Smd Ppt My Notes

Strategic Marketing Decisions

Knowledge Factory

Market led strategic management

The discipline of marketing has migrated from being a functional discipline to being a concept of how business should be run

Only few companies have moved beyond the marketing trapping of advertising, short-term sales growth and flamboyant innovations to achieve a sustainable robust marketing strategy that produces long term performance and strong shareholder value

Radical strategy Rational strategy Robust strategy

2003/2004 TKF

Competitive Advantage

Definition of competitive advantage

Sustainable competitive advantage strategies

SustainableCompetitiveAdvantage

The way you compete

Basis of competition

Where you compete?

Who you compete against with?

Product StrategyPositioning strategyDistribution strategyPricing / Manufacturing strategy

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Managing in the 21st Century

Globalization of markets

(e.g.:- Intel, Microsoft, McDonalds, Barbie, Sony)

Change in industrial structures

(e.g.:- Coconut Vs. Microchips)

The information revolution and technological change

(e.g.:- Amazon.com) Rising customer expectation

(e.g.:- Nike, P&G, United Distillers, Coca Cola, Dell)

Intel Company Microsoft Barbie Sony Amazon Ni`ke Proctor & Gamble United Distillers Coca Cola Dell

Company Profiles

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Rising customer expectation

Nike

P&G

United Distillers

Coca Cola

Dell computers Time

expectation

Mass marketing

Customization

Mass customization

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Stages of involvement in global market

Domestic market(Local customer)

Export market(Reactive, No product development, No Research)

International markets(Committed, Resource dedication, Profit objective

Segment importance)

Global markets(Global opportunity, Global branding, Standardized products)

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Key drivers of the globalization

Customer demand Global supply Organizational objective

to be globally competitive

Global Business

Risk perception

Competition Commitment

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Understanding global strategies and competitive advantage Manage globally available information ROI marketing e.g.:- HSBC Develop global strategies Manage customization Vs. standardization

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Decisions involved in developing a global strategy In which country should products be marketed and at

what market share level (e.g.:- India or China) To what extent should products & services be

standardized across countries Where should the value added activities such as

research production and service be located To what extent should the brand name and marketing

activities such as brand positioning, advertising and pricing be standardized across countries

Should competitive moves be part of a global strategy or should it be individual (e.g.:- HSBC)

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Motivation for global strategies

Obtaining scale economies(e.g.:- Nike footwear, Kodak film, Nestle coffee)

Desirable global brand association Access to low labour and materials Access to national investment incentives Dodged Trade barriers Cross subsidization

(Resources accumulated in one country can be used in another)

Access to strategically important markets(e.g.:- India & China)

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10 ways to develop a high global business IQ Be comfortable with change and respond at lightning

speed (Speed rules). Peter Ducker said “One cannot manage change,one can be a head of it”

Develop and old encompasy perspectives, Where should able to function well on small scale and large scale

Welcome new experiences even crises for they loring about the positive confrontation between different prospective. “A crisis is a turning point which offers as much opportunity as danger”

Adopt, take risk and be innovative

continue….2003/2004 TKF

10 ways to develop a high global business IQ (Continued) Travel to atleast one foreign country and stay for

several weeks preferably with a native family Learn as much as possible about the culture in which

you are above to do the business Maintain position & enthusiasm, playfulness &

curiosity know your self well before you present your self.

(listening, empathizing and understanding) Store enormous reserves of energy with patient Own courage

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Standardization Vs. Customization

The prime motivation for standardization is economies. The more standardization, the more potential there is for scale economies.

The vision of a single global product that share not only R&D and manufacturing but also a common name as well as brand equity

The second motivation for standardization is to create impact for the marketing programs outside the main country through media-spill-over

The 3rd motivation for standardization global strategy is the global brand association and essence of brand positioning (e.g.:- Levis jeans, French perfumes)

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The customization option

Customization provides name associations and advertising that can be developed locally tailored to the local market and selected without the constrains of standardization

customization also involves reduce risk from “buy local” sentiments

Home work:- One page summary Sony’s of global strategy

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Question

You are the Marketing Manager of AXY company, who currently markets specialized ice creams. Recent meeting at Tesco’s with other competitor manufacturers. Tesco has requested that your company manufacturers an ice-cream for Tesco. This would be chosen on the basis of product cost and quality.

Evaluate and justify options available for the company to perceive or not to perceive this decision

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Definition of Marketing

Marketing is the management process that seeks to maximise return to shareholders by developing and implementing strategies to build relationship of trust with high value customers and to create a sustainable differential advantage

Two critical areas of focus in this topic is understanding what customers want and choosing

them Profiling your competitors so that the company can

create continue value for customers

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Areas of creating value for customers Choice of markets Target market

segmentation Differential advantage Marketing mix

Overtime perceive similar competitive strategies and use the same distribution channel and heavy advertising

Have similar characteristics

Have similar assets and competencies

Identifying competitors

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Strategic groups

Product Range

Sca

le o

f op

erat

ion

BroadSpecific

Global

Local

•Land Rover•Range Rover

•Montex

•Mercs•BMW•Volvo•Audi

•Toyota•Nissan•Honda•Ford

•Hyundai

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Changing traditional thinking

From the marketing concept to marketing as a business process

Old Marketing concept definition New Marketing concept definition marketing as a business process

Old Marketing concept

New Marketing concept

Businessprocess

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Old marketing concept Marketing concept can

be defined as a process of achieving organisational goals by determining customer needs and wants of target markets and delivering the desired satisfactions more efficiently and effectively than competitors

Marketing is the process of planning and executing activities that satisfy individual, ecological and social needs ethically and sincerely by also satisfying organisational objectives

New marketing concept

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Marketing as a Business process

Marketing can be thought of as a process which designs and manages business process necessary to define, develop and deliver value to target customers

Therefore marketing should include;

Value defining, Value developing & Value delivery

Value definingprocess

Value developing

process

Value deliveryprocess

Gillette:- complete shaving system

Philips:- CD ROM

Sony:- CDROM BMW:- i-Drive

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Assignment

Identify one company that has been a market leader and identify why this company lost its position as a market leader and decline?

