MIM 578: Global Strategy II Day 2

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MIM 578 Global Strategy IIDay 2

• Scott Marshall
• SBA Corporate Partners Professor
• School of Business
• Portland State University

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Product and Market Strategies

• Differentiation Strategies
• Price
• Image
• Support
• Quality
• Design
• Undifferentiation

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Product and Market Strategies

• Scope Strategies
• Unsegmentation
• Segmentation
• Niche
• Customization

4
Product and Market Strategies

• Intensive Strategies
• Market Penetration
• Market Development
• Product Development

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Competition and Latent Markets and Products

• The Intensity of Existing Products Markets
• Strategy Cost or Differentiation
• Competition Make value/cost tradeoff
• Product Markets Supply-based
• Innovation Incremental Improvements

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Competition and Latent Markets and Products

• The Potential of Latent Products and Markets
• Strategy Cost and Differentiation
• Competition Break value/cost tradeoff
• Product Markets Demand-based
• Innovation New Market Space

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Competition and Latent Markets and Products

• Examples of Exploited Latent Products and Markets
  
• 1984 Chrysler Minivan preferred features at
  car price
• 1985 Cirque du Soleil improved acts and
  experience at high price
• 1990s Dells build-to-order PCs greater
  convenience at lower price
• 1995 AMC Megaplex improved experience at
  lower cost
• 2001 Casella Wine and yellow tail fun,
  quality wine at moderate cost
• 2003 Apples IPOD enhanced convenience
  experience at moderate cost

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Competition and Latent Markets and Products
Product Attribute Model Latency Identification
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Competition and Latent Markets and Products
Strategy Canvas Competitive Attribute
Differentiation
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Competition and Latent Markets and Products

• British retailer enter the hyper-competitive US
  market
• Tesco Announces the Entry
• The Economist analyzes the model

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Competition and Latent Markets and Products

• In-Class Exercise
• For Icebreaker, complete a
• Blue Oceans Product Attribute Model
• Blue Oceans Strategy Canvas
• From these analyses, what do you conclude?

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Strategic Uncertainty

• Traditional Strategic Emphases Efficiency and
  control
• Works flows, job designs, control mechanisms,
  organizational structures
• Emergent Strategic Emphases Innovation and speed
• Design teams, forward and reverse supply chain
  collaboration, product technology cannibalism,
  internal venturing

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Strategic Uncertainty

• Knowable (What can we know?)
• Market Segment Demographics
• Marketplace Offerings
• Past Technology Trends
• Competitiveness.

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Strategic Uncertainty

• Unknown but Knowable (What can we figure out?
• Firms and its competitors Capabilities
• Performance attributes of current technologies,
• Demand elasticities for different products,
• Competitors general technology and product
  commitments.

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Strategic Uncertainty

• Residual Uncertainty (What is difficult, if not
  impossible, to figure out until it becomes
  knowable?)
• Performance attributes of new technology,
• Outcomes of regulatory issues,
• New competitive entry from unrelated industry.

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Strategic Uncertainty

• Residual Uncertainty
• Level 1 A Clear-Enough Future If the unknown
  but knowable is sufficiently researched,
  residual uncertainty is sufficiently small that
  strategy may proceed.
• Example Took many years and billions of dollars
  in failures before new entrants learned to
  compete with Southwest Airlines.

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Strategic Uncertainty

• Residual Uncertainty
• Level 2 Alternative Futures Residual
  Uncertainty can be classified into discrete
  scenarios with approximate probabilities.
• Example Nike and Factory Location Disclosure

Analytical Tools Decision analysis, option
valuation models, game theory
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Strategic Uncertainty

• Residual Uncertainty
• Level 3 A Range of Futures Numerous potential
  futures are possible, defined by a limited number
  of market, technology, and competitive variables.
  However, actual outcome may lie anywhere along
  the continuum.

Analytical Tools Latent demand research,
technology forecasting, scenario planning
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Strategic Uncertainty

• Residual Uncertainty
• Level 4 True Ambiguity No basis for future
  forecast Rare and tends to migrate towards other
  Levels.

