1. Strategic Marketing 052 430 Instructor: Michael Cooke
Address:
Office: IC room 817
Class hours: Friday 13:00-16:00
Class Location: IC room 806
Web: home/kku.ac.th/michco

2. Rebranding a Country

3. Rebranding a Country

4. Quiz: Pass/Fail = 50%
Which of the following are not elements of strategy:
A) Resources
B) Goals
C) Plans
D) All are elements of strategy
2. Intuition is:
A) Most reliable when based on long experience
B) Can not be used with rigorous analysis
C) Never wrong
D) Useless when thinking about strategy
3. Business goals and priorities are theoretically decided by:
A) Partner owners
B) Proprietor owners
C) Shareholders
D) Any of the above, depending on the structure of the business
4. Which is not one of Michael Porter’s three generic strategies?
A) Niche or Focus strategy
B) Peaceful coexistence
C) Differentiation
D) Cost leadership
5. According to Booz and Company, successful innovation is most likely to involve A) Substantial research and development expenses
B) Well paid and intelligent managers
C) Engaging customers to shape innovation
D) Consulting firms
6. When a business owner or partner has unlimited liability
A) The owner or partner’s personal assets may be used to settle claims against the business
B) The owner can only lose the amount invested in the business
C) Owner’s or partners may lose an unlimited amount of money
D) Both A and C.

5. Definitions
Unlimited liability: personal assets can be taken to pay losses or debts of the business.
Limited liability: financial liability of owners is limited to amount of investment.
Sole proprietorship: business owned and operated by one person
Owner has unlimited liability for business losses and debts
Issue of business continuity makes getting loans difficult
Partnership: proportional sharing of profits and losses. Unlimited liability, except in the case of a limited partner.
Corporation: organization that acts and has rights of a person. Shareholders and officers are protected from personal claims in most cases.
Stock: a security that signifies ownership in a corporation, and a claim on earnings and assets. Liability is limited. In event of bankruptcy, shareholders have lowest claim on assets. Note: “publicly traded”
Venture capital (VC): money provided to a start up or pre-IPO business in the form of a high rate loan or an investment in the business.
IPO (initial public offering): first time sale of stock.
Privately owned/publicly owned: company that does not/does have shares traded on a stock exchange. Note liquidity and reporting aspects of public ownership.

6. Role of Strategic Market Management
Marketing is in the best position to understand customers, competitors, environments, and trends
Marketing has lead role in understanding brand portfolio, distribution channels, and new product development
Marketing ought to be voice of the customer within the organization
Business strategy makes no sense without marketing
Marketing strategy depends on business competencies
The marketing function often spans all areas and functions of the organization

7. Booz & Co. R&D Survey 2011 http://www. booz
Study of 1,000 public companies that spent the most on research and development in 2010
Total for the 1,000 $550 bb
Computing and electronics 28% of all R&D expenditure
Health care (pharmaceuticals) 22%
Automotive 15% of all R&D expenditures
China and India HQ companies = 2% of total R & D
Spending doesn’t correlate successful innovation
“There is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues.” according to Booz & Co
Most innovative firms were Apple, Google, and 3M
Samsung and Toyota were big spenders and innovative
The key finding: culture is key to innovation success
According to 3M: “Our goal is to get the voice of the customer all the way back to the basic research level and the product development level, to make sure our technical people see how their technologies work in various market conditions.”

8. Booz & Co. R&D Survey 2011 http://www. booz
Need Seekers, Market Readers and Technology Drivers
Need Seekers consistently strive to be first movers and proactively engage customers to shape new innovations, and align innovation and business strategies (3M)
Market Readers adopt a second mover strategy and emphasize incremental change (Samsung)
Technology Drivers stress technology achievement and both incremental and breakthrough change (Google)
If you align innovation strategy and culture to your business model, build the right capabilities, and execute, you can prevail no matter which strategy you follow
There may be no more critical source of business success or failure than a company’s culture. It is more important than strategy and leadership. According to Booz & Co.:
Companies whose strategic goals are clear, and whose cultures strongly support those goals, possess a huge advantage
“Connect with the customer, find out their articulated and unarticulated needs, and then determine the capability at 3M that can be developed across the company that could solve that customer’s problem in a unique, proprietary, and sustainable way. Our businesses are all interdependent and collaborative.”

