Strategy Tools

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Strategy Tools

• Amit Joshi
• MAR 6816

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Some Basic Questions

• What is marketing?
• What is strategy?

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Why do markets exist?

• Raw material scarcity
• Labor specialization
• Learning curves
• Consumption satiation

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The Exchange Process

• Two or more parties give something of value to
  each other to satisfy felt needs.

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Exchanges
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Successful Exchanges Require
Two or morepeople
Somethingof interest or value
Needs Wants
Ability for successfulcommunication
Desire and freedomto deal
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Understanding Needs of Toothbrush users

• Favorite color is blue
• 37 of us use one that is more than 6 months old
• 47 put water on the brush before applying the
  paste
• 15 put water on the brush after applying the
  paste
• 24 do both
• 12 dont wet the paste at all
• 2 dont brush at all

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Demand

• Demand is a measure of the desire that potential
  customers have for a product or service . . .
  plus their willingness and ability to pay for it

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Demand

• Why is Demand not the same as Desire?
• Everyone desires to drive a red Ferrari.
• Why do we need ability and willingness to pay?

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What is Marketing?
Understanding the needs of the consumers and
satisfying them!
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• Is Marketing for Products only?

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Nontraditional Marketing
Person marketing
Example Dating!!
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Nontraditional Marketing
Place marketing
Example What happens in Vegas, stays in Vegas!
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Nontraditional Marketing
Organization marketing
Example Ads for Boeing on Monday Night Football
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Nontraditional Marketing
Event marketing
Example The Olympics, Superbowl, etc.
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Nontraditional Marketing
Cause marketing
Example 5K Run for AIDS
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What is STRATEGY?

• A campaign to win in a competitive situation,
  taking into account your resources, your
  competitions resources and the nature of the
  battlefield to obtain a sustainable competitive
  advantage.

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What is Marketing Strategy?

• It means deliberately choosing a different set of
  activities to deliver a unique mix of value to
  the target market.
• Two components of marketing strategy
• Target market selection (STP)
• Selection of marketing mix variables

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• if you dont know where you are going,
  all roads will take you there!
• Strategy provides the directions!

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Resource-based View of the Firm
firms ability to use the resources
COMPETENCIES
STRATEGY
PERFORMANCE
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GENERIC STRATEGIES

• Overall Cost Leadership
• At average industry prices or below to obtain
  market share. Why?
• lowest production and distribution costs
• core competency in engineering, production,
  distribution, purchasing
• Differentiation
• Getting stuck in the middle - disaster!!

Recommended reading Michael Porter, COMPETITIVE
ADVANTAGE
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THE BIG IDEA Strategy is all about focus You
cannot both be an IMAGE LEADER Penny Pinching
COST LEADER
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Implementation

• Execution and implementation - vitally important
• Paralysis by Analysis syndrome
• Understand soft issues

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10 Strategy 90 Implementation
0 Implementation 100 Strategy
100 Implementation 0 Strategy
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Levels of Strategy

• Corporate Level
• Business Unit Level
• SBUs - a subgroup of a single business or
  collection of related businesses
• Functional Level
• Marketing

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Activity Map of Southwest
No connections
No transfers
Limited Passenger Amenities
Point-to-Point flights
Frequent Departures
Limited use of travel agents
Standard fleets
15 min. turnaround
Automatic Ticketing machines
Flexible Union contracts
Low prices
Lean and productive crew
High aircraft utilization
High employee compensation
Emply. Stock ownership
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Back to Marketing Strategy!
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More Marketing

• Marketing is about manipulation of economic,
  social, and moral incentives to achieve optimal
  goals for the firm.
• Decisions involved in creating and keeping
  customers.
• Marketing is much more than advertising, or sales.

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Target Market

• Group of people toward whom the firm decides to
  direct its marketing efforts

TargetMarket
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The Marketing Mix
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Product Positioning

• Positioning starts with a product. Positioning is
  not what you do to a product. Positioning is
  what you do to the mind of the prospect. That
  is, you position the product in the mind of the
  prospect.
• Al Ries and Jack Trout (1981)
• The way the product is defined by consumers on
  important attributes!

