What are the basic concepts of marketing? - Chapter 1

What does strategy consist of?

All markets are dynamic. Change occurs everywhere, and change affects strategy. A winning strategy today may not prevail tomorrow, it might not even be relevant tomorrow. Markets also become risky, complex and cluttered. These convoluted markets make strategy creation and implementation far more challenging.

Strategists need new and refined perspectives, tools and concepts. In particular, they need to develop competencies around five management tasks:

• Strategic analysis. The need for information about customers, competitors and trends affecting the market is now higher than ever. The information needs to be on-line, because a timely detection of threats, opportunities, strategic problems or emerging weaknesses can be crucial in getting the right response.

• Innovation. Numerous empirical studies have shown that the ability to innovate is a key to successfully win in dynamic market. The organizational challenge consists of creating a context that supports innovation. Next to organizational challenge, there is also a brand challenge, a strategic challenge and an execution challenge.

• Multiple business units. The rare firm does not operate multiple business units defined by channels and countries in addition to product categories and subcategories. Decentralization is a century-old organizational form that provides for accountability, a deep understanding of the product or service, being close to the customer, and fast response: all of which are good things.

• Creating sustainable competitive advantages (SCAs). Creating strategic advantages that are truly sustainable in the context of dynamic markets and dispersed business units is challenging.

• Developing growth platforms. Growth is imperative for the vitality and health of any organization. Growth can come from revitalizing the core business, making growth platforms, as well as creating new business platforms.

A business generally is an organizational unit that has (or should have) a defined strategy and a manager with sales and profit responsibility. They can be defined by a variety of dimensions, including: product line, country, channels, or segments. An organization will thus have many business units that relate to each other horizontally and vertically. There are four dimensions that define a business strategy: the product market investment strategy, the consumer value proposition, the assets and competencies and the functional strategies and programmes.

The product market investment strategy

The scope of a business is defined by:

• The products it offers and chooses not to offer

• The markets it seeks to serve and not to serve

• The competitors it chooses to compete with and to avoid

• Its level of vertical integrations.

Expanding the business scope can help the organization achieve growth and vitality and can be a lever to cope with the changing market by seizing opportunities. Though, expanding the business scope entails risks as well.

Business strategy

• Where to compete: the product market investment decision

• How to compete: value proposition, assets & competencies, functional area strategies & programmes.

What is the customer value proposition?

Ultimately, the offering needs to appeal to new and existing customers. There needs to be a value proposition that is relevant and meaningful to the customer and is reflected in positioning of the product or service.

What are assets and competencies?

The strategic assets or competencies that underlie the strategy often provide a sustainable competitive advantage (SCA). A strategic competency is what a business unit does exceptionally well – such as a customer relationship programme, manufacturing, or promotion – that has strategic importance to that business. It is usually based on knowledge or a process.

A strategic asset is a resource, such as a brand name or installed customer base, that is strong relative to that of competitors. Competence and assets can involve a wide spectrum. The ability of assets and competencies to support a strategy partly depend on their power relative to competitors. Assets and competencies can also provide points of parity. A target value proposition should mandate some strategy imperatives in the form of a supportive set of functional strategies or programmes. These strategies and programmes, in turn, will be implemented with a host of tactical programmes with a short-term perspective.

Strategic market management is a system designed to help a management create, change or retain a business strategy and to create strategic visions. A strategic vision is a projection of a future strategy or sets of strategy. A vision will provide a direction and purpose for interim strategies and activities and can inspire those in the organization by providing a purpose that is worthwhile and ennobling. Strategic market management involves decisions with a significant long-term impact on the organization. Strategic market management is intended to:

• Precipitate the consideration of strategic choices

• Help a business cope with change

• Force a long-range view

• Make visible the resource allocation decision

• Aid strategic analysis and decision-making

• Provide a strategic management and control system

• Provide both horizontal and vertical communication and coordination.

Strategic analysis consist of an internal and an external analysis. External analysis involves an examination of the relevant elements external to an organization.
There are five analysis: customer analysis, competitor analysis, market/submarket analysis, environmental analysis. The external analysis should be purposeful and focus on key outputs: opportunities, threats, trends, and strategic uncertainties. The frame of reference for an external analysis is a typically defined strategic business unit (SBU). Internal analysis aims to provide a detailed understanding of strategically important aspects of the organization: performance analysis, determinants of strategic options. The key outputs are strengths, weaknesses, liabilities, problems, constraints and uncertainties.

Marketing has seen its strategic role growing over the years. There are a few marketing roles. The first one is to be the primary driver of the strategic analysis. The marketing group is in the best position to understand the customers, competitors, markets and submarkets, and environmental forces and trends. Marketing should also take the lead in the internal analysis. The second role is to develop business strategies. The dimension of business strategy most clearly owned by marketing is the customer value proposition. The third role is to drive growth strategy for the firm. Growth options are either based on or dependent on customer and market insights, and marketing therefore should be a key driver. The fourth role is to deal with the dysfunctions of product and geographic silos. Although all functional groups need to deal with this problem, marketing is often on the front line.

When is an analysis succesful? - Chapter 2

What are the key elements of an successful external analysis?

A successful external analysis needs to be directed and have a clear purpose. There is always the danger that it will become an endless process resulting in an excessively descriptive report.

The external analysis should not be an isolated process which stands on its own, but a process that can impact a strategy directly by suggesting strategic decision alternatives or influencing a choice among them. An external analysis can contribute to a strategy indirectly by identifying significant trends, future events, threats, opportunities and strategic uncertainties that could affect the outcomes of a particular strategy.

Strategic uncertainty is a particularly useful concept in conducting an external analysis. Strategic uncertainties focus on specific unknown elements that will affect the outcome of strategic decisions.

There are three ways of handling uncertainty:

• A strategic decision can be accelerated because the logic for a decision is compelling and/or because a delay would be costly or risky.
• It may be worthwhile to attempt to reduce the uncertainty by information acquisition and analysis of an information-need area.
• The uncertainty could be modeled by a scenario analysis.

A scenario is an alternative view of the future environment that is usually prompted by an alternative possible answer to a strategic uncertainty or by a prospective future event or trend.

External analysis is an exercise in creative thinking. There is often too little effort devoted to developing new strategic options and too much effort directed to solving instant operational problems. The essence of creative thinking is considering different perspectives, and that is exactly what an external analysis does. The level of analysis will depend on the organizational unit and strategic decisions involved. There is always a trade-off to be made. A narrow scope specifications will inhibit a business from identifying trends and opportunities that could lead to some attractive options and directions.

