TEAM PRODUCT – Sections A & B
• DESCRIBE AREA SELECTED AND WHY
– Political, economic, social-culture, technological,
geographical, demographics, etc. as relates to your business
• COMPANY NAME AND WHY
–
–
–
–
–
Descriptive, suggestive, or non-sensical
Office Max, Home Depot, Florist Creations
Perfection Solutions, Excel Landscaping
Radio Shack or Nordstrom
Why did you select that name
1
TEAM PRODUCT – Section C
• LEGAL FORM
–
–
–
–
Sole proprietorship
Partnership
Corporation
Limited liability
• WHY YOU SELECTED THAT FORM
2
TEAM PRODUCT – Section D
• ORGANIZATIONAL FORM
–
–
–
–
–
Simple
Functional
Divisional
Matrix
Other
• NUMBERS OF EMPLOYEES NEEDED
• TYPES – SKILLED, UN-SKILLED, ETC
3
BASIC ORGANIZATIONAL STRUCTURES:
SIMPLE AND FUNCTIONAL
I. Simple Structure
Owner-Manager
Workers
II. Functional Structure
Top Management
Manufacturing
Sales
Finance
Personnel
4
TEAM PRODUCT – Section E
• NAME OF PRODUCT AND VALUE (WHY
SHOULD CONSUMERS PURCHASE IT –
DOES IT SATISFY A NEED OR WANT THAT
THEY HAVE)
• NAME OF THE PRODUCT IS IMPORTANT
5
PRODUCT NAME CONSIDERATIONS
• NAME SHOULD BE APPEALING
• HELPS TO BE TRADEMARKED
• GREAT CARE IN:
– Creating/developing the name
– Pre-testing the name
– Managing the name
6
GOALS OF THE NAME
•
•
•
•
FOUNDATION FOR COMMUNICATION
HELPS IDENTIFY THE PRODUCT
TAKES ON MEANING
LENDS STREGTH TO THE PRODUCT
7
BRAND NAME STRATEGIES
•
•
•
•
•
GENERIC
DESCRIPTIVE
SUGGESTIVE
ARBITRARY
COINED OR FANCIFUL
8
TRADEMARK PROTECTION
• GENERIC BRAND NAMES:
– Difficult to obtain protection
– Some examples:
 Bakery, aspirin, flower, automobile, la
boulangerie
– Not conducive for your protection and
promotion
9
PROTECTION 1
• DESCRIPTIVE BRAND NAMES
– They describe the product
– Some examples:
 “Laser jet” printers
 “Flu relief” cold/flu medicine
 “Solid head” thumb tacks
 “Invisible tape”
 “Color brite” detergent
 “Clean all” cleaners
10
PROTECTION 2
• SUGGESTIVE BRAND NAMES
• EVOKES A PRODUCT’S BENEFITS
• SOME EXAMPLES:




“Ever-ready” batteries
“Sleepeezy” cold/flu medicine
“Sparkle” cleaner
“Vanish” toilet bowl cleaner
11
PROTECTION 3
• ARBITRARY BRAND NAMES
• COMMON WORD WITH NO APPARENT
RELATION TO THE PRODUCT
CATEGORY
• SOME EXAMPLES:




“Camels” cigarettes
“Sequence” cold/flu medicine
“Jump” detergent
“Horizon” cleaner
12
PROTECTION 4
• COINED OR FANCIFUL NAMES
• FICTIONAL WORDS UNRELATED TO THE
PRODUCT AND PRODUCT CATEGORY
• SOME EXAMPLES:




“Exxon” gasoline
“Sucrets” throat lozenges
“Robitussin” cough medicine
“Mylanta” for stomach
13
IMPLICATIONS
• DESCRIPTIVE AND SUGGESTIVE NAMES
A BETTER OVERALL CHOICE
• SURVEY RESULTS SHOWED THAT
RECALL AND LIKING WERE HIGHEST
• HARDER TO REGISTER FOR PROTECTION
14
TEAM PRODUCT – Section F
• VISION – A FIRM’S FUTURE BUSINESS
PATH – WHERE WE ARE GOING
• MISSION – FOCUSES ON CURRENT
BUSINESS ACTIVITIES – WHO WE ARE
AND WHAT WE DO
15
TEAM PRODUCT – Section G
STRATEGIC & FINANCIAL OBJECTIVES
• CONVERTS VISION AND MISSION TO
PERFORMANCE TARGETS
• CREATES A YARDSTICK TO TRACK
PERFORMANCE
• PUSHES FIRM TO BE INVENTIVE AND
FOCUSED ON RESULTS – NOT ACITIVIES
16
TEAM PRODUCT – Section G
• FINANCIAL OBJECTIVES – OUTCOMES
FOCUSED ON IMPROVING FINANCIAL
PERFORMANCE
• STRATEGIC OBJECTIVES – OUTCOMES
FOCUSED ON IMPROVING LONG-TERM,
COMPETITIVE BUSINESS POSITION
17
TEAM PRODUCT – Section G1
STRATEGIC OBJECTIVES
– Higher product quality than rivals
– Lower costs relative to key competitors
– Broader product line than rivals
– Better e-commerce and internet sales capabilities
than rivals
– Better customer service than rivals
– Recognition as a leader in technology
– Wider geographic coverage than rivals
18
TEAM PRODUCT – Section G2
FINANCIAL OBJECTIVES
–
–
–
–
–
Achieve revenue growth of 10% per year
Increase earnings by 15% annually
Increase dividends per share by 5% per year
Increase net profit margins from 2% to 4%
A rising stock price (outperform the S&P 500)
19
EXAMPLE: GE CORPORATE
OBJECTIVES
– Become the most competitive enterprise in the
world.
