Strategy Formulation | Types of Strategies | Implementation
Questions to Ask:
- Are you committed to implementing a plan to move your company forward?
- What are the names of the key people who need to buy in to the plan?
- How will you communicate the plan throughout the company?
- Will you commit money, resources, and time to support the plan?
Lally, R. (1997). Aligning Values with Strategies: Getting results for the Hands on Manager (Office Edition, pp. 6-9).
Identifying the specific definitions for an organization’s formal values is often a fairly clean-cut task. Most companies include this information in their personnel handbook. Aligning the understanding of a company’s informal values between executive management and many layers of subordinate employees can prove to be a more challenging task. So what are informal values? “You find them in questions like, “What does it take to get promoted,” “What does it take to get fired”… “How late do I have to stay to be recognized as a hard-worker?” (Lally, 1997). Many of these questions can usually be answered by one’s common sense. Although, it is most helpful to a company’s employee body, to understand clearly all values, formal or informal. It is the manager who is usually charged with the task of communicating formal or informal values. How does this all relate to strategy? “Managers are good at creating strategies based on market conditions, but they often stop there without considering whether elements underneath the strategy–values, staff, and the rest–are aligned with it. If they aren’t, the strategy fails” (Lally, 1997). The core idea is that regardless of how market conditions change, when the manager realigns his or her strategy, other organizational elements must also change. “Managers must facilitate changes in organizational structures, compensation, and the informal values so that they all line up with the strategy” (Lally, 1997). The manager should also work diplomatically with senior management in order to facilitate certain changes that require approval. Often, the manager has to entertain both the employees and senior management when working to accomplish strategy changes.
Clampitt, P., Berk, B. and Williams, M. (2001). Leaders as Strategic Communicators: Ivey Business Journal (2nd Edition, pp. 51-55).
Among the important traits of a great leader, being a strategic communicator stands out as the most important. Some leaders are naturally strategic communicators, most of us however, could always be much better. The difference between good and great is usually having a formula, a well thought out plan. A 2002 article, in the Ivey Business Journal, outlines four steps to follow in order to be an effective strategic communicator. The first step is to assess the context. “Effective leaders assess those they seek to influence. A proper assessment allows leaders to determine the group’s limits and possibilities. Push too slow and key initiatives never get traction. Push too fast and they falter through sheer exhaustion” (Clampitt, Berk, and Williams, 2002). The second step is to craft a strategy. The leader must “select communication goals that are linked to the organizational goals…executives generally choose one of the five basic communication strategies:
- Spray & Pray: Executives shower employees with all kinds of information…
- Tell & Sell: Executives communicate a more limited set of messages, first telling employees about key issues, then selling them on the wisdom of their approach.
- Underscore & Explore: Executives focus on developing a few core messages clearly linked to organizational success, while actively listening for potential misunderstandings…
- Identify & Reply: Executives identify key employee concerns and then reply to them.
- Withhold & Uphold: Executives withhold information until necessary.
Underscoring a theme is not enough. To be effective, executives must play an active role in translating the theme into corporate priorities and objectives at each level of the organization” (Clampitt, Berk, and Williams, 2002). The third step is a simple one, the leader’s communication strategy must be clear. The most important steps of this stage are “repetition and redundancy…identify and utilize opinion leaders…select the right channels” (Clampitt, Berk, and Williams, 2002). The fourth and final step in this process is to provoke dialogue. By obtaining feedback, a leader will be able to evaluate his or her own plan and learn any additional insight that maybe useful in the future.
Galpin, T. “Connecting Culture to Organizational Change” HR Magazine (March 1996,
“Connecting Culture to Organizational Change” from HR Magazine clearly communicates how significantly difficult and complex it can be to accomplish this task. I extracted some ideas that seemed to effectively simplify this process. They are:
- Set specific, numeric expectations…using this strategy allows people in the organization to begin ‘measuring the immeasurable.
- Keep it simple…
- Be creative…
- Involve managers and employees in designing there own measures
- Reward and recognize” (Galpin, 1996).
In addition to the preceding points it is essential to reward and recognize positive actions. Other important ideas include leading by example and focusing on consistent positive behavior.
Sussland. W.A. (2002). Connecting the planners and doers. Quality Progress. Vol. 35,
Issue 6, June 2002. Retrieved April 1, 2003 from the World Wide Web:
Connecting the Planners and Doers, (2002), appearing in the journal Quality Progress presents the Two Rings model developed by the author, Sussland to link business strategy to its implementation. The outer ring of the model includes the key tasks of senior management which are to check, alert, plan and deploy (CAPD), in that order. The inner ring includes the key tasks of line management which are to plan, do, check and act (PDCA).
On the outer ring, check refers to reviewing the strengths, weaknesses, opportunities and threats of the organization through qualitative and quantitative measures. Alert signifies initiating proactive changes and developing contingency plans to respond to future trends. Plan refers to developing the strategic objectives and allocating resources to deploy the plan. Sussman describes deploy as linking “doing the right thing and doing it right” (p.6).
When top-down deployment is complete, the process reverses direction. Line management takes over and follows the inner ring processes of planning, checking, doing and acting. The process is complete when roles and responsibilities have been assigned, and resources allocated. Tasks representative of PDCA include the role of operations management to manage the actions planned, the use of resources, processes deployed, products and services delivered and the value chain of customers and suppliers.
Successful linking of business strategy and its implementation results in connecting the internal and external environments, connecting the past to the future and connecting all levels and functions of the organization. The Two Rings model is a systematic methodology to accomplish this linkage.
The author found hundreds of articles on grand strategies, and for the most part they all dealt with military or political issues. One would think that after two hours of searching, even someone who is poor at using search strings would have stumbled upon more business related articles. The attached article was the closest to “useful” that could be found. What caught the authors’ eye was the narrative approach of putting the reader in the position of just having been promoted to an important position in a niche portion of a large company, and then asking that person to take the somewhat ethereal big picture strategies of the larger organization and apply them in some workable manner. The gist of the message was one of “marketing a process”, not a “marketing process”.
This proved to be an interesting site in that it took a flash card, or sound bit type of approach to discussing leadership characteristics, and the connections with proper employee resource management. The author especially liked the sections that contained “myth v. reality” comparisons. It could be argued that this site does not address a wide variety of resources other than personnel, but in the authors’ opinion, the people are the most important resource. This site also included information on issues such as reward systems and employee empowerment. In retrospect, this site would probably be a more effective part of the tool kit if it was split up and scattered throughout the tool kit.
“How to achieve the targeted results”
(Action plans, how to get there)
“There are three kinds of companies: those that make things happen, those that watch things happen, and the rest who wonder what happened.” Anonymous
A successful business is about creating value for its customers, and the intent or plan should be to create more value than the competitors. This process involves matching the firm’s resources and capabilities with the opportunities and challenges of the marketplace. A successful business strategy matches the firm’s strengths (resources and capabilities) with market opportunities to create a sustainable competitive advantage by providing more value for its customers than competitors.
Three ingredients are necessary for a business to successfully steer a strategic course through market turbulence and become proactive in shaping events and competitive behavior to its advantage.
- Mission – A strategic mission and vision that articulates the nature of the business and focuses the energies of all parts of the organization toward the task of outperforming the competition.
- Market – A market orientation in which the beliefs and values that pervade the organization emphasize the need to put the customer first.
- Measurement – A process for formulating, choosing, and evaluating the best strategy (Day, p. 20).
THOUGHTS ABOUT STRATEGY
Superior firm performance is generally attributed to its competitive advantage. Competitive advantage arises from leveraging a firm’s unique skills and resources to implement value-creating strategy that competitors cannot implement as effectively. A sustainable competitive advantage occurs when the advantage is immune or not subject to erosion by competitor’s actions.
Thus, a strategy is decisions and activities that enable a firm to achieve and sustain competitive advantage and to improve its performance. It is a game plan for moving the company into an attractive business position and building a sustainable competitive advantage (Thompson, p.43).