Giving examples of findings two areas of information; Why market leaders decline? What are the capabilities market leaders need

to acquire to maintain leadership?

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Characteristics shared by the strongest brand today Clarity of vision (ownership in the people’s mind)

Consistency Leadership

Out of sum 2500 Interbrand studies in brand valuation throughout the world the most discriminating factor in generating long term brand value at the highest level is leadership

This is the brand’s ability to lead and exceed expectations to take people in to new territories and new areas of product and service and even social philosophy at right time

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Sainsbury’s strategic return to core values The UK’s 3rd biggest food retailer is looking to

establish a more up market position in order to reverse the recent downturns in fortune

A new flagship store in London will feature a luxury product ranges. These includes a juice bar, a up market bakery, a premium wine merchant and a seasonal produce counter

Sainsbury’s traditional strength is not price but rather quality with the above developments aiming to position the company upmarket

Sainsbury struggled to compete in a price war with larger groups such as ASDA and Tesco

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Strategic drift

Strategy must fit the environment

Successful strategies erode

Effectiveness is more important than efficiency

Speed and decisiveness (first mover advantage)

Organisation is more vital than the strategy Time

Sales

The environment changes over time

Strategic drift

Strategic ware out

This doesn’t have a corporate charisma

Efficiency

Effect

ivene

ss

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Strategy must fit the environment

Companies like Virgin, Orange, O2 seceded, because they give today’s customers what they want.

They have the brands and distribution channels which offer update solutions for customers

Virgin (web link) Brand name associated

with Richard Branson Orange (web link)

There are 16 countries in the Orange Group worldwide offering a broad range of voice and data communication services.

O2 (web link)Products & Services Mobiles Voicemail WAP Media Messaging Mobile Video

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Successful strategies erode

History suggest that nothing fails like success IBM had 80% market share 10 years ago, today it has 8%. Almost

invariably a new competitors innovative technology, new distribution channels or changes in customer tastes undermines market dominant

market leadership is immensely difficult . It requires enormous investments, high rates of innovation, greater flexibility (e.g.:- HSBC conservative lending policy)

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Effectiveness is more important than efficiency

Peter Drucker made the famous distinguish between efficiency (doing things right) and effectiveness (doing the right thing).

Efficiency is essential about cost reduction and effectiveness about innovation

innovations first offer customers superior benefit, but in long run also offer lower cost

Profit

Time

Efficiency

Effect

ivene

ssInnovationApple Ipod

Play station 2Cost reduction

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Speed and decisiveness

First mover find it easier to establish competitive advantage.

They get premium prices and faster payback on their earlier investments.

Companies, who are slow have to launch at discounted prices and catch-up in the battle in the battle for market share

First mover advantage

suchimi principle

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Organisation is more vital than the strategy Where organisations

create systems, structures and attitudes, which stimulate people to be customer focus

Culture and behavior of corporations (The Seven-Ss Model)

Structure

Strategy Systems

Skills Style

Staff

Sharedvalues

Hard Ss

Soft Ss

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Reinvention or changing the paradigm

Adoption of Recipe

Developmentof strategy

ImplementationBusiness

Performance

If unsatisfactory

Abandon old recipe & reinvent

Modify plan or tighten control

Modify or develop new strategy

Source: CIM Professional PG Diploma SMD Slide No. 36

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The strategic planing factors

Value and purpose Time Level of market

orientation Performance measures Product, market and

industry sectors Degree of turbulence Resource leverage &

resource availability Market analysis

This is that the more linear and iterative process of marketing although useful may be too restrictive and not dynamic enough.

When organizations need to consider the various internal and external factors which must be taken in to account when developing a strategic marketing stance

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Organizational learning and knowledge management Organizational learning can be basically defined as a

process of improving action through better knowledge and understanding

Organizational learning is a development of knowledge or insights that have the potential to influence behavior

Learning facilities, behavior changes that lead to improve performance

dynamic and turbulent environment demand learning and behavior changes that lead to improve performance

Continue…...

