Transcript CHAPTER 6
CHAPTER 6 BUSINESS STRATEGIES BUSINESS STRATEGIES Strategic Planning Strategic Options Global Market-driven Strategies Major Marketing Strategies STRATEGIC PLANNING Core Competency Strategic Alliances Outsourcing Sustainable Competitive Advantage CORE COMPETENCY The activities that an organization has expertise in and performing very well • WalMart •IBM •Pappas IBM STRATEGIC ACTIONS Bought PricewaterhouseCoopers consulting division in 2002 Sold IBM personal computer division in 2005 Reorganized service group in 2005 a) Technical computer services b) Traditional consulting STRATEGIC ALLIANCES A win-win strategy where all parties benefit from the relationship •UH Bauer School and Methodist Hospital •Toyota and Nissan •Busch and Tsingtao Beer OUTSOURCING Corporate Outsourcing Global Outsourcing Microbusiness Outsourcing CORPORATE OUTSOURCING IN THE UNITED STATES 2005 Manufacturing 170 Billion Logistics and Procurement 179 Billion Information/ Technology 90 Billion GLOBAL OUTSOURCING India Dominates Eastern Europe Asia Latin America SUSTAINABLE COMPETITIVE ADVANTAGE Obtaining a competitive advantage over a long period of time •Patents/copyrights •Brand equity •Location PATENTS/COPYRIGHTS Patents and copyrights are monopoly awards given by the government for new technology and innovations • Microsoft Windows •Valium Drugs •Dead Moneymakers LOSS OF DRUG PATENT PROTECTION Company Eli Lilly Drug Prozac Sales Results Yearly sales fell 61% Roche Valium Yearly sales fell 67% DEAD MONEYMAKERS 2003 Celebrity Millions Elvis Presley Charles Schulz J. R. R. Tolkien John Lennon 40 32 22 19 BRAND EQUITY Brand equity is the goodwill of a brand. •Coca Cola •Intel •Toyota LOCATION Location is used as a sustainable advantage, particularly in retailing •Specs Liquor Store •UH Bookstore •Flying J Truck Stops STRATEGIC OPTIONS Contrasting Business Models Strategic Decision Choices SWOT Analysis Changing Business Models CONTRASTING BUSINESS MODELS Traditional Business Model Many Levels of Management Rules are Very Important Focus on Command and Control Entrepreneurial Model Few Levels of Management Rules are Guidelines Focus on Recognition and Response ENTREPRENEUR RULES FOR SUCCESS Focus on the Customer Keep a Short Turnaround Time Always Add Value to the Customer STRATEGIC DECISION CHOICES Maximizing Maximizing is where you are trying to get the one best answer. Satisficing Satisficing is where you are trying to get a satisfactory (best) answer. SATISFICING CONTINGENCIES IN MARKETING Should I introduce a new banking service for immigrants? Should I introduce Blue Bell Ice Cream nationwide? Should “Mattress Mac” change his advertising message on TV? SWOT ANALYSIS Controllable by Management Strengths of the Business Weaknesses of the Business Not Controllable by Management Opportunities Threats CHANGING BUSINESS MODELS Southwest Airline Toyota Dell SOUTHWEST AIRLINE BUSINESS MODEL Use one type of plane - Boeing 737 Avoid hub airports in favor or secondary airports Concentrate on short-haul flights Use low-fare pricing Emphasize no frill service DELL BUSINESS MODEL Minimal R & D No intermediaries Minimize inventory Low operating cost TOYOTA BUSINESS MODEL Faster turnaround time for new cars Outsource manufacturing and assembly Close high cost manufacturing plants Revolutionize traditional inventory and supply chain systems STRATEGIC WEAKNESSES OF GM AND FORD High Labor, Health, and Retirement Costs Obsolete Plants in Detroit High Supply Chain Costs Weak Customer Focus OPERATING COST FOR PERSONAL COMPUTERS Dell 10% H-P 21% Gateway 25% THREATENED BUSINESS MODELS Department Stores Lots of Services Telephone Companies Physical Phone Lines Brokerage Firms Execute Orders Financial Advice GLOBAL MARKET-DRIVEN STRATEGIES Push for Healthy Competition Meaningful Incentives Rules for the System Move To Common Standards PUSH FOR HEALTHY COMPETITION Protect small Japanese retailers from international competition Moscow blocks new Ikea retail store Rewarding family members in Indonesia MEANINGFUL INCENTIVES Reduce the cost of starting a new business in Mexico Change the incentives in U.S. to inflate shortterm profits Cheaper labor costs encourages outsourcing overseas RULES FOR