2. Capability platform: assessment of sources of
competitive advantage (1/2)
Example
• BHP’s low-cost mines
Physical asset
• Telecomm/media company with rights
Location/quot;spacequot;
radio spectrum
Privileged
assets • Avon’s representatives
Distribution/sales network
• Coca-Cola
Brand/reputation
• Pharmaceutical company with a quot;wonder
Patent
Necessary
drug‖
capabilities
in order to
• quot;Favored nationquot; status with a key
Relationship with quot;licensequot;
succeed in
allocator minister in liberalizing economy
the
industry
• 3M with new products
Innovation
• McDonald’s with QSC&V
Cross-functional
Distinctive
coordination
competencies
• J&J with branded consumer health products
Market positioning
• Emerson Electric’s Best Cost Producer
Cost/efficiency program
management
• P&G brand management program
Talent development
3. Extremely relevant
Capability platform: assessment of Somewhat relevant
sources of competitive advantage (2/2) Irrelevant
Segments
BU Overall A B C
Physical asset
Location/quot;spacequot;
Privileged
assets Distribution/sales network
Brand/reputation
Necessary
Patent
capabilities in
order to
Relationship with quot;licensequot;
succeed in the
allocator
industry
Innovation
Cross-functional
coordination
Distinctive
competencies
Market positioning
Cost/efficiency
management Talent
development
Step 2: Assess your overall position relative to
Step 1: Ensure that these are the
the capabilities required to succeed in the industry.
capabilities required to succeed in the
Also, determine if these capabilities are relevant to
industry. Use this list as a thought
the segments you serve
starter, add and delete as you see
appropriate
4. Competitor capability comparison
Competitors
BU Overall A B C
•
Physical asset
•
Location/quot;spacequot;
Privileged
•
assets Distribution/sales network •
Brand/reputation
Necessary
Patent
capabilities
in order to
Relationship with quot;licensequot;
succeed in
allocator
the
Innovation
industry
Cross-functional
coordination
Distinctive
competencies
Market positioning
Cost/efficiency
management Talent
development
Step 3: Compare the strengths and weaknesses of
your competitive position vs. the necessary skills
5. Porter’s 5 Forces of Competitive
Position Diagram
New Market
Entrants
Supplier Competitive
Buyer Power
Power Rivalry
Product &
Technology
Development
8. Porter’s 5 Forces of Competitive
Position #3 Entry Barriers
Economies of Scale
Brand Identity
Rivalry Determinants
Capital Requirements
Industry Growth
Fixed Costs
New Product Differences
Entrants
Determinants of Supplier Power Brand Identity
Switching Costs Exit Barriers
Supplier Volume
Impact
Forward Integration
Industry
Competitors
Suppliers Buyers
Intensity
of Rivalry Determinants of Buyer Power
Buyer Concentration
Determinants of Buyer Volume
Substitution Threat
Backward Integration
Relative Price
Performance Substitutes
Switching Costs
9. Forces at work framework
2. Determinants of barriers to entry
1. Determinants of supplier power
• Economies of scale
• Differentiation of inputs
• Proprietary product differences
• Switching costs of suppliers and firms in the
• Brand identity
industry
• Switching costs
• Presence of substitute inputs
• Capital requirements
• Supplier concentration
• Access to distribution
• Importance of volume to supplier
• Absolute cost advantages
• Cost relative to total purchases in the industry 2. New entrants
– Proprietary learning curve
• Impact of inputs on cost or differentiation
– Access to necessary inputs
• Threat of forward integration relative to threat
– Proprietary, low-cost product design
of backward integration by firms in the industry
• Government policy
5. Industry competitors
• Expected retaliation
1. Suppliers
3. Buyers
Intensity of rivalry
3. Determinants of buying power
• Bargaining leverage
5. Rivalry determinants
– Buyer concentration vs. firm
• Industry growth
• Fixed (or storage) cost/value added concentration
4. Substitutes – Buyer volume
• Intermittent overcapacity
– Buyer switching costs relative to firm
• Product differences
• Brand identity switching costs
4. Determinants of – Buyer information
• Switching costs
substitution threat – Ability to backward integrate
• Concentration and balance
• Relative price performance of – Substitute products
• Informational complexity
substitutes – Pull-through
• Diversity of competitors
• Switching costs • Price sensitivity
• Corporate stakes
• Buyer propensity to substitute – Price/total purchases
• Exit barriers
– Product differences
– Brand Identity
– Impact on quality perception
– Buyer profits
– Decision makers' incentives
10. Ninety ways to measure
demand (6 x 5 x 3)
World
Geographical
Level Region
Country
Territory
Client
Total sales
Sector sales
Company’s sales
Product
Product lines
Level
Product config
Product items
Short Medium Long
term term term
Timing Level
11. Strategic Planning Link with
Marketing Planning
Businesses that succeed do so by creating and keeping customers.
