3 A practical example - Walkisoft Phase 1/1980: UPM form a partnership with a Danish inventor to develop dry-laid paper business.- A test plant with 1000tn capacity in Danemark is built.Phase 2/1984: The partnership is dissolved.The technology rights are divided.UPM gets the rights for Europa and Asia.The Danish partner gets America and forms a 50/50 partnership with 2 U.S. partners to develop U.S. businessPhase 3/1987: UPM decides to build a 4000tn machine in Germany.
4 A practical example - Walkisoft Phase 4/1988: UPM decides to prepare a dry-laid paper mill feasibility study in the Bahamas.Phase 5/1989: UPM negotiates with the partners of the Danish inventor. They propose suing the inventor for breaking anti-competition laws.Phase 6/1990: The feasilibility study is completed. The Americas plant is no built in the Bahamas.Phase 7/1990:Danish partner cannot organize financing for its’ U.S. plant and approaches UPM.
5 A practical example - Walkisoft Phase 8/1990: UPM and the Danish partner negotiate a deal regarding UPM building one dry-laid paper plant in U.S. Price 1 M$.Phase 9/1992: UPM builds a tn dry-laid paper plant in North Carolina, U.S.Phase 10/ : UPM struggles with the production. Waste runs very high.Phase 11/1997: UPM decides to sell the Walkisoft business to Buckeye Technologies with more than 100M$.Go to Int. Mkt.
7 Strategy Process (1)Mission statement and business idea at the moment.Specifies basic product or service, primary market, and principal technology.What business are we in?Who are the customers we serve?Why does this company exist?SWOT analysisStrengths and Weaknesses Opportunities and ThreatsDifferential advantage analysis(differentiation, positioning)Go to Positioning
8 Strategy Process (2) SWOT analysis Unfavorable trend in theenvironment that can causewithout proper marketingto the weakening ofcompany’s position.SWOT analysisStrengths and Weaknesses Opportunities and ThreatsCustomer oriented marketingmix variable of the companyin which it is stronger/weakerthan the competitor.An attractive area forcompany marketingaction from which thecompany can get acompetitive advantage.Competitive environmentInternal analysisExternal environmentMarket analysisGo to Purchase Anal.
10 Strategy Process (3) Competitive environment Internal analysis External environmentMarket analysisCompetitionCompetitorsNew entrantsProductsMarket sharesGrowth/shareInternal analysisOperationsProfitabilityResourcesOrganizationProducts/servicesExternalEconomyLegislationTechnologyPoliticsSocialMarketSizeDevelopmentPreferencesPurchasing powerStructureAnalysis of the market(Portfolio, Positioning)The competitiveness ofthe operation and resourcesGo to Opp./Threats
11 Strategy Process (4) Analysis of the market (Portfolio, Positioning) The competitiveness ofthe operation and resourcesCritical Strategy Issues (CSIs)andKey Performance Indicators (KPIs)Realignment of company mission statement and/or business ideaStrategic alternatives:Choice of market segments, positioningand marketing mix variables.
12 Core CompetenciesCore competencies are extremely difficult for competitors to imitate, because they are embedded deeply in the organization's routines, procedures and people.True core competencies are significantly related to the benefits a customer receives in using a product.Core competencies allow a firm to access a wide variety of very disparate market opportunities.Go to Honda Engines
13 Critical Strategy Factors (CSFs) Are longer term in nature.Affect the entire organization.May require new programs or service to address.Are very important for the key stakeholders.Appear on the agenda of the board.May involve additional staff.
14 Critical Strategy Factors (CSFs) Sensitivity to changing market needsInnovative response to customer needsAbility ot target and reach segments of marketsLong term view of market development and resourcesKnowing when to shift resources from old to new productsIdentify and exploit global marketWillingness to form interfirm coalitionsDistribution coverage and delivery speedAdvertising budget and copy effectivenessSales force size and productivityHigh product qualityMarketing research qualityManagerial ability and experienceLearning systematically from past strategies
15 Critical Strategy Factors (CSFs) Understand how and why customers buyLinkage of technology to market demandLinkage of marketing and productionInvestment in growth marketsProduct line coverageCustomer loyaltyStrong brand image and awarenessAggressive commitment when requiredCooperative trade relationsPromotion magnitude and impactCustomer service and feedbackPatent protectionAnalytic support capabilityQuick decision and action capabilityOrganizational effectiveness
16 Strategy Process (5) Strategic alternatives: Choice of market segments, positioningand marketing mix variables.Marketing plan and establishment of specific objectivesImplementation of strategies and realignment of resourcesReallocationof resourcesEvaluation ofperformanceMonitoringof trends
17 Execution is not just tactics - it is a discipline and a system Strategy executionSoundFlawedDoomedfrom the startAt RiskFlawedStrategyFormulationMissedOpportunityStrategicSuccessSoundBad execution, not bad strategy is the cause for 70% of CEO failures.** Larry Possidy, Fortune Magazine: Why CEOs fail.
18 Key points in strategy process (1) Phase 0. Definition of current mission statement and business idea.Be honest.Describe the mission statement and especially the business idea as they really are at the momentDon't mix the mission statement and the business idea to what you would like to be.
19 Key points in strategy process (2) Phase 1. Differential advantage and opportunity and threat analysis (SWOT).Do your homework.Find out which area (Environment, Market, Competition and/or Internal) needs immediate attention, and start with that.Rely on external rather that internal sources as much as you can (it's the customer's point of view, which counts).Firms succeed at opportunities that fit its resources, processes, and values, and struggle with opportunities that run counter to those strengths.
