1

Strategic Planning

• The process of developing and maintaining a fit between a compan y’s goals and capabilities and its changing marketing opportunities

• It involves:– Defining company vision/mission– Specifying objectives– Designing portfolio of products/businesses– Coordinating functional strategies

Three Levels of Strategy in an Organization

Business unit strategy• Mission• Business goals• Competencies

Business unit strategy• Mission• Business goals• Competencies

Corporate strategy• Vision• Corporate goals• Philosophy and culture

Corporate strategy• Vision• Corporate goals• Philosophy and culture

Research &development

Informationsystems

Finance Marketing

Manufacturing

Human resources

Functional strategy

2

Components of Strategy

• Scope• Breadth of strategic domain: number and types of industries, product lines, market

segments. Reflects company mission and strategic intent (vs. Strategic fit)• MCI... Core business (long distance), Contiguous business (fastest growing sector -

communications related products: wireless paging, Internet, local service), Content (invested $2 billion in News Corp): Vision of Bert Roberts, Chairman

• MMM• PCL

• EllisDon• Mattamy

Components of Strategy

• Goals and Objectives• Desired level of accomplishment on one or more performance dimensions and the

growth vector

• Resource deployments• Allocation of human, financial and other resources across businesses, markets, etc.

• Identification of a sustainable competitive advantage• What are the distinctive competencies or strengths relative to competitors?• MMM• PCL• EllisDon• Mattamy

• Synergy• Improving overall efficiency and effectiveness by exploiting syn ergies across

businesses and product markets

3

Market Oriented Vision / Missions

COMPANY

PRODUCT-ORIENTED VISION/MISSION STATEMENTS

MARKET-ORIENTED VISION/MISSION STATEMENTS

Revlon We make cosmetics.

Disney We run theme parks.

Wal-Mart We run discount stores.

We sell lifestyle and self expression;success and status;memories, hopes and dreams.

We provide fantasies andentertainment -- a place where America still works the way it is supposed to.

We offer products and services that deliver value to middle Americans.

Market Oriented Vision / Missions

COMPANY

PRODUCT-ORIENTED VISION/MISSION STATEMENTS

MARKET-ORIENTED VISION/MISSION STATEMENTS

MMM

PCL

EllisDon

Mattamy

4

The Strategic Marketing Process:

1. Situation and SWOT analysis

2. Market-product focus & goal setting

3. Marketing programs

1. Situation Analysis: The Three Cs

Company

Customers

Competitors

•Market Potential (size, growth rate)

•Customer Behavior(wants and needs, segmentation, price sensitivity)

•Market Potential (size, growth rate)

•Customer Behavior(wants and needs, segmentation, price sensitivity)

•Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes)

•Competitor Response Profiles (capabilities, current and future actions)

•Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes)

•Competitor Response Profiles (capabilities, current and future actions)

•Economic Analysis(costs, break-even, profitability)

•Company Fit(strengths, weaknesses, resources, culture, goals)

•Economic Analysis(costs, break-even, profitability)

•Company Fit(strengths, weaknesses, resources, culture, goals)

5

Company considerations

• History / Culture• Resources• Existing portfolio

• Existing customer base– characteristics, esp. vis a vis future market– loyalty

• Experience– with markets– with marketing

Business Objectives

• Maximize profits

• Maximize shareholder returns

• Maximize market share

• Survival

• Social responsibility

6

SWOT Analysis

Strengths:

Opportunities: Threats:

Weaknesses:

