Strategy & Decision Tools

David Forlani University of Colorado at Denver and Health Sciences Center

Outline
Overview of Strategy
Defined Levels and Components

Focus on Business Unit Strategy

Determining competitive advantage

Decision Tools for Strategy Making

Forlani, MKTG MGT, UCDHSC

What is Strategy
A Plan for Deploying Resources to Achieve Organizational Goals

Forlani, MKTG MGT, UCDHSC

Strategies Exist At Multiple Levels

Corporate Business Unit (SBU) Product Market (Marketing Area)

Forlani, MKTG MGT, UCDHSC

A Strategys Key Components

Scope: Addresses the Issue of Domain?
What businesses (industries) should we be in? In which Markets should we compete? How should we compete in the chosen markets?

Forlani, MKTG MGT, UCDHSC

A Strategys Key Components

Goals & Objectives: Addresses the Issue of Purpose. If a strategy is implemented what outcomes should we expect?
Correspondence with level: e.g., Share Price-Corporate, Profits--SBU, Revenues--Marketing Type: Adaptability, Effectiveness, Efficiency Format: S.M.A.R.T. (Specific, Measurable, Attainable, Relevant, Time Frame)

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A Strategys Key Components

Source of Competitive Advantage: Addresses how our goals will be met and why we can have confidence in this happening. By level:
we hire the best people in the industry we can make it for less we are the best at understanding users wants

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A Strategys Key Components

Resource Allocation Decisions: Addresses the Issue of Who Gets the Money. E.g., if we have 3 SBUs/Brands/Lines, how much money should each get to pursue its objectives?

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A Strategys Key Components

Synergy: Addresses the Issue of Scope Efficienciesgetting more out of a given asset. E.g., Can we combine operations, computer systems, distribution networks, or introduce under the same brand to improve cost/benefit ratios?

Forlani, MKTG MGT, UCDHSC

A Strategys Components
Scope, Goals, Competitive Advantage, Resource Allocations and Synergy form the foundation of strategies at all levels. The better the integration of the components within and across levels, the better its fit, the more likely the strategy will be successfully implemented and the more likely it will be effective.

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How Do Firms (BUs) Compete?

Michael Porters Competitive Dimensions:
Differentiation: make it fancier Cost Leadership: make it for less Focus: make it for a small section of the market

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How Do Firms (BUs) Compete?

Miles and Snow Typology:
Prospectors: close to market, induce change Defenders: big, hate change Analyzers: big, profit from change Reactors: lack a proactive strategy

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Integrating Porter with Miles & Snow

Emphasis on market growth Heavy emphasis Prospector Emphasis on production / product Differentiation Cost leadership

Analyzer Units with strong core bus.; actively seeking to expand into Units primarily rel. prod-mkts concerned with with attaining growth differentiated through offerings aggressive Units with strong pursuit of new core bus.; product-market actively seeking opportunities to expand into rel. prod-mkts with low-cost offerings

Defender
Units primarily concerned with maintaining a differentiated position in mature markets Units primarily concerned with maintaining a low-cost position in mature markets

No emphasis Reactor

Units with no clearly defined product-market development or competitive strategy

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SBU Types by Strategy Component

Component Scope Prospector Broad/dynamic domains; tech. and cust. segments not well-established Extensive Analyzer Mixture of defender and prospector strategies

Goals and obj. Adaptability (new product success) Effectiveness (inc. mrkt share) Efficiency (ROI) Resource deployment Synergy

Mix. of defender & prospector strats. Large Mix. of defender & prospector strats. Low Mix. of def. & prosp. strats Need cash for product Need cash for prod. dev. dev. (? or *) but < prospectors Danger in sharing Danger in sharing operating fac. and operating fac. and programs - better to programs - better to share tech./mktg skills share tech./mktg. skills
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SBU Types by Component

Component Scope Low-cost defender Mature/stable/welldefined domain; mature tech.and cust. segments
Very little Little High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies
Forlani, MKTG MGT, UCDHSC

Differentiated defender Mature/stable/welldefined domain; mature tech.and cust. segment

Little Little High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies
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Goals and obj. Adaptability (new product success) Effectiveness (inc. mrkt share) Efficiency (ROI) Resource deployment Synergy

What about Competitive Advantage?

It should be reflected In Strategy the firm (BU) is following. A firms Competitive Advantage should determine how it competes in a given market.

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Decision Tools for Strategy Making

The Expanded 5 W model Ansoffs Growth Matrix Market Targeting Grid BCGs Growth-Share Matrix

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Decision Tools: The Expanded 5W Model

Who are our customers? What do they do with our product? Where is it purchased? When is it purchased? Why is ours the selected product? Why is ours NOT the selected product?

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Decision Tools: Ansoffs Growth Model

Current PRODUCTS New

Existing MARKETS New

Market Penetration

Product Development

Market Development

Diversification

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Decision Tools: Position-Attractiveness Matrix

COMPETITIVE POSITION
INDUSTRY ATTRACTIVENESS High Medium Low 1 1 1 2 2 3

High Medium Low

3
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1=Invest; 2=Maintain; 3=Harvest

Decision Tools: BCG Growth-Share Matrix

High Relative Market Share High Market Growth Rate Low Star ? Low

Cow

Dog

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