Mod 3 & 4 Flashcards
Different approaches to planning
Bottom-up planning: business units develop their own objectives and strategies.
Top-down planning: corporate management is involved in the development and implementation of strategy.
Four dimensions of planning
The definition of the vision and business mission
Establishing the company’s strategic business units (SBUs)
Evaluating the existing business portfolio
Identifying new areas for the business to enter.
Strategic Business Units (SBUs)
Is a single business or a collection of related businesses that offer scope for independent planning and might feasibly stand alone from the rest of the organization
Has its own set of competitors
Has a manager who has responsibility for strategic planning and profit performance, and control of profit-influencing factors.
BCG growth share matrix
Hi Growth/Hi Market Share = Stars
Hi Growth/Low Market Share = ?
Lo Growth/Hi Share = Cash Cows
Low Growth/Low Share=Dogs
Cash Cows
(high share, low growth): earnings generated by cash cows can be invested into question marks.
Stars
(high share, high growth): usually generate high profits, but require a lot of investment too in order to keep up with the market growth. As the state of market growth declines, stars may become cash cows.
Question Marks
(low share, high growth): they may turn into stars with correct investments, but usually require a lot of money. The decision is whether to invest in them or withdraw them from the market.
Dogs
(low share, low growth): most of these businesses eventually leave the market.
Four major strategies
Build: primary objective is to increase the SBU’s market share to strengthen its position. If an SBU is believed to have the potential to be a star, management may decide to invest in it.
Hold: primary objective is to maintain the current market share. Management may want to preserve the current market share of a successful cash cow.
Harvest: primary objective is to increase short-term cash flows, even at the expense of long-term returns. This strategy may be used for cash cows, question marks, and dogs.
Divest or terminate: primary objective is to get rid of unprofitable businesses. Often used for question marks and dogs.
BCG growth share matrix Pros
Easy to use when thinking about investment needs of a portfolio of businesses.
BCG growth share matrix Cons
A guide to investment rather than strategy.
Based on the assumption that business planning is determined by two factors: growth rate and market share.
Cash flow may not depend on market growth and market share.
Market share is difficult to measure.
Ignores factors such as the nature of the strategy and competitive advantage.
GE multifactor portfolio model
An SBU is evaluated on two dimensions: industry attractiveness and competitive position.
Industry attractiveness is determined by the market’s size, rate of growth, the nature, degree and bases of competition, and all other external factors (PEST).
Competitive position is influenced by market share, product quality, brand image and reputation, organizational capabilities…
Porter’s generic strategies
Overall cost leadership strategy
Differentiation strategy
Focus strategy
Porter’s five forces
The bargaining power of suppliers
The bargaining power of customers
The threat of new entrants to the industry
The threat of substitute products or services
The rivalry among current competitors
Value chain five primary activities
Inbound logistics: raw materials, consumer data etc.
Operations: transforming inputs to final products
Outbound logistics: distributing the products to customers
Marketing and sales
Service activities (after-sales service)
Value chain four support activities
Procurement (purchasing of inputs)
Technology development (improving products and processes)
Human resource management (hiring, training, compensating staff)
Firm’s infrastructure (planning, finance, etc)
BCG strategic environment matrix
Volume industry: companies in a volume industry typically have a few large advantages
Stalemated industry: companies in a stalemated industry typically have a few small advantages
Fragmented industry: companies in a fragmented industry typically have many small advantages
Specialized industry: companies in a specialized industry typically have many large advantages
5 Buying Roles
1 The initiator, who first suggests buying the product or service
2 The influencer, whose comments affect the decision made
3 The decider, who ultimately makes all or part of the buying decision
4 The buyer, who physically makes the purchase
5 The user(s), who consume(s) the product or service.
Emergence of the new consumer & the youth market
Great emphasis on value
High levels of price awareness and price sensitivity
Low levels of brand loyalty
Skeptical towards big brands
High level of environmental awareness
Tech savvy
Highly dependent on social media for information search and gathering
Factors influencing consumer behavior
Cultural factors
Social factors
Personal factors
Psychological factors
Factors influencing consumer behavior-Cultural
Culture – set of values, perceptions, preferences, and behavior patterns.
Sub-culture – nationality groups, religious groups, racial groups, geographical areas, attitudes, and lifestyle.
Social class – determined by occupation, income, education, and values.
Factors influencing consumer behavior-Social
Reference groups – opinion leaders influence individual behavior
Family – parents, siblings, spouse, and children
Social role and status
Factors influencing consumer behavior-Personal
Personal characteristics: socio-economic, demographic, and psychographic characteristics.
Factors influencing consumer behavior=Psychological
Motivation – Maslow’s hierarchy of needs
Perception
Learning
Beliefs and attitudes
Consumer buying process
Recognition of a problem Search for information Evaluation of the alternative Purchase decision Post-purchase behavior
Organizational buying behavior
Three types of buying decision
Straight rebuy: products are reordered
Modified rebuy: when the buyer modifies the specification, price, or delivery terms
New task: buyer needs to go through the buying process
Organizational buying behavior
Users: often initiate the buying process, are individuals within the organization who will use the product or service.
Influencers: provide input when evaluating the alternatives, often are technical or engineering personnel
Deciders: individuals who make the final decision
Approvers: give the authorization of deciders and buyers
Buyers: responsible for the buying process (negotiation)
Gatekeepers: control information flow, coordinate between suppliers and the buying organization, usually are secretaries and administrative assistants.
Ansoff’s matrix (Four marketing strategies)
Existing Market/Existing Product=Market Penetration
New Market/Existing Product=Market Development
New Product Existing Market=Product Development
New Product/New Market = Diversification