They do this by providing better value for the customer than the competition.
Marketing management constantly have to assess which customers they are
trying to reach and how they can design products and services that provide
better value (―competitive advantage‖).
The main problem with this process is that the ―environment‖ in which
businesses operate is constantly changing.
So a business must adapt to reflect changes in the environment and make
decisions about how to change the marketing mix in order to succeed.
This process of adapting and decision-making is known as marketing
planning.
Key
Strategic Business Marketing Regional Industry
Account
Sales Plan State Plan
Plan Plan Plan Plan Plan
Plan
12. Strategic vs. Marketing Plans
Strategic planning is concerned about the overall direction of the
business.
◦ It is concerned with marketing, of course.
◦ But it also involves decision-making about production and operations, finance,
human resource management and other business issues.
The objective of a strategic plan is to set the direction of a
business and create its shape so that the products and
services it provides meet the overall business objectives.
Marketing has a key role to play in strategic planning, because it is
the job of marketing management to understand and manage the
links between the business and the ―environment‖. Sometimes this is
quite a straightforward task.
◦ For example, in many small businesses there is only one geographical market
and a limited number of products (perhaps only one product!).
◦ However, consider the challenge faced by marketing management in a
multinational business, with hundreds of business units located around the
globe, producing a wide range of products.
◦ Keeping control of marketing decision-making in such a complex situation calls
for well-organised marketing planning.
13. Key issues in strategic and
marketing planning?
The following questions are key in the marketing and strategic
planning process:
◦ Where are we now?
◦ How did we get there?
◦ Where are we heading?
◦ Where would we like to be?
◦ How do we get there?
◦ Are we on course?
A marketing plan helps to:
◦ The ability of a business to achieve profitable sales is impacted by dozens of
environmental factors, many of which are inter-connected
◦ Identify sources of competitive advantage
◦ Gain commitment to a strategy
◦ Get resources needed to invest in and build the business
◦ Inform stakeholders in the business
◦ Set objectives and strategies
◦ Measure performance
14. Situation Analysis
Internal Analysis—company; capability etc.
External Analysis—customers, market
definition, industry structure
SWOT Analysis
◦ Strengths, Weaknesses,
Opportunities & Threats
◦ Identify & prioritize major problems and
opportunities: selection of key issues
Based on the firm’s core
competencies, decide on future
options
15. SWOT
Internal Environment
Strengths Weaknesses
World class product Technical support
Financial resources Internal processes
Know-how Channels network
External Environment
Opportunities Threats
Water & Energy crises Competitors market share
Environment awareness Euro X Dollar
Productivity improvement Technology development
16. SWOT ANALYSIS
Opportunities/Threats
• How are demand and
supply expected to
NEUTRALIZE
evolve?
THREATS
• How do you expect the
industry chain
economics to evolve?
• What are the potential
major industry
discontinuities?
YOUR
• What competitor
BUILD ON CONVERT
BUSINESS
actions do you expect?
STRENGTHS OPPORTUNITIES
Strengths/
Weaknesses
• What are your BU’s
Surfaces potential
assets/competencies ADDRESS opportunities/threats arising
that solidify your WEAK- from factors external to the
competitive position? NESSES business
• What are your BU’s
assets/competencies
that weaken your
competitive position?
Can be used as a thought
starter for competitive
analysis and internal
assessment
18. TOWS matrix
Strengths Weaknesses
Opportunities S-O strategies W-O strategies
Threats S-T strategies W-T strategies
S-O strategies pursue opportunities that are a good fit to the
companies strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the firm can use its strengths to
reduce its vulnerability to external threats.
