Competitive Strategies And Environment

29
THE INSTITUTE OF BUSINESS THE INSTITUTE OF BUSINESS DEVELOPMENT DEVELOPMENT EXECUTIVE CONVERSION COURSE EXECUTIVE CONVERSION COURSE LECTURE SERIES LECTURE SERIES COMPETITIVE STRATEGIES AND ENVIRONMENT COMPETITIVE STRATEGIES AND ENVIRONMENT Paul Ikele, Paul Ikele, M.Sc, MBA, M.Sc, MBA, FBDI, FBTM FBDI, FBTM

Transcript of Competitive Strategies And Environment

Page 1: Competitive Strategies And Environment

THE INSTITUTE OF BUSINESS THE INSTITUTE OF BUSINESS DEVELOPMENTDEVELOPMENT

EXECUTIVE CONVERSION COURSEEXECUTIVE CONVERSION COURSELECTURE SERIESLECTURE SERIES

COMPETITIVE STRATEGIES AND ENVIRONMENTCOMPETITIVE STRATEGIES AND ENVIRONMENT

Paul Ikele, Paul Ikele, M.Sc, MBA,M.Sc, MBA, FBDI, FBTMFBDI, FBTM

Page 2: Competitive Strategies And Environment

Discussion PlanDiscussion Plan- What is Competitive Strategies & Environment- How business strategy is created- Managing the Competition- Pricing - Communicating the Strategy- What are Customers Thinking?- Conjoint Analysis- When the Chips are Down- Nature of Business Environment- Environmental Scanning- Sustainable Competitive Overview- Key Routes to Competitive Advantage- Evaluating the Effectiveness of a Strategic System- Class Debate Session

Page 3: Competitive Strategies And Environment

What is Competitive Strategies & What is Competitive Strategies & EnvironmentEnvironment

It is a fundamental pattern of presentation of planned objectives, resources deployment and interaction of an

organisation with market competitors and other environmental factors: Boyd, Walker and Lareche.

STRATEGIC MAIN TASKS:IS

Those things that need to be done over the medium and long time period to achieve a particular goal.

Page 4: Competitive Strategies And Environment

How business strategy is createdHow business strategy is createdThe process includes the following:

Analysis: The examination of the available resources within the organisation for sustainable

advantage:- - ORGANISATION ASSESSMENT a) What the organisation does and hope to achieve as widely as possible.b) To determine the available resources and further requirementsc) The extent the objectives in terms of long and short term scenarios.d) The strengths, weakness, opportunities and Traits.e) The organisations overall mission and strategyf) The organisations Resource requirements.g) The organisations Policies and Norms.h) The organisations Past Performance.i) The organisations Capacities.

Page 5: Competitive Strategies And Environment

How business strategy is createdHow business strategy is created

• ENVIRONMENTAL ASSESSEMENT This is categorized into two1) Operating Environment: The environment of which

a company interacts on a routine basis in carrying out its business.

The key actors are:- The Competitors The Public Institutions2) Macro Environment: It defines the society with

which an organisation operates.

Page 6: Competitive Strategies And Environment

How business strategy is createdHow business strategy is created

FORMULATION This is the identification of tactical options. It can be either Competitive or Collaborative.Competitive when an application of distinctiveness

is made. Collaborative when opting for alliance, mergers

and joint venture.

Page 7: Competitive Strategies And Environment

How business strategy is createdHow business strategy is created

IMPLEMENTATION AND CONTROL Company

Customer Competitor

Page 8: Competitive Strategies And Environment

Implementation and ControlImplementation and Control

The differentiation by the Company of its position from its Competitors using its weakness and strength to better satisfy Customers

- Need to create a Strategic Planning Unit ( S. P.U.)- The Unit to have full freedom expected with respect to 3C- Members of the Unit to compose of professionals with peculiar character

features, broad minded and well read individuals.

THE SPUs MAIN FUNCTIONS AMONGST OTHERS INCLUDES:-- Clear definition of Customer wants.- Ability to garner informed speculations on the wants- To keep an eye on Competitors

The company must ensure that adequate resources are made available for quick response to any of the wants of the customer.

Page 9: Competitive Strategies And Environment

Implementation and ControlImplementation and Control KEY APPROACHES THAT CAN BE USED CUSTOMER BASED STRATEGY: This is a systematic means of segmenting

the market on the usual consumer ways and then devising key ways of approaching the segmentation. It can be by use, location and demographic characteristics. CBS is very significant in key decision issues in organisations on the need of the product being determined by consumer behaviour.