Favorable UnfavorableIn

tern

alE

xter

nal

Strategic Issue Analysis

Opportunities Threats

Strengths Areas toLeverage

Problems

Weaknesses Chances lost Vulnerabilities

7

Strengths and Weaknesses Checklist…do this for every competitor

Marketing1. Company reputation -------- -------- --------- -------- -------- ---- ----- ----2. Market share -------- -------- --------- -------- -------- ---- ----- ----3. Customer satisfaction -------- -------- --------- -------- -------- ---- ----- ----4. Customer retention -------- -------- --------- -------- -------- ---- ----- ----5. Product quality -------- -------- --------- -------- -------- ---- ----- ----6. Service quality -------- -------- --------- -------- -------- ---- ----- -----7. Pricing effectiveness -------- -------- --------- -------- -------- ---- ----- ----8. Distribution effectiveness -------- -------- --------- -------- -------- ---- ----- ----9. Promotion effectiveness -------- -------- --------- -------- -------- ---- ----- ----10. Sales force effectiveness -------- -------- --------- -------- -------- ---- ----- ----11. Innovation effectiveness -------- -------- --------- -------- -------- ---- ----- ----12. Geographical coverage -------- -------- --------- -------- -------- ---- ----- ----Finance13. Cost/availability of capital -------- -------- --------- --------- -------- ---- ----- ----14. Cash flow -------- -------- --------- --------- -------- ---- ----- ----15. Financial stability -------- -------- --------- --------- -------- ---- ----- ----Manufacturing16. Facilities -------- --------- --------- ---------- -------- ---- ----- ----17. Economies of scale -------- --------- --------- ---------- -------- ---- ----- ----18. Capacity -------- --------- --------- --------- -------- ---- ----- ----19. Able, dedicated workforce -------- --------- --------- --------- -------- ---- ----- ----20. Ability to produce on time -------- --------- --------- --------- -------- ---- ----- ----21. Technical manufacturing

skill -------- --------- --------- --------- -------- ---- ----- ----Organization22. Visionary,capable leadership-------- --------- --------- --------- -------- ---- ----- ----23. Dedicated employees -------- --------- --------- --------- -------- ---- ----- ----24. Entrepreneurial orientation -------- --------- --------- --------- -------- ---- ----- ----25. Flexible or responsive -------- --------- --------- --------- -------- ---- ----- ----

Performance Importance

MAJOR MINOR NEUTRAL MINOR MAJOR HI MED LOWSTRENGTH STRENGTH WEAKNESS WEAKNESS

Opportunities and Threats

1

3 4

2

Success Probability

High

High

Low

Low

Attr

activ

enes

s

Opportunities1. ___________________2. ___________________3. ___________________4. ___________________

1

3 4

2

Probability of Occurrence

High

Low

Seri

ousn

ess High Low

Threats1. ___________________2. ___________________3. ___________________4. ___________________

8

Designing the Business Portfolio

• Fit company strengths and weaknesses to the opportunities in theenvironment

– Analyze current SBU’s– Which SBU’s should receive more, less, or no investment?– Develop growth strategies

2. Identify SBUs

• Single business standing alone from rest of company

• Having own competitors to equal or surpass

• Has own manager who is responsible for strategic planning and profit

• Examples?

9

3. Evaluate your Current Portfolio

• The Boston Consulting Group (BCG) Matrix

• The General Electric (GE) Approach

Portfolio Analysis: The BCG Matrix

10

Strategies Associated with the BCG Matrix

• Business unit strategy:

Manage your portfolio

• Marketing/product strategy:

Build

Hold

HarvestDivest

Limitations of the BCG

• Beyond growth rate:– Barriers to entry– Long term, stable consumer demand

– High ROI relative to other options

• Beyond market share:– Technological leadership

– Related competencies• Distribution strength• Supplier relationships• Management skills• Leverage/extend brand equity

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General Electric’s stoplight strategy chart

Mar

ket a

ttra

ctiv

enes

s

Business positionStrong Medium Weak

High

Medium

Low

Green band = “Go” signal = Build Yellow band = “Caution” signal = Hold

High ov

erall a

ttractiv

eness

overal

l

Low ov

erall a

ttractiv

eness

Med

ium

attrac

tivenes

s

B A

C

Red band =“Stop” signal = Divest

Competitive Analysis

• Market structure– Leader– Follower

– Nicher

• Defining competition– Industry Based Definition

– Market Based Definition• Substitutes

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Porter’s Five Forces

Bargaining Power of Suppliers

Bargaining Power of Buyers

Intensity of Competitive

Rivalry & Barriers to

Exit

Barriers to Potential Entrants

Substitutes in Other

Industries

External environment

• Political trends-- “politically correct,” partisan• Regulatory trends – what’s (il)legal• Economic trends: macro, micro• Social and Cultural trends

– Changing family, immigration

• Technological trends• Other:

– Demographic trends

– Natural resources

13

Agenda for Competitor Analysis

• Introduction

• Competitive Analysis – Strengths and Weaknesses– Behaviors

• Competitive Strategy for dealing with competition– Game Theory

– Porter’s 5 Forces Framework

Competitive Analysis and Strategy

• Competitive analysis answers …– What is driving competition in this industry or industries the firm may consider

joining?

