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					     How to fail without trying
           Fred Wiersema and Mike Treacy

 Why does Casio sell a calculator cheaper than a
  box of cornflakes ?
 Why does it take a few minutes to rent a car at
  Hertz but twice the time to get a room at the
  Hilton?
 Why does Land’s End remember your last order
  and family member’s sizes, while America
  Express urges you to join after you have been a
  member for ten years?
          BUSINESS STRATEGY
Steps in Setting Strategy
 What is a company’s mission?
 Set goals and objectives - quantify, set time
 Design the business portfolio
 Operational details - 4P’s
             Strategy - basics
 Mission
 BusinessObjectives
 Marketing Objectives
 Marketing Strategy
                 Mission
 Who is the customer?
 What is the value to the customer ?
 What will our business be?
 What should our business be?
    Factors that affect mission
 History
 Current preferences of owners and
  management
 Market environment
 Resources
 Distinctive competencies - Core
  competencies - Hamel and Prahalad
                    Mission
 Should   define
  –   Industry scope
  –   Products and services
  –   Competencies
  –   Segments
  –   Vertical scope
  –   Geographical scope
            Portfolio Models
 Boston   Consulting Group Matrix
  – (BCG Matrix)
 General   Electric Grid
  – GE Grid
Portfolio Analysis
 Boston Consulting Group - BCG Matrix

Market                            ?
Growth 10%      Star          Question Mark
Rate

                 Cash Cow     Dog
                          1.0
                   Relative Market Share
               General Electric Grid
Business Strengths
  Relative Market Share
  Product Quality
  Sales/Promotion Effectiveness
  Geography


Market Attractiveness
 Market Size
 Growth Rate
 Profits
 Competition
 Intensity
                                Business Strengths
Market                   Strong    Avg.       Weak
Attractiveness
     High                    A      A          C

    Med                      A      C          B

    Low                      C      B          B

A-Build
B-No Growth-Divest/Harvest
C-Wait & See
      Ansoff’s Product Market Grid
                          Products
Markets     Current                  New
Current     Market                   Product
            Penetration              Development

New         Market                   Diversification
            Development
         Marketing Myopia
                 Ted Levitt

Focus on needs not products

Revlon
Xerox
Standard oil
Columbia Pictures
Encyclopedia Brittanica
Railroads
                      Strategic Choices

Competitive Advantage          The Discipline of Market Leaders
Michael Porter                 Treacy and Wiersema

   Overall Cost Leadership    Operational Excellence

   Differentiation            Product Leadership

   Focus                      Customer Intimacy
       Strategy and tactics
The science or art of military command as
applied to the overall planning and conduct
of large-scale combat operations

Tactics are a plan of action resulting from
the practice of this science
        Art of War - Sun Tsu

350 B.C.
Sun Pin - strategist of Tien Chi
Horse Races
            Laws of Physics
Stronger force will overcome the lesser, all
  else being equal

Boxing and weight classes
                Lessons
 Strategy is about getting a competitive
  advantage
 Know the laws that govern the competition
 Know the competition and the terrain
 Creating strategies can be learned
          Marketing Warfare
Al Ries and Jack Trout

4 types of players       Kotler
    Leaders             Leaders
    Followers           Challengers
    Flankers            Followers
    Guerillas           Nichers
    Principles

 Principle   of force

 Superiority   of defense

 Mind   is the battleground
          Defensive warfare
 Only  the market leader should play defense
 The best defensive strategy is the courage to
  attack yourself
 Strong competitive moves should be
  blocked
                 Gillette
 Blue  Blade
 Super Blue Blade
 Trac II - double blade
 Atra     - Adjustable
 Good News     - Disposable
 Pivot         - Adjustable disposable
 Sensor
          Offensive warfare
 Consider   the strength of the leader’s
  position
 Find a weakness in the leader’s strength and
  attack at that point (Achilles heel)
 Launch the attack on as narrow a front as
  possible
            Flanking warfare
 Move  into an uncontested area
 Tactical surprise is very important
 The pursuit is as critical as the attack itself
  Don’t move resources to other targets.
               Flanking
 With low price      - tell the loophole
 With high price     - popcorn, perfume
 With distribution   - Timex, L’eggs
 With size           - VW Beetle
 With product form   - Close-Up gel
           Guerilla warfare
 Find a niche small enough to defend
 No matter how successful, never act as the
  leader
 Be prepared to bug out at a moment’s notice


Rolls Royce, Roos, United Jersey Bank,
People’s Express, Jeep
             Segmentation
         segmentation variables
 Identify
 Segment the market
 Develop profiles of segments
        Bases for segmentation
 Geographic
  –   Region
  –   Metro
  –   Climate
  –   Density
               Segmentation
 Demographic
  –   Age
  –   Gender
  –   Income
  –   Education
  –   Race
  –   Family Size
                Segmentation
 Psychographic
  – Social Class
  – Lifestyles
     • Activities, Interests, Opinion
  – Personality
               Behavioral
 Occasions
 Benefits
 User  Status
 Usage rate
 Loyalty
 Attitude towards product
      Industrial segmentation
 Demographic
  – Industry
  – Size
  – Location
 Operations
  – Technology
  – User/ nonuser
         Industry Segmentation
 Purchasing   Approach
  –   Centralized or decentralized
  –   Engineering dominated or financial dominated
  –   Existing Relationships
  –   Purchase policies - leasing, service etc.
  –   Purchase criteria
 Situation
  – Urgency
  – Specific Applications
  – Size of Order
  Requirements for Effective Segmentation

 Measurable
 Profitable
 Accessible
 Differentiable
 Actionable
         Evaluation of segments
 Size and growth
 Structural Attractiveness
  –   Segment rivalry
  –   New Entrants
  –   Substitutes
  –   Buyer clout
  –   Supplier Clout
 Company     objectives and resources
               American Express
Based on Income and age - 9 segments
   Up and Comers -          <50, >$40k
   Affluent established -   > 50, > $40k
   Affluent Retired -       retired, > $40k
   Successful Beginners -   <35 $15-40k
   Mainstream Family        36-50 $15-40k
   Conservative Core        >50
   Young Survivors
   Older Survivors
   Retired Survivors
              Food Products
      (based on attitudes towards food)

 Hedonists   (20%)
  – want good life, taste, convenience, not
    expensive, not health conscious, young, no kids
 Don’t   Wants (20%)
  – Avoid sugar, fat; Are over 50 years, better
    educated
 WeightConscious (33%)
 Moderates (25%)
            Levi Strauss Men’s Clothing
   Utilitarian Jeans Customer (26%)
         • Loyalist, work and play, does not care for style
   Trendy/Casual (19%)
         • High fashion, likes to be noticed, younger
   Price shopper (12%)
         • Older, department store sales and discount stores
   Mainstream Traditionalist (22%)
         • Older, conservative tastes, shops with wife,
           department stores
   Classic Independent (21%)
         • late 20s/30s, real spender on clothes, shops alone,
           specialty stores, traditional styles

				
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