mrktg mgt - strategies

8/3/2019 Mrktg Mgt - Strategies

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Business Strategies

Growth strategies


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Strategic Planning

It is the management taskconcerned with the growthand future of businessenterprise.

It provides the route map forthe firm and helps to takedecision in the future with agreater awareness.


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Ansoff Product Market Growth Matrix

Market Penetration Product Development

Market Development Diversification

PRODUCTSPresent New

M

ARKETS Present

New


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BCG & GE Matrix

MarketA

ttractivene

ss

Business Strength

MarketGrowth

Relative Position

(Market Share)


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About GE Matrix

Developed by McKinsey & Company in 1970s.

GE is a model to perform business portfolio analysison the SBUs.

GE is rated in terms of Market Attractiveness &Business Strength

It is an Enlarged & Sophisticated version of BCG.


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Classification

Mark

etAttractiveness

Strong Medium Weak

Low

Medium

High

Business Strength

5.00 1.002.333.67

5.00

3.67

2.33


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Market Attractiveness

Annual market growth rate

Overall market size

Historical profit margin

Current size of market Market structure

Market rivalry

Demand variability Global opportunities


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Business Strength

Current market share

Brand image Brand equity

Production capacity

Corporate image

Profit margins relative tocompetitors

R & D performance

Managerial personal

Promotional effectiveness


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Invest Heavilyfor Growth

InvestSelectively &

Build

Develop forIncome

InvestSelectively &

Build

DevelopSelectively for

Income

Harvest

or

Divest

Develop

Selectively &build onstrengths

Harvest DivestMa

rketAttractiv

eness

Low

Medium

High

Business PositionHigh Medium Low


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Strategies

Protect Position

Invest to grow

Effort on maintaining strength

Invest to Build

Challenge for leadership

Build selectively on strength

Build Selectively

Invest in most attractive segment

Build up ability to counter competition

Emphasize profitability by raising

productivity


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Strategies

Protect & Refocus

Manage for current earning

Defend strength

Selectivity for earning

Protect existing program

Investments in profitable segments

Build Selectivity

Specialize around limited strength

Seek ways to overcome weakness

Withdraw if indication of sustainable

growth are lacking


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Strategies

Limited expansion for Harvest

Look for ways to expand without risk

Manage for Earnings

Protect position in profitable segment.

Upgrade product line

Minimize Investment

Harvest

Sell at time that will maximize cash

value

Cut fixed costs and avoid investment

meanwhile.


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Over View

Business Strengths

Mark

etAttractiveness

Low

High

LowHigh

Attractive

Moderate

Attractive

Unattractive


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TATA Group

IT (information Technology): TCS

Consumer Durable: Automobiles, Titan, etc.

Textiles: Tata Fabrics, West Sides, etc.


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GE Matrix for TATA

Business Strengths

Mark

etAttractiveness

Low

High

LowHigh

IT

ConsumerDurables

Textiles


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BCG v/s GE

BCG GE

Market Growth Market Attractiveness

Market share Market strength

4 cell 9 cell

Multi Products Multi Business Units

Primary tools Secondary tools


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Five Competitive ForcesThreat of

NewEntrants

Rivalry AmongExisting

Competitors

Bargaining Powerof Customers

Bargaining Powerof Suppliers

Threat ofSubstitutes


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Threat of

NewEntrants

Threat of

Substitute

Products

Threat of

NewEntrants

Rivalry AmongCompeting Firms

in Industry

BargainingPower of

Buyers

BargainingPower of

Suppliers

porters five forces Model of coMpetition

y


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Purpose of Five-Forces Analysis

The five forces are environmental forces that

impact on a companys ability to compete in agiven market.

The purpose of five-forces analysis is todiagnose the principal competitive pressuresin a market and assess how strong andimportant each one is.


