Transcript Basic Strategies

Strategy
Strategy and Tactics differ mainly around
time scale.
In Foundation®, a 5-8 year Strategy is supported with
annual tactical decisions.
Strategic Plan might consist of:
1) Vision or Mission Statement
2) S.W.O.T. Analysis (or Environmental and Internal scans)
3) Tactical and Functional Area Plans
Introduction
A strategy is one of four
organizational time drivers.
Mission Statement
(timeless)
Strategy
(3-5 years)
Operational Intents
(1 year)
Tactics
(Day to day)
TIME IN YEARS
CAPSTONE STRATEGIES
STRATEGY
Mission Statement
PERFORMANCE
ASSESSMENT
Success Measurements
Analyst Report
Round Analysis - Star
Summary
 Strategies are declared in
corporate mission
statements
 Foundation firms may
develop and execute any
INDUSTRY AND MARKET
ANALYSIS
strategy (or none at all S.W.O.T Analysis
though that isn’t advisable).
Competitor Analysis
Competitive Analysis
Basic strategies include:
 Overall Cost Leader
 Cost Leader with Focus
(Low Tech or Product
FUNCTIONAL PLANNING
Life-Cycle)
R&D
 Differentiator
Marketing
Production
 Differentiator with Focus
HR
Finance
(High-Tech or Product
TQM
Life-Cycle)
BUSINESS STRATEGY CONCEPTS
 Strategy is the comprehensive plan that
states how a corporation will achieve its
mission and objectives
 Many different theories on strategies
 This game uses theories of Michael
Porter
BASIC CONCEPTS
 Product life cycle
Concept of how a product moves through
four stages of “life”
Introduction
Growth
Maturity
Decline
For game, it reflects a product moving
through perceptual map
 Niche market
 focused part of a market - limited and
clearly defined range of products is sold to
specific group of customers
An example for the cleaning industry would
be a window cleaning service or a cleaning
service for people with pets
Game allows sales to only low tech or high
tech market
 Competitive advantage
Something your firm is perceived to do
better than another firm
Porter identified two types:
Cost advantage – you can deliver similar
benefits to consumers at a lower cost than
other firms
Differentiation – you can deliver benefits that
exceed other firms
Capstone Strategies
The Situation Analysis generated an overview of the forces at
work within the Foundation® market place.
Now you must decide how to use that information to gain a
competitive advantage.
There are many different combinations of the basic ideas
covered. All can be successful depending on how well they
are implemented tactically.
BROAD COST LEADER
An overall cost leader will attempt to be the low-cost
producer in both segments of the market. They will
have good profit margins on all sales while keeping
prices low.
 Firm Profile:
R&D
 More likely to revise products than introduce new ones
to the market
Marketing
Prices will be below average
Tend to spend less on promotion and sales
Production
 Capacity improvements are unlikely to
be undertaken (may run overtime instead)
Automation may be pursued to increase
margins
Finance
Investments will be financed primarily with
debt
NICHE COST LEADER (LOW TECH FOCUS)
A low-tech focused cost leader seeks to
dominate the low-tech market segment.
Their aim is to set prices below all
competitors - and still be profitable.
 Firm Profile:
R&D
Multiple product lines in the low-tech segment
Marketing
Spend heavily on promotion (less on Sales
as staff has more than one product to pitch
to prospects)
Prices lower than average
Production
Invest heavily in automation
Finance
Investments financed primarily with debt
COST LEADER WITH PRODUCT LIFE-CYCLE FOCUS
 Seek to minimize costs through efficiency
and expertise. Products will be allowed to
age and change in appeal from high-tech
to low end buyers.
 This saves cost of constant R&D
Firm Profile:

R&D




Marketing


Low R&D spending
very little re-positioning
introduce new product every 2-3 years in High Tech
High spending on promotion and sales
Production

Invest in automation early in the product’s
life-cycle

Finance

Primarily finance with long-term debt
BROAD DIFFERENTIATOR
A Differentiator will seek to create maximum
awareness and brand equity. They want to be well
known as makers of high quality/highly desirable
products.
 Firm Profile:
R&D
High R&D spending to keep products fresh
Introduce a new product line to meet need in
both markets
Marketing
Spend heavily on advertising and sales to
create maximum awareness and
accessibility
Prices will be higher (premium product)
Production
Increase capacity
Slight increases in automation if it doesn’t
take away from R&D
Finance
Prefer to finance with stock/operations and
avoid debt
NICHE DIFFERENTIATOR (HIGH-TECH FOCUS)
A high-tech differentiator seeks to be known far
and wide as the top producer of the best
performing state-of-the-art products.
 Firm Profile:
 R&D
Multiple product lines in high-tech segment
Minimum focus in low-tech segment
High R&D expenditures to continually
introduce new product lines and keep existing
products fresh
Marketing
High promotion and sales investments to
create maximum awareness and
accessibility
Premium price
Production
Increase capacity to meet demand
Unlikely to invest in increased automation
Finance
Finance through stock issues and cash
DIFFERENTIATOR WITH PRODUCT LIFE-CYCLE FOCUS
A product life-cycle differentiator seeks to be wellknown as a top producer of good performing products
in each of the targeted segments.
 Firm Profile:
R&D
Multiple product lines in both segments
High R&D expenditures to continually reposition product lines as they transition from
high-tech to low-tech
Marketing
High promotion and sales investments to
create maximum awareness and
accessibility
Premium price
Production
Increase capacity
Unlikely to invest in increased automation
Finance
Finance through stock and cash
Strategies Evolve
Today’s shift is
tomorrow’s
nightmare
• Poor tactics undermine a good strategy
• Good tactics can overcome a poor strategy
SUMMARY
There is no "magic bullet," guaranteed winning
strategy. Each simulation has a unique
competitive dynamic.
 Successful firms will focus on planning,
strategic alignment, teamwork, competitor
analysis, and tactical adjustments.
 Strategy help available at capsim.com
in the Help, Student Resources, Online
Managers’ Guide or Tutorials & Demos