Winning Market

Market Orientated Strategic Planning

 Theme
It is important to do what is
strategically right
than what is
immediately profitable
 Art of Market orientated strategic
Planning

Adapt to a continuously changing marketplace by

streams of decision and actions that lead to
effective strategies and which in turn help the
firm achieve its growth objectives.
MOSP is a managerial process of developing and
maintaining a viable fit between the
organization's objectives, skills, and resources
and its changing market opportunities.
Actions and levels of MOSP

Actions Levels
 Manage as investment  Corporate level
portfolio  Division level
 Assess strength, and  Business unit level, and
 Strategy  Product level
Corporate and Division strategic
planning
 Preparing statements of mission, policy, strategy and
goals, head quarters establishes the framework within
which the division and business units prepare their
plans.
 Undertake four planning activities
– Defining corporate mission
– Establishing strategic business units (SBUs)
– Assigning resources to each SBU
– Planning new businesses, downsizing older businesses
Defining the corporate mission
 What is our business?
 Who is the customer?
 What is a value of customer?
 What should our business be?
Successful companies continuously raise these questions and
answer them thoughtfully and thoroughly
It should help the employee to work independently yet collectively
towards goal
If mission losses is relevance – change it
Good Mission Statement
 Focus on limited number of goals
 Stress the major policies and the values the
company wanted to honour, and
 Define major competitive scopes
– Industry scope, Product and application scope,
competence scope, market segment scope, vertical
scope and geographical scope.
Define the business

 Definition must be market oriented, not product

oriented
 Business must be viewed as a customer
satisfying process , not a producing process
 May be defined in terms of
– Customer group
– Customer need and
– technology
Basic characteristics of SBU

 It is single business or collection of related

business that can be planned separately
 It has its own set of competitors
 It has a manager who is responsible for
planning
Assigning resources to each SBUs

 Proper strategy is required

 May be done using two popular portfolio
evaluation models
– Boston Consulting Group (BCG)Model
– General Electric (GE) model.
 BCG Matrix( Boston Consulting Group)

20% STARS QUESTION MARK

18%
4

?
Build
Market growth rate

16% 3 1
14%

5 2
12%

10%
CASH COW DOG
8%
7
6%

4% 6
2%
8
0%
10X 4X 2X 1.5X 1X 0.5X 0.4X 0.3X 0.2X

Relative market share

 T he B C G M odel
PR O B L E M
ST A R
C H IL D
H igh

M arket-

BCG Matrix G row th

R ate C A SH C O W DOG

L ow

 Itis growth share matrix H igh L ow

M arket D om inance

 Circle represents current size and positions of

business units
 Vertical axis is for market growth rate, 10 %
considered to be considerably high
 Horizontal axis is for market share, 0.1 means
10% of the leader share volume
BCG Matrix( Boston Consulting Group)

Question mark: ?
 Highgrowth but low relative marker share
 Usually starting of business, where already a leader
 Requires lot of cash to overtake leader
 Requires hard thinking and so ‘?’
BCG Matrix( Boston Consulting Group)

Stars:
 Market leader in a high growth market
 If ‘?’ is successful is becomes
 Does not necessarily produce positive cash flow
but must spent substantial funds to fight
competitors
BCG Matrix(Boston Consulting Group)

Cash cows:

 When growth rate falls to less than10%, star

becomes cash cow.
 Produce lot of cash
 Enjoys economies of scale, high
BCG Matrix(Boston Consulting Group)

Dogs
 Weak market share
 Generate low profit or loss
 Should consider only for turnaround or
sentimental reasons
 Marketing Strategy

BCG Matrix:

22%

Stars ?
Some cash use High cash use
Future cash cow ? Is to build or not

Market Growth 10%

Rate

Cash Cows Dogs

Generate cash for Low or no cash use
?, Stars When to divest

0%
10x 1..5x .1x (log scale)
Relative Market Share
BCG Matrix(Boston Consulting Group)
Strategies to be persuaded

 Build:For ? – Objective to increase market share

 Hold: For Strong Cash Cows _ Preserve market share
 Harvest: For weak Cash Cows _ Decision to withdraw by
retrenchment
 Divest: For Dog and ? - Sell or liquidate
BCG Matrix(Boston Consulting Group)