COMPANY BASED STRATEGY: This is maximizing the Company's price in the functional areas that is critical in the industry. The key thing here is to understand the functional areas. It is important to be clear in sequencing the functional areas because they don’t remain constant in terms of their priority. E.g. the Japanese were able to penetrate the Western World in business in areas of Automobile and Electronics.

THE COMPETITIVE BASED STRATEGY: This the identification of the Company's key Competitors and determine their strengths. It is important to look at customers reaction to every strategy. All strategies should be positioned to have a feed back process so as to enable you determine where deviations occur.

Page 10: Competitive Strategies And Environment

Managing the CompetitionManaging the Competition

• Sometimes allowing the competitor to win in the unattractive segments can create the opportunity to gain a foothold in the market place, allowing you to stake out a superior position and making it very difficult for the competitor to re-establish themselves.

In any market it's important to: • Understand the profit drivers . • Recognize that the profit drivers can be different for different

segments. • Consider that margin percentages and high gross profits don't

always translate into bottom line profits.• For any product it will be amazing how a simple market

segmentation can give a competitive advantage in a tough price driven market. Isn't it interesting how easy strategy can be - the tough part is actually taking the time to think it out. Take the time - develop a strategy - manage your competition!

Page 11: Competitive Strategies And Environment

PricingPricingExperience is what you get when you don't get what you want...Experience is what you get when you don't get what you want... Anon Anon

Getting a price increase in a tough competitive environment is difficult. By raising prices you're challenging the relationship between the money asked for and the value provided. In order to raise prices one needs a solid understanding of the value one's product or service brings to the customer. In some cases this value can be different for each customer.

The easiest time to get the right price is when the product is introduced. A poor product launch often means the launch team had a weak understanding of the product's value. Pricing too low has the effect of transferring potential profits directly to the customer's bottom line.

Once a product is in the market and the value established, raising price is, at best, difficult. Opportunities to increase price are when a significant update is launched or when a new market is entered.

Page 12: Competitive Strategies And Environment

Effective Ways to Raise PriceEffective Ways to Raise Price

The following six ways can be used to increase prices: • Brute force: simply insist on a higher price. The risk is that you may alienate your customer. A

price hike without an explanation can send the customer looking for alternatives. If the customer has choices this is not a good tactic.

• Change the value: Bringing more value to the customer allows one to increase the price. However, like beauty, value is in the eyes of the beholder. Customers rarely figure out the increase in value for themselves. Do it for them! Show them why the new product is a better value.

• Price completely: Charge for previously free services. Sophisticated customers want the product and expect to pay the lowest price while others expect service to accompany the product. Segment the market and offer the product at price points for different segments with different service needs.

• Change Roles: Some customers just want the job done. They don't want to purchase products. Sell them the completed job rather than just the product.

• Leverage your price structure: Some customers (especially in bid situations) focus heavily on the initial price. Knowing that they will need additional services to complete the purchase bid low and price the add-ons at a premium.

• Manage the price: Allowing local offices to charge what they may can work for established products, but is often a disaster for new products. Territories determining their own pricing won't work in today's transparent world. Establish a team to manage new products. Pricing takes great discipline which few territorial managers can exercise.

If experience is what you get when you don't get what you want - then many of us have lots of experience in pricing.

Page 13: Competitive Strategies And Environment

Communicating the StrategyCommunicating the Strategy• A good business strategy exploits and strengthens a competitive advantage and must be

communicated throughout the company. Business units might then adapt or modify the corporate strategy but in the end everyone must be completely clear about the tasks that must be done. They must be certain who will do those tasks and how they will be performed. Ask any individual what are the two or three key things that they or their business unit need to accomplish this year and the answers should always link back to the over all strategy and the role their business unit plays in executing it.

Great leaders know they must speak in clear, simple and uncomplicated terms so everyone knows exactly what is required. They leave no doubt where the company is going...and where it is not.

Successful communication is not measured by how much is said but rather in the clarity of what was said. The listener must "get it" and when they do they must be inspired to act. From clear communication people find courage - they get ready to fight. Say it as simply as you can and engage your people.

• Use discussions not decks of slides: strategies on slide decks greater than ten to twelve slides are rarely well thought out and even more, rarely understood.

• Synthesize: be prepared to discuss details (if asked) but keep the focus on the strategy and the overall picture - don't dump data - it doesn't impress anyone.