Strategy is a directional statement that serves as a central theme guiding and coordinating integrated actions in the pursuit of competitive advantage. It is a compass, not a detailed road map (Day, p21). Strategy is both
- proactive (intended) deliberate and planned action
- reactive (adaptive) as-needed reactions to unanticipated developments and fresh competitive pressures. (Thompson, p.9)
Strategy is a guide how to pursue the company’s mission and strategic vision and how to achieve it. A competitive strategy specifies how a business intends to compete in the markets it chooses to serve (Day, p5). Strategy focuses on how to achieve performance targets, how to outcompete rivals, how to achieve sustainable competitive advantage, how to strengthen the company’s long-term position, how to grow the business, how to satisfy customers, how to respond to changing market conditions, (Thompson, p.10, 42). Basically the central thrust of business strategy is how to build and strengthen the company’s long-term competitive position in the marketplace.
Steps to Formulate a Competitive Strategy
Simply stated, strategy is an action plan that directs a firm in developing a competitive advantage. A sustainable competitive advantage arises from leveraging a firm’s core competencies to create value for the customer. For a strategy to be successful, it must be consistent with the firm’s mission/vision, objectives/goals, with its internal and external environment, and target market.
A pictorial representation of this process is as follows:
Formulating a competitive strategy is based upon the steps we have done thus far: (Porter, xix-xx)
- What customer needs is our company uniquely qualified to meet?
- What is the business doing now? What are our core competencies?
- What is the current strategy?
- What assumptions about the company’s relative position, strengths and weaknesses, competitors, and industry trends must be made for the current strategy to make sense?
- What is our business and what are we trying to accomplish on behalf of our customers?
- What will our business look like in 5-10 years from now?
- In what areas will our business continue being actively involved in the future?
- What is happening internally and externally?
- What is happening in the environment?
- Industry Analysis – What are the key factors for competitive success and the important industry opportunities and threats?
- Competitor Analysis – What are the capabilities and limitations of existing and potential competitors, and their probable future move?
- Strengths and Weaknesses – Given an analysis of industry and competitors, what are the company’s strengths and weaknesses relative to present and future competition?
- What is to be accomplished?
- Goals are developed after being filtered through a SWOT analysis.
- What are our specific, measurable targets?
- What customers are we targeting?
- How should the firm differentiate and position itself in the target market?
- What should the business be doing?
- What are the feasible strategic alternatives given the customer analysis?
- Which alternatives best relates the company’s situation to external opportunities and threats?
Strategy – “How to Achieve the Targeted Results”
With these steps completed, we are now able to formulate a strategy to provide direction to the company.
A company’s strategy should be market-driven and customer-driven using outside-in strategic thinking aimed at boosting customer satisfaction and achieving sustainable competitive advantage. The company must study market trends, listen to customers, enhance the company’s competitiveness, and steer the company in whatever new directions are dictated by market conditions and customer preferences. (revised Thompson, p.10)
A corporate planning director of a Fortune 500 MNC observes that “the process of strategic marketing is coming to be defined as the management of competitive advantage – that is, as process of identifying, developing, and taking advantage of opportunities that result in a tangible business advantage.” Meeting these challenges requires developing market-driven strategies. The process involves becoming market-oriented, matching customer value opportunities with organization’s distinctive capabilities, and developing internal and external strategic relationships. The basic initiative for guiding market-driven strategy begins by developing a market-oriented culture and processes in the organization” (Excerpt from: “Competitive Advantage in the Global Marketplace: a Focus on Marketing Strategy,” by Thomas Hult, David Cravens, and Jagdish Sheth; Journal of Business Research, v51, 2001.)
Formulating a business strategy that yields sustainable competitive advantage requires some of the following actions: (Thompson p.11,48-49).
- Actions to strengthen the company’s resource base and competitive capabilities
- Actions to strengthen the company’s long-term competitive position and secure a competitive advantage (accelerate R & D, to broaden/narrow the product line, improve product design, alter product quality or add new features, introduce new technologies, modify customer service, outcompete rivals on the basis of superior resources and competitive capabilities.
- Actions to respond to changing industry conditions and other emerging developments in the external environment (shifting customer preferences, new government regulations, the globalization of competition, entry or exit of new competitors)
- Actions to capitalize on new opportunities
- Defensive moves to counter the actions of competitors and defend against external threats
- Actions to merge with or acquire a rival company or form strategic alliances and collaborative partnerships
- Efforts to alter geographic market coverage and degree of vertical integration
- Moves and approaches that define how the company manages key activities.
- Moves to unite strategic initiatives in the various functional area of business (manufacturing and operations; marketing, promotion, and distribution; R&D technology; human resources; financial) to build competitively valuable resource strengths and capabilities to support the company’s competitive approach and overall strategy.
A company’s competitive strategy consists of its business approaches and initiatives to attract customers and fulfill their expectations, to withstand competitive pressures, and to strengthen its market position (Thompson, p.135). Having identified and evaluated its major competitors, the company must design broad competitive marketing strategies by which it can gain competitive advantage by offering superior customer value. Competitive strategies have been classified to define marketing strategy in terms of a single-minded pursuit of delivering superior value to customers.
An competitive advantage typically is based on:
- lower costs
- a differentiated product
- a focused in-depth understanding of the consumer
Examples of competitive advantages for:
- Lower costs – Walmart
- Differentiated product – IMB provides technology products that many business consumers would prefer to own. Harvard proves a business education that is truly unique.
- Focused – Nordstroms provides products and services that exhibit a unique understanding of the more affluent consumer.
Each company must determine which strategy makes the most sense given its position in the industry, its objectives, opportunities, and resources (Kotler, p.685) Companies that pursue a clear strategy are likely to perform well. The firm that carries out that strategy best will make the most profits. Firms that do not pursue a clear strategy – “Middle-of-the-roaders” or stuck in the middle and do the worst (Kotler, p.686)
Generic Competitive Strategies
A generic business strategy classifies business strategies and approaches toward obtaining a sustainable competitive advantage into groups with a common thrust. There are a host of strategic thrust available. Being innovative, global, entrepreneurial, information technology based, or manufacturing could drive a strategy.
The basic differences among competitive strategies are:
- whether a company’s market target is broad or narrow
- whether it is pursuing a competitive advantage linked to low costs, product or understanding your customer. Any complex strategy uses one of these as the basis. Michel Porter, an influential strategy researcher, has classified competitive positioning strategies: low cost, differentiation, and focus. The difference among the three generic strategies are illustrated in the following chart: (Porter, p.39).
The following are the most basic strategies. We will be choosing one of these for each of your segment/target markets.
Overall Low Cost Leadership Strategy
This strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost provider of a product or service. Overall low cost does not refer solely to price. It refers to the delivered cost to the customer. The company works to achieve the lowest costs of production and distribution so that it can price lower than its competitors and win a large market share (Kotler, p.686).
This strategy is aimed at achieving low-cost leadership industrywide. It is based on achieving a sustainable cost advantage in some important element of the product or service (Aaker, p.7). A low-cost provider is a powerful competitive approach in markets where many buyers are price sensitive. A low-cost leader’s basis for competitive advantage is lower overall costs than competitors. Successful low-cost leaders are exceptionally good at finding ways to drive costs out of their business (Thompson, p. 135, 136). Ex. Dollar Tree Store, Walmart, Dell Computer
A low-cost leader has two options for achieving superior profit performance:
- To use the lower-cost edge to under price competitors and attract price-sensitive buyers.
- To refrain from price-cutting altogether, be content with the present market share, and use the lower-cost edge to earn a higher profit margin on each unit sold, thereby raising the firm’s total profits and overall return on investment (Thompson, p. 136, 137)
The overall cost leadership position can be achieved through a high market share or through other advantages, such as favorable access to raw materials or state-of-the-art manufacturing equipment (Aaker, p.7). To achieve a cost advantage, a firm’s cumulative costs across its value chain must be lower than competitors’ cumulative costs. Keys to success in achieving low-cost leadership is to be proactive in restructuring the value chain, finding innovative ways to restructure processes and tasks, cut out frills, and provide the basics more economically (Thompson, p. 138, 145). A low cost strategy need not always be associated with low prices, because lower cost could lead to enhanced profits or increased advertising or promotion instead of reduced price (Aaker, p.7).
The more price sensitive buyers are and the more inclined they are to base their purchasing decision on which seller offers the best price, the more appealing a low-cost strategy becomes. A low-cost provider’s product offering must always contain enough attributes to be attractive to prospective buyers. A low-cost leadership strategy works best when:
- Price competition among rival sellers is especially vigorous.
- The industry’s product is standardized or readily available from other sellers.
- There are few ways to achieve product differentiation, thereby making buyers very sensitive to price differences.
