CHAPTER 2CHAPTER 2

Strategic Market Strategic Market ManagementManagement

‘‘If you do not have a Competitive If you do not have a Competitive Advantage, don’t Compete.’Advantage, don’t Compete.’

Jack Welch, GEJack Welch, GE

Strategic Market Management Strategic Market Management (SMM)(SMM)

A strategic decision involves the creation, A strategic decision involves the creation, change, or retention of a strategy.change, or retention of a strategy.The cost of altering a wrong decision may be so The cost of altering a wrong decision may be so high.high.Normally a strategic decision has a time Normally a strategic decision has a time frame>one year, sometimes decades are frame>one year, sometimes decades are involvedinvolvedThe role of SMM is not only selecting among The role of SMM is not only selecting among alternatives, but identification of alternatives as alternatives, but identification of alternatives as well. well.

The External and Internal AnalysisThe External and Internal Analysis

External AnalysisExternal Analysis

The examination of the relevant elements external to the The examination of the relevant elements external to the companycompanyAnalysis should be purposeful, focussing on the Analysis should be purposeful, focussing on the identification of opportunities, threats, trends, strategic identification of opportunities, threats, trends, strategic uncertainties and choicesuncertainties and choicesOutput is identification and understanding of Output is identification and understanding of opportunities and threatsopportunities and threatsUsually at business unit levelUsually at business unit level

External AnalysisExternal Analysis

Customer AnalysisCustomer AnalysisCompetitors AnalysisCompetitors Analysis

PerformancePerformance Image and personalityImage and personality Current and past strategyCurrent and past strategy CultureCulture Strengths and weaknessesStrengths and weaknesses

External AnalysisExternal Analysis

Market AnalysisMarket Analysis Size Size Growth prospectsGrowth prospects Market profitabilityMarket profitability Cost structuresCost structures Distribution channelsDistribution channels Market trendsMarket trends Key success factorsKey success factors

Environmental AnalysisEnvironmental Analysis

Internal AnalysisInternal Analysis

Performance AnalysisPerformance AnalysisProduct Portfolio AnalysisProduct Portfolio AnalysisDeterminants of strategic optionsDeterminants of strategic optionsStrategy reviewStrategy reviewStrategic problemsStrategic problemsOrganizational capabilities and constraintsOrganizational capabilities and constraintsFinancial resources and constraintsFinancial resources and constraintsStrengths and weakness Strengths and weakness

Creating a Vision for the BusinessCreating a Vision for the Business

A business vision can play several roles for A business vision can play several roles for many decadesmany decadesFirst, it can suggest strategic paths for the First, it can suggest strategic paths for the businessbusinessSecond, it can help to perpetuate the core of the Second, it can help to perpetuate the core of the businessbusinessThird, it can inspire and provide a purpose to the Third, it can inspire and provide a purpose to the people in the organization.people in the organization.

Creating a Vision for the BusinessCreating a Vision for the Business

Core Values;Core Values; Usually three to fiveUsually three to five Timeless and passionately held guiding principlesTimeless and passionately held guiding principles

Core PurposeCore Purpose Which should last for at least 100 yearsWhich should last for at least 100 years Beyond current product and servicesBeyond current product and services

BHAGs (big, hairy, audacious goals)BHAGs (big, hairy, audacious goals)

Creating a Vision for the BusinessCreating a Vision for the Business

Core values;Core values;1.1. Delivering consumer value, breakthrough innovation, and building Delivering consumer value, breakthrough innovation, and building

strong brands (Procter & Gamble).strong brands (Procter & Gamble).

Core PurposeCore Purpose1.1. To make technical contributions for the advancement and welfare of To make technical contributions for the advancement and welfare of

humanity (Hewlett-Packard)humanity (Hewlett-Packard)2.2. Preserve and improve human life (Merck).Preserve and improve human life (Merck).3.3. To make people happy (Walt Disney). To make people happy (Walt Disney).

One approach to finding a core business purpose is to ask five whysOne approach to finding a core business purpose is to ask five whys Why is that important?Why is that important?

Creating a Vision for the BusinessCreating a Vision for the Business

CoreValues

CorePurpose

BHAGs

Business Vision

Strategy Identification and Selection Strategy Identification and Selection

Product-Market Investment StrategiesProduct-Market Investment Strategies Product definitionProduct definition Market definitionMarket definition Vertical integrationVertical integration Growth directionsGrowth directions Investment strategiesInvestment strategies Functional area strategiesFunctional area strategies Bases of SCABases of SCA Strategic positioningStrategic positioning

Product-Market Growth Directions Product-Market Growth Directions

Market Penetration Product Expansion

Market Expansion Diversification

CurrentMarkets

New Markets

CurrentProducts

NewProducts

Selecting Among Strategic Selecting Among Strategic AlternativesAlternatives

The five useful general areas selecting among The five useful general areas selecting among alternativesalternatives

Consider scenariosConsider scenarios Pursue a SCAPursue a SCA Be consistent with organizational vision and objectivesBe consistent with organizational vision and objectives Be feasibleBe feasible Consider the relationship to other firm strategiesConsider the relationship to other firm strategies

ImplementationImplementationStrategy reviewStrategy review