Marketing Strategy

Marketing Strategy Study Notes

A look into the frameworks and major themes of the course from lectures and text book

Table of Contents
Marketing Strategy Study Notes 1
Week 1 - Introduction to Marketing Strategy 3
Week 2: Strategic Analysis - Customer and Competitor Analysis 11
Week 3: Strategic Analysis - Market and Environmental Analysis 28
Week 4: Internal Analysis and Creating Advantage 47
Week 5: Alternative Value Propositions and Building and Managing Brand Equity63
Week 6: Energising and Leveraging the Business 71
Week 7: Creating New Business and Global Strategies 78
Week 8: From Silos to Synergy - Harnessing the Organisation 81
Week 9: Red and Blue Ocean Strategy 87
Week 10: Contemporary Marketing Issues 90
Week 13: Course Review 91

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The textbook and most lecture follows this structure. The course goes through each element
as a way to develop a SCA. Within this there are only four areas of marketing strategy from
which firms can compete. They are:
- Products-market investment strategies
- Customer value proposition
- Assets, competencies, and synergies
- Functional strategies and programs


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Week 1 - Introduction to Marketing Strategy

A look into the platforms of the course and an introduction to the main ideas and topics that
will be covered.

Chapter One: Strategic Market management - an introduction and overview

 
Main Point

An introduction to what Marketing Strategy is and is not. Also why marketing strategy is
important and why it should be studied.
 
Stated Goal:

This book is concerned with helping managers identify, select, implement, and adapt market-
driven business strategies that will enjoy a sustainable advantage in dynamic markets, as well
as create synergy and set priorities among business units.

What do Strategist do? 

Strategists need new and refined perspectives, tools, and concepts. In particular, they need
to develop competencies around five management tasks—strategic analysis, innovation,
getting control of multiple business units, developing sustainable competitive advantages
(SCAs), and developing growth platforms.

• Strategic analysis. The need for information about customers, competitors,

and trends affecting the market is now higher than ever. Further, the information needs to be
continuous, not tied to a planning cycle, because a timely detection of threats, opportunities,
strategic problems, or emerging weaknesses can be crucial to getting the response right.
There is an enhanced premium on the ability to predict trends, project their impact, and
distinguish them from mere fads. That means resources need to be invested and
competencies created in terms of getting information, filtering it, and converting it into
actionable analysis.

• Innovation. The ability to innovate is one key to successfully winning in

dynamic markets as numerous empirical studies have shown. Innovation, however, turns out
to have a host of dimensions. There is the organisational challenge of creating a context that
supports innovation. There is the brand portfolio challenge of making sure that the innovation
is owned and not a short-lived market blip. There is the strategic challenge of developing the
right mix of innovations that ranges from incremental to transformational. There is the
execution challenge; it is necessary to turn innovations into offerings in the marketplace..

• Multiple businesses. It is the rare firm now that does not operate multiple
business units defined by channels and countries in addition to product categories and
subcategories. Decentralisation is a century-old organisational form that provides for

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accountability, a deep understanding of the product or service, being close to the customer,
and fast response, all of which are good things. However, in its extreme form, autonomous
business units can lead to the misallocation of resources, redundancies, a failure to capture
cross-business potential synergies, and confused brands. The challenge is to adapt the
decentralisation model so that it no longer inhibits strategy adaptation in dynamic markets.

• Creating sustainable competitive advantages (SCAs). Creating strategic

advantages that are truly sustainable in the context of dynamic markets and dispersed
business units is challenging. Competitors all too quickly copy product and service
improvements that are valued by customers. What leads to SCAs in dynamic markets? One
possible cornerstone is the development of assets such as brands, distribution channels, or a
customer base or competencies such as social technology skills or sponsorship expertise.
Another is leveraging organisational synergy created by multiple business units, which is
much more difficult to copy than a new product or service.

• Developing growth platforms. Growth is imperative for the vitality and health
of any organisation. In a dynamic environment, stretching the organisation in creative ways
becomes an essential element of seizing opportunities and adapting to changing
circumstances. Growth can come from revitalising core businesses to make them growth
platforms as well as by creating new business platforms.

 
 The Product-Market Investment Strategy: Where to Compete
 
 

This matrix is important and must me understood.

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Functional Strategies and Programs

A target value proposition, or a set of assets and competencies, should mandate some
strategy imperatives in the form of a supportive set of functional strategies or programs

Functional strategies or programs that could drive the business strategy might include a:
• Customer relationship program  
• Brand-building strategy  
• Social technology strategy  
• Communication strategy
• Information technology strategy
• Distribution strategy  
• Global strategy  
• Quality program
• Sourcing strategy  
• Logistical strategy
•  Manufacturing strategy
 
Over view of Strategic management
 
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MARKETING AND ITS ROLE IN STRATEGY
 
• Marketing has seen its strategic role growing over the years. The question for each
organisation is whether the CMO (chief marketing officer) and his or her team have a seat at
the strategy table or are relegated to being tactical implementers of tasks such as
managing the advertising program. The view that marketing is tactical is changing; it is now
more and more frequently being accepted as being part of the strategic management of the
organisation. Given the definition of a business strategy and the structure of strategic
market management, the roles that marketing can and should play become clearer.

• One marketing role is to be the primary driver of the strategic analysis. The marketing group
is in the best position to understand the customers, competitors, market and submarkets,
and environmental forces and trends. By managing marketing research and market data, it
controls much of the information needed in the external analysis. Marketing should also
take the lead in the internal analysis with respect to selected assets (such as the brand
portfolio and the distribution channel) and competencies (such as new product introduction
and the management of sponsorships).

• A second role is to drive growth strategy for the firm. Growth options are either based on or
dependent on customer and market insights, and marketing therefore should be a key
driver. In fact, a study by Booz Allen and Hamilton of some 2,000 executives found that a
small but growing number of firms (9 percent) describe the CMO as a growth champion
involved in all strategic levers relating to growth.5

• A third role is to deal with the dysfunctions of product and geographic silos. Although all
functional groups need to deal with this problem, marketing is often on the front lines. The
corporate brand and major master brands usually span silos, and a failure to exercise some
central control and guidance will result in inefficiencies and inconsistencies that can be
damaging to one or more business strategies. Business-spanning marketing programs
such as sponsorships or distribution channels need to be actively managed if opportunities
are to be realised and waste and inefficiency are to be avoided.

• A fourth role of marketing is to participate in the development of business strategies. This

role is best understood by detailing the relationship between marketing and business
strategies.

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Lecture

Philosophy of the course

“The strategist’s method is very simple to challenge the prevailing

assumptions with a single question: why? and to put the same question
relentlessly to those responsible for the current way of doing things until they
are sick of it” - Kenichi Ohmae in The Mind of the Strategist: The Art of
Japanese Business

What is strategy

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Quotes

“Strategy is the creating of a unique and valuable position, involving a

different set of activities”- Micheal Porter in What is Strategy

“Four dimensions define business strategy: the product-market investment

strategy, the customer value proposition, assets and programs. The first
specifies where to compete and the remaining three indicate how to
compete to win” Daivd Asker in Strategic market management (the textbook)

These quotes imply that strategy incorporates

- Formulation aspects
- Implementation aspects
- Control aspects

Overview of main areas of strategy

The Product-market Investment strategy

- Invest to grow (or enter a product market)
- Invest only to maintain the existing position
- Milk the business by minimising investment
- Recover as many of the assets as possible by liquidation or divesting the business

The Customer Value Proposition

- Perceived benefit to customer
- Functional
- emotional
- social
- self- expressive

Assets and Competencies

- Strategic Competency
- What a business unit dose exceptionally well
- Has strategic importance to the business
- Based on knowledge or a process
- Strategic Asset
- A resource

Functional Strategies and Programs

Strategy:
- Manufacturing
- Distribution
- Brand-Building
- Communication
- Information Technology

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- sourcing
- Global
- Logistical

Programs:
- Quality program
- customer relationship program
- social technology program

SCA
is when a firm possess capabilities that allow it to serve customer needs better, it is said to
have a completive or differential advantage. Competitive advantages are not realised unless
customers see them as valuable.

The Sustainable Competitive Advantage

Key Learnings

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• Strategy needs to be developed and executed in the context of a dynamic market. To
cope, it is important to develop competencies in strategic analysis, innovation,
managing multiple business, and developing SCAs and growth platforms.
• A business strategy includes the determination of the product - market investment
strategy, the customer value proposition, assets and competencies, and the functional
area strategy. A marketing strategy involves the allocation of the marketing budget over
product markets, the customer value proposition by segment, the marketing assets and
competencies, and the strategies of the functional areas of marketing.
• Strategic market management, a system designed to help management create, change,
or retain a business strategy and to create strategic visions, includes a strategic analysis
of the business to identify existing or emerging opportunities, threats, trends, strategic
uncertainties, information need areas, scenarios, and strategic alternatives. It should
precipitate strategic choices, help a business cope with change, force a long-term view,
make visible resource allocations, aid strategy analysis and decisions, provide
management and control systems, and enhance communication and coordination.
• The CMO role has grown over the years and is now often charged with being a partner
in developing strategies and a vehicle to deal with the dysfunctions of the product-
market silos.

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Week 2: Strategic Analysis - Customer and Competitor Analysis

The first step in marketing strategy is examining the customer and the competitor. Moreover,
in this weeks lecture there are several alternative strategic planning framework to compare
with the one in the text. These are:
- The resource based view
- Porter’s Positioning School of strategy formation
- D’Avenis ideas of Hypercompetitioon

Chapter Two: External And Customer Analysis

Main Point

This chapter is about internal and customer analysis. The author goes through the 'how to' to
both and then goes into why they are important to the firm and the marketing strategist.
 
THE EXTERNAL ANALYSIS:
 
The Role of External Analysis

Analysis
There are three ways of handling uncertainty, as suggested by Figure 2.1. First, a strategic
decision can be precipitated because the logic for a decision is compelling and/or because a
delay would be costly or risky. Second, it may be worthwhile to attempt to reduce the
uncertainty by information acquisition and analysis of an information-need area. The effort
could range from a high-priority task force to a low-key monitoring effort. The level of
resources expended will depend on the potential impact on strategy and its immediacy. Third,
the uncertainty could be modelled by a scenario analysis.