– Be number one or number two in each business
we are in.
– Globalize every activity in the company.
– Embrace the internet and become a global e-
business.
20
EXAMPLE: MOTOROLA CORPORATE
OBJECTIVES
– Self-funding revenue growth of 15% annually.
– An average return on assets of 13 to 15%.
– An average return on shareholders’ equity
investment of 16 to 18%.
21
TEAM PRODUCT – Section H
TARGET MARKET – DESCRIBE:
• TOTAL POPULATION AND ITS
CHARACTERISTICS:
– Gender, income, etc. – Things relevant to your product
• SAMPLE – WHO, WHEN, WHERE, HOW
– Results from sampling – match population?
22
SURVEY INSTRUMENT
• OBTAIN DEMOGRAPHICS OF YOUR SAMPLE
• ASK TWO KEY QUESTIONS?
– Would you buy this product
 Definitely
 Probably
 Maybe
 No
– How much would you pay?
• GIVE ME PRODUCT COST AND EXPECTED
SALES
23
Sample Size Calculation for Opinions/Preferences
(1) For unknown population
(p) (q)
n = -------------Sp2
(2) For known population
(p) (q)
n = ------------------------(e)2
(p) (q)
-------- + ---------(z)2
N
n = sample size
p = probability of a positive response to the question
q = difference from p to 100 or .1
e = confidence interval - your + or - estimate
z = confidence level - for 95%, z converts to 1.96
Sp2 = standard error of the proportion: e/z
24
Examples :
For unknown: Assume you want to know how many graduate business majors
look forward to taking Management 210, with a CI of = or - 6%, and a CL of
95%, and you did a brie f survey and found that 32% look forward. P,
therefore, is 32 and Q is 68.
32 x 68
------------------- =
(6/1.96)2 = 9.36
2176
---------- =
9.36
232 samples needed
You don’t do a survey, and go with 50% will look forward and 50% will not.
50 x 50
------------------ =
(6/1.96)2 = 9.36
2500
------------ =
9.36
266 samples needed
For known population of 500 graduate students at 50-50.
50 x 50
--------------------------------- =
(6)2
50 x 50
----------- + ---------------(1,96)2
N (500)
2500
------------------------ = 174
9.36 + 5 = 14.36
For a known population based on survey of 32 and 68:
2176/14.36 = 152
NOTE : If you increase the CI, you’ll need less surveys, but you lose precision.
For example - at 10% CI:
For unknown at 32-68, it’s 2176/26 = 84 needed
For unknown at 50-50, it’s 2500/26 = 96 needed
For known at 32-68, it’s 2176/31 = 70 needed
For known at 50-50, it’s 2500/31 = 81 needed
25
TEAM PRODUCT – Section I
COMPETITORS (TOP FIVE) DIRECT OR
IN-DIRECT
• DESCRIBE THEIR SIMILAR PRODUCTS
• THE PRICES THEY CHARGE
• HOW THEY PROMOTE THEIR PRODUCTS
• WHERE THEY SELL THEIR PRODUCTS
26
AN UNWEIGHTED COMPETITIVE
STRENGTH ASSESSMENT
KSF/Strength Measure
ABC Co.