- Most buyers use the product the same ways.
- Buyers incur low switching costs.
(Thompson, p. 146, 147)
Implementing overall low cost leadership strategy require different resources and skills. It also implies differing organizational arrangements, control procedures, and inventive systems. Some common implications are as follows: (Porter, p.40)
Defenses Against Five Competitive Forces: (Porter, p.36, 37)
The low-cost position protects the firm against all five competitive forces because bargaining can only continue to erode profits until those of the next most efficient competitor are eliminated.
Risks: (Porter, p.45)
Cost leadership imposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvement. Some of these risks are:
- Technological breakthroughs can open up cost reductions for rivals that nullify a low-cost leader’s past investments, learning, and gains in efficiency.
- Low-cost learning by industry newcomers or followers, through imitation or through their ability to invest in state-of-the-art facilities.
- Inability to see required product or marketing change because of the attention placed on cost.
- Inflation in costs that narrow the firm’s ability to maintain enough of a price differential to offset competitors’ approaches to differentiation.
- Getting carried away with overly aggressively price-cutting and ending up with lower, rather than higher, profitability.
- Not emphasizing avenues of cost advantage that can be kept propriety. Sustaining its cost in ways difficult for rivals to copy or match.
- Becoming too fixated on cost reduction. It can be pursued so zealously that a firm’s offering ends up being too frills-free to generate buyer appeal.
This strategy concentrates on creating a highly differentiated product/service line and marketing program so that it is perceived to a broad spectrum of customers as being unique. The company focuses on superior performance by targeting an important customer benefit valued by a segment of market. Most customers would prefer to this product/service line if its price is not too high (Kotler, p.686). Ex. Victoria Secret, Marriott, IBM
A differentiation strategy is one in which the product offering is differentiated from the competition by providing value to the customer by product quality, perhaps by enhancing the performance, quality, prestige, features, service backup, reliability, or convenience of the product (Aaker, p.6,7). It seeks to differentiate the company’s product/service offering from rivals’ in ways that will appeal to buyers. (Thompson, p. 135).
Sustainable differentiation usually has to be linked to unique internal skills, core competencies, and capabilities. As a rule, differentiation yields a long-lasting and more profitable competitive edge when it is based on new product innovation, technical superiority, product quality and reliability, and comprehensive customer service. Such attributes are widely perceived by buyers as having value (Thompson, p. 148)
The competitive advantage for a differentiation strategy is either a product/service offering whose attributes differ significantly from the offerings of rivals or a set of capabilities for delivering customer value. Successful differentiation strategy begins with a deep understanding of what customers need and ends with building organizational capabilities to satisfy these needs better than rivals (Thompson, p.149-151)
Differentiation strategies work best in markets where: (Thompson, p.152)
- There are many ways to differentiate the company’s offering from that of rivals and many buyers perceive these differences as having value.
- Buyer needs and uses of the item or service are diverse.
- Few rival firms are following a similar differentiation approach.
- Technological chance is fast-paced and competition revolves around evolving product features.
Implementing differentiation strategy require different resources and skills. It also implies differing organizational arrangements, control procedures, and inventive systems. Some common implications are as follows: (Porter, p.41)
Defenses Against Five Competitive Forces: (Thompson, p.151, 152)
Differentiation results in enhanced buyer loyalty to a company’s brand or model and greater willingness to pay more for it. It creates a defensible position for coping with the five competitive forces.
Risks: (Porter, p.46) (Thompson, p. 152)
Differentiation also involves a series of risks:
- The cost differential between low-cost competitors and the differentiated firm becomes too great for differentiation to hold brand loyalty. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings.
- Over-differentiating so that price is too high relative to competitors or that the array of differentiating attributes exceeds buyers’ needs
- Trying to charge too high a price premium. The bigger the price differential the harder it is to keep buyers from switching to lower-priced competitors. . Buyers are satisfied with a basic product and don’t think “extra” attributes are worth a higher price.
- Buyers’ need for the differentiating factor falls.
- Trying to differentiate on the basis of something that does not lower a buyer’s cost or enhance a buyer’s well-being, as perceived by the buyer.
- Imitation narrows perceived differentiation. Rapid imitation means that a firm never achieves real differentiation.
- Not understanding or identifying what buyers consider as value.
This strategy concentrates on a narrow market segment by offering niche customers a customized product or service that meets their tastes and requirements better than rivals’ offerings. The company focuses on targeting an important customer benefit valued by a narrow segment of the market (could be a particular buyer group, segment of the product line, or geographic market). It concentrates its effort on serving a few market segments well rather than going after the whole market (Kotler, p.686). The entire focus strategy is built around serving a particular target very well. Ex. microbreweries, local bakeries, bed-and-breakfast inns, boutiques
A focuser’s basis for competitive advantage is either
- lower costs than competitors in serving the market niche
- an ability to offer niche members something they perceive is better.
This strategy works best when: (Thompson, p.156)
- It is costly or difficult for multisegment competitors to meet the specialized needs of the target market niche.
- When no other rival is attempting to specialize in the same target segment.
- When a firm doesn’t have the resources or capabilities to go after a bigger piece of the total market.
- When the industry has many different niches and segments, allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities.
Defenses Against Five Competitive Forces: (Thompson, p.155,156)
A focuser’s specialized competencies and capabilities in serving the target market niche provide a basis for defending against the five competitive forces.
Risks: (Porter, p.46) (Thompson, p. 156)
Focus involves yet another set of risks:
- The cost differential between broad-range competitors and the focused firm widens to eliminate the cost advantages of serving a narrow target or to offset the differentiation achieved by focus.
- The differences in desired products or services between the strategic target and the market as a whole narrows.
- Competitors find submarkets with the strategic target and out focus the focuser.
Stuck in the Middle Strategy
This is a losing strategy. Firms that do not pursue a clear strategy , called middle-of-the-roaders, do the worst. Do not be stuck in the “middle” trying to be successful at all three disciplines, because your firm will generally end up not being good at any one. Business that do not stand out as the lowest in cost, highest in perceived value, or best in serving some market segment encounter difficulties. Ex. Sears, Holiday Inn
Market-Based Generic Strategies
These are similar to Porter’s competitive two strategies, but market-based in their development. Market strategy has two fundamental objectives:
- To create superior customer value. This is similar to achieving competitive advantage, but with a different emphasis. The superior customer value perspective, also known as market orientation, focuses everyone in the organization on customers’ needs that than on competitors’ products, thereby helping the business act rather than merely react.
- To create economic value for the owners of the business. Superior economic performance is the result of a strategy that creates superior customer value (Slater, p.37)
It is believed that companies gain leadership position by delivering superior value to their customers. Michael Treacy and Fred Wiersema, in their book the Discipline of Market Leaders, 1995, suggest three generic market strategies – Product leadership, customer intimacy, and operational excellence (Slater, p.37). Companies can pursue any one of the market-based strategies for delivering superior customer value. Few firms can be the best at more than one of these disciplines. Leading companies focus on and excel at a single market-based generic strategy, while meeting industry standards on the other two. (Kotler, p.686, 287). Their success depends more on how well each is executed and less on the market environment of the business. The following is an explanation of the market-based strategies:
This strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost provider of a product or service because of the firm’s focus on efficiency. The company provides superior value to their customers by offering them lowest total cost. It works to reduce costs and to create a lean and efficient value-delivery system. It serves customers who want reliable, good-quality products or services, but who want them cheaply and easily. (Kotler, p.686). Ex. Wal-Mart, Southwest Airlines, Dell Computer, and McDonalds.
Two operating characteristics common to these businesses are:
- Commitment to standardization and simplicity. Ex.-McDonald’s has developed a set of uniform procedures that provide for easy employee training and efficient operations.
- The use of information technology. Ex. – Wal-Mart’s competitive advantage is based on their investment in information technology that has resulted in the creation of a superior logistics capability (Slater, p.39).