• Understand your audience: Depending on the business unit and level in the organization a business strategy can affect audiences in different ways. Treat them like any other customer and speak to their needs. They must leave knowing what is expected of them and be motivated to do it.

• Invite participation: Let team members come back with ideas on how they can better execute their part of the strategy.

• Great leaders communicate the business strategy so it engages everyone and leaves no doubt what objectives will be achieved and by whom.

Page 14: Competitive Strategies And Environment

What are Customers Thinking?What are Customers Thinking? Customers are fickle! So when Motorola was developing a new version of its

popular TalkAbout two way radio for the recreational and industrial market it was trying to determine what customer groups might want in a two-way radio. Motorola couldn't possibly fit all the new features they envisioned into the new two-way radio but which ones should they incorporate and which ones should they leave out? Motorola needed to answer a question asked by all companies; which product or service features would the customers value most and how much to charge for the new product?

The obvious answer to the question is to ask the customer. However, traditional research tools such as focus groups and surveys have provided little help to unlocking the customers' true needs and to understanding their decision making process. Gerald Zatman in his book states that 95% of thinking that ultimately drives human behavior takes place below the level of awareness in memories, emotions and stories that he claims are the real drivers of purchase behavior. So how does one understand the true motivators behind customers' decisions?

Page 15: Competitive Strategies And Environment

CONJOINT ANALYSIS• A tool developed by Dr. Paul Green at Wharton Business School called 'Conjoint

Analysis' unlocks the answer. Conjoint analysis can accurately determine why a customer chooses one product or service over another. This tool measures the trade offs customers make by having potential customers compare various product and service attribute options. It then simulates these choices (using regression mathematic techniques) and determines how customers will likely react to changes in the product attributes. This sounds very complicated (and the math is) but the survey itself is quite easy to conduct.

Conjoint studies can provide an excellent measure of the consumer's true needs. The results of a conjoint study can be used to assist in:

• Product development: to determine what attributes to include in a product. • Price setting: to establish what the customer is willing to pay for a specific product or

service. • Market segmentation: to identify customer groupings who value the product attributes

similarly.• Market size and share prediction: to predict market size and potential market share

and thus assist in setting production and sales strategies.• Motorola conducted conjoint studies in six key markets across North America with

groups who actively participated in outdoor activities and with industrial users where two way radio communications is a natural benefit. They tested eighteen different product benefits and price points to come up with the optimal two-way radio. Using the research results they designed what is today by far the market leader in the recreational and industrial two-way radio market

Page 16: Competitive Strategies And Environment

In short, Conjoint Analysis gives a glimpse

into the future and is a proven tool that can be used to accurately predict potential market share and price sensitivity. New product development teams can use the conjoint information to better design new products, segment markets and more accurately predict potential market share and profits. When business teams ask "what's the customer thinking", Conjoint can provide the answer.

Page 17: Competitive Strategies And Environment

When the Chips are DownWhen the Chips are Down• There are many brilliant strategies sitting in the bottom of too many drawers or in the

minds of too many bright managers because managers don't know how to or don't have the confidence to implement them. Equally there are many good strategies that are not effectively implemented leading to poor business or business unit performance. So why do so many good strategies fail and what did Andy Grove and others like him do to push their strategies through?

• Plan: Strategic change is difficult because people often perceive they will lose power, and / or resources. The change plan must be thought through with the same discipline as the development of the new strategy.

• Courage: When you know what to do, one needs courage to push the strategy through

• Try not to do everything at once: The strategic change plan must set priorities. Too many tasks at once can overwhelm even the believers.

• Define responsibilities: Assign managers specific change tasks. This gives managers specific objectives to work towards - this helps ensure buy-in as they feel like their input to the change program is essential (which of course it is)

• Communicate the change properly: Change can be a threat or an exciting journey. One must market to the internal team as much as to the customers.

There are three parts to developing a good strategy. Analyze the market, develop the strategy, and implement the strategy. The toughest step by far is implementation. When the chips are falling make sure they fall the right way!

Page 18: Competitive Strategies And Environment

NATURE OF BUSINESS ENVIRONMENTNATURE OF BUSINESS ENVIRONMENT• Basically, the business environment can be classified into three

categories – micro, macro and international environment.• The micro-environment consists of elements whose decisions and

activities have immediate impact on the operations of the business enterprise. These elements include consumers or users, trade unions, competitors, creditors, government regulatory agencies, marketing intermediaries, suppliers, investors, and the community. The micro-environment is also called task environment or operating environment. The business enterprise cannot survive without taking into cognizance the activities of these groups.

