Vinod Kaul Jan 2015

Developing Business & Marketing Strategies

Strategy, tactics, competitive advantage, marketing plan, mis-mr-mi, Bowman’s clock

What is strategy?

• A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

• The art and science of planning and marshalling resources for their most efficient and effective use.

The term is derived from the Greek word for generalship or leading an army!

What is strategy?

• Success comes from a good strategy and executing it well!!!

STRATEGY

Management Decisions &

Actions

RESULTS

CompetitiveEnvironment

GOALS

The difference between Strategic & Tactical?

STRATEGIC• Important or essential in

relation to a plan of action or an independent objective.

• Winning a war: B-52 Bomber

TACTICAL• Made or carried out with

only a limited or immediate end in mind.

• Winning a battle: MI-24 support helicopter

The difference betweenStrategic & Tactical

Strategic• Direction• Strategy Statement• Broad• Unstructured• Problem solving• Creativity• External Focus• Irregular• Long Term• Difficult to evaluate• Senior Management

Tactical• Implementation• Annual plans• Specific detailed• Structured• Problem solving• Analytical• Internal focus• Regular• Short term• Easy to evaluate• Middle-level Management

The Three Levels of Strategy

• Corporate Level Strategy ‘The What’• Business Level Strategy ‘The How’• Functional Level Strategy ‘The Operational’

The Three Levels of Strategy

• Corporate Level Strategy– Highest level of strategic decision-making by Top

Management– Covers actions dealing with objectives of the firm,

acquisition, allocation of resources, coordination of strategies of SBUs for optimal performance

– Decision is value oriented, conceptual & less concrete

– Defines long term objectives, limits to the whole enterprise

The Three Levels of Strategy

• Business Level Strategy– Strategy for SBUs serving discrete independent

product/market segments in separate environments

– Operates within the overall, long-term strategies of the organization

The Three Levels of Strategy

• Functional Level Strategy– Tactical– Relates to single functional operation and activities– Guided by and constrained by overall strategic

considerations– Each function may be further divided into sub-

functions: marketing strategy promotion, sales, distribution,

pricing strategies

What is Competitive Marketing Strategy?

• It is an organisational process to optimize resources and opportunities to meet business goals and to increase sales through a sustainable competitive advantage.

• Focuses on long term marketing activities and competitor analysis to formulate, evaluate and select market-oriented strategies.

• Bata: from factory to market

What is Competitive Advantage?• the ability gained through attributes and resources to

perform at a higher level than others in the same industry or market

• External Market attributes– Price– Product– Brand– Distribution

• Dynamic Internal attributes– Innovation– Operational efficiency

• Resources– Financial resources:

Competitive Advantage

• Price: Walmart, Big Bazaar, Nano• Design: Jimmy Choo• Innovation: 3M• User interface: Apple (PC, mouse, icon drag,

tablet, i-pod)• Mass customisation: Dell• Lifestyle, iconic: Harley Davidson, Royal

Enfield

e.g.Elements in Marketing Strategy

• Target Market– Customer Needs, identification

• Marketing Channels– Method for Satisfying Needs

• Building Sustainable Competitive Advantage– Defending position against competitors

How can a marketer develop a sustainable competitive advantage?

• Dropping the price of his merchandise?• Building a store at the best location?• Deciding to sell ‘hot’ merchandise?• Increasing his level of advertising?• Attracting better sales associates by paying

higher wages?• Providing better customer service?

Sources of Competitive Advantage

More Sustainable• Location (for retail)• Customer Loyalty• Customer Service• Exclusive Merchandise• Low cost supply chain

management• Information Systems• Buying power with vendors• Committed employees

Less Sustainable• Better computers• More employees• More merchandise• Greater assortments• Lower prices• More Advertising• More Promotions• Cleaner Stores

Types of Competitive Strategies

• Cost Leadership Strategy• Differentiation Strategy• Innovation Strategy• Operational Effectiveness Strategy• Customer Orientation Strategy

Cost Leadership Strategy• This strategy involves the firm winning

market share by appealing to cost-conscious or price-sensitive customers.

• Achievement of lowest cost on sustained basis

• Buying clout through size/economies of scale• Economies of scale: manufacturing, retailing,

distribution• Efficiencies in supply chain• New / external sourcing

Differentiation Strategy • Differentiate the products in some way in

order to compete successfully.• Appropriate where the target customer

segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.

•Firm has unique resources / capabilities which enable it to satisfy needs in ways that are difficult to copy

DesignBranding

Strategies Based on Market Dominance, Scope, Strength

• Leader: Apple, Nokia• Challenger: Samsung (now leader), Sony• Follower: Micromax, Spice• Nicher: Blackberry• Strategic Scope: market penetration: Bata• Strategic Strength: sustainable competitive

advantage, GE

Operational Effectiveness• The goal of operational effectiveness, is to

perform internal business activities better than the competitors. This strategy attempts to increase quality, productivity, and employees and customers satisfaction with the company– E.g. Sports Station (Nike, Levi’s, Benetton, Lotto)

Sports Station• SSIPL Group: specialty retailer across retailing,

manufacturing & franchising of sports & lifestyle products.