This strategy concentrates on a narrow market segment by a deep understanding of its customer and his perception of the value of the product or service offered. The company provides superior value by precisely segmenting its markets and then tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique customer needs through a close relationship with and intimate knowledge of the customers. It builds detailed customer databases for segmenting and targeting, and empowers its marketing people to respond quickly to customer needs. It serves customers who are willing to pay a premium for a service, or special attention they receive (Kotler, p.686). Ex. Amazon, Land’s End
Customer intimate business focuses on understanding the customer and his perception of the value of the product or service offered. Accompanying this orientation is a focus on the lifetime value of a relationship. It costs only about one-fifth as much to make an additional sale to an existing customer as it does to attract and sell to a new one. Thus the concepts of “customer equity” and “customer share” instead of market share are central to the customer intimacy business (Slater, p.38)
Product Leadership – This strategy concentrates on creating an innovative product/service line and marketing program so that it is perceived to a broad spectrum of customers as being leading-edge products or services. They provide superior value by offering its customers a continuous stream of state-of-the-art products or services. The company seeks to identify emerging opportunities and continuously strive to develop and deliver new products. They look for first mover advantages. It is open to new ideas, relentlessly pursues new solutions, and works to reduce cycle times so that it can get new products to market quickly (Slater, p.38, Kotler, p.686). Ex. Sony, Microsoft, and Nike
They key task for product leaders if to maintain an environment in which focused creativity can flourish. It requires a culture that encourages experimentation and risk-taking, one in which wee-developed plans that fail are often celebrated rather than punished. Product leaders usually work in multifunctional teams to shorten response times and development cycles. They recognize the importance of developing platform technologies and products that become the foundation for future products (Slater, p.39).
The basic differences among competitive strategies are:
- whether a company’s market target is broad or narrow
- whether it is pursuing a competitive advantage linked to low costs, product, or understanding its customer. Any complex strategy uses one of these as the basis.
The following are the most basic strategies. We will be choosing one of these for each of your segment/target markets.
Cost Leadership Strategy – (Operational)
This strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost provider of a product or service. Overall low cost does not refer solely to price. It refers to the delivered cost to the customer.
The company works to achieve the lowest costs of production and distribution so that it can
price lower than its competitors and win a large market share.
- Dollar Tree Store, Motel 6
Operational Excellence – (Market Focused)
This strategy focuses on appealing to a broad spectrum of customers based on being the overall low-cost provider of a product or service because of the firm’s focus on efficiency. The company provides superior value to their customers by offering them lowest total cost. It works to reduce costs and to create a lean and efficient value-delivery system. It serves customers who want reliable, good-quality products or services, but who want them cheaply and easily.
- Wal-Mart, Southwest Airlines, Dell Computer, and McDonalds, Federal Express
Differentiation Strategy – (Operational)
This strategy concentrates on creating a highly differentiated product or service line and marketing program so that it is perceived to a broad spectrum of customers as being unique. The company focuses on superior performance by targeting an important customer benefit valued by a segment of market. Most customers would prefer to this product/service line if its price is not too high.
- Victoria Secret, Marriott, IBM
Product Leadership – (Market Focused)
This strategy concentrates on creating an innovative product/service line and marketing program so that it is perceived to a broad spectrum of customers as being leading-edge products or services. They provide superior value by offering its customers a continuous stream of state-of-the-art products or services. The company seeks to identify emerging opportunities and continuously strive to develop and deliver new products.
- Sony, Microsoft, Nike, Johnson & Johnson
Focused Strategy – (Operational)
This strategy concentrates on a narrow market segment by offering niche customers a customized product or service that meets their tastes and requirements better than rivals’ offerings. The company focuses on targeting an important customer benefit valued by a narrow segment of the market (buyer group, segment of the product line, or geographic market). The entire focus strategy is built around serving a particular target very well.
- Microbreweries, local bakeries, bed-and-breakfast inns, boutiques.
Customer Intimacy – (Market Focused)
This strategy concentrates on a narrow market segment by a deep understanding of its customer and his perception of the value of the product or service offered. The company provides superior value by tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique customer needs through an intimate knowledge of the customers. It builds detailed customer databases for segmenting and targeting, and empowers its marketing people to respond quickly to customer needs.
- Amazon, Land’s End, Cable & Wireless, Home Depot
Now that you have a strategy for each customer group, make sure it is a winning strategy for your company. A winning strategy must build a competitive advantage that can become sustainable, fits the enterprise’s situation, and improves company performance. The following criteria are to be used as thought proving questions. It is not necessary for your strategy to meet all these criteria. However, they are presented for your consideration.
Tests of a Winning Strategy
A winning strategy must build sustainable competitive advantage, fit the enterprise’s situation, and improve company performance. Tests can be used to evaluate the merits of one strategy over another and to gauge how good a strategy is. The soundness of a competitive strategy depends on how well it can satisfy the following tests: (Thompson, p.62 and Day, p.35-37, 41)
Sustainable Competitive Advantage Test
A good strategy leads to sustainable competitive advantage. The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.
- Will the strategy create and maintain a competitive advantage through some combination of lowest delivered costs, or superior customer value?
- Is there an effective match of core competencies with opportunities and threats?
- Is there a basis for a competitive advantage that is sustainable in light of probable competitive moves?
- Will the strategy put the business in a position to ward off known threats, exploit opportunities, enhance current advantages, or provide new sources of advantages?
- Can the strategy adapt to a broad range of foreseeable environments?
- How difficult will it be for competitors to match, offset, or leapfrog the expected advantages?
- Does the strategy enhance the company’s competitive position for the long term?
- Does the build a company reputation and recognizable industry position?
The Goodness of Fit Test
A good strategy is tailored to fit the company’s internal and external situation. Without tight situational fit, there’s real question whether a strategy appropriately matches the requirement for market success.
- Is the strategy vulnerable to unacceptable environmental and internal uncertainties?
- Can these risks be managed or avoided?
- Does the strategy play aggressive offense to build competitive advantage and aggressive defense to protect it?
A good strategy boosts company performance.
- What are the gains in profitability?
- What are the gains in the company’s competitive strength and long-term market position?
- What are the prospects for successful implementation, feasibility, supportability, consistency?
Competitive Advantages Do Diminish (Source Day, page 206-)
Most advantages are contestable as sustainability is only a matter degree. Consider a Price Advantage. It is only a matter of time before a competitor can easily counter the price because it becomes known to the marketplace. Due to reverse-engineering abilities, most product innovation is quickly contested. As such, a couple of mechanisms are at work in most markets to undermine the leader; however these factors can also benefit competitors seeking to attack.
- Protective barriers are weakened by technological and environmental changes. New technology allows followers to either match or leapfrog the leader.
- Competitors can quickly learn how to imitate the advantage sources of the leaders by researching the leader’s mistakes, hiring key personnel, and conducting research to determine unfulfilled expectations of customers or the leader’s channel.
The following are situations when basically no competitive advantage is secure:
- Highly turbulent environment.
- Few barriers to entering the industry.
- Low asset intensity.
However, there can be some redemption in developing invisible assets. These generally exist in the superior skills of personnel, the training or information they acquired, and their commitment to the organization. Another is a unique corporate culture (such as a customer orientation) and committed employees. Other invisible assets can exist outside the firm in a well-established brand name, exclusive sources of raw material, or in reliable channel relationships. The distinguishing features of invisible assets are:
- They are unattainable with money alone, meaning difficult to copy.
- They are time-consuming to develop.
- Generally they are capable of multiple uses.
Strategic Identification (Aakers, p.6, 28-31)
The identification of strategic alternatives is based on the determination of:
Product Market Investment Strategy
The Product-market scope is defined by…
- Product expansion – the products it offers and chooses not to offer.
- Market expansion – the markets it seeks to serve and not serve, the competitors it chooses to compete with and to avoid.
- Vertical expansion – its level of vertical integration.
In the following product-market matrix, four growth options are shown.
- To penetrate the existing product market. A firm may attempt to attract customers from competitors or increase usage by existing customers.
- To Product expansion while remaining in the current market.
- Apply the same products in new markets.
- To diversity into new product markets.
- Vertical integration adds another dimension to the product-matrix
For each product market four investment options are possible:
Grow – invest to grow (or enter the product market.
Maintain – invest only to maintain the existing position.
Milk – Milk the business by minimizing investment.
Withdraw – recover as many of the assets as possible buy liquidating or divesting the business.
Functional Area Strategies
The development of a business strategy involves coordination of various function area:
The strategic assets or competencies that underlie the strategy and provide the sustainable competitive advantage.
Strategy formulation must consider the cost and feasibility of generating or maintaining asset or competencies that will provide the basis for a sustainable competitive advantage.
