Problem 07

No One Owes Me A Living

E112
Engineering Design
Importance of Business Strategy
and Its Components

• A business strategy helps a company attain distinct competitive

advantages. A company must have a good strategic plan to
compete successfully against business competitors.
• Components of a typical business strategy:
a) Strategic Objectives
b) Targeted Market
c) Competitive Target Analysis
d) Positioning
e) Key Success Factors / Marketing Mix (4Ps)
f) Operating Model

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 Formulating a Business Strategy is
the Key to Business Success

Gathering info Business

on customer success
needs

Obtaining
customer
Encourages
Writing an feedback
active goal
excellent
setting which in
business Formulate
turn, Specifying
plan Business
encourages: needed strategies
resources/cap
abilities

Identifying key steps needed to

market effectively (marketing mix)

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Components of a Business Strategy:
(i) Strategic Objectives

• This outlines the objectives of the strategy, which your company

hopes to achieve.
Example:
Mission and Vision
• To be the world’s leading company in the industry which sells
high quality wastepaper bins which are environmentally
friendly.
Financial Objectives
• To generate at least $1 million in revenue from the new
products over the next two years.
• To be able to market and sell at least 200, 000 of such new
products within the next two years.

• There are also other kinds of objectives such as operation

objectives, etc…

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Components of a Business Strategy:
(ii) Target Market/Customer Selection

• Refers to the target market which your company intends to sell

your products.
• The target market can be segmented into the following
categories:
(i) Demographic (age, gender, race, education, marital status,
income levels of potential customers, etc.)
(ii) Psychographic (Which geographical region?, Is the product
going to be sold in the political, technological, social, or
economic spheres?)
(iii)Usage-related (timing of market launch – whether seasonal
in nature?, life-cycle of product – period in which the product
is favorably accepted in the market.)

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Components of a Business Strategy:
(ii) Competitive Target Analysis

• Evaluate the strengths and weaknesses of your company’s

competitors so as to capitalize on the competitors’ weaknesses
and enhance your company’s strengths when launching and
marketing your products.
• A commonly used tool is aptly called “Strengths-Weaknesses-
Opportunities-Threats” (SWOT) analysis.
• In order to assess the competitiveness of a company, it is
important to understand the business and its market. This can
be done using SWOT analysis.
• SWOT analysis is frequently used to help a company build up
and sustain its competitive advantages.

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SWOT Analysis
SWOT analysis allows one to analyze:

1. Internal Strengths and Weakness

• You
• Your staff
• Your products
• Your business
2. External Opportunities and Threats
• Impact on your business
• Impact on your market
• Impact on your consumer
• Trends
• Legislation
• Financial issues

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SWOT Examples
STRENGTH WEAKNESS
• Products. • What features are lacking in your
• Processes. product as compared to your
• Environmental friendly. competitors?
• Cost. • Possible improvement for processes
• What features do you offer that your
competitors don’t have?

OPPORTUNITIES THREATS
• In capabilities of competitors. • New competitors coming up
• Trend. (Competitor Analysis).
• Up and coming related technology. • Are existing competitors claiming
• Changing buying habits of more and more market share?
consumers. • Possible change in legislation.
• Use PESTLE analysis – Political,
Economic, Social, Technological,
Legal and Environmental analysis.

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Generic Sources of
Competitive Advantage

Two main sources: Low Cost and Product Differentiation.

1. Low Cost:
Avoid “frills”, avoid complexity in the cost structure of the
business, systems must be in place to reinforce cost concerns
through detailed control reports.
2. Product Differentiation:
Refers to product differentiation as perceived by the customer.
Can be in terms of quality, features, excellent after-sales service
related to the product, design, etc.

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Competitive Advantage should be Sustainable

• Allows the maintenance and improvement of organization's

competitive position in the market.
• Requires value-creating products, processes, and services that
cannot be matched by competitors now.
• Plans content to maintain that position as you scale.
• Enables business to survive against its competition over a long
period of time.
• “First to market” may or may not sustainable, depending on
what kind of competitive advantages that have been built up
Advantages: consumer impact, name recognition, lack of
competition (at least for a short while).
Disadvantages: Competitors offering cheaper solutions, need to
educate consumers how to use the new product, high product
development costs.

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Factors to Sustainable Competitive
Advantage

• Original intellectual property.

• A dynamic range of product (rather than a single product).

• Breakthrough in technology or process.

• Great team with good interrelationships.

• Steady and strong market or customer base.

• Strong product differentiation and focus.

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Some Common Ways to Build and Maintain
Sustainable Competitive Advantages

The following are some of the ways that a company can use to
build and maintain competitive advantages.
• Trade Secrets
- Keeping others from learning about or understanding how to
exploit the business opportunity.
- E.g. Coca-cola company keeps its trademark drink
ingredients and formula a secret to prevent competitors from
developing identical products.
• Obtaining Control of Resources
- Controlling the resources and keeping them away from
competitors so that they cannot even start the business to
compete.
- E.g. De Beers Group owns most of the world’s major
diamond mines so it controls a large portion of the world’s
supply of diamonds. This effectively blocks its competitors
and helps it obtain huge profits for many decades.

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Some Common Ways to Build and Maintain
Sustainable Competitive Advantages

• Obtaining a Legal Monopoly

- Applying for patents which give the inventor of a new product
or service the right to use it for a specified period of time.
- E.g. Many pharmaceutical companies have patents for new
drugs development for many years which protect them from
imitator competitors.
• Establishing a Reputation
- Creating goodwill and loyalty among customers to keep them
from shifting their allegiance to competitors.
- E.g. Apple’s iPods and iPhones are very popular with
consumers despite similar products in the market. This is
largely due to the reputation it has established among
consumers for its excellent product design and packaging.

