Published on February 7, 2008
How to fail without tryingFred Wiersema and Mike Treacy: How to fail without tryingFred 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: 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: Strategy - basics Mission Business Objectives Marketing Objectives Marketing Strategy Mission: 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: Factors that affect mission History Current preferences of owners and management Market environment Resources Distinctive competencies - Core competencies - Hamel and Prahalad Mission: Mission Should define Industry scope Products and services Competencies Segments Vertical scope Geographical scope Portfolio Models: Portfolio Models Boston Consulting Group Matrix (BCG Matrix) General Electric Grid GE Grid Portfolio Analysis: 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: 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: Ansoff’s Product Market Grid Products Markets Current New Current Market Product Penetration Development New Market Diversification Development Marketing Myopia Ted Levitt: Marketing Myopia Ted Levitt Focus on needs not products Revlon Xerox Standard oil Columbia Pictures Encyclopedia Brittanica Railroads Strategic Choices: 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: 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: Art of War - Sun Tsu 350 B.C. Sun Pin - strategist of Tien Chi Horse Races Laws of Physics: Laws of Physics Stronger force will overcome the lesser, all else being equal Boxing and weight classes Lessons: 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: Marketing Warfare Al Ries and Jack Trout 4 types of players Kotler Leaders Leaders Followers Challengers Flankers Followers Guerillas Nichers Principles: Principles Principle of force Superiority of defense Mind is the battleground Defensive warfare: 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: Gillette Blue Blade Super Blue Blade Trac II - double blade Atra - Adjustable Good News - Disposable Pivot - Adjustable disposable Sensor Offensive warfare: 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: 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: 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: 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 Identify segmentation variables Segment the market Develop profiles of segments Bases for segmentation: Bases for segmentation Geographic Region Metro Climate Density Segmentation: Segmentation Demographic Age Gender Income Education Race Family Size Segmentation: Segmentation Psychographic Social Class Lifestyles Activities, Interests, Opinion Personality Behavioral: Behavioral Occasions Benefits User Status Usage rate Loyalty Attitude towards product Industrial segmentation: Industrial segmentation Demographic Industry Size Location Operations Technology User/ nonuser Industry Segmentation: Industry Segmentation Purchasing Approach Centralized or decentralized Engineering dominated or financial dominated Existing Relationships Purchase policies - leasing, service etc. Purchase criteria Slide 33: Situation Urgency Specific Applications Size of Order Requirements for Effective Segmentation: Requirements for Effective Segmentation Measurable Profitable Accessible Differentiable Actionable Evaluation of segments: Evaluation of segments Size and growth Structural Attractiveness Segment rivalry New Entrants Substitutes Buyer clout Supplier Clout Company objectives and resources American Express: 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): 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 Weight Conscious (33%) Moderates (25%) Levi Strauss Men’s Clothing: 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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