The analysis usually needs to be conducted at several levels. An analysis may be needed at the segment level, because entry, investment, and strategy decisions are often made at that level. The key success factors could differ for different product markets within a market or industry. Segmentation is often the key to developing a sustainable competitive advantage. In a strategic context, segmentation means the identification of customer groups that respond differently from other groups to competitive offerings. A segmentation strategy couples the identified segments with a programme to deliver an offering to those segments.

The first set of variables describes segments in terms of general characteristics unrelated to the product involved. The second category of segment variables includes those that are related to the product. The most useful segmentation variable is benefits sought from a product, because the selection of benefits can determine a total business strategy.

Brand loyalty can be structured using a loyalty matrix shown in figure 2.4. Each cell represents a very different strategic priority and can justify a very different programme. The loyalty matrix suggest that the moderate loyals, including those of competitors, should also have high priority because they represent one route to increase the size of loyal segment.

Some products and services, particularly industrial products, can best be segmented by use or application. An application focus is more likely to lead to successful new and marketing programmes than other segmentation schemes.

After identifying customer segments, the next step is to consider their motivations. For example, internet retailers have learned that there are district shopper segments, and each has a very different set of driving motivations. There are newbie shoppers, reluctant shoppers, frugal shoppers, strategic shoppers, enthusiastic shoppers and convenience shoppers. Some motivations will help to define strategy.

What is Customer Motivation Analysis?

Customer motivation analysis starts with the task of identifying motivations for a given segment. A group of managers can identify motivations, a more valid list is usually obtained by getting customers to discuss the product or service in a systematic way. Customers can be accessed with group or individual interviews.

Another task of customer motivation analysis is to determine the relative importance of the motivations.

Qualitative research is a powerful tool in understanding customer motivation. It can involve:

• focus-group sessions
• in-depth interviews
• customer case studies
• ethnographic research

The concept is to search for the real motivations that do not emerge from structured lists. Organizational buyers using multiple vendors may have a good perspective of the firm relative to the competitions.

Customer priorities often evolve from needing help in selecting and installing the right equipment to wanting performance to looking for low cost.

Customers are increasingly becoming active partners in their relationship with the firm and brand rather than passive targets of product development and advertising.

To harness this change, managers should

• encourage active dialogue
• mobilize customer communities
• manage customer diversity
• co-creating personalized experiences

Interacting with the customers on the internet requires skills in listening, engaging and leading. There is also an information overload.

An unmet customer is a customer need that is not being met by the existing product offerings. Unmet needs are strategically important because they represent opportunities for firms to enhance existing brand relationships, increase their market share, break into a market or create and own new markets. Unmet needs that are not obvious may be more difficult to identify, but they can also represent a greater opportunity for an aggressive business because there will be little pressure on established firms to be responsive.

The key is to stretch the technology or apply new technologies in order to expose unmet needs.

Customers are a prime source of unmet needs. The trick is to access them and to get customers to detect and communicate unmet needs.

Problem research develops a list of potential problems with the product. An effective and efficient way to access customers is to use the internet to engage them in a dialogue. A risk with customer-driven idea sites is that there can be a surge around an idea that is impractical or unwise and the company would then be defensive.

Ethnographic or anthropological research involves directly observing customers in as many contexts as possible. By accurately observing not only what is done involving the target or service but why it is being done, companies can achieve a deeper level of understanding of the customer’s needs and motivations and generate actionable insights.

Ethnographic research is particularly good at identifying breakthrough innovations. Customers usually cannot verbalize such innovations, because they are used to the current offerings. These type of research can also be used to improve existing products or services.

The conceptualization of an ideal experience can also help to identify unmet needs.

What is the competitor analysis? - Chapter 3

One approach to identifying competitor sets is to look at competitors from the perspective of customers.

Another approach that provide insights is the association of products with specific-use context or applications.

Both the customer-choice and product-use approaches suggest a conceptual basis for identifying competitors that can be employed by managers even when marketing research is not available.

Primary competitors are quite visible and easily identified. Heineken competes with Stella Artois, Guinness, Bavaria, Carlsberg and other beers. CNN competes with other international news channels. The competitor analysis for this group should be done with depth and insight. In many markets, customer priorities are changing, and indirect competitors offering customers product alternatives are strategically relevant. Understanding these indirect competitors can be strategically and tactically important.

What are Strategic Groups?

The concept of a strategic group provides a very different approach towards understanding the competitive structure of an industry. A strategic group is a group of firms that:

• over time pursue similar competitive strategies
• have similar characteristics
• have similar assets and competencies

Each strategic group has mobility barriers that inhibit or prevent businesses from moving from one strategic group to another. An ultra-premium group has the brand reputation, product and manufacturing knowledge needed for the health segment, access to influential veterinarians and retailers, and a local customer base.

A member of a strategic group can have exit as well as entry barriers. The mobility barrier concept is crucial because one way to develop sustainable competitive advantage is to pursue a strategy that is protected from competition by assets and competencies that represent barriers to competitors.

The conceptualization of strategic groups can make the process of competitors analysis more manageable. Strategic groupings can refine the strategic investment decisions. Instead of determining in which industries to invest, the decision can focus on what strategy group warrants investment. Ultimately, the selection of a strategy and its supporting assets and competencies will often mean selecting or creating a strategic group. A knowledge of the strategic group structure and dynamics can be extremely useful.

It is important to consider potential market entrants, such as firms that might engage in:

• Market expansion
• Product expansion
• Backward integration
• Forward integration
• The export of assets or competencies
• Retaliatory or defensive strategies

Understanding competitors and their activities can provide several benefits. An understanding of the competitors’ strengths and weakness can suggest opportunities and threats that will merit a responds. Second, insights into future competitor strategies may allow the prediction of emerging threats and opportunities.

The competitor actions are influenced by eight elements.

