Strategy

1. Strategy Dr. Matti J. Haverila

2. A practical example - Walkisoft

3. A practical example - Walkisoft • Phase 1/1980: UPM form a partnership with a Danish inventor to develop dry-laid paper business. - A test plant with 1000tn capacity in Danemark is built. • Phase 2/1984: The partnership is dissolved. • The technology rights are divided. • UPM gets the rights for Europa and Asia. • The Danish partner gets America and forms a 50/50 partnership with 2 U.S. partners to develop U.S. business • Phase 3/1987: UPM decides to build a 4000tn machine in Germany.

4. A practical example - Walkisoft • Phase 4/1988: UPM decides to prepare a dry-laid paper mill feasibility study in the Bahamas. • Phase 5/1989: UPM negotiates with the partners of the Danish inventor. They propose suing the inventor for breaking anti-competition laws. • Phase 6/1990: The feasilibility study is completed. The Americas plant is no built in the Bahamas. • Phase 7/1990:Danish partner cannot organize financing for its’ U.S. plant and approaches UPM.

5. A practical example - Walkisoft • Phase 8/1990: UPM and the Danish partner negotiate a deal regarding UPM building one dry-laid paper plant in U.S. Price 1 M$. • Phase 9/1992: UPM builds a 15.000 tn dry-laid paper plant in North Carolina, U.S. • Phase 10/1992-96: UPM struggles with the production. Waste runs very high. • Phase 11/1997: UPM decides to sell the Walkisoft business to Buckeye Technologies with more than 100M$. Go to Int. Mkt.

6. Strategy Process

7. Mission statement and business idea at the moment. Specifies basic product or service, primary market, and principal technology. Strategy Process (1) • What business are we in? • Who are the customers we serve? • Why does this company exist? SWOT analysis Strengths and Weaknesses Opportunities and Threats Differential advantage analysis (differentiation, positioning) Go to Positioning

8. Unfavorable trend in the environment that can cause without proper marketing to the weakening of company’s position. Strategy Process (2) SWOT analysis Strengths and Weaknesses Opportunities and Threats Customer oriented marketing mix variable of the company in which it is stronger/weaker than the competitor. An attractive area for company marketing action from which the company can get a competitive advantage. Competitive environment Internal analysis External environment Market analysis Go to Purchase Anal.

9. Strengths Weaknesses Opportunties Threats Wild Card Customer Internal Processes Employee Learning & Growth Financial BSC SWOT Analysis SWOT BSC

10. Strategy Process (3) • Internal analysis • Operations • Profitability • Resources • Organization • Products/services • Competition • Competitors • New entrants • Products • Market shares • Growth/share • External • Economy • Legislation • Technology • Politics • Social • Market • Size • Development • Preferences • Purchasing power • Structure The competitiveness of the operation and resources Analysis of the market (Portfolio, Positioning) Competitive environment Internal analysis External environment Market analysis Go to Opp./Threats

11. Strategy Process (4) The competitiveness of the operation and resources Analysis of the market (Portfolio, Positioning) Critical Strategy Issues (CSIs) and Key Performance Indicators (KPIs) Realignment of company mission statement and/or business idea Strategic alternatives: Choice of market segments, positioning and marketing mix variables.

12. Core Competencies • Core competencies are extremely difficult for competitors to imitate, because they are embedded deeply in the organization's routines, procedures and people. • True core competencies are significantly related to the benefits a customer receives in using a product. • Core competencies allow a firm to access a wide variety of very disparate market opportunities. Go to Honda Engines

13. Critical Strategy Factors (CSFs) • Are longer term in nature. • Affect the entire organization. • May require new programs or service to address. • Are very important for the key stakeholders. • Appear on the agenda of the board. • May involve additional staff.

