Strategic Alternatives

1. Strategic Alternatives

2. Review • Components of a situation analysis • SWOT Analysis • Environmental Scan • Identify a firms competitive advantage (Build one v. Mimic) • Cost • Experience Curves, Efficient Labor, No Frills, Govt. Subsidies, Product Design, Reengineering, Production Innovation, New Methods of Service Delivery • Product/Service Competitive Advantage • Niche

3. Strategic Alternatives

4. Mission Statement • Mission Statement is a statement of the firms business based on a careful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions. • Should focus on the market being served rather than the goods being offered • Too Narrow – Market Myopia (Defined in terms of products not benefits) • Too Broad – No Direction • Just Right – Focus on Market & Benefits

5. Strategic Marketing • Strategic Business Unit (SBU) • A subgroup of a single business or a collection of related businesses within the larger organization • An SBU will have its own identity • Distinct mission statement • A specific target market • Control over its resources • Its own competition • Marketing Plans separate from other SBU’s within a single corporation • Goal is to find highest level of desired growth & balance it with acceptable levels of risk.

6. SBU’s & Portfolio Matrix • To determine the future cash contributions & cash requirements expected for each SBU, managers can use the Boston Consulting Groups portfolio matrix • Portfolio Matrix will classify each group by its present or forecasted growth and market share. • Assumption is that market share & profitability are linked • Use relative market share formula to measure market share • Ration between the company’s share & the share of the largest competitor • Example: Firm A has 50% market share & its competitor has a 5% market share; ratio 10-1 • Example: Firm A has 10% market share & the largest competitor has 20%; ratio .5 – 1

7. Hypothetical Portfolio Matrix • Star: A market leader & growing fast • Usually have large profits • Need a lot of cash to finance growth • Best Marketing tactic is to protect existing market share by • Reinvesting earnings in product improvement • Better distribution • More promotion • Production efficiency • Management must strive to capture most of the new users as they enter the market

8. Hypothetical Portfolio Matrix • Cash Cows: An SBU that usually generates more cash than it needs to maintain its market share • Low growth market, but product has a dominate market share • Examples: Personal computers & laptops are cash cows • Strategy of a cash cow is to maintain market dominance by being the price leader and making technological improvements in the product. • Managers resist pressure to extend the basic line unless they can dramatically increase demand • Managers should allocate excess cash to the product categories where growth prospects are the greatest

9. Cash Cow Example • Clorex owns the following brands • Clorex Bleach • Kingsford Charcoal • Glad brand of products • Fresh Step, Scoop Away, & other pet litters • Black Flag pest control • Brian water filteration systems • K.C. Masterpiece Barbeque Sauce • Clorex’scash cow has been its Clorex Bleach line so they invest the most in its product growth • Clorex 2 Bleach & Scented Bleach

10. Portfolio Matrix • Problem Child is a question mark in the industry • Shows rapid growth but poor profit margins • Low market share in a high growth industry • Need a great deal of cash • Without cash support they will become “dogs” • Strategy is to invest heavily to gain better market share, acquire competitors to get the necessary market share, or drop the SBU • Sometimes a problem child can be repositioned into stars

11. Hypothetical Portfolio Matrix • Dogs have low growth potential and a small market share • Most dogs eventually leave the market place • Examples: • Computer Mainframe Industry • Jack In The Box Shrimp dinners • Campbell’s Red Kettle soups • Stouffer’s cheese-filled snacks & Rumbles Granola Nuggets • A dog will either harvest or divest

12. Portfolio Matrix • Once a company classifies its products as a cash cow, star, problem child, or dog they will allocate future resources for each • Four strategies a company uses

13. Target Market • Target Market is a segmented group that shares one or more characteristics • Similar product needs • Conduct a Market Opportunity Analysis (MOA) • Describes and estimates the size and sales potential of market segments that are of interest to the firm • After conducting MOA these options exist • Trying to appeal to the entire market with one marketing mix • Concentrating on one marketing segment • Appealing to multiple market segments using multiple mixes

14. The Marketing Mix • Marketing Mix = 4 P’s • Product • Physical Unit, package, warranty, after-sale service, brand name, company image, value, etc.. • Place • Distribution factor that allows the product to be available when & where the consumer wants them. Includes storing & transporting items. • Promotion • Advertising, PR, Sales promotions, & personal selling • Pricing • What the customer must give up in order to acquire the product • Most flexible of the 4 P’s

15. Evaluation & Control • Implementation means turning marketing plan into action assignments • Evaluation entails gauging the extent to which marketing objectives have been achieved during a specified time period. • Reasons Marketing Objectives Fail • Unrealistic Marketing Objectives • Inappropriate Marketing Strategies • Poor Implementation • Changes in the environment • Controlallows you to see if objectives are being met. Common to conduct a marketing audit to accomplish this.