• Size growth, and profitability. The level and growth of sales and market share provide indicators of the vitality of a business strategy. The maintenance of a strong market position or the achievement of rapid growth usually reflects a strong competitor and a successful strategy. A profitability business will generally have access to capital for investment unless it has been designated by the parent to be milked.
• Image and positioning strategy. In order to develop positioning alternatives, it is helpful to determine the image and brand personality of the major competitors. Weakness of competitors on relevant attributes or personality traits can represent an opportunity to differentiate and develop advantage.
• Objectives and commitment. A knowledge of competitor objectives provides the potential to predict whether or not a competitor’s present performance is satisfactory or strategic changes are likely. The financial objectives of the business unit can indicate the competitor’s willingness to invest in that business even if the payout is relatively long term.
• Current and past strategies. The competitor’s current and past strategies should be reviewed. In particular, past strategies that have failed should be noted, because such experience can inhibit the competitor from trying similar strategies again.
• Organization and culture. Knowledge about the background and experience of the competitor’s top management can provide insight into future actions. An organization’s culture, supported by its structure, systems, and people, often has a pervasive influence on strategy.
• Cost structure. Knowledge of a competitor’s cost structure can provide an indication of its likely future pricing strategy and its staying power.
• Exit barriers. Exit barriers can be crucial to a firm’s ability to withdraw from a business area, and thus are indicators of commitment.
• Assessing strengths and weakness. Knowledge of a competitor’s strength and weakness provides insight that is key to a firm’s ability to pursue various strategies. It also offers important input into the process of identifying and selecting strategic alternatives.

Competitor’s strength and weakness analysis

Competitor’s strength and weakness are based on the existence or absence of assets or competencies. Thus, an asset such as a well-known name or a prime location could represent a strength as could a competency such as the ability to develop a strong promotional programme. Conversely, the absence of an asset or competency can represent a weakness.

There are six areas in which a competitor can have strengths and weaknesses:

• Innovation (new product capability, patents, R&D, technologies etc.)
• Manufacturing and operations (outsourcing, capacity, cost structure)
• Finance – access to capital (from operations, from net short-term assets)
• Management (culture, strategic goals and plans, knowledge of business)
• Marketing (distribution, retailer relationship, sales force, brand name recognition)
• Customer base (size and loyalty, market share, growth of segments served)

With the relevant assets and competencies identified, the next step is to scale your own firm and the major competitors or strategic groups of competitors on those assets and competencies.

A sustainable competitive advantage is almost always based on having a positions superior to that of the target competitors in one or more assets or competence areas that are relevant both to the industry and to the strategy employed.

What is the market analysis? - Chapter 4

Market analysis builds on customer and competitor analyses to make some strategic judgements about a market and submarket and its dynamics. One of the primary objectives of a market analysis is to determine the attractiveness of a market to current and potential participants. The frame of reference is all participants.

The second objective of market analysis is to understand the dynamics of the market.

A key success factor is an asset of competency that is needed to play the game. If a firm has a strategic weakness in an key success factor that isn’t neutralized by a well-conceived strategy, its ability to compete will be limited.

The nature and content of an analysis of a market and its submarkets will depend on context, but will often include the following dimensions.

• Emerging submarkets
• Actual and potential market and submarket size
• Market and submarket growth
• Market and submarket profitability
• Cost structure
• Distribution systems
• Trends and developments
• Key success factors

Emerging submarkets

The management of a firm in any dynamic market requires addressing the challenge and opportunity of relevance, as described in figure 4.1. The challenge is to detect and understand emerging submarkets and to identify those that are attractive to the firm, given its assets and competencies, and then to adjust offerings and brand portfolios in order to increase their relevance to the chosen submarkets.

Actual and potential market and submarket size

A basic starting point for the analysis of a market or submarket is the total sales level. The ultimate source is often a survey of product users in which the usage levels are projected to the population. It’s also useful to consider the potential size. A new use, new user group or more frequent usage could dramatically change the size and prospects for the market or submarket.

Market and submarket growth

If all else remains constant, growth means more sales and profits, even without increasing market share. It can also mean less price pressure when demand increases faster than supply and firms are not engaged in experience curve pricing, anticipating future lower cost. Growth situations can involve substantial risks.

Leading indicators of market sales may help in forecasting and predicting the turning points. Leading indicators are demographic data and sales of related equipment.

Submarket growth is usually critical because it affects investment decisions and value propositions. That involves identifying and analysing current and emerging submarkets.

Market and submarket profitability

Economists have long studied why some industries or markets are profitable and others are not. The basic idea of Porter’s five factor model of market profitability is that the attractiveness of an industry or market, as measured by the long-term return on investment of the average firm, depends largely on five factors that influence profitability.

These five factors are

• The intensity of competition among existing competitors.
• The more competitors that exists, the more competition intensifies. The considerations are how many competitors are already in the market, the amount of differentiation and the level of fixed costs.
• The existence of potential competitors who will enter if profits are high.
• An analysis of barriers to entry is important in projecting likely competitive intensity and profitability levels in the future.
• Substitute products that will attract customers if prices become high.

Substitute products can influence the profitability of the market and can be a major threat or problem. These compete with less intensity than do the primary competitors.

• The bargaining power of customers
• When customers have a lot of power, they can forces prices down or demand more services, thereby affecting profitability.
• The bargaining power of suppliers.
• when the supplier industry is concentrated and sells to a variety of customers in diverse markets, it will have relative power that can be used to influence prices.

Cost structure

An understanding of the cost structure of a market can provide insights into present and future key success factors. The first step is to conduct an analysis of the value chain presented in figure 4.4 (value added and key success factors) to determine where value is added to the product of service. The proportion of value added attributed to one value chain stage can become so important that a key success factor is associated with the stage.

Distribution systems

Sometimes the creation of a new channel of distribution can lead to a sustainable competitive advantage. An analysis of likely or emerging changes within distribution channels can be important in understanding a market and its key success factors.

Trends and developments

A discussion of market trends can serve as a useful summary of customer, competitor and market analysis. It is thus helpful to identify trends near the end of market analysis. It’s crucial to distinguish between trends that will drive growth and reward those who develop differentiated strategies and fads that will only last long enough to attract investment.

Key success factors

An important output of the market analysis is the identification of key success factors (KSF’s) for strategic groups in the market. These are assets and competencies that provide the basis for competing successfully. There are two types, strategic necessities and strategic strengths. It is important not only to identify KSF’s but also to project them into the future and, in particular, to identify emerging KSF’s.

Risks in high growth markets
The conventional wisdom that strategist should seek out growth areas often overlooks a substantial set of associated risks. These risks are

• Competitive risk

  • Competitive overcrowding: perhaps the most serious risk is that too many competitors will be attracted by a growth situation and enter with unrealistic market share expectations.

  • Superior competitive entry: the ultimate risk is that a position will be established in a healthy growth market and a competitor will enter late with a product that is demonstrably superior or that has an inherent cost advantage.

• Market changes

  • Changing key success factors: a firm may successfully establish a strong position during the early stages of market development, only to lose ground later when key success factors change.

