Scope
range of activities that a firm performs internally, breadth of its products and service offerings, extent of its geographic market presence, and mix of businesses
Product-Market Growth Matrix
Exhibit 1-28 pg. 1-63
- Market penetration - pursue larger market share in existing market with existing product
- Product development - focus on growing within existing market by introducting new products
- Market development - org sells its existing products in a new market e.g. new geographical market (overseas)
- Diversification - org extends scope to start performing new activities e.g. new products in new markets
Diversification
- expansion of scope of product line to exploit new markets
- key objective is to spread org’s risk over several product lines in case there should be a downturn in any one product’s market
- often pursued when original markets are saturated / declining / evolving macro-environment conditions (e.g. changes in consumer habits) are eroding market size & profitability
- Risks - may be difficult for leaders to assess unfamiliar industry, others depend on how closely purchaser intends to integrate acquisition into existing org
Related Diversification Strategies
- focuses on industries with value chain activities similar to org’s own (strategic fit) that take place at various pints of chain e.g. R&D, production, distribution, customer service
- should be submitted to 3 tests:
1) industry attractiveness
2) cost of entry
3) better-off test
*
Strategic Fit
Exists when:
* there is potential for sharing expertise / assets that will have synergistic effects e.g. baby food manufacturer has effective market reearch that can be transferred to children’s apparel market research
* assets can be shared to lower costs e.g. plant can produce both lawnmowers and snowblowers
* brand identity can be transferred to support consumer reconigiton *
Unrelated Diversification Strategies
- involve orgs with diff. value chan activities and/or diff. types of resources
- does not offer opportunity for synergy
Industry Attractiveness
Assessed based on multiple factors
1. market size and growth trend
2. intensity of competition
3. emergency opportunities & threats
4. cross-industry strategic fit
5. resource requirements
6. macro-environmental effects
7. industry profitability
High IA + strong business unit competitive position = little competitive pressure, good profit margins, growing market size
High IA + weak business unit competition position = weak competitor / old tech / poor management in strong industry
Low AI + strong business unit competitive position = revenue down in segment, strong brand, acceptable profits
Low AI + weak business unit competitive position = profits down industry wide, weak brand, arrogant management
Global Expansion
- can provide access to new customers
- can lower costs and improve competitive position
- can be a response to negative conditions in home country
Profit Sanctuary
- created when an org. expands into a foreign market and enjoys a strong/protected competitive position, which then support competitive activities in the org’s domestic and foreign markets
- org can afford to compete more aggresively against its domestic rivals because of profits from outside domestic market
International Strategies - Global/Multinational
- designed to out-compete rivals by focusing on opportunities to achieve cross-business and cross-country coordination thereby enabling economies of scope and an improved competitive position with regard to reducing costs, cross-country subsidization, etc.;
- standardized policies and processes
* challenges
1. need for leaders who have global perspectives and cultural sensitivity
2. management is complex
3. product may be moving around more leading to increased costs for transportation / cross border tariffs
4. trades abilities to adapt to local markets
International Strategies - Transnational
- aims at achieving some degree of both standardization and local responsiveness
- think global, act local
- intregated capabilities
- localized policies and processes**
International Strategy - Multidomestic/Multicountry
- each country market is self-contained
- customers have unique product expectations addressed by local production capabilities
- think local, act local
- org is highly decentralized
- responsive to local conditions and needs
Horizontially Intregated Firm
produces or sells similar products in various geographical locations
Vertically Intregrated Firm
- functions that were previously performed by suppliers are now done interally
- grows in terms of what it makes or what activities it performs
Merger
- acquisition of assets and liabilities of one company by another
- new entity formed
- 5 objectives satisified by merger or acquisition
1. creating cost efficiencies
2. expanding geographical coverage
3. extending product offerings
4. gaining access to tech, resources, capabilities
5. supporting org’s ability to adapt to evolution of its industry
Vertical Intregation
-degree to which firm has decided to directly produce multiple value-adding stages from raw materials to sale of product to ultimate consume
-the more steps in sequence, the greater the vertical integration
-can provide more control over value chain and opportunities to lower costs
Challenges
* increases investment in industry and exposure to changes/negative trends
* if activity is not significant to org’s operations, output may not make its acquisition cost-efficient
Backward Intregration
-process of buying or owning elements of production cycle and channel of distribution back toward raw material suppliers
-focuses on activities located closer to origin of value chain
-offers more control over cost, time, quality of supplies –> competitive advantage when there are a few suppliers and they exert power over their customers
-significant investment in activity that is not one of org’s core competencies
Forward Integration
-process of buying or owning elements of production cycle
-channel of distribution forward toward the final customer
-can provide opportunity to gain more control over distribution and sale of their products/services
Outsourcing
-process of having suppliers provide goods/services that were previously provided internally
-involves substitution / replacement of internal capacity and production by that of the supplier
-opposite of integration / adds activities to its value chain system
-makes sense when activities can be performed better, more cheaply, or more quickly by a supplier
-comes with risks & loss of control –> products/services may not meet time, quantity, quality specs., prices may increase, supplier may have access to proprietary info
-should not include core competencies (activities that distinguish org from its competitors)
Subcontracting
-sending production work outside to another manufacturer
Strategic Drivers
-factors that influence business unit and manufacturing strategies
-start to identify during information-gathering phase of strategic planning
-can be external factors e.g. potential markets not being served or underserved by competitors or intense levels of competition that will require close control of costs
-can be internal factors e.g. capacity, expertise, and resources that can be used more fully to create a competitive advantage
Customer/Market Segments
-well-prepared market research will identify customer needs that can be tied to changes in specific attributes of existing products or might require new products
-helps determine if product loyalty is strong or weak
-provides background information on the gap between customer expectations and perceptions of a product
-2 approaches:
* inquiry - focus groups, telephone, online surveys
* observation - observation of customer product use in relevant conditions
Segmentation
-can be used to improve services or products for existing customers and determine prospective customers
-often used in starting stages of product design –> market analysis and surveys of existing customers
-Questions: who? where? when? why? what? how many?
-primary reason to identify and understand segments is to increase org’s profits over long term
-2 types: market and customer segmentation
Market Segmentation
-marketing strategy in which total market is disaggregated into submarkets or segments that share some measurable characteristics based on demographics, psychographics, lifestyle, geography, benefits, etc.
-broader form of customer segmentation
-typically used more at business strategy level
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Module 1 Section A48
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Module 1 Section B40
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Module 1 Section C14
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Module 1 Section D55
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Module 1 Section E52
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Module 1 Section F23
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Module 1 Section G13
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Module 1 Section H14
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Module 1 Section I: Sustainability Strategies12
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Module 2 - Section A: S&OP Purpose and Process15
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Module 2 - Section B: Aggregate Demand & Supply Plans13
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Module 3 - Section A: Demand Management21
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Module 3: Sources of Demand/Forecasting62
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Module 4 - Creating & Validating the Master Schedule37
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Module 4 - Section B - Using & Maintaining the Master Schedule6
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Module 4 - Section C - Material Planning Requirements16
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Module 4: Section D - CRP and Scheduling19
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Module 4 - Section E: Suppliers & Purchasing33
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Module 5 - Section A: Detailed Schedules20
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Module 5 - Section A: Detailed Schedules8
