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Showing posts from December, 2010

Foreign Market Entry Modes

The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:

* Exporting
* Licensing
* Joint Venture
* Direct Investment


Exporting

Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

Exporting commonly requires coordination among four players:

* Exporter
* Importer
* Transport provider
* Government


Licensing

Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pa…

Global Strategic Management

During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition.

Sources of Competitive Advantage from a Global Strategy

A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can arise from the following sources:

* Efficiency
o Economies of scale from access to more customers and markets
o Exploit another country's resources - labor, raw materials
o Extend the product life cycle - older products can be sold in lesser developed countries
o Operational flexibility - shift production as costs, exchan…

Core Competencies

In their 1990 article entitled, The Core Competence of the Corporation, C.K. Prahalad and Gary Hamel coined the term core competencies, or the collective learning and coordination skills behind the firm's product lines. They made the case that core competencies are the source of competitive advantage and enable the firm to introduce an array of new products and services.

According to Prahalad and Hamel, core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, motors are a core product that can be used in wide array of end products. The business units of the corporation each tap into the relatively few core products to develop a larger number of end user products based on the core product technology.

The intersection of market opportunities with core competencies forms the basis for launching new businesses. By combining a set of core competencies in …

The Value Chain

To analyze the specific activities through which firms can create a competitive advantage, it is useful to model the firm as a chain of value-creating activities. Michael Porter identified a set of interrelated generic activities common to a wide range of firms. The resulting model is known as the value chain and is depicted below:

The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin.

*

Inbound logistics include the receiving, warehousing, and inventory control of input materials.
*

Operations are the value-creating activities that transform the inputs into the final product.
*

Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc.
*

Marketing & Sales are those activities associated with getting buyers to purchase the product, including channel selection, advertising, pricing, etc.

Porter's Five Forces

The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure.

Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

I. Rivalry

In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences.

Economists measure rivalry by indicators of industry concent…

Competitive Advantage

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

* cost advantage
* differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation.

A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultima…

SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

* patents
* strong brand names
* good reputation among customers
* cost advantages from proprietary know-how
* exclusive access to high grade natural resources
* favorable access to distribution networks


Weak…

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

* Political
* Economic
* Social
* Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macroenvironmental factors.

Political Factors

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:

* tax policy
* employment laws
* environmental regulations
* trade restrictions and tariffs
* political stability


Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:

* economic growth
* interest rates
* exchange rates
* inflation rate


Social Factors

Social factors include the demographic and cultural aspects of the external macroenviron…

Hierarchical Levels of Strategy

Strategy can be formulated on three different levels:

* corporate level
* business unit level
* functional or departmental level.

While strategy may be about competing and surviving as a firm, one can argue that products, not corporations compete, and products are developed by business units. The role of the corporation then is to manage its business units and products so that each is competitive and so that each contributes to corporate purposes.

Consider Textron, Inc., a successful conglomerate corporation that pursues profits through a range of businesses in unrelated industries. Textron has four core business segments:

* Aircraft - 32% of revenues
* Automotive - 25% of revenues
* Industrial - 39% of revenues
* Finance - 4% of revenues.

While the corporation must manage its portfolio of businesses to grow and survive, the success of a diversified firm depends upon its ability to manage each of its product lines. While there is no single competitor to Textron, we…

The Business Vision and Company Mission Statement

While a business must continually adapt to its competitive environment, there are certain core ideals that remain relatively steady and provide guidance in the process of strategic decision-making. These unchanging ideals form the business vision and are expressed in the company mission statement.

In their 1996 article entitled Building Your Company's Vision, James Collins and Jerry Porras provided a framework for understanding business vision and articulating it in a mission statement.

The mission statement communicates the firm's core ideology and visionary goals, generally consisting of the following three components:

1. Core values to which the firm is committed
2. Core purpose of the firm
3. Visionary goals the firm will pursue to fulfill its mission

The firm's core values and purpose constitute its core ideology and remain relatively constant. They are independent of industry structure and the product life cycle.

The core ideology is not created in a mission statem…

The Strategic Planning Process

The Strategic Planning Process


In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.

A simplified view of the strategic planning process is shown by the following diagram:

The Strategic Planning Process
Mission & Objectives
Environmental
Scanning
Strategy
Formulation
Strategy
Implementation
Evaluation& Control

Mission and Objectives

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.

Guided by the business vision, the firm's leaders can define measu…

Business Development

Organizations apply the term “business development” (a.k.a. “biz dev”) to a variety of activities.
“Business development” in the Strategic Marketing Process refers to high-level partnerships
that generate revenue, create better products and/or increase efficiency. These partnerships can
help you
Access new markets
Increase sales to existing markets
Improve your access to technology
Boost your productivity
Gain capital (human or financial)
In a true partnership, companies collaborate to achieve a common goal. It’s more than a short-term promotion
such as a special offer or marketing to each other’s customers. Instead, it’s an agreement to do business
together while sharing responsibilities, resources, risks and rewards.

To Create New Products
A computer manufacturer enters a
partnership with a fashion designer
to create a limited-edition laptop
and matching case.
They create a team of employees
from both companies to designs and
market the product. The computer
manufacturer produces the
computer…

Sales Management

Good sales management is one of the simplest ways to increase your revenue and profitability.
Sales management is about leading the people and process your company uses to sell prospects
and service customers. Responsibilities include:
Building the right sales strategy
Hiring the right team
Creating the right compensation plans,
territories and quotas
Setting the right projections
Motivating your team
Tracking revenue against goals
Resolving conflicts
Training and coaching sales reps
Managing processes
Getting the sale!
Why is there a sales management chapter in the Strategic Marketing Process?
Your sales team is the voice of your company. In fact, your reps may be the only people with direct
customer interaction. They may be responsible for prospecting, selling and managing existing
customers. They control the dialogue with your market, gather feedback, and deliver on your value
proposition and brand promise.
The sales team will make or break your marketing efforts. Even if you’…

Customer Relationship Management

Customer relationship management (“CRM”) is a term
that refers to two things:
A company’s strategy for managing leads and customer data
Software that manages that data
In its simplest form, CRM is a database where sales and marketing teams store critical account
data:
Contact & account information (contact names, emails, phone numbers, SIC code, address, etc.)
Source of the lead
Sales rep name and activity history (calls, emails sent, inquiries, etc)
Purchase history
Projected revenue by customer
Marketing campaign data
CRM can also be an important reporting tool. For example, you can use it to:
Generate revenue projections for a product, a sales rep, and your company as a whole
Tie revenue to the original marketing campaign
Pull up lists of leads and activities by sales rep
View the number of leads you have at each step in your sales process
Track your progress against your goals
Manage marketing campaigns
Capture leads from your website
Minimize the time your team sp…

Website

These days, most business buyers use
the web to read news, research solutions,
find vendors and learn about other companies.
And whether they learn about your company online
or through other means, most buyers and potential
partners will review your site before they do business with you.
Your website is potentially the most powerful sales &
marketing tool you have. A good site plays an enormous role in
your sales process and can help you:
Generate leads
Nurture existing leads and move them closer to purchase
Deliver information about your products & services in a compelling way
Process orders, cross- and up-sell, and run special promotions
Communicate with existing customers and distribution channels
Generate publicity
Think of your site as an interactive brochure that speaks with different groups and converts visitors into
prospects and customers. It’s an extension of your brand and an example of the quality of work you do.
Although a site can be a substantial investment, it doesn…