  • Changing technology: developing first-generating technology can involve a commitment to a product line and production facilities that may become obsolete and to a technology that may not survive. A safe strategy is to wait until it is clear which technology will dominate and then attempt to improve it with a compatible entry.

  • Disappointing market growth: many shakeouts and price wars occur when market growth falls below expectations. Forecasting demand is difficult, especially when the market is new, dynamic and glamorized.

  • Price instability: when the creation of excess capacity results in price pressures, industry profitability may be short lived, especially in an industry such as airlines or steel, in which fixed cost are high and economies of scale are crucial.

• Firm limitations

  • Resource constraints: the substantial financing requirements associated with a rapidly growing business are a major constraint for a small firms.

  • Distribution constraints: most distribution channels can support only a small number of brands.

What is the enviromental analysis? - Chapter 5

In this chapter, the focus changes from the market to the environment surrounding the market. Environmental analysis is by definition very broad and involves casting a wide net (see figure 5.1). although environmental analysis has no bounds with respect to subject matter, it is convenient to provide some structure in the form of three areas of inquiry that are often useful. Impact analysis and scenario analysis are tools that help to evolve that uncertainty into strategy.

Technology trends

One dimension of environmental analysis is technological trends or technological events occurring outside the market or industry that have the potential impact strategies. They can represent opportunities and threats to those in a position to capitalize.

Trends, both market and environmental, can stimulate innovation, which can take several forms. Substantial innovations have 10 times the impact of incremental innovations.

An incremental innovation makes the offering more attractive or profitability but does not fundamentally change the value propositions or the functional strategy. A transformation innovation will provide a fundamental change in the business model, likely involving a new value proposition and a new way to manufacture, distribute, and/or market the offering. Substantial innovations are in between newness and impact. They often represent a new generation of products, that make existing products obsolete for many.

It can be important to manage the transition to a new technology. The appearance of a new technology does not necessarily mean that business based on the prior technology will suddenly become unhealthy.

Consumer trends can present both threats and opportunities for a wide variety of firms. There are a few new cultural trends, like cocooning, fantasy adventure, pleasure revenge, small indulgences, down ageing, being alive and 99 lives. The greatest change agent in the marketing profession is the emergence of social media such as Facebook, twitter and LinkedIn.

Increasingly, firms are assessing strategy and markets on the basis of the environmental cost and impact of their involvement. Citizens are more concerned about the impact of society and business on the global ecosystem. Consumers may be less willing to pay a brand that is harmful to the environment.

Demographic trends can be a powerful underlying force in a market, and they can be predictable. Among the influential demographic variables are age, income, education and geographic location. The older demographic group is of particular interest because it is growing rapidly and is blessed not only with resources but also with the time to use them.

Economic forecasts will affect strategy. Very different types of investment and strategy are needed when the economic climate is healthy to when it is under stress. Good forecasting means having links to authoritative voices, a broad-based information system, and a clear understanding of leading indicators.

The addition or removal of legislative or regulatory constraints can pose major strategic threats and opportunities. For example, the ban on some ingredients in food products or cosmetics has dramatically affected the strategies of numerous firms

In an increasingly global economy with interdependencies in markets and in the sourcing of products and services, possible political hot spots need to be understood and tracked.

Opportunities to gain market position will occasionally emerge in times of economic stress, sometimes caused by that stress. In that case, it might pay to be aggressive with some portion of the marketing budget. In rare cases, it might be worthwhile to consider increasing the budget. Numerous empirical studies of marketing budget changes during recessions have shown that, on average, there is a strong correlation between the marketing budget during a recession and the performance of the business both during and in the years after the recession.

There is a strong tendency to fail to understand important trends or predict future events. One reason is that executives are focused on execution and have little attention span left for what ‘might be’.

What is Strategic Uncertainty?

Strategic uncertainty is a key construct in external analysis. A typical external analysis will emerge with dozens of strategic uncertainties. Sometimes the uncertainty is represented by a future trend or event that has inherent unpredictability. Information-gathering and additional analysis will not be able to to reduce uncertainty. Scenario analyses basically accepts the uncertainty as given and uses it to drive a description of two or more future scenarios.

An important objective of external analysis is to rank the strategic uncertainties and decide how they are to be managed over time. The problem is that dozens of strategic uncertainty and many second-level strategic uncertainties are often generated. These strategic uncertainties can lead to an endless process of information-gathering and analysis that can absorb resources indefinitely. The extent to which a strategic uncertainty should be monitored and analysed depends on its impact and immediacy.

Each strategy uncertainty involves potential trends or events that could have an impact on present, proposed and even potential business. The impact of a strategic uncertainty will depend on the importance of the impacted business to a firm.

Events or trends associated with strategic uncertainties may have a high impact but such a low profitability of occurrence that is not worth actively expending resources to gather or analyse information.

Figure 5.2 suggests a categorization of strategic uncertainties for a given business. If both the immediacy and impact are low, then a low level of monitoring may suffice. If the impact is thought to be low but the immediacy is high, the area may merit monitoring and analysis. If the immediacy is low and the impact high, then the area requires monitoring and analysis in more depth. When both are high, then an in-depth analyses will be appropriate.

Scenario analyses can help deal with uncertainty. It provides an alternative to investing in information to reduce uncertainty, which is often an expensive and futile process.

There are two types of scenario analysis.

• Strategy-developing scenarios: the object is to provide insights into future competitive contexts, then use these insights to evaluate existing business strategies and stimulate the creation of new ones.
• Decision-driven scenarios: a strategy is proposed and tested against several scenarios that are developed. The goal is to challenge the strategies, thereby helping to make the go/no-go decisions.

In either case, a scenario analysis will involve three general steps

• The creation of scenarios
• Relating those scenarios to existing or potential strategies
• Assessing the probability of the scenarios

Strategic uncertainties can drive scenario development. The impact will identify the strategic uncertainty with the highest priority for a firm. A competitor scenario analysis can be driven by the uncertainly surrounding a competitor’s strategy. After scenarios have been identified, the next step is to relate them to strategy – both existing strategies and new options. To evaluate alternative strategies, it is useful to determine the scenario probabilities. The task is actually one of environmental forecasting, except that the total scenario may ne a rich combination of several variables.

What is the internal analysis? - Chapter 6

Internal analysis often starts with an analysis of current financials – measures of sales and profitability.

