Situational Analysis

Strategy formulation SITUATIONAL

ANALYSIS

Strategic planning or long-range planning

(Develops mission, objectives, strategies, policies)

Or

process of finding a strategic fit between external

opportunities and internal strengths while working
around external threats and internal weaknesses
 Situational Analysis

SWOT Criticism
Generates lengthy lists
No weighted priorities
Ambiguous wording
Same factor can be in two categories
No supporting data
Single level analysis
No link to strategy implementation
IFAS Maytag as Example
EFAS Maytag as Example
SFAS Matrix
 Situational Analysis

Niche
Need in the marketplace that is currently
unsatisfied

Corporate Goal
Find propitious niche market segment big
enough for only one company

Strategic window opportunity available

for a limited time
TOWS Matrix
 Business Strategy

Business Strategy
Focuses on improving competitive position of
companys products or services within the
specific industry or market segment
 Porters Competitive Strategies

Competitive Strategy
Lower Cost strategy
Greater efficiencies than competitors
Differentiation strategy
Unique/superior value, quality, features, service

Competitive Scope -
Direct competition
Focus on niche
Porters Competitive Strategies
 Porters Competitive Strategies

Cost Leadership
Low-cost competitive strategy
Broad mass market
Efficient-scale facilities
Cost reductions
Cost minimization
Potential Outcome
Barriers to entry
Higher ROI
 Porters Competitive Strategies

Differentiation
Broad mass market
Unique product/service
Premiums charged
Less price sensitivity
Potential Outcome
Increase Market Share
Higher Profit
Brand as barrier to entry
 Porters Competitive Strategies

Cost-Focus

Low-cost competitive strategy

Focus on market segment/Niche
Geographic
Buyer Group
Cost advantage in market segment
 Porters Competitive Strategies

Differentiation Focus
Specific group or geographic market focus
Differentiation in target market
Special needs of narrow target market
 Porters Competitive Strategies

Stuck in the middle

No competitive advantage
Below-average performance
 Risks of Generic Strategies

Risks of Cost Leadership Risks of Differentiation Risks of Focus

Risks
Cost of CostisLeadership
leadership not Risks of Differentiation
Differentiation is not TheRisks
focus of Focusis
strategy
Cost leadership
sustained: is not Differentiation is not
sustained: The focus strategy is
imitated:
sustained:
Competitors imitate. sustained:
Competitors imitate. Theimitated:
target segment becomes
Competitors
Technology imitate.
changes. Bases
Competitors imitate.
for differentiation The target
structurally segment becomes
unattractive:
Other
Technology
bases forchanges.
cost become
Bases for
lessdifferentiation
important to structurally
Structure unattractive:
erodes.
leadership
Other bases
erode. cost
for become less important to
buyers. Structure
Demand erodes.
disappears.
leadership
Proximity erode.
in differentiation is Costbuyers.
proximity is lost. Demand
Broadly targeteddisappears.
competitors
Proximity
lost. in differentiation is Cost proximityfocusers
Differentiation is lost. Broadly targeted
overwhelm competitors
the segment:
lost.focusers achieve even
Cost Differentiation
achieve focusers
even greater overwhelm
The segmentsthe segment:
Costcost
lower focusers achieve even
in segments. achieve eveningreater
differentiation segments. The segments
differences from other
lower cost in segments. differentiation in segments. differences
segments from other
narrow.
Thesegments
advantagesnarrow.
of a
Theline
broad advantages
increase.of a
broad line
New focusers increase.
subsegment
theNew focusers sub-segment
industry.
the industry.
 Risks of Generic Strategies

Broad versus Focused Strategies

Although there is generally room for only one
company to successfully pursue the mass-
market cost leadership strategy (requires
dominant market share), there is room for an
almost unlimited number of differentiation and
focus strategies (depending on the range of
possible features and market niches).
8 Dimensions of Quality
 Competitive Strategy

Industry Structure
Fragmented Industry
Focus
Consolidated Industry
Cost/Differentiation through service
Move toward commoditization
 Competitive Strategy

Strategic Rollup (industry consolidation)

Involve larger numbers of firms
Acquired firms are typically owner operated
Objective is not to gain incremental advantage but to
reinvent an entire industry
 Competitive Tactics

Tactics
A specific operating plan that details how a
strategy is to be implemented in terms of when
and where it is to be put into action. (Narrower
in scope and shorter time horizons than
strategies)
 Competitive Tactics

Timing Tactics
First mover advantages
Reputation for industry leadership
Cost leadership as product matures
Temporary high profits
10 years for CPG
12 years for Industrial
Late movers advantages
Imitate technology advances
Lower R&D costs
Lower risk
Market segmentation opportunities
 Competitive Tactics

Market Location Tactics -- Offensive

Frontal Assault match the competition

Flanking Maneuver - segmentation
Bypass Attack change the rules
Encirclement - variety
Guerrilla Warfare many small initiatives on
small market segments
 Competitive Tactics

Market Location Tactics -- Defensive

Raise structural barriers

Increase expected retaliation
Lower the inducement for attack
 Cooperative Strategies

Collusion
active cooperation of firms within an industry to
reduce output and raise prices to get around the
economic laws of supply and demand

Implicit or explicit
Generally illegal
 Cooperative Strategies

Strategic Alliances (Why?)

