Competitive advantage Description of the Model This matrix examines how an organization might gain a competitive advantage. It measures relative costs and the degree to which the organization can differentiate its products/services from those of its competitors. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: ability to create barriers to entry market prominence & tenure brand recognition product uniqueness pricing & benefits switching costs distribution channels You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Companies that don't take steps to realign their offerings with market demand risk failure. Those who address the issue -- usually by breathing new life into their business model -typically see an increase in revenue by attracting new customers and offering new value to current customers. Statistics show that business model innovators see operational margin growth of more than 5X that of competitors who only practice product or service innovation. Competitive advantage Maintain Specialty Differentiation: High Relative costs: High Analysis of Your Enterprise Position Outstandin Hope for Growth Market g Success Differentiati Differentiation: Low on: High Relative costs: High Relative Costs: Low Indicates a specialty company Outstanding You have high costs and a that markets unique products at opportunity commodity type of product. premium price. for success. The only hope for success is Freedom to rapid growth of the market. compete at any price. Maintain Cost Advantage Differentiation: Low Relative costs: Low Your products or services are much like your competitors'. If you can maintain your cost advantage, you can compete well as the lowest cost producer. Potential Generic Strategies Description of the Model This chart graphically displays the potential for your enterprise to implement each of the generic strategies. Characterize Your Enterprise The expert system will position your enterprise based upon your description of: market segmentation product differentiation distribution channels enterprise reputation relative pricing cost controls economies of scale You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Potential Generic Strategies A COST LEADERSHIP STRATEGY is based on the enterprise's ability to control their operating costs so well that they are able to price their products or services very competitively and still generate high profit margins, thus having a significant competitive edge. A DIFFERENTIATION STRATEGY involves the offering of a product or service that is clearly unique when compared to alternatives. Uniqueness can take many forms such as brand image, technology, functionality, customer service, dealer networks and many others. It is likely that differentiation will involve a combination of two or more of these forms. A FOCUS STRATEGY may be the most sophisticated of the generic strategies, in that it is a more intense form of either the cost leadership or differentiation strategy. It is designed to address a focused segment of the marketplace, product form or cost management process and is usually employed when it isn't appropriate to attempt an across the board application of cost leadership or differentiation. It is based on the concept of serving a particular target in such an exceptional manner, that others cannot compete. Usually this means addressing a substantially smaller market segment than others in the industry, but because of minimal competition profit margins can be very high. Strategic Factors Description of the Model Characterize Your Enterprise This is a graphical display of strategic factors. The strongest The expert system will position your enterprise on the chart enterprise would have all points at the outer limit of the chart. based upon your description of: market penetration Each factor is rated between zero and one hundred. To have a demographic trends reasonable chance for successful implementation of your marketing strategy, each of the strategic factors should have a price sensitivity rating of 70 or higher. product differentiation competitor's staying power proprietary technology competitive rivalry You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Environmental Factors Description of the Model This chart presents the assessment of the environmental factors on your product or service. The higher the rating (all points near the outer extent of the chart), the more positive is the factor for your business. You should study the weak areas carefully and plan alternative actions to lessen their impact on your plans. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: competitive alternatives government regulations fashion trends changes in income levels changes in average age You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Environmental Risk Matrix Description of the Model This matrix illustrates the relationship between the risk of environmental forces affecting a business area and the other factors affecting the prospects for developing and maintaining long-term profits. The prospect for profitability is based on factors including: the bargaining power of buyers the bargaining power of suppliers the threat of new entrants the threat of substitutes the competitive rivalry among existing firms in the industry Characterize Your Enterprise The expert system will position your enterprise on the chart based upon environmental factors: economic cultural technology demographic government You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Tendency to Buy Description of the Model Buying decisions are influenced by many factors. Two of the most important factors are the nature of the product itself and the extent to which the customer knows and trusts the supplier. This chart illustrates the relationship between these factors as it relates to you and your competitors. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: product features proprietary technology performance advantages awareness of need You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Tendency to Buy Promotion Well-known Company Me-too Product Your company is well known but your product offers little differential advantage over its competition. The success you can expect will depend largely on your skills in sales and your efforts in the general promotion of your product. Analysis of Your Enterprise Position You Have It Made Focused Differentiation Well-known Company Unknown Company Unique Product Me-too Product This quadrant implies success. Most of your customers will re-buy from you most of the time if you fall into this category. Most customers will not buy from you. Your best chance for survival is to differentiate your product to make it attractive for some sub-group of customers. It is going to be difficult. Advertising Unknown Company Unique Product Customers are suspicious about dealing with companies which are unknown even if they have superior products. Your success depends on the impact that sales and advertising make on your image. You must focus your efforts in these areas of marketing to be successful. Price Sensitivity Description of the Model This is a two-dimensional grid that focuses on the choice between reducing costs or building in more value to the customer. Each of the four quadrants has different implications in terms of suggested strategy. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: product quality product availability prospect knowledge level buyer objectives You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Price Sensitivity Analysis of Your Enterprise Position Commodity Transitional Hybrid Specialty High Price Sensitivity Few Perceived Differences High Price Sensitivity Low Price Sensitivity Low Price Sensitivity Many Perceived Few Perceived Many Perceived Differences Differences Differences A commodity strategy is recommended. Efforts should be exerted to increase the firm's market share thereby lowering marginal costs. A transitional strategy A hybrid strategy is is suggested. recommended. You Emphasize the should avoid price quality of your wars and talk product, but be ready quality. to respond to competitor product improvements that attract customers. A specialty strategy is recommended. You should initiate or continue efforts to differentiate your offering. Product & Market Change Description of the Model The form of your product or service and the makeup of your prospect base will influence how you structure your promotion. If you are offering an improved version of the same product or service to the same customer/prospect base then no changes should be required. On the other end of the spectrum, a new product or service going to a new prospect base calls for a new and innovative approach to promotion. In between circumstances require a more subtle approach to promotional changes. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: product function buyer history You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Product & Market Change Analysis of Your Enterprise Position Brand Repositioning The product remains the same, but is now offered to a new market. There will be new competitors and a new marketing mix. Product Repositioning The product is changing, and is now offered to a new market. There will be a new appearance, new features and benefits and new competitors. Innovation This is the most complex change. New technology, new price, new promotion, and new competitors call for new strategy. Re-market Re-launch The product remains the same, Change the name, appearance, but the marketing mix, price, costs and the marketing mix. and promotion are re-blended. Obvious Substitution The new product appears in a conspicuous manner drawing attention to new technology and materials. Change the name, appearance, costs and the marketing mix. No change Neither the product or market is changing. Maintain the status quo. Quiet Substitution No change in marketing. The new product creeps quietly into the market without fanfare. Face lift No change in marketing, but changes in the product must provide greater competitive advantage. Industrial Decision Making Description of the Model In industrial markets two of the important criteria controlling the decision cycle are the complexity of the offering and the risk associated with the purchase decision. This chart examines the relationships between these variables and indicates the implications to the seller. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: degree of risk to buyer technical content variety of options support required training required You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Industrial Decision Making Analysis of Your Enterprise Position Functional Specialist Large Decision Making Unit Purchasing Manager Financial Staff High Complexity High Complexity Low Complexity Low Complexity Low Risk High Risk Low Risk High Risk Where there is significant When both the complexity and the In the case where there is When the complexity of the complexity to understand but little commercial risk are high, a number little product complexity to offering is low but the overall commercial risk in the of key people throughout the understand and absorb and commercial risk is high the purchase decision process, a customer's company will have to be there is little risk associated purchase decision is usually functional specialist generally satisfied that the purchase will be with making an incorrect given to either the purchasing makes the decision. This is the beneficial. The decision making decision, the purchasing function or the senior person who is most conversant with unit is likely to be large and the manager generally handles financial staff. Efforts must the technology employed in the process is likely to be lengthy. the purchase decision by be focused at reducing the offering. Sales activities should be Generally there must be sales himself. Here, past perceived commercial risk for focused on the technical side and be efforts focused at each of the major experience is the most crucial these personnel. prepared to point out the groups represented in the process; factor. It is critical here to be differential advantages of your at the executive, financial and in front of purchaser at every offering. technical levels to insure that their opportunity through needs and concerns are addressed. advertising, promotion, and sales calls. Make sure your offering is readily available through all possible sources and channels so that the purchaser can gain easy access to it. Product Life Cycle Description of the Model This chart illustrates the value of customer loyalty in markets with different levels of growth. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: visibility in the industry complementary products buyer non-price objectives stage of the market cycle You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Product Life Cycle Analysis of Your Enterprise Position Develop Loyalty Maintain Loyalty Specialist Company Try Not to Lose It High Market Growth High Market Growth Low Market Growth Low Customer High Customer Low Customer Loyalty Loyalty Loyalty Low Market Growth High Customer Loyalty There are clear longterm advantages to developing customer loyalty in this quadrant. Your actions should be focused at the efforts required to secure this loyalty. Some customers are very loyal to their suppliers. If you have developed their trust and support, even in a low-growth market, take care not to do anything to lose that loyalty. The market is probably mature, so do not overspend in this environment. This quadrant indicates success. You should be reaping the rewards of customer loyalty. However, you should continue to work to maintain that loyalty. You should not become complacent. The low market growth makes it questionable for you to spend resources in building customer loyalty. If you are a specialist company or are in the embryonic stage of a market, your efforts may be justified. Capacity & Propensity to Attack Description of the Model Competition can offer benefits as well as threats to your participation in the industry. Competition may actually increase your competitive advantage by providing such benefits as a cost umbrella. They can assist in market development activities, and thereby increase the overall demand for your offering. Their actions may also deter new market entrants by crowding distribution channels thereby allowing you higher margins. Competitors can also threaten your position by attacking your offerings and your moves in the market. This chart presents your competitors as being threats or benefits to your efforts. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: share of market market growth rate competitor's staying power liquidity exit barriers You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Capacity & Propensity to Attack Analysis of Your Enterprise Position Disruptive Dangerous No Threat Good Competitors Low Capability High Propensity to Attack High Capability Low Capability High Propensity to Attack Low Propensity to Attack High Capability Low Propensity to Attack While lacking the capability to improve the industry structure, these competitors can be highly disruptive to your activities. They may counter your moves and be a continual annoyance. These are the competitors Competitors in this that are truly dangerous to quadrant are neither a your position. They threat nor a benefit. posses both the capability Their efforts do not to attack and often enhance the industry demonstrate that behavior. because of their limited You should attempt to capability. On the other position yourself away hand, they do not from these participants. threaten your position. Select other segments, distribution channels, pricing and packaging alternatives to create as much distance as possible. These competitors can be good to the industry structure. They are highly capable, but are not prone to capricious acts which damage the industry and your position. Their capability will clearly offer a challenge to your efforts and will keep you honest. Sales Volume Description of the Model Characterize Your Enterprise This chart displays the projected revenue for Financial information is entered directly your enterprise and all of the named and the chart is drawn automatically. competitors over the five year planning period. Product Market Profitability Description of the Model Profit Impact of Market Studies (PIMS) research has shown that there is a clear relationship between profitability, market share, and product quality. Here we consider quality of all aspects of your offer. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: performance durability If customers perceive the offering as being of higher quality, they are prepared to pay more for it. This matrix displays this relationship. conformance to specifications features brand recognition reliability fit and finish serviceability You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Product Market Profitability Analysis of Your Enterprise Position 40$ ROI 20% ROI 20% ROI Low Return High Market Share High Product Quality High Market Share Low Product Quality Low Market Share High Product Quality Low Market Share Low Product Quality Your offering is in the best quadrant. Companies which are able to combine high product quality with high market share average around 40 percent return on investment. Your offering is in the quadrant that averages about 20 percent return on investment. These profits probably result from low costs as a result of economies of scale made possible by the high market share. Products in this quadrant are often oriented to a mass market and are generally quite difficult to differentiate. The principal criteria for purchase is price. Your offering is in the group that averages a 20 percent return on investment. Although you have a low market share, customers are willing to pay a higher price for the product. Your offering is in the quadrant where profitability is generally very low. Both market share and product quality are below average. Companies in this quadrant generally consider withdrawing their offering and making investments elsewhere. Boston Consulting Group Matrix Description of the Model One axis shows the market share relative to the industry leader which is always the leftmost circle. The other axis shows market growth rate for the industry. A circle is drawn for each competitor. The size of each circle represents that company's dominance. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: share of market condition of the market You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Boston Consulting Group Matrix Analysis of Your Enterprise Position Stars High growth High share Cash Cows Low growth High share Question Marks High growth Low share Dogs Low growth Low share Business is likely to Business can be used Business requires a Business is a cash trap. generate enough cash to support other lot of cash to maintain focus on short term to be self sustaining. business units. market share. avoid risky project Recommended defend & invest more cash limited future tactics: maintain or, divest promote aggressively expand your product or service invest in R & D Product Competitive Position Description of the Model This graph compares the attributes of your offering with the best of your competition in each category. Ideally the display for your product will form a circle around the extremes of the graph. This evaluation will force you to consider the strength of each of the competitive offerings and how you must position your offering to face them. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: distribution channels product quality product performance product features relative pricing You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Industry Attractiveness Description of the Model This industry model was initially described by Michael Porter in his book, Competitive Strategy. It addresses the key factors that influence industry profitability. The ideal position would be the outer edge of each axis. Any point on the scale where your enterprise ranks higher than all competitors represents a market opportunity. Any competitor positioned higher on the scale represents a threat. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: switching costs economies of scale barriers to entry substitutes shopping costs differentiation capacity You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Marketing Strategy Matrix Description of the Model The General Electric Company, with the aid of the Boston Consulting Group and McKinsey and Company, pioneered the nine cell strategic business screen illustrated here. The circle on the matrix represents your enterprise. Both axes are divided into three segments, yielding nine cells. The nine cells are grouped into three zones: The Green Zone consists of the three cells in the upper left corner. If your enterprise falls in this zone you are in a favorable position with relatively attractive growth opportunities. This indicates a "green light" to invest in this product/service. Characterize Your Enterprise The vertical axis represents the industry attractiveness. The expert system will position your enterprise on the chart based upon your description of: bargaining power of the buyers bargaining power of the suppliers internal rivalry the threat of new entrants the threat of substitutes The horizontal axis represents the firm's competitive strength or ability to compete in the industry. It includes an analysis of: the value and quality of the offering market share staying power experience You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. A position in the yellow zone is viewed as having medium attractiveness. Management must therefore exercise caution when making additional investments in this product/service. The suggested strategy is to seek to maintain share rather than growing or reducing share. The Red Zone consists of the three cells in the lower right corner. A position in the red zone is not attractive. The suggested strategy is that management should begin to make plans to exit the industry. Marketing Strategy Matrix High Attractiveness Strong Competitive Position The strategy advice for this cell is to invest for growth. Consider the following strategies: provide maximum investment Analysis of Your Enterprise Position High Attractiveness Average Competitive Position The strategy advice for this cell is to invest for growth. Consider the following strategies: build selectively on strength Low Attractiveness Strong Competitive Position The strategy advice for this cell is to selectively invest for earnings. Consider the following strategies: defend strengths Low Attractiveness Average Competitive Position The strategy advice for this cell is to restructure, harvest or divest. Consider the following strategies: make only essential commitments shift resources to attractive segments prepare to divest examine ways to revitalize the industry shift resources to a more attractive segment time your exit by monitoring for harvest or divestment timing High Attractiveness Weak Competitive Position The strategy advice for this cell is to opportunistically invest for earnings. However, if you can't strengthen your enterprise you should exit the market. Consider the following strategies: diversify define the implications of challenging for market ride with the market growth leadership consolidate your position to focus your resources seek niches or specialization fill weaknesses to avoid vulnerability accept moderate near-term profits to build share seek an opportunity to increase strength through acquisition Medium Attractiveness Medium Attractiveness Medium Attractiveness Strong Competitive Position Average Competitive Position Weak Competitive Position The