– What actions are competitors likely to take, and what are the best responses?– How will the industry evolve?

• … in order to set strategy, which answers– How should the firm be positioned to compete in the long-run?

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Competitive Analysis

Current position and strategy – Market share and sales– Target market and positioning– Marketing mix (4 P’s)– Manufacturing and R&D– Financial strength

Capabilities: Ability to…– Design new products– Manufacture

– Market– Finance

– Manage

Future Goals– Product portfolio– Share or profit– Product Differentiation or Cost

Leadership

Step 2: Market-product focus & goal setting

1. Set market & product objectives

2. Select target markets

3. Find points of difference

4. Position the product

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Step 3: Marketing Programs

Marketing MixMarketing Mix

Target MarketTarget Market

ProductProduct Variety

Quality

Design

Features

Brand Name

Packaging

Sizes

Services

Warranties

Returns

PlaceChannels

Coverage

Assortments

Locations

Inventory

TransportPriceList Price

Discounts

Allowances

Payment Period

Credit Terms

PromotionSales Promotion

Advertising

Sales Force

Public Relations

Direct Marketing

Current marketing situation (3 C’s)

Opportunity and issue analysis (3 C’s)

Objectives

Marketing strategy(4 P’s)

Action programs(4 P’s)

Project profit-and-loss statement

Background data on sales, costs, profits, market, competitors, distribution, and environment.

Identifies the main opportunities/threats, strengths/weaknesses.

Defines plan’s financial and marketing goals in terms of sales volume, market share, and profit.

Presents the broad marketing approach that will be used to achieve the plan’s objectives.

Presents the special marketing programs designed to achieve the business objectives.

Forecasts the plan’s expected financial outcomes.

The Marketing Plan- Integrating the 3 C’s and the 4 P’s -

Adapted From: Philip Kotler, Marketing Management, pg. 89.

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Ansoff Product-Market Expansion Grid

Market Penetration

Market Development

Product Development

Diversification

ExistingMarkets

NewMarkets

Existing Products New Products

Strategy: Porter’s Five Forces Model

IndustryCompetitors

Rivalry amongexisting firms

Suppliers

PotentialEntrants

Customers

Substitutes

Threat ofnew entrants

Bargaining powerof suppliers

Bargaining powerof customers

Porter’s Five Forces Model - Each Force is a Threat

Threat of substitute offerings

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Existing Rivalry More Intense If:

• Numerous or equally balanced competitors• Slow industry growth• High fixed costs• Low customer loyalties or switching costs• Added capacity comes in large increments• Diverse competitors• High strategic stakes• High exit barriers

– Specialized assets, emotional barriers, government and social restrictions (e.g., concerns for job losses, etc)

Threat of New Entry

• Barriers to entry– Economies of scale– Brand loyalties– Capital requirements– Switching costs independent of loyalties– Access to distribution– Cost disadvantages independent of scale

• Market Attractiveness

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Expected Reactions of Firms

• Conditions that signal strong retaliation– Firms with history of retaliation to entrants– Firms with substantial resources

• Cash and unused debt and/or equity capacity

• Excess productive capacity• High leverage with channels or customers

– Firms with commitment to industry and high levels of idiosyncratic assets employed in it

– Slow industry growth

The Entry Deterring Price

• Structure of prices that just balances ...– the potential rewards from entry that are forecast by the potential entrant with– the expected costs of overcoming structural barriers to entry and costs of

retaliation

• If prevailing prices exceed the entry deterring price, entry will occur

19

Bargaining Power of Customers

• Customers compete for lower prices

• Customers tend to be powerful when …– They represent a large portion of the firm’s sales– Offerings represent large portion of their expenditures– Offerings are undifferentiated

– Switching costs are low– They pose a credible threat of backward integration

– Quality of offerings is not important to them– They have full information

• Big customers are attractive and dangerous (e.g., Walmart)

Bargaining Power of Suppliers

• Suppliers “compete” with the industry by trying to force costs higher

• Suppliers tend to be powerful when …– They are concentrated– There are few substitutes to their offerings– The industry is not an important customer of theirs’

– Their offerings are important inputs to the firm’s– Their offerings are differentiated or there are high switching costs

– They pose a credible threat of forward integration– They have full information

20

Customer or Competitor Orientation?