9. Booz & Co. R&D Survey – 2011*
Most often cited strategic goals of innovation are:
Superior product performance
Superior product quality
Cultural attributes:
Strong identification with the customer
Pride in products
Need seekers: Gaining insights on customers needs is the responsibility of all customer-facing employees.
Silicon Valley companies are almost twice as likely as average companies to have capabilities that provide a superior understanding of the stated and unstated needs of their end customers
Technological advances that lead to products and services that gain traction in the marketplace come through superior insight into customers, as well as the development of practical value propositions that will win those customers business
6/10 of the most innovative were need seekers
2/10 of the biggest spenders were need seekers *

10. Booz & Co. R&D Survey Top 12 R&D in 2010 Excluding Health
Rank list
Rank all
Company
R&D $BB
% sales
Region 1 4
Microsoft
8.7 14 US 2 6
Toyota
8.5
Asia 3 7
Samsung
7.9 8
Nokia
7.8
Europe 5 9
General Motors
7.0 11
Intel
6.6 15 12
Panasonic
6.1 VW
IBM
6.0 10 17
Honda
5.7 19
Cisco
5.3 13 20
Siemens
5.2

11. Booz & Co. R&D Survey 2011 Innovation
As part of this year’s study, Booz & Co. surveyed almost 600 innovation leaders in companies around the world, large and small, in every major industry sector.
As noted, almost half of the companies reported inadequate strategic alignment and poor cultural support for their innovation strategies.
Possibly even more surprising, nearly 20 percent of companies said they didn’t have a well defined innovation strategy at all.

12. Booz & Co. R&D Survey Top 10 Innovative Companies in 2010
Rank
Company
R&D $BB
% sales
Spend rank 1
Apple
$1.8
2.7 70 2
Google
$3.8
12.8 34 3 3M
$1.4
5.4 86 4 GE
$3.9
2.6 32 5
Microsoft
$14.0
14.0 6
IBM
$6.0
6.0 15 7
Samsung
$5.9
5.9 8
P&G
$2.5
2.5 61 9
Toyota
3.9 10
Facebook na

13. Strategy Defined Many definitions of business strategy
Johnson and Scholes: "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".
Alfred Chandler's definition: "determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."
Business dictionary:
1. A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.
2. The art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for leading an army.
Harvard Business School: You can't develop a strategy for your business without first thinking through mission and goals. Likewise, you can't develop a coherent strategy in isolation from decisions concerning the network of partners with whom the business will co-create and capture value. By focusing on all four elements, and sequencing them in the right way, the process of crafting strategy can be demystified
All have in common
Goals
Resources
Plans

14. “The Mind of the Strategist”
“In terms of the three key players (competitors, customers, company) strategy is defined as the way in which a corporation endeavors to differentiate itself positively from its competitors, using its relative corporate strengths to better satisfy customer needs.”
Kenichi Ohmae
“The Mind of the Strategist”
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 14 14

15. Strategy or Strategic Planning
Strategic planning is a process typically done in large companies when they perceive the need to change
We will focus more on strategy, or how to achieve long range goals
Strategy is often thought of as ‘how to achieve competitive advantage’
But many businesses simply want to co-exist
All businesses need to have goals and plans

16. Sole Proprietorships Need Strategy
Example sidewalk vendor in Bangkok
Rents space in front of a business
Buys food for cooking and resale
Has a helper, or two
Owns some basic equipment, purchased with family funds
Skilled cook, good location, good price = many customers
But:
Business and family funds are comingled
Revenue from business goes to family consumption
Expenses are ‘lumpy’ (due only at certain times)
Problem arises when bills for rent or supplies are due, when equipment needs maintenance or replacement, or at payday
Need to understand resources of the business and marketing
If co-existence is the aim, still have “5 Forces” long term issues

18. Strategy for Whom? We will focus on strategy for owners
This might differ from strategy of managers
Illustration from banking:
Think of bank loan marketing
Easy to make loans that will go bad in two years
Short term profit in the loans, losses appear later
Lending officer gets bonus based on his sales
But he works against owner interests
Think of bank customer service
Branch manager can show bigger profit by cutting staff
Customers wait, or face surly overworked staff
If the bank had brand that said ‘great service’ the brand suffers
How would an owner, or management that works for owners prevent this?
In general, managers often have incentive to achieve short term profit by wasting brand equity where owners want to preserve B/E

19. Business Purpose Why does a business exist?
In theory, a public company exists to benefit shareholder ‘owners’
A partnership or sole proprietorship exists to benefit owners (and in return they have unlimited risk)
What happens when unlimited risk becomes limited?
Company strategy may change, actions may become more risky
Example of investment banking firms in USA, 1999
Some early investors want to ‘cash out’ by selling a company
Management and owners of public companies may have different interests
Managers can employ strategies that further manager interest
Managers might be most interested in protecting their positions
Fight ‘hostile’ merger or acquisition that is in interest of shareholders
Jeff Bezos owns 19% of all AMZN stock ($20BB). Which type of strategy would AMZN use?