14. Critical Strategy Factors (CSFs) • Sensitivity to changing market needs • Innovative response to customer needs • Ability ot target and reach segments of markets • Long term view of market development and resources • Knowing when to shift resources from old to new products • Identify and exploit global market • Willingness to form interfirm coalitions • Distribution coverage and delivery speed • Advertising budget and copy effectiveness • Sales force size and productivity • High product quality • Marketing research quality • Managerial ability and experience • Learning systematically from past strategies

15. Critical Strategy Factors (CSFs) • Understand how and why customers buy • Linkage of technology to market demand • Linkage of marketing and production • Investment in growth markets • Product line coverage • Customer loyalty • Strong brand image and awareness • Aggressive commitment when required • Cooperative trade relations • Promotion magnitude and impact • Customer service and feedback • Patent protection • Analytic support capability • Quick decision and action capability • Organizational effectiveness

16. Strategy Process (5) Strategic alternatives: Choice of market segments, positioning and marketing mix variables. Marketing plan and establishment of specific objectives Implementation of strategies and realignment of resources Reallocation of resources Evaluation of performance Monitoring of trends

17. Execution is not just tactics - it is a discipline and a system Strategy execution Sound Flawed Doomed from the start At Risk Flawed Strategy Formulation Missed Opportunity Strategic Success Sound Bad execution, not bad strategy is the cause for 70% of CEO failures.* * Larry Possidy, Fortune Magazine: Why CEOs fail.

18. Key points in strategy process (1) Phase 0. Definition of current mission statement and business idea. • Be honest. • Describe the mission statement and especially the business idea as they really are at the moment • Don't mix the mission statement and the business idea to what you would like to be.

19. Key points in strategy process (2) Phase 1. Differential advantage and opportunity and threat analysis (SWOT). • Do your homework. • Find out which area (Environment, Market, Competition and/or Internal) needs immediate attention, and start with that. • Rely on external rather that internal sources as much as you can (it's the customer's point of view, which counts). • Firms succeed at opportunities that fit its resources, processes, and values, and struggle with opportunities that run counter to those strengths.

20. Key points in strategy process (3) Phase 2. Comparison and analysis of market position via portfolio analysis. • Stop analyzing. • Decide amongst your management team what are the key Strategy Issues for your company based on the previous analysis (a good rule of thumb is to have about five of them).

21. Key points in strategy process (4) Phase 3. Realignment of company mission statement and/or business idea • Establish your objective mission statement and/or business idea. • In most of the cases only your business idea needs adjustment. • Phase 4. Establishment of company objectives • Establish measurable and only measurable quantitative and qualitative • objectives, which enable your to achieve your objective business idea.

22. Key points in strategy process (5) Phase 5. Strategic alternatives: choice of market segments, positioning and marketing mix variables. • Try establish at least two or three different kind of alternatives. • Don't fall into the trap deciding already in the beginning of the strategic planning process what strategic alternative you are going to pursue (i.e. before you have done your analyses).

23. Key points in strategy process (6) Phase 6. Implementation of strategies and realignment of resources. • Don't just implement (this is the fire fighting approach), do strategic planning). • Organize your company or SBU so that at least somebody has time to do strategic planning. • You won't achieve your objectives without reallocation of resources.

24. Key points in strategy process (7) Phase 7. Evaluation of performance • Evaluate your performance on a continuous basis as regards to achieving your objectives. • Phase 8. Re-monitoring of trends. • Follow the environment all the time, look for clues and windows of opportunities. It might be that they are only open for so long. • Strategic planning is a continuous process, it never ends.

25. John Warnock, former CEO, Adobe: • One of the biggest parts of my job is to figure out where the company is going. What are the opportunities? • I stay very immersed and very up-to-date on what new companies are being started, what new technologies are emerging, what new ideas are getting floated in business plans, and things like that. I see a lot of product ideas and a lot of new technologies. • What I try to do is factor in how people use computers, what people's problems are and how these technologies can get applied to those problems. • Then I try to direct the various product groups to act on this information. Most of my time is either listening to people or talking to people, or communicating by e-mail.

