholder satisfaction Strategic soothsaying Directed at identifying new ways to serve existing customers better or new customers that no one else serves now

Capability for disruption

Sustaining the momentum by developing flexible capacities for: Speed Surprise that can be applied across many actions to build a series of temporary advantageous

Tactics for disruption

Seizing initiative to gain advantage by Shifting the rules Signaling Simultaneous & sequential strategic thrusts with actions that shape, mold, or influence the direction on nature of the competitors responses

Market disruption

Exhibit 6-10
6-14

KOMATSUV CATERPILLAR
Arena 1 Cost & Quality Arena 2 Timing & Know-how Arena 3 Strongholds Arena 4 Deep Pockets Disrupt Cats strategic strengths Boost Lower quality cost
Outmaneuver Cats strengths (Encircle Cat)

Timing Rolls out one product at a time

Know-how Aggressive R&D and new product program

Geographic Komatsu moves out of Japanese stronghold to Asia, Europe, South America, and lastly North America

Channels Komatsu moves to direct sales, dealers, then regional centers

Komatsu builds resources, new plants and user alliances to Gain strengths initially

Erodes Cats premium price, global volume, low costs

Picks off Cats full line one by one

Undermines Cats advantage on product innovation

Erodes Cats World dominance one place at a time

Maneuvers around Cats strong dealer network

Erodes Cats deep pockets

From the Field: 6-1

6-15

MARKET ORIENTATION ELEMENTS

BEING SYSTEMATIC IN: 1. Gathering of information on customers and competitors

2. Analyzing information to develop market knowledge 3. Using this knowledge to guide strategy

6-16

PAYOFFS FROM A MARKET ORIENTATION

A MARKET ORIENTATION COMPANY IS:

1. BETTER AT FITTING NEEDS OF CUSTOMERS

2. MORE DIFFICULT FOR COMPETITORS TO ASSESS 3. APT TO BE UNIQUE
6-17

REQUISITES FOR THE LEARNING ORGANIZATION

Visionary leadership

Target & trajectory

Information systems

Creating & striving

Execution

Exhibit 6-13
6-18