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Organizational learning and knowledge management (continued)

More recently a learning organization has been viewed as a continuously creative, innovative organization

As an coherent, cohesive structure, where each member is willingly active

If this is to occur there needs to be single loop learning and double loop learning

Organizational Learning

IndividualLearning

Gap

Transfer Learning

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Double loop learning

This is limited to a section of an organization

Have a defined set of behaviors, design to cope with particular problems (reactive learning)

Emphasis on making technique more efficient

This effects the whole organization

it entails deeper challenge to routine practices and rules

Take advantages of windows of opportunities

Single loop learning

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Distinguishing between Explicit knowledge and Tacit knowledge Explicit Knowledge

can be formally articulated or encoded

This can be more easily transferred or shared

This is abstract and removed from direct experience

Tacit Knowledge is knowledge in practice

Developed from direct experience and action

highly pragmatic and situation specific

Subconsciously understood and applied

Difficult to articulate Usually shared through

highly interactive conversation and shared experience

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Knowledge ManagementLeveraging learning across markets

Socialisation(Sharing experience)

Externalisation(Articulating tacit knowledge

explicitly)

Internalisation(Learning by doing)

Combination(Building a knowledge

system)

Fro

m

Exp

licit

know

ledg

eT

acit

know

ledg

e

To

Tacit Knowledge Explicit Knowledge2003/2004 TKF

Barriers to the sharing of Tacit Knowledge Hierarchies Strong preference for analysis over intuition: discouraging

employees to offer ideas without “hard facts” to back it up Penalties for failure (discouraging experimentation) Strong preference for a particular type of communication

within working groups Fear of failing to express the inexpressible: When trying to

convert tacit knowledge to explicit one Inequality in status among the participants Uneasiness of expressing emotional life experience Distance, both physical separation and time

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Tacit knowledge as a source of competitive advantage Tacit knowledge underlies many competitive

capabilities. Tacit knowledge, or implicit knowledge as opposite to

explicit knowledge, is far less tangible and is deeply embedded into an organisation’s operating practices.

Tacit knowledge includes relationships, norms, values and standard operating procedures

Because tacit knowledge is much harder to detail, copy and distribute it can be a sustainable source of competitive advantage Individual tacit knowledge Collective tacit knowledge

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Learning organisation

An organisation that learns and encourages learning among its people, it promotes; Exchange of information between employees Hence creating a more knowledgeable work force

This promotes; Very flexible organisation Where people except and adopt to new ideas and

changes through a shared vision The corporation which is able to quickly learn

and then innovate their work practices performs better in the constantly changing environment

Continue….2003/2004 TKF

Learning organisation (Continued)

Business reengineering used to concentrate on eliminating waste and not working smarter and learning

Speed of learning this is how fast an organisation absorb and put it in to practice

This can only be introduced to a company that is prepared to reach a balance between change and stability

Balance

Change in the

organisation

Stability ofthe

organisation

Company

1. No tacit knowledge shared

2. Sharing tacit knowledge

3. Convert it in to explicit knowledge

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The nature of strategic innovation

Most strategic innovations came from outsiders, rarely from established players

It arises from complex interactions between many individuals, organisations and their operating environment

Rapid innovation requires an effective innovation process. "The process of innovation is a rhythm of search and selection, exploration and synthesis, cycles of divergent thinking followed by convergence".

Corporate innovation system Systematic approach to innovation - 7 areas of

innovation

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Marketing & Innovation

In most businesses innovation is regarded as the key to corporate success

In today’s rapidly changing environment a company cannot alone maintain market share or profits unless its innovative

If a company’s product or service are not continually improved, competitive pressure in variably leads to fall in prices, declining margins and the commoditization of the offer

Innovation is the path to achieve growth in sales and profitability

Marketing innovation Innovative design and

presentation techniques

New forms of differentiation, positioning and advertising

Innovative distribution and customer service methods

Source: 1000 ventures web site2003/2004 TKF

Key challenges to companies

1. Collapse of boundaries

WTO (reduction of taxes for foreign entry)

Dell computers (Innovative and cost effective processes

Amazon.com (e-businesses)

2. Rising customer expectations

Micro marketing

Customized products (Nike, make your own shoe)

High number of users and large volumes

3. Speed of change

Latest product Latest

technology Latest model

or version “Latest” is the

key word of today’s business

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Exploiting innovation for effective strategies

Product differentiation Service differentiation Customer intimacy Brand leadership Lower total cost

Process innovation

Gillette, Nike

Singapore airlines HSBC

Giorgio Armani McDonalds, Dell,

Amozon.com, Boeing

HSBC-PIL, SIA - e-ticket

Giorgio Armani NIKE

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Success criteria for innovation

The strategy must fit the environment This means companies must offer customers, brands

they want and offer them through distribution channels which offer update solutions (e.g.:- Dell Computers)

Successful strategies erode “Nothing fails like success”. Today's market leaders

generally tomorrow’s basket cases(number of years earlier IBM had 80% market share, now it has 8%)

Effectiveness is more important than efficiency (Doing things right Vs. Doing the right thing)

Speed and decisiveness Organisation is more vital than the strategy

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Conditions required for innovation

Innovation

Moderateenvironmental

uncertainty

Cohesivework

groups

Exchangeof information

Resourcesfor

innovation

Supportivestructure and

systems

Lowpeople

turnover

Source: CIM Professional PG Diploma SMD Slide No. 55

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Criteria of success innovation

It must offer customer value Breathtaking technology is not good enough. It

must offer unique value (e.g.:-WIFI) It must be perceived as unique It must be marketable(e.g.:-Concord) It must be sustainable

(e.g.:-Coca-Cola, Malbro, Starbucks)

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Example Question

For an organisation of your choice discuss how the organisation has created conditions for effective innovation.

Explain how this innovation process sets them apart from competitors What are the obstacles they are likely to face

and why? What can they do to overcome this obstacles? How do you think e-technology can contribute

supporting and stimulating innovation?2003/2004 TKF

Innovation strategy Marketing department led innovation

e.g.:- STP, new Campaigns, differentiated branding, trading up customers, Rin & SurfUltra, Johnnie Walker ad.

