Strategy

1. Strategy

2. “Making strategy work is more difficult than the task of strategy making” Lawrence Hrebiniak

3. Today’s Topics • Strategy Effectiveness • Maximizing Impact and Avoiding Pitfalls

4. A little background….

5. Three Reasons why Good Strategies Fail • Execution • Execution • Execution Hallmark of a good strategy is a firm’s ability to translate it into action

6. Execution ≠ Tactics

7. Execution ≠ Tactics Execution = Getting Things Done

8. Why aren’t strategies executed well? • Fuzzy frame of reference • Dysfunctional separation between strategy formulation and strategy execution • Resistance to change • Structural issues • Poor communication • Conflicting mandates & reward systems • Weak linkage among strategies • Diffusion of resources and energy • Lack of accountability

9. Common denominator = People • The lifeblood of an organization, strategies are vessels that affect and are affected by living and breathing people.

10. Levels of Strategy • Corporate strategy • Business-level strategy • Marketing strategy

11. Market Orientation • Consistent and synchronized focus on customer needs and competitive advantage.

12. But who is the customer? Manufacturer Wholesaler/Distributor Retailer Consumer

13. But who is the customer? Manufacturer Wholesaler/Distributor Retailer Consumer

14. And are functional areas really aligned? • Operations • Marketing / Sales

15. Levels of Strategy • Corporate strategy • Business-level strategy • Marketing strategy

16. Brand Field Distributors Retailers Consumers

17. Brand Field Distributors Retailers Consumers

19. As the pendulum swings….. CORPORATE FIELD

20. Brand Positioning/Strategy (Multiple Brands) Brand Promotions Media Services Event Marketing Field Marketing (Planning & Integration) Field Sales Distributors

21. Brand Positioning/Strategy (Multiple Brands) Brand Promotions Media Services Event Marketing Field Marketing (Planning & Integration) Ntl Retail Sales Field Sales Distributors Retailers

22. Investment Model Excerpt

23. Five Basic Criteria Were Used For Determining “Investment” Markets • Brand Volume 30% • MC/bbl 25% • Industry Volume 15% • Brand Share 15% • Brand Trend 15% • 12 MMT 7.5% • YTD 7.5%

24. Tier Breaks Were Established For Varying Levels Of Investment Brand A example: Tier 1 = 12 markets representing 35% of volume Tier 2 = 26 markets representing 25% of volume Tier 3 = 24 markets representing 15% of volume 60 75%

25. For Each Tier, An Investment Model Was Established For each Tier 1 Brand A market: 1. Estimate the cost of a XXXX TRP radio plan. 2. Assume that XX% of the local marketing investment is spent against radio. 3. Derive a local marketing spending target, i.e., divide Step 1 by Step 2. 4. Adjust spending targets upward if market indexes highly on Hispanic population, LDAC-24 population growth, or is a designated competitive target attack/defend market.

26. Fixed Commitments and Shortfalls were Identified and Accommodated Brand B Example: Contract spending in 4 markets exceeds the total recommended local marketing investment: City A Covered cost of contracts plus City B equivalent of XXXX radio TRPS X X% City C City D Covered cost of contracts plus normal Tier 1 spending

27. Brand A LOCAL MARKETING INVESTMENT STRATEGY • General Overview • Investment recommendation was based on a weighted average derived from the investment model plus added emphasis for the following brand imperatives. • The template identified XX investment markets that account for XX% of the brand’s volume. • Six additional markets were added based on brand imperatives. • The Brand A investment for 2001 is $XX million or XX% of the local marketing budget. • Contracts account for XX% ($XX MM) of the investment. • $XX mm was removed from the optimum model to cover contract overages in certain markets.

28. Brand A LOCAL MARKETING INVESTMENT STRATEGY Tier 1 Spending Path Allocate resources against complete array of local investment opportunities. • Local radio • OOH • Marquis sports/music/event sponsorships. • Activation funding budget. • Hispanic programming/sponsorships. • National promotion localization funding. • Local fairs/festivals/sponsorship funding. • Local ground-up promotions budget. • Key channel initiative fund. • On-premise • C-store • Supers/liquors

29. Levels of Strategy • Corporate strategy • Business-level strategy • Marketing strategy

30. Multidimensionality • Strategy begets strategies begets strategies begets tactics….. • Linkage?

31. Destination, objectives, strategies, measures(DOSM) Company: D O S M Division: D O S M Region: D O S M Area: D O S M

32. Destination, objectives, strategies, measures(DOSM) Company: 2 4 6 12 Division: 4 6 12 20 Region: 6 12 20 30 Area: 12 20 30 50

33. Two problems • Fuzziness and slippage along the line • Somebody has to execute this stuff

34. An Illustration

35. It all comes down to choices • “The essence of strategy is what not to do.” Michael Porter, “What is Strategy”, HBR • “Not choosing means creating managerial complexity that results in doing business with yourself, rather than with your customers” Michael Treacy & Fred Wiersema Discipline of Market Leaders

36. Strategy is a means, not an end • Mediocre strategy well executed trumps a great strategy poorly executed • What are you willing to drop to get what you want? • Have to be able to say NO

37. Do a few, unique, things really well • Define what success looks like • Align the air war and ground war • Mobilize troops • Measure & reward results • Share accountability

38. Impact = I3 Innovation X Integration X Intensity