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Positioning is determined by the firms resources
and capabilities in conjunction with the needs of
the market!
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Schematic of the Marketing Process
Based on Robert Dolans Note on Strategy, HBR
Press
Product
Place
Promotion
Price
PROFITS
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The 5 C Strategic Analysis Framework

• Customers What needs do we satisfy?
• Company What special competence do we possess
  to meet those needs?
• Competitors Who competes with us in meeting
  those needs?
• Context What environmental factors limit us?
• Collaborators Who should we enlist to help us?

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Consumer Behavior Analysis

• Identify decision making unit (DMU)
• Who is involved in the purchase?
• What role does each play?
• Possible roles
• Initiator
• Decider
• Influencer
• Purchaser
• User

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Consumer Behavior Analysis

• Decision Making Process (DMP)
• Information search? How?
• Criteria of evaluation?
• Importance of attributes?
• Purchase and Consumption patterns
• Where does the consumer buy?
• How is the product used?
• Frequency of use?
• How important is the problem that is being
  solved?

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Company Analysis

• Definition of the Business
• We are a Rail Road vs. We are a transportation
  company.
• Assess product / company fit by understanding the
  finances, RD capability, manufacturing
  capability, and other assets of the firm.

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Competitor Analysis Basics

• Comparison of costs, capabilities, methods and
  strategies.
• Identify both current and potential competitors
• Strategic analysis
• Future Goals What drives the competition?
• Assumptions What do competitors believe about
  the market?
• Current Strategy What are the competitors doing?
• Capabilities What can the competitors do?

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Context Macro Economic, Technology, Industry
Analysis

• PEST Political, Economic, Social, and
  Technological environments
• Traditional industry analysis
• looks at size, growth, profitability,
  concentration, business cycles, technology etc.
• Historical trend analysis.
• Technology discontinuities and market turbulence

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Collaborator Analysis

• Downstream channels
• Upstream suppliers
• Industry level alliances
• Technology alliances
• Market alliances
• Financial linkages
• International linkages

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The 5Cs Framework

• Consumer Centered
• Competition New Rules, New Ways
• Company Resources, Capabilities
• Collaboration Alliances Collaborations
• Context New markets, New technologies

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The Place of Marketing in Todays World

• 6 of Fortune 500 CEOs are from a predominantly
  marketing background
• Why?
• Trend?
• Across time
• Across countries?
• The importance of measuring Marketing
  Effectiveness

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The Basics of Case Analysis
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Diagnosing the Problem

• Jane has malaria. Doctor treats her with the
  most powerful and latest drug for pneumonia.

Your problem diagnosis determines alternatives,
criteria and ultimate choice of a solution.
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Remember!

• A good solution to a well posed decision problem
  is almost always a smarter choice than an
  excellent solution to a poorly posed one
• Problems often can be turned around as big
  opportunities.

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Problem Definition Be Creative

• The LAZY wayoften the wrong way
• What pops up first in your mind? Dig deep.
• How it has been viewed in the past? Break
  conventional wisdom and ask bold questions.
• What is stated as the problem in the case? Is
  there a framing bias? Critically examine and
  question what is stated.
• When symptoms are seen as the problem?

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Conventional wisdom

• Most companies focus on matching and beating
  their rivals along the same dimensions.
• They think like their competition does.
  Competitive convergence. RED OCEAN strategy.
• Where is the element of surprise?????

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How to create new market spaces?

• By looking across substitute industries.
• Indirect and budget competition.
• By looking across buyer groups.
• Examine the consumer roles carefully.

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How to create new market spaces?

• By looking across complementary product and
  service offerings.
• Map the consumption chain. Redefine consumer
  value.
• By looking across the functional-emotional
  orientation of an industry.
• Re-think the dimensions.
• By looking across time.
• Focus on trends. Atkins diet.

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The Essence of Strategy!

• Choosing to perform activities differently than
  rivals do to create a sustainable competitive
  advantage!!
• What does Southwest Airlines do?

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Example Southwest Airlines

• If you get your passengers to their destinations
  when they want to get there, on time, at the
  lowest possible fares, and make darn sure they
  have a good time doing it, people will fly your
  airline.