Offensive strategies

Offensive strategies Dosen: Osa Omar Sharif

Content • Strategic Market Plan • Offensive Strategic Market Plan • Offensive Core Strategy 1 : Invest to Grow sales • Offensive Core Strategy 2 : Improve Competitive Position • Offensive Core Strategy 3 : Enter New Markets • Choosing Offensive Strategic Market Plan

Strategic Market Plan Many business experienced considerable growth during the 1990’s and early 2000’s, Starbucks, Apple, Toyota, Microsoft, Wal-Mart are a few example. Three Basic Performance Objective : Share Position Sales Growth Profit Performance

Starbucks’s Offensive Growth Strategies • Company-operated Retail Store (85% of sales) • Market Penetration • 7,102 US Stores; 746 new stores in 2005, 1,040 in 2006 • Includes 11 Seatle’s Best Coffee and 4 Hear Music Stores • Revenue per Store • 1,600 drive-through locations • 5,100 stores carry prepared food • 640 store with warm breakfast sandwiches • Specialty Operation (13% of sales) • Licensed Retail Store • 5,338 licensed retail store in 30 other countries • Grocery Stores and Warehouse Clubs • Starbucks Coffee, Seatle’s Best Coffee, Torrefrazione Italia, and Tazo Teas in 31,900 retail outlets • Branded Product (2% 0f sales) • Existing Products • Frappuccino coffee drinks • Starbucks double-shot espresso drinks • New Products • Starbucks Ice Cream, Starbucks Coffee Liqueur, and Starbucks Discoveries (ready-to-drink Chilled Coffee, available in Japan and Taiwan) • 24-hour Starbucks Hear Music Channel (downloadable with Apple’s iTunes) • Starbucks Card Dueto (Visa credit card) $8 $7 $6 $5 Sales Revenue ($ Billion) $4 Starbucks Product Mix 2006 Beverage ------------------- 77% Food Product ------------- 15% Whole Coffee Bean ----- 3 % Equipment ----------------- 5 % $3 $2 $1 $0 2004 2005 2006 $389 m $494 m $564 m Net Profit

Strategic Market Plans • The Strategic Market Plans address three basic performance objective • Share Position : How will the strategic market plan contribute to the business’s share position in served market ? • Sales Growth : To what degree will the strategic market plan contribute to sales growth ? • Profit Performance : How will the strategic market plan short- and long-run profit performance

Market Growth and Offensive & Defensive Strategies Defensive Defensive Strategic Focus Managing profit and investing to protect position Market Demand Offensive Strategic Focus Investing for growth and position Offensive Emerging Market Early Growth Rapid Growth Late Growth Maturing Market Mature Market Declining Market Product Life Cycle Stage

100 Offensive Strategies Offensive Strategies Offensive Strategies or Defensive Strategies 80 Offensive Strategies or Defensive Strategies Offensive Strategies or Defensive Strategies Offensive Strategies or Defensive Strategies 60 Market Attractiveness Portfolio Position and Strategic Market Plans 40 Defensive Strategies Defensive Strategies Defensive Strategies 20 0 0 20 40 60 80 100 Competitive Position Offensive Strategies : Invest to grow, Improve position, New Market entry

Offensive Strategic Market Plan Offensive strategies can range from improving the competitive position and market share in existing product –markets to entering new market with no establish share position. A business could explore the possibility of using an offensive strategic market plan to cultivate an emerging or underdeveloped market Of the six portfolio, in quadrant Offensive or Defensive, we would need more information before decide one of them. Offensive strategic market plans are fundamentally geared for growth and inherently involve strategies for penetrating or growing existing market or entering or developing new markets

Strategic Market Plans and Offensive Strategies Offensive Strategies Core Strategy I Invest to grow sales in existing markets Strategic Objective Grow in existing markets Core Strategy II Invest to improve competitive position Strategic Objective Improve Margin Core Strategy III Invest to enter new markets Strategic Objective Diversify Growth IA Grow Market Share IB Grow Revenue per Customer IC Enter New Market Segment ID Expand Market Demand IIA Improve Customer Loyalty & Retention IIB Improve Differentia tion Advantage IIC Lower Cost/improve Marketing Productivity IID Build Marketing Advantage IIIA Enter Related New Market IIIB Enter Unrelated New Market IIIC Enter New Emerging Markets IIID Develop New Markets

Offensive Core Strategy I : Invest to Grow The objective of the Offensive Core Strategy I is to grow the business in existing market. The specific strategic market plans range from share penetration to growing market demand A business could grow its market share , increase its revenue per customer, enter new market segments, or it could expand new demand.

Offensive Strategy IA : Grow Market Share • There are many factors can effect a business’s ability to grow share and profitability : • To what degree has the business achieved its share potential ? • What factors driving share development need to be manage to grow share in given product market ? • Will share growth actually contribute profitability ? • A business estimate : 90% product awareness, 50% product preference, 80% intention to purchase, 80% Availability, and 70% rate of purchase. • It means the business has achieved only 40% of its potential market share  It would have a good opportunity to grow market share with market penetration strategy. Market Share Potential Product Awareness Product Preference Purchase Intention Product Availability Purchase Rate = x xxx = 0.90 x 0.50 x 0.80 x 0.80 x 0.70 = 20.2 % If the business actual market share was 8% Current Market Share Share Development Index = = 8% / 20.2% x 100 = 40 Market Share Potential

Offensive Strategy IB : Grow Revenue per Customer • Business with its share potential almost fully realized, over all performance improvement relies more on growing sales with existing customer, which increases the amount of revenue per customer • Revenue per customer can also increased through price premium. Business that enhance their product with value-added services or built superior reputation for quality can change higher prices.