A sensitive measure of how customers regard a product or service can be sales or market share. Sales levels can be strategically important. Increased sales can mean that the customer base has grown. A problem with using sales as a measure is that it can be affected by short-term actions, such as promotions by a brand and its competitors.

The ultimate measure of a firm’s ability to prosper and survive is its profitability. Although both growth and profitability are desirable, establishing a priority between two can help guide strategic decision-making. The return on assets can be considered as having two causal factors. The first is the profit margin, which depends on the selling price and cost structure. The second is the asset turnover, which depends on inventory control and asset utilization.

Return on assets (ROA) = (profits / sales) x (sales / assets).

Each business should earn an ROA that meets or exceeds the cost of capital. Which is the weighted average of the cost of equity and cost of debt. If the return is greater than the cost of capital, shareholder value will increase, and if it is les, shareholder value will decrease. The concept of shareholder value is theoretically valid. If a profit stream can be estimated accurately from a strategic move, the analysis will be sound. The problem is that short-tern profits are easier to estimate and manipulate than long-term profits.

Stakeholder value

One danger of shareholder value analysis is that it reduces the priority given to other stakeholders such as employees, suppliers and customer, each of whom represents assets that can form the basis for long-term success. The shareholder does not in any practical way have any influence over the management of the firm. It might be reasonable the elevate the priority of other stakeholders.

One of the difficulties in strategic market management is developing performance indicators that convincingly represent long-term prospects. The temptation is to focus on short-term profitability measures and to reduce investment in new products and brand images that have long-term payoffs. The concept of net present value represents a long-term profit stream, but it is not always operational. It is necessary to develop performance measures that will reflect long-term viability and health.

Perhaps the most important asset of many firms is the loyalty of the customer base. Measures of sales and market share are useful but potentially inaccurate indicators of how customers really feel about a firm. Measures about customer satisfaction and brand loyalty are much more sensitive and provide diagnostic value as well.

Problems and causes of dissatisfaction that may motivate customers to change brands or firms should be identified. Exit interviews for customers who have decided to leave the brand can be productive. The lifetime value of a customer can be a useful concept. Measures should be tracked over time and compared with those of competitors.

A product or service and its components should be critically and objectively compared both with the competition and with customer expectations and needs. Product and service quality are usually based on several critical dimensions that can be identified and measured over time.

An often overlook asset of brand or firm is what customers think of it. Perceived quality can be based on experience with the past products or service and quality cues, such as retailer types, pricing strategies, advertising and typical customers. Associations can be monitored by regularly asking customers to describe their use experiences and to tell what a brand or firm means to them.

A careful cost analysis of a product or service and its components involves tearing down competitor’ products and analysing their systems in detail. In average costing, some elements of fixed or semi-variable cost are not carefully allocated but instead are averaged over total production. Average costing can provide an opening for competitors to enter an otherwise secure market.

Also key to a firm’s long-term prospects are the people who must implement strategies. An organization should be evaluated not only on how well it obtains human resources but also on how well it nurtures them. A healthy organization will consist of individuals who are motivated, challenged, fulfilled, and growing in their professions.

The firm with strong performance over time usually have a well-defined set of values that are both known and accepted within the organization, values that are more than simply increasing financial return. Values and heritage not only create strong and consistent brand and support the business strategy.

Values provide a reason to believe for employees and will influence the brand as a result. Having a heritage based on a founder or on early success can be a guide and a value anchor.

In developing or implementing strategy, it is important to identify the assets and competencies that represent areas of strength and weakness. A successful strategy needs to be based on assets and competencies because it is generally easier for competitors to duplicate what you do rather than who you are.

Comparing the performance of a business with others is called benchmarking. The goal is to generate specific ideas for improvement, and also to define standards at which to aim.

The other half of an internal analysis is the identification of threats and opportunities. The internal challenge is to determine which are the most relevant for the firm’s business and to prioritize them. Those threats that are imminent and have high impact should drive a strategic imperative, a programme that has the highest priority. When the threat is of low impact or is not immediate, a more measured response is possible. The most extreme threat is one that potentially makes obsolete the business model. Threats can come in the form of a strategic problem or a liability. Strategic problems, events or trends adversely affecting strategy generally need to be addressed aggressively and corrected, even if the fix is difficult and expensive.

An opportunity can similarly be evaluated as to whether its impact will be immediate and major. Opportunities that have a low impact or are in the future may justify serious investment and perhaps an experimental entry into a new business area to gain information. In general, lost opportunities are costly and are only too common.

In making strategic decisions, inputs from a variety of assessments are relevant, as the last several chapters have already made clear. The core of any strategic decisions should be based on three types of assessment.

• Organizational strengths and weaknesses
• Competitor strengths, weaknesses and strategies
• The competitive context: the customer and their needs, the market needs, the attractiveness and the key success factors.

The goal is to develop a strategy that exploits business strengths and competitor weaknesses and neutralizes business weakness and competitor strengths. The ideal is to compete in a healthy, growing industry with a strategy based on strengths that are unlikely to be acquired or neutralized by competitors.

How does a business strategy develop? - Chapter 7

Our attention now shifts from strategic analysis to the development of a business strategy.

A sustainable competitive advantage is an element or combination of elements of the business strategy that provides a meaningful advantage over both existing and future competitors. An SCA needs to be both meaningful and sustainable. Sustainability means that any advantage needs to be supported and enhanced over time. There needs to be a moving target for competitors.

The assets and competencies of an organization represents the most sustainable element of a business strategy, because these are usually difficult to copy or counter.

An effective SCA should be visible to customers and provide or enhanced a value position. The key is to link a value proposition with the positioning of a business. A reputation for delivering a value proposition can be a more important asset than the substance that underlies that reputation. A business with such a reputation can falter over for a time, and the market will either never become aware of the weakness or will forgive the firm.

An important determinant for an SCA is the choice of the target product market. A well-defined strategy supported by assets and competencies can fail because it does not work in the marketplace. One way to create marketplace value is to be relevant to customers.

The scope of the business also involves the identity of competitors. the goal is to engage in a strategy that will match up with competitors’ weak points in relevant areas.

A key success factor (KSF) is an asset or competence needed to compete. An SCA involves an asset or competence that is the basis for continuing advantages.

Most of the SCAs reflect assets or competencies. Customer base, quality reputation, and good management and engineering staff, for example, are business assets, whereas customer service and technical superiority usually involve sets of competencies.

