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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Chapter Six

Market Strategy

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CRITICAL ELEMENTS IN A STRATEGIC PLAN

Determining the product marketto serve

(What markets do we serve with what products)

Determining the level of commitment to provide resources

(What level of investment in the product market are we willing to make)

Determining the objectives and plans for each functional area

(What are the detailed aims and action plans)

1

2

3

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Update historical data

Collect current situation data

Data analysis

Develop objectives, strategies programs

Develop financial documents

Negotiate final plan

Measure progress toward objectives

Audit

STRATEGY PROCESS MODEL

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1. Define mission

2. Develop statement of operating principles and values

3. Define vision

4. Define goals

Strategicplanning foundation

Track 1

Environmental scanning Strategy development

Track 25. Define planning

assumptions & implications: Develop consensus re: environment (customer/market, competition, suppliers, etc.)

6. Define total market & most attractive segments

7. Defineleadership requirements, assess long-term strengths & weaknesses in attractive segments

8. Select segments and define corporate & segment strategy

Business strategy

Gap analysis Strategy integration and capability development

Track 39. Define capability

gaps by assessing strengths/weaknesses against current capabilities & specific competitors in selected segments

10. Formulate strategies that yield competitive advantage

11. Appraise, test & reconcile strategy with functional plans/needs

12. Modify goals if required, set functional and business objectives

Strategy integration capability development

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HIGH IMPORTANCE

Assistancein cost control

OVERACHIEVEMENT

UNDERACHIEVEMENT

Consistent product quality and appearance

Reliable delivery

Sales support

Fast order cycle

Leadgeneration

Access to top management

HIGH PERFORMANCE

WANTS-GETS GRID

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The Business to Business Marketplace--NowThe Business to Business Marketplace--Now

Highly Customized

Pure Commodity

The Business to Business Marketplace--FutureThe Business to Business Marketplace--Future

Highly Customized

Pure Commodity

Percent of all products

Percent of all products

CONCEPTUAL MAP

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Share of user $

Manufacturers Specialty Dealers Users 2000 2005

1 wholesalers

120 150 300 40% 50%

Manufacturers Distributors Users 60% 50%

2 100% 100%

101 130 200

Total spending by users $10mm $15mm

VALUE CHAIN ANALYSIS

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Threat of substitutes

Bargaining power of suppliers

Struggles between

industry rivals

Bargaining power of

customers

Threat of potential entrants

FIVE FORCES OF COMPETITION

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Marketdisruption

Identifying and creating oppor-tunities for temporary advantage

through understanding

•Stakeholder satisfaction•strategic soothsaying

Vision for disruption

Directed at identifying new waysto serve existing customers

better or new customersthat no one else

serves now

Capabilityfor disruption

Sustaining the momentum by developing flexible capacities for:

•Shifting the rules•Signaling•Simultaneous & sequential strategic thrusts

•Speed•Surprise

Seizing initiative to gainadvantage by

that can be applied acrossmany actions to build a

series of temporaryadvantageous

with actions that shape, mold,or influence the direction of nature of the competitors’

responses

Tacticsfor disruption

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Arena 1Cost & Quality

Arena 2Timing & know-how

Disrupt Cat’s strategic strengths

Arena 3Strongholds

Arena 4Deep pockets

Outmaneuver Cat’s strengths (“Encircle Cat)

Boostquality

Lowercost

TimingRolls out

oneproductat a time

GeographicKomatsumovesout ofJapanesestronghold toAsia, Europe,South America,and lastlyNorth America

Know-howAggressiveR&D andnew productprogram

ChannelsKomatsumoves todirect sales,dealers,thenregionalcenters

Komatsubuildsresources,new plantsand useralliances togainstrengthsinitially

Erodes Cat’spremium price,global volume,low costs

Picks offCat’s fullline oneby one

UnderminesCat’sAdvantageOn productinnovation

ErodesCat’s WorldDominanceOne placeat a time

ManeuversaroundCat’s strongdealernetwork

ErodesCat’s deeppockets

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Visionaryleadership

Target &trajectory

Informationsystems

Creating &striving

ExecutionX X X X

REQUISITES FOR THE LEARNING ORGANIZATION