Lecture 2: Strategic Market Management Overview

Lecture 2 : Strategic Market Management (.doc)

A System to:

  1. Help management precipitate and make strategic decisions
  2. Create strategic visions: a vision of future strategies or sets of strategies, even if the firm is not ready or the market conditions are not yet right

 Process:

INPUT: Information derived from an External and Internal analyses

INTO: Strategy Development Process

OUTPUT: Set of Strategic Decisions

THE KEY TO EFFECTIVE STRATEGIC PLANNING: DEVELOP THE PROCESS INPUT (i.e., data and information) FIRST, before diving into strategy development.

 Input from EXTERNAL ANALYSIS:

–           Customer analysis

–           Competitor analysis                  to identify OPPORTUNITIES and THREATS

–           Market analysis

–           Environmental analysis

 Input from INTERNAL ANALYSIS:

–           Performance analysis

–           Determinants of past strategic options    to identify WEAKNESSES and STRENGHTS

 SWOT

 …leading to STRATEGY IDENTIFICATION and SELECTION

 EXTERNAL ANALYSIS

I. Customer Analysis (focus of chapter 3):

–           segments

–           segment’s motivations

–           segment’s unmet needs

 Hotel Customers: People who stay there,

  1. conventioneers
  2. vacationers/ leisure travelers
  3. business travelers

 Different segments. Subsegments?

 II. Competitor Analysis (focus of chapter 4):

–           Current

–           Potential

–           Number

 For strategic planning purposes, it is important to understand your competitors:

  1. Performance (health)
  2. Image and personality
  3. Objectives
  4. Current and part strategy
  5. Culture
  6. Cost structure
  7. Strengths and weaknesses

 III. Market Analysis:

Seeking to understand:

–           Market and submarket attractiveness

–           Market dynamics

For strategic planning purposes, it is important to understand these market factors:

  1. Size
  2. Growth prospects (growth v. decline: either can be profitable)
  3. Market profitability vis-à-vis competition.
  4. Cost structures: where is the value-added stage?
  5. Distribution channels: clogged? New outlets available/ developable, i.e. fast food in convenience stores in gas stations?
  6. Market trends: well-appointed hotels. Podcasting.
  7. Key Success Factors

IV. Environmental Analysis:

Watch for scope creep. Seek to understand only what is truly relevant, FILTER! CRITICAL THINKING!

 INTERNAL ANALYSIS:

For strategic planning purposes, it is important to understand these internal factors:

  1. Performance: honest and empirical assessment – how are we doing? How are our products doing?
  2. Determinants of strategic options

CREATE (and/ or REVIEW) THE CORPORATE VISION

Who are we?

What are we here to do? Who do we serve?

What are we capable (on our best day) of doing?

What do we desire to become?

What will it take to get there?

STRATEGY IDENTIFICATION and SELECTION

The purpose for the external/ internal analysis is TWOFOLD:

  1. Generate strategic alternatives
  2. Provide criteria for selecting among alternatives

–           Product and Market Investment strategies

–           Functional Area strategies

–           Bases of SCAs

–           Strategic Positioning (relative to competitors)

Selecting Strategic Alternatives

IDENTIFICATION OF STRATEGIC ALTERNATIVES

  • Product-market investment strategies
  • Product-market scope
  • Growth direction
  • Investment strategies
  • Functional Area Strategies
  • Bases of competitive advantage – assets, competencies, synergies

 CRITERIA FOR STRATEGY SELECTION

  • Consider scenarios suggested by strategic uncertainties and environmental opportunities/ threats
  • Pursue a Sustainable Competitive Advantage
  • Exploit your organizational strengths or your competitor weaknesses.
  • Neutralize your organization’s weaknesses or your competitor’s strengths.
  • Be consistent with organizational vision/ objectives
  • Achieve a long-term on investment
  • Be compatible with vision/ objectives
  • Be feasible
  • Need only available resources
  • Be compatible with the internal organization
  • Consider the relationship to other strategies within the firm
  • Foster product portfolio balance
  • Consider flexibility
  • Exploit synergy

PROCESS REVIEW:

DIAGNOSIS

INPUT: Information derived from an External and Internal analyses

INTO: Strategy Development Process

PRESCRIBED COURSE OF ACTION

OUTPUT: Set of Strategic Decisions

 

But, keep in mind that this is a logical, iterative and circular, not a linear, sequential process, BUT, it is a process nonetheless. It can be learned, improved upon, and spread throughout the organization.

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Lecture 1: Business Strategy – Concepts and Trends in its Management

Lecture 1 Business Strategy Concepts and Trends in its Management.doc

Strategic Market Management – Four thrusts:

  1. A structure and methodology for analyzing the EXTERNAL ENVIRONMENT
    • WHY? Because great strategic planning is NOT an extension of last year’s strategic plan. The external analysis leads to the type of breakthrough insight needed for long-term sustainable success.
  2. These sustainable successes are defined as SUSTAINABLE COMPETITIVE ADVANTAGES (SCAs), without which a business will eventually be middle-of-the-pack, treading water, or dying/ dead.
  3. Investment decision: where to invest or disinvest capital for growth (acquisition; merger; vertical integration; diversification, etc.) or retrenchment.
  4. Implementation.

Changes in the world of planning:

  1. Knowledge management: access to data and information; informatics; empirical research
  2. External market (customer) orientation
  3. Time compression
  4. Globalism
  5. Revised demographics: Hispanics (U.S.); creative class (globally)

More than detecting and reacting to change, good strategic planning anticipates or even creates changes to the market forces that drive the enterprise.

What is a strategy?

War
Sports

FORMAL DEFINITION:

  1. The product market in which the business is to compete
  2. The level of investment

    • Invest to grow
    • Invest to maintain existing market position/ share
    • Milk the Business
  3. The functional area strategies needed to compete in the selected product market

    • Product line strategy
    • Marketing strategy
    • HR strategy
    • Distribution strategy
  4. Underlying competency or asset (SCA) that will give competitiveness

For multi-business unit enterprises

  1. Allocation of assets across business units (Dell; Sears; GM)
  2. Synergy across business units (ESPN, Disney; ABC)


Pg. 6: Six elements condensed:

STRATEGIC THRUSTS

KEYS:

–           Differentiation vs. Low Cost


OTHERS:

–           Focus

–           Preemptive mover

–           Synergy


BUT THE KEY OF THESE THRUSTS IS that they exemplify the SCAs behind the enterprise’s success.

BOTTOM LINE: WHY SMM?

To stay focuses on strategies and a strategic outlook, especially in a rapidly changing business environment