20. Apple and Amazon Two of the Three Generic Strategies.
Michael Porter wrote about three basic strategies for competitive advantage
Cost leadership
Differentiation
Niche (or Focus) strategy
Amazon’s strategy is cost leadership
Apple’s strategy is differentiation
Each has profoundly different approaches
See: “So Amazon unnerved investors” Word document
Differences in approach to markets
Differences in how resources are deployed
Yet each creates barriers to entry
Businesses may use niche strategy to compete with giants

21. Integrating Intuition & Analysis
The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty (Fred David)
Strategy can be a formal planning process or informal
Intuition is based on:
Past experiences
Judgment
Feelings (often the ego leads to poor judgment)
Intuition is useful for decision making in conditions of:
Great uncertainty
Little precedent
Highly interrelated variables
Several plausible alternatives
Intuition and analysis complement each other

22. There is no Substitute for Knowing the Business
Maurice Greenberg CEO, AIG, Inc.,
AIG’s legendary risk management was mostly in the head of one man: Hank Greenberg
He would get raw data. He made assessments.
AIG became an extremely complex organization with hundreds of subsidiaries
What happened when Maurice Greenberg left AIG?
The new CEO did not understand risks taken by distant units. The culture did not support succession.
AIG Collapse (word document)

23. Structure of a Global Company
Parent
Product line A
(subsidiary)
Country A
Country B
Country C
Product C

24. How are Resources Allocated?
Budgets are typically organized annually
Can be thought of as communication documents
Priorities are arranged within the framework of a strategic plan
Resources are identified
Management allocates resources according to priorities
Mechanisms are set up for monitoring actual v budget
Most companies have quarterly or rolling ‘reforecasts’
How are budget priorities established?
A formal strategic plan is used to set global priorities, in some cases
Resources allocated by negotiation at the highest levels
Detailed assessment of strategic variables may occur within budget process
Strategy is created or modified with information from all areas
Often begin with ‘wish lists’ at lowest levels of hierarchy
Ends with explicit or implicit broad company strategy
Most organizations have flexible budgets – can redirect resources

25. From “Only the Paranoid Survive” Andy Grove
We live in an age in which the pace of technological change is pulsating ever faster, causing waves that spread outward toward all industries. This increased rate of change will have an impact on you, no matter what you do for a living. It will bring new competition from new ways of doing things, from corners that you don't expect.
If you run a business, you must recognize that no amount of formal planning can anticipate such changes (strategic inflection points).
Does that mean you shouldn't plan? Not at all. You need to plan the way a fire department plans: It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event.

26. Course Correction
Organizations typically review budget variances monthly
Periodic re-forecasts (streamlined budget exercises) might be supplemented
When variances point to unforeseen issues
When new opportunities or threats arise
How are these opportunities or threats discovered
Many times through variance analysis (for example sales versus expected)
Other times from external sources
We will discuss innovation at length later
Course corrections or resetting strategic priorities might occur outside of normal planning cycles
Often found in conjunction with review of quarterly results (in the case of public companies)

27. Why do thriving small businesses fail?
Often they lack information about their resources
Formal bookkeeping does not happen or is sloppy
Personal and business expenditures are mingled
Or they under-estimate need for capital
Revenue and expenses have cycles
Revenues might spike before a holiday
Expenses have cycles
Pay employees
Pay for materials
Monthly rents, etc
False sense of wealth before expenses loom or failure to borrow before crisis (the worst time to borrow is during crisis)
Without having a sense of future income and expenses, the owner or manager ‘misallocates’ resources
To survive, a business must be forward looking

28. Successful Businesses have Plans and Goals
Bank lending facilities require long range plans
Venture capitalists are demanding about strategy & calibration of plans
Wise investors look for goals and plans
How does a company plan to earn a profit (or generate capital)?
When does a company plan to generate profit or pay back loans?
Government demanded a strategic plan for automobile companies before injecting capital in
Sole proprietorships need to consider the future (money for college, legacy for children?) and how to get there