THE SYSTEM Russia Mafia influences Japan Banking off-book losses U.S. CPA auditing rules MOVE TO COMMON STANDARDS English as international business language Common physical measurements Euro monetary system Standard container in global shipping INTERNATIONAL DIFFERENCES Concept Time Measurements U.S. Other Countries 1-12 am 1-12 pm 1:00 - 24:00 Feet Meter Temperature Fahrenheit Centigrade Driving On Right On Left MAJOR MARKETING STRATEGIES Intensive Growth - growth within the organization Concentrated Niche – one target segment Multiple Niches – more than one target segment Market Positioning Multiple Revenue Streams INTENSIVE GROWTH Market Penetration – existing products in existing markets Product Development – new products in existing markets Market Development – existing products in new markets MARKET PENETRATION Use more of the product Cross-sell products/services •Green ketchup •Arm & Hammer baking soda PRODUCT DEVELOPMENT New products New services MARKET DEVELOPMENT Expand from Houston to all major U.S. cities Expand overseas Develop new market for existing products INTENSIVE GROWTH OF BLUE BELL ICE CREAM Market Penetration Increasing share of market for existing products in Houston Product Development Introducing a new line of Diet Blue Bell ice cream Market Development Enter Oklahoma and Kansas with Blue Bell CONCENTRATED NICHE Marketing to one market segment rather than the whole market for a product/service •Cliff Notes •Jolt Soda •Long haul blue jeans MULTIPLE NICHES Marketing to more than one market segment rather than the whole market for a product/service •Procter & Gamble •General Motors •Anheuser – Busch GENERAL MOTORS AUTOMOBILES Chevrolet Cadillac Buick Pontiac Saturn MARKET POSITIONING The perception that a potential buyer has about your product/service versus your competitor’s product/service •Lite beer •Gerber •Barbie doll MULTIPLE REVENUE STREAMS Sterling McCall Wells Fargo Bank Harry Potter STERLING MCCALL TOYOTA MULTIPLE REVENUE STREAMS New automobiles Used automobiles Finance contracts Service department THREATS TO MULTIPLE REVENUE STREAMS Car Max vs. New Car dealers Cartridge World vs. HP cartridge refills Ditech mortgage vs. local home mortgages MARKETING MIX Target Market(s) Product/Service Strategy Distribution Strategy Pricing Strategy Promotion Strategy MARKETING MIX STRATEGIES Girl Scout Cookies Prescription Drugs Long Haul Blue Jeans GIRL SCOUT COOKIES Target Market Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy DRUG COMPANIES MARKETING MIX Product Distribution Promotion Pricing DRUG PRODUCTS Patent Drugs Generic Drugs Over-the-counter Drugs U.S. HEARTBURN DRUGS Drugs Purchase Pattern Cost per pill Sales Prilosec Over-the-Counter $.80 304 Million Prevacid Prescription Only $4.00 2,190 Million Nexium Prescription Only $4.00 2,100 Million LOSS OF DRUG PATENTS Company Drug Sales Results Eli Lilly Prozac Yearly sales fell 61% Roche Valium Yearly sales fell 67% U.S. GENERIC DRUG GROWTH (Share of Market) 1984 19% 2002 47% DRUG DISTRIBUTION Retail Pharmacies Employer Buying Group Medical Insurance Companies Medicare/Medicaid Supermarkets DRUG PROMOTIONS Advertising Personal Selling Sales Promotion ADVERTISING OF PRESCRIPTION DRUGS IN 2003 (Millions) Drug Treatment Advertising Nexium Clarinex Allegra Viagra Lipitor Heartburn Allergy Allergy Impotency Cholesterol 257 129 125 112 109 PRESCRIPTION DRUG ADVERTISING 1996 .8 Billion 2000 2.5 Billion PRESCRIPTION DRUG SALES FORCE 1993 35,000 2003 82,000 PRESCRIPTION DRUG SALES PROMOTIONS Consumers •Drug Coupons •Rebates •Free Samples Doctors •Gifts •Honorarium •Educational Programs DRUG PRICING Antibiotics Claritin tablets Online in Canada PRICING OF PRESCRIPTION DRUGS ANTIBIOTICS (100 Tablets) Branded Product (Abbot) Generic Product (Mylan) Price to Retailer $13.27 $4.75 Price to Consumer $18.93 $10.99 42% 131% Retail Markup PRICES FOR CLARITIN TABLETS Availability Time Period Prescription Only Dec. 1997 Dec. 2002 $2.50 - $3.00 Over the Counter Jan. 2003 May 2003 $0.90 – $1.35 July 2003 $0.40 – $0.50 Generics Enter The Market Price Range ONLINE DRUG PRICES Drug and Purpose U.S. Price Canada Price Lipitor (Cholesterol) $269 $184 Tamoxifen (Breast Cancer) $287 $47 Celebrex $133 $68