 
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THE CUSTOMER ANALYSIS

THE SCOPE OF CUSTOMER ANALYSIS

Segmentation
Segmentation is often the key to developing a sustainable competitive advantage. In a
strategic context, segmentation means the identification of customer groups that respond
differently from other groups to competitive offerings. A segmentation strategy couples the
identified segments with a program to deliver an offering to those segments. Thus, the
development of a successful segmentation strategy requires the conceptualisation,
development, and evaluation of a targeted competitive offering.

How Should Segments Be Defined?

Loyalty
Brand loyalty, an important consideration in allocating resources, can be structured using a
loyalty matrix as shown in Figure 2.5. Each cell represents a very different strategic priority
and can justify a very different program.
 

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Unmet Needs
An unmet need is a customer need that is not being met by the existing product offerings.
Unmet needs are strategically important because they represent opportunities for firms to
increase their market share, break into a market, or create and own new markets. They can
also represent threats to established firms in that they can be a lever that enables
competitors to disrupt an established position.

Key Learnings
• External analysis should influence strategy by identifying opportunities, threats, trends, and
strategic uncertainties. The ultimate goal is to improve strategic choices—decisions as to
where and how to compete.
• Segmentation (identifying customer groups that can support different competitive
strategies) can be based on a variety of customer characteristics, such as benefits sought,
customer loyalty, and applications.
• Customer motivation analysis can provide insights in to what assets and competencies are
needed to compete, as well as indicate possible SCAs.
• Unmet needs that represent opportunities (or threats) can be identified by asking
customers, by accessing lead users, by ethnographic research, and by interacting with
customers.

Chapter Three: Competitor Analysis

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Main Point
This chapter focus on the competitor analysis, how to do a CA, how to get the information,
and the importance of looking at strengths and weakness'.
 
What Questions are involved in a competitor analysis?

 
Different Competitors
 
Direct
 
Companies the firm is in direct competition with.
 
Indirect
 
Companies that the firms is still in competition with but may be slightly different in offerings or
segments.
 
Strategic groups
 
• A strategic group is a group of firms that:
• Over time pursue similar competitive strategies (for example, the use of the same
distribution channel, the same type of communication strategies, or the same price/
quality position)
• Have similar characteristics (e.g., size, aggressiveness)  
• Have similar assets and competencies (such as brand associations, logistics
capability, global presence, or research and development)
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Potential Competitors

In addition to current competitors, it is important to consider potential market entrants, such

as firms that might engage in:

1. Market expansion. Perhaps the most obvious source of potential competitors is firms
operating in other geographic regions or in other countries. A cookie company may want
to keep a close eye on a competing firm in an adjacent state, for example.
2. Product expansion. The leading ski firm, Rossignol, has expanded into ski clothing,
thus exploiting a common market, and has moved to tennis equipment, which takes
advantage of technological and distribution overlap.
3. Backward integration. Customers are another potential source of competition.
General Motors bought dozens of manufacturers of components during its formative
years. Major can users, such as Campbell Soup, have integrated backward, making their
own containers.
4. Forward integration. Suppliers attracted by margins are also potential competitors.
Apple Computer, for example, opened a chain of retail stores. Suppliers, believing they
have the critical ingredients to succeed in a market, may be attracted by the margins, the
control, and the visibility that come with integrating forward.
5. The export of assets or competencies. A current small competitor with critical
strategic weaknesses can turn into a major entrant if it is purchased by a firm that can
reduce or eliminate those weaknesses. Predicting such moves can be difficult, but
sometimes an analysis of competitor strengths and weaknesses will suggest some
possible synergistic mergers. A competitor in an above-average growth industry that does
not have the financial or managerial resources for the long haul might be a particularly
attractive candidate for merger.
6. Retaliatory or defensive strategies. Firms that are threatened by a potential or
actual move into their market might retaliate. Thus, Microsoft has made several moves
(including into the Internet space) in part to protect its dominant software position.

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How to understand competitors?
 

Strengths and Weakness' of a competitor ?

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Key Learnings
 
• Competitors can be identified by customer choice (the set from which customers select) or
by clustering them into strategic groups (firms that pursue similar strategies and have
similar assets, competencies, and other characteristics). In either case, competitors will
vary in terms of how intensely they compete.
• Competitors should be analysed along several dimensions, including their size, growth and
profitability, image, objectives, business strategies, organisational culture, cost structure,
exit barriers, and strengths and weaknesses.
• Potential strengths and weaknesses can be identified by considering the characteristics of
successful and unsuccessful businesses, key customer motivation, mobility barriers, and
value-added components.
• The competitive strength grid, which arrays competitors or strategic groups on each of the
relevant assets and competencies, provides a compact summary of key strategic
information.


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Lectures
What is the goal of Strategy?

Resource based View

Positioning School

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Overview of Two Key Strategic paradigms

Position Resources

Strategic Logic Established Position Leveraged Resources

Strategic Steps - Identify an attractive market. - Establish Vision

- Locate a defensible position - Build Resources
- Fortify and Defend - Leverage across markets
Sources of Advantage Unique, valuable position Unique, valuable.
Inimitable resources

Strategic Question Where should we be? What should we be ?

A business strategy

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The role of External analysis

External analysis
serves to see future trends, threats/opportunities and examine strategic uncertainties. An
external analysis will influence the strategic decisions of the company.

Strategic Uncertainties
are essential to understand as they inform the strategic decision of weakness in the future.
The goal in strategy is to limit and know the strategic uncertainties as to remain competitive.

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CUSTOMER ANALYSIS

Segmentation
identification of customer groups that respond differently from other groups to competitive
offerings. Thus, a successful segmentation strategy requires the conceptualisation,
development, and evaluation of targeted competitive offering. Examples include:

Customer Characteristics:
- Geographic
- type of organisation
- size of firm
- lifestyle
- sex
- age
- occupation
Product-related Approaches:
- User type
- Usage
- Benefits sough
- Price sensitivity
- Competitor
- Application
- Brand Loyalty

The Brans Loyalty Matrix: Priorities

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Customer Motivations
- What elements of the product/service do customers value most?
- What are the customers’ objectives? What are they really buying ?
- How do segments differ in their motivations priorities ?
- What changes are occurring in customer motivation? In customer priorities?

Unmeet needs
- Why are some customers dissatisfied? Why are some changing brands or supplies?
- What are the unmeet needs that customers can identify? Are there some of which
consumers are unaware?
- Do these unmet needs represent leverage points for competitors?

COMPETITOR ANALYSIS
There are two approaches to a competitor analysis.

- Degree to which they compete for a buyer’s choice. A customer based approach
- Organise competitors into strategic groups on the basis of their completive strategy. A
competitor based approach

Customer based Approaches

-Customer choices
- What brand would you buy if your favourite was unavailable?
- Applications associations
- What applications?
- What brands for each application?
- What product substitutes?

Competitor Identification
How do we arrange into strategic groups?
- Pursue similar competitive strategies
- Have similar characteristics
- Have similar assets and competencies

Potential Competitors
- Market expansion
- Product expansion
- backward integration
- Forward integration
- Export assets or competencies
- Retaliatory or defensive strategies

Understanding the Competitors

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- Understanding competitor strengths and weaknesses may provide insights into

opportunities
- General strategy ‘pit our strengths against their weakness’ rather then reacting to
competitor strengths
- Competitor strengths and weakness are operationalised by markets in terms of the
existence or absence of strategic assets or competences
- However, must assess these strengths and weakness in terms of the industry in question

The
value
chain

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HYPERCOMPETITION

Sustained competitive advantage is not possible. According to D’Aveni there exists only
temporary advantages created by a company’s speed and aggressiveness. This assumes:
- Every advantage becomes eroded
- Sustaining an advantage uses too much time and resources
- Instead, companies must seek to stay ahead of its competitors by creating temporary
advantages
- These are done in small steps over short competitive cycles. Focus on creating the next
temporary advantage before the current benefits erodes.

Sustainable Competitive Advantage

the traditional view

hyper-competition view

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Where can you compete

There are only four areas where hypercompetition may have been seen:

- Cost and Quality

• Higher quality has to be achieved even as costs are being lowered
- Timing and Know-How
• Being first is important when exploiting the firm’s special know-how
- Strongholds
• The company needs to define some geographic or other market segment in which it is
strong, and there some entry barriers can be built and defended
- Financial Resources
• Financial strength is necessary for the company to keep the leading competitive edge by
accessing new technology and acquiring competitors

7-S’S FRAMEWORK

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D’Aveni’s New 7-S’s

• Superior stakeholder satisfaction: maximise customer satisfaction by adding value

strategically
• Strategic soothsaying: use new knowledge to predict new windows of opportunity
• Positioning for speed: prepare the organisation to react as fast as possible
• Positioning for surprise: surprise competitors
• Shifting the rules of competition: serve customers in novel ways
• Signalling strategic intent: communicate intentions in order to stall competitors
• Simultaneous and sequential strategic thrusts: take steps to stun and confuse
competitors in order to disrupt or block their efforts

What approach should a business take

The Market Orientation approach is the best

Customer Oriented Company Competitor Oriented Company Market Oriented Company

A company that focuses on A company whose moves A company that pays

customer developments in are mainly based on balanced attention to both
designing its marketing competitors’ actions and customers and competitors
strategies reactions in designing its marketing
strategies

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Market Orientation
the market and the customers that form the market should be the starting point in formulation
the overall business strategy

Quote in market orientation:

“[Market Orientation,] the organisational culture that most effectively and

efficiently creates the necessary behaviours for the creation of superior value
for buyers and, thus, continues superior performance for the business’
Narver and Slater in 1990


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Week 3: Strategic Analysis - Market and Environmental Analysis

This week examines the final two elements of the external analysis - the market and the
environment.

Chapter Four: Market/Submarket Analysis

Market/Submarket Analysis
 
This chapter focus on the market analysis. The author says that the combination of market
analysis with customer and competitor analysis allows the strategist to make strategic
judgments about what tactics a firm can undertake.
 