• Focus on competitors: Aggressive and alert for changes

• Focus on customers: Align resources to customer needs

• Which is better?

• Which is more common?

Porter’s 4 Generic Business Strategies

Source of Competitive Advantage

Broad Target

NarrowTarget

Lower Cost Differentiation

DifferentiationFocus

Co

mp

etit

ive

Sco

pe

Cost Leadership

Differentiation

Cost Focus

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Market Life Cycle

High

Price

Low

LowCost-to-serve

High

*Selected products /selected markets*Problem solvingemphasis*Customer needs knowledge*Product/Market

expansion*Competitive activity*Knowledgeablecustomers *Product/market

proliferation*Market volatility*Aggressive customer

Changing the players

• Bring in customers - Increase industry demand. • Educate consumers about your product • Pay customers (esp. early adopters)

• Subsidize some customers, other full paying customers will follow (Initial discount to lower risk)

• Become your own customer

• Bring in suppliers• Bring in complementors

• Do it yourself. • Encourage complementors to come (Banking)

• Bring in competitors• License technology to make money, avoid complacency• Create a second source to encourage buyers to adopt technology

22

Changing the added value

• Limit your supply• DeBeers and diamonds

• Raise amount consumers are willing to pay

• Policies that build loyalty (frequent flier miles) increase will ingness to pay - GM / Ford credit cards; Intuit

• Lower competitors’ value

• Questions to ask :

• What is your added value?• How can you increase value by changing supply, buyers, suppliers, complementors, or

substitutors in your value net?

• What is the value added by other players? Should you be increasing or decreasing their added values?

Changing the rules

Questions to ask are:

• Which rules are helping you? Which ones are hurting you? Rules can be for pricing, advertising, product variety, satisfaction, etc.

• What kinds of contracts are you willing to write with your buyers and suppliers? Do you want Match Competition Clauses? What does this do for you?

• Do you have the power to change the rules? Does someone else have the power to overturn them?

• Can you signal your commitment credibly

23

Changing tactics

Questions to ask are:• How do other players perceive the game? How do these perceptions affect the play of the game? • Which perception do you want to keep, which to change?

• Do you want the game to be transparent or opaque? When do you want to send signals that benefit you? When do you want to preserve the fog?

• To establish credibility (clear the fog)

– Accept a pay-for-performance contract– Offer guarantees or advertise

– Ask others to demonstrate their credibility to you• To preserve the fog

– Create complexity (long distance calling rates)– Bluff: Ask yourself whether you will be believed and under what circumstances– Ask what others stand to gain by preserving the fog, and what they could be bluffing about

Changing tactics

• Competitive stances that can be used to clear / add to the fog

Top Dog Fat Cat

Puppy DogLean &Hungry

Being Big

Being Small

AppearTough

AppearSoft

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• Fishbowl. This exercise brings everybody with an ax to grind on a given issue together in one room, with advocates of certain points of view in the center of the

• Red team / blue team. assign managers to teams representing major competitors and have them plan the strategies they would use to beat us.

• Future mapping. This is a fancy name for a way of looking at different scenarios for the future. We look at several alternative futures, or "end states," for our business, assign a probability to each one, and identify the forces that will determine whether that scenario will happen.

The Strategy Game

Strategic objectives for share leaders

• Typically the pioneer or initial entrant• Share maintenance objectives

• Retain current customers by:

– Maintaining and improving loyalty – Encourage / simplify repeat purchase– Reduce attractiveness of switching

• Stimulate selective demand among later adopters

– Head-to-head positioning against competition – Differential positioning against competition

25

Strategic choices for share leaders

Competitor or potentialcompetitor

Flanker strategy: Proactive / Reactive

ConfrontationStrategy

Proactive / Reactive

MarketExpansion

Contraction /Strategic

withdrawal

Fortress /Positiondefense

Leader

Fortress or position defense

Primary objective • Increase satisfaction, loyalty, repeat purchase

• Build on strengths to keep current customers; use same tactics to appeal to late adopters

Market characteristics • Relatively homogeneous market • Strong preference for leader’s product in

the largest segment Competitors’ characteristics • Current / potential competitors have

limited resources and competencies

Firm’s characteristics • High awareness and preference for leader’s product

• Marketing and R&D resources exceed competition’s.