Strategic positioning specifies how the business is to be perceived relative to its competitors and market by its customers and employees/partners. It represents the essence of a business strategy (Aakers). Positioning is the way the product/service is defined by consumers on important attributes. The place the product/service occupies in the consumer’s mind in relation to its competitors. (K&A, p.269)
Criteria For Strategy Selection (Aaker, p.30)
Consider scenarios suggested by strategic uncertainties and environmental opportunities/threats.
Pursue a sustainable competitive advantage.
Exploit organizational strengths or competitor weaknesses.
Neutralize organizational weaknesses or competitor strengths.
Be consistent with organizational vision/objectives.
Achieve a long-term return on investment.
Be compatible with vision/objectives
Need only available resources.
Be compatible with the internal organization.
Consider the relationship to other strategies within the firm.
Foster product portfolio balance.
Competitive Strategies - Based on Competitive Positions
There are different competitive strategies based on the different competitive position the firm plays in the target market. Based upon the company’s competitive position, there are specific marketing strategies. The following are strategies for market leaders, challengers, followers, and nichers: (Kotler, 687-689 and Thompson, p.200-207)
Strategy for Market Leader
The firm in an industry with the largest market share. It usually leads another firms in price changes, new product introductions, distribution coverage, and promotion spending.
Expand total market
Protect market share
Expand market share
A runner-up firm in an industry that is fighting hard to increase its market share.
Full frontal attack
A runner-up firm in an industry that wants to hold its share without rocking the boat.
Follow at a distance
A firm in an industry that serves small segments that other firms overlook or ignore. The firm knows the target customer group so well that it meets their needs better than other firms that casually sell to this niche. The nicher can charge a substantial markup over costs because of the added value. An ideal market niche is big enough to be profitable and has growth potential.
Additional Competitive Strategies
First-Mover Strategies/ Preemptive Strategy – (Thompson, p.170) – A preemptive strategic move is the pioneering implementation of a strategy into a business area that, because it is first, generates an asset or competency that forms the basis of an sustainable competitive advantage. For a preemptive move to create “first-mover advantages,” competitors must be inhibited pr prevented from duplicating or countering it (Aaker, p.7).
Synergy Strategy - (Aaker, p.8) Synergy strategy occurs when a business has an advantage because it is linked to another business within the same firm or division. The two businesses, may be able to share a sales force, office, or warehouse and thus reduce costs or investment. They may be able to jointly offer a customer a combination of coordinating products.
Tactical Issues and Program Formulation
Studies have shown that a 5% increase in customer loyalty can produce profit increases up to 85%. (Peppers & Rogers Group Newsletter – Oct. 2, 2002)
“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.” (American Marketing Association, 1985) This is not based on customer actions, but firm actions.
Connecting with Customers through Segmenting, Targeting, and Positioning
Segmenting: determining distinct groups of buyers (segments) with different needs, characteristics, and/or behaviors. Can’t serve all profitably.
Targeting: process of evaluating each segments attractiveness and selecting.
Positioning: arranging for a product to occupy a clear, distinctive, desirable place in target’s mind relative to competitors.
Probably a critical aspect for marketers in future will be to focus on Niches.
Shifting aging demographics
High income consumers
Importance of brands
Quality, pricing, and service
Develop the Positioning through Marketing Mix or 4 Ps
The Marketing Mix (4 Ps) is a set of marketing tools/tactics that the firm uses to pursue its objectives.
Product – goods &/or service combination that a company offers a target market;
defined as an offering not just physical characteristics
Price – amount of money consumers have to pay to obtain the product
Promotion – activities that persuade target customers to buy the product
Place – activities that make the product available
Tactics are the specific actions that lead to implementing your strategies. The tactics are broken down in to four areas (product, price, promotion, distribution) and will provide the framework for creating action items to accomplish your strategic market objectives of reaching your target market. Together, they are a set of tools that the firm blends to produce a response it wants in the target market. There are different tactical positions for each functional area based on the selected strategy. The tactical positions reinforce your strategy.
From a product-focused approach, the four areas are defined as:
Product: The product or service you are offering to your target market
Price: The amount of money customers have to pay to obtain your product.
Promotion: The activities that communicate the merits of the product and persuade target customers.
Distribution: The company’s activities that make the product available to target consumers.
From a customer-focused approach, the four areas are defined as:
Each tactical area contains numerous considerations and issues firms need to be aware of, and sometimes address, when implementing strategies. This section addresses the considerations at a high level and is meant to provoke further research if an issue pertains to your company. We will provide you with a list of resources for each area.
What is a product? A product is anything that can be brought to the market, which will provide satisfaction. A product is more than just a physical object, which is why we refer to a product as an offering. It includes physical objects, services, events, persons, places, organizations, ideas, and any combination of these.
Are you offering a product or a service?
What is your customer “really buying” when he/she acquires your product?
Considerations for product/service identification
Why do consumers buy products/services?
Attributes- products are a “bundle” of attributes, which include quality, features, and style & design.
Branding- some type of designation that identifies the market or seller. Brand equity management is critical for 21st century marketers.
Packaging- it is used not just to contain the product, but has promotional value as well.
Labeling- at least product identification, but can extend to in-depth descriptions and promotion.
Product support services – activities that augment the actual product.
Product life-cycle strategies
Product life-cycle – estimation of a product’s revenues and profits over the course of its life. This is another “tool” to assist a marketer in product/service strategies. Provides a perspective to understand the aspects of the product. The five stages are:
Product development begins when the company finds a new product. Sales are $0 and heavy investment.
Introduction provides a period of slow growth with nonexistent profits due to extensive promotional costs.
Growth is a period of rapid market acceptance and developing profits.
Maturity is a period of slow growth, level profits, and increasing marketing expenditures to defend the product’s position against competitors.
Decline is a period of falling sales and profits.
Why is price important?
Price is one of the major factors affecting buyer choice and needs to be cohesive with the strategy you picked. Price is the only element of the four tactics that produces revenues as the other areas represent cost areas. Common pricing mistakes include:
Too cost-oriented rather than customer value-oriented.
Not revised often enough to reflect market changes.
Not taking the other 3 tactics into consideration.
Not varying enough for different products (in the mix), market segments, or purchase occasions.
Considerations for Pricing Decisions
There are both internal and external factors to consider when setting prices.
Internal factors include
Looking at your strategic market objectives and associated goals
Looking at the benefits you are providing your customer. Customers typically seek out products and services that provide the best value in terms of benefits received.
Consider your costs for “production.” Costs generally set the floor for pricing considerations.
Assess your company and decide who should set the price.
Reviewing your SWOT analysis. The nature of market demand will generally set the upper limit for pricing considerations.
Considering how price sensitive your customers are.
o Customer are not price sensitive when product is high in quality, prestige or exclusiveness. Substitutes are hard to find. Product price is low compared to customer’s income.
o Customer are price sensitive when products are commodities, similar across companies, and the market is flooded with substitutes.
Prices need to be set somewhere between product costs and market demand.
There are three ways to look at pricing decisions 1) costs, 2) value, 3) competition.
Customers do not distinguish between messages sources about a company and its products, thus the necessity to manage the total promotional program and ensure it is sending a unified consistent message. This idea is called “integrated marketing communications.”
Definition: Concept for carefully integrating and coordinating a company’s many communication channels to deliver a clear, consistent and compelling message.
Considerations for Promotional Decisions
To deliver the message, a mix of the following well-known communication tools are used:
Advertising – Any paid form of nonpersonal presentation and promotion of ideas, goods or services through print and broadcast ads, packaging outer and inserts, motion pictures, brochures, booklets, posters, leaflets, directories, billboards, display signs, pop displays.
Direct Marketing – Use of mail and telephone to communicate with or solicit a response from customers by using catalogs, mailings, telemarketing, electronic shopping, TV shopping
Sales Promotion – Short-term incentives to encourage trial or purchase of a product or service through contests, games, premiums, samplings, trade shows, exhibits, demonstrations, coupons, rebates, low-interest financing, trade-in allowances, stamps
Public Relations – A variety of programs designed to promote and/or protect a company’s image or its individual products through the use of press kits, speeches, seminars, annual reports, charitable donation, sponsorships, publications, community relations, lobbying events.
Personal Selling – Face-to-face interaction with one or more prospective purchasers for the purpose of making sales by using sales presentations, sales meetings, incentive programs, samples, fairs and trade shows.