The author claims that the market analysis allows the strategist to understand the dynamics
of the market. Thereby, informing the investment decision of the firm so as to become a
winner in the market. This process first starts off by finding the industry's key success
factors, which are assets and competency's need to compete in the game,  without these
factors the firm will be very weak in the industry and the ability to survive will be very low.
 
Dimensions of a Market/Submarket analysis
The nature of market analysis really depends on context but will often include the following
dimensions along with these following questions:

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SUBMARKETS:
One key area to understand for business is to detect and understand the emerging
submarkets and identify areas that may be attractive, and the adjust offerings to take
advantage of this change. This may include:
 
• Provide a lower price point—discount airlines  
• Serve nonusers—Kodak Brownie camera - Serve niche markets—performance
snowboards  
• Provide systems solutions—home heaters  
• Serve unmet needs—Lexus car buying experience
• Respond to a customer trend—fortified energy drinks  
• Leverage a new technology—Gillette Fusion Razors
 
SIZE AND GROWTH:
The basic starting point for a market analysis of the total sales level. Other useful data
includes:

• The financial analysis of relevant firms,

• Customer data
• Government data
• Trade magazines
• Associations

It is also useful to consider the potential size of the market. Things to consider include:

• New users
• New group users
• More frequent usage

In this new economic era focusing just on large invest decision may mean that a firm misses
large sales in products that have great future sales. Things to keep in mind are:

• Most business area were small at one point

• Small niche business may be very profitable now thanks to technology
• The downside to focusing on niches is that the costs to run them while they grow can be
costly.

The next thing to focus on is the market growth rate. Things to consider include:

• What are the size of the future markets/submarket

• Will there be sales growth without market share growth
• Is there any price pressures
• The most important strategic uncertainty involves the prediction of market sales.
• What factors are driving sales growth
• The historical data can provide a useful perspective
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However, strategy is not about the history of the company or industry but about why it did
what it did.

• Submarket growth is important because it affects investment decisions and value

propositions
• An important set of turning points on market sales occurs when the growth phase of the
product life cycle changes to a flat maturity phase and when the maturity phase changes
into a decline phase.
• Price pressure caused by over capacity and the lack of product differentiation.
When growth slows or even reverses, capacity developed under a more optimistic scenario
becomes excessive. Furthermore, the product evolution process often results in most
competitors matching product improvements. Thus, it becomes more difficult to maintain
meaningful differentiation.
• Buyer sophistication and knowledge. Buyers tend to become more familiar and
knowledgeable as a product matures, and thus they become less willing to pay a premium
price to obtain the security of an established name. Computer buyers over the years have
gained confidence in their ability to select computers—as a result, the value of big names
has receded.
• Substitute products or technologies. The sales of personal TV services like TiVo provide
an indicator of the decline of VCRs.
• Saturation. When the number of potential first-time buyers declines, market sales should
mature or decline.
• No growth sources. The market is fully penetrated and there are no visible sources of
growth from new uses or users.
• Customer disinterest. The interest of customers in applications, new product
announcements, and so on falls off.

MARKET AND SUBMARKET PROFITABILITY ANALYSIS (or porters five forces)

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To best understand some Key Success Factors you need to understand a few aspects:
 

COST STRUCTURE

An understanding of the cost structure of a market can provide insights into present and
future key success factors. The first step is to conduct an analysis of the value chain:

The value chain can be a very useful place to understand the changes in a market, especially
if that market is undergoing a large macro change.

DISTRIBUTION SYSTEMS
Should include three main questions:
 
•   What are the alternative distribution channels?
•   What are the trends? What channels are growing in importance? What new channels have
emerged or are likely to emerge?
•   Who has the power in the channel, and how is that likely  to shift?

MARKET TRENDS
What are the market trends ? This question usually has two main focus:
• it focuses on change,
• and it tends to identify what is important.

Strategic insights are usually generated with these questions

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Trends vs. Fads
What trends will actually drive growth and what trend will fizzle out is an important question.

One firm, the Zandl Group, suggests that three questions can help detect a real trend, as
opposed to a fad.

• What is driving it? A trend will have a solid foundation with legs. Trends are more likely to
be driven by demographics (rather than pop culture), values (rather than fashion), lifestyle
(rather than a trendy crowd), or technology (rather than media).
• How accessible is it in the mainstream? Will it be constrained to a niche market for the
foreseeable future? Will it require a major change in ingrained habits? Is the required
investment in time or resources a barrier (perhaps because the product is priced too high or
is too hard to use)?
• Is it broadly based? Does it find expression across categories or industries? Eastern
influences, for example, are apparent in health care, food, fitness, and design—a sign of a
trend.
 
KEY SUCCESS FACTORS
An important output of market analysis is the identification of key success factors (KSFs) for
strategic groups in the market. These are assets and competencies that provide the basis for
competing successfully. 

There is generally two different types:

• Strategic necessities do not necessarily provide an advantage, because others have
them, but their absence will create a substantial weakness.
• Strategic strengths, are those at which a firm excels, the assets or competencies that
are superior to those of competitors and provide a base of advantage.

It is important not only to identify KSFs but also to project them into the future and, in
particular, to identify emerging KSFs. Many firms have faltered when KSFs changed and the
competencies and assets on which they were relying became less relevant. Microsoft
anybody!!!!

RISKS IN HIGH-GROWTH MARKETS

The conventional wisdom that the strategist should seek out growth areas often overlooks a
substantial set of associated risks.

Competitive Overcrowding
Perhaps the most serious risk is that too many competitors will be attracted by a growth
situation and enter with unrealistic market share expectations. The reality may be that sales
volume is insufficient to support all competitors. Overcrowding has been observed in virtually
all hyped markets, from railroads to automobiles, airplanes, radio stations and equipment,
television sets, and personal computers.

Key high risk areas include:  

The number and commitment of competitors may be greater than the market can support:
•   A competitor may enter with a superior product or low-cost advantage.
•   Key success factors might change and the organisation may be unable to adapt.
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•   Technology might change.
•   The market growth may fail to meet expectations.
•   Price instability may result from over capacity or from retailers’ practice of pricing hot
products low to attract customers.
•   Resources might be inadequate to maintain a high growth rate.   Adequate distribution
may not be available.

KEY LEARNINGS
• Market analyse should assess the attractiveness of a market or submarket, as well as its
structure and dynamics.
•   A usage gap can cause the market size to be understated.
•   Market growth can be forecast by looking at driving forces, leading indicators, and
analogous industries.
•   Market profit ability will depend on five factors—existing competitors, supplier power,
customer power, substitute products, and potential entrants.
•   Cost structure can be analysed by looking at the value added at each production stage.
•   Distribution channels and trends will often affect who wins.
•   Market trends will affect both the profitability of strategies and key success factors.
•   Key success factors are the skills and competencies needed to compete in a market.
•   Growth-market challenges involve the threat of competitors, market changes, and firm
limitations.

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Chapter Five: Environmental Analysis and Strategic Uncertainty

This chapter:
This chapter examines the environmental analysis. This analysis consists of five parts:

• Technology
• Consumer Trends
• Government/Economic trends
• General External Analysis Questions
• Scenarios

The author says that the Environmental analysis is very broad and involves casting a wide net.
Its important to actually ensure that the firm dose not get carried away with this type of
analysis.

An Environmental Analysis Involves

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TECHNOLOGY

Big Data
Is a massive challenge to firms in both the strategic and tactical areas. This topic is covered
later in the course

Transformational Innovations
will fundamentally change the business model in all four of Aaker’s four areas of Strategic
advantage.

Substantial innovations
Aaker describes substantial innovations in terms of; “newness and impact” and often
represent a new generation of products. In most instances the value proposition is enhanced.

Incremental Innovations
are transformational or even substantial ,are often championed by new entrants into the
industry so it is important to monitor new, even small, firms and not let the large established
firms dominate the external analysis.

Forecasting Technologies
Forecasting new technologies can be hard. However, there is a useful guideline:

• Use technology to create an immediate, tangible benefit for the consumer. The benefit, in
short, needs to be perceived as such.
• Make the technology easy to use.
• Execution matters: prototype, test, and refine.
• Recognise that customer response to technology.

Impact of new Technologies

can be critical for the firm but hard to know what the impact will be. Managing to move over
to a new innovation, even a incremental innovation can take a lot of resources and change
dramatically the established strategy of the company.

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CONSUMER TRENDS

Cultural Trends
There is a general trend towards a social unit that is centred around an interest or activity.

Being Green
or greeness is the consumers desire to have ever more eco-friendly products. One of the
challenges of this movement is that the consumer will examine backwards to see where the
products come from and expect that to be ‘Green’ too

Demographics
can be a powerful force in a market and can be predictable. The most influential
demographics are:
- age
- income
- education
- geographic location
- ethnicity

GOVERNMENT/ECONOMIC TRENDS

Economic Recessions
effects strategy. For example a very different strategy is needed in a downturn than when the
economy is heathy

Government Regulations
can effect your business depending on what industry you are in.

Global Events
with an increasing global economy events on a global scale are becoming more important.
This ranges from sports such as FIFA to the wars in Iraq.

Cultivation Vigilance
organisations have to remain vigilant on the changing cultural trends otherwise it might find
itself overtaken.

GENERAL EXTERNAL ANALYSIS QUESTIONS

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Strategic Uncertainties
Strategic uncertainty, uncertainty that has strategic implications, is a key construct in external
analysis. A typical external analysis will emerge with dozens of strategic uncertainties. To be
manageable, they need to be grouped into logical clusters or themes. It is then useful to
assess the importance of each cluster in order to set priorities with respect to information
gathering and analysis.

Impact Analysis
is designed to examine the different strategic uncertainties and rate from most important to
least important.

The extent to which a strategic uncertainty should be monitored and analysed depends on its
impact and immediacy.
1. The impact of a strategic uncertainty is related to:
• The extent to which it involves trends or events that will impact existing or potential
businesses
• The importance of the involved businesses
• The number of involved businesses
2. The immediacy of a strategic uncertainty is related to:
• The probability that the involved trends or events will occur
• The time frame of the trends or events
• The reaction time likely to be available compared with the time required to develop
and implement appropriate strategy

Managing Strategic Uncertainties

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SCENARIOS ANALYSIS
is designed to help with uncertainty. By undertaking this method a firm may save time and
money and instead focus in small scale situations. There are three main steps to a scenario
analysis:

1. Identify Scenarios
ask what is the most important scenario to test

2. Relate Scenarios to Strategies

After scenarios have been identified, the next step is to relate them to strategy—both
existing strategies and new options. If an existing strategy is in place, it can be tested
with respect to each scenario.