Synergy

Synergy between business units can provide an SCA that is truly sustainable because it is based on the unique characteristics of an organization. A competitor might have to duplicate the organization in order to capture the assets or competencies involved. Synergy can be generated by leveraging assets and competences. Amazon has leveraged its warehouse, ordering, and distribution system over hundreds of products and allows other firms to use its system, which generates more scale and margin dollars.

Synergy means that the whole is more than the sum of its parts. In this context, it means that two or more business operating together will be superior to the same two business operating independently. Positive synergy means that offering a set of products will generate a higher return over time than would be possible if each of the products were offered separately.

Obtaining instant synergy is a goal of alliances. Alliances are often the key to a successful internet strategy. Facebook and Amazon have many major alliances and thousands of smaller ones that combine to help them reach their goals of driving internet traffic and offering differentiated value to their visitors.

A firm’s asset or competency that is capable of being the competitive basis of many of its businesses is termed a core asset or competency and can be a synergistic advantage. Core competence represents the consolidation of firm-wide technologies and skills into a coherent thrust. A core asset, such as brand name or a distribution channel, merits investment and management that span business units.

Highly effective business processes often represent a core competence that can be applied across businesses, leading to a sustainable advantage. One such process is the new product development and introduction process. The tense relationship between retailers and brand owners is often attributed to retailer brands and the threat they represent to the price and quality expectations of other brands.

Developing superior capabilities in key processes involves strategic investments in people and infrastructure, the use of cross-functional teams, and clear performance targets.

There are three very different philosophies or approaches to the development of successful strategies and sustainable competitive advantages, which can be labelled strategy commitment, strategy opportunism and strategic adaptability.

Strategic commitment

Strategic commitment involves a passionate, disciplined loyalty to a clearly defined business strategy that can result in an ever-stronger and more profitable business over time. This stick-to-your-knitting focus avoids being distracted by enticing opportunities or competitive threats that involve expending resources and do not advance the core strategy. Strategic commitment is based on the assumption that the future will be sufficiently like the past for today’s effective business model also to be successful in the future. Execution and improving the strategy are the keys to success. The goal is improvement of the existing strategy rather than the creation of a new strategy.

Strategic commitment places demands on the organization and its people, culture, structure, and systems. Strategic commitment has some commonalities with strategic intent. And in general, the organization is centralized.

The risk of strategic commitment route is that the vision may become obsolete or faulty and its pursuit may be a wasteful exercise in strategic stubbornness. New operating models can also change the paradigm. The internet has changed the way people communicate and consume media. This has left newspapers. See figure 7.5 for vision versus opportunism.

Strategic opportunism

Strategic opportunism is driven by a focus on the present. The premise is that the environment is so dynamic and uncertain that it is at least risky, and more likely futile, to predict the future and invest behind those predictions.

One key to success in strategic opportunism is an entrepreneurial culture and the willingness to respond quickly to opportunities as they emerge. The organization needs to be decentralized. Another key is to be close to the market. The management team needs to be talking to customers and others about the changing customer tastes, attitudes and needs. The advantage of strategic opportunism is that the risk of missing emerging business opportunities is reduced.

Strategic opportunism tends to generate validity and energy that can be healthy, especially when a business had decentralized R&D and marketing units that generate a stream of new products.

Strategic opportunism results in economies of scope, which assets and competencies supported by multiple product lines.

The problem with strategic opportunism model is that, it can turn into strategic drift. Investment decisions are made incrementally in response to opportunities rather than directed by a vision. Strategic drift not only creates business without needed assets and competencies, but also can result in failure to support a core business that has a good vision. Without a vision and supporting commitment, it is tempting to divert investment into seemingly sure things that are immediate strategic opportunities.

Strategic adaptability, like strategic opportunism, is based on the assumption that the market is dynamic, the future will not necessary mimic the past, and an existing business model, however successful, may not be optimal in tomorrow’s marketplace.

Strategic adaptability, based on the assumption that it is possible to understand, predict, and manage responses to market dynamics that emerge, and even create or influence them, is about managing relevance. As the market dynamics evolves and the niches and submarkets emerge, one goal is to adapt the offering so that it maintains its relevance.

A firm that aspires to being strategically adaptable needs to have competence in identifying and evaluating trends, a culture that supports aggressive response, and organizational flexibility so that business creation and modification can occur quickly.

The strategically adaptable firm needs to have a good external sensing mechanism to detect underlying customer trends and market dynamics involving drivers.

When trends are detected, the strategically adaptable firm needs to have a culture that supports aggressive response to opportunities represented by the trend analysis.

Strategic adaptability usually requires flexibility so that the firm will be ready when a window of opportunities arises. Investing behind trends and emerging submarkets is inherently risky because of the uncertainty and judgement involved and because the execution of the strategy is often difficult. An error in interpreting a trend or emerging submarket can result in a substantial blunder that can damage or even cripple the firm.

There are firms that have a dominant strategic philosophy. Most firms are a blend. They engage in strategic commitment in one business area, strategic opportunism in another, and strategic adaptability in yet another. The philosophies can also overlap within a business. The real question is not which philosophy to have. The real challenge is which blend of philosophies makes sense to provide a successful and coherent strategic path to success.

Strategic Market Management by Aaker & McLoughlin - Bulletpoints

What are the basic concepts of marketing? - Chapter 1

• All markets today are dynamic. Markets become also risky, complex and cluttered. Such convoluted markets strategy creation and implementation far more challenging.
• Strategists need new and refined perspectives, tools and concepts. In particular, they need to develop competencies around five management tasks. These tasks are strategic analysis, innovation, multiple business, creating sustainable competitive advantages (SCAs) and developing growth platforms.
• A business is generally an organizational unit that has (or should have) a defined strategy and a manager with sales and profit responsibility.
• The product market investment strategy. The scope of a business is defined by the products it offers and chooses not to offer, by the markets it seeks to serve and not to serve, by the competitors it chooses to compete with and to avoid, and by its level of vertical integrations.
• Business strategy: where and how to compete.
• The customer value proposition. There needs to be a value proposition that is relevant and meaningful to the customer and is reflected in positioning of the product or service.
• The strategic assets or competencies that underlie the strategy often provide a sustainable competitive advantage (SCA).
• A strategic competency is what a business unit does exceptionally well that has strategic importance to that business. It is usually based on knowledge or a process.
• A strategic asset is a resource, such as a brand name or installed customer base, that is strong relative to that of competitors.
• Strategic market management is a system designed to help management create, change, or retain a business strategy and to create strategic visions.
• A strategic vision is a projection of a future strategy or sets of strategy. A vision will provide a direction and purpose for interim strategies and activities and can inspire those in the organization by providing a purpose that is worthwhile and ennobling.
• Strategic market management involves decisions with a significant long-term impact on the organization.
• Strategic analysis consist of an internal and an external analysis.
• External analysis involves an examination of the relevant elements external to an organization.
• Internal analysis aims to provide a detailed understanding of strategically important aspects of the organization.
• Marketing has seen its strategic role growing over the years. There are a few marketing roles. The first one is to be the primary driver of the strategic analysis. The second role is to develop business strategies. A third role is to drive growth strategy for the firm. A fourth role is to deal with the dysfunctions of product and geographic silos.