• The macro-environment consists of those external forces over which the firm has no control. They include economic, socio-cultural, political, legal, technological and physical environment. The international environment refers to all those elements or forces outside of the national boundaries but which are capable of having effect on the decisions and operations of a business enterprise.

• These three categories of the business environment exert pressure on the business enterprises simultaneously. They also interact and affect one another.

Page 19: Competitive Strategies And Environment

ENVIRONMENTAL SCANNINGENVIRONMENTAL SCANNING • All the environmental factors are not all equally important to the survival and growth

of the business. Some are more critical. Nevertheless, business managers are expected to establish a system by which they can monitor the nature and direction of changes in the environmental factors and determine the action they must take to ensure a satisfactory performance.

• At any point in time there are key factors which affect or are likely to affect the operations of the business. The first step in monitoring the environment is to identify these factors. One process is a general and continuous surveillance of the environment. Without any particular problem in mind, managers read newspapers, magazines, journal articles, listen to radio and television in order to be informed about developments in the society. They participate in the activities of organizations such as the Manufacturers Association of Nigeria (MAN) and exchange views with colleagues in the industry. They also attend workshops, seminars and conferences where issues affecting businesses are generally discussed.

• When managers are faced with a specific problem and they require information about the environment to make decisions, they may engage in a systematic study. This process is more focused on the problem at hand than a general environmental surveillance. A systematic study involves a definition of the problem, identification of the key factors that may be useful in analyzing the problem, measurement of the key factors, evaluation and selection of a preferred course of action to solve the problem.

• The purpose of environmental scanning is for managers to be able to determine the current state or conditions in the environment and predict changes that are likely to take place in the future. This way, managers build up a capability to deal with threats that may emanate from the environment or take advantage of opportunities available.

Page 20: Competitive Strategies And Environment

SUSTAINABLE COMPETITIVE OVERVIEWSUSTAINABLE COMPETITIVE OVERVIEW

• To achieve sustainable success in the market place over the Competitive Motivations.

• To have the Knowledge of Resources and Capabilities you have.

• To anticipate the current and changing nature of customers demand, e.g. the cement dealer anticipates the changes through market research, knowledge and experience.

• To perform in the market place in a manner which is efficient and more effective than your Competitor.

Page 21: Competitive Strategies And Environment

Key Routes to Competitive AdvantageKey Routes to Competitive Advantage• Identify key factors for Success: In the industry or business

concentrate resources on the key factors to gain advantage and establish your presence in the market.

• Identify those area where you have relative superiority over your competitors: Try to emphasise on those areas e.g. technology, sales, network, asset and marketing base.

• Identify where the Competitors are skidding of and challenge them: You seek to challenge the rule of the game by obstructing the statuesque and dislodge them, or challenging the basic assumptions on the ways business are done. It is also known as mkt strategy based on Strategic Initiative. (MSBAI)

• Deployment of Innovations bases on the degree of freedom: This happens when there is intensive Competition ensure to avoid head on war.

Page 22: Competitive Strategies And Environment
Page 23: Competitive Strategies And Environment

EVALUATING THE EFFECTIVENESS OF A STRATEGIC SYSTEM

ALLIGNMEN

T

OF RES

ULTS

& GOALS

EFFICIENCY OF

TECHNIQUES

The soundness of the system in any organisation can be evaluated with criteria

as follows:

INTELLIBILITY

ADEQUACY OF CONTROLS SYSTEMATIC REVIEW

ADEQUACY OF DELEGATION &

DECENTRALISATION FLEXIBILITY

ADEQUACY OF

COMMUNICATIONS

Page 24: Competitive Strategies And Environment
Page 25: Competitive Strategies And Environment

Class Debate Session

Page 26: Competitive Strategies And Environment
Page 27: Competitive Strategies And Environment

Competitive Strategies

and Environment

always depends on the market scenarios

ISSUEISSUEIt is realistic to

evaluate the effectiveness of

Competitive Strategies and Environment

Issue

Group

Group

For

Against

For

Against

Speaking

Speaking

1

2

3

4

Page 28: Competitive Strategies And Environment
Page 29: Competitive Strategies And Environment

Regularly review the effectiveness of

the Competitive Strategies and

Environment for adequacy

Concluding Comments