Here are the six steps using the above tools to creating an effective communication plan.
Step One – Identify the target audience. In this plan you determined the customer segments, which are your target audience.
Step Two – Determine the communication goals. Your strategic market goals have been identified, but you may consider adding a goal here that directly relates to this communications plan and segment.
Step Three – Design the message. A good message gets a customer’s attention, holds interest, arouses desire, and obtains action. A message must have content, structure, and a format.
Step Four – Select the communication tools, as listed above.
Step Five – Identify the message source. How is the message being communicated and is the source credible for the message being delivered?
Step Six – Evaluate the results. Did the message have the intended impact on the target audience? Measure the behavior of the target audience.
There are two basic promotion strategies/plans:
Distribution channels are ways and the process of making a product or service available to the customer. For many years, distribution was not given much priority within company strategies. However, in the past decade distribution decisions have risen in importance because channel activities impact all other marketing and promotional activities. Companies or people in your distribution channels in many instances provide greater efficiency in making goods and services available to your target markets because of contacts, experience, specialization, and scale of operation.
Considerations for Distribution Decisions
Companies and people in your marketing channel perform many key functions. Some help to complete transactions through:
Information – Gathering and distributing market research and intelligence information about forces in the marketing environment needed for planning and aiding exchange.
Promotion – Developing and spreading persuasive communications about an offer or your company.
Contact – Finding and communicating with your customers.
Negotiation – Reaching an agreement on price and/or other terms of the offer so that ownership or possession can be transferred.
Physical distribution – Transporting and storing goods
Financing – Acquiring and using funds to cover the costs of the distribution
Structure follows strategy.
Alfred Chandler, Jr.
Those that implement the plans must make the plans.
Patrick Hagerty, Texas Instruments
A strategic plan will provide a business with the roadmap it needs to pursue a specific strategic direction and set of performance objectives. However, this is just a plan; it does not guarantee that the desired performance objectives will be reached any more than having a roadmap guarantees the traveler will arrive at the desired destination (Best, p.325).
The real strategy in strategic planning rests with turning your tactic into a strategy for your company. Doing this requires effective implementation. Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives. Implementation involves activities that effectively put the plan to work. Whereas the strategic plan addresses the what and why of activities, implementation addresses the who, where, when, and how. Implementation of the tactic drives the strategy of the company (Kotler, p.71 and Best, p.325).
While the strategy itself is important, the ability to execute it is the only thing that counts. Strategy is a word that is thrown around liberally in most organizations. Task forces are formed, consultants are hired, and extensive plans are written. Yet, still 90% of organizations are unable to implement what they have spent so much time, effort, and money for planning. According to a cover story in Fortune magazine, nine out of ten organizations fail to do so due to the fact that: (Kaplan & Norton promotional brochures)
Only 5% of the workforce understand their company’s strategy
Only 15% of executive teams spend more than one hour per month discussing strategy
Only 25% of managers have incentives linked to strategy.
Only 40% of organizations link budgets to strategy.
60% of organizations do not link strategy to budgeting
75% of organizations do not link middle management incentives to strategy
86% of executive teams spend less than one hour per month discussing strategy
95% of a typical workforce does not understand their organization’s strategy
the source of value has shifted from tangible to intangible assets, such as human and information capital, that today comprise 85% of the market value of a typical company.
Organizations need a strategic management process that puts strategy at the center of what they do.
To achieve business goals and objectives, a business needs not only a good strategic plan, but also a well-executed implementation of the plan (Best, p.325). It is believed that implementation is as important, or even more important, than strategy. The fact is that both are critical to success. Actually, companies can gain competitive advantage through implementation if done effectively (Kotler, p.71). There are three major forces that contribute to the successful implementation of a strategic plan: Owning the Plan, Supporting the Plan and Adapting the Plan (Best, p.325).
Owning the Plan
The most common reason a plan fails is lack of ownership. If people do not have an ownership stake and responsibility in the plan, it will be business as usual for all but as frustrated few. Ownership of a plan can be enhanced with detailed action plans, a champion and ownership team, compensation based on performance metrics, and top management involvement (Best, p.326).
Detailed Action Plan
The development and use of a detailed action plan may be the single most effective practice in determining the success of a strategic plan. A detailed action plan involves each aspect of the strategy, but in greater detail with respect to specific actions that have to occur for the plan to be implemented. As shown in the example below, for each action items specified, an individual is assigned a specific responsibility, a measure or goal is delineated, and a time frame within which the action item should be completed is agreed upon. In this way individuals have ownership, understand their roles and responsibilities, and are accountable for implementing a portion of the significant elements of the strategic plan (Best, p.327).
Champion and Ownership Team
Even though assigning individual responsibilities in the detailed action plan is a way to get people involved in implementation, every successful strategic plan has a champion and/or ownership team. A champion is a person who is devoted to the successful implementation of the strategy and plan. Better yet is the creation of an ownership team, who can leverage the unique talents of multiple people and exert more organizational leverage than a single champion (Best, p.327).
The only way your tactics will be implemented is if everyone in the organization understands your plan and is driven to make it happen. You must inform, sell, and rally your plan internally. Let people know why the plan will make a difference for the company and for them. Encourage their input on how to most effectively implement the tactics. Let these people tell you how they can make the company better and help facilitate the success of the plan (Cook, p.105).
Business owners or managers must stay committed to their involvement with the strategic plan and review its progress. When owners or management lessen the time available to review the plan and performance, they send an implicit signal of lack of interest and support. This signal weakens the motivation of the ownership team and the chance for successful implementation (Best, p.328).
Supporting the Plan
The support of a strategic plan are influenced by five key organizational components:
People – required competencies and skills of people, strategic leadership
Resources allocation – personnel, money, and time
Structure – required structural capabilities
Systems – communication, information, operating, planning, measurement and rewards
All must be in sync with each other and with the business strategy .
The figure below illustrates a conceptual framework showing how external analysis and internal analysis provides a link to the strategy. The strategy in turn must successfully match and interact with the five organizational components and organizational performance. Consideration of organizational components can help a business identify actual and potential implementation problems, as well as determine how its organization would adapt to a new strategy. Interactions between organizational components should be considers, such as: (Aaker, p.288)
Do the systems fit the structure?
Do the people fit the structure?
Does the structure fit the culture?
Required Competencies and Skills of People
A strategy is generally based on an organizational competency that, in turn, is based on people. People profiles and their motivation provide the bases of competencies needed to support sustainable competitive advantage. Strategies require certain types of people (Aakers, p.292, 305). In addition to the type and quality of people, the motivation level can affect strategy implementation. Motivation is enhanced if employees are empowered to accomplish their goals and are linked to the corporate culture and objectives. Companies can accomplish these links in part by providing titles, such as “host” (Disney), “partner” Starbucks, and “associate” (J.C. Penny) (Aakers, p.294)
It is key to match the competencies in your organization to the needs of implementing your strategy (Cook, p.106). The following questions will help you focus on your organizational needs to implement:
Do people implementing the plan have the required competencies to effectively implement the strategy?
At all levels, people who have the needed skills, motivation, and personal characteristics must staff the company. Identify what competencies are needed and then equip and train your people to deliver them. For example, a bank wanting to improve customer satisfaction and retention may have to do some training to communicate new policies and customer-oriented employee attitudes (Best, p.329). If a gap exists, it may be necessary to hire people who already possess the skills needed.
Does your strategy require skills of key management personnel in order for it to be effectively implemented?
Members of the management team may need additional training to successfully implement the strategic plan. For example, a business implementing a program to get more new product sales may need to provide some management training on the new product.
While your tactic is market driven, your company strategy to support it must be top-down driven. You need to exert the leadership to make it happen. As the owner, or one of the key executives in your company, your actions send a message to your employees, which in turn set the tone for the company. Consider the impact of your actions and the changes you may want to make in the following areas: (Cook, p.108)
Successful implementation requires that the resources needed are fully committed to support implementation of the strategic plan. Sufficient resources should be allocated with respect to personnel and funding. If the resources needed are not systematically determined in the planning process, most likely the plan will be underresourced. Thus, you need to focus personnel and money toward effective tactic implementation (Best, p. 328). The following questions will help you structure your thoughts and actions: (Cook, p.107).
In order to effectively implement the plan, the business is dependent on your existing organization and resource capabilities (Cook, p. 104).