3. Estimate Scenario Probabilities

To evaluate alternative strategies, it is useful to determine the scenario probabilities.
The task is actually one of environmental forecasting, except that the total scenario
may be a rich combination of several variables. Experts could be asked to assess
probabilities directly. A deeper understanding will often emerge, however, if causal
factors underlying each scenario can be determined

KEY LEARNING
• Environmental analysis of technology, consumer, and government/ economic trends can
detect opportunities or threats relevant to an organisation.
• The green movement provides opportunities to connect to customers and employees.
• Impact analysis involves assessing systematically the impact and immediacy of the
trends and events that underlie each strategy uncertainty.

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• Scenario analysis, a vehicle to explore different assumptions about the future, involves the
creation of two to three plausible scenarios, the development of strategies appropriate to
each, the assessment of scenario.

Lecture
OBJECTIVES OF A MARKET ANALYSIS

Measure of industry attractiveness

Understand dynamics of market or sub-market

- Emerging key success factors.

- Trends
- Threats and Opportunities.
- Strategic uncertainties.

Basis for future information gathering and analysis.

Dimensions of a Market Analysis

Submarkets
are augmented products, emerging niches, trend toward systems, new applications,
repositioned product classes, customer trends, or new technologies creating worthwhile
submarkets? How should they be defined?

Size and Growth

potentially important submarkets? Size and growth characteristics? Submarkets declining?
How fast? Driving forces behind the trends?

Profitability
how intense is the competition among existing firms? Threats from potential entrants and
substitute products? Bargaining power of suppliers and customers? Attractive/profitable
markets or submarkets?

Cost Structure
major cost and value-added components for various types of competitors?

Distribution Systems
alternative channels of distribution? How are they changing?

Market Trends
a look into what the trends in the market are

Key Success Factors

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KSF are assets and competencies needed to compete successfully.

The Product Life Cycle

Knowing where a product sits within the product life cycle will influences how the company
marketing strategy is conducted. For example if the product is in the introduction phase then
there will be a learning marketing campaign telling people about the product. However, if the
product is in the maturity phase then their will a lot more marketing then when the decline
phase happens. Thats where marking should start to stop.

Detecting Maturity and Decline

- Price pressure caused by overcapacity and the lack of product differentiation
- Buyer sophistication and knowledge
- Substitute products or technologies
- Saturation
- No growth sources
- Customer disinterest

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Porters Five Factor Model

In marketing strategy Porters five forces is explored in relation to marketing activities. This
includes examining the competitor in terms of their positioning. It is useful in marketing
strategy to get the big picture and understand what is happing in the market place.

The implications of the 5 forces model

• The competitive environment is unattractive from a profit making standpoint when:

– Rivalry is vigorous
– Entry barriers are low and entry is likely
– Competition from substitutes is strong
– Suppliers and customers have considerable bargaining power

• The competitive environment is ideal from a profit-making standpoint when:

– Rivalry is moderate
– Entry barriers are high and no firm is likely to enter
– Good substitutes do not exist
– Suppliers and customers are in a weak bargaining position

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Risks in High Growth Markets

ENVIRONMENTAL ANALYSIS AND STRATEGIC UNCERTAINTY

Environmental Analysis

Technology Trends
- To what extent are existing technologies maturing?
- What technological developments or trends are affecting or could affect the
industry?

Government/Economic Trends
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- What changes in regulation are possible? What will their impact be?
- What are the political risks of operating in governmental jurisdiction?
- What are the economic prospects and inflation outlets for the countries in which the
firm operates? How will they affect strategy?

Consumer Trends
- What are the current or emerging trends in lifestyles, fashions, and other
components of culture? Why? What are their implications?
- What demographic trends will affect the market size of the industry or its
submarkets? What demographic trends represent opportunities or threats?

Innovations

Transformational—changes what people buy—changes the assets and

competencies needed

Substantial—significant change as in a new generation offering

Incremental—makes the offering more attractive or less costly

Disruptive technologies
technologies that change the current way of doing things.

- Success is more likely to come from creating transformational technologies rather than just
forecasting them.
- As established companies usually rely upon incremental innovation as it sustains their
approach in the marketplace.
- The introduction of disruptive technologies doesn’t impact upon existing technologies right
away, because they tend to create new markets.

This goes back to D’Aveni’s ideas of hypercompetition, that no one company can sustain a
competitive advantage for a long time. You as a company have to keep innovating new
technologies and new marketing efforts in order to stay ahead.

Being Green
- Motivation in terms of the protecting the natural environment
- Practical functional benefits to customers and firms
- Customers see it as a solution to global warming
- Generates respect from customers and employeers

General External Analysis Questions

- What are the significant trends and future events?
- What threats and opportunities do you see?
- What are the key areas of uncertainty as trends or events that have the potential to impact
strategy?

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- and then asses these strategic uncertainties in terms of their impact and immediacy

Scenarios
what strategic uncertainties are worth being the basis of a scenario analysis?

Examples

Overall Cost Leadership Strategy and the Internet

The Internet can decrease costs throughout a firm’s value chain in both primary and support
activities:
• Minimising rework
• Minimising sales-force expense
• Reducing costs of procurement and paper
• Reducing costs of and speeding up the new product development process
• Reducing costs of hiring and training employees
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The Internet can create new ways of differentiating by enabling customisation and increasing
customer control over the process:
• Shortening response times and accelerating organisation learning
• Personalising online customer access
• Enhancing marketing efforts
• Empowered sales force and updated R&D efforts

The Internet permits focusers to access markets less expensively (low cost) and provides
more services and features (differentiation):
• Focusing sales efforts on specific customers
• Creating community for customers with common interests
• Providing advertisers with access to viewers with specialised interests
• Highlighting specialised buyers and drawing attention to smaller suppliers
Leveraging Internet Capabilities

Business-Level Strategy
- Providing new ways to add value
- Shifting power to the five forces
- Requiring modifications in generic strategies
- Altering competitive climate in many industries
Corporate-level strategy
- New means of generating synergies
- Enhancing revenue among elements of a diverse firm
- Linking sources of supply more efficiently
- Streamlining distribution
- Dealing with suppliers more efficiently
International-level strategy
- Conducting business without time and expense of physical travel
- Increasing level of access to local cultures and markets conditions
- Addressing both cost reduction and local adaptation issues
- Facilitating collaborations between remote locations

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Week 4: Internal Analysis and Creating Advantage

This week we look at several dimensions of internal analysis. The lecture examines how an
organisation evaluates itself in terms of its resources and capabilities. It links with the
Resource Based View of strategy formation as shown between the relationship between an
organisation’s internal structure, strengths and capabilities and the strategic directions it is
then able to consider. Then the lecture moves onto identifying sources of competitive
advantage with a focus on those that have the most chance of remaining sustainable.

SINCE THE LECTURE IS FOLLOWING THE TEXT BOOK AND ADDING BITS HERE
AND THEIR FROM THIS POINT ON I AM MIXING THE TWO. IT MAKES MORE SENSE.

About
This is the last part of the strategic analysis. It deals with the internal analysis of the company.

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FINANCIAL PERFORMANCE AND PROFITABILITY

Sales and Market Share

how customers regard a product or service can be through knowing the sales or market
share of the company. Sales levels can be strategically important. Increased sales can mean
that the customer base has grown. An enlarged customer base, if we assume that new
customers will develop loyalty, will mean future sales and profits. Increased share can provide
the potential to gain SCAs in the form of economies of scale and experience curve effects.
Conversely, decreased sales can mean decreases in customer bases and a loss of scale
economies.

Profitability
is the ultimate measure of a firms ability to be completive.

Shareholder Value Analysis

a calculation of the value of a company made by looking at the returns it gives to its
shareholders. It assumes that the objective of a company director is to maximise the wealth
of the company's shareholders, and is based on the premise that discounted cash flow
principles can be applied to the business as a whole.

In terms of strategy it is a valid analysis because if a firms success depends on good strategy
and its the leaders that make good strategy then their should be a good return.

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PERFORMANCE MEASUREMENT BEYOND PROFITABILITY

Product and Service Quality

The quality must meet or exceed expectations of the customer base and even do more if the
customer needs are different than expectations. Is the offering delivering value? How? Is it
delivering superior quality?

Brand/Firm Associations
what the brand is associated with will effect its value. Thos may be that the brand is seen as
expensive even though its actually affordable.

Relative Cost
A careful cost analysis of a product (or service) and its components, which can be critical
when a strategy is dependent on achieving a cost advantage or cost parity, involves tearing
down competitors’ products and analysing their systems in detail.

Brand Loyalty
loyalty of customer base. Strategic investments will be influenced by an assessment of
customer loyalty. Loyalty will affect profitability by supporting prices and by reducing cost of
customer acquisition and retentions. Consequently, a firm should, in general, invest behind
product-markets in which a strong loyal customer base exists. If a business lacks loyalty and
a program cannot be economically be created to generate that missing asset, on average,
that would not be a place to invest.

Innovation
looks at what new products the firm is making. Can also include internal improvements.

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Manager/Employee Capability and Performance
one key to a firm’s long-term prospects are the people who must implement strategies.

Values and Heritage

The firms with strong performance over time usually have a well-defined set of values that
are both known and accepted within the organisation, values that are more than simply
increasing financial return. Strong values that guide and even inspire are enhanced if they are
supported by a well-known and relevant heritage. Values and a heritage not only create a
strong and consistent brand but also support the business strategy.

Often when the company is in trouble it will look to its heritage to see where it started out
strong.