Acquisition led innovation Many companies have often sought to find innovation through

acquisition.It is faster and the company can leapfrog in competition (e.g.:- Apple Ipod-Fujitsu hard disk, HP-Compaq, Nissan-Renault

Invention led innovation e.g.:- Evan moisturizing spray

Market led innovation most effective way to build sustainable innovations through a

comprehensive market innovation. This focuses on building value generating relationships with

customers, system partners & staff (e.g.:- Amazon, FedEx)2003/2004 TKF

Innovation Zones

Zone 03

Zone 02

Zone 01

Basic innovation

Relativeinnovation

Conceptinnovation

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Basic innovation – Zone 01

Minor product or service enhancement.

This will not add value to the product

It can be copied by the competitors easily

Examples:- Coca cola Lemon HSBC 0% interest in

credit cards Life policy premiums and

Bonus combined packages

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Relative innovation – Zone 02

This is innovations that build on existing products and services

Taking existing products to new markets

Relate yourself to the competitors and to the markets

Examples Gillette Sensor for women HSBC e-saver accounts Ceylinco LIPS

Gillette Sensor for women

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Concept innovation – Zone 03

Major areas of concept innovation are; Information technology

innovation (e.g.;- e-merchandizing, use PDAs to send order immediately to suppliers extranets)

Strategic innovation e.g.:- Tetra packs

Demand innovation e.g.:- Samsung mobile phones

Operational innovation e.g.:- McDonalds drive through

Mc-Drive Through

Tetra packs Samsung SGH E700

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Strategic decisions on innovation in marketing

BlindKnow how to, but not whether we can sell it.Need alliances with

better partnersAnti aging products

SpeculativeDon’t know how to or What the market is?Sometimes can be

Successful, sometimes notDesign a baby (Bio-tech)

Straight forwardKnow the market

and how to approachBasic approachMobile windows

Potential disasterKnow what the market isBut not how to approach

3G

Un

cert

ain

ty a

bo

ut

mar

ket

(en

ds)

Low

Hig

h

Uncertainty about development approach

Low High2003/2004 TKF

Alternative approaches to strategic decisions

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Strategic Intent versus Traditional Missions and Visions

Traditional company visions and missions, developed in one-day strategy session, often lack discovery, opportunity and purpose, the critical elements of strategic intent

Strategic intent cannot be planned all in advance. It must evolve on the basis of experience during its implementation. Separating strategy creation from strategy implementation by using corporate planners or consultants for the former activity is thus a hindrance to the evolution of a successful strategy. Linking creation and implementation supports the overall process, and thus a strategy emerges and evolves.

Source: 1000 ventures Business E-coach, Strategic Intent

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Coca-cola Strategic priorities (6)

1. Accelerated carbonated soft-drink growth led by Coca-cola

2. Selectively broaden our family of beverage brands to drive profitable growth

3. Grow system profitability and capability to together with our bottling partners

4. Serve customers with creativity and consistency to generate growth across all channels

5. Direct investments to highest-potential areas across markets

6. Drive efficiency and cost-effectiveness everywhere

Continue …….2003/2004 TKF

Strategic intent defined

Strategic intent is a high level statement of the means by which an organisation will achieve its vision

The purpose of the strategic intent; is a logic, the uniqueness and

discovery that makes the strategic intent come to life are vitally important for all the employees

They have to understand, believe and live according to it

Strategic intent

Challenges

Opportunities

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Strategic define (Continued)

In developing a “strategic intent” takes the form of a number of corporate challenges. It should imply or convey a significant stretch for your company, a sense of direction, discovery and opportunity

Strategy should be a stretch exercise not a fit exercise

therefore the expression of strategic intent is to help individuals and organisations share a common intention to survive, continue and extend

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Developing a Statement of Strategic Intent Strategic intent takes the form of a number of

corporate challenges, specified as short term projects and opportunities.

The strategic intent must convey a significant stretch for your company, a sense of direction, discovery and opportunity that can conveyed a worthwhile to all employees.

It should not focus so much on today's problems, which are normally dealt with by company visions and missions, but rather on tomorrow's opportunities.

Strategic intent should specify the competitive factors, the factors critical to success in the future.


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Developing a Statement of Strategic Intent (Continued)

The strategic focus is the starting point for developing a statement of strategic intent.

A statement of strategy must become then a statement of design through which the principles, processes and practices of an organization are developed.

These statements must represent the whole as seen from any location in the organization

strategic intent should also be accompanied by intermediate goals against which company achievements can be measured.


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Developing a Statement of Strategic Intent (Continued)

Discovery and detection of opportunity serve as platforms for developing strategic intent.

A strategic intent creates a picture of the customer daily life and describes discontinuities and anticipated changes from the world of today.

It describes future customer's needs and the success factors required for meeting these needs.

An example of expression of strategic intent would be Coca Cola's dream of putting a Coke within arm's reach of every consumer in the world.


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Mission statement

The mission statement should be clear succinct represented of the enterprises purpose for existence.