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Threat ofNew

Entrants

Threat of

New

Entrants



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Barriers to

Entry

Expected Retaliation

Government

Policy

Economies of Scale

Product Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independent

of Scale

Threat of New Entrants


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Bargaining

Power of

Suppliers

Threat ofNew

Entrants

Threat of

New

Entrants



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Suppliers exert power

in the industry by:

* Threatening to raise

prices or to reduce quality

Powerful suppliers

can squeeze industry

profitability if firms

are unable to recover

cost increases

Suppliers are likely to be powerful if:

Supplier industry is dominated by a

few firms

Suppliers products have few substitutes

Buyer is not an important customer to

supplierSuppliers product is an importantinput to buyers product

Suppliers products are differentiated

Suppliers products have highswitching costs

Supplier poses credible threat offorward integration

Bargaining Power of Suppliers


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Bargaining

Power of

Buyers

Threat ofNew

Entrants

Threat of

New

Entrants

Bargaining

Power of

Suppliers



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Buyers compete

with the supplying

industry by:

*Bargaining down prices

* Forcing higher quality

* Playing firms off of

each other

Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases

are large relative to sellers sales

Purchase accounts for a significantfraction of suppliers sales

Products are undifferentiated

Buyers face few switching costs

Buyers industry earns low profits

Buyer presents a credible threat ofbackward integration

Product unimportant to quality

Buyer has full information

Bargaining Power of Buyers


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Threat of

Substitute

Products

Threat of

New

Entrants

Threat of

NewEntrants

BargainingPower of

Buyers

BargainingPower of

Suppliers



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Products

with similar

functionlimit the

prices firms

can charge

Keys to evaluate substitute products:

Products with improving

price/performance tradeoffs

relative to present industryproducts

Example:

Electronic security systems inplace of security guards

Fax machines in place of

overnight mail delivery

Threat of Substitute Products


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Threat of

Substitute

Products

Threat of

NewEntrants

Threat of

NewEntrants

Rivalry AmongCompeting Firms

in Industry

BargainingPower of

Buyers

BargainingPower of

Suppliers



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Intense rivalry often plays out in the following ways:

Jockeying for strategic position

Using price competition

Staging advertising battles

Making new product introductions

Increasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but

may be costly to smaller competitors

Rivalry Among Existing Competitors


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Cutthroatcompetition is more likely to occur when:

Numerous or equally balanced competitorsSlow growth industry

High fixed costs

Lack of differentiation or switching costsHigh storage costs

Capacity added in large increments

High strategic stakes

High exit barriers

Diverse competitors

Rivalry Among Existing Competitors


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The Five Forces are Unique to Your Industry

Five-Forces Analysis is a framework foranalyzing a particular industry.

Yet, the five forces affect all the other businesses in that

industry.

Growth


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Growth

Internal

ExternalLicensing

Franchising

Strategic Alliance

Joint venture

Merger & Acquisitions

Green field ventures

Concentration growth


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Concentration growth

If a companys current product lines have real growth

potential. Growing firms in a growing industry tend to choose these

strategies

VerticalForward integration

Assuming a function previously provided by distributors

Backward integrationAssuming a function previously provided by a supplier

Horizontal Extending product variants and scope of operations into other territories

Concentric growth


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Concentric growth

Related diversificationEntering into related businesses opportunities for

Transferring competitively valuable expertise, technological know-how

and other capabilities from one business to another.

Combining related activities to reduced cost

Achieving economies of scope

Exploiting well known common brand name / contact

Achieving synergy 1+ 2 > 3

Examples Rolls royce Aircraft , Automobiles eng

GE

electrical appliances , captive power gensets, energy generation /diesel locomotives

Conglomerate growth


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Conglomerate growth

Un-related diversification Diversifying into an industry unrelated to its current one.

Future growth given importance

To spread the business risk

Ex TATA : steel / Automobile / IT / Tea / FMCG / Life Style / Publishing /

Power & energy

ITC

Cigarettes / FMCG/ Packaging King fisher Hard Drinks / Airlines

Wipro FMCG/ IT / Electricals

Godreg Machine tools / FMCG

Turn Around


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Turn Around

Turn around management refers to the managementmeasures that reverse the negative trends in theperformance indicators of the company (ie) turn asick company back to a healthy one.


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Indicators for the need of Turn around

Persistence negative cash flow

Declining Market ShareDeterioration in physical facilities

Elements that contribute to a Turn around


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Elements that contribute to a Turn around

Changes in Top management

To initiate credibility action

Neutralizing external pressure

Initial control / cost control

Revenue generation thru liquidation of Non-performing assets

Better co-ordination


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