Where do we go?How do we get there?

High

High

Low

Low

Customer valueOuter productivity‘Doing right things’

ProfitabilityInner productivity

‘Doing things right’

Corporate strategy◦ Lever brother’s strategy

Business strategy◦ Lever brother’s shampoo division’s strategy in Pakistan

Operational strategy◦ Strategy for the day to day running of a business

Functional strategies◦ marketing strategy

How marketing is going to help achieve the business strategy

◦ technology strategy How technology helps

◦ competitive Strategy Who else is doing it and how do we survive?

Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price.

There are two basic types of competitive advantage: cost leadership and differentiation.

Michael Porter, Competitive Advantage, 1985, p.3

- Operational efficiency- Do it better. Optimize the supply chain, buy new machines, fire people, acquire competition

- Customer Intimacy- People pay better if they know and trust you

- Product Leadership- Constantly creating new products to avoid competition

Top Managers

Middle Managers

Supervisors and Employees

Implementationof strategy

Strategy

Goal Goal Goal

Actions

Emergent strategy

How to read, analyze and understand the environment?PEST –analysisSWOT –analysisPorter’s Five Forces Analysis

Political Factors.The political arena has a huge influence upon the regulation of

businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your

business?3.What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU,

NAFTA, ASEAN, or others?

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

1. Interest rates.2. Inflation 3. Employment level per capita. 4. Long-term prospects for the economy 5. Gross Domestic Product (GDP) per capita, and so

on

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

1.What is the dominant religion? 2.What are attitudes to foreign products and services? 3.Does language impact upon the diffusion of products onto

markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within society? 6.How long are the population living? Are the older generations

wealthy? 7.Do the population have a strong/weak opinion on green issues? http://www.statpak.gov.pk/depts/pco/statistics/

demographic_indicators98/demographic_indicators.html

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

Strength: attributes of the organization that are helpful to achieving the objective.

Weaknesses: attributes of the organization that are harmful to achieving the objective.

Opportunities: external conditions that are helpful to achieving the objective.

Threats: external conditions that are harmful to achieving the objective.

Resources: financial, intellectual, locational Customer service Efficiency Competitive advantages Infrastructure Quality Staff Management Price Delivery time Cost Capacity Relationships with key industry customers Brand and Reputation in the Market Local Language Knowledge Brand Names Ethics Environment

Political/Legal Market Trends Economic condition Expectations of stakeholders Technology Public expectations Competitors and competitive actions

Internal analysis

Strengths Weaknesses

External

Analysis

Opportunities

S-O-Strategies:Develop new methods which are suitable to the company's strength.

W-O-Strategies:Eliminate weaknesses to enable new opportunities.

ThreatsS-T-Strategies:Use strength to defend threats.

W-T-Strategies:Develop strategies to avoid weaknesses that could be targeted by threats.

New Entrants

BuyersSuppliers

Substitutes

IndustryCompetitors

Intensityof Rivalry

Threat ofSubstitutes

Threat ofNew Entrants

Bargaining Powerof Suppliers

Bargaining Powerof Buyers

Determinants of Buyer Power

Bargaining Leverage• Buyer concentration vs. firm concentration• Buyer volume• Buyer switching costs relative to firm switching costs• Buyer information• Ability to backward integrate• Substitute products• Pull-through

Price Sensitivity• Price/total purchases• Product differences• Brand identity• Impact on quality/ performance• Buyer profits• Decision maker’s incentives

Determinants of Substitution Threat• Relative price performance of substitutes• Switching costs• Buyer propensity to substitute

Rivalry Determinants• Industry growth• Fixed (or storage) costs / value added• Intermittent overcapacity• Product differences• Brand identity• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers

Entry Barriers• Economies of scale• Proprietary product differences• Brand identity• Switching costs• Capital requirements• Access to distribution• Absolute cost advantages Proprietary learning curve Access to necessary inputs Proprietary low-cost product design• Government policy• Expected retaliation