Life cycle
?
GE Model (General Electric ) Model

 Some Additional factor are considered to be very important and so earlier model is improved, called
as multifactor portfolio matrix
 It is pioneered by General Electric (GE)
 Size of circle represent the size of relevant market not company business
 Market attractiveness and business strength are taken as dimensions
 Weight and rating is done to measure above
GE Model (General Electric ) Model

 GE matrix is divided in nine matrix

 Upper left corner – strong SBUs – means invest and
grow
 Diagonal three – Medium in overall attractiveness –
peruse selectivity and manage for earning
 Lower right corner – Low – give serious thought
 GE Model (General Electric ) Model

Strong Medium Weak

Protect Invest to Build
High
position build selectivity

Attractiveness
Selectivity / Limited
Medium Build
Manage for expansion or
selectivity
earnings harvest
Protect and Manage for Divest
Low refocus earnings

Strength
GE Model (General Electric ) Model

Representative Nine -Cell Industry

Attractiveness -Business Strength Matrix
Business Strength
• Relative Market Share • Relative Costs
• Reputation/ Image • Profit Margins
Industry • Bargaining Leverage • Fit with KSFs
Attractiveness • Ability to Match Quality/Service
10.0 Strong 6.7 Average 3.3 Weak 1.0
• Market Size
• Growth Rate
• Profit Margin High
• Intensity of Competition
6.7
• Seasonality
• Cyclicality Medium
• Resource Requirements
• Social Impact 3.3
• Regulation
• Environment Low
• Opportunities &Threats
1.0

Rating Scale: 1 = Weak ; 10 = Strong

 The Directional Policy Matrix
Competitive Position

Strong Medium Weak

Overcome,
High Maintain Challenge Niche, or
Leadership Leader Quit
Market
Attractiveness
Challenge Manage for
Medium Leader Harvest
Earnings

Cash
Harvest Divest
Low Generator
 Marketing Strategy

Product Mix Strategies

Market penetration versus market skimming

Premium Penetra - Super

High Goods tion Bargain
Quality
Over - Average Bargain
Medium Pricing Quality

Low Hit and Shoddy Cheap

Run Goods Goods

High Medium Low

Price
SWOT ANALYSIS
 Ansoff’s Matrix (Product/Market Matrix)

Existing Markets New Markets

Market Penetration Market Development

Products
Existing

Product Development Diversification

Products
New
 IMPORTANCE-PERFORMANCE MATRIX
Performance
Low High

High Concentrate Maintain

efforts efforts
Importance
Low Possible over-
Low
priority investment
The Product Life Cycle
Critique of portfolio models

Models could improve manager’s analytical and

strategic capabilities and permit them to make
better decisions
 Must be used cautiously
 Planning new business, downsizing
older business

Accomplish strategic planning gap-

Diversification growth
Desired Strategic
sales Intensive growth planning
gap
Integrative growth
Sales

Current
portfolio

0 Time (Years) 5
Ways to fill up gap
 Intensive growth opportunities : Achieve further growth within
the company’s current business
 Integrative growth opportunities: To build or acquire business
that are related to the company’s current business
 Diversification growth opportunities: Add attractive business
that are not related to the company’s current business
Intensive Growth
Product market expansion grid
Detecting new intensive growth opportunities by
 Market penetration strategy: gain more market share
with current product
 Market development strategy: Develop new market with
current product
 Product development strategy: Develop new product of
potential interest
 Diversification strategy: New market for new product
Integrative Growth

 Increasesales and profit through backward,

forward and / or horizontal integration
Diversification growth

Finding good opportunities outside the present business.

Three ways
 Concentric : Seek new product that have technological
and/or marketing synergies with existing product line
 Horizontal : Seek new product that have technological
and/or marketing unrelated with existing product line
but appeal to current customers
 Conglomerate : No relation
Downsizing older business

 Prune, harvest or divest fired business in order

to release needed resources and reduce cost.
Memo

 Itis your experience and skill requires at all the

stages to be success.