How to fail without trying
Fred Wiersema and Mike Treacy
Why does Casio sell a calculator cheaper than a
box of cornflakes ?
 Why does it take a few minutes to rent a car at
Hertz but twice the time to get a room at the
Hilton?
 Why does Land’s End remember your last order
and family member’s sizes, while America
Express urges you to join after you have been a
member for ten years?

BUSINESS STRATEGY
Steps in Setting Strategy
 What is a company’s mission?
 Set goals and objectives - quantify, set time
 Design the business portfolio
 Operational details - 4P’s
Strategy - basics
 Mission
 Business
Objectives
 Marketing Objectives
 Marketing Strategy
Mission
 Who
is the customer?
 What is the value to the customer ?
 What will our business be?
 What should our business be?
Factors that affect mission
 History
 Current
preferences of owners and
management
 Market environment
 Resources
 Distinctive competencies - Core
competencies - Hamel and Prahalad
Mission
 Should
–
–
–
–
–
–
define
Industry scope
Products and services
Competencies
Segments
Vertical scope
Geographical scope
Portfolio Models
 Boston
Consulting Group Matrix
– (BCG Matrix)
 General
Electric Grid
– GE Grid
Portfolio Analysis
Boston Consulting Group - BCG Matrix
Market
Growth 10%
Rate
Star
?
Question Mark
Cash Cow
Dog
1.0
Relative Market Share
General Electric Grid
Business Strengths
Relative Market Share
Product Quality
Sales/Promotion Effectiveness
Geography
Market Attractiveness
Market Size
Growth Rate
Profits
Competition
Intensity
Market
Attractiveness
Business Strengths
Strong
Avg.
Weak
High
A
A
C
Med
A
C
B
Low
C
A-Build
B-No Growth-Divest/Harvest
C-Wait & See
B
B
Ansoff’s Product Market Grid
Products
Markets
Current
Current
Market
Penetration
New
Product
Development
New
Market
Development
Diversification
Marketing Myopia
Ted Levitt
Focus on needs not products
Revlon
Xerox
Standard oil
Columbia Pictures
Encyclopedia Brittanica
Railroads
Strategic Choices
Competitive Advantage
Michael Porter
The Discipline of Market Leaders
Treacy and Wiersema

Overall Cost Leadership
Operational Excellence

Differentiation
Product Leadership

Focus
Customer Intimacy
Strategy and tactics
The science or art of military command as
applied to the overall planning and conduct
of large-scale combat operations
Tactics are a plan of action resulting from
the practice of this science
Art of War - Sun Tsu
350 B.C.
Sun Pin - strategist of Tien Chi
Horse Races
Laws of Physics
Stronger force will overcome the lesser, all
else being equal
Boxing and weight classes
Lessons
 Strategy
is about getting a competitive
advantage
 Know the laws that govern the competition
 Know the competition and the terrain
 Creating strategies can be learned
Marketing Warfare
Al Ries and Jack Trout
4 types of players

Leaders

Followers

Flankers

Guerillas
Kotler
Leaders
Challengers
Followers
Nichers
Principles
 Principle
of force
 Superiority
 Mind
of defense
is the battleground
Defensive warfare
 Only
the market leader should play defense
 The best defensive strategy is the courage to
attack yourself
 Strong competitive moves should be
blocked
Gillette
 Blue
Blade
 Super Blue Blade
 Trac II - double blade
 Atra
- Adjustable
 Good News
- Disposable
 Pivot
- Adjustable disposable
 Sensor
Offensive warfare
 Consider
the strength of the leader’s
position
 Find a weakness in the leader’s strength and
attack at that point (Achilles heel)
 Launch the attack on as narrow a front as
possible
Flanking warfare
 Move
into an uncontested area
 Tactical surprise is very important
 The pursuit is as critical as the attack itself
Don’t move resources to other targets.
Flanking
 With
low price
 With high price
 With distribution
 With size
 With product form
- tell the loophole
- popcorn, perfume
- Timex, L’eggs
- VW Beetle
- Close-Up gel
Guerilla warfare
 Find
a niche small enough to defend
 No matter how successful, never act as the
leader
 Be prepared to bug out at a moment’s notice
Rolls Royce, Roos, United Jersey Bank,
People’s Express, Jeep
Segmentation
 Identify
segmentation variables
 Segment the market
 Develop profiles of segments
Bases for segmentation
 Geographic
–
–
–
–
Region
Metro
Climate
Density
Segmentation
 Demographic
–
–
–
–
–
–
Age
Gender
Income
Education
Race
Family Size
Segmentation
 Psychographic
– Social Class
– Lifestyles
• Activities, Interests, Opinion
– Personality
Behavioral
 Occasions
 Benefits
 User
Status
 Usage rate
 Loyalty
 Attitude towards product
Industrial segmentation
 Demographic
– Industry
– Size
– Location
 Operations
– Technology
– User/ nonuser
Industry Segmentation
 Purchasing Approach
–
–
–
–
–
Centralized or decentralized
Engineering dominated or financial dominated
Existing Relationships
Purchase policies - leasing, service etc.
Purchase criteria
 Situation
– Urgency
– Specific Applications
– Size of Order
Requirements for Effective Segmentation
 Measurable
 Profitable
 Accessible
 Differentiable
 Actionable
Evaluation of segments
 Size
and growth
 Structural Attractiveness
–
–
–
–
–
Segment rivalry
New Entrants
Substitutes
Buyer clout
Supplier Clout
 Company
objectives and resources
American Express
Based on Income and age - 9 segments









Up and Comers Affluent established Affluent Retired Successful Beginners Mainstream Family
Conservative Core
Young Survivors
Older Survivors
Retired Survivors
<50, >$40k
> 50, > $40k
retired, > $40k
<35 $15-40k
36-50 $15-40k
>50
Food Products
(based on attitudes towards food)
 Hedonists
(20%)
– want good life, taste, convenience, not
expensive, not health conscious, young, no kids
 Don’t Wants
(20%)
– Avoid sugar, fat; Are over 50 years, better
educated
 Weight
Conscious (33%)
 Moderates (25%)
Levi Strauss Men’s Clothing





Utilitarian Jeans Customer (26%)
• Loyalist, work and play, does not care for style
Trendy/Casual (19%)
• High fashion, likes to be noticed, younger
Price shopper (12%)
• Older, department store sales and discount stores
Mainstream Traditionalist (22%)
• Older, conservative tastes, shops with wife,
department stores
Classic Independent (21%)
• late 20s/30s, real spender on clothes, shops alone,
specialty stores, traditional styles