It should incorporate socially meaningful and measurable criteria addressing concept such as the moral and ethical position of the enterprise, public image, target market, products/services, geographic domain and expectation of growth and profitability

The intent of the mission statement should be the first consideration for any employee, who is evaluating a strategic decision

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How specific should mission statement be (e.g.) Airco Inc. mission statement

Airco incorporated will be recognized as the most progressive enterprise in the transportation business. We will offer our customers cost effective transportation service within geographical areas and market segments that can be benefit from our service and be ensure on ROI and growth rate consistent with a current management guide lines.

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Example mission statements

3M mission statement “To solve unsolved problems innovatively”

Mary K cosmetics mission statement “To give unlimited opportunity to women”

Merc - Pharma Co. USA “To perceive and improve human life”

Walt Disney “To make people happy”

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Strategic decisions are concerned with; Long term directions of the organization as

suppose to day to day management issues Defining the scope of the organization activities

of what it will do and will not do Matching the activities of the organization to the

environment in which it operates. So that it promises and minimizes threats

Matching the organizations activities to it resource capacity in finance, technology or skill level

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Different ways of building strategies by organisations

Planning model Interpretive model Political model Logical incremental model Ecological model Visionary leadership model

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Planning model

Strategic decisions are reached by use of sequenced plan; search for optimum solutions to define problems

This process is highly rationale and fuel by concrete data

e.g.:- Play Station 2, Apple Ipod, Pixal,MP3

e.g.:- Employee Develop Systems, Strategic Alliances

Play Station 2

Apple Ipod

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Interpretive model

The organisation as regarded as collection of associations, sharing similar values believes and perceptions.

These frames of reference enable the stakeholders to interpret the organisation and the environment.

Strategy thus become the product not of defined aims and objectives, but of the prevailing values, attitudes and ideas in the organisation

e.g.:- Family driven business (Walt Disney)

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Political model

Where a strategy is not chosen directly, but immerges through compromise, conflicts and consensus seeking among interested stakeholders.

The person with the most amount of power have the greatest influence

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Logical incremental model

Strategies immerged from strategic subsystems, each concern with a different type of strategic issue

It is not structured as planning model

Goals can be wage, general and non-rigid

e.g.:- Sony vision statement moves from;

Digital company to Content enabler to Integrated intelligent networks

Time

Sales

Sony HIFI

Sony Pictures

Sony PS2

Today’s bread winners

Tomorrow’s bread winners

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Ecological model

In this perspective the environment impinges on the organisation in such a way that strategies are virtually prescribed and there is little or no free choice

The organisation that adopts to this environment will survive

e.g.:- Post Sep 11th model (Way the airlines compete)looked at the business class and long haul passengers, for traveling executives economy class with office environment

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Visionary leadership model

Where strategy immerges as a result of a leaders vision enforced by his commitment, credibility and how he articulate others

e.g.:- Starbucks, Microsoft, Body-shop, E-bay

Body Shop2003/2004 TKF

Characteristics of Competitive Advantage An efficient SCA will be created when a

strategy has at least 3 characteristics It should be supported by assets and

competencies It should be employed in a competitive arena

that contains segments that will value the strategy

It should be employed against competitors, who cannot easily match or neutralize SCA

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an effective SCA should be;

Substantial enough to make difference e.g.:- Marginally superior, quality

Sustainable in the phase of environmental changes/challenges

and competitive actions a high-tech market can erode their advantage overtime.

Leverage When possible the SCA should be embedded in to

the visible business attributes that will influence customers. This is possible through advertising and positioning.

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Strategic Thrusts (Route to an SCA)

Strategic Thrust

Differentiation Focus

Synergy

PreemptionCost Leadership

Besides the strategic thrust shown out above there are several other strategic thrusts that could be considered. They are;

Being innovative, Thinking globally, Having an entrepreneurial style, Exploiting information technology2003/2004 TKF

Differentiation strategy

There is a element of uniqueness above to strategy that provides value to the customer

Firms differentiate their offerings by enhancing performance, quality, reliability, prestige or convenience

The differentiation strategy is an integrated set of action designed to produce or deliver goods or services that customers perceive as being different in ways that are important to them

. With the enormous competition markets today are driven by choice - your targeted customers have too many choices, all of which can be fulfilled instantly. Choosing among multiple options is always based on differences, implicit or explicit, so you ought to differentiate in order to give the customer a reason to chose your product or service.

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Low cost strategy

Low-cost strategy can be based on cost advantage that can be used to invest in the product support low prices or provide high profit

Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing, and vertical integration decision, or avoiding some costs altogether

e.g.:- McDonalds, Dell Computers, ToysRus

Continue…

2003/2004 TKF

Preemptive strategy Preemptive strategies

employee first mover advantage to inhibit or prevent competitors from duplicating or countering

Synergistic strategy rely on synergy between a business and other businesses at the same firm

e.g.:- GE is Jack Welch e.g.:- IBM focus on the

internet was to create synergy by pushing core technologies across more product lines

Synergistic strategy

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Strategies for specific situations

The position of the organisation or product within a given market will clearly influence the strategic options available

A market leader dominant within given market or a segment. This dominance is mainly due to the market share

You can be a; market leader market challenger market follower market nicher

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The strategic square

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The market leader

The market leader will be the constant target for aggressive competitors. Therefore must be vigilant and proactive. The common strategies for a market leader will be;

Expanding the market This can be achieved by

finding new users or new uses Muscles

& Joint pain

Headache

Panadol 650 million tablets per

year

60 million market

penetration

MarketsContinue…….