strategy advice for this cell is to selectively invest The strategy advice for this cell is to selectively invest The strategy advice for this cell is to preserve for harvest. for growth. Consider the following strategies: for earnings. Consider the following strategies: Consider the following strategies: invest heavily in selected segments, segment the market to find a more attractive act to preserve or boost cash flow as you exit the position business establish a ceiling for the market share you wish to achieve make contingency plans to protect your seek an opportunistic sale vulnerable position seek attractive new segments to apply strengths seek a way to increase your strengths Low Attractiveness Weak Competitive Position The advice for this cell is to harvest or divest. You should exit the market or prune the product line. Directional Policy Matrix Description of the Model This matrix measures the health of the market and your strength to pursue it. The results indicate the direction for future investment. The recommendation may be to invest, grow, harvest or divest. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: Supplier Bargaining Power Threat of Substitutes Threat of New Entrants Competitive Rivalry Buyer Bargaining Power Product Quality Product Value Relative Market Share Reputation Customer Loyalty Staying Power Experience You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Directional Policy Matrix Analysis of Your Enterprise Position Invest Grow Harvest Divest High Market Attractiveness High Business Strengths High Market Attractiveness Low Business Strengths Low Market Attractiveness High Business Strengths Low Market Attractiveness Low Business Strengths This is the ideal quadrant. Your strengths are directed at a highly attractive market. Invest your best resources in those parts of your business which are in this quadrant. You are in an uncomfortable quadrant. The market potential is attractive but you do not have the business strengths necessary for being really successful. The options facing you are either to take what you can while it is still possible or to invest in building a better competitive position. You must be selective in your efforts here, as this segment will cost you to invest in every aspect of the business. In this quadrant you have high strengths in a market that has lost its attractiveness in terms of future potential. It is still good for near term profits, so maintain the position for as long as possible. Think carefully about what you are doing to be in this quadrant. The market is not particularly attractive and your business strengths are below average here. Keep in this segment only if it supports a more profitable part of your business (for instance, if this segment completes a product line range) or if it absorbs some of the overhead costs of a more profitable segment. Business Risk Analysis Description of the Model The concepts of closeness to the core business and market attractiveness can be combined to analyze the risk of investing in new offerings. The proximity of the new offering to the core business is measured by its proximity to current offerings and current markets. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: technology familiarity with the materials special finishes quality standards suppliers bargaining power threat of substitutes threat of new entrants competitive rivalry bargaining power of the buyers You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Business Risk Analysis Analysis of Your Enterprise Position Ideal Risky Low Potential Poor Prospect Close to Core Business Distant from Core High Market Business Attractiveness High Market Attractiveness Close to Core Business Distant from Core Low Market Business Attractiveness Low Market Attractiveness Offerings in this category represent the least risk and will be ideal candidates for development. The decision to proceed Offerings in this should be based on the quadrant are poor evaluation of the prospects. They depart market potential. The from the core business low attractiveness of and offer low market the market may be a attractiveness benefit since it will be less lucrative for competitors. Offerings in this quadrant are risky to develop since they stray from the core business. They will need a high level of investment, both in terms of resources and expertise. Proceed only if the long-term corporate strategy is intended to develop in this way. Market Forces Description of the Model This chart portrays the interaction between three of the five forces from the Industry Attractiveness chart. If the prospect is in a position to dictate the terms under which they purchase your product or service and there is also a high probability of new competition or substitute products then it will be difficult to be profitable. As either or both of these forces is weakened, your potential for profitability increases. Characterize Your Enterprise The expert system will position your enterprise on the chart based upon your description of: switching costs economies of scale barriers to entry distribution channels differentiation You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise. Internal Factors Description of the Model Characterize Your Enterprise This is a graphical display of critical internal The expert system will position your enterprise operations factors. The strongest enterprise would have on the chart based upon your description of: all points at the outer limit of the chart. Each factor is rated between zero and one hundred. To have a reasonable chance for successful implementation of your marketing strategy, each of the internal factors should have a rating of 70 or higher. market prominence distribution channels service history production experience complexity of technology economiebargaining power of suppliers s of scale You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your description accurately characterizes your enterprise.