Company Analysis: Strategy

Collis & Montgomery Resource Based View (RBV) of strategy Resources: Physical (e.g., best faculty); Intangible (e.g., reputation

in marketing) A firm is a collection of resources (or capabilities) - some good and

some bad(IBM) Different firms have different sets of resources (IBM vs. Dell) The firm with the “best” set most likely to be successful RBV bridges the gap between External view (Porter) and Internal

view (Prahalad)

Collis & Montgomery, cont.

Resources need to pass the market test of value:

–Is resource hard to copy?–How quickly does resource depreciate? –Who captures the value that resource creates? –Can a unique resource be trumped by a different one?–Whose resource is really better?

Implications:Need to invest in resources; upgrade resources; to leverage resources

Managers over-estimate transferability of specific skills and assets Managers over-estimate ability to compete in highly profitable

industries Managers assume competitive advantage in one industry transfers

to others regardless of competitive dynamics

Porter’s POV Defining and communicating the company’s unique

positioning Variety-based (Product line choice - e.g., narrow) -

Marketing at Vanderbilt Needs-based (Customer segment choice) - Store

brands Access-based (Specific to how customers are

reached) - Amazon.com Making tradeoffs

Performing activities consistent with chosen position Not performing activities not consistent with chosen

position Continental vs. Continental Lite

Porter’s POV, cont. Forging a fit among firm’s activities

Simple consistency between each activity & with strategy

Activities reinforce each other Optimization of effort Locks out imitators and provides

competitive advantage Create activity system maps P&G and Value pricing; Republic

Industries Mercedes with full line strategy will

make an interesting study

P&G

Marketing

ManufacturingR&D

Global Ops.Organization

Product

Place Price

Promotion

BestProduct

MR

CPRValue

Pricing

HighQuality

LowCost

NoT.P.

LowC.P.

Advert-ising

BrandEquity

LowCost

Sm

oothP

roductionC

ycles

Value

CategoryManagement

SimplifiedProduct Line

StrategicAlliances Localized

Product

Globalization

MarketAccess

Efficiency

Customers Competitors

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

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?

Synergy Improving overall efficiency and effectiveness by exploiting synergies

across businesses and product markets

Strategy Over Time: The PLC

Introduction Growth

Shakeout Maturity Decline

Adopter Categorization for New Products

2.5% Innovators 13.5% Early Adopters 34% Early Majority 34% Late Majority 16% Laggards

PLC: Implications

• Selected products/ Selected markets

•Problem solving emphasis

•Technical uncertainty

• Product / market expansion

•Competitive activity

•Customers better informed

• Product / market proliferation

•Market volatility

•Aggressive customers

• Market contraction

• Consolidation

• Regeneration

Introduction

Growth Maturity

Decline

Characteristics of PLC Stages

Introduction Growth Maturity Decline

Sales Low Rapidly Rising Peak Declining

Costs /Customer

High Average Low Low

Profits Negative Rising High Declining

Customers Innovators Early Adopters MiddleMajority

Laggards

Competitors Few Growing Stable, BeginDecline

Declining

Marketing Objectives by PLC Stage

Introduction Growth Maturity Decline

Create ProductAwareness and

Trial

MaximizeMarket Share

Maximize ProfitsWhile Defending

Market Share

ReduceExpenditure and

Milk Brand

Strategies for PLC StagesIntroduction Growth Maturity Decline

Product Basic Product ProductExtensions

DiversifyBrands and

Models

Phase OutWeak Items

Price Cost + Penetration Price to MatchCompetition

Cut Price

Distribution Selective Intensive More Intensive Selective

Advertising Awarenessamong EarlyAdopters and

Dealers

Awareness andInterest in

Mass Market

Stress BrandDifferencesand Benefits

Reduce toRetain Hard-Core Loyals

SalesPromotion

Induce Trial Reduce toExploit Heavy

Demand

Increase ForBrand

Switching

Reduce toMinimal Level

Characteristics of PLC Stages

Sales level Cost per customer Profits Nature of customers (early adopter,

etc.) Competitors

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/marketproliferation*Market volatility*Aggressive customer