2003/2004 TKF

The market leader (Continued)

Offensive strategy Aggressive perceived of market share and the

fight taken to competitors Maintaining high Share of Voice and Share of

Mouth Defensive strategy

Its equally important to protect your customer base

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Market challenger

Market challenges will see confrontation and aggressively perceived market share

These organisations have to be well resourced and present a long term sustainable challenge to the market leader

Two strategies available are; Selective targeting;- where challenger can target

specific competitors. Locking at attacking weaker competitor who are under finance and under resource.

Attack the leader:- where the challenger can challenge the dominant player. Usually a long term war and have to be sustained for market share to be won

2003/2004 TKF

Market follower

Market follower tend to shadow the market leaders as oppose to challenging them

Two broad strategies used by the market follower is; Duplication:- Where the offering is duplicated in

every possible way even in packaging and promotion

Adoption:- Here the market follower will adopt the basic product offering, if possible improve on the concept

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Offensive Strategies

Frontal attack Flank attack Encirclement attack By pass attack Guerilla warfare

Defensive Strategies

Position defense Flank defense Preemptive defense Counter defense Mobile defense

2003/2004 TKF

Frontal attack

This is an all out attack on a competitor.

Requires a sustained effort and attackers must be certain that they are able to endure a long and hard struggle

e.g.:- Elephant House Vs. Cargils in Sri Lanka

Flanks are the weakest points of any company.

Flanking is achieved by attacking selective market segments, where the competitor is relatively weak

e.g.:- Elephant house don’t look at the health conscious segment

e.g.:- HSBC most expensive bank charges

Flank attack

2003/2004 TKF

Encirclement attack Here the company offer

a range of products that effectively encircles the competitor

e.g.:- a washing powder market leader can be encircled on three product attributes. They are; Low cost Cleaning power Environmental friendly

This is more of avoidance than attack

where the attacker moves in areas, where competitors are inactive

e.g.:- “Move & Pick” Supermarket

Bypass attack

2003/2004 TKF

Gorilla warfare

Tactical, short term marketing initiatives are used to gradually weaken the opposition.

e.g.:- price cuts, burst of promotional activities or other tactics

Gorilla attacks are not committed to marketing activities. They may also includes; Legal action Field force recruitment

2003/2004 TKF

Position defense Aims to strengthen

the current position and shut out the competition

Assets and competencies are used to develop a value added product, which is unmatchable

This is more of protect weak points

e.g.:- Elephant house can come with a low fat healthy ice cream

Flank defense

2003/2004 TKF

Preemptive defense This involves striking

at potential competitors before they attack

e.g.:- Deep price cuts and special promotions

E.g.:- Points, Interest Free on credit cards, Loyalty points

Counter defense

2003/2004 TKF

Mobile defense

Involve the flexible and adoptive response allowing the defender to switch in to new areas of interests

It is achieved by diversifying in to the unrelated markets and broadening current markets e.g.:- Elephant House can go to drinking ice-

creams, soft drinks to energy drinks e.g.:- HSBC car loans, PIL, Insurance

2003/2004 TKF

Investment Appraisal

A means of assessing whether an investment project is worthwhile or not

Investment project could be the purchase of a new PC for a small firm, a new piece of equipment in a manufacturing plant, a whole new factory, etc

Used in both public and private sector

2003/2004 TKF


Types of investment appraisal: Payback Period Accounting Rate of

Return (ARR) Internal Rate of Return

(IRR) Profitability Index Net Present Value

(discounted cash flow)What factors need to be considered before investing in equipment such as this?

Source: Gergely Erno, http://www.sxc.hu

2003/2004 TKF


Why do companies invest? Importance of remembering investment as the

purchase of productive capacity NOT buying stocks and shares or investing in a bank!

Buy equipment/machinery or build new plant to: Increase capacity (amount that can be produced)

which means: Demand can be met and this generates sales

revenue Increased efficiency and productivity

2003/2004 TKF


Investment therefore assumes that the investment will yield future income streams

Investment appraisal is all about assessing these income streams against the cost of the investment

Not a precise science!

A fork lift may be an important item but what does it contribute to overall sales? How long and how much work would it have to do to repay its initial cost?

2003/2004 TKF

Investment appraisals - action check list

Identify the key plans objectives for the organisation(market share, brand extension & NPD)

Asses payments, receipts and duration of the investment project

Produce a each flow forecast and profit & loss account for the project

Establish the methods that your organisation uses to appraise investments Payback point Net Present Value Internal Rate of Return

2003/2004 TKF

Payback Method

The length of time taken to repay the initial capital cost

Requires information on the revenue the investment generates

E.g. A machine costs £600,000 It produces items that sell at £5 each and produces

60,000 units per year Payback period will be 2 years

2003/2004 TKF

Payback method

Payback could occur during a year Can take account of this by reducing the cash

inflows from the investment to days, weeks or years.

Days/Weeks/Months x Initial Investment

Payback = ------------------------------------------

Total Cash Received

2003/2004 TKF

Payback Method

e.g. Cost of machine =

£600,000 Annual income

streams from investment = £255,000 per year

Payback = 36 x 600,000/765,000 = 28.23 months (2 yrs, 6¾ months)

255,000Year 3

255,000Year 2

255,000Year 1

Income

2003/2004 TKF

Accounting Rate of Return

A comparison of the profit generated by the investment with the cost of the investment

Average annual return or annual profit

ARR = --------------------------------------------

Initial cost of investment

2003/2004 TKF

Accounting Rate of Return

e.g. A investment is expected to yield cash flows of

£10,000 annually for the next 5 years. The initial cost of the investment is £20,000 Total profit therefore is: £30,000 Annual profit = £30,000 / 12

= £2,500ARR = 2,500/20,000 x 100

= 12.5%A worthwhile return?