W-T strategies establish a defensive plan to prevent the firm's
weaknesses from making it highly susceptible to external threats.
19. PEST analysis
A scan of the external macro-
environment in which the company
wants to operate (or operates) and
can be expressed in terms of the
following factors:
◦ Political
◦ Economic
◦ Social
◦ Technological
20. PEST Analysis - market, business, proposition, etc.
POLITICAL ECONOMIC
• •
ecological/environmental issues home economy situation
• •
current legislation home market home economy trends
• •
future legislation overseas economies and trends
• •
European/international legislation general taxation issues
• •
regulatory bodies and processes taxation specific to product/services
• •
government policies seasonality/weather issues
• •
government term and change market and trade cycles
• •
trading policies specific industry factors
• •
funding, grants and initiatives market routes and distribution trends
• •
home market lobbying/pressure groups customer/end-user drivers
• •
international pressure groups interest and exchange rates
• •
wars and conflict international trade/monetary issues
SOCIAL TECHNOLOGICAL
• •
lifestyle trends competing technology development
• •
demographics research funding
• •
consumer attitudes and opinions associated/dependent technologies
• •
media views replacement technology/solutions
• •
law changes affecting social factors maturity of technology
• •
brand, company, technology image manufacturing maturity and capacity
• •
consumer buying patterns information and communications
• •
fashion and role models consumer buying mechanisms/technology
• •
major events and influences technology legislation
• •
buying access and trends innovation potential
• •
ethnic/religious factors technology access, licencing, patents
• •
advertising and publicity intellectual property issues
• •
ethical issues global communications
21. PEST or SWOT
A PEST analysis most commonly measures a market; a
SWOT analysis measures a business unit, a proposition
or idea.
Generally speaking a SWOT analysis measures a business
unit or proposition, whereas a PEST analysis measures the
market potential and situation, particularly indicating growth
or decline, and thereby market attractiveness, business
potential, and suitability of access - market potential and 'fit' in
other words.
PEST analysis uses four perspectives, which give a logical
structure, in this case organized by the PEST format, that
helps understanding, presentation, discussion and decision-
making.
PEST analysis can be used for marketing and business
development assessment and decision-making, and the
PEST template encourages proactive thinking, rather than
relying on habitual or instinctive reactions.
22. Structure-conduct-performance (SCP)
model
Industry Producers
External
S C P
tructure onduct erformance
shocks
Feedback
• Technology Economics of demand Marketing Finance
• Availability of substitutes • Pricing • Profitability
breakthroughs
• Changes in • Differentiability of products • Volume • Value creation
• Rate of growth • Advertising/promotion
government Technological progress
• Volatility/cyclicality • New products/R&D
policy/regulations Employment objectives
– Domestic • Distribution
Economics of supply
– International • Concentration of producers Capacity change
• Import competition • Expansion/contraction
• Diversity of producers • Entry/exit
• Fixed/variable cost structure • Acquisition/merger/ divestiture
• Capacity utilization Vertical integration
• Entry/exit barriers • Forward/backward integration
• Vertical joint ventures
Industry chain economics
• Bargaining power of input • Long-term contracts
suppliers Internal efficiency
• Bargaining power of customers • Cost control
• Logistics
• Process R&D
• Organization effectiveness
23. Definition of risks
Definition
• Risk of loss due to changes in industry and competitive
Business risk environment, as well as shifts in customer preferences
• Risk due to changes in regulatory environment (e.g.
Regulatory risk deregulation)
• Risk due to major changes in technology
Technology risk
• Risk of failures due to business processes and
Integrity risk operations or people’s behavior, either intentional (e.g.
fraud) or unintentional (e.g. errors)
• Risk of loss due to changes in the political, social, or
Macroeconomic
economic environments
risk
24. Management
Management, control and evaluation
25. Five disciplines – Peter Senge
Personal Mastery:
◦ Aspiration involves formulating a coherent picture of the results
people most desire to gain as individuals, alongside a realistic
assessment of the current state of their lives today.
◦ Learning to cultivate the tension between vision and reality can
expand people's capacity to make better choices, and to achieve
more of the results that they have chosen.
