270 presentation2
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MS&E 270: STRATEGY IN TECHNOLOGY-BASED COMPANIES
Chris Mocko, Lakshmi Mohan, Sohail Razzaq, and Jun Jiang
Initial Position
• R&D new product for Others & Singles• SOLD = High Earners, Pros, Buffs• SONO = Buffs, Singles, Others
Market Shares Based on Units Sold (Rd 0)
0.00% 10.00% 20.00% 30.00% 40.00% 50.00%
Buffs
Singles
Pros
HiEarners
Others
SOLD
SONO
Initial Strategy
Five Forces Analysis Low Price Commodity Market
Barriers to Entry
• Need for a new product (significant R&D investment)
• Consumer perception problem• Base unit cost problem
• Low brand awareness in target consumers
Rivals
• One dominant player and one moderate performer
Substitutes• Only one brand with base cost < $70
Buyers
• Primary consumer segment: Others
• Emphasis on economy• Fastest growing segment• Our firm’s market share < 2%, room for growth
Suppliers
• Not applicable
Mar
ket
Sh
ares
Bas
ed o
n U
nit
Sal
es O
ver
Tim
e
SO
LD
SO
NO
SO
NY
0%
10%
20%
30%
40%
50%
60%
0 1 2 3 4 5 6
0%
5%
10%
15%
20%
25%
30%
0 1 2 3 4 5 6
0%
2%
4%
6%
8%
10%
12%
14%
16%
0 1 2 3 4 5 6
Buffs
Singles
Pros
HiEarners
Others
Strategy Evolution - Sonite
1) Cheap Product for Singles & Others
3) Discontinue product to focus efforts on two products
2) Stop competing with giants—focus on Pros only
Evolution of StrategyMarket Shares Based on Unit Sales (All Products)
0%
10%
20%
30%
40%
50%
60%
0 1 2 3 4 5 6
PeriodBuffs Singles Pros HiEarners Others
Strategy Evolution - Vodite
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
4 5 6
Innovators
Adopters
Followers
Market Shares Based on Unit Sales Over Time
1) Focus on Followers—most aligned with product
2) R&D to improve product to go after largest segment, Adopters
Game TheoryStrategy Performance
Sonite:
• Protect our cash cow, protect our market share
• Regain market share and profit
• Our cash cow product generated enough revenue to fund the costly R&D for Vodite
• Our market share in Pros soared
Vodite:
• Gain first-mover advantage
• Come out with a product with one solid attribute
• Prepare for possible price war
•Focus on one product only
• Third wave
• Attracts both Innovators and Early Adopters
• Our low base cost gave us high profit margins
•Outspend other teams on advertising and sales force
Game Theory1
2
3
R&D Expenditures1. PSONY2. PVOOM3. Improving on all existing products
Strategy on the Edge• Edge of Chaos: Product is loosely aligned to all
segments to test the market.
• Adapt : Change the genetic make-up of the product one gene at a time to better cater to a segment.
• Low-cost R&D : Improve base cost and attractive characteristics.
• Edge of Time: Base R&D projects off one another to build on past strengths.
• Constant improvement: Move from one short term win to another.
Strategy on the EdgeName Autonom
yDesign
PVOOM 30 3
PVOM3 50 6
Name Power Base Cost
PSOLD 220
PSOL3 182
PSONY 97
PSNY2 75
PSOLD 75
PSOL2 90
5th to 6th turn:Revenue increase by 170%
5th to 6th turn:Contribution after marketing increased by 40%
5th to 6th turn:Contribution after marketing increase by 43%4th to 5th turn:Revenue increased by 38%
Strategy as Simple RulesEisenhardt/ Sull Our MarkStrat
TeamWorks best in rapidly changing environment
Rapidly changing consumer preferencesRapid changes in number of brands
Unpredictable competition
No historical knowledge of competitors
Performance goal is growth
Our goal was to grow our stock price via growing market share
The Six CommandmentsI. Thou shall not forsake thy homiesII. Thou shalt not covet price and product
attributes (consumer perceptions)III.Thou shalt have no other segment
before the fastest growingIV.Remember research and development,
to keep it holyV. Honour thy advertising and thy salesVI.Thou shall withdraw thy dogs
Recommendations1. Focus on growth in market share and
profitability will follow2. It’s better to have one or two star products
than to have a range of mediocre products3. Market share can be sticky after achieving a
threshold. 4. Don’t be afraid to withdraw low performing
brands5. Advertising and sales force spending is more
important than brand characteristics6. Use market studies as a guide, not a crystal
ball that predicts the future perfectly