2003/2004 TKF


To make a more informed decision, more sophisticated techniques need to be used.

Importance of time-value of money

2003/2004 TKF

Net Present Value

Takes into account the fact that money values change with time

How much would you need to invest today to earn x amount in x years time?

Value of money is affected by interest rates NPV helps to take these factors into

consideration Shows you what your investment would have

earned in an alternative investment regime

2003/2004 TKF

Net Present Value

e.g. Project A costs £1,000,000 After 5 years the cash returns = £100,000 (10%) If you had invested the £1 million into a bank

offering interest at 12% the returns would be greater

You might be better off re-considering your investment!

2003/2004 TKF

Net Present Value

The principle: How much would you have to invest now to earn

£100 in 1 years time if the interest rate was 5%? The amount invested would need to be: £95.24 Allows comparison of an investment by valuing

cash payments on the project and cash receipts expected to be earned over the lifetime of the investment at the same point in time, i.e the present.

2003/2004 TKF

Net Present Value

Future ValuePV = -----------------

(1 + i)n

Where i = interest rate n = number of years The PV of £1 @ 10% in 1 years time is 0.9090. If you invested 0.9090p today and the interest rate

was 10% you would have £1 in a years time Process referred to as:

‘Discounting Cash Flow’

2003/2004 TKF

Net Present Value

Cash flow x discount factor = present value e.g. PV of £500 in 10 years time at a rate of

interest of 4.25% = 500 x .6595373 = £329.77 £329.77 is what you would have to invest today

at a rate of interest of 4.25% to earn £500 in 10 years time

PVs can be found through valuation tables (e.g. Parry’s Valuation Tables)

2003/2004 TKF

Discounted Cash Flow

An example: A firm is deciding on investing in an energy

efficiency system. Two possible systems are under investigation

1 yields quicker results in terms of energy savings than the other but the second may be more efficient later

Which should the firm invest in?

2003/2004 TKF

Discounted Cash Flow – System A

NPV =139,416285,000Total

113,544.750.7569650+150,0006

166,513.390.7929209+210,0005

166,116.920.8305846+200,0004

130,505.610.8700374+150,0003

91,136.410.9113641+100,0002

71,599.040.9546539+75,0001

-600,0001.00- 600,0000

Present Value (£) (CF x DF)

Discount Factor (4.75%)

Cash Flow (£)Year

2003/2004 TKF

Discounted Cash Flow – System B

NPV =108,802.70285,000Total

340,634.300.7569650+450,0006

118,938.100.7929209+150,0005

83,058.460.8305846+100,0004

73,953.180.8700374+85,0003

68,352.310.9113641+75,0002

23,866.350.9546539+25,0001

-600,0001.00- 600,0000

Present Value (£)

(CF x DF)

Discount Factor (4.75%)

Cash Flow (£)Year

2003/2004 TKF

Discounted Cash Flow

System A represents the better investment System B yields the same return after 6 years

but the returns of System A occur faster and are worth more to the firm than returns occurring in future years even though those returns are greater

2003/2004 TKF

Internal Rate of Return Allows the risk associated with an investment

project to be assessed. The IRR is the rate of interest (or discount rate)

that makes the net present value = to zero Helps measure the worth of an investment Allows the firm to assess whether an investment in the

machine etc would yield a better return based on internal standards of return

Allows comparison of projects with different initial outlays Set the cash flows to different discount rates Software or simple graphing allows the IRR to be found

2003/2004 TKF

Profitability Index

Allows a comparison of the costs and benefits of different projects to be assessed and thus allow decision making to be carried out

Net Present Value

Profitability Index = --------------------

Initial Capital Cost

2003/2004 TKF


Key considerations for firms in considering use: Ease of use/degree of simplicity required Degree of accuracy required Extent to which future cash flows can be

measured accurately Extent to which future interest rate movements

can be factored in and predicted Necessity of factoring in effects of inflation

2003/2004 TKF

Corporate Social Responsibility

Representing CSR in action

Triple Bottom Line Sustainability and

marketing Organisational

interactions Sustainability through

the market Ethical consumerism A CSR value chain

CSR Brands2003/2004 TKF

CSR in action (e.g. Unilever)

Representing CSR in action around our business. The picture shows our on-site fire fighting team – which is staffed entirely by employee volunteers – practising their skills at their monthly training session.

2003/2004 TKF

Triple Bottom Line

People

Planet

Profit

People

Planet Profit

2003/2004 TKF

Sustainability and marketing

Recent surveys suggest that awareness of green issues is currently running at very high levels in most of the developed world.

Instead of lowering living standards in one part of the world and improving them in other parts, the business idea is to create sustainable development by creating goods and services that improve the quality of life in all parts of the world.

Companies have the opportunity to improve people’s lives through what they do, how they do it, and who and what they affect.

