1 STRATEGY FORMULATION

BSC
Michael Treacy & Fred Wiersema

Major Strategies

 Operational Excellence
 Customer Intimacy
 Product Leadership

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 1 STRATEGY FORMULATION
BSC
Michael Treacy & Fred Wiersema

Major Strategies – The Cost leadership

4Ps?

 Operational Excellence
Efficiency & Productivity
Lean management
Manufacturing excellence

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 1 STRATEGY FORMULATION
BSC
Michael Treacy & Fred Wiersema

Major Strategies – The Focus

4Ps?

 Customer Intimacy
Building relationship with
customers
Customer loyalty
CRM & Social CRM

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 1 STRATEGY FORMULATION
BSC
Michael Treacy & Fred Wiersema

Major Strategies – The Differentiation

4Ps?

the 4Ps, e.g. high

 Product Leadership
quality camera
Differentiation
Quality of products & Product?
services Price?
Promotion?
Place?

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 1 STRATEGY FORMULATION
BSC
Michael Porter
Major Strategies

 Overall cost leadership

 Differentiation
 Focus
Middle-of the-road

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 1 STRATEGY FORMULATION
BSC

Major Strategies
 Expanding the total
 Market-Leader market
 Market-Challenger  Defending market
 Market-Follower share
 Market-Nicher  Expanding market
share

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 1 STRATEGY FORMULATION
BSC

Major Strategies
 First define the
 Market-Leader strategic goals and
 Market-Challenger opponent(s)
 Market-Follower  Choose general
 Market-Nicher attack strategy
 Choose specific
attack strategy

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 1 STRATEGY FORMULATION
BSC

Major Strategies
 Imitation may be more
profitable than
 Market-Leader innovation
 Market-Challenger  Four broad strategies:
Counterfeiter
 Market-Follower 
 Cloner
 Market-Nicher  Imitator
 Adapter

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 1 STRATEGY FORMULATION
BSC

Major Strategies  Niche specialties:

 End-user
 Vertical-level
 Market-Leader  Customer-size
 Specific customer
 Market-Challenger  Geographic
 Market-Follower  Product/product line
 Product feature
 Market-Nicher  Job-shop
 Quality-price
 Service
 Channel

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 Product/Market
BSC
Expansion Grid

PRODUCT
Existing New

Market Product
Existing
MARKET

Penetration Development

Market
New Diversification
Development

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 Linking the Product/Market Expansion Grid to
BSC
Marketing Strategies

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BSC
Product Life Cycle & Marketing Strategies

Product life cycle (PLC) is the course that a

product’s sales and profits take over its
lifetime
• Product development
• Introduction
• Growth
• Maturity
• Decline

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BSC
Product Life Cycle & Marketing Strategies

Introduction stage is when the new product is first

launched
• Takes time
• Slow sales growth
• Little or no profit
• High distribution and promotion expense

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BSC
Product Life Cycle & Marketing Strategies

Growth stage is when the new product satisfies the market

• Sales increase
• New competitors enter the market
• Price stability or decline to increase volume
• Consumer education
• Profits increase
• Promotion and manufacturing costs gain economies of scale
• Product quality increases
• New features
• New market segments and distribution channels are entered

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BSC
Product Life Cycle & Marketing Strategies

Maturity stage is a long-lasting stage of a product that has

gained consumer acceptance

• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to support sales and
profits
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BSC
Product Life Cycle & Marketing Strategies

Decline stage is when sales decline or level off for

an extended time, creating a weak product
• Maintain the product
• Harvest the product
• Drop the product

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BSC
Product Life Cycle & Marketing Strategies

Modifying Strategies

• Market modifying
• Product modifying
• Marketing mix modifying

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BSC

Modifying Strategies

Market modifying strategy is when a company

tries to increase consumption of the current
product
• New users
• Increase usage of existing users
• New market segments
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BSC

Modifying Strategies

Product modifying strategy is when a company

tries to modify the current product
• New features
• Adding new function
• Enhancing appearance of the products

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BSC

Modifying Strategies

Marketing mix modifying strategy is when a

company changes one or more of the marketing
mix elements
• Price
• Promotion
• Distribution channels
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BSC
Companywide Strategic Planning:
Defining Marketing’s Role
Developing Strategies for Growth and Downsizing
- Ansoff
• Product/market expansion grid strategies
• Market penetration
• Market development
• Product development
• Diversification