Determinants of Supplier Power• Differentiation of inputs• Switching costs of suppliers and firms in the industry• Presence of substitute inputs• Supplier concentration• Importance of volume to supplier• Cost relative to total purchases in the industry• Impact of inputs on cost or differentiation• Threat of forward integration relative to threat of backward integration by firms in the industry

Structural analysis within industries (???)Industry evolution:

Fragmented Industries

No form has significant market share that can strongly influence the industry outcome

Emerging industries

No rules of the game. Great uncertainty and great change

Mature Industries

Slow growth, selling to repeat buyers, greater emphasis on cost, core business processes are undergoing change, Industry profits decrease

Declining industries

An absolute decrease in unit sales over a sustained period of time.

Competitive analysis◦ What drives the competitor◦ What is the competitor doing and what can he do?

Market signals◦ Announcements, after the fact analysis and discussions

reveal the competitors true intentions Competitive moves

◦ Threatening moves: A competitor must predict and influence retaliation

◦ Perceptual lag◦ Retaliation lag◦ Conflicting goals: Retaliation can hurt the company itself◦ Denying a base: ◦ Commitment: cornerstone of defensive strategy

Product

◦ Positioning, is it differentiated enough to stand against competition

◦ What kind of Brand Equity does the product hold up?

◦ Does it fit in with what the company does? Or is known to do? (Packaging issues)

The right goal: Superior long term ROI. ◦ Don’t define goals in terms of market shares

A clear value preposition: ◦ A set of benefits that different from those of any

competitor Strategy needs to be reflected in a distinctive value chain

◦ A company must perform different activities than rivals, or perform the same activities differently.

Trade-off:◦ Company must abandon or forego products or services or

activities in order to be unique at others. Fit:

◦ Rivals can copy individual activities but not a set of reinforcing activities is much harder to copy

Continuity:◦ Frequent “Reinvention” is a sign there is no strategy at

all

IT (or technology) Strategy

Technology strategy is a planning document that explains how information technology should be utilized as part of an organization's overall business strategy.

Executive Summary - single page summary of the IT strategy

◦ High level organizational benefits ◦ Relationship to overall business strategy ◦ Resource summary

Staffing Budgets Summary of key projects

Internal Capabilities ◦ IT Project Portfolio Management - An inventory of current projects

being managed by the information technology department and their status. Note: It is not common to report current project status inside a future-looking strategy document.

◦ Current IT departmental strengths and weaknesses

External Forces ◦ Summary of changes driven from outside the organization ◦ Rising expectations of users

Example: growth of high-quality web user interfaces driven by Ajax technology Example: Availability of open-source learning management systems such as

Moodle

◦ List of new IT projects requested by the organization

Opportunities ◦ Description of new cost reduction or efficiency

increase opportunities ◦ Description of how Moore's Law (faster processors,

networks or storage at lower costs) will impact the organizations ROI for technology

Threats ◦ Description of disruptive forces that could cause the

organization to become less profitable or competitive ◦ Analysis IT usage by competition

Milestones ◦ List of monthly, quarterly or mid-year milestones and

review dates to indicate if the strategy is on track ◦ List milestone name, deliverables and metrics

IT INDUSTRY LANDSCAPE◦ Business Consulting (not strictly IT) Product vendors

◦ Product Sales teams◦ Product Resellers◦ Implementation partners = SIs◦ OEM builders Services (SIs)

◦ Training◦ Technology Consulting◦ Support and maintenance

CUSTOMER IT DEPARTMENTS◦ In house◦ Highly Outsourced

Software packed with hardware◦ Embedded◦ Telecom?◦ Standard based software

Hosted services◦ ISPs, ASPs (Salesforce.com)

- Xavor and a Product Vendor?- Xavor and an in-house IT Department (they are competition)

XAVOR SPECIFIC ANALYSIS

◦ What’s Xavor’s value preposition?◦ What isn’t Xavor doing?

- What distinguishes Xavor from an in-house development setup?