Rival 1
Rival 2
Rival 3
Rival 4
Quality/product performance
8
5
10
1
6
Reputation/image
8
7
10
1
6
Manufacturing capability
2
10
4
5
1
Technological skills
10
1
7
3
8
Dealer network/distribution
9
4
10
5
1
New product innovation
9
4
10
5
1
Financial resources
5
10
7
3
1
Relative cost position
5
10
3
1
4
Customer service capability
5
7
10
1
4
61
58
71
25
32
Overall strength rating
Rating Scale: 1 = very weak; 5 = average; 10 = very strong
27
A WEIGHTED COMPETITIVE STRENGTH
ASSESSMENT
KSF/Strength Measure
Weight
ABC
Co.
Rival 1
Rival 2
Rival 3
Rival 4
Quality/product performance
0.10
8/0.80
5/0.50
10/1.00
1/0.10
6/0.60
Reputation/image
0.10
8/0.80
7/0.70
10/1.00
1/0.10
6/0.60
Manufacturing capability
0.10
2/0.20
10/1.00
4/0.40
5/0.50
1/0.10
Technological skills
0.05
10/0.50
1/0.05
7/0.35
3/0.15
8/0.40
Dealer network/distribution
0.05
9/0.45
4/0.20
10/0.50
5/0.25
1/0.05
New product innovation
0.05
9/0.45
4/0.20
10/0.50
5/0.25
1/0.05
Financial resources
0.10
5/0.50
10/1.00
7/0.70
3/0.30
1/0.10
Relative cost position
0.35
5/1.75
10/3.50
3/1.05
1/0.35
4/1.40
Customer service capability
0.15
5/0.75
7/1.05
10/1.50
1/0.15
4/1.60
Sum of weights
1.00
6.20
8.20
7.00
2.10
2.90
Overall strength rating
Rating Scale: 1 = very weak; 5 = average; 10 = very strong
28
WHICH COMPANIES ARE IN
STRONGEST / WEAKEST POSITIONS
VERSUS YOUR COMPANY
• ONE TECHNIQUE FOR REVEALING
THE DIFFERENT COMPETITIVE
POSITIONS OF INDUSTRY RIVALS IS
STRATEGIC GROUP MAPPING
• A STRATEGIC GROUP CONSISTS OF
THOSE RIVALS WITH SIMILAR
COMPETITIVE APPROACHES IN
AN INDUSTRY
29
STRATEGIC GROUP MAPPING
• FIRMS IN SAME STRATEGIC GROUP HAVE
TWO OR MORE COMPETITIVE
CHARACTERISTICS IN COMMON
–
–
–
–
–
–
–
Sell in same price/quality range
Cover same geographic areas
Be vertically integrated to same degree
Have comparable product line breadth
Emphasize same types of distribution channels
Offer buyers similar services
Use identical technological approaches
30
CONSTRUCTING A GROUP MAP
• Identify competitive characteristics that
differentiate firms in an industry from one another
• Plot firms on a two-variable map using pairs of
these differentiating characteristics
• Assign firms that fall in about the same strategy
space to same strategic group
• Draw circles around each group, making circles
proportional to size of group’s respective share of
total industry sales
31
TEAM PRODUCT – Section J
• ACQUISITION SOURCES AND COSTS
(IN TABLE FORM)
– Name of supplier
– Quantities
– Costs
32
TEAM PRODUCT – Section K
BUSINESS-LEVEL OR COMPETITIVE
STRATEGIES
• CONVINCE CUSTOMERS YOUR FIRM’S
PRODUCT/SERVICES OFFERS SUPERIOR VALUE
– Offer a good product at lower prices
– Use differentiation to provide a better product buyers think is
worth a premium price
33
FIVE GENERIC COMPETITIVE
STRATEGIES
Type of Advantage Sought
Market Target
Lower Cost
Broad
Range of
Buyers
Narrow
Buyer
Segment
or Niche
Differentiation
Overall Low-Cost
Broad
Provider
Differentiation
Strategy
Strategy
Best-Cost
Provider
Strategy
Focused
Focused
Low-Cost
Differentiation
Strategy
Strategy
34
LOW-COST LEADERSHIP
Keys to Success
• Make achievement of low-cost relative to rivals the
theme of firm’s business strategy
• Find ways to drive costs out of business year-afteryear
Low-cost
leadership
Low-cost
leadershipmeans
meanslow
low
OVERALL
costs,
not
just
low
overall costs, not just low
manufacturing or production costs!
manufacturing or production costs!
35
WHEN DOES A LOW-COST STRATEGY
WORK BEST?