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BSC

Developing Strategies for Growth and Downsizing

Market penetration is a growth strategy increasing

sales to current market segments without
changing the product

Market development is a growth strategy that

identifies and develops new market segments for
current products

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BSC

Developing Strategies for Growth and Downsizing

Product development is a growth strategy that

offers new or modified products to existing
market segments

Diversification is a growth strategy through starting

up or acquiring businesses outside the company’s
current products and markets
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BSC

Developing Strategies for Growth and Downsizing

Downsizing is the reduction of the business

portfolio by eliminating products or business
units that are not profitable or that no longer fit
the company’s overall strategy

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 Analyzing Current SBU’s:
BSC BCG Growth-Share Matrix
Relative Market Share
High Low
Stars
Stars Question
Question Marks
Marks
?
Highgrowth
••High growth&&share
share ••Low
Lowshare
shareSBUs
SBUsininhigh
highgrowth
growth
High

markets
Market Growth Rate

••May
Mayneed
needheavy
heavy markets
investmenttotogrow
grow ••Require
Requirecash
cashto
tohold
hold
investment market share
Eventually,growth
••Eventually, growthwill
willslow
slow market share
••Build
Buildinto
intoStars
Starsor
orphase
phaseout
out

Cash
Cash Cows
Cows Dogs
Dogs
••Low
Lowgrowth
growth&&share
share
Low

••Low ••Generate
Generate cash tosustain
cash to sustainself
Lowgrowth,
growth,high
highshare
share self
••Established, successful ••Do not promise to be cash
Do not promise to be cash
Established, successful sources
SBU’s
SBU’s sources
••Produce
Producecash
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BSC The BCG Growth-Share Matrix

Analyzing the Current Business Portfolio

The Boston Group Approach

Stars are high-growth, high-share businesses or products

requiring heavy investment to finance rapid growth. They
will eventually turn into cash cows.

Cash cows are low-growth, high-share businesses or products

that are established and successful SBUs requiring less
investment to maintain market share

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BSC The BCG Growth-Share Matrix
Analyzing the Current Business Portfolio
The Boston Group Approach

Question marks are low-share business units in high-growth

markets requiring a lot of cash to hold their share

Dogs are low-growth, low-share businesses and products that

may generate enough cash to maintain themselves but do
not promise to be large sources of cash

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BSC The BCG Growth-Share Matrix

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New-Product Pricing Strategies – Durable
consumer products
Pricing Strategies
Market skimming pricing is a strategy with high initial
prices to “skim” revenue layers from the market

• Product quality and image must support the price

• Buyers must want the product at the price
• Costs of producing the product in small volume should
not cancel the advantage of higher prices
• Competitors should not be able to enter the market easily

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 New-Product Pricing Strategies
BSC

Pricing Strategies

Market penetration pricing sets a low initial price in order

to penetrate the market quickly and deeply to attract a
large number of buyers quickly to gain market share
• Price sensitive market
• Inverse relationship of production and distribution cost to
sales growth
• Low prices must keep competition out of the market

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 Four level of competition – soft drinks, e.g. Pepsi
BSC
Product form competition – a competition between
brands that is focused on the same market, e.g.
diet Pepsi and diet Coke

Product category competition – between products

with comparable characteristics, such as various
soft drinks
Generic competition – products that respond to the
same needs of consumers, e.g. drinks

Budget competition – between for the money of the

consumer, such as food and entertainment
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 Sales and Profits Over the Product’s Life from
BSC
Inception to Decline (The Product Life Cycle)
Market growth and market attractiveness – for
laundry detergent

Less Attractive?
Attractive? Attractive?

Less Attractive?

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BSC

The challenging issues

•Marketers could embark on new
marketing strategies in ‘less attractive’
situation?
•Competitors, new suppliers could exerted
forces that may change the ‘attractive
situation’?

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 The Five Forces Model – the external factors of industry
BSC structure analysis (Porter)

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 Applying the Five Forces Model to the Asian
BSC Airline Market

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BSC
The power of suppliers and/or distributors is strong
when …
•Their power is strongly concentrated, e.g. various
fusions, merger, a few distributors for a large share
of sales
•They are not very price sensitive
•There is little product differentiation (presence of
alternative)

Food industry, grocery? …

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