Offensive Strategy IC : Enter New Market Segments Personal Computer Market Segments $ 3,000 Xeon Pentium $ 2,000 Price Celeron $ 1,000 Intel New Segment Entry Strategy 0 Performance (capacity, speed, features)

Offensive Strategy ID : Expand Market Demand New Segment Offensive Growth Strategy in the VODKA Market $30 Super Premium Segment $ 25 - $ 35 Level (New Segment Entry) $25 Premium Segment $ 15 - $ 25 Absolute Spirits (Core brand primary segments) $20 Price per Bottle $15 Traditional Segment $ 10 - $ 15 Danzka New segment entry $10 Price Segment Under $ 10 $5 $0 Perceived Quality (brand image, taste, packaging)

Strategies to enlarge a business’s customer base include : focus on winning over competitor’s customers and focus on growing market demand by drawing new customers into market • Example : • The market of flat-screen TVs was 4 million per year in 2003 • Although Sony and Samsung battle each other for market share, their common offensive strategies is to grow market demand • They estimate this market increased from 14 million per year in 2005 to 30 million per year in 2007 • This means, the market is very potential who various reason have not entered it. Market Development Index (MDI) Market Demand for Flat TV 2007 = Market Potential for Flat TV 30 million = x 100 = 30 100 million (worldwide)

Factors to be Address in Growing Market Demand Price / Cost Potential buyers can’t effort The product at current price Interest Product doesn’t have attractive benefits Untapped Market Demand Compatibility Product incompatible with Lifestyle or use situation Availability Product unavailable at local Retail outlet Number of Customers Awareness Potential Buyers unaware of Flat-panel TV benefits. Business Segment (60%) Current Market Demand Personal Users Segment (40%) Current Market Demand Market Potential

Offensive Core Strategy II : Improve Competitive Position Situation attractive market but weak competitive position  invest to improve competitive position is the best way. Better competitive position  better chance of achieving price premium, high level of customer retention, improve margin and net marketing contribution.

Offensive Strategy II : Improve Competitive Position • Offensive Strategy IIA : Improve Customer Loyalty Business spend money to attract new customers to growing markets, but if they don’t retain these customers, they will experience higher marketing expenses and lower marketing profit. • Offensive Strategy IIB : Improve Differentiation Advantage One of the major customer’s complain in the wireless communication market is reliability. To address this problem and turn it into differentiation advantage, Verizon Wireless created a team of 50 “road warriors” in specially equipped cars to test the reliability of networks. • Offensive Strategy IIC : Lower Cost / Improve Marketing Productivity Sony found its profit margins were shrinking in consumer electronic as prices eroded faster than manufacturing cost could be lowered. • Offensive Strategy IID : Build Marketing Advantage Nautilus was a pioneer brand in the $ 5 billion home-fitness equipment market

Offensive Core Strategy III : Enter New Market Every business will need to examine growth opportunities outside its existing markets. Any of three fundamental reasons : A limited number of attractive market opportunities within existing markets Attractive opportunities in term of meeting the business’s overall performance objective outside existing market A desire diversity sources of profitability to reduce variation in performance

Offensive Strategy IIIA : Enter Related New Markets Strong Taste Ice Tea & Coffee Energy Drink Cola Soft Drinks Club Soda Sport Drink Bottled & Mineral Water New Market Entry Opportunities for Coca Cola Non Cola Soft Drinks Fruit Juice Fruit Drink Fruit Flavor Sweet Tasting Bitter Tasting

Offensive Strategy IIIB : Enter Unrelated New Markets • Westinghouse acquired CBS in 1990, Disney had acquired ABC • One of the primary advantage of an unrelated new market entry strategy is reduced market dependency • There three reasons : • New Source of growth, new market diversification offers the potential of adding to the business’s sales growth and profit performance • Smoother Performance, new market diversification offers customer diversification , which can reduce the magnitude of swings in sales and profit performance • Reduce Vulnerability  reduce market dependence and vulnerability

Offensive Strategy IIIC : Enter New Emerging Markets • When the current customers is small but market potential is great  business can grow by entering emerging market, this strategy can enable a business to establish a early leadership position in the market • High technology markets have rapidly emerging market demand and relatively short product life cycles. • The pioneer  has potential to achieve competitive advantage • As an emerging markets begins to grow, early follower enter the market, early follower emulate the dominant design and enter the market after letting the pioneer invest in developing the technology

Offensive Strategy IIID : Develop New Markets • Apple’s initial entry into the personal computer market was a market-growth strategy that focused on the enormous untapped potential of the PC market. • Product that operate by electricity have no market in rural area of underdeveloped countries where no electricity service available  GE adapted its technology to enable business in area with no electricity power to produce their own electricity and sell their excess to local utilities. • A growth strategy to develop untapped new market potential involve high risk but offers the potential high return

Offensive strategies