Chapter 2 a

Business Strategies Planning

Product or Service Market in Which You Plan to Compete

Level of Investment Needed

Strategy

Marketing Mix Needed to Compete

Assets or Capabilities to Provide Sustainable Competitive Advantage

The key elements DLFs business strategy

Increase land reserves in strategic locations Expand core business verticals nationally Diversify into SEZ development Undertake infrastructure development. Diversify into hotel development Enhance execution capabilities

Strategic Planning
The managerial process of developing and maintaining a viable fit between the organizations objectives, skills, and resources and its changing marketing opportunities. The aim of strategic planning is to shape the companys businesses and products so that they yield target profits and growth (Kotler, p.40).

Strategic Process
Analysis Formulation Implementation Adjustment/ Evaluation

Capabilities of Market-Driven Organizations External Emphasis Outside-In Process Spanning Processes Market Sensing Customer Linking Channel Bonding Technology Monitoring Customer Order Fulfillment Pricing Purchasing Customer Service Delivery New Product/Service Development Strategy Development Financial Management Cost Control Technology Development Integrated Logistics Manufacturing / Transformation Processes Human Resources Management Environment Health and Safety Internal Emphasis

Inside-Out Processes

Searching for Sustainable Competitive Advantages

Technical superiority Quality Customer service

Good management
Name recognition Low cost

Sustainable Competitive Advantage Based on Differentiation Strategies

Develop products with unique:
Design Performance Quality Service Enhance Profits

Once customers perceive your product as unique, they are less sensitive to price and you can charge more

Sustainable Competitive Advantage Based on Low Cost Strategies

Lower costs via

Economies of scale Access to raw materials Automated equipment Outsourcing

Charge low prices to build market share Use margins to increase profits

Spend more on advertising and promotion

Enhance Profits

Strategic Approach to Marketing

Helps firm orient themselves toward key external factors Builds marketdriven strategies that reflect customer concerns

Anticipates changes in environment

Forces firm to take a long term view of the world

Strategy-Building Process

What is our Business?

What Will Our Business Be?

What should be our Business?

Determine mission and set objectives

Effective Mission Statement

Should cover the following areas: Product line definition Market scope for their products or services Directions for future growth Types and levels of technology emphasized

Strategy-Building Process
Mission and Objectives External Analysis Customer Segments Competition Environment

Assess business position of each business unit

Internal Analysis

Performance
Strategic Options

Develop product/service strategies for each strategic business unit

Strategic Business Unit (SBU)

Any organizational unit that has a business strategy and a manager with sales and profit responsibility.

Strategy-Building Process
Assess business position of each business unit

Develop product/service strategies for each SBU

Target market segments

Position product/service

Design marketing mix

Strategy-Building Process

Develop product/service strategies for each SBU

Design marketing mix

Forecast sales and profits for target market segments

Marketing Mix
Product Development and Policymaking Customer Focus
Promotion (Marketing Communications)

Pricing

Channel selection and control

Strategy-Building Process
Marketing mix
May need to revise strategy and marketing mix if forecasts are not consistent with objectives

Forecast sales and profits for target market segments

Implement marketing plan

Strategy-Building Process

Implement marketing plan

Review and monitor program

Control with Strategic Information System to adjust strategies, Mission, and Objectives

Analyzing the SBU: PLC

$ Sales and profits
Introduction Growth Maturity Decline

Business unit sales

Business unit profits

0 Losses

10

Time in years

Analyzing the SBU: Portfolio Analysis Compare SBUs by relative marketing share
market share compared to share of largest competitor

Compare SBUs by market growth rate

Combine and map into a Portfolio Matrix

Corporate and Division Strategic Planning

The Boston Consulting Groups Growth-Share Matrix

BCG Approach
20% Hi 18% Stars Question Marks

16%
14%

1
2 4 5

Market Growth Rate

12% 10% 8% 6%

7
Cash Cows Dogs

Low

4% 2% 0% 10.0 x 8.0 x Hi 6.0 x 4.0 x 2.0 x 1.5 x 1.0 x 0.8 x Low

0.5 x 0.1

Relative Market Share

Star
Strong relative market share High rate of market growth Goal is to maintain its market position and increase sales volumes Key to the future Requires extra money investment Attracts competitors

Cash Cow
Low market growth High relative market share Likely to be in mature stage of product life cycle Established market positions, so therefore dont need a lot of advertising expenditures High earnings and depreciation allowances generate cash surpluses

Question Mark
Low relative market share Fast growing market Potential to become star of the future or failure Usually absorbs more cash then it generates Goal is to increase relative market share and move it into star category but this can be expensive

Dogs
Low-growth Low relative market share Often in decline phase of product life cycle Can become cash trap Usually sell or de-emphasize

Balancing the Product Portfolio

High A Star Question Mark ?
Present position

Market Growth Rate %

D
Desired or expected position

Cash Cow

Dog E

C
Low 10x 4x 2x 1x 0.4x Relative Market Share

Divestment

0.1x

BCG Approach
20% Hi 18% Stars Question Marks

16%
14%

1
2 4 5

Market Growth Rate

12% 10% 8% 6%

7
Cash Cows Dogs

Low

4% 2% 0% 10.0 x 8.0 x Hi 6.0 x 4.0 x 2.0 x 1.5 x 1.0 x 0.8 x Low

0.5 x 0.1

Relative Market Share

GE Approach
High

Market Attractiveness

Mediu m

Low

High

Medium SBU Strengths

Low

Creative Strategic Thinking

Challenge the present strategy Look for strategic windows Play on the vulnerabilities of competitors Change the rules of the game Enhance customer value

Market-Attractiveness Portfolio Strategies

Planning Grids Help Evaluate a Portfolio of Opportunities

Industry Attractiveness
High High Medium Low

Business Strength

Medium

No Growth

Low

Borderline Growth

2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

GE Approach
High

Market Attractiveness

Mediu m

Low

High

Medium SBU Strengths

Low

Corporate and Division Strategic Planning

MarketAttractiveness Portfolio Strategies