STRENGTHS AND WEAKNESSES

The goal of strategy is to leverage strengths and neutralise weakness

Point-of-advantage

Points-of-parity
Associations that are not necessarily unique to the brand but may be shared by other brands

Strategic Liability
the absence of an asset

Point-of-advantage V’s Points-of-parity V’s Liability

THREATS AND OPPORTUNITIES

Threats can come in the form of a strategic problem or a liability. Strategic problems, events,
or trends adversely affecting strategy generally need to be addressed aggressively and
corrected even if the fix is difficult and expensive.

An opportunity similarly can be evaluated as to whether its impact will be immediate and
major. If so, the organisation should be set up to move quickly and decisively.

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FROM ANALYSIS TO STRATEGY

“However, the core of any strategic decision should be based on three types
of assessments. The first concerns organizational strengths and
weaknesses. The second evaluates competitor strengths, weaknesses, and
strategies because an organization’s strength is of less value if it is
neutralized by a competitor’s strength or strategy. The third assesses the
competitive context, the customers and their needs, the market, and the
market environment in order to determine how attractive the selected market
will be, given the business strategy.

The goal is to develop a strategy that exploits business strengths and

competitor weaknesses and neutralizes business weaknesses and
competitor strengths. The ideal is to compete in a healthy, growing industry
with a strategy based on strengths that are unlikely to be acquired or
neutralized by competitors.”

Aaker, David A. Strategic Market Management, 10th Edition. John Wiley &
Sons, 2013-10-21. VitalBook file.

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OUTCOMES OF EXTERNAL AND INTERNAL ENVIRONMENTAL ANALYSES

From a combination of both external and internal analysis come the actual information
strategist can use to create strategies. But seeing all this information in a useful way can be
hard. Some methods are shown below:

TOWS MATRIX

Using
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the TOWS matrix its possible to see how the key internal factors and the key external factors
can result in strategy.

MATCHING KEY FACTORS TO FORMULATE ALTERNATIVES STRATEGIES

This is designed to see what key factors influence each other and then decide on a strategy.

PORTFOLIO STRATEGY
considers the business mix of the firm, that is, the types of business unites and products lines
the firm control. In using a portfolio strategy companies use the BCG matrix and the GE
matrix to help them select portfolios

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BCG matrix:

Major Assumption:
If you have a low market share and/or it’s a slow growth market, the long term profitability
potential of an investment is low.

Problem with Assumption:

Does not allow for a sharing of activities or core competencies (skills and abilities) that
makes an otherwise poor investment (for some) more attractive for your firm.
Assumes that if it’s a high growth market where you can have a large presence, then it’s a
good investment.

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GE matrix:

STRUCTURING STRATEGIC DECISION

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Key Learning
• Sales and profitability analysis provide an evaluation of past strategies and an indication of
the current market viability of a product line.
• Shareholder value holds that the flow of profits emanating from an investment should
exceed the cost of capital (which is the weighted average of the cost of equity and cost of
debt). Routes to achieving shareholder value – such as downsizing, reducing assets
employed, and outsourcing – can be risky when they undercut assets and competencies.
• Performance assessment should go beyond financials to include such dimensions as
customer satisfaction/brand loyalty, product/service quality, brand/firms associations,
relative cost, new product activity, and manager/employee capability and performance.
• Assets and competences can represent a point of advantage, a point of parity, or a liability.
Threats and opportunities that are both imminent and important should trigger strategic
imperatives, programs with high priority.

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CREATING, ADAPTING, AND IMPLEMENTING STRATEGY

a good overview of strategy

This chapter move past strategic analysis and starts to look at ways to develop business
marketing strategy. It is an general overview of what will come from the rest of the book. A
good source of revision. The main focus of this section is about the main three strategic
philosophy’s. The lecture material introduces one more:

- Commitment
- Opportunism
- Adaptability
- Intent

Synergy
means that the whole is more than the sum of its parts. Sounds simple but the reality is that
achieving synergy is very hard.

- Two or more businesses in combination will generate:

• Increased customer value and thus loyalty and/or sales
• Lower operating costs
• Reduced investment
- Challenge
• Finding it
• Overcoming organisational issues
- Especially when an alliance is involved

SUSTAINABLE COMPETITIVE ADVANTAGE

Asset or competency that provides a basis for sustainable advantage. Is meaningful,
sustainable and depends of the four main areas:
- Assets and competences (resource based view)
- Value Proposition
- Product/market Investment
- Functional Areas strategies

Some examples of SCA:

3M - Innovation
BMW - Technological superiority
Rolex - Brand Image
Arnotts - Quality, heritage
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Amazon.com- Distribution, product range
Body Shop - Environmentally friendly philosophy
Virgin Airlines- Price / consumer advocate

Assets and competences (resource based view)

The Resource-Based Model suggests that above-average returns for any firm are largely
determined by characteristics inside the firm.

The Resource-Based view focuses on developing valuable resources and capabilities which
are difficult or impossible for rivals to imitate

Example of firms that have a SCA in a resource based view:

- IBM
- Microsoft
- Intel Inside
- Apple
All these companies depend heavily on developing resources which their rival cant copy. This
may involves other elements of the four but all these companies actively try and improve this
advantage and are competitive in it.

Assumptions of the Resource-Based View to Superior Profitability

• Firms are unique.
• Firms may not possess the same resources and capabilities.
• Resources may not be highly mobile across firms.
• Differences in firms form the basis of competitive advantage.

Outcome
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Value Proposition

- Provide or enhance a value proposition

- SCA with positioning
- Can sometimes be imitated by competitors.
- Perception is as important (or more) than reality
• Your target market should clearly recognise and understand your value proposition

Product/market Investment

- Choice of target market critical

- A more sustainable source of SCA than some other elements.
- Need to ask does it work in the market place?
• Relevant to the customer?

Functional Areas strategies

- Refers to marketing tactical programmes relating to a wide range of functions. E.g

distribution, communication, pricing, information technology, human resources.
- In some cases can be easily imitated by others and therefore not always a good source of
SCA.

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KEY SUCCESS FACTOR

Asset or competency required to compete

Differences between SCA and KSF:

KSF is essential . SCA is desirable!

STRATEGIC COMMITMENT, OPPORTUNISM, AND ADAPTABILITY

With each philosophy that a company takes comes a set of risks that the company has to
take into consideration. This is summarised in this table:

Strategic Approach Strategic Risk

Strategic Commitment Strategic Stubbornness

Strategic Opportunism Strategic Drift

Strategic Adaptability Strategic Blunders - Misreading trends

Strategic Intent Continuing effort

Strategic Commitment:
involves a passionate, disciplined loyalty to a clearly defined business strategy that can result
in an ever stronger and more profitable business over time. This “stick to your knitting” focus
avoids being distracted by enticing opportunities or competitive threats that involve
expending resources that do not advance the core strategy.

This strategy:
• Assumes that the current strategy will work into the future
• Tunnel vision—avoid distractions
• Buy-in throughout the organisation
• Improve the offering, the costs, the customer relationships
• Patience

Strategic stubbornness
that the vision may become obsolete or faulty and its pursuit may be a wasteful exercise in
strategic stubbornness. May involve:
- Implementation Barriers
- Faulty assumptions of the future
- a paradigm shift

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Strategic Opportunism:
is driven by a focus on the present. The premise is that the environment is so dynamic and
uncertain that it is least risky, and more likely futile, to predict the future and invest behind
those predictions.

This strategy:
• Assumes that the company is in a fast changing market and that it is not possible to predict
the future, so the best strategy is to be sensitive to current opportunities and exploit them.
• Short-term oriented
• Decentralised, entrepreneurial, risk taking organisation

Strategic Drift
Investment decisions are made incrementally in response to opportunities rather than
directed by a vision. As a result, a firm can wake up one morning and find that it is in a set of
businesses for which it lacks the needed assets and competencies and that this situation
provide few synergies.

Strategic Adaptability:
Strategic adaptability, like strategic opportunism, is based on the assumption that the market
is dynamic, the future will not necessarily mimic the past, and an existing business model,
however successful, may not be optimal in tomorrow’s marketplace. Unlike in strategic
opportunism, however, there is also an assumption that it is possible to understand, predict,
and manage responses to market dynamics that emerge and even create or influence them.

This strategy:
• Assumes a changing market and that the organisation can predict and manage responses
to those changes
• A medium term perspective
• Organisation is flexible and supports investments behind trends

Strategic Blunders
Investing behind trends and emerging submarkets is inherently risky because of the
uncertainty and judgment involved and because the execution of the strategy is often difficult.

Strategic Intent:
Couples strategic vision with a sustained obsession with winning at all levels of the
organisation (e.g. Samsung, Fuji Xerox). Stretches an organisation with a continuing effort to
identify and develop new SCAs or to improve existing ones.

Often requires real innovation, a willingness to do things very differently. However, it takes a
lot of effort to implement this strategy and the firms needs to be fully committed.

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Blended Philosophies
Firms can engage in strategic commitment in one business arena, strategic opportunism in
another, and strategic adaptability in still another.

Key Learnings
• To create an SCA, a strategy needs to be valued by the market and supported by assets
and competencies that are not easily copied or neutralised by competitors. The most
common SCAs are quality reputation, customer support, and brand name.
• Synergy is often sustainable because it is based on the unique characteristics of an
organisation.
• Strategic commitment, involving a stick-to-your-knitting focus on a clearly articulated
strategy, is based on an assumption that the business model needs to be refined and
improved and not changed.
• Strategic opportunism assumes that the environment is so dynamic and uncertain that it is
futile to predict the future and invest behind those predictions. The more prudent and
profitable route is to detect and capture opportunities when they present themselves, with a
goal of achieving immediate profits.
• Strategic adaptability, based on the assumption that is possible to understand, predict, and
manage responses to market dynamics that emerge and even create or influence them, is
about managing relevance.
• A blended strategy uses all three over time and over products.

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Week 5: Alternative Value Propositions and Building and Managing

Brand Equity
This week introduces Porters Five Forces in terms of marketing. And starts to examine how
to create, adapt, and implement marketing strategy in terms of different value propositions.
However, the majority of the lecture focus’s on the importance of building and managing
successful brands and how brands can be strategic assets an can help develop a SCA.

Value Propositions
is a promise of value to be delivered and acknowledged and a belief from the customer that
value will be appealed and experienced. A value proposition can apply to an entire
organisation, or parts thereof, or customer accounts, or products or services.

