colin boydstrategic analysis defining a firm’s product- market position colin boyd professor of...

Colin BoydStrategic Analysis

Defining a Firm’s Product-Market Position

Colin BoydProfessor of Management

University of Saskatchewan


“Would you tell me, please, which way I ought to go from

here?”

“That depends a good deal on where you want to get to,”

said the Cat.

“I don’t much care where—” said Alice.

“Then it doesn’t matter which way you go,” said the Cat.

“…as long as I get somewhere,” Alice added as an

explanation.

“Oh, you’re sure to do that,” said the Cat, “if you only walk

long enough.”

Alice in Wonderland

What relevance does this have for organizations, and for organizational decision-making?


“Who are you,” said the caterpillar.

Alice replied, rather shyly, “I—I hardly know, Sir, just at present—at least I know who I was when I got up this morning, but I think I must have changed several times since then.”

But you cannot specify a desired destination unless you first of all know your starting point.

I wonder if I've been changed in the night? Let me think. Was I the same when I got up this morning? I almost think I can remember feeling a little different. But if I'm not the same, the next question is 'Who in the world am I?' Ah, that's the great puzzle!


Future Strategy Comes from UnderstandingHow a Firm has Historically Defined Itself

How can you determine where to move to unless you know where you are before the start of the move?


How has the firm historically defined

its product-market position in terms of:• horizontal

integration?• vertical integration?• geographical

coverage?

What is the current position of the firm?


A Sideways Slide!

we sell fruit juice

we sell cranberries

we supply Thanksgiving food

we sell berries

we sell cranberry stuff

cranberries

add a product to thehorizontal shelf and

change the definitionof the business!

cranberries turkeys

cranberries blueberries

cranberries cranberry juice

cranberry juice orange juice

cranberry juice cranberry candies we sell candies


horizontal integrationhow does the business definition change

as we add new products to the shelf?

Bread Milk Cigarettes Confectionery

Magazines Arcade Games

Slurpies Coffee & Danish Hot Dogs Hamburgers

Western Union Money Services

Gasoline

Videotape Rentals

Big Gulps

ATM

Motor Oil Washer Fluid


The dilemma of horizontal integrationWhich business definition is the one which should

define our future strategic direction? Can we follow more than one path?

Bread Milk Cigarettes Confectionery

= Entertainment

Slurpies

Magazines

Western Union

Gasoline

(= no coherent definition)

= Auto supplies & services

= Banking

= Fast Food


Men’s suits

Shirts

Ties

Shoes

Socks

Belts

Horizontal integration as a natural market grouping

What else can I sellyou right now thatwill transfer moremoney from yourwallet into my till?


Horizontal integration as a natural market grouping

Ocean Spray Cranberry JuiceOcean Spray Orange JuiceOcean Spray Cranberry Candies

30 Polo Ralph Lauren Stores, 9 Polo Concept Stores, 54 Club Monaco Stores, 130 Outlet Stores (Horizontal at retail level)

Men's Clothing, Sportswear, Jeans, Underwear

Women's Clothing, Swimwear, Jeans

Children's Clothing

Accessories: Luggage and Handbags, Leathergoods, Footwear, Gloves, Scarves, Eyewear, Jewelry, Hosiery, Fragrances

Ralph Lauren Home, Bedding Products and Accessories, Bath Products., Furniture, Fabric and Wallpaper, Table Linens, Flatware, Paint, Broadloom Carpets, Area Rugs

Ralph Lauren


Men’s suits

Shirts

Ties

Shoes

Socks

Belts

Horizontal integration as a natural manufacturing grouping

What else can I make that uses

my current manufacturing skills?

WalletsReins Holsters Bags


• ICE CREAM • SODA • SUNSCREEN• INTERNET ACCESS?

Does your next product conform to your business definition?


But if your product range becomes too wide, you risk losing your focus and your

original identity.

A competitor with a tighter focus may

emerge, forcing you to retreat back to

your core product.


Vertical Integration:Understanding the Supply Chain

Raw Materialstransport

raw material processing

transport

manufacturing

transport

warehousing

transportEnd Customer

Where do you want to be in the

supply chain?

Do you want to be involved in more than one stage in the supply chain?

The Supply Chain


BackwardIntegration

Raw Materials

End Customer

Do you want to move positions

within the supply chain?

Sliding Backwards and Forwards:Vertical Integration in the Oil Industry

• Exploration• Drilling• Production Platforms• Transport• Refinery• Pipeline• Distribution Depot• Retail Outlet• Auto Servicing

ForwardIntegration

Back towards the source of raw materials

Forward towards the

end consumer


Canadian operating facilities include:

Four natural gas plants in AlbertaOffshore natural gas production facilities in Nova Scotia (Sable - joint venture)Heavy oil production facilities in AlbertaOil sands mine and extraction plant in Northern Alberta (Athabasca Oil Sands Project – joint venture)Oil sands upgrader (Athabasca Oil Sands Project – joint venture)Three refineries, each in Alberta, Ontario and Quebec respectivelyOne chemical plant in AlbertaTwo lubricant facilities, each in Alberta and Ontario respectivelyOver 1,600 branded retail stations

About Shell


VERTICAL

INTEGRATION

SHELL

7-ELEVEN

Arriving at the same place from totally

different directions!

Which firm makes the best burger?

Which firm would be a better banker?

H O R I Z O N T A L I T E G R A T I ON


A Menswear Store in Saskatoon, Sask.What Next? What Strategy to Adopt?

Horizontal Integration

Vertical Integration

• Add boys' clothing• Add women's clothing• Add sports equipment

• Manufacture suits• Dry cleaning business

Geographical Expansion

• A second Saskatoon store• A store in Regina• A store in Edmonton


PRODUCTPresent New

CUSTOMER

New

Present MarketPenetration

MarketDevelopment

ProductDevelopment

Diversification

THE ANSOFF MATRIX


Why go for unrelated diversification?

• Risk of market innovation or consumer fickleness• Risk of production innovation• Risk of technological change• Risk of obsolescence• Dependence on one economic cycle• Dangerous to put all one’s eggs in one basket

It does not use any of your core skills!

Sticking to one product/market area =


Related and Unrelated DiversificationMarket-relatedDiversification

Production-relatedDiversification

customers youknow very well

customers youknow less about

customers youdon’t know at all

production you know very well

production you know less about

production you are ignorant

about

relateddiversification

concentricdiversification

unrelateddiversification

Core Setof Skills


Decision Making at the Strategic Level

…involves questions such as….

• Are we in the right kind of business?• Should we stay the same, or change in some way?• Should we become smaller, or bigger?• On which dimension(s) should we change…• ….geographical scope?• ….breadth of products offered?• ….extent of vertical integration?• ….specialization versus diversification?

colin boydstrategic analysis defining a firm’s product- market position colin boyd professor of...

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