How can you focus the individual’s performance of tasks on effectively implementing and supporting the tactic, rather than just carrying out his or her duties?
Assign and delegate responsibilities and have accountability.
For each step in your implementation, be sure you have a point of responsibility and accountability. This is so you can go to the source to correct any problems that crop up (Cook, p.109)
Don’t stretch your resources too thin.
For each new responsibility you assign to someone’s plate, check to see that they do not feel overloaded (Cook, p.109).
What financial resources do you need to complete actions in support of the strategy? (Cook, p.107)
The time to succeed, along with market metrics that signal progress, are important aspects of commitment to the marketing plan and successful implementation. Time to succeed will depend on the marketing strategy and the nature of the market opportunity. A share penetration strategy in an existing market should take less time to succeed than a strategy to enter a new market that is undeveloped. With meaningful market metrics, a business a business can track why or why not the plan is working (Best, p.328).
Organizational structure defines lines of authority and communication and specifies the mechanism by which organizational tasks and programs are accomplished. Structure can vary in the degree of centralization and formality of communication channels The following are various types of business structures: (Aakers, p.288).
Centralization versus Decentralization Organization
One key structural dimension is the degree of centralization (Aaker, p.289).
Centralized functional organization – consists of specialized groups in marketing, sales, production, engineering, R&D, personnel, and administration. Centralization will maximize the scale and synergies across the organization.
Decentralized organization – consists of autonomous business units based on product or market groups with the ability to develop strategies in response to the needs of the markets they serve. Decentralization places the business strategists close to the market and allows innovation with a minimum of bureaucracy. However, the economies of scale and synergies across the organization are often difficult to achieve and inefficiencies and duplications are created.
Functional organization – consists of units organized by product or market.
Matrix organization – is one in which a manager reports to two or three other managers responsible for the product line.
Borderless organizations find ways to bread down boundaries within the firm. Cross-functional management organizes around missions that involve a variety of functions to communicate across organizational units such as divisions or country operating units. Various approaches include task forces, best practices conference, and to set up coordination committees (Aaker, p.290).
Markets and competitors can change significantly and it is import to be able to respond quickly. There may not be time to develop needed assets and competencies, and responses that require large commitments to new technologies and distribution channels. One solution is to form a network of alliances and joint ventures with suppliers, customers, distributors, and competitors. With such a network, needed assets can be made available instantly (Aakers, p.290).
A virtual corporation is a team of people and organizations (suppliers, customers, and competitors) specifically brought together for a particular client or job. The people might include contract workers who are hired only for the specific project. The core of the team is likely to be located in a single building. Whereas some team members will be connected via computer workstations. Thus, clients do not have to wait for an agency with the optimal set of characteristics. For example: (Aakers, p.290).
Advertising agency – form teams tailored to the needs of particular clients. Members of the team my come from firms specializing in design, packaging, direct marketing, promotion, brochures, and the media.
It is key to match the structure in your organization to the needs of implementing your strategy. For example: Does your strategy require certain structural efficiencies if you are differentiating on: (Cook, p.106)
Speed of delivery – be sure that your delivery organization can satisfy the customer.
Product reliability – be sure that your manufacturing operation strives for zero defects.
Extended billing arrangements – be sure that your financial organization can track customer data and bill accurately and at the proper time.
Management systems can all influence strategy implementation.
The strategic intent of the plan must be aggressively communicated internally within the company. Although business owners, management, and champion teams fully understand the logic and tactics of the plan, others in sales, customer support, manufacturing, and finance, may not understand the strategic objectives and strategy being implemented. As a result, these employees, who may play key roles in successful implementation, will continue in a business-as-usual mode of operation. It is important to facilitate communication and understanding of strategic objectives, goals, and strategy.
The information system and the technology, databases, and models on which it is based can affect strategy. For example, manufacturers and retailers are affected by information technology. New systems control inventory, ordering, pricing, and promotions. The ability to control information generated by retail scanners can be key to their strategies.
The following questions will help you structure your thoughts and actions:
Do your personnel have all the information they need to effectively implement the strategy?
Is customer information readily accessible to service personnel?
Do salespeople have the proper promotional material to present the strategy effectively?
Policies, procedures, information, and controls should support implementation. The following questions will help you focus on these support issues: (Cook, p.107)
Policies and Procedures – To effectively implement the tactic, are there any policy changes needed within the company?
Should you drive down the organization decision authority?
Do you need to alter credit approval procedures to speed up order processing time?
Should you strengthen quality control policies to drive towards zero defects?
Controls – Do your controls keep implementation on course and not slow it down? Do your control procedures facilitate customer satisfaction or hinder it? (Cook, p.107)
Plans are nothing, planning is everything. Eisenhower
A scheduled strategic planned time for is key. Workshops and retreats are often crucial elements in dedicating quality time to planning. Creative, out-of-the box think, aided by formal creative-thinking exercises is a vital part of any planning system.
Planning should not be separated from the values, culture, and energy of the organization.
According to Henry Mintzberg “Managers with a committing style engage people in a journey. They lead in such a way that everyone on the journey helps shape its course.” “Strategies only take on value as committed people infuse them with energy. ” As a result enthusiasm builds. (Aakers, p.292).
Measurement and Rewards Systems
Measurement can drive behavior and thus directly affect strategy implementation. The key to strategy is often the ability to introduce appropriate performance measurements that are linked to the reward structure (Aakers, p.292). Most people respond to financial rewards. Tying the compensation of those principally responsible for implementation of the plan to performance metrics increases the incentive to successfully implement the strategic plan. The overall goals of compensation tied to market metrics is to create motivation and responsibility (Best, p.327, 328).
A concern in designing measurement and reward systems is to balance the short-term and long-term perspectives. One approach is to use measures that have long-term horizons. Another approach is to link the performance measurement to the nature of the business. For example: (Aakers, p.292)
A manager might be compensated if a loyalty measure or distribution goal is met three years in the future.
Firm can use stock options.
A high-growth SBU could be measured on the basis of market share and customer satisfaction.
A low-growth SBU could be measured on ROA and cash flow.
It is important to create and nurture a strategy supportive work environment and corporate culture. The reality is that people make a difference. Management has to create an environment that connects employees to the organization’s mission, and motivates their creativity, commitment and passion. (Dobni, p.401). The most successful companies have almost cultlike cultures built around strong, market-oriented missions. At companies such as Walmart, Microsoft, Walt Disney, employees share a strong vision (Kotler, p. 72).
Owners and managers must understand what behavior they are trying to develop and reinforce with respect to the goals of the organization and the competitive realities. Ideas should be canvassed from employees. Most employees can suggest what would be more effective for achieving higher performance. After all, they are often closer to the customer and realities of competition. Also involving them in the process will give them a clear ideal of what is expected of them and help them buy into any changes that may be required (Dobni, p.401).
Organizational culture provides the key to strategy implementation because it is such a powerful force for providing focus, motivation, and norms. Because organizational culture is difficult to change, the fit between culture and strategy is important. Organization culture involves three elements: (Aakers, p.294, 299)
Shared values or dominant beliefs define an organization’s priorities. Shared values can have a variety of foci. For example:
A key asset or competency that is the essence of a firm’s competitive advantage: We will be the most creative advertising agency
An organizational output: We will deliver zero defects or 100% customer satisfaction
A management style: This is an informal, flat organization that fosters communication and encourages unconventional thinking.
A belief: The importance of people as individuals.
To make a real difference, the culture must be strong enough to develop norms of behavior – informal rules that influence decisions and actions throughout an organization by suggesting what is and is not appropriate. The fact is that strong norms can generate much more effective control over what is actually done or not done in an organization than a very specific set of objectives and measures. Norms encourage behavior consistent with shared valued. For example, sloppy work affecting quality would be informally policed by fellow workers, without reliance on a formal system (Aaker, p.295).
Symbols and Symbolic Action
Cultures are developed and maintained by the use of consistent, visible symbols and symbolic action. A few symbols and actions are as follows: (Aakers, p.296)
A firms unique roots, including the personal style and experience of its founder, can provide extremely potent symbols.
Modern heroes and role models help communicate, personalize, and legitimize values and norms.
An owners/executive’s use of time. Ex. An owner who spends one week a month looking at customer service.