Analytical Tools Analogies and pattern
recognition, nonlinear dynamic models
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Strategic Uncertainty

• Residual Uncertainty
• Level 4 True Ambiguity

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Strategic Uncertainty

• Residual Uncertainty
• Level 4 True Ambiguity

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Strategic Uncertainty

• Strategic Postures
• Shapers set standards
• Adapters react through speed and flexibility
• Reserving the Right to Play invest to play
  later
• Portfolio of Actions - Payoffs
• Big Bets Positive in some, negative in other
  scenarios
• Options Positive in many scenarios, Small
  Negative in some scenarios
• No-Regrets Positive under any scenario

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Strategic Uncertainty

• In-Class Video
• Michael Raynor Discusses The Strategy Paradox

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Strategic Uncertainty
Not a competitive option.
Create value through innovation in products
services
Causes higher levels of uncertainty, and tries to
change industry
Invest in understanding options and players
Try to reduce uncertainty by setting standards
for certain alternative
Build capabilities related to discrete strategic
options.
Maintain flexibility and speed, as well as
investments in orgl capabilities
Make big bets and move industry and market in
certain direction.
Send trial balloons so ready to go if industry
moves.
Create vision amongst key players in the industry.
Maintain flexibility and speed, as well as
investments in orgl capabilities
Generally a poor posture.
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Strategic Uncertainty

• In-Class Exercise
• What strategic product- and market-related issues
  faced by Icebreaker are
• Knowable
• Unknown, but Knowable
• Residual Uncertainty
• Level 1
• Level 2
• Level 3
• Level 4
• For issues that fall under Residual Uncertainty
  Levels 1-4, should Icebreaker play the role of
  Shaper, Adapter, or Reserve the Right to Play.
  Why?

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Strategic Uncertainty
and making commitments

• Strategic management often referred to as the
  resource allocation process
• Identify position.
• Identify strategic alternatives.
• Determine the best path.
• And allocate resources

Resources are allocated for planned, personal
and/or political reasons.
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Strategic Uncertainty
and making commitments

• Barriers to effective resource allocation
• Overprotection of resources and reluctance to
  take risk
• Too much emphasis on short term financial returns
• Organizational politics
• Vague strategy targets

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Strategic Uncertainty
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Strategic Uncertainty

• Marketing Commitments at Samsung
• Situation
• In 1999, 14 product categories in 200 countries
  476 category-country combinations.
• Strategic Goal - Match Sonys brand in 5 years.
• The Challenge Optimal Marketing resource
  allocation.
• Information
• Needed Comparability Collect, cleanse and
  harmonize
• Needed Benchmarks Minimum industry investments
  in regions
• Operational Goal Evaluate all potential
  allocation scenarios for ROI.

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Strategic Uncertainty

• Marketing Commitments at Samsung
• Findings
• By regions
• Overinvestment 2 regions (NA Russia) with
  relatively limited growth
• Underinvestment 2 regions (Europe and China)
  with relatively high growth.
• By categories
• Over/Underinvestment 3 categories (mobile
  phones, vacuum cleaners AC units) receiving too
  much funding relative to other high growth
  categories

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Strategic Uncertainty
Allocation Assessment Model
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Strategic Uncertainty

• Marketing Resource Allocation at Samsung
• Situation
• Strategic Goal - Match Sonys brand in 5 years.
• Interbrands Rating of Global Brands - 2006

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Strategic Uncertainty
RD and Design Commitments at Samsung
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Strategic Uncertainty
RD and Design Commitments at Samsung
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Strategic Uncertainty
Top 10 Private Sector Patent Recipients 2003
Calendar Year
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Strategic Uncertainty
Top 10 Private Sector Patent Recipients 2004
Calendar Year
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Strategic Uncertainty
Top 10 Private Sector Patent Recipients 2005
Calendar Year
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Key Take-Aways from Today

• Fundamentals of Product Market Strategies
• Competitive Intensity in Existing Markets
• Potential of Latent Markets
• The Reality of Uncertainty
• Making Commitments/Allocating Resources in this
  Reality