Sustainability is about understanding the interactions of the various stakeholders in an organisation. 2003/2004 TKF

Organisational interactions

2003/2004 TKF

Sustainability through the market - Seven keys to success Innovate Practice eco-efficiency Move from stake holder dialogues to

partnerships for progress Provide an inform consumer choice Improve market framework conditions Establish the worth of earth Make the markets work for every one

2003/2004 TKF

Ethical consumerism

The “invisibles” contributed £5.6 billion to the £19.9 billion ethical marketplace in 2002.

The total value of ethical banking increased to £3.9 billion (a rise of 16%), while the value of ethical investments fell back to £3.5 billion, (a contraction of 8% against a market decline of 17%).

Boycotts by ethically motivated consumers cost big brands £2.6 billion a year.

Ethical consumerism has crossed into the mainstream with some ethical products now close to being the product of consumer choice in their respective sectors.

2003/2004 TKF

UNILEVER SUSTAINABLE VALUE CHAIN

INBOUND LOGISTICS

Recyclable raw materials sourcing e.g. recyclable soap packaging for Lux

Sustainable procurement and logistics practices e.g. Reduction of supplier delivers.

Sustainable Vendor Partnership.

e.g. Fish, Agriculture

FIRM INFRASTRUCTURE

% of Greenery in the factory, Preservation of surrounding eco-system, Location effect on the environment

OPERATIONS

Using renewable energy sources e.g. Renewable energy for production

Increasing production eco-efficiency e.g. water conservation.

Environmental Control mechanisms (ISO 14000)

OUTBOUND LOGISTICS

Optimize delivery time and loads e.g. less deliveries to retailers.

Sustainable transport strategy e.g. use of eco-efficient deliver vans.

E-Technologies to drive eco-efficient order processing.

MARKETING & SALES

Reduce printed material/collateral

Ethical Communication e.g. proper labeling on food products

Develop CSR based MKIS

Cause Related Marketing & Branding e.g. Unilever campaign in India

AFTER SALES

Incentives for recycling of used products/parts. e.g. collection and reuse of waste detergent packaging.

Website or Call Center to reduce field visits.

SU

STA

INA

BLE

MA

RG

IN

HUMAN RESOURCE MANAGEMENT

Good Quality of Work Life e.g. Setting CSR Standards (TQM), Diversity and Equality in the work place

Motivation scheme to encourage employee participation in CSR. Internal CSR Marketing

TECHNOLOGY DEVELOPMENT

Using internet and e-commerce, and as waste minimizer. Research and Development into CSR products and best practices. E.g. Research into new sources of renewable energy.

PROCUREMENT

Sustainability Audits for supplier selection – e.g. Unilever’s sustainable sourcing of agriculture products.

2003/2004 TKF

Challenge conventional marketing thinking Global position Master brand The integrated enterprise and end user focus Best in class processes Mass customization Break - Through technology

2003/2004 TKF

Branding

Brands are difficult to build Brands add value for customers

e.g.:- Coca cola Vs. Pepsi

Brands create defensible position e.g.:- Panadol and Paracetamol

Brands build customer retention e.g.:-Johnson & Johnson

Brands can transform markets e.g.:- Dialogue GSM

Brands perform financially2003/2004 TKF

Brands perform financially

Brand Value in Year 2004(in USD / $) 01. COCA-COLA 67,394 02. MICROSOFT 61,372 03. IBM 53,791 04. GE 44,111 05. INTEL 33,499 06. DISNEY 27,113 07. McDonald's 25,001 08. NOKIA 24,041 09. TOYOTA 22,673 10. MARLBORO 22,128 11. MERCEDES 21,331 12. HEWLETT–PACKARD 20,978

2003/2004 TKF

Factors consider in brand evaluation

Current market position Brands that are market leaders typically more highly

than brands that may have good market shares, but operating markets where another brand is dominant

Market type Brands are more valuable in more established markets

with further potential for growth Durability

Brand names which have lasted for many years are likely to have develop stronger customer loyalty and become part of the fabric of the market

2003/2004 TKF

Factors consider in brand evaluation(continued)

Global presence Those brands that can be exploited internationally are

generally more valuable than those restricted to domestic market

Extendibility Brands that can be extended and exploited in the same

or new markets have greater value than brands that are more limited in scope

Protection e.g.:- Coca cola’s patent protection of the shape of the

bottle

2003/2004 TKF

Market relationship alliances

Key drivers of customer equity Value equity Brand equity Retention equity Recommendation

CustomerEquity

Recommendations

Brand Equity

Value Equity

Retention Equity

2003/2004 TKF

Building relationship with customers

Building enhanced benefits of loyalty e.g.:- Loyalty cards, (HSBC, AmEx)

Creating structural ties and bonds e.g.:- Through strategic bundling, strategic

alliances and loyalty contracts Creating delighted customers

Satisfaction is not the something as retention and loyalty. Some customers who defect are yet satisfied with their previous supplier

2003/2004 TKF

Three phases in CRM

AcquireDifferentiation

InnovationConvenience

Retain

adoptability

Bun

dlin

g

Red

uce

cost

Enh

ance

cust

omer

serv

ice

2003/2004 TKF

Technology drivers that creates CRM

Salesman on the road can be updated on customer requirement Information can be used to enhance CRM and logistics

Mobile devices enables customers to access supplier inventories

Consumers as well as talking to each other will be able to communicate with machines

Using blue tooth retailers can give customers special offers

GPS (Global positioning System) enables customers to locate nearest outlet or ask for service

2003/2004 TKF

The End

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