McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 6
Market Strategy
 ELEMENTS OF
BUSINESS STRATEGY
1 Determining the (What markets do we
product market serve with what
to serve products)

2 Determine partner (How do agreements

relationship impact choices)
commitments

3 Determining the level (What level of

of commitment to investment in the
provide resources product market are we
willing to make)
4 Determining the
(What are the detailed
objectives and plans
aims and action plans)
for each functional
area

6-3
CRITICAL ELEMENTS IN A STRATEGIC PLAN

Determining the (What markets do we

1
product market serve with what
to serve products)

Determining the level (What level of

2
of commitment to investment in the
provide resources product market are we
willing to make)
Determining the (What are the detailed
3
objectives and plans aims and action plans)
for each functional
area

6-4
STRATEGY PROCESS MODEL 1
EXTERNAL SELF (INTERNAL
ANALYSIS ANALYSIS

Evaluate opportunities, Evaluate strengths,

threats and strategic weaknesses, problems,
questions constraints, questions

STRATEGY IDENTIFICATION
AND SELECTION
Exhibit 6-2

6-5
 STRATEGY PROCESS MODEL 2
Update
historical data
Collect current
situation data
Data analysis
Develop objectives,
strategies, programs

Develop financial
documents
Negotiate final plan
Measure progress
toward objectives

Exhibit 6-2 Audit

6-6
 STRATEGY PROCESS MODEL 3
1. Define 2.
Develop 3. Define 4. Define Strategic
Track 1 mission statement of vision goals planning
operating foundation
principles and
values
Environmental scanning Strategy development
5. Define planning 6. Define total 7. Define 8. Select Business
Track 2 assumptions & market & leadership segments strategy
implications: most requirements, and define
Develop consensus re: attractive assess long-term corporate &
environment segments strengths & segment
(customer/market, weaknesses in strategy
competition, attractive segments
suppliers, etc.)
Gap analysis Strategy integration and capability development

9. Define capability 10. Formulate 11. Appraise, test 12. Modify Strategy
Track 3 gaps by assessing strategies & reconcile goals if integration
strengths/ that yield strategy with required, set capability
weaknesses against competitive functional functional development
current capabilities & advantage plans/ and
specific competitors in
needs business
selected segments
Exhibit 6-2 objectives
6-7
 WANTS-GETS GRID
HIGH PERFORMANCE

Assistance Consistent product

in cost control quality and
appearance
OVERACHIEVEMENT Reliable
delivery
Sales
support

UNDERACHIEVEMENT
Fast order
cycle
Access to top
Lead management
generation
HIGH IMPORTANCE
Exhibit 6-5
6-8
 CONCEPTUAL MAP
Project manager’s
competency
Hi
NOVUS

MAVUUS
T3
Reputation
for
Bad Good Excellence

CLARKE

Lo

Exhibit 6-6
6-9
 VALUE CHAIN ANALYSIS

Share of user $
Manufacturers Specialty Dealers Users 2000 2005
1 Wholesalers
100 120 150 300 40% 50%

Manufacturers Distributors Users 60% 50%

2 100% 100%
101 130 200

Total spending by users $10mm $15mm

Exhibit 6-7
6-10
FIVE FORCES OF COMPETITION
Threat of
substitutes

Bargaining Struggles Bargaining

power of between power of
suppliers industry rivals customers

Threat of
potential
entrants
Exhibit 6-8
6-11
 BARRIERS TO ENTERING A
MARKET

• PRODUCT DIFFERENTIATION
• ECONOMIES OF SCALE
• CAPITAL REQUIREMENTS
• ACCESS TO DISTRIBUTION CHANNELS
• COST DISADVANTAGES UNRELATED TO
SIZE
• GOVERNMENT POLICY
Exhibit 6-9
6-12
ACTIONS TO MEET COMPETITIVE
CHALLENGES

• CHOOSE ITS COMPETITIVE

BATTLEGROUND JUDICIOUSLY

• CHANGE THE COMPETITIVE

STRUCTURE OF THE INDUSTRY

• ANTICIPATE AND EMPLOY CHANGE

6-13
 Vision for disruption
Identifying and creating oppor-
tunities for temporary advantage
through understanding
•Stakeholder satisfaction
•Strategic soothsaying
Directed at identifying new ways
to serve existing customers
better or new customers
that no one else
serves now
Capability Tactics
for disruption for disruption
Market Seizing initiative to gain
Sustaining the momentum by disruption advantage by
developing flexible capacities for: •Shifting the rules
• Speed •Signaling
• Surprise •Simultaneous & sequential
strategic thrusts
that can be applied across
with actions that shape, mold,
many actions to build a
or influence the direction on
series of temporary
nature of the competitors’
advantageous
responses
Exhibit 6-10
6-14
 KOMATSUV CATERPILLAR
Arena 1 Arena 2 Arena 3 Arena 4
Cost & Quality Timing & Know-how Strongholds Deep Pockets

Disrupt Cat’s strategic strengths Outmaneuver Cat’s strengths (“Encircle” Cat)

Boost Lower Timing Know-how Geographic Channels Komatsu

quality cost Rolls out Aggressive Komatsu moves Komatsu builds
one R&D and out of Japanese moves to resources,
new product stronghold to new plants
product direct sales,
program and user
at a time Asia, Europe, dealers, then
South America, alliances to
regional
and lastly Gain
centers
strengths
North America
initially

Erodes Cat’s Picks off Undermines Erodes Maneuvers Erodes

premium price, Cat’s full Cat’s Cat’s World around Cat’s deep
global volume, line one advantage dominance Cat’s strong pockets
low costs by one on product one place dealer
innovation at a time network
From the Field: 6-1
6-15
MARKET ORIENTATION ELEMENTS

BEING SYSTEMATIC IN:

1. Gathering of information on customers and
competitors

2. Analyzing information to develop market

knowledge

3. Using this knowledge to guide strategy

6-16
 PAYOFFS FROM A MARKET
ORIENTATION

A MARKET ORIENTATION COMPANY IS:

1. BETTER AT FITTING NEEDS OF

CUSTOMERS

2. MORE DIFFICULT FOR COMPETITORS TO

ASSESS

3. APT TO BE UNIQUE

6-17
 REQUISITES FOR THE LEARNING
ORGANIZATION

Creating
Visionary Target & Information
x x x & x Execution
leadership trajectory systems
striving

Exhibit 6-13

6-18