2005 John Wiley & Sons

Strategic Market Management

By
David A. Aaker
Vice-Chairman, Prophet
Professor Emeritus, University of California at Berkeley

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Chapter One

2005 John Wiley & Sons

Introduction and Overview

Copyright 2005 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in
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Plans are nothing,

planning is everything.
- Dwight D. Eisenhower

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Even if you are on the right track, youll get

run over if you just sit there.
- Will Rodgers

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If you dont know where you are

going, you might end up
somewhere else.
- Casey Stengel

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Management Tasks

Strategic Analysis
Innovation
Multiple BusinessStrategies and Issues
Creating SCAs
Developing Growth Platforms

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What is a Business Strategy?

The Product-Market Investment Strategy
where to compete

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The Customer Value Proposition

Assets and Competencies
Functional Strategies and Programs

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A Business Strategy
Where to Compete
The product-market investment decision

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A Business
Business Strategy
Strategy
A

How to Compete
Value
proposition

Assets &
competencies

Function area
strategies and programs
Figure 1.1

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The Product-Market Investment

Strategy
Invest to grow (or enter a product market)
Invest only to maintain the existing position

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Milk the business by minimizing investment

Recover as many of the assets as possible by
liquidating or divesting the business

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Product-Market Growth Directions

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Present
Present
Products
Products

New
New
Products
Products

Present
Present
Markets
Markets

Market
Market
Penetration
Penetration

Product
Product
Expansion
Expansion

New
New
Markets
Markets

Market
Market
Expansion
Expansion

Diversification
Diversification

Vertical
Vertical Integration
Integration
Source: H. Igor Ansoff, Strategic Diversification, Harvard Business
Review, September-October 1957, pp.113-24

Figure 2.4

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The Customer Value Proposition

Perceived benefit to customer:
Functional

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Emotional
Social
Self-Expressive

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Customer Value Proposition

Examples
A good value
Excellence on an important product or service attribute
The best overall quality

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Product line breadth

Innovative offerings
A shared passion for an activity or a product
Global connections and prestige

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Assets and Competencies

Strategic Competency:
What a business unit does exceptionally well
Has strategic importance to the business

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Based on knowledge or a process

Strategic Asset:
A resource

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Functional Strategies and

Programs

Manufacturing strategy

Global strategy

Distribution strategy

Segmentation strategy

Brand-building strategy

Quality program

Communication strategy

Customer relationship program

Information technology
strategy

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Criteria to Select Business Strategies

Is the ROI attractive?
Is there a SCA?

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Will the strategy have success in the future?

Is the strategy feasible?
Does the strategy fit with the other strategies of the firm?

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Overview of Strategic Market Management

External Analysis

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Customer Analysis
Competitor Analysis
Market/submarket Analysis
Environmental Analysis

Internal Analysis
Performance Analysis
Determinants of strategic options

Strategic
Strategic Analysis
Analysis Outputs
Outputs
Strategy
Strategy Identification,
Identification, Selection,
Selection,
and
and Implementation
Implementation
Figure 2.1

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Why Strategic Market Management?

Precipitate the consideration of strategic choices.
Help a business cope with change.
Force a long-range view.

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Make visible the resource allocation decision.

Aid strategic analysis and decision making.
Provide a strategic management and control system.
Provide both horizontal and vertical communication and
coordination systems.
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Marketing and Strategy

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Key Learnings

Strategy needs to succeed in a dynamic market.

A business strategy includes the determination of the product-market

scope and its dynamics (as reflected in the intensity of the business
investment), the customer value proposition, assets and competencies,
and functional strategies and programs.

External analysis includes analyses of customers, competitors, markets,

and the environment. Internal analysis includes a performance appraisal
and an examination of organizational strengths, weaknesses, problems,
constraints, and strategic options.

The role of these analyses is to identify existing or emerging

opportunities, threats, trends, strategic uncertainties, and strategic
options.

Marketing has a key role in strategy.

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Ancillary Slides

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It isnt that they cant see the

solution, its that they cant see the
problem.
- G. K. Chesterton

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Experience, to most men, is like the

stern lights of a ship, which illuminate
only the track it has passed.
- Samuel Coleridge

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Strategy is a framework which

guides those choices that determine
the nature and direction of an
organization.
-Benjamin B. Tregoe &
John W. Zimmerman
Top Management Strategy

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In terms of the three key players

(competitors, customers, company)
strategy is defined as the way in which a
corporation endeavors to differentiate
itself positively from its competitors,
using its relative corporate strengths to
better satisfy customer needs.
-Kenichi Ohmae
The Mind of the Strategist
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Business has only two basic

functions - marketing and innovation.
- Peter Drucker

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