• Exclusive Nike stores: 156 stores, first in 1998• Franchised stores: Levi’s, Benetton, Beverly Hills Polo

Club• MBO’s: Shoe Tree, Value Station• Licensed: Lotto

DLF Retail• Closed luxury operations• Franchised operations: DKNY,

Alcott, Claire’s, Mothercare, Boggi, Sunglass Hut, Early Learning Centre

• 150 stores• Limited success inspite of

huge resources– Real estate initiative

Customer-Orientation Strategy

• The goal of customer-orientation strategy, is to delight the customer. This strategy focuses on what the customer wants from the company and how to provide that.

• Business centered on consumer & retailer needs and identifying relevant insights into market trends, demographics, etc to adapt or add products & services.

• HUL, P&G, ITC

Growth & Diversification Strategies• Horizontal integration

– Mergers & acquisitions, Flipkart acquires

Myntra • Vertical integration

– Supply chain, manufacturing, Woodland enters retail

• Diversification– Brand extension, licensing, Benetton

• Intensification– Line extension, Subsidiary brands,

Bata

Strategies for Profitability• Private Label• Cost cutting

– Advertising & promotion– Personnel– Pruning unviable stores,

renegotiating rentals • Streamlining operations

– Enhancing productivity– Automation

• Direct sourcing

Bowman’s Strategy Clock• 1980: Michael Porter publishes seminal book

Competitive Strategy: Techniques for Analyzing Industries & Competitors.

• Strategy reduced to three generic variables– Cost leadership (price)– Product differentiation (perceived value)– Market segmentation (specific customer)

• 1996: Cliff Bowman & David Faulkner extend three strategic positions to eight combinations of varying levels of price & value.

Bowman’s Strategy Clock

.

Bowman’s Strategy Clock

• Position 1: Low Price / Low Value– Bargain basement bin– Companies forced in this position if no differentiation– Need to continually get new customers & sell large volumes– Examples: cheap Chinese imports, USA (Ulhas Nagar)

• Position 2: Low Price– Low cost leaders– Very low prices, very high volumes– If unsustainable, can cause price wars– Examples: Walmart, Big Bazaar, Vishal, Peter England

Bowman’s Strategy Clock

• Position 3: Hybrid (moderate price/differentiation)– Attractive cost but with higher perceived value– fair price for reasonable goods, builds customer loyalty– Examples: discount department stores – Shoppers Stop, Westside, Lifestyle

• Position 4: Differentiation– High perceived value, branding, pricing as per market share targets– Examples: Nike, Reebok, Louis Philippe, M&S ?

• Position 5: Focused differentiation– High perceived value & high prices– Designer products– Examples: BMW, Ritu Kumar, Ravissant

Bowman’s Strategy Clock

• Position 6: Increased price / standard product– A gamble for increased profitability– Short term strategy

• Position 7: High price / low value– Monopoly pricing, unsustainable in modern scenario– Examples: pre-liberalization – cars, air travel (IA)

• Low value / standard price– Declining market share, price reduction spiral– CRT TV, Ambassador cars (move to niche ?)

The contents and structure of the marketing plan

• The executive summary• Situational analysis • Threats and opportunity Analysis• Marketing objectives• Marketing strategies • Marketing tactics/Action Programs• Schedules and budgets• Financial data and control

Objectives of the marketing plan

• Acts as a roadmap• assist in management control and monitoring

the implementation of strategy• informs new participants in the plan of their

role and function• to obtain & deploy resources for

implementation• to stimulate thinking and make better use of

resources

Marketing Information system

• It consists of people , equipment and procedures to gather , sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision makers

Marketing Information System Process

Analysis Planning Implementation Control

Marketing Environment

Target MarketsMarketing ChannelsCompetitors Publics

Assessing Information

Needs

Distributing & Using

Information

Marketing Information System

Internal database

Marketing Intelligenc

e

Marketing Research

Information analysis

Marketing Managers and other info users

Developing Needed Information

Marketing Intelligence

• It is a set of procedures and sources managers use to obtain everyday information about developments in the market environment.

• Sources: Sales persons, newspapers, trade publications, stake holders, internet, discussion groups, blogs etc

Marketing Research

• Set objectives• Define research Problem• Assess the value of the research• Construct a research proposal• Specify data collection method• Specify techniques of measurement• Select the sample• Data collection• Analysis of results• Present in a final report

The systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services.

Terminology of Marketing Research

• Primary data - collected firsthand• Secondary data - already exists, desk research• Quantitative research - statistical basis• Qualitative research - subjective and personal• sampling - studying part of a ‘population’ to

learn about the whole

Marketing Research Techniques• Interviews• Attitude measurement

– Likert scale: strongly agree, agree, neither agree nor disagree, disagree, strongly disagree

– Semantic differential scales - differences between words e.g. practical v impractical – Projective techniques: sentence completion, psychodrama (yourself as a product),

friendly martian (what someone else might do)• Group discussion and focus group• Diary panels - sources of continuous data• Store audits (Nielsen): scan barcodes• Telephone research• Observation

• home audit• direct observation

• In-store testing