29. Eastman Kodak Company Background information
Founded in 1880s, once an iconic US firm
In 1976 Kodak sold between 85-90% of all film and cameras in the USA
Fuji of Japan took market share in 1980s (economy segment)
In 1994 Kodak 20th ranked US company by sales
Kodak spins off Eastman Chemical, now thriving
Apple launched a digital camera made by Kodak
Kodak stops selling film cameras in 2004, becomes biggest retailer of digital cameras in 2005
Falls to 7th biggest digital camera retailer by 2010
Declares bankruptcy in 2012

30. Eastman Kodak Company Transition from Film
Gross margins in the film business estimated at 75%
Compare with computers and peripherals at 33%
George Eastman wanted ‘rapid succession of changes and improvements’
Kodak had technological lead in film backed by patents
Vertical integration and cost leadership
Film sales immensely profitable
Digital imaging a disruptive technology
Kodak executives aware of digital camera trend from 1993*
CEO Fisher from Motorola and Bell Labs hired 1993, a technologist
Resistance by customers (film development business)
Resistance from investors (legacy business as ‘cash cow’)
Company culture resistance (film business, not imaging)
Public image of support for film business through 1990s
CEOs aware of competitive environment, no barriers to entry in digital, lower margins
Collaboration with Canon in 2000 (professional segment)
Collaboration with Fuji, HP, IBM, others to develop digital image storage
By late 1990s Kodak was leader in digital color management and electronic image sensors due to huge digital R&D effort **

31. Eastman Kodak Company What Went Wrong?
Conflicts between film and digital began to ebb around 2005
More collaborative culture
Ten years elapsed since CEO Fisher began determined push to digital
Leader in digital sales in 2005
Losing money on each camera
Legacy labor costs*
Vertical integration impossible in digital business (JVs, alliances instead)
Diminished film business (would have been used to subsidize transition)
Tried to buy time by selling film in developing markets
But Asian film sales dropped as rapidly as elsewhere
Falls to seventh rank in digital camera sales in 2010
Capable competitors Canon, Sony, Samsung, and Nikon in Asia and others
Pace of change in digital camera business rapid and unpredictable, with rapidly declining prices
Could Kodak’s culture adapt to digital’s pace of change?
Did they miss a product cycle in 2007?
What happened in their R&D organization? Marketing? *

32. Objectives of Strategic Market Management (from McLoughlin p. 14)
Precipitate consideration of strategic choices
Assess opportunities and threats
Organizations fail because strategic decisions were made too late
Help a business cope with change
Force a long range view
Make the resource allocation decisions explicit
These decisions are too often political or the result of inertia
Promising businesses may get too few resources
Aid strategic analysis and decision making
Provide a strategic management and control system
Provide both horizontal and vertical communication and coordination

33. The Strategy Planning Cycle
Identify issues facing the firm (challenges, trends)
Bring together people from all functional areas
Adapt planning cycles to the business
Differing regular intervals
Trends or events can trigger strategy review
Create a strategy performance system
Progress goals (milestones)
End objectives
Identify barriers and ways around barriers

34. Exercise Select a company What business are they in?
Who are the direct and indirect competitors?
Is this company proactive or reactive?
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 34 34

35. What is a Business Strategy?
The Product-Market Investment Strategy – Scope of the Business
Products offered, not offered
Often the most important strategic choice
A resource allocation decision
Markets served
Competition a business chooses to engage or avoid
Vertical integration
Scope dynamics
Product expansion (new products to existing markets)
Market expansion (bring existing product to new markets)
Diversification (Enter new product markets)
Strategic investment choices
Invest to grow or enter new markets
Invest to maintain existing position
Minimize investment (milk the business)
Liquidate or divest (get rid of) the business
Assets and Competencies (to achieve Strategic Competitive Advantage)
Resources such as brands or customer base that is strong relative to competitors
Competency: What does a business unit do well that has strategic importance?
Avoidance of disadvantage might be enough 35 35

36. A Business Strategy A Business Strategy
Where to Compete
The product-market investment decision
A Business Strategy
How to Compete
Value Assets & Function area
proposition competencies strategies and programs
Figure 1.1
© Copyright 2010 John Wiley & Sons Ltd 36
Figure 1.1 36

37. Customer Value Proposition Examples
Good value (Aldi – discount markets)
Excellence on an important product or service attribute (El Bulli restaurant in Spain)
The best overall quality (Krug Grande Cuvée)
Product line breadth (Tesco)
Innovative offerings (Logitech)
A shared passion for an activity or a product (Ducati)
Global connections and prestige (HSBC)
© Copyright 2010 John Wiley & Sons Ltd 37 37

