Corporate and marketing strategy Levels in organizations

CORPORATE

BUSINESS UNIT

BUSINESS UNIT

BUSINESS UNIT

FUNCTIONAL

FUNCTIONAL

FUNCTIONAL

Single business or group of related businesses that can be planned independently from other company businesses (distinct mission, customers, competitors, resources or technologies, responsibility for profits)

Specialized functions (Marketing, finance, R&D, Human Resources etc)

Levels of strategy in organizations

Business
Overall reason for the companys existence
Who am I?

What is our business? What will our business be?....what should it be? Who is our customer? What does the customer value? What customer benefits do we provide?

Business

Marketing myopia (Theodore Levitt, 1960) What is the market definition of your business?
Product Definition We make copying equipment. We sell gasoline. Market Definition We help improve office productivity. We supply energy. We market entertainment. We distribute information.

Company Xerox Standard Oil

Columbia Pictures We make movies. Encyclopedia Britannica We sell encyclopedias.

Medtronic

We make medical devices

1. 2. 3.

We restore health and extend life

Focus on consumer benefits Scope Definition of competition

Mission
Mission is a statement of the organizations scope, often identifying its customers, markets, products, technology, and values.

Effective mission statements should Focus on only a limited number of goals. Stress the guiding policies & values the company wants to honor Define the companys major competitive scope

E.g., industry focus (industrial, consumer, services, etc) markets served (luxury, value-focused, etc) Geographical scope

Company A is the worldwide leader in networking for the Internet. Company As hardware and software solutions are used to link computers and computer networks so people have easy access to information - regardless of differences in time, place, or type of computer system. Customers benefit from Company A networking solutions through more efficient exchange of information, which in turn leads to cost savings, process efficiencies, and closer relationships with their customers, prospects, business partners, suppliers and employees. Company A solutions are the networking foundation for companies, universities, utilities, and government agencies worldwide.

Company B's overall mission is to increase the value of our shareholder's investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.

Organizational culture
Set of shared values, ideas and attitudes that is learned and shared amongst members of the organization

Culture is the glue that holds our organization together- Herb Kelleher

Southwest's "People Department" motto:

- Hire for Attitude, Train for Skills - Humor taken seriously! - Hire for life

Goals
A targeted level of performance set in advance of work
Well-stated goals should be: Measurable Specific Time Period Consistent Prioritized
Well-Stated goals
Our objective is to increase market share from 30 percent to 40 percent in 2009 by increasing promotional expenditures 11 percent. Poorly Stated goals Our objective is to be a leader in the industry in terms of new product development. Our objective is to maximize profits. Our objective is to be the best that we can be.

Our objective is to spend 12 percent of sales revenue between 2009 and 2010 on research and development in an effort to introduce at least five new products by 2011.

Our objective is to better serve the customers.

Goals

Some common goals for companies Profit Sales volume Sales revenue Market share

Company sales / Industry sales (incl. company)

Why is market share important?

ROI

Market share
PIMS Data: 200 Companies with over 3000 Businesses

Business Portfolio Analysis

What is business portfolio analysis?

Business portfolio analysis studies a firms business units (BUs) as though they were a collection of separate investments.

Portfolio Analysis: The BCG Growth-Share Matrix

Market leaders Fast growing Require investments

Star

Problem Child/ Question Mark

Market growth rate

High (>10%)

Rapid growth Poor profit margins Enormous demand for cash

Cash Cow
Low (<10%)

Dog

Cost disadvantage Markets not growing

Profitable products Generate more cash than needed for share maintenance Slow sales growth

10

0.1

Market share relative to largest competitor

Business Portfolio Analysis

Build

Invest in question marks to turn them into stars Invest in stars to ensure continued growth Invest just enough in cash cows to maintain share Remove cash from cash cows Sell or delete dogs from the portfolio

Hold

Harvest

Divest

BCG Analysis for Kodak 2004

Kodak digital camera

Kodak digital photo printer

Kodak film sales: US, Canada, & W. Europe

Kodak selfservice kiosk

Kodak 2006

1st time in its 125 year history, digital imaging businesses comprised majority of revenues (54%)

Digital: 2.67 billion (+ 45%) Chemical based: 1.51 billion (-21%)

Kodak will shut down film manufacturing operations globally Strategic intent: become a digital heavyweight in photography, medical imaging and commercial printing

Product-Market analysis
Current Products Current Markets 1. Market penetration strategy
Sell more Pepsi

New Products 3. Product development strategy

Vanilla Pepsi

New Markets

2. Market development strategy

Sell Pepsi in overseas market

4. Diversification strategy
Pepsico buying Pizza Hut

The Strategic marketing process

Planning phase
Step 1 Step 2 Goal setting Step 3 Marketing program Corrective actions

Situational analysis

Marketing plan
Implementation phase Results Control phase

Situation Analysis
Taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organizations plans and the external factors and trends affecting it. Where are we? Customers

Company
Competition

Competencies

An organizations special capabilities, including skills, technologies, and resources that distinguish it from other organizations, which if exploited, can lead to the organizations success.

SHOULD YIELD A COMPETITIVE ADVANTAGE

Dell, Wal Mart: Operational excellence Customer Intimacy: Nordstroms, American Express, Lexus Product Leadership: Intel, Motorola

Competition

Current vs. potential competitors Intertype competition Competitor analysis

Identifying competitors Assessing their objectives, strategies, strengths, weaknesses and reaction patterns Selecting which competitors to attack or avoid

SWOT Analysis

How can we:

Build on key competencies (strengths) Correct glaring problems (weaknesses) Exploit significant opportunities (opportunities) Avoid disaster (threats)
Opportunities and threats are External

Strengths and weaknesses are Internal

SWOT
What is the difference between a strength and an opportunity in a SWOT analysis?

Both are positive factors for the organization, but a strength is an internal factor whereas an opportunity is an external one.

SWOT
What is the difference between an opportunity and a threat in a SWOT analysis?

Both are external factors, but an opportunity is positive while a threat is negative

SWOT Analysis: Microsoft

Strengths Scale Development capability Windows brand

Opportunities Increasing availability and speed of broadband internet access Bundling of software products Threats Government anti-trust action Economic conditions

Weaknesses Broad scope makes focusing on niches difficult

Implementation Phase: Strategy vs. tactics

STRATEGY: Specific plan of action designed to accomplish objective.

TACTICS: Logistics necessary to execute strategy

Example
Container Store Objective: Strategy: Increase sales 5% during 3Q (July, Aug., Sept.) Increase purchases by SMU students via couponing.

Tactic:

Place $3.00 off coupon good on all purchases over $15.00 in SMU Daily Campus the weeks of 8/28 and 9/4.

Marketing dashboards