When is an analysis successful? - Chapter 2

• A successful external analysis needs to be directed and purposeful. There is always the danger that it will become an endless process resulting in an excessively descriptive report.
• An external analysis can contribute to strategy indirectly by identifying significant trends and future events, threats and opportunities and strategic uncertainties that could affect strategy outcomes.
• Strategic uncertainty is a particularly useful concept in conducting an external analysis and focus on specific unknown elements that will affect the outcome of strategic decisions.
• A scenario is an alternative view of the future environment that is usually prompted by an alternative possible answer to a strategic uncertainty or by a prospective future event or trend.
• The essence of creative thinking is considering different perspectives, and that is exactly what an external analysis does.
• The level of analysis will depend on the organizational unit and strategic decisions involved. There is always a trade-off to be made. The analysis usually needs to be conducted at several levels. The key success factors could differ for different product markets within a market or industry.
• Segmentation is often the key to developing a sustainable competitive advantage.
• Segmentation means the identification of customer groups that respond differently from other groups to competitive offerings. The most useful segmentation variable is benefits sought from a product.
• Brand loyalty can be structured using a loyalty matrix shown in figure 2.4. Each cell represents a very different strategic priority and can justify a very different programme.
• Customer motivation analysis starts with the task of identifying motivations for a given segment.
• Qualitative research is a powerful tool in understanding customer motivation. The concept is to search for the real motivations that do not emerge from structured lists.
• Customer priorities often evolve from needing help in selecting and installing the right equipment to wanting performance to looking for low cost.
• Interacting with the customers on the internet requires skills in listening, engaging and leading. There is also an information overload.
• An unmet customer is a customer need that is not being met by the existing product offerings.
• Customers are a prime source of unmet needs. The trick is to access them and to get customers to detect and communicate unmet needs.
• Problem research develops a list of potential problems with the product. An effective and efficient way to access customers is to use the internet to engage them in a dialogue.
• A risk with customer-driven idea sites is that there can be a surge around an idea that is impractical or unwise and the company would then be defensive.
• Ethnographic or anthropological research involves directly observing customers in as many contexts as possible.

What is the competitor analysis? - Chapter 3

• Customer choice approach: identifying competitor sets is to look at competitors from the perspective of customers.
• Product-use approach: provide insights is the association of products with specific-use context or applications.
• The concept of a strategic group provides a very different approach towards understanding the competitive structure of an industry. A strategic group is a group of firms that over time pursue similar competitive strategies, have similar characteristics and have similar assets and competencies
• Each strategic group has mobility barriers that inhibit or prevent businesses from moving from one strategic group to another. A member of a strategic group can have exit as well as entry barriers.
• The conceptualization of strategic groups can make the process of competitors analysis more manageable. Strategic groupings can refine the strategic investment decisions. Instead of determining in which industries to invest, the decision can focus on what strategy group warrants investment. Ultimately, the selection of a strategy and its supporting assets and competencies will often mean selecting or creating a strategic group. A knowledge of the strategic group structure and dynamics can be extremely useful.
• Understanding competitors and their activities can provide several benefits. An understanding of the competitors’ strengths and weakness can suggest opportunities and threats that will merit a responds. Second, insights into future competitor strategies may allow the prediction of emerging threats and opportunities.
• The competitor actions are influenced by eight elements. These are size growth, and profitability, image and positioning strategy, objectives and commitment, current and past strategies, organization and culture, cost structure and exit barriers.
• Competitor’s strength and weakness are based on the existence or absence of assets or competencies. The next step is to scale your own firm and the major competitors or strategic groups of competitors on those assets and competencies.
• A sustainable competitive advantage is almost always based on having a positions superior to that of the target competitors in one or more assets or competence areas that are relevant both to the industry and to the strategy employed.

What is the market analysis? - Chapter 4

• Market analysis builds on customer and competitor analyses to make some strategic judgements about a market and submarket and its dynamics. One of the primary objectives of a market analysis is to determine the attractiveness of a market to current and potential participants. The frame of reference is all participants.
• The second objective of market analysis is to understand the dynamics of the market.
• A key success factor is an asset of competency that is needed to play the game. If a firm has a strategic weakness in an key success factor that isn’t neutralized by a well-conceived strategy, its ability to compete will be limited.
• The nature and content of an analysis of a market and its submarkets will depend on context, but will often include the following dimensions.
• Emerging submarkets. The management of a firm in any dynamic market requires addressing the challenge and opportunity of relevance.
• Actual and potential market and submarket size. A basic starting point for the analysis of a market or submarket is the total sales level.
• Market and submarket growth. If all else remains constant, growth means more sales and profits, even without increasing market share. It can also mean less price pressure when demand increases faster than supply and firms are not engaged in experience curve pricing, anticipating future lower cost.
• Market and submarket profitability. Economists have long studied why some industries or markets are profitable and others are not. See Porter’s five factor model of market profitability.
• Cost structure: an understanding of the cost structure of a market can provide insights into present and future key success factors.
• Distribution systems: sometimes the creation of a new channel of distribution can lead to a sustainable competitive advantage.
• Trends and developments: a discussion of market trends can serve as a useful summary of customer, competitor and market analysis.
• Key success factors: are assets and competencies that provide the basis for competing successfully.
• Risks in high growth markets. The conventional wisdom that strategist should seek out growth areas often overlooks a substantial set of associated risks. These risks are competitive risk (competitive overcrowding and superior competitive entry), market changes (changing KSFs, technology, disappointing market growth and price instability) and firm limitations (response/ distribution constraints).

