MBA Basics - Lecture notes
Part I: Strategy and Marketing
Susanne Lind-Braucher
Winter term 2013/14
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Winter term 13/14
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Strategy
“WELL, THE DISCUSSION HAS APPARENTLY TURNED TO STRATEGY; AND I MUST CONFESS TO
BEING OUT OF MY DEPTH”
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Winter term 13/14
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Popstars have strategies too
Johnson/Scholes
/S
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Elements of strategic management
- The environment
- Expectations and purposes
- Resources and competences
The strategic position
Strategic choices
p
strategies
g
- Corporate-level
- Business-level strategies
- Development directions and methods
Strategy into action
- Organising
- Enabling
- Managing change
Johnson/Scholes
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The Seven S Model
Structure
Strategy
Systems
Superordinate
Goals
Skills
Style
Staff
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The Value Chain and Integration
■ Porter: Value Chain
▪ Each link in the chain, a channel participant, adds value to the product
Component
Purchase
Preparation
Motor
Assembling
Car
Assembling
Distribution
(Retailers)
■ Integration
▪ Forward and backward integration
▪ Vertical and horizontal integration
Backward Integration
Horizontal Integration
Ore Mining
GM
“Car”
Company
Direct Sale
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Horizontal Integration
FIAT
Forward Integration
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Level of Strategy
■ Functional Strategy
▪ Are those operational methods and “value adding” activities that management chooses for
its business (lower cost by advanced productions technology)
■ Business Strategy
▪ Are the battle plans used to fight the competition in the industry that a company currently
participates in (heavy marketing activities)
■ Corporate Strategy
▪ Looks at the whole gamut of business opportunities (launch a new product in a new
market)
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Expansion Strategy
■ Ansoff Matrix
Product
old
old
ld
new
M k t Penetration
Market
P t ti
Expansion
E
i (Product
(P d t
Development)
Market
new
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Related Diversification
(Market Development)
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Unrelated
Diversification
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Industry Analysis
■ Porter: The Five Forces Theory
Potential
Entrants
Threat of new entrants
Bargaining power of suppliers
Industry
Competitors
Suppliers
Buyers
Bargaining power of buyers
Threat of substitute products or services
Substitutes
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Generic Strategies
Strategic Advantage
Industrywide
Uniqueness
Low Cost
Differentiation
Overall Cost Leadership
Strategic
g
Target
Particular
Segment Only
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Focus
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Cost Leadership
■ Economies of Scale
■ Learning efficiencies
▪ Labor Efficiency: repetition and automation (CIM, CAM)
▪ New processes and improved methods
▪ Product redesign: to lower cost of labor, material...(CAD)
▪ Product standardization: decreasing the variations (CI)
▪ Efficiencies of scale: doubling capacity doesn’t cost twice as much
▪ Substitution: using less expensive materials
■ Learning Curve 10
8
Direct Labor Cost of 6
Last Unit Produced [$]
4
2
Total Units Produced
1
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2
4
8
16
32
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64
128 256 512
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Competitive Tactics
■ Signaling: Letting your competitors know what is on your
mind - or just bluffing
▪ Price movements
▪ Prior announcements
▪ Media discussion
▪ Counterattack
▪ Announced results
▪ Ligitation: to tie up a competitor in court
■ Synergy
S
▪ Market linkages: customer bases, distribution channel, brands
▪ Technological linkages: factory processes, research, IT
▪ Product linkages: excess capacity, staff functions
▪ Intangible linkages: know-how, experience, similar strategy
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The Boston-Consulting-Group-Growth-ShareMatrix (BCG box)
Industry Growth
Question Marks
Stars
+
high
-/
...Amount of Cash Flows
+/-
+
...Direction
Direction of Cash Flows
10%
...Life Cycle
_
low
+
Dogs
Cash Cows
low
1
high
Relative Markt Share
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Link between strategy and objectives
■ Balanced Scorecard (Kaplan/Norton)
▪ Innovation and Learning Perspective
▪ Measures
−
−
−
−
% Revenue from new products or services
Rate of improvement
Staff attitude survey
No. Of employee suggestions
▪ Internal
I
l Perspective
P
i
− Rework
− Safety index
− Performance per €
▪ Customer Perspective
− Customer satisfaction index
− Market share
▪ Financial Perspective
− Return on capital employed
− Cash Flow
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Intended & Unintended Strategies
Deliberate Strategy
Non-realized Strategies
Emergent Strategies
Mintzberg
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Marketing
Cartoon p. 18
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Topic : Marketing
“Marketing comes first” Philip Kotler
■ Marketing integrates all the functions of a business and
speaks directly to the customer through advertising,
salespeople and other marketing activities.
■ The 7 Steps of Marketing Strategy Development
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The Marketing Strategy Process
1. Consumer
Analysis
7. Go Back
7
& Revise
2. Market
2
Analysis
6. Evaluate
Economics
3. Competition
p
Analysis
5. Marketing
Mix
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4. Distribution
Channel
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Step 1: Consumer Analysis
■ Wh
Whatt iis th
the need
d category?
t g ?