26. Customer needs Vs. Benefits of the Product. Customer needs vs. Resources Whom? (What are the markets and their needs? Who is the customer?) What? What is the benefit of the Product and/or Service to the customer? 1. Compatibility Do the parts of the business idea support each other? 2. 6. 5. 3. 4. How? (Do we have the necessary resources? Is the organization correct? Are the operating procedures correct? Image/Perception? Why does the customer buy from us? Benefits of the product vs. Resources Benefits of the product vs. Image/perception Customer needs vs. Image Resources vs. Image Business Idea

27. At Your Service!

28. Positioning • Positioning is not only what you do with the product. • Positioning is also what you do with the mind of the prospect. • With consumer products positioning is achieved via mainly advertising. • With industrial products positioning is achieved via personal selling, publicity, trade shows, advertising and company performance. Key marketing variable Not Key marketing variable Customer service, product performance.

29. Positioning (1:1, 1:M, M:M markets) Launching Video E-Mail Personal Video E-Mail Personal Letter Personal telephone call Personal E-Mail Inefficient communicator Efficient communicator E-Marketing campaign Tele conference Video conference Telemarketing RealPlayer Precisioncasting SPAM Non-personal

30. Opportunities • Merger • Customer power • Size of market • Growth of market • High margins • Low investment • Stable price structure • Low exit barriers • Technological change • Political, economic and social trends • High response to sales, ads and promotions • Unfulfilled customer needs • Market not segmented • Gaps in existing product positions • Few or weak competitors • Low entry cost to new markets • Transfer cost experience • Match with our strengths

31. Threats • Economic stagnation • Inflation/deflation • Regulatory changes • Terrorism • Foreign exchange fluctuation • Political/social changes • Environmnetal pollution • Takeover/merger • Reaction from existing competition • New competition likely to enter • Competition by vertical integration • Decreased entry costs by competitors • Price/promotion war • Customer power • Change in consumer tastes and values • Increasing segmentation • Technological change • Material scarcity and supplier price hikes

32. Purchasing criteria analysis • Lead the purchasing criteria from the 4 P’s (=customer perspective). • Using customer feedback, put the criteria in ranking order. • Ask the customer to evaluate your company in relation to its competitors. • Note: If customers do not have real experience with your company’s products and/or competitive products, the perceptions of consumers are equally important. Investment products are, however, an exception.

33. Examples of product related purchasing criteria • Performance:How well does the product perform its’ core function. • Features:Does the product have adequate auxiliary dimensions that provide secondary benefits. • Conformity to specs: What is the incidence of defects • Reliability: Does the product ever fail to work? Does the product work with consistency? • Durability: What is the economic life of the product? • Aesthetic design: Does the product’s design look and fell like that of high-quality product? • Serviceability: Is the service system efficient, competent and convenient?

34. Examples of service related purchasing criteria • Tangibles:Appearance of physical facilities, equipment, personnel, and communication materials. • Reliability:Ability to perform the promised service dependably and accurately. • Responsiveness: Willingness to help customers and provide prompt service. • Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence. • Empathy: The caring, individualized attention the organization provides its customers.

35. External Analysis in International Marketing • Market entry barriers • Tariffs • Country specific (Import, export) • Purpose specific (Protective, Revenue) • Time specific (Surcharges, Countervailing) • Import restraints (Special, variable) • Tariff rates (Specific, Ad valorem, Combined) • Production, distribution and consumption (Single stage, Value added, Cascade, Excise)

36. External Analysis in International Marketing • Market entry barriers • Non-Tariff • Government participation (Administrativ guidance, Subsidies, Government procurement) • Customs and entry procedures (Product classification, Product valuation, Documentation, Licence to pemit, Inspection, Health and Safety) • Product reuirements (Standards, Packaging, labelling and marking, Testing, Specifications) • Quotas (Import/Export: Absolut, Tariff, Voluntary) • Financial control (Exchange, Multiple exchange rates, Import deposits, Credit restrictions, Profit remittance) • Other (Market reserve, Performance)