Mental Models:
◦ Reflection and inquiry skills is focused around developing
awareness of the attitudes and perceptions that influence thought
and interaction.
◦ By continually reflecting upon, talking about, and reconsidering
these internal pictures of the world, people can gain more
capability in governing their actions and decisions.
26. Five disciplines – Peter Senge
Shared Vision:
◦ Establishes a focus on mutual purpose.
◦ People learn to nourish a sense of commitment in a group
or organization by developing shared images of the future
they seek to create, and the principles and guiding
practices by which they hope to get there.
Team Learning:
◦ Group interaction.
◦ Through techniques like dialogue and skillful discussion,
teams transform their collective thinking, learning to
mobilize their energies and actions to achieve common
goals, and drawing forth an intelligence and ability greater
than the sum of individual members' talents.
27. Five disciplines – Peter Senge
Systems Thinking:
◦ People learn to better understand
interdependency and change, and thereby to
deal more effectively with the forces that shape
the consequences of our actions.
◦ Systems thinking is based upon a growing body
of theory about the behavior of feedback and
complexity - the innate tendencies of a system
that lead to growth or stability over time.
◦ To help people see how to change systems more
effectively and how to act more in tune with the
larger processes of the natural and economic
world.
32. Success Keys - Deployment
Deployment - Completing the Plan
Success Failure
>Assign roles and responsibilities >No accountability for deployment
>Establish priorities >Too many goals, strategies, or objectives
- no apparent priority
>Involve mid-level management as >Plan in a vacuum-functional focus
active participants
>Think it through - decide how to >No overall strategy to implement
manage implementation
>Charge mid-level management with >Make no attempt to link with day-to-day
aligning lower-level plans operations
>Make careful choices about the >Not being thorough-glossing over the
contents of the plan and form it will details
take
33. Success Keys - Communication
Deployment - Communicating
Success Failure
Assign roles and responsibilities No accountability
Communicate the plan constantly Never talk about the plan
and consistently
Recognize the change process Ignore the emotional impact of
change
Help people through the change
process Focus only on task
accomplishment
34. Success Keys - Implementation
Implementing - I
Success Failure
Assign roles and responsibilities No accountability
Involve senior leaders Disengagement from process
Define an infrastructure Unmanaged activity
Link goal groups Fragmented accomplishment of
objectives leads to sub-optimization
Phase integration of Force people to choose between
implementation implementation and daily work; too
actions with workload many teams
Involve everyone within the No alignment of strategies
organization
35. Success Keys - Implementation
Implementing - II
Success Failure
Allocate resources for Focus only on short term need for
implementation resources
Ignore or avoid change
Manage the change process
No measurement system
Evaluate results
Hide mistakes/lay blame;
Share lessons learned; limited/no communication
acknowledge
successes through open and
frequent communication
36. Success Keys - Measurement
Strategic Measurement - I
Success Failure
Assign roles and responsibilities No accountability
Use measurement to understand Sub-optimization: focus only on
the organization efficiencies
Use measurement to provide a Use measures that provide no real
consistent viewpoint from which to information on performance; use
gauge performance too many measures
Use measurement to provide an Use measurement to focus on the
integrated, focused view of the bottom-line only
future
37. Success Keys - Measurement
Strategic Measurement - II
Success Failure
Use measurement to communicate Use measurement to control
policy (new strategic direction)
Update the measurement system Never review measures
Use measurement to provide Fail to use measurement to make
quality feedback to the strategic strategic, fact-based decisions; use
management process only for control
38. Success Keys - Evaluation
Evaluation
Success Failure
Assign roles and responsibilities No accountability
Recognize when to update the plan Poor timing and not recognizing
external forces
Modify strategic planning process to Rigid application of strategic
accommodate the more mature planning process; ignore lessons
organization learned from previous efforts
Ignore impact of new leaders
Incorporate new leaders into the
strategic planning process
Don't use measurement
Integrate measurement with strategic information
planning
Shortcut the process
Use experienced strategic planning
facilitators
39. Best Companies Spend more time
on Forward Planning than Historical
Analysis
Achieving Agility Through a New Approach to Forecasting In today’s turbulent economy, rolling forecasts are proving to be an
important new tool in changing the way budgeting and planning has traditionally been handled. Mary Brandel