1. CHAPTER 6
BUSINESS STRATEGIES

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

3. STRATEGIC PLANNING Core Competency Strategic Alliances Outsourcing
Sustainable Competitive
Advantage

4. CORE COMPETENCY WalMart IBM Pappas
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 Billion
Logistics and
Procurement Billion
Information/
Technology 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
J. R. R. Tolkien
John Lennon

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 %
H-P %
Gateway %

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 am : :00
1-12 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 competitor’s 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
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 $ ,190 Million
Nexium Prescription Only $ ,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
Clarinex Allergy
Allegra Allergy
Viagra Impotency
Lipitor Cholesterol

59. PRESCRIPTION DRUG ADVERTISING
Billion
Billion

60. PRESCRIPTION DRUG SALES FORCE
,000
,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 $ $4.75
Price to Consumer $ $10.99
Retail Markup % %

64. PRICES FOR CLARITIN TABLETS
Availability Time Period Price Range
Prescription Dec $ $3.00
Only Dec. 2002
Over the Jan $0.90 – $1.35
Counter May 2003
Generics Enter July $0.40 – $0.50
The Market

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