Implications

High

Price

Low

LowCost-to-serve

High

C

B

D

A

Value axis

Power axis

StrategiesHigh

Price

Low

LowCost-to-serve

High

C

B

D

A

Value axis

Power axis

1

2

4

3

Technology Adoption Life Cycle - Discontinuous Innovations

Innovators = Technology enthusiasts Technology eventually helps improve lives; No money; Have

influence; Gatekeepers to the life cycle; If they hate it implies trouble Early adopters = Visionaries

Believe in competitive advantage via discontinuous innovation; Bring $$ to table & demand modifications; Techies explore-visionaries exploit

Early majority = Pragmatists Do not love technology for its own sake; Believe in evolution not

revolution; Want to improve organizational effectiveness; Difficult to convince them to shift paradigms; Prefer to buy from market leaders

Late majority = Conservatives Technology skeptics; Price sensitive; Demanding consumers;

Largely untapped opportunity for high tech Laggards = Skeptics

Gadflies of high tech; Challenge the hype; Need to sell around them

Seed enthusiasts with new productsHelp them educate visionaries

Seed enthusiasts with new productsHelp them educate visionaries

Capture interest of visionariesMake them satisfied customers

Serve as good references for pragmatists

Capture interest of visionariesMake them satisfied customers

Serve as good references for pragmatists

Gain bulk of revenue by serving pragmatists ideally by becoming

market leader and setting de factostandards

Gain bulk of revenue by serving pragmatists ideally by becoming

market leader and setting de factostandards

Generate volumes and experience soproducts become reliable and cheap

to meet demands of conservatives

Generate volumes and experience soproducts become reliable and cheap

to meet demands of conservatives

Leave skeptics to their own devicesLeave skeptics to their own devices

The Adoption“Stairway”

Visionaries

Technology

Enthusiasts

Pragmatists

Conservatives

Skeptics

The EarlyMarket

The EarlyMarket

The MainstreamMarket

The MainstreamMarket

TheChasm

TheChasm

The Chasm

The EarlyMarket

The EarlyMarket

TheChasm

TheChasm

The TornadoThe Tornado

Main StreetMain Street

The BowlingAlley

The BowlingAlley

End ofLife

End ofLife

Landscape of TechnologyAdoption Life Cycle

Early Market: Time of great excitement; techies and visionarieslooking to get on board the new paradigm

The Chasm: Time of great despair; early market interest wanes, butmainstream not comfortable with the product

The Bowling Alley: Period of niche-based adoption in advance ofthe general marketplace; whole products for niche applications

The Tornado: Period of mass market adoption; marketplaceswitches over to new paradigm

Main Street: Period of aftermarket development; goal is nowto reach and flesh out the market potential

End of Life: Entry of new paradigms

Landscape of TechnologyAdoption Life Cycle

Strategy Implications of TALC

Bowling alley argues for customer-centric niche strategies

Tornado forces push in opposite direction towards mass market

Main street forces push back towards customer-centric focus

Given the dramatic reversals in strategy, firm should be acutely aware of its life cycle stage

Moving fluidly from strategy to strategy is the ultimate challenge to organization; Demands extremely flexible responses from management team

Implications for Segmentation

In the early market, do not segment - go where visionaries lead you To cross the chasm and negotiate the bowling alley, need to segment Once inside the tornado, must not segment On mains street, must segment - basis of +1 strategy

Complications

• Firms carry different products; each could be at a different TALC stage (1-2-3, ccMail, Notes)

• Different segments in the same market can be at different stages (Internet is on main street for Unix technical community, in the tornado for college students, in bowling alley for marketing researchers, early market for commercial transactions…)

• Mini-tornadoes (segment-specific) can occur in the bowling alley

• Markets at different life cycle stages interact with one another (main street financial applications being ported to tornado client-server platforms using bowling alley development tools!)

ProductLeadership Only

ProductLeadership Only

Product Leadership+

Operational Excellence

Product Leadership+

Operational Excellence

Operational Excellence+

Customer Intimacy

Operational Excellence+

Customer Intimacy

Product Leadership+

Customer Intimacy

Product Leadership+

Customer Intimacy

Value Disciplines &the Life Cycle