• Price competition is vigorous
• Product is standardized or readily available from many
suppliers
• There are few ways to achieve differentiation that have
value to buyers
• Most buyers use product in same ways
• Buyers incur low switching costs
• Buyers are large and have significant bargaining power
• Industry newcomers use introductory low prices to
attract buyers and build customer base
36
DIFFERENTIATION STRATEGIES
Objective
• Incorporate differentiating features that cause buyers to
prefer firm’s product or service over brands of rivals
Keys to Success
• Find ways to differentiate that create value for buyers
and that are not easily matched or cheaply copied by
rivals
• Not spending more to achieve differentiation than the
price premium that can be charged
37
APPEAL OF DIFFERENTIATION
STRATEGIES
• A powerful competitive approach when
uniqueness can be achieved in ways that
– Buyers perceive as valuable and are willing to pay for
– Rivals find hard to match or copy
– Can be incorporated at a cost well below the price
premium that buyers will pay
38
TYPES OF DIFFERENTIATION
THEMES
• Unique taste -- Dr. Pepper
• Multiple features -- Microsoft Windows and Office
• Wide selection and one-stop shopping -- Home Depot
and Amazon.com
• Superior service -- FedEx, Ritz-Carlton
• Spare parts availability -- Caterpillar
• More for your money -- McDonald’s, Wal-Mart
• Prestige -- Rolex
• Quality manufacture -- Honda, Toyota
• Technological leadership -- 3M Corporation, Intel
• Top-of-the-line image -- Ralph Lauren, Chanel
39
COMPETITIVE STRATEGY PRINCIPLE
A low-cost producer strategy can defeat a
differentiation strategy when buyers are
satisfied with a standard product and do not
see extra attributes as worth paying
additional money to obtain!
40
BEST COST PROVIDER STRATEGIES
• Combine a strategic emphasis on low-cost with a
strategic emphasis on differentiation
– Make an upscale product at a lower cost
– Give customers more value for the money
Objectives
• Deliver superior value by meeting or exceeding buyer
expectations on product attributes and beating their price
expectations
• Be the low-cost provider of a product with good-toexcellent product attributes, then use cost advantage to
under-price comparable brands
41
FOCUS / NICHE STRATEGIES
Objective
• Concentrated attention on a narrow piece of the total
market - Serve niche buyers better than rivals
Keys to Success
• Choose a market niche where buyers have distinctive
preferences, special requirements, or unique needs
• Develop unique capabilities to serve needs of target
buyer segment
42
FOCUS / NICHE STRATEGIES AND
COMPETITIVE ADVANTAGE
Approach 1
Achieve lower costs than rivals in serving
the segment -- A low-cost strategy
Approach 2
Offer niche buyers something different from
rivals -- A differentiation strategy
43
EXAMPLES OF FOCUS STRATEGIES
• eBay
– Online auctions
• Porsche
– Sports cars
• Horizon and Comair (commuter airlines)
– Link major airports with small cities
• Jiffy Lube International
– Maintenance for motor vehicles
• Bandag
– Specialist in truck tire recapping
44
TEAM PRODUCT – Section L
FUNCTIONAL STRATEGIES
–
–
–
–
–
–
–
Production
Logistics
Marketing
Accounting
Research and development
Management information system
Finance
45
FUNCTIONAL STRATEGIES
• PRODUCTION
– What strategy – batch, assembly, etc.?
– Detailed step-by-step explanation of the manufacturing
process
– Include tools and equipment needed
– Location of the production site
46
FUNCTIONAL STRATEGIES
• LOGISTICS
– Process to acquire raw materials
– Channels of distribution of finished product
 Direct, agent, wholesaler, retailer, etc.
47
FUNCTIONAL STRATEGIES
• MARKETING (PRICE)
– Pricing strategy (penetration or skimming)
– Include the cost of the finished product
– Wholesale or retail price
48
FUNCTIONAL STRATEGIES
• MARKETING (PROMOTION)
– Advertisement (media selected)
– Personal selling
– Coupons, discounts, contests, samples, etc.
49
FUNCTIONAL STRATEGIES
• MARKETING (PLACE)
– Where will you offer the product to the
consumer?
– Direct, retail store, on-line, etc.?
50
MARKETING STRATEGIES
PRODUCT
Current
M
A
R
K
E
T
Current
Penetration
New
Market
Development
New
Product
Development
Diversification
51
FUNCTIONAL STRATEGIES
• ACCOUNTING SYSTEM STRATEGY
–
–
–
–
Traditional?
Activity-base?
Outsource, in-house?