20 Key points in strategy process (3) Phase 2. Comparison and analysis of market position via portfolio analysis.Stop analyzing.Decide amongst your management team what are the key Strategy Issues for your company based on the previous analysis (a good rule of thumb is to have about five of them).
21 Key points in strategy process (4) Phase 3. Realignment of company mission statement and/or business ideaEstablish your objective mission statement and/or business idea.In most of the cases only your business idea needs adjustment.Phase 4. Establishment of company objectivesEstablish measurable and only measurable quantitative and qualitativeobjectives, which enable your to achieve your objective business idea.
22 Key points in strategy process (5) Phase 5. Strategic alternatives: choice of market segments, positioning and marketing mix variables.Try establish at least two or three different kind of alternatives.Don't fall into the trap deciding already in the beginning of the strategic planning process what strategic alternative you are going to pursue (i.e. before you have done your analyses).
23 Key points in strategy process (6) Phase 6. Implementation of strategies and realignment of resources.Don't just implement (this is the fire fighting approach), do strategic planning).Organize your company or SBU so that at least somebody has time to do strategic planning.You won't achieve your objectives without reallocation of resources.
24 Key points in strategy process (7) Phase 7. Evaluation of performanceEvaluate your performance on a continuous basis as regards to achieving your objectives.Phase 8. Re-monitoring of trends.Follow the environment all the time, look for clues and windows of opportunities. It might be that they are only open for so long.Strategic planning is a continuous process, it never ends.
25 John Warnock, former CEO, Adobe: One of the biggest parts of my job is to figure out where the company is going. What are the opportunities?I stay very immersed and very up-to-date on what new companies are being started, what new technologies are emerging, what new ideas are getting floated in business plans, and things like that. I see a lot of product ideas and a lot of new technologies.What I try to do is factor in how people use computers, what people's problems are and how these technologies can get applied to those problems.Then I try to direct the various product groups to act on this information. Most of my time is either listening to people or talking to people, or communicating by .
26 Business Idea 1. 2. Whom? (What are the markets and Customer needs Vs.Benefits of the Product.2.Customer needs vs. ResourcesWhom? (What are the markets andtheir needs? Who is the customer?)What? What is the benefit of theProduct and/or Service to the customer?6.Benefits of the product vs. Resources5.Customer needs vs. Image3.Benefits of the product vs. Image/perceptionCompatibilityDo the parts of thebusiness idea support each other?How? (Do we have the necessaryresources? Is the organization correct?Are the operating procedures correct?Image/Perception?Why does the customer buy from us?4.Resources vs. Image
28 Positioning Positioning is not only what you do with the product. Positioning is also what you do with the mind of the prospect.With consumer products positioning is achieved via mainly advertising.With industrial products positioning is achieved via personal selling, publicity, trade shows, advertising and company performance.Key marketing variableNot Key marketing variableCustomer service,product performance.
30 Opportunities Technological change Political, economic and social trendsHigh response to sales, ads and promotionsUnfulfilled customer needsMarket not segmentedGaps in existing product positionsFew or weak competitorsLow entry cost to new marketsTransfer cost experienceMatch with our strengthsMergerCustomer powerSize of marketGrowth of marketHigh marginsLow investmentStable price structureLow exit barriers
31 Threats Reaction from existing competition New competition likely to enterCompetition by vertical integrationDecreased entry costs by competitorsPrice/promotion warCustomer powerChange in consumer tastes and valuesIncreasing segmentationTechnological changeMaterial scarcity and supplier price hikesEconomic stagnationInflation/deflationRegulatory changesTerrorismForeign exchange fluctuationPolitical/social changesEnvironmnetal pollutionTakeover/merger
32 Purchasing criteria analysis Lead the purchasing criteria from the 4 P’s (=customer perspective).Using customer feedback, put the criteria in ranking order.Ask the customer to evaluate your company in relation to its competitors.Note: If customers do not have real experience with your company’s products and/or competitive products, the perceptions of consumers are equally important. Investment products are, however, an exception.
33 Examples of product related purchasing criteria Performance: How well does the product perform its’ core function.Features: Does the product have adequate auxiliary dimensions that provide secondary benefits.Conformity to specs: What is the incidence of defectsReliability: Does the product ever fail to work? Does the product work with consistency?Durability: What is the economic life of the product?Aesthetic design: Does the product’s design look and fell like that of high-quality product?Serviceability: Is the service system efficient, competent and convenient?
34 Examples of service related purchasing criteria Tangibles: Appearance of physical facilities, equipment, personnel, and communication materials.Reliability: Ability to perform the promised service dependably and accurately.Responsiveness: Willingness to help customers and provide prompt service.Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence.Empathy: The caring, individualized attention the organization provides its customers.
35 External Analysis in International Marketing Market entry barriersTariffsCountry specific (Import, export)Purpose specific (Protective, Revenue)Time specific (Surcharges, Countervailing)Import restraints (Special, variable)Tariff rates (Specific, Ad valorem, Combined)Production, distribution and consumption (Single stage, Value added, Cascade, Excise)
36 External Analysis in International Marketing Market entry barriersNon-TariffGovernment participation (Administrativ guidance, Subsidies, Government procurement)Customs and entry procedures (Product classification, Product valuation, Documentation, Licence to pemit, Inspection, Health and Safety)Product reuirements (Standards, Packaging, labelling and marking, Testing, Specifications)Quotas (Import/Export: Absolut, Tariff, Voluntary)Financial control (Exchange, Multiple exchange rates, Import deposits, Credit restrictions, Profit remittance)Other (Market reserve, Performance)