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Some Common Ways to Build and Maintain
Sustainable Competitive Advantages

• Innovation
- Innovation includes any effort to keep the entrepreneur’s
products or service ahead of the alternatives offered by
competitors on any dimension desirable to consumers such
as quality, features, speed, cost, etc.
- E.g. HTC is capitalizing on innovation by incorporating latest
features/technology to strengthen its position in the market
as one of the world’s leading providers of smartphones.

The ways just described often help a company to set up and

sustain its competitive advantages.

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Components of a Business Strategy:
(iv) Positioning

• Involves ascertaining how your company’s product is being

perceived in the minds of customers as compared to your
competitors.
• Use of Positioning Profile tools such as Strategy canvas (a
charting tool to compare how customers rate your product
against similar products from other competitors).

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Components of a Business Strategy:
(iv) Positioning

• In a strategy canvas, the vertical axis represents the low and

high ratings of the customers regarding the product, while the
horizontal axis represents the various factors of competition
(features, cost, design, quality, etc).
• Based on the strategy canvas, a particular position is selected.
• After that, key success factors (KSFs) of the product are
identified.

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Components of a Business Strategy:
(iv) Key Success Factors/Marketing Mix

• KSFs are critical factors that will contribute to a business

success.
• To identify these factors, some questions to ask are:
(i) Who are the customers, and what do they want in the
product?
(ii) What is their decision making process?
(iii)What are the main dimensions of the competition?
(iv)How intense is the competition?
(v) How can we obtain a superior competitive position?
• Once that are identified, it’s time to consider how to market the
product through the use of Marketing Mix.

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Components of a Business Strategy:
(iv) Key Success Factors/Marketing Mix

• One common tool to help formulate the marketing strategy is

known as the 4Ps of marketing mix.
• The marketing mix is a set of controllable variables that must be
managed to satisfy the target market and achieve the
organisation objectives. These controllable variables are
classified as the 4Ps: Product, Price, Place and Promotion.

4Ps of
Marketing Mix

Product Price Place Promotion

Product Product Life Cost-plus Fair/parity Skimming Penetration Advertising

Differentiation Cycle pricing pricing price price effectiveness

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The 4 Ps of Marketing Mix - Product
This refers to product differentiation and product life cycle.

• Product Differentiation
- The product should be differentiated from competitor’s
products in terms of quality, quantity and intellectual
property protection.

• Product Life Cycle

- Every product has its own life cycle which includes
introduction, growth, maturity, saturation, decline and finally
abandonment.

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The 4 Ps of Marketing Mix - Product

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The 4 Ps of Marketing Mix - Price
There are four types of pricing schemes:

(a) Cost-Plus Pricing

Involves setting a price that factors into a given profit margin
(e.g. cost + 25% profit).
(b) Fair/Parity Pricing
Involves setting a price that roughly matches that of competing
brands within the product class.
(c) Skimming Price
Involves charging a high price relative to other brands within the
product class. Depends strongly on branding image.
(d) Penetration Price
Involves charging a low price on the assumption of selling the
product in enormous quantity.

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The 4 Ps of Marketing Mix - Place
• It refers to the product’s channels of distribution or how it is
conveyed from the producer to the end user.
• Functions may include manufacturing, transportation,
warehousing, wholesaling and retailing.
• Three distribution options:
(a) Intensive
Aims for maximum exposure; product is sold through any
responsible whole-saler or retailer who will stock it.
(b)Elective
Aims for moderate exposure; product is sold through “better”
retailers.
(c) Selective
Aims for limited exposure; product is sold through a single
dealer within each trading region.

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The 4 Ps of Marketing Mix - Promotion
• Involves communicating the product attributes and the corporate
image in the most favorable light to intermediary sellers and end
users.
• Some advertising media include:
- Newspaper
- Radio
- TV
- Magazines
- Internet
• Effectiveness of advertising media is measured by cost-per-
thousand, CPM.
CPM = Media Cost / Audience in thousands

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Components of a Business Strategy:
(iv) Operating Model

• This refers to the organization levels of the company, as well as

the systems and processes put in place to execute the business
strategy.
• Value Chain analysis is a common tool used to develop an
operating model for the business.

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Components of a Business Strategy:
(iv) Operating Model

• This is beyond the scope for today’s problem.

• You may refer to worksheet under “Going Further”.

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No One Owes Me a Living
• Singapore was able to develop from a third-world developing
country in the 1960s to an economically prosperous nation due
to its capitalization on manpower, and attracting direct foreign
investments.
• However, as Singapore progresses in future, there will be an
increasing need to develop local entrepreneurs to help support
Singapore’s economic growth.
• Spring Singapore is a government agency that helps budding
local entrepreneurs with their ventures, including capital funding.
http://www.spring.gov.sg/
• Nobody owes us a living. To survive as a nation, we need to
think on our feet and be ever ready to innovate and come
up with new ideas.

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Learning Objectives
• Understand the importance of a business strategy to achieving
business success and its various components:
i. Define and identify the competitive advantages of a business and
evaluate the competitors using SWOT analysis.
ii. Recognise the importance and benefit of having a competitive
advantage.
iii. Understand that a competitive advantage must be sustainable and
the sources of competitive advantage.
iv. Determine the positioning through use of the Strategy Canvas.
v. Identify the key success factors of your product against the
competitors.
vi. Understand the use of Marketing Mix as a tool to formulate
marketing strategy through its 4Ps (Product, Price, Place,
Promotion).
vii. Understand how to use Value Chain analysis to develop an
operating model for the strategy.
• Appreciate how Singapore is able to thrive as a nation and prosper
despite lack of natural resources and how we can turn challenges into
opportunities
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