■ Who is buying and who is using the product?
■ What is the buying process?
▪ Awareness - Information Search - Evaluate Alternatives - Purchase - Evaluate
■ Is the product a high- or a low-involvement product?
▪ High price - the need for the benefit - the need for the psychological reward (Consumer
Behavior Matrix)
■ How can a segmentation be done?
▪ Segments: large enough, efficiently reached, help develop marketing programs
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The Consumer Behavior Matrix
D
Differenc
ces
Significant
Few
Experiment
Complex Process
Variety Seeking
Brand Loyality
Buy cheapest one
Dissonance
Reduction
R d
Random
B
Behavior
h i
Baseless Beliefs
Low
High
Involvement
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Step 2: Market Analysis
■ What
Wh t iis the
th relevant
l
t market?
k t?
▪ Once identified: accessible and large enough?
Yes
es = Marketable
a etab e product
p oduct
■ Where is the product in its product life cycle?
▪ Intro - Growth - Maturity - Decline
■ What are the ke
key competiti
competitive
e factors in the industry?
ind str ?
▪ Key Competitive Factors:
▪ Quality, Price, Advertising, R&D, Service?
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The Product Life Cycle (PLC)
Market Sales
Maturity
Decline
Growth
?
Intro
Time
■ Introduction: What is it?
▪ Awareness and education needed - innovators/adopters
■ Growth: Where can I g
get it?
▪ Education and competition - selective distribution (boost your sales volume)
■ Maturity: Why this one?
▪ Price competition and brand loyalty - strong segmentation
■ Decline: How much?
▪ Slow price decline or increase - relationship marketing, relaunch
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Step 3: Competitive Analysis
■ What
Wh t iis th
the th
the company and
d th
the competitors
tit
g
good
d at?
t?
▪ Distribution, new product development and intro (3M), advertising?
■ Who are we in the marketplace?
▪ Market size and relative share, financial position, historic performance and
reputation?
■ What are our and the competitors resources?
▪ People, technology-research, sales forces, cash, trade relations,
manufacturing (core competencies)?
■ Entry Barriers?
■ Market Share Leverage?
“What are the Strengths and Weaknesses”? (SWOT-Analysis)
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Step 4: Distribution Analysis
■ How
H can my product
d t reach
h the
th consumer?
?
▪ Direct selling (mail selling, e-commerce) or channel intermediaries
(wholesalers, distributors, retailers, sales forces...: e.g. B2BMarketing)
■ How do the players in each distribution channel profit?
▪ Everyone who touches the merchandise takes a cut = margin
▪ Percent Markup on Selling Price (SP) = ($ Markup / $ SP) x 100
(Exercise)
■ Who has the power in the channels?
▪ Grower, refiner, stock exchange, supermarket?
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Exercise: What is the Retail Price?
Channel
Partcipant
Channel
Function
S JJuan V
Sr.
Valdez
ld
G
Grower
W estway Merkuria
Coffee Broker
4.8%
Kraft General Food
Processor
75%
Associated Grocers
Inc.
Grocery
Wholesalers
9%
Bob's Market
Retailer
23%
Mr. & Mrs. Student
Consumer
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Margin
SP to next level
$2/k
$2/kg
Winter term 13/14
..............
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Step 5: The Marketing Mix
■ The four P’s
Product
Place
Price
Promotion
▪ Product:
▪ How does my product fit with my others?
▪ How do I differentiate my product?
▪ How does the PLC affect my plans?
▪ Place - Where to Sell?
▪ What distribution strategy? (exclusive, selective, mass)
▪ Which channels? (product specifics, need for control, margins desired)
▪ Promotion:
▪ Advertising, Personal Selling, Sales Promotion, Public Relations-Publicity, Direct Selling
▪ Price: What should my price be?
▪ Cost Plus, Perceived Value to the Customer, Skimming, Penetration, Price/Quality
p, Meet Competition,
p
, Market Size,, Price Elasticityy
Relationship,
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Step 6: What are the Economics
■ What are the costs?
▪ Fixed or Variable Costs?
■ What is the Break Even?
▪ ”BE is the point at which the costs are recovered from the sale of
goods but no profit is made”
▪ BE Unit Volume = Fixed Costs / Unit Contribution (= Price - Variable
Costs)
▪ Target Volume = ( FC + Profit ) / Unit Contribution
■ How long
g is the p
payback
y
of myy investment?
▪ “How long does it take to get my investment back?”
▪ Payback = Initial Investment / Annual Profit
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The Break Even Point
Total Revenue
Revenue [$]
Total Costs
BE Revenue
Variable Costs
Fixed Costs
BE Sales
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Quantity Sold [t...]
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Step 7: Go Back and Revise the Plan
■ At thi
this stage
t g revisit
i it the
th marketing
k ti g strategy
t t g d
development
l
t
process outlined before:
■ Should another segment be targeted?
■ Is the mail order respectively e-commerce an option?
■ Should I not advertise and rely an a cheap price to move
my product?
■ .....
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