Patterns of consistent reinforcement activities – Ex. -firm that recognizes cost-saving accomplishments
Type of question continually asked by top executives
Traditions – work life, celebration, retirement
Adapting the Plan
The strategic plan needs to be adaptive to survive changing or unanticipated conditions. Factors that contribute to the adaptive nature of the plan are adaptive roll-out, persistence, feedback metrics, and continuous improvement (Best, p. 330).
It is best to roll-out the marketing plan in a controlled manner to work out the kinks, both internally and externally to ensure success. There are many benefits to a regional roll-out as opposed to a nationwide launch: (Best, p.331).
Fewer resources are required in a small-scale regional launch than in a nationwide launch.
Problems with distributors, marketing communications, and product positioning can more readily be addressed and corrected on a small scale.
If the plan is more effective than planned, additions can be made to production capacity without the potential of stockout and the loss of opportunities to capture customers.
Additional marketing insights will results that can be opportunistically integrated into the marketing plan as full marketing plan implementation is pursued.
The financial metrics generated from a successful roll-out signal long-run profit potential and can be used to help fund the full introduction.
Successful implementation requires a high degree of owner/management persistence, particularly when aspects of the strategic plan need to be modified. It is interesting to note that adaptive persistence has been attributed to the success of many Japanese strategies. One of Japanese management’s greatest assets is their inherent ability to adapt and persist throughout the implementation of the plan. They remain committed to the strategic objectives and persist by adapting their plans. It is their determination to make them work that underlies the secret of their market success (Best, p.330).
An essential element of any adaptive system is feedback. Key process metrics that provide leading signals as to the success of the strategic market and implementation include:
Customer awareness, interest, intentions to buy, trial, and repeat purchase.
Intermediary market coverage, interest, support, and motivation.
Business responsiveness to customer inquiries and problems.
Each of these market metrics has to reach an effective level of performance before financial metrics, such as sales, market share, total contribution, and net profit can begin to perform (Best, p.330).
The importance of market metrics is twofold:
They provide an early signal as to the progress of the marketing plan.
They provide a signal as to which aspect of the marketing plan is not working (i.e. channel system, communications strategy, product-price positioning strategy) (Best, p.330).
Continuous Improvement – Best Practices
A business must be flexible in modifying its strategic plan to adapt to the changing market conditions. While the strategic plan sets the direction and provides the initial roadmap, once it is in place, the flexibility to adapt is an important aspect of continuous improvement.
Continuous improvement involves evaluating the results of strategies and plans and taking corrective action to ensure that objectives are attained. Graphically continuous improvement looks like the following: (Kotler, p.73)
Assessing Plan Implementation
A good strategic plan, market strategy, and improved level of implantation effort will enable your business to achieve a market success well beyond planned performance, and in a much shorter time than expected. No one factor presented will make or break the successful implementation of the strategic plan. However, when the sum of these factors is adequately addressed, the chances for successful implementation are greatly improved (Best, p.331).
It is important to understand why some organizations have failed in attempts to develop sustainable implementation contexts. Three primary reasons are:
Strategies supporting a product or service focus (product, price, promotion, place) are no longer the differentiators they used to be. They have become generic and are easily copied.
Brilliant strategies often succumb to not so brilliant implementation processes. There is an inability to move strategy out of the boardroom and into the playing-field. Great intentions outlined in an eloquently written strategic plan is supported by a poor, fragmented or sometimes non-existent implementation plan.
There is often a failure to recognize the contributions that employees can have on strategy implementation (Dobni, p.400).
The difference between average and top performing organization that have maintained a sustainable competitive advantage lies in the ability of the later to provide superior customer value on a continual basis. Value differentiation and superior performance is sustained through distinctive capabilities possessed by employees. The organizations’ culture is the interface between the employees and the environment that fosters the internal behaviors necessary to develop a continuous cycle of innovation, and external relationships necessary to build sustainable customer loyalty and commitment (Dobni, p.407.)
Studies reveal that the aggregate behaviors of the organization’s employees are responsible for the implementation of company intentions. Strategy implementation fosters a competitive position by leveraging on the distinctive skills and capabilities of employees and then selectively directing these competencies as a basis to compete in the marketplace. In fact, employee behaviors are much harder for the competition to understand and duplicate than generic marketing actions, a piece of equipment, location of a firm, or access to a distribution channel (Dobni, p.407).
Assessment of Strategic Plan Implementation (Best, p.332)
The following are some helpful implementation techniques:
The Post-it Planning process is a simple way to organize a complicated project into a comprehensive strategy which anyone can follow. All you need are some small post-it notes and news print or a white board.
Identify a goal or objective to be accomplished.
Brainstorm important milestones to be achieved in order to fulfill the goal. Write each one down on a post-it note in the past tense.
Arrange milestones in a logical sequence on a poster board, adding other milestones as you find gaps and/or missing tasks. Draw lines to show the relationships. Some tasks can be accomplished simultaneously. Other tasks are sequential.
One task must be accomplished before beginning the next activity. Many are interdependent. Sometimes 2-3 tasks must be finished before accomplishing the another key milestone.
Rearrange milestones in a time sequence, maintaining the logical relationships. Complete reality checks: Logical sequence? Realistic schedule? Adequate personnel? Sufficient resources? Gaps identified?
Summarize the Plan of Action
Summarize the plan of action you intend to take in a few sentences by answer the following questions:
What do you intend to accomplish through this plan?
What are the specific steps you will need to take?
What assumptions or events about which you do not have certain information may affect your plan as it unfolds?
What resources do you have or will you need to carry out your plan?
What limitations or barriers do you face in carrying out your plan? Which of these barriers can be weakened or eliminated?
What steps need to be taken according to what schedule to put your plan in action?
Field Test and Evaluate
One of the reasons for failure to reach goals is starting too big. Begin by developing a trial run to test the validity of goals and action plans without exhausting resources. Reasons to run a pilot project:
It allows the leader to test his/her own ability in handling the project.
Small wins will build confidence in ability to accomplish greater things.
Small wins can be used to generate support for larger vision.
A pilot project can reveal where a plan needs adjusting in order to prevent failure.
A pilot project allows an idea to fail without total devastation to all involved.
Establish standards to measure effectiveness: what to measure, how to measure, when to measure.
Evaluation after Implementing
After every structured event, discuss what people learned. Simply ask three questions and expect to get different responses.
What just happened?
Why do you think it happened?
What can we learn from this?
Implementing a successful plan is a process which includes developing and maintaining good relationships and individual growth toward personal goals. Provide coaching and support for leaders. Continue decision making and problem solving as you implement. Evaluate periodically and make adjustments Some helpful keys to effective evaluations are the following:
Schedule evaluation times into your strategic plan; otherwise, people may not slow down enough to reflect upon their effectiveness.
Everyone involved in the project needs to be included in the evaluation in some way. A thorough evaluation will include evaluating the people involved as well as evaluating the process of the project.
Nothing replaces face to face communication whether that is in a group or one-on-one. Times of evaluation can be very intense.
Find ways to give people a break in the intensity as needed.
Reflection questions for evaluation are the following:
What measurable progress has been made toward achieving your goals?
Have resources been adequately assessed? Is the project within budget?
How are members of the team being cared for and being motivated? Is an adequate effort being made in each area?
How has each team member contributed toward the effort? Is each person in their most effective position?
How do the achievements reflect the vision and mission of the organization?
What obstacles have been encountered? Are adjustments needed in the process?
How are people’s lives being changed for the better?
Are there others who need to “buy in” to the plan?
Obtaining Information About Organizational Compontents (Aakers, p.299)
What are the skills, knowledge, and experience of the firm’s employees?
What is their depth and quality?
What are the employees’ expectations?
What are their attitudes toward the firm and their jobs?
What is the organization’s structure? How decentralized is it?
What are the lines of authority and communication?
What are the roles of task forces, committees, or similar mechanisms?
How are budgets set?
What is the nature of the planning system?
What are the key measures used to evaluate performance?
How does the accounting system work?
How do product and information flow?
Are their shared values that are visible and accepted?
What are these shared values and how are they communicated?
What are the norms of behavior?
What are the significant symbols and symbolic activities?
What is the dominant management style?
Where would the new strategy fit into the organization?
Would the new strategy fit into the strategic plan and be adequately funded?
Would the systems and culture support the new strategy?
What organizational changes would be required for the new strategy to succeed?
What impact would these changes have? Are they feasible?