Business Strategy Challenges

• A real customer value proposition?
• A perceived customer value proposition?
• Is the value proposition/strategy feasible?
• Is the value proposition relevant to customers?
• Does it represent a sustainable point of difference?

Porters Generic Strategies

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Strategic Options
while there is almost an unlimited number of value propositions there are some elements that
are use more often then not. Each one of these options relates to porters generic strategies
as part of the border strategy. Below is some of the main strategic options when it comes to
value propositions:

Niche Specialist
Focus strategy (part of Porters Generic Strategies)
• Involves differentiation, low cost or both
• Concentrates on one part of the market or product line. e.g Ocean Media
• has three attributes:
A. Concentrating resources and energy
B. Competing with limited Resources
C. Strategic position

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Quality Value Proposition

1. Performance
2. Conformance to specifications
3. Features
4. Customer support
5. Process quality
6. Aesthetic design

The Value Option

A Low-Cost Culture
A successful low-cost strategy is usually multifaceted and supported by a cost-oriented
culture. Performance measurement, rewards, systems, structure, top management values,
and culture are all fronts where cost reduction should be stressed. The single-minded focus
needed is comparable to that required for total quality management.

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Creating a Cost Advantage

or avoiding a Cost Disadvantage involves 4 main areas:
- No-Frills Product/Service
- Operations
- Scale economics
- the experience curve

Cost Advantage: No frills product/service

Approach – remove all extras from a product or service. eg. Aldi – “Welcome to smarter
shopping.” From a strategic point of view, what is a potential problem with pursuing this
strategy?
You may start to devalue your own brand, or you may get into a price war etc

Competitors…
Offer marginally better service and position themselves against low-cost incumbents in
industry. Especially risky in services sector (discount insurance brokers etc).

Cost advantage- Operations

Low cost may be derived through exploiting strategic assets and competencies in operations
Access to raw materials. Vertical integration in distribution channel. Labour costs (global
sourcing). Government subsidies (tariff barriers). Location costs (close to customers).

Cost Advantage: Scale economies

Spread cost of R&D, advertising, sales force, staff work and facilities over many units.
Larger operations can support specialised assets and activities (eg market research, legal
staff, manufacturing/ engineering operations).

Cost Advantage - Experience Curve Learning

- Rationale: People do things faster/ more efficiently with repetition
- Tendency to improve task processes with greater volume.
- Technological improvement in operations (new machinery, information systems and
resultant improvements in personnel efficiency).
- Product redesign. Simplifying products can result in cost savings.

Key Leanings
Business strategies usually cluster around a limited number of value propositions, such as
superior attribute, appealing design, offering complete system solutions, social responsibility,
a familiar brand, a superior customer relationship, a specialist niche, superior quality, and
superior value. The value proposition should be real, believed, feasible, relevant, and
sustainable.

A value proposition needs to be communicated effectively and supported by a cost

advantage, which can be based on a no-frills offering, operations, scale economies, and/or
the experience curve.

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Superior quality, which has been shown to drive stock return, has to be continuously
addressed through processes and programs and transferred into quality perceptions.

BUILDING AND MAINTAINING BRAND EQUITY

BRAND AWARENESS
is an asset that can be extremely durable and thus sustainable. It can be very difficult to
dislodge a brand that has achieved a dominant awareness level. This allow brands with high
awareness to have advantages such as:

- Provides sense of familiarity

- Signal of commitment and substance
- Salience will help it get considered

BRAND LOYALTY
Brand loyalty, or resistance to switching, can be based on simple habit (there is no motivation
to change from the familiar gas station or supermarket), preference (people genuinely like the
brand of cake mix or its symbol, perhaps based on use experience over a long time period),
or switching costs. Switching costs would be a consideration for a software user, for
example, when a substantial investment has already been made in training employees to
learn a particular software system. This can result in:

- Reduces marketing costs

- Creates entry barrier
- Generates a positive image
- Provides time to respond to competitor moves

BRAND ASSOCIATIONS
associations attached to a firm and its brands can be key enduring business assets, as they
reflect the strategic position of the brand. A brand association is anything that is directly or
indirectly linked in the consumer’s memory to a brand. Thus, McDonald’s could be linked to
Ronald McDonald, kids, the Golden Arches, Ronald McDonald House.

Attribute or benefit associations provide a reason-to-buy but are easily copied.

Brand associations usually go beyond to other value propositions into:
- Product category—relevance
- Personality
- Organisational associations
- Emotional or self-expressive benefits
- The experience
- Being global

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BRAND IDENTITY

Creating and managing a brand requires a brand strategy, the heart of which is the brand
identity, which provides direction, purpose, and meaning for the brand. A brand identity is a
set of brand associations that the firm aspires to create or maintain, an aspirational external
brand image. These associations represent what the brand aspires to stand for and imply a
promise to customers from the organisation. It differs from brand image in that it could
include elements that are not present in the current image (you now make trucks as well as
cars) or even conflict with it (you aspire to have a quality reputation that is superior to the
current perceptions). Summery:

Externally
-Shape our brand image
-Provide basis for relationships and choice

Internally
-Stimulate programs and prioritise initiatives
-Inspire people

Potential dimensions
• Attributes/benefits/branded differentiators
• Personality
• Organisational associations
• Emotional & self-expressive benefits
• Product class relevance-scope

How does a brand fit with other elements of strategy ?

1) Segmentation
2) Positioning
3) Platform for growth
4) Financial Analysis – Brand Value
5) Competitor Analysis – Porter’s 5 Forces

How is a Brand a Strategic Asset?

Segmentation
Strong brand associations clearly help a firm recognise consumers (or segments) who identify
with these characteristics and who seek similar benefits from a product or service.

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Positioning
Brands help consumers organise product/service information in their minds so as they have a
clear idea of what the brand stands for relative to competitors.

Platform for Growth

Strong brands make it easier for firms to enter new segments / markets, as consumers
already have familiarity and trust in the brand and will accept a new product more readily.

Brand Value
A strong brand is a source of long term profitability for the firm due to it’s ability to retain
customers and generate loyalty.

Brands have the ability to move all the 5 forces.

Porter’s 5 Forces
Suppliers – brands represent the maintenance of quality and supply at the best
price.
Customers – brands affect the ability of customers to put the firm under pressure
(create switching costs) and the degree to which they are price sensitive.
New Entrants – a strong brand is a barrier to entry as it costs time and money to
create one.
Substitutes – brands create a sense of uniqueness around a product or service,
making substitution harder.
Competition – brands exist at the very edge of competition, driving choice and
creating desire beyond the simply rational.

How is a Brand a Source of SCA?

Product / Market Investment

Brands help identify segments
Brands provide a platform for growth

Value Proposition
Brands help consumers process and retrieve information
Creates positive attitudes and feelings towards the product / service
Provides the consumers with a reason to buy.

Assets and Competencies

A strong brand provides the firm with trade leverage over other members of the value chain.
E.g distributors Reduces marketing costs
A strong brand provides a firm with time to respond to competitive threats.

Functional Area Strategies

A strong brand reduces marketing costs for communication strategies.
Again provides trade leverage with distribution strategy.
A strong brand allows a price premium to be charged in some markets which enhances
profitability for the firm
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EXAMPLES

Key Learnings
• Brand equity, a key asset for any business, consists of brand awareness, brand loyalty,
and brand associations.
• Awareness provides a sense of familiarity, credibility, and relevance in that customers
are more likely to consider brands that are top-of-mind.
• A core loyal customer base reduces the cost of marketing, provides a barriers to
competitors, supports a positive image, and provides time to respond to competitor
moves.
• Brand associations can and should go beyond attributes and benefits to include such
associations as brand personality, organisational intangibles, and product category
associations.
• The brand identity represents aspirational associations. The most important of these, the
core identity, should be supported by proof points and/or strategic imperatives and
should be the driver of strategic programs including product development.
• While the identity represents long-term aspirational associations and is multidimensional,
the position represents the short-term communication objectives and is more
focused.

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Week 6: Energising and Leveraging the Business

This week moves onto to the strategy creation stage and examines Ansoff growth principles
as a alternative way to energise business and leveraging growth. These is again a push to
use examples to make the work relevant.

Energising the Business

There are four ways to grow a business. The first is about leveraging the current business.
That can mean taking the existing products into new markets, finding new products or
services for the existing customer base, or leveraging assets such as brand equity or
competencies such as managing the supermarket channel. The second involves creating a
new business based on finding a white space in the market or by transformational innovation,
a business for which a substantial competitive advantage will exist and persist. The third
entails going global, leveraging the business into new countries to create a broader market or
creating new or improved assets and competencies that will lead to sustainable advantage in
a global marketplace.

The fourth route to growth, the subject of this chapter, is to energise the existing business, an
attractive growth avenue because an established firm has market and operating experience,
assets, competencies, and a customer base on which to build.

INNOVATING THE OFFERING

The ultimate business energiser is to improve the offering through innovation. An innovation,
or better, a series of innovations, provides a sense that a firm is dynamic, creative, and
always improving its offering. Innovation means new, interesting, and energetic. However it is
essential too:

Branding the Innovation

• Innovations, no matter how exciting, novel, and relevant, will not energise the business
unless they are communicated to the marketplace.

Branded Differentiators
A branded differentiator is an actively managed, branded feature, ingredient or technology,
service, or program that creates a meaningful, impactful point of differentiation for a branded
offering over an extended time period.

Example:
For example, the Westin Hotel Chain created the “Heavenly Bed” in 1999, a custom-
designed mattress set (by Simmons) with 900 coils, a cozy down blanket adapted for climate,
a comforter with a crisp duvet, high-quality sheets, and five goosedown pillows. The
Heavenly Bed became a branded differentiator in a crowded category in which differentiation
is a challenge. Later on the bed even became a brand energise when the company started
selling the bed separately.

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Branded Energisers
A branded energiser is a branded product, sponsorship, endorser, promotion, symbol, social
program, CEO, or other entity that by association significantly enhances and energies a target
brand. The branded energiser and its association with the target brand are actively managed
over an extended time period.

What is the difference between a differentiator and an energiser ?

Branded Differentiators: Is part of an offering
Branded Energisers: May or may not be part of an offering

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INCREASING THE USAGE OF EXISTING CUSTOMERS

Attempts to increase market share will very likely affect competitors directly and therefore
precipitate competitor responses. An alternative, attempting to increase usage among current
customers, is usually less threatening to competitors. Examples of strategy to increasing
usage is below:

Alternative Growth Strategies

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Increasing the Usage of Existing Customers

• Motivate Heavy Users to Use More

• Provide Reminder Communications
• Position for Regular or Frequent Use
• Make the Use Easier
• Provide Incentives
• Reduce Undesirable Consequences of Frequent Use
• Find New Uses

Key Learnings

• Increasing product usage can be based on motivated heavy users to use more, make the
use easier with reduced undesirable consequences, providing usage incentives, reminder
communicator, positioning for frequent use and by finding a new use.
• A branded differentiator is an actively managed branded feature, ingredient or technology,
service or program that creates a meaningful, impactful point of differentiation for a branded
offering over an extended time period.
• A branded energiser is a branded product, promotion, sponsorship, symbol, program, or
other entity that by association significantly enhances and energies a target brand—the
branded energiser and its association with the target brand is actively managed over an
extended time period.

LEVERAGING THE BUSINESS

Growth Options
Some questions to ask include:

• Which assets and competencies can be leveraged?

• What brand extensions are possible?
• Can the scope of the offering be expanded?
• Do viable new markets exist?

Which Assets and Competencies Can be Leveraged?

Marketing Skills
A firm will often either possess or lack strong marketing skills for a particular market. Thus, a
frequent motive for expanding into new product markets is to export or import marketing
skills

Capacity in Sales or Distribution

A firm with a strong distribution capability may add products or services that could exploit
that capability

Manufacturing Skills
Design and manufacturing ability can be the basis for entry into a new business area.

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R&D Skills
Expertise in a certain technology can lead to a new business based on that technology.

Achieving Economies of Scale

BRAND EXTENSIONS
One common exportable asset is a strong, established brand name—a name with visibility,
associations, and loyalty among a customer group. The challenge is to take this brand asset
and use it to enter new product markets. The name can make the task of establishing a new
product more feasible and efficient because it makes developing awareness, trust, interest,
and action all easier.

New Products for Existing Markets

• Expand boundaries
• Explore customer use context
• Methods:
- Product Feature Addition.
- Developing New-Generation Products.
- Expand the product scope
- New Products for Existing Markets.

New Markets for Existing Products

• Expanding Geographically
• Expanding into New Market Segments
- Distribution Channel
- Age
- Home vs. Office

Expanding into new market segments

Define the new segments

- Usage (non-users can be a good segment).
- Distribution channel
- Age.
- Attribute preference (some users may require greater detail/accuracy)
- Application-defined market.

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THE MIRAGE OF SYNERGY

Potential Synergy Does not Exist

Strategists often manipulate semantics to delude themselves that a synergistic justification
exists.

Example:
When a packaged-goods manufacturer bought Burger Chef, a chain of 700 fast-food
restaurants, the fact that both entities were technically in the food business was of little
consequence. Because the packaged-goods firm never could master the skills needed to run
restaurants, there was considerable negative organisational synergy.

Potential Synergy Exists But is Unattainable

Sometimes there is real potential synergy, but implementation difficulties—usually far greater
than expected—inhibit or block this synergy from being realised. When two organisations
(perhaps within the same firm) have different cultures, strategies, and processes, there are
significant issues to overcome.

Example:
The effort to combine United Airlines, Westin Hotels and Resorts, and Hertz into one
organisation was a classic case in which the operational problems coupled with presenting a
confused brand face to customers doomed the idea. The efforts to create multi- service
telecommunication companies and fully integrated entertainment companies in order to
achieve synergies have struggled.

Potential Synergy is Overvalued

One risk of buying a business in another area, even a related one, is that the potential synergy
may seem more enticing than it really is.

Example:
Perhaps carried away by its success with Gatorade, Quaker Oats purchased the Snapple
business in 1994 for $1.6 billion, only to sell it two years later for a mere $300 million. Quaker
had difficulties in distribution and was inept at taking a quirky personality brand into the
mainstream beverage market (its program was based on pedestrian advertising and a giant
sampling giveaway). Moreover, the fact that Quaker paid several times more than Snapple
was worth was a fatal handicap.

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Example

Eskimo Joes

The Problem:

• 1985 – Legal age for drinking increased from 18 to 21 years in Oklahoma state.
• Major threat – elimination of Eskimo Joe’s core customer base.

Strategic Alternative:

• Option 1: Product Development – convert bar to full service restaurant.

• Option 2: Market Penetration – continue with beer bar and try to offset decline in sales
with clothing sales.
• Option 3: Market Development – close beer bar leaving alcohol industry and focus on
retail/clothing business.

The Solution:

• Option 1: Product Development – convert bar to full service restaurant. But still sell
clothing

• Identify according to Aaker and Ansoff principles various growth options undertaken by EJ..
• Outline growth strategies implemented over short, medium and long term.

Key Learnings

• Leveraging assets and competencies involves identifying them and creatively determining in
what business areas they might be able to contribute.
• Brand extensions should both help and be enhanced by the new offering, in addition to
being perceived to have a fit with it.
• The business can be leveraged by introducing new products to the market or expanding
the market for the existing products. In doing so, the new product market should be
attractive, be accessible to the business with its current assets and competencies, and
have access to the needed resources to be successful.
• Entering a new product market is risky, as the new offering might lack market acceptance
or needed resources. Success likelihood goes up if the core business is healthy, if the new
product market is attractive (competitors will be profitable), if the business model is
repeatable, if market leadership is possible, and if the stretch from the core is small.
• Synergy can be a mirage. Too often, it does not exist, or it exists but is unattainable or
overvalued.


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Week 7: Creating New Business and Global Strategies

This lecture examines growth strategies and looks are creating new business and global
strategies. It build on the last lecture and Ansoff growth principles. These is again a lot of
examples to make the work relevant.

CREATING NEW BUSINESS

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Diversification
Related diversification eg. Qantas Airlines and Qantas Holidays Travel Agents.
Unrelated diversification eg. Virgin Music, Airlines, Mobile, Credit cards.

Assets and Competencies - Diversification

Positive Scenario
Relevant assets and competencies are transferred across different markets and
product lines efficiently and profitably?

Negative Scenario:
Assets and competencies not shared across markets and product lines. Resources are
fragmented and spread ineffectively across too many areas resulting in inefficiencies and poor
profit performance.
Eg. Fosters Brewing – control whole alcoholic beverage market (wine & spirits)

Vertical Integration Strategies

Access to Supply or Demand

Access to Supply (access to supply of raw materials will reduce availability risk).
Access to Demand. (manufacture near key consumer markets to control transport /
distribution costs)

Control of the Product System

Vertical integration may be only method of ensuring that desired quality of input
products is achieved (external suppliers may not have the money for the required
levels of investment).

Entry into a Profitable Business Area

Comprehensive services.
(Augment product to extend product value).
Integrated solutions. Eg. Car manufacturers – Mercedes

Risks of Managing a Different Business

Reduction in Strategic Flexibility

Alternatives to Integration
Long term contracts, exclusive deals, joint ventures, franchising etc

The Innovator’s Advantage

Competitors inhibited from responding

• Fear cannibalisation
• Fear taking eye off existing business

Competitors unable to respond

• Lack assets, competencies, culture etc.
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Innovator can create customer loyalty & authenticity

Early Market Leaders Strategy

• Early Market Leaders Strategy
• Envision the Mass Market
• Managerial Persistence
• Financial Commitment
• Relentless Innovation
• Asset Leverage

Managing Category Perceptions

Focus at outset on attributes and functional benefits
Labels help define the category—use them. Make your brand the exemplar (the best
example of the new category)

Creating New Business Arenas

• Creating a dramatically lower price point
• Technological innovation
• From components to systems
• Customer insights—unmet needs
• Market trends
• Niche markets

Key Learnings
• In general, above-average earnings come from new business arenas, and those attempting
to excel in existing business arenas on average do less well financially.
• A business can vary in its “newness” depending on how much it departs from existing
businesses in terms of value proposition, target market, assets and competencies
employed, and how it defines what a customer is buying.
• An innovator has an advantage because it can build up a core loyal customer segment and
because competitors, committed to their own business, may lack the motivation and
capability to respond.
• Successful market leaders envision a mass market, are persistent, make a commitment,
continue to innovate, leverage firm assets, and manage category perception.
• Transformational new business arenas can be based on offering a dramatically lower price
point, analyzing alternative industries to find white space, offering systems rather than
components building on customer insights or market trends, and by collaborating with
other people and firms.
• Established firms tend to be focused on their own business and regard new ventures as a
distraction that is unlikely to help their financials and may make them worse. To overcome
these biases they need to create a space for entrepreneurial initiatives and a mechanism
that ensures new ventures will get the resources they need.

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Week 8: From Silos to Synergy - Harnessing the Organisation

Last chapter of the textbook. This lecture examines the different organisational levers and
how this influences strategic development and formation. The textbook focus heavily on the
ideas and concepts around silos and their advantages and disadvantages.

Global Strategies

A global strategy requires addressing a set of issues that include the following:
1. What are the motivations (objectives) for a global strategy?
2. To what extent should products and service offerings be standardised across countries?
3. To what extent should the brand name and marketing activities (such as brand position,
advertising, and pricing) be standardised across countries?
4. How can the global footprint be expanded successfully? 5. To what extent should strategic
alliances be used to enter new countries? 6. How should the brand be managed globally?

MOTIVATIONS UNDERLYING GLOBAL STRATEGIES

Obtaining Scale Economies

• Scale economies can occur from product standardisation.
• Scale economies can also occur from standardisation of marketing, operations, and
manufacturing programs.
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Global Brand Associations

Being global generates the image of being global, which turns out to be a significant
advantage

Global Innovation
Being global means that innovation around brand building, new product, and product
improvements can be sourced anywhere.

Access to Low-Cost Labor or Materials

Another motivation for a global strategy is the cost reduction that results from access to the
resources of many countries. Substantial cost differences can arise with respect to raw
materials, R&D talent, assembly labor, and component supply.

Access to National Investment Incentives

Another way to obtain a cost advantage is to access national investment incentives that
countries use to achieve economic objectives for target industries or depressed areas.

Cross-Subsidisation
A global presence allows a firm to cross-subsidise, to use the resources accumulated in one
part of the world to fight a competitive battle in another

Dodge Trade Barriers

Strategic location of component and assembly plants can help gain access to markets by
penetrating trade barriers and fostering goodwill.

Access to Strategically Important Markets

Markets can be strategically important because of their size and growth. It is hard to be
successful be avoid the large growth markets.

Standardisation vs Adaptation

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Adaptation Standardisation
– Adjusting marketing mixes – The development of marketing
according to cultural, regional, strategies that treat the entire world
and national differences (or its major regions) as a single entity
– Includes standardisation of products,
“The adoption of a strategy of promotion campaigns, prices, and
universal standardisation appears to be distribution channels
naive and oversymplistic” (Douglas & “A powerful force drives the
Craig, 1987) world toward a converging commonality, and
that force is technology” (Levitt, 1983

Adaptation Standardisation
• Cultural differences • Leverage great branding and marketing
• Brand Positioning • Economies of scale
• Customer Motivations • Better resources are available
• Government demands • Easier to manage brands
– Economic as well as social,
cultural, nationalistic Forces for Standardisation
requirements • Economies of scale
– Decreasing costs per unit production
– Typical for capital intensive production
e.g., car assembly > optimal
scale


• Economies of scope
– Handling related products through a
single set of facilities
e.g., broad lines of consumer
electronics

• Factor costs
– Globalisation in search for cheap
resources


• Cross- subsidisation potential

– Funds generated in one market can
subsidise a product in another market

Advantages and Drawbacks of Standardisation

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Advantages Disadvantages

Cost Reduction Lack of Uniqueness

Global Customers Sensitive to protectionism

Global Segments Strong Local competitors

The Globalisation Paradox

• The degree to which we modify our products
• When is which strategy appropriate? Hard to say what is better !

Expanding the Global Footprint

• A strong core. A strong home market provides resources and experience that can be
leveraged in geographic expansion. It is a rare firm that finds success abroad without a
successful home market.
• A repeatable formula for expansion. When the same model works in country after country,
the risk of entry is reduced. Avon, for example, uses its direct model everywhere and has
refined the execution to a science.
• Customer differentiation that travels. When the same segments are targeted and the same
product and position work across countries, there is no need to research the market and
reinvent the offering every time a new country is entered. Nike, Pampers, and Heineken, for
example, have been able to differentiate their respective brands the same way everywhere.
• Industry economics. It is important to recognise whether global share or local share will
drive success. Some industries like razors or computers, for example, provide cost
advantages for global scale. Others, like beer, cement, and software, reward high local
share. A mistake is to expect global scale in a local scale industry.

Which countries ?
• Market attractiveness
• Can the firm add value?
• Competition?
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• Critical mass be achieved?

Examples:



Gillette Philosophy:

One Market

One Brand

One Positioning

One Campaign
• Phase 1
- Re-establish bond with men
- Increase advertising
• Phase 2:
- Enhance technology leadership
- Shift market to refillable systems
• Phase 3:
- Extend beyond shaving
- Become grooming leader worldwide

Packaging Objectives:
- Support positioning
- Complement imagery
- Have strong visual impact
- Differentiate from Sensor
Advertising:
- Capitalizes on MACH3 name
- Utilizes jet plane and sonic booms (masculine approach)
Marketing Support
- Communications launch explosion
- Mass advertising (TV, radio, Magazines)
- Public Relations
- Point-of-sale

Success
• Repeat Sensor success faster
• Become Number 1 in every market
• Drive user growth and trade up
• Attract new users to Gillette franchise
Moral of the Story:
• Operate in right category
• Have a right product
• Organize to implement global strategy
• Commit resources to advertising and promotion
• Focus on commonalties

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LEVIS – “GO FORTH” 2011

• Levis first global creative platform and marketing campaign in its 138 year history.
• Campaign will utilise TV, cinema, print, digital and outdoor marketing vehicles in 24
countries across the Americas, Europe, and Asia-pacific regions.
• Campaign launched August 2011 will showcase the fall collection while encouraging
customers to make positive changes in the world.
• “Go Forth is more than a marketing idea. It is also a call to action. For youth today,
optimism is power.”
• Had to postpone launch in UK due to the youth riots and images of “revolution” portrayed
in the ads.

Key learnings
• A global strategy considers and exploits interdependencies between operations in different
countries.
• Among the motivations driving globalization are obtaining scale economies, accessing low-
cost labor or materials, taking advantage of national incentives to cross-subsidize, dodging
trade barriers, accessing strategic markets, enhancing firm innovation, and creating global
associations.
• Companies successful at expanding their global footprint usually had a strong core market,
a repeatable expansion formula, customer differentiation that travels, and an understanding
of local vs. global scale.
• A brand with extensive commonalities across countries can potentially yield economies of
scale, enhanced effectiveness because of better resources involved, cross-market
exposure, and more effective brand management.
• The selection of a country to enter should involve an analysis of the attractiveness of the
market and the ability of the firm to succeed in that market.
• A standardized brand is not always optimal. Economies of scale may not exist, the
discovery of a global strategy (even assuming it exists) may) be difficult, or the context (for
example, different market share positions or brand images) may make such a brand
impractical.
• Global brand management needs to include a global brand communication system, a
global brand planning system, a global management structure, and a system to encourage
excellence in brand building. The brand group can operate under a command-and-control,
service provider, consultative, or facilitator style.
• Strategic alliances (long-term collaboration leveraging the strengths of two or more
organizations to achieve strategic goals) can enable an organization to overcome a lack of a
key success factor, such as distribution or manufacturing expertise. A key to the long–term
success of strategic alliances is that each partner contributes assets and competencies
over time and obtains strategic advantages.


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Week 9: Red and Blue Ocean Strategy

This lecture is the first that dose not use the textbook. This lecture examines the differences
in Red and Blue Ocean strategies and class decision was focused on exploring how to use
these strategies and when.

Red Ocean – Basic Concepts

▪ “How to outpace rivals in existing market space – a market competing strategy.”

▪ Industry boundaries are already defined and accepted.
▪ Competitive rules of the game are known.
▪ Companies try to outperform rivals and grab a share of existing demand.
▪ As market space gets crowded, profit and growth prospects reduce.
▪ Products become commodities, cut throat competition turns the red ocean
bloody!
▪
Blue Ocean – Basic Concepts

▪ “is about how to get out of established market boundaries to leave competition behind –
a market creating strategy”.
▪ The existence of ‘blue oceans’ is not new, just the term and perspective.
▪ Most industries are characterised by over supply as trade barriers fall – need to search
for blue oceans is increasing.
▪ Demand for most goods in developed markets is not increasing – again suggesting the
need to find uncontested market space.
▪ Finding a true ‘blue ocean’ can bring considerable barriers to imitation.

VALUE INNOVATION

• Focus on making competition irrelevant by creating new value for consumers = an

uncontested market space.
• Align innovation with utility, price and cost positions: incremental scale.
• New way of thinking about strategy
• Defies the value-cost trade off: value innovation sees a company’s actions favorably
affecting both Cost Structure and its value proposition to buyers simultaneously,
• More than innovation – about a strategy that embraces the entire system of company’s
activities.

EXAMPLE

EG: Cirque de Soleil

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• sought to offer fun and thrill of circus AND intellectual sophistication and artistic richness
of theatre.
• Removed animal shows, three ring venues and ‘so called stars’
• Kept tent, clowns, acrobatics but positioned them with sophisticated style and offered a
story line/theme.
• FORMULA:
• New form of entertainment (differentiation / buyer value +
• Elimination of costly elements of the circus (decreased cost structure) = Value Innovation
/ Blue Ocean strategy

The Imperative for Red and Blue Ocean Strategies

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• RED OCEAN STRATEGY • BLUE OCEAN STRATEGY

• Compete in existing market space. • Create uncontested market space.
• Beat the competition. • Make the competition irrelevant.
• Exploit existing demand. • Create and capture new demand.
• Make the value/cost trade off • Break the value/cost trade off.
• Align the whole system/activities with • Align the whole system/activities in
EITHER differentiation or low cost. pursuit of differentiation AND low cost.

THE US WINE INDUSTRY – 


A Red OceanFinding a Blue Ocean – Casella Wines – Yellowtail!
• Australian Market shows similar characteristics to US.
a) Oversupplied.
b) Capital intensive.
c) Dominated by a few large players with huge resources.
Casella Wines – Finding a Blue Ocean for Yellowtail Wines!

• Rapid increase in demand / production from 500k cases in 2001 to 16 million in

2005
• Within 2 years of entering the market
a) Yellowtail #1 imported brand in US
b) Fastest growing wine brand in US market history.
c) Yellowtail Shiraz #1 selling red wine brand in the US.
• Changed positioning of wine from “a special occasion indulgence to an everyday
pleasure.”
• Didn’t try to take the big market players ‘head on.’
• Attempted to capture (existing drinkers) and create (non-wine drinkers) new demand.

Blue Ocean Issues for Debate!

• As most industries today are considered to operate within “red oceans”, does this mean
the only way to compete effectively is to pursue a “blue ocean” strategy?
• Is it always possible to find a “Blue Ocean” and does it always involve a degree of risk
for organisations?


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Week 10: Contemporary Marketing Issues

This weeks lecture is to examine the current issues in marketing that relate to strategic
marketing plans. The three main areas of focus are:

- Co-creation
- Content marketing
- Big Data

What this lecture is about is the growing importance of of the digital marketing platform and
their relationship to each of the three main areas of focus. What is the strategic implications of
trying to use these ideas? 


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Week 13: Course Review

In this section we will go ever the main concepts of the course. Furthermore it will be a good
indicator of what is happening in the test. The lecture says that knowing how all the main
ideas work together with one another to allow for marketing strategy decisions is what will get
good marks in the test. 


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Marketing Strategy

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