To obtain technology and/or manufacturing
capability
To obtain access to specific markets
To reduce financial risks
To reduce political risk
To learn new capabilities
 Cooperative Strategies

Mutual service consortia

Pooled services within an industry
Joint ventures
Creates an independent entity, allocates ownership,
financial risk and reward (temporary with high failure
rates)
Licensing arrangements
Rights are granted to a firm in another country to
produce or sell products
Value-chain partnerships
Alliances among companies and their suppliers and/or
distributors
 Cooperative Strategies

Continuum of Strategic Alliances

Mutual Service Joint Venture Value Chain

Consortium Licensing Arrangement Partnerships

Weak and Distant Strong and Close

 CHAPTER 6
Strategy Formulation:
Situation Analysis &
Business Strategy

STRATEGIC MANAGEMENT & BUSINESS POLICY

11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
Marketing planning
The business plan has three purposes:
- It serves to develop a strategy
- It serves as the justification of the
budget request
- It provides as an instrument for
monitoring ongoing progress and
making corrections during the plan
implementation period
Marketing planning
A crucial part of every business plan is the marketing
plan
The marketing plan operates at two levels:
Strategic marketing plan
- develops the broad marketing objectives (MO) and
strategy based on an analysis of current market
situation and opportunities
Tactical marketing plan
- outlines the specific marketing tactics for the period,
including advertising, pricing, channels, services etc.
The marketing process
Two views of the value-delivery process
Firm proceeds to make something and
then to sell it traditional view
Marketing at the beginning of the
business planning process present
view
- choosing the value, providing the
value and communicating the value
 Make the Product Sell the Product

Product Design
Procure raw material
Make the Production
Product

Pricing
Sell the Selling
Product
Advertising & Promotion

Distribution

Services
 Provide the Communicate
Choose the value the value
value
Customer Segmentation

Market selection focus

Choose the
value Value Positioning

Product development
Provide the
value Pricing

Distribution

Communicate the Sales Promotion

value
Advertising
The marketing process
Choosing the value
- segment the market,
- select the appropriate market target
- develop the offers value positioning
The formula segment, target and
positioning (STP) is the essence of
strategic marketing
The marketing process
Provide the value
- product development
- pricing
- distribution
Developing specific features of the
product, prices and distribution are part
of tactical marketing
The marketing process
Communicate the value
- inform the market about the offer
- sales promotion
- advertising
- other promotional tasks
The marketing planning
process
The marketing planning process consists
of
analyzing market opportunities,
selecting target markets,
designing market strategies,
planning marketing programs,
organizing, implementing and controlling
marketing efforts
The marketing planning
process
Analyzing market opportunities
- analyze long run opportunities in the market for
improving the performance
Tools:
- reliable market information system
- marketing research (customers needs, their
locations, buying practices etc)
- understanding company micro environment
(suppliers, market intermediaries, customers, and
competitors) and macro environment (demographic,
economic, social/cultural, technological, political and
legal forces)
The marketing planning
process
- Analysis of consumer market (how
many potential consumers, who buys,
why do they buy, what are their
preferences, where do they buy,
frequency of buying)
- competitors analysis
The marketing planning
process
Selecting target markets
- measure and forecast the
attractiveness of any given market
(estimating market size, growth,
profitability and risk)
- market segmentation
The marketing planning
process
Designing marketing strategies
- differentiating and positioning market
- new product development, testing and
launching
- new product strategy will have to be
modified at the different stages in the
product life cycle (introduction, growth,
maturity and decline)
The marketing planning
process
Planning marketing programs
- making basic decisions on marketing expenditures,
marketing mix, and marketing allocation
- what level of marketing expenditure is necessary to
achieve its marketing objectives? (marketing budget
to sales ratio)
- how to divide the total marketing budget among
the various tools in the marketing mix?
- allocation of marketing budget to the various
products, channels, and markets?
The marketing planning
process
Organizing, implementing and
controlling marketing efforts
- Organizational set up for
implementing the marketing plan
- feedback procedures
- control mechanisms (annual plan
control, profitability control, strategic
control)
The marketing planning
process
Annual plan control
- divide the well defined goals in the
annual plan for each month or quarter
- measure ongoing performance in the
market
- determine the causes of any serious
performance gaps
- choose corrective actions
The marketing planning
process
Profitability control
- measuring actual profitability of
products, customers groups, trade
channels, and order sizes
- profitability of different marketing
activities
- how various marketing activities could
be carried out efficiently?
The marketing planning
process
Strategic control
- evaluating whether the companys
marketing strategy is still appropriate to
the market conditions?
- marketing audit
Components of marketing plan
Sl Section Purpose
I Executive summary Presents a brief overview of the proposed plan
for quick grasp for management
II Current marketing situation Presents relevant background data on the
market, product, competition, distribution and
macroeconomic environment
III Opportunity and issues Swot analysis & major issues for the product
IV Objectives Defines the goals the plan wants to reach
(sales volume, market share, profit)
V Marketing Strategy Presents the broad marketing approach to be
used to achieve the objectives
VI Action programs Answers like what will be done, who will do,
when it will be done, how much it will cost
VII Profit and loss statement Forecast the expected financial outcomes

VIII Controls Indicate how the plan will be monitored