26

Flanker strategy

Primary objective • Protect against loss of specific segment• Develop a second “filler” entry• Attract customers in the segment

Market characteristics • Two or more major segments with distinctneeds and purchase criteria

Competitors’ characteristics • One or more current or potentialcompetitors

• Have resources to implement adifferentiation strategy

Firm’s characteristics • Current product weak on at least oneattribute for a major segment

• Firm has resources to develop and launch asecond offering for disaffected segment

Confrontation strategy

Primary objective • Protect loss of share among currentcustomers

• Meet/beatcompetitive offerings head-on• Get new customers who may be

attracted to competitorsMarket characteristics • Relatively homogeneous market

• Little preference for leader’s product in thelargest segment

Competitors’ characteristics • One or more potential competitors• Sufficient resources and competencies to

implement head-to-head strategyFirm’s characteristics • Current product suffers from low

awareness, preference, loyalty in a majorsegment

• Firm has resources (R&D, marketing)comparable or greater than competitor

27

Market expansion strategy

Primary objective • New products or line offerings• Aimed at new applications / users• Improve ability to retain customers as

market fragmentsMarket characteristics • Heterogeneous market

• Multiple product uses requiring differentproduct or service attributes

Competitors’ characteristics • Current / potential competitors have limitedresources / competencies in R&D andmarketing

Firm’s characteristics • No offerings in one or more applicationsegments

• Firm has relative competencies in R&Dand marketing

Contraction strategy

Primary objective • Increase ability to attract new customersin selected high growth segments

• Withdraw from slower growingsegments to conserve resources

Market characteristics • Heterogeneous market• Segments with different growth potential• Multiple product uses requiring different

product / service attributesCompetitors’ characteristics • One or more current / potential competitors

with resources to mount a strong challengein growth segments

Firm’s characteristics • Current product suffers from lowawareness, preference, loyalty in one ormore major growth segment

• Firm’s resources limited vis-a-vis one ormore competitor

28

Strategic objectives for followers

• Capture repeat / replacement purchases from current customers of the leader or other target competitor by:

• Head-to-head positioning against competitor’s offering in primary targetmarket (athletic footwear, PCs)

• Technological differentiation from target competitor’s offering in a primary target market

• Stimulate selective demand among later adopters by:

• Head-to-head positioning against target competitor’s offering in established market segments

• Differentiated positioning focused on untapped or underdevelopedsegments

Strategic choices for challengers

Targetcompetitor Challenger

Flanking attack

FrontalAttack

Leapfrog strategy

Encirclement strategy

Guerrillaattacks

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Who should a follower attack?

• Attack the share leader within its primary target market• Most to lose, but also most likely to retaliate - in a few geographic markets?

• Attack another follower who has an established position within a major market segment

• Attack one or more smaller competitors who have only limited resources• Avoid direct attacks on any established competitor

Frontal attack

Primary objective • Capture substantial repeat / replacementbuyers from target competition

• Attract new customers from lateradopters via better price / features

Market characteristics • Homogeneous market• Little preference or loyalty for existing

brandsCompetitors’ characteristics • Vulnerable to direct attack

• Few R&D and marketing resources

Firm’s characteristics • Stronger R&D, marketing resources thantarget competitor and / or

• Lower operating costs

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Leapfrog

Primary objective • Induce current buyers to switch to asuperior product offering

• Attract new customers via superiorbenefits

Market characteristics • Relatively homogeneous w.r.t. customerneeds and purchase criteria

• Some needs or criteria are currentlyunfulfilled

Competitors’ characteristics • One or more current competitors has strongmarketing competencies but relativelyweaker R&D capabilities

Firm’s characteristics • Firm has proprietary technology• Has necessary marketing and production

resources to stimulate and meet primarydemand for next generation products

Flank attack

Primary objective • Attract share of new customers inmarket segments where needs aredifferent from those of early adopters

