McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 6

Market Strategy

ELEMENTS OFBUSINESS STRATEGY

Determining the product marketto serve

(What markets do we serve with what products)

Determining the level of commitment to provide resources

(What level of investment in the product market are we willing to make)

Determining the objectives and plans for each functional area

(What are the detailed aims and action plans)

1

3

4

Determine partner relationship commitments

(How do agreements impact choices)

2

6-3

CRITICAL ELEMENTS IN A STRATEGIC PLAN

Determining the product marketto serve

(What markets do we serve with what products)

Determining the level of commitment to provide resources

(What level of investment in the product market are we willing to make)

Determining the objectives and plans for each functional area

(What are the detailed aims and action plans)

1

2

3

6-4

STRATEGY PROCESS MODEL 1

EXTERNAL ANALYSIS

SELF (INTERNAL ANALYSIS

Evaluate opportunities, threats and strategic

questions

Evaluate strengths, weaknesses, problems, constraints, questions

STRATEGY IDENTIFICATIONAND SELECTION

Exhibit 6-2

6-5

STRATEGY PROCESS MODEL 2

Negotiate final plan

Measure progress toward objectives

Audit

Develop financial documents

Update historical data

Collect current situation data

Data analysis

Develop objectives, strategies, programs

Exhibit 6-2

6-6

Strategy integration and capability developmentGap analysis

Environmental scanning Strategy development

1. Define mission

2. Develop statement of operating principles and values

3. Define vision

4. Define goals

Strategicplanning foundation

Track 1

Track 25. Define planning

assumptions & implications: Develop consensus re: environment (customer/market, competition, suppliers, etc.)

6. Define total market & most attractive segments

7. Defineleadership requirements, assess long-term strengths & weaknesses in attractive segments

8. Select segments and define corporate & segment strategy

Business strategy

Track 39. Define capability

gaps by assessing strengths/weaknesses against current capabilities & specific competitors in selected segments

10. Formulate strategies that yield competitive advantage

11. Appraise, test & reconcile strategy with functional plans/needs

12. Modify goals if required, set functional and business objectives

Strategy integration capability development

STRATEGY PROCESS MODEL 3

Exhibit 6-26-7

HIGH IMPORTANCE

Assistancein cost control

OVERACHIEVEMENT

UNDERACHIEVEMENT

Consistent product quality and appearanceReliable

delivery

Sales support

Fast order cycle

Leadgeneration

Access to top management

HIGH PERFORMANCE

WANTS-GETS GRID

Exhibit 6-56-8

CONCEPTUAL MAP

Exhibit 6-6

Reputationfor

Excellence

NOVUS

MAVUUS

CLARKE

T3

Project manager’scompetency

Hi

Lo

Bad Good

6-9

Share of user $

$15mm$10mmTotal spending by users

100%100%2

50%60%Users

200

Distributors

130

Manufacturers

101

50%40%

1

20052000Users

300

Dealers

150

Specialty

Wholesalers

120

Manufacturers

100

VALUE CHAIN ANALYSIS

Exhibit 6-7

6-10

Threat of substitutes

Bargaining power of suppliers

Struggles between

industry rivals

Bargaining power of

customers

Threat of potential entrants

FIVE FORCES OF COMPETITION

Exhibit 6-8

6-11

BARRIERS TO ENTERING A MARKET

• PRODUCT DIFFERENTIATION

• ECONOMIES OF SCALE

• CAPITAL REQUIREMENTS

• ACCESS TO DISTRIBUTION CHANNELS

• COST DISADVANTAGES UNRELATED TO SIZE

• GOVERNMENT POLICY

Exhibit 6-9

6-12

ACTIONS TO MEET COMPETITIVE CHALLENGES

• CHOOSE ITS COMPETITIVE BATTLEGROUND JUDICIOUSLY

• CHANGE THE COMPETITIVE STRUCTURE OF THE INDUSTRY

• ANTICIPATE AND EMPLOY CHANGE

6-13

Vision for disruption

Sustaining the momentum bydeveloping flexible capacities for:

Seizing initiative to gainadvantage by •Shifting the rules•Signaling•Simultaneous & sequential strategic thrusts

Marketdisruption

Identifying and creating oppor-tunities for temporary advantage

through understanding

Directed at identifying new waysto serve existing customers

better or new customersthat no one else

serves nowCapability

for disruption

that can be applied acrossmany actions to build a

series of temporaryadvantageous

with actions that shape, mold,or influence the direction onnature of the competitors’

responses

Tacticsfor disruption

•Stakeholder satisfaction•Strategic soothsaying

• Speed• Surprise

Exhibit 6-10

6-14

Disrupt Cat’s strategic strengths Outmaneuver Cat’s strengths (“Encircle” Cat)

Boost

quality

Lower

cost

Timing

Rolls out

one

product

at a time

Geographic

Komatsu moves out of Japanese

stronghold to

Asia, Europe,

South America,

and lastly

North America

Know-how

AggressiveR&D andnew productprogram

Channels

Komatsu

moves to

direct sales,

dealers, then

regional

centers

Komatsu

builds

resources,

new plants

and user

alliances to

Gain

strengths

initially

Erodes Cat’s

premium price,

global volume,

low costs

Picks off

Cat’s full

line one

by one

Undermines

Cat’s

advantage

on product

innovation

Erodes

Cat’s World

dominance

one place

at a time

Maneuvers

around

Cat’s strong

dealer

network

Erodes

Cat’s deep

pockets

Arena 1Cost & Quality

Arena 2Timing & Know-how

Arena 3Strongholds

Arena 4Deep Pockets

KOMATSUV CATERPILLAR

From the Field: 6-16-15

MARKET ORIENTATION ELEMENTS

BEING SYSTEMATIC IN:

1. Gathering of information on customers and competitors

2. Analyzing information to develop market knowledge

3. Using this knowledge to guide strategy

6-16

PAYOFFS FROM A MARKET ORIENTATION

A MARKET ORIENTATION COMPANY IS:

1. BETTER AT FITTING NEEDS OF CUSTOMERS

2. MORE DIFFICULT FOR COMPETITORS TO ASSESS

3. APT TO BE UNIQUE

6-17

REQUISITES FOR THE LEARNING ORGANIZATION

xxxxVisionary

leadership

Information

systemsExecution

Creating &

striving

Target &

trajectory

Exhibit 6-13

6-18