Software packages?
52
ACTIVITY-BASED COSTING: A KEY
TOOL IN STRATEGIC COST ANALYSIS
• Determining whether a company’s costs are in line with
those of rivals requires measuring how a company’s
costs compare with those of rivals activity-by-activity-from one end of the value chain to the other
• Requires having accounting data that measures the cost
of each value chain activity
• Activity-based accounting systems provide the data for
determining the costs for each relevant value chain
activity
53
TRADITIONAL COST ACCOUNTING VS.
ACTIVITY BASED COSTING
Traditional Cost
Accounting Categories in
Department Budget
Wages & Salaries
Employee Benefits
Supplies
Travel
Depreciation
Other Fixed Charges
Miscellaneous
Operating Expenses
Departmental Activities
Using Activity-Based
Cost Accounting
$350,000
115,000
6,500
2,400
17,000
124,000
25,520
$640,150
Evaluate Suppliers
Process Purchase Orders
Expedite Deliveries
Expedite Internal Process
Check Item Quality
Check Deliveries Against
Purchase Orders
Resolve Problems
Internal Administration
$135,750
82,100
23,500
15,840
94,300
48,450
110,000
130,210
$640,150
54
FUNCTIONAL STRATEGIES
• RESEARCH AND DEVELOPMENT
– For the next production cycle, cite what:
– Changes you can make to the product
– Changes you can make to the process
55
FUNCTIONAL STRATEGIES
• FINANCIAL STRATEGY
– Detail expenses needed
– Source of the funds (no make-believe)
56
FUNCTIONAL STRATEGIES
• MANAGEMENT INFORMATION SYSTEM
STRATEGY
–
–
–
–
Manually
Outsource
In-house
Off-the-shelf
57
TEAM PRODUCT – Section M
• CHARTS REQUIRED:
– Organizational chart
– Value chain
– Start-up categories and costs
 Licenses, attorney, incorporation, phone installation
(one-time expenses)
 Other costs – see syllabus
– Pro-forma (p/l) two years by quarters
• COPY OF SURVEY AND RESULTS
• BIBLIOGRAPHY
58
WHAT IS STRATEGIC COST ANALYSIS?
• Focuses on a firm’s costs relative to its rivals
• Compares a firm’s costs activity by activity
against costs of key rivals
– From raw materials purchase to
– Price paid by ultimate customer
• Pinpoints which internal activities are a source of
cost advantage or disadvantage
59
THE CONCEPT OF A COMPANY VALUE
CHAIN
• A company’s value chain shows the linked set of
activities, functions, and business processes that it
performs in the course of designing, producing,
marketing, delivering, and supporting its product /
service.
• A company’s value chain consists of two types of
activities
–
–
Primary activities (where most of the value for
customers is created)
Support activities that are undertaken to aid the
individuals and groups engaged in doing the primary
activities
60
TYPICAL COMPANY VALUE CHAIN
Primary Activities and Costs
Purchased
Supplies
and
Inbound
Logistics
Operations
Distribution
And
Outbound
Logistics
Sales and
Marketing
Service
Profit
Margin
Product R&D, Technology, Systems Development
Human Resources Management
General Administration
Support
Activities
and Costs
61
TEAM PRODUCT – Section M3
COSTS INVOLVED IN THE VALUE CHAIN:
–
–
–
–
–
–
Raw materials
Transportation to factory
Storage/inventory cost
Tools/equipment/and labor
Factory location costs
All overhead
62
TEAM PRODUCT – Section M3
Continued
COSTS INVOLVED IN THE VALUE CHAIN:
–
–
–
–
Packaging costs
All marketing costs
Transportation to consumer
Warranties/service costs
63
UNBUNDLING AND OUTSOURCING
STRATEGIES
Concept
De-Integration or unbundling involves narrowing
the scope of the firm’s operations, focusing on
performing certain “core” value chain activities and
relying on outsiders to perform the remaining value
chain activities
Internally
Performed
Activities
Suppliers
Support
Services
Functional
Activities
Distributors
or Retailers
64
WHEN DOES OUTSOURCING MAKE
STRATEGIC SENSE?
• Activity can be performed better or more cheaply by
outside specialists
• Activity is not crucial to achieve a sustainable
competitive advantage
• Risk exposure to changing technology and/or
changing buyer preferences is reduced
• Operations are streamlined to
– Cut cycle time
– Speed decision-making
– Reduce coordination costs
• Firm can concentrate on doing those “core” value
chain activities that best suit its resource strengths
and capabilities
65