What is the environmental analysis? - Chapter 5

• Although environmental analysis has no bounds with respect to subject matter, it is convenient to provide some structure in the form of three areas of inquiry that are often useful.
• Technology trends: can represent opportunities and threats to those in a position to capitalize and can stimulate innovation.
• An incremental innovation makes the offering more attractive or profitability but does not fundamentally change the value propositions or the functional strategy.
• A transformation innovation will provide a fundamental change in the business model. Substantial innovations are in between newness and impact.
• Consumer trends can present both threats and opportunities for a wide variety of firms. There are a few new cultural trends. Increasingly, firms are assessing strategy and markets on the basis of the environmental cost and impact of their involvement.
• Demographic trends can be a powerful underlying force in a market, and they can be predictable.
• Economic forecasts will affect strategy. Very different types of investment and strategy are needed when the economic climate is healthy to when it is under stress.
• Opportunities to gain market position will occasionally emerge in times of economic stress, sometimes caused by that stress.
• In that case, it might pay to be aggressive with some portion of the marketing budget. In rare cases, it might be worthwhile to consider increasing the budget.
• There is a strong tendency to fail to understand important trends or predict future events. One reason is that executives are focused on execution and have little attention span left for what ‘might be’.
• Strategic uncertainty is a key construct in external analysis. A typical external analysis will emerge with dozens of strategic uncertainties. Scenario analyses basically accepts the uncertainty as given and uses it to drive a description of two or more future scenarios.
• An important objective of external analysis is to rank the strategic uncertainties and decide how they are to be managed over time. The problem is that dozens of strategic uncertainty and many second-level strategic uncertainties are often generated.
• Each strategy uncertainty involves potential trends or events that could have an impact on present, proposed and even potential business. The impact of a strategic uncertainty will depend on the importance of the impacted business to a firm.
• Scenario analyses can help deal with uncertainty. There are two types of scenario analysis. Strategy-developing scenarios and decision-driven scenarios
• In either case, a scenario analysis will involve three general steps. The creation of scenarios. Relating those scenarios to existing or potential strategies and assessing the probability of the scenarios

What is the internal analysis? - Chapter 6

• Internal analysis often starts with an analysis of current financials – measures of sales and profitability.
• A sensitive measure of how customers regard a product or service can be sales or market share. Sales levels can be strategically important.
• A problem with using sales as a measure is that it can be affected by short-term actions, such as promotions by a brand and its competitors.
• The ultimate measure of a firm’s ability to prosper and survive is its profitability. Although both growth and profitability are desirable, establishing a priority between two can help guide strategic decision-making. The return on assets can be considered as having two causal factors. The profit margin and the asset turnover.
• One of the difficulties in strategic market management is developing performance indicators that convincingly represent long-term prospects. The temptation is to focus on short-term profitability measures and to reduce investment in new products and brand images that have long-term payoffs. Performance areas often depends on the situation. They will often include customer satisfaction/ brand loyalty, product/service quality, and brand/firm associations, relative cost, new product activity, and manager/employee capability and performance.
• Problems and causes of dissatisfaction that may motivate customers to change brands or firms should be identified.
• A product or service and its components should be critically and objectively compared both with the competition and with customer expectations and needs.
• Product and service quality are usually based on several critical dimensions that can be identified and measured over time.
• Associations can be monitored by regularly asking customers to describe their use experiences and to tell what a brand or firm means to them.
• A careful cost analysis of a product or service and its components involves tearing down competitor’ products and analysing their systems in detail.
• Also key to a firm’s long-term prospects are the people who must implement strategies. An organization should be evaluated not only on how well it obtains human resources but also on how well it nurtures them.
• The firms with strong performance over time usually have a well-defined set of values that are both known and accepted within the organization, values that are more than simply increasing financial return. Values and heritage not only create strong and consistent brand and support the business strategy.
• Comparing the performance of a business with others is called benchmarking. The goal is to generate specific ideas for improvement, and also to define standards at which to aim.
• The other half of an internal analysis is the identification of threats and opportunities. The internal challenge is to determine which are the most relevant for the firm’s business and to prioritize them. An opportunity can similarly be evaluated as to whether its impact will be immediate and major.
• The core of any strategic decisions should be based on three types of assessment. Organizational strengths and weaknesses, competitor strengths, weaknesses and strategies and the competitive context.
• The goal is to develop a strategy that exploits business strengths and competitor weaknesses and neutralizes business weakness and competitor strengths.

How does a business strategy develop? - Chapter 7

• A sustainable competitive advantage is an element or combination of elements of the business strategy that provides a meaningful advantage over both existing and future competitors. Sustainability means that any advantage needs to be supported and enhanced over time.
• An effective SCA should be visible to customers and provide or enhanced a value position. The key is to link a value proposition with the positioning of a business.
• An important determinant for an SCA is the choice of the target product market.
• A key success factor (KSF) is an asset or competence needed to compete. An SCA involves an asset or competence that is the basis for continuing advantages.
• Synergy between business units can provide an SCA that is truly sustainable because it is based on the unique characteristics of an organization.
• Positive synergy means that offering a set of products will generate a higher return over time than would be possible if each of the products were offered separately.
• Obtaining instant synergy is a goal of alliances. Alliances are often the key to a successful internet strategy. Facebook and Amazon have many major alliances and thousands of smaller ones that combine to help them reach their goals of driving internet traffic and offering differentiated value to their visitors.
• Highly effective business processes often represent a core competence that can be applied across businesses, leading to a sustainable advantage.
• Strategic commitment involves a passionate, disciplined loyalty to a clearly defined business strategy that can result in an ever-stronger and more profitable business over time. This stick-to-your-knitting focus avoids being distracted by enticing opportunities or competitive threats that involve expending resources and do not advance the core strategy.
• The risk of strategic commitment route is that the vision may become obsolete or faulty and its pursuit may be a wasteful exercise in strategic stubbornness.
• Strategic opportunism is driven by a focus on the present. The premise is that the environment is so dynamic and uncertain that it is at least risky, and more likely futile, to predict the future and invest behind those predictions.
• The advantage of strategic opportunism is that the risk of missing emerging business opportunities is reduced.
• The problem with strategic opportunism model is that, it can turn into strategic drift. Investment decisions are made incrementally in response to opportunities rather than directed by a vision.
• Strategic adaptability is based on the assumption that the market is dynamic, the future will not necessary mimic the past, and an existing business model, however successful, may not be optimal in tomorrow’s marketplace. Strategic adaptability, based on the assumption that it is possible to understand, predict, and manage responses to market dynamics that emerge, and even create or influence them, is about managing relevance.
• The real question is not which philosophy to have. The real challenge is which blend of philosophies makes sense to provide a successful and coherent strategic path to success.