Market characteristics • Two or more segments with distinct needs• Needs of at least one segment not currently

metCompetitors’ characteristics • Strong target competitor able to withstand

direct attack

Firm’s characteristics • Resources limited but sufficient topenetrate and serve at least one majormarket segment

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Encirclement

Primary objective • Attract share of new customers inseveral smaller, specialized segmentswhose needs are different from those ofearly adopters

Market characteristics • Heterogeneous• Some segments not currently served

Competitors’ characteristics • Strong competitors capable of withstandingdirect attack

Firm’s characteristics • Decentralized and adaptable managementstructure

• Resources to serve several small segments

Guerrilla attack

Primary objective • Capture modest share of repeat,replacement purchases in several marketsegments or territories

• Attract a share of new customers in anumber of existing segments

Market characteristics • Heterogeneous market, several segments• Needs of most currently being satisfied by

competitionCompetitors’ characteristics • Number of strong competitors capable of

direct attack

Firm’s characteristics • Limited resources• Decentralized and adaptable management

structure

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Rubbermaid’s growth strategy

Objectives for the 1990s

1. Corporate objective is to increase sales, earnings, and EPS 15% a year, while achieving a 20% return on shareholders’ equity

2. Pay approx. 30% of current year earnings as dividends to shareholders while using the remainder to fund future growth

3. Each year, 30% of sales are projected to come from new products introduced over the past 5 years. It is planned to enter an entirely new market every 12 to 18 months

4. The objective for customers and consumers is to offer the best value possible. Highest quality products at a reasonable price, a continuous flow of new products, and exceptional service to customers

5. Treat all constituents fairly and consider the interests of associates as individuals6. Aim to be an environmentally responsible corporate citizen

Rubbermaid’s growth strategy

• Incremental growth• Focus on growth within the company’s businesses that was responsive to customer needs and in turn,

provided value to these customers

• Leap growth• High visibility and high vulnerability• Win big or lose big

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Rubbermaid’s incremental growth strategy

• To increase the value of Rubbermaid’s existing products. The key to this growth area was in providing value to dealers, distributors, and consumers. The key to value is providing quality, low cost and service

• To upscale existing products to meet today’s consumer and new design preferences. Upscalingincludes introducing new colors to existing lines

• To extend existing lines to capitalize on product successes, increase retail shelf space, and boost sales volume

• To expand Rubbermaid’s international business as a significant growth opportunity during the 1990s

Rubbermaid’s leap growth strategy

• To develop new products. Goal is to have at least 30% of annual sales coming from new products introduced during the past 5 years

• To hone product lines and optimize the number of stock units retained to keep the lines manageable and provide proper customer service le vels

• To enter entirely new markets. This is consistent with the corporate objective to enter a new market every 18-24 months

• To engage in joint ventures or acquisitions to enter new markets by combining the capabilities of a strong outside partner with the many strengths of Rubbermaid

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Implications

High

Price

Low

LowCost-to-serve

High

C

B

D

A

Value axis

Power axis

1

2

4

3

Growth markets

• Share gains are easier. Due to• Gaps or undeveloped segments in the market

• Lower risk of retaliation from share leader given growth

» Problem: Leader has higher expectations given growth• Share gains are worth more

• Based on the expectation that earnings produced by each share point expands as market expands. This depends critically upon

» Changes in technology and other success factors » Competitive structure (large number of new entrants: PC)» Market fragmentation

• Price competition less intense?• Early entry necessary to maintain technical expertise

35

Marketing strategies for mature markets

Maintain current market share• Maximize flow of profits over the remaining life which (could be several

decades)• Need to maintain repeat purchases via customer satisfaction• For large players

– Use fortress defense to» improve customer satisfaction and loyalty» encourage and simplify repeat purchasing

– Expand product line or launch flanker brands• For small players

– Avoid prolonged direct confrontation with the “big guys”– Niche strategy

Extend volume growth....(later)

Marketing strategies for mature markets

Extend volume growth• Sales depend upon

(1) Number of persons buying product(2) Number of units purchased per person(3) How often the product is purchased

• So, one of the following strategies can be used

– Increased penetration strategy– Increased frequency of use– Wider variety of uses

• Market expansion strategy

– Underdeveloped domestic markets (BDI / CDI analysis)– New customer or application segments– Produce private labels– Global expansion via sequential strategies

36

Marketing strategies for mature markets

• Assess the relative attractiveness of declining markets

• Conditions of demand

– speed of decline, certainty of decline, existence of pockets of enduring demand, extent of product differentiation in market, price stability

• Exit barriers

– reinvestment requirements, amount of excess capacity, age of assets, resale market for assets, extent of facilities shares with other SBUs, extent of vertical integration, number of single product competitors

• Intensity of future competitive rivalry

– bargaining power of customers, customer switching costs, diseconomies of scale

Marketing strategies for mature markets....

• Divestment or liquidation• Strategies for remaining competitors

• Harvesting

• Maintenance• Profitable survivor

• Niche

37

Problem

• Not easy to tell when a market has reached maturity• Variations in brands, marketing programs, and customer groups can mean that

different brands and segments reach maturity at different times

• Industry stability also affected by threats and opportunities• Customer preferences can shift• Product substitutes may appear

• Raw material costs may increase• Changes in government regulation

• Entry of low-cost foreign producers• Mergers and acquisitions

• Product improvements• Process technology improvements• Other environmental factors

Strategic issues

• Shakeout• declining growth rate

• potential for overestimating future demand, hence over capacity• competition intensifies as volume increases needed to cover fixed costs• weaker businesses fail, withdraw or acquired

• Maturity• volume stabilizes

• replacement sales dominate• continued satisfaction and loyalty of existing customers key• not all segments and all brands reach maturity simultaneously

• possibility of extending life via new uses, applications or creative marketing• Decline

• divest, liquidate or hang-on?• consolidation

38

Shakeout

• Excess capacity

• More intense competition

• Difficulty in maintaining differentiation

• Distribution problems

• Pressures on prices and profits

Strategic traps during shakeout

• Failure to recognize events signaling the beginning of a shakeout...hence optimistic forecasts

• Stuck without a clear strategic advantage during shakeout

• Failure to recognize declining importance of product differentiation and increasing importance of price and / or service

• Giving up market share in favor of short term profits...hence priced out of the market

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Strategies to beat the commodity magnet

• Pro-active strategies• Value-added strategy• Process innovation strategy

• Reactive strategies• Market focus strategy

• Service innovation strategy

• Demand side: Value added & Market focus• Supply side: Process innovation & Service innovation

International Marketing Strategy

• Strategic Alliances• Global Companies

– International Firm • Take our domestic practices overseas

– Multinational firm• Customize strategies to each market

– Global firm• Standardize strategy globally

40

Global Market Entry Strategies

• Exporting• Licensing• Joint Venture

• Direct Investment

International Environment Trends

• Political: stability, sentiment• Regulatory: trade regulations, tariffs, quotas• Economic: exchange rates

• Social and Cultural: ethnocentrism

41

The NewProd Scoring Model

Very Good(10)

Good(8)

Average(6)

Poor(4)

Very Poor(2)

Sub-factor Sub-factorWeight

EP EV EP EV EP EV EP EV EP EV TOTALEV

Sub-factorEvaluation

ProductSuperiority

1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4

Uniquefeatures for

users

1 .1 1 .2 1.6 .4 2.4 .2 0.8 .1 0.2 6.0 6.0

Reducecustomer

costs

3 .3 3 .4 3.2 .2 1.2 .1 0.4 - - 7.8 23.4

Higherquality thancompetitors

1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4

Does uniquetask for user

2 .5 5 .4 3.2 .1 0.6 - - - - 8.8 17.6

Priced lowerthan

competition

2 - - .2 1.6 .5 3.0 .3 1.2 - - 5.8 11.6

10 TOTAL 71.4

• To help evaluate ideas generated

Steps in the Design Process

OpportunityDefinition

Refinement

• Marketing• R&D

• Engineering• Production

Evaluation

Customer Measurement

1. Qualitative measurement to identifyissues

2. Quantitative measurement for input to models

Summary of Customer

Perception

Segments

Product Features

Preference

Choice

“What-if” Forecasts1. Aggregate Individuals2. Awareness & Availability