38. Functional Strategies and Programs Supportive Functions or Programs
Manufacturing strategy
Distribution strategy
Brand-building strategy
Communication strategy
Information technology strategy
Sourcing strategy
Global strategy
Segmentation strategy
Quality program
Customer relationship program
Social technology strategy
© Copyright 2010 John Wiley & Sons Ltd 38 38

39. Criteria to Select Business Strategies
Strategic Market Management 7th Edition – David Aaker
Criteria to Select Business Strategies
Is the ROI (return on investment) attractive?
Is there a Sustainable Competitive Advantage?
Exploit assets and competencies
Neutralize weaknesses
Will the strategy have success in the future? (scenario testing – is it adaptable?)
Is the strategy feasible (within the organization’s capabilities)?
Does the strategy fit with the other strategies of the firm?
PPT 1-39

40. Overview of Strategic Market Management
External Analysis
Customer Analysis
Competitor Analysis
Market/submarket Analysis
Environmental Analysis
Internal Analysis
Performance Analysis
Determinants of strategic options
SWOT Strategic Analysis Outputs etc
Creating, Adapting, and Implementing Strategy
Figure 2.1
PPT 1-40

41. Why Strategic Market Management?
Strategic Market Management 7th Edition – David Aaker
Why Strategic Market Management?
Precipitate the consideration of strategic choices.
Help a business cope with change.
Force a long-range view.
Make visible the resource allocation decision.
Aid strategic analysis and decision making.
Provide a strategic management and control system.
Provide both horizontal and vertical communication and coordination systems.
PPT 1-41

42. Strategic Options Product quality Product line breadth
Corporate social responsibility
Brand familiarity
Customer intimacy
Quality
Innovation
Focus
Being global
Product attribute
Product design
© Copyright 2010 John Wiley & Sons Ltd 42 42

43. Key Ideas
A business strategy includes the determination of the product- market investment strategy, the customer value proposition, assets and competencies, and functional area strategy.
Strategy needs to be developed and executed in the context of a dynamic market. To cope, it is important to develop competencies in strategic analysis, innovation, managing multiple businesses, and developing Sustainable Competitive Advantages.
Strategic market management is a system designed to help visions. A strategic vision is a vision of a future strategy or sets of strategies. Strategic market management includes a strategic analysis of the business to identify existing or emerging opportunities, threats, trends, strategic uncertainties, and strategic alternatives.
The CMO role has grown over the years and is now often charged with being a partner in developing strategies and a vehicle to deal with the dysfunctions of the product market silos.
© Copyright 2010 John Wiley & Sons Ltd 43 43

44. “It isn’t that they can’t see the solution, it’s that they can’t see the problem.”
G. K. Chesterton
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 44 44

45. Benjamin B. Tregoe & John W. Zimmerman “Top Management Strategy”
“Strategy is a framework which guides those choices that determine the nature and direction of an organisation.”
Benjamin B. Tregoe & John W. Zimmerman
“Top Management Strategy”
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 45 45

46. Harvard Business Review
“Strategy is the creation of a unique and valuable position, involving a different set of activities.”
Michael Porter,
“What is Strategy?”
Harvard Business Review
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 46 46

47. David Aaker and Damien McLoughlin “Strategic Market Management”
“Four dimensions define a business strategy: the product-market investment strategy, the customer value proposition, assets and competencies, and functional strategies and programs. The first specifies where to compete, and the remaining three indicate how to compete to win.”
David Aaker and Damien McLoughlin
“Strategic Market Management”
David Aaker, Damien McLoughlin, Strategic Market Management European Edition, , © Copyright 2007 John Wiley & Sons Ltd 47 47

48. Adapting to Change
Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

49. But: self interest and greed are distinct
According to Fred David: “Strategic Management is Gaining and Maintaining Competitive Advantage”
Competitive advantage is “Anything that a firm does especially well compared to rival firms”
But: self interest and greed are distinct
Self interest often means helping others
Gains from greed are usually short term

50. Achieving Sustained Competitive Advantage
1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources
2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

51. External Opportunities and Threats
Analysis of Trends
Social, Economic, Demographic
Cultural
Political, Legal, Governmental
Technological
Competitors
Larger companies may have people designated to monitor external threats and opportunities
Lobbying seeks to influence government

52. External Opportunities
External Opportunities and Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimize impact of
External Threats
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

53. Internal Strengths and Weaknesses
Controllable activities performed especially well or poorly
Determined relative to competitors
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

54. Internal Strengths and Weaknesses
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Management Information Systems
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall

55. Strategies Examples Geographic expansion Diversification Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall