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CHAPTER 6 BUSINESS STRATEGIES. Strategic Planning Strategic Options Global Market-driven Strategies Major Marketing Strategies.

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Presentation on theme: "CHAPTER 6 BUSINESS STRATEGIES. Strategic Planning Strategic Options Global Market-driven Strategies Major Marketing Strategies."— Presentation transcript:

1 CHAPTER 6 BUSINESS STRATEGIES

2 Strategic Planning Strategic Options Global Market-driven Strategies Major Marketing Strategies

3 STRATEGIC PLANNING Core Competency Strategic Alliances Outsourcing Sustainable Competitive Advantage

4 CORE COMPETENCY The activities that an organization has expertise in and performing very well WalMart IBM Pappas

5 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

6 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

7 OUTSOURCING Corporate Outsourcing Global Outsourcing Microbusiness Outsourcing

8 CORPORATE OUTSOURCING IN THE UNITED STATES 2005 Manufacturing 170 Billion Logistics and Procurement 179 Billion Information/ Technology 90 Billion

9 GLOBAL OUTSOURCING India Dominates Eastern Europe Asia Latin America

10 SUSTAINABLE COMPETITIVE ADVANTAGE Obtaining a competitive advantage over a long period of time Patents/copyrights Brand equity Location

11 PATENTS/COPYRIGHTS Patents and copyrights are monopoly awards given by the government for new technology and innovations Microsoft Windows Valium Drugs Dead Moneymakers

12 LOSS OF DRUG PATENT PROTECTION Company Drug Sales Results Eli Lilly Prozac Yearly sales fell 61% Roche Valium Yearly sales fell 67%

13 DEAD MONEYMAKERS 2003 Celebrity Millions Elvis Presley 40 Charles Schulz 32 J. R. R. Tolkien 22 John Lennon 19

14 BRAND EQUITY Brand equity is the goodwill of a brand. Coca Cola Intel Toyota

15 LOCATION Location is used as a sustainable advantage, particularly in retailing Specs Liquor Store UH Bookstore Flying J Truck Stops

16 STRATEGIC OPTIONS Contrasting Business Models Strategic Decision Choices SWOT Analysis Changing Business Models

17 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

18 ENTREPRENEUR RULES FOR SUCCESS Focus on the Customer Keep a Short Turnaround Time Always Add Value to the Customer

19 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.

20 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?

21 SWOT ANALYSIS Controllable by Management Strengths of the Business Weaknesses of the Business Not Controllable by Management Opportunities Threats

22 CHANGING BUSINESS MODELS Southwest Airline Toyota Dell

23 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

24 DELL BUSINESS MODEL Minimal R & D No intermediaries Minimize inventory Low operating cost

25 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

26 STRATEGIC WEAKNESSES OF GM AND FORD High Labor, Health, and Retirement Costs Obsolete Plants in Detroit High Supply Chain Costs Weak Customer Focus

27 OPERATING COST FOR PERSONAL COMPUTERS Dell 10% H-P 21% Gateway 25%

28 THREATENED BUSINESS MODELS Department Stores Lots of Services Telephone Companies Physical Phone Lines Brokerage Firms Execute Orders Financial Advice

29 GLOBAL MARKET-DRIVEN STRATEGIES Push for Healthy Competition Meaningful Incentives Rules for the System Move To Common Standards

30 PUSH FOR HEALTHY COMPETITION Protect small Japanese retailers from international competition Moscow blocks new Ikea retail store Rewarding family members in Indonesia

31 MEANINGFUL INCENTIVES Reduce the cost of starting a new business in Mexico Change the incentives in U.S. to inflate short- term profits Cheaper labor costs encourages outsourcing overseas

32 RULES FOR THE SYSTEM Russia Mafia influences Japan Banking off-book losses U.S. CPA auditing rules

33 MOVE TO COMMON STANDARDS English as international business language Common physical measurements Euro monetary system Standard container in global shipping

34 INTERNATIONAL DIFFERENCES Concept U.S. Other Countries Time 1-12 am 1: : pm Measurements Feet Meter Temperature Fahrenheit Centigrade Driving On Right On Left

35 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

36 INTENSIVE GROWTH Market Penetration – existing products in existing markets Product Development – new products in existing markets Market Development – existing products in new markets

37 MARKET PENETRATION Use more of the product Cross-sell products/services Green ketchup Arm & Hammer baking soda

38 PRODUCT DEVELOPMENT New products New services

39 MARKET DEVELOPMENT Expand from Houston to all major U.S. cities Expand overseas Develop new market for existing products

40 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

41 CONCENTRATED NICHE Marketing to one market segment rather than the whole market for a product/service Cliff Notes Jolt Soda Long haul blue jeans

42 MULTIPLE NICHES Marketing to more than one market segment rather than the whole market for a product/service Procter & Gamble General Motors Anheuser – Busch

43 GENERAL MOTORS AUTOMOBILES Chevrolet Cadillac Buick Pontiac Saturn

44 MARKET POSITIONING The perception that a potential buyer has about your product/service versus your competitors product/service Lite beer Gerber Barbie doll

45 MULTIPLE REVENUE STREAMS Sterling McCall Wells Fargo Bank Harry Potter

46 STERLING MCCALL TOYOTA MULTIPLE REVENUE STREAMS New automobiles Used automobiles Finance contracts Service department

47 THREATS TO MULTIPLE REVENUE STREAMS Car Max vs. New Car dealers Cartridge World vs. HP cartridge refills Ditech mortgage vs. local home mortgages

48 MARKETING MIX Target Market(s) Product/Service Strategy Distribution Strategy Pricing Strategy Promotion Strategy

49 MARKETING MIX STRATEGIES Girl Scout Cookies Prescription Drugs Long Haul Blue Jeans

50 GIRL SCOUT COOKIES Target Market Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy

51 DRUG COMPANIES MARKETING MIX Product Distribution Promotion Pricing

52 DRUG PRODUCTS Patent Drugs Generic Drugs Over-the-counter Drugs

53 U.S. HEARTBURN DRUGS Purchase Cost Drugs Pattern per pill Sales Prilosec Over-the-Counter $ Million Prevacid Prescription Only $4.00 2,190 Million Nexium Prescription Only $4.00 2,100 Million

54 LOSS OF DRUG PATENTS Company Drug Sales Results Eli Lilly Prozac Yearly sales fell 61% Roche Valium Yearly sales fell 67%

55 U.S. GENERIC DRUG GROWTH (Share of Market) % %

56 DRUG DISTRIBUTION Retail Pharmacies Employer Buying Group Medical Insurance Companies Medicare/Medicaid Supermarkets

57 DRUG PROMOTIONS Advertising Personal Selling Sales Promotion

58 ADVERTISING OF PRESCRIPTION DRUGS IN 2003 (Millions) Drug Treatment Advertising Nexium Heartburn 257 Clarinex Allergy 129 Allegra Allergy 125 Viagra Impotency 112 Lipitor Cholesterol 109

59 PRESCRIPTION DRUG ADVERTISING Billion Billion

60 PRESCRIPTION DRUG SALES FORCE , ,000

61 PRESCRIPTION DRUG SALES PROMOTIONS Consumers Doctors Drug Coupons Rebates Free Samples Gifts Honorarium Educational Programs

62 DRUG PRICING Antibiotics Claritin tablets Online in Canada

63 PRICING OF PRESCRIPTION DRUGS ANTIBIOTICS (100 Tablets) Branded Generic Product Product (Abbot) (Mylan) Price to Retailer $13.27 $4.75 Price to Consumer $18.93 $10.99 Retail Markup 42% 131%

64 PRICES FOR CLARITIN TABLETS Availability Time Period Price Range Prescription Dec $ $3.00 Only Dec Over the Jan $0.90 – $1.35 Counter May 2003 Generics Enter July 2003 $0.40 – $0.50 The Market

65 ONLINE DRUG PRICES Drug and Purpose U.S. Price Canada Price Lipitor $269 $184 (Cholesterol) Tamoxifen $287 $47 (Breast Cancer) Celebrex $133 $68


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