Strategy

Strategy and Tactics differ mainly around

time scale.
In Capstone®, a 5-8 year Strategy is supported with
annual tactical decisions.

Strategic Plan might consist of:

1) Vision or Mission Statement
2) S.W.O.T. Analysis (or Environmental and Internal scans)
3) Tactical and Functional Area Plans
 Strategy
From where in the organization strategy should
emerge?

•Michael Porter argues for a top-down view. Strategy is designed

at the top of the organization, with the goal of positioning
resources and building relationships in a unique way.

•Eric Banabeau says strategy should emerge from the bottom-up

in a sort of dance with the marketplace, and that the goal of
strategy should be to apply simple rules.
 Introduction

A strategy is one of four

organizational time drivers.

Mission Statement
(timeless)

Strategy
(3-5 years)

Operational Intents
(1 year)

Tactics
(Day to day)
TIME IN YEARS
 CAPSTONE STRATEGIES

 Strategies are declared in

corporate mission
statements
STRATEGY
Mission Statement  Capstone firms may develop
INDUSTRY AND MARKET and execute any strategy (or
ANALYSIS none at all - though that isn’t
S.W.O.T Analysis
Competitor Analysis advisable). Basic strategies
Competitive Analysis include:
 Overall Cost Leader
PERFORMANCE
ASSESSMENT  Cost Leader with Focus
Success Measurements
Analyst Report
(Low Tech or Product
Round Analysis - Star FUNCTIONAL PLANNING Life-Cycle)
Summary R&D
Marketing  Differentiator
Production
HR  Differentiator with Focus
Finance (High-Tech or Product
TQM
Life-Cycle)
Porter Curve

Extensive coverage on Porter’s theories

High
ROI of competitive advantage are easily
located on the internet.
Those theories in a Capstone® context
are explained in a tutorial on the website.

Low High

Market Share
 •Firms with High ROI / Low Overall Market
Porter Curve Share would likely have a clearly defined
focused strategy

ROI •High Overall Market Share / High ROI firms

would likely have a strong position in all
High
segments –risky, but effective when executed
properly

Low Market Share High

Porter Curve
Firms in the middle have a less definable identity,
and a hard time competing. They might have a
High number of “sofa-bed” product lines: Not great
ROI sofas – not great beds.

Low High

Market Share
 •The Boston Consulting
BCG Growth/Share Matrix Group Growth-Share
Matrix was developed in
the 1960’s as a tool to
Market Share assess a firm’s Strategic
Business Unit (SBU) or
High Low product
Market Growth

?
High

•Long-term success is
achieved by having a mix
of high-growth potential
products that require lots
of cash, and low-growth
Low

“cash cows” that

generate the required $$
 •Star products occupy
BCG Growth/Share Matrix
strong positions in high
growth markets
Market Share
High Low •Cows occupy strong
positions in low growth
Market Growth

markets

?
High

•Question Marks have

low market share in
segments with strong
Low

growth
•Dogs are low market
share products
positioned in low
potential markets
Capstone Strategies

The Situation Analysis generated an overview of the forces at

work within the Capstone market place.
Now you must decide how to use that information to gain a
competitive advantage.
There are many different approaches - all of which can be
successful depending on how well they are implemented
tactically.
“Competitive strategy is about being
different. It means deliberately choosing
to perform activities differently or to
perform different activities than rivals
to deliver a unique mix of value.”

Michael E. Porter
Fig. 5.1: The Five Generic Competitive Strategies
 OVERALL COST LEADER

An overall cost leader will attempt to be the low-cost producer in

every segment of the market. They will have good profit margins
on all sales while keeping prices low for price-sensitive customers.

 Firm Profile:
 More likely to re-position products than introduce new ones to
the market
 Capacity improvements are unlikely to be undertaken (may run
overtime instead)
 Automation may be pursued to increase margins
 Investments will be financed with debt and/or stock issues
 Tend to spend less on promotion and sales
 Focus on Market Share, Profits, and Stock Price
 COST LEADER WITH LOW-TECH FOCUS

A low-tech focused cost leader seeks to dominate the price sensitive

market segments. Their aim is to set prices below all competitors -
and still be profitable.

 Firm Profile:
 Multiple product lines in the low-tech segments (Low &
Traditional)
 Invest heavily in automation
 Spend heavily on advertising to cost sensitive customers (sales
people have more than one product to pitch to prospects)
 Investments financed with debt and/or stock issues
 Focus on ROS, ROE, and Profits
COST LEADER WITH PRODUCT LIFE-CYCLE FOCUS

A product life-cycle focused cost leader will seek to minimize costs

through efficiency and expertise. Products will be allowed to age and
change in appeal from high-tech, to traditional, and eventually low
end buyers.

 Firm Profile:
 Minimum presence in “specialty” segments (Size & Performance)
 Low R&D spending (very little re-positioning & new product every 2-3
years)

Invest in automation early in the product’s life-cycle
 High spending on promotion and sales
 Focus on ROE, ROS, and Profits
 DIFFERENTIATOR

A Differentiator will seek to create maximum awareness and

brand equity. They want to be well known as makers of high
quality/highly desirable products.

 Firm Profile:
 High R&D spending to keep products fresh
 Maintain a presence in all market segments
 Spend heavily on advertising and sales to create maximum
awareness and accessibility
 Prices tend to be higher
 Focus on Market Share, Profits, and Stock Price
 Types of Differentiation Themes

 Unique taste – Dr. Pepper

 Multiple features – Microsoft Windows and Office
 Wide selection and one-stop shopping – Home
Depot, Amazon.com
 Superior service -- FedEx, Ritz-Carlton
 Spare parts availability – Caterpillar
 Engineering design & performance – Mercedes,
BMW
 Prestige – Rolex
 Product reliability – Johnson & Johnson
 Quality manufacture – Karastan, Michelin, Toyota
 Technological leadership – 3M Corporation
 Top-of-line image – Ralph Lauren, Starbucks, Chanel
 DIFFERENTIATOR WITH HIGH-TECH FOCUS

A high-tech differentiator seeks to be known far and wide as the top

producer of the best performing state-of-the-art products.

 Firm Profile:
 Multiple product lines in high-tech segments (High, Performance,
and Size)
 Minimum focus in other segments
 High promotion and sales investments to create maximum
awareness and accessibility
 High R&D expenditures to continually introduce new product lines
and keep existing products fresh
 Unlikely to invest in increased automation or production capacity
 Focus on ROA, Asset Turnover, and ROE
DIFFERENTIATOR WITH PRODUCT LIFE-CYCLE FOCUS

A product life-cycle differentiator seeks to be well-known as a top

producer of good performing products in each of the targeted
segments.

 Firm Profile:
 Multiple product lines in targeted segments (High, Traditional, and
Low)
 Minimum focus in other segments
 High promotion and sales investments to create maximum
awareness and accessibility
 High R&D expenditures to continually re-position product lines and
keep products fresh
 Unlikely to invest in increased automation or production capacity
 Focus on ROA, Stock Price, and Asset Turnover
Strategies Evolve

Today’s shift is
tomorrow’s
nightmare

• Poor tactics undermine a good strategy

• Good tactics can overcome a poor strategy
 SUMMARY

There is no "magic bullet," guaranteed winning

strategy. Each simulation has a unique
competitive dynamic.

 Successful firms will focus on planning,

strategic alignment, teamwork, competitor
analysis, and tactical adjustments.