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Strategic Marketing Summary
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- Katholieke Universiteit Leuven (KU Leuven)
Excellent summary . Includes everything mentioned in class.
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Chapter one:What is strategy and why is it so important?Strategic myopia:Why are some successful companies not as successful anymore? Taking as an example Kodak,
Nokia, General motors etc..they are no longer as successful. Does this mean that they have a bad strategy - Not
necessarily because they rely on successes of the past. Strategic myopia explains the concept that when companies rely
heavily on past successes, they do not change or reorganise but continue to operate only in the way which generated
successes one time.
The case of Lady Gaga: This example talks about the fame of Lady Gaga, and how we cannot say that the merit of this
fame is only related to luck or talent. She is not only known for her voice(because she is mainly a singer), she is known
as much for her voice as for her over the top wardrobe. She has expended into creating her own beauty line, and those
who bought tickets associated with this. A big part of her success is due to strategy
Characteristics of forming a strategy:
1.A long term goal: a clarity of direction. Knowing what we want to do, creating a competitive advantage. In the case
of Lady Gaga, she knew she wanted to become a star, but what kind of star(the competitive
advantage)=CONTENT(where do we want to go)
2.We must have a clear understanding of the external environment. We have to know our competition and position
in order to differentiate. It is also very important to have a clear understanding of the internal environment.
Knowing the strengths and the weaknesses, understanding of the resources=CONTEXT(what is present in our
situation)
3.We need to know how do we get to our strategy=PROCESSES
For a better understanding of: context, content and process
Context: what is our present situation?
Business environment and industry conditions
Firm’s financial and competitive resources/capabilities
Changes: what are the changes in my environment
Content:where do we want to go from here?
Creating a vision/mission for the firm’s future direction
Thinking and defining our competitive advantage
Process:how are we going to get there?
Crafting an action plan that will get us there: can be either a full blown plan ( in a stable environment) or defining the
overall direction(when the environment is a fast moving industry).
The success of individuals or organisations is seldom the outcome of purely random processes = La chance ne
favorise qui les esprits bien preparees. Luck alone will not do, you need strategy.
Different definitions of strategy:
1.Alfred Chandler: the determination of the long run goals and objectives of an enterprise, and the adoption of course
of action and the allocation of resources necessary for carrying out these goals.
2.Prahalad & Hamel: The essence of strategy lies in creating tomorrow’s competitive advantages faster than
competitors mimic of the ones you possess today.
3.Porter: The essence of strategy is choosing what NOT to do. Strategy is the position that you want to achieve. The
steps that you take are not the strategy.
What is strategy about?
It is about competing differently from rivals
It is doing what sets the firm apart and attracts customers: setting the competitive advantage
, It can be described as adopting a particular position: this position depends
on what rivals are doing and what the company is doing, what they can do
or can do it better.
It is about deciding whether they should or shouldn’t produce a
competitive edge
It is about defining course of action(s) to get the competitive advantage
We look at how many of these options relate to differentiation:
performance features, appealing designs or better quality. We may
differentiate based on lower prices, or via alliances and collaborative
partnerships. Remembering what Porter said: Actions are important, but we
should never forget the big picture: the WHY. The why is therefore
attaining a competitive advantage.
The Competitive Advantage:A company is always on the quest for a competitive advantage.Dennis Bakke said:
profits/money are to business as breathing is to life. Breathing is essential to life, but it is not the purpose of living.
Profit is often a condition sine qua non for doing other things like Corporate Social Responsibility (CSR) and
sustainability. Money is also needed in non-profit organisations, but, profit is not really a goal that inspires the
workforce.
Defining “competitive advantage”: an advantage that a firm has over its competitors, allowing it to generate greater
sales or margins and/or retain more customers than its competition = basically answering the questions: Why do
customers buy our products? What is the magnet to draw customers? There can be many sources of a competitive
advantage: firm’s cost structure, product offerings, distribution network and customer support = to know how we can
offer a competitive advantage we take a look at the Resource Based Value Approach.
A competitive advantage vs a sustainable competitive advantage(a durable competitive advantage): a competitive
advantage is meeting customer needs more effectively, with products or services that a customer values more highly, or
more efficiently at a lower cost, while a sustainable/durable competitive advantage is giving buyers lasting reasons to
prefer a firm’s products or services over those of its competitors. With creating a sustainable/durable competitors can
not easily do/copy the same thing.
How do we create a sustainable competitive advantage?
Having resources, developing valuable expertise and competitive capabilities over the long term, that rivals cannot
readily copy, match or best.
It is about repositioning yourself wisely and choosing the basic strategy that best matches your company.
Crafting the competitive advantage should be the centre stage in crafting your strategy = your strategy should
revolve around building your competitive advantage.
Important characteristics of strategy
Creating a strategy is not a one-time thing but always a work in progress(environment is constantly changing)
A strategy is partly proactive and partly reactive.With proactive we understand an intended/deliberate strategy
which is a strategy conceived by top management and realised as planned. With reactive we mean an emergent
strategy which means that the strategy elements have been changed as conditions warrant.
Strategy and the business model?How will the business make money?
The Business Model entails how the business will make money. It has two main
components:providing customers with value and generating revenues sufficient to cover costs
and produce attractive profits.
Providing customers with value we have: the firm’s customer value proposition(V-P): the
greater the value provided and the lower the price, the more attractive the value proposition is
to customers. (Trying to change the premium price?)
,Generating revenues sufficient to cover costs and produce attractive profits: the lower the costs for a given
customer value proposition, the greater the ability of the business model to be a money maker.
Linking these two concepts together = Strategy is the quest for creating and protecting the competitive advantage, while
the Business model is finding out how to get value out of the competitive advantage.
What makes a good strategy: conducting the three tests
1.The Strategic Fit test: does my strategy exhibit a fit with the external and internal aspects of the firm’s situation? A
test if strategy properly links the firms internal fit with the strategy, and the firms external fit with the strategy.
2.The competitive advantage test: can my strategy help the firm achieve a significant and sustainable competitive
advantage?
3.The performance test: can my strategy produce good performance as measured by the firm’s profitability and
competitive strength?
Why crafting and executing a strategy is important?
Provides a road map to competitive advantage
A formula for attaining long term standout marketplace performance
A prescription for doing business = it orients and helps in decision making
It animates/motivates = gives purpose
It serves as a game plan for pleasing customers
It attracts suppliers of funds
, Chapter two:Vision, mission and incorporating sustainability
This chapter focuses on the strategy making and strategy executing process, as well as explaining the role of corporate
governance in strategy crafting and executing.
What does the strategy making and the strategy executing process entails?
This follows certain stages:
1. Developing or reviewing a strategic vision, mission and values.
2. Executing an external and internal analysis in order to set objectives.
3. It is crafting a strategy to achieve the objectives and move the company along the intended direction
4. It is executing the strategy
5. Monitoring developments, evaluating performance and initiating corrective adjustments.
=> These stages are very theoretical. In reality, all these stages are intertwined. It is possible you start with an
idea, or with an external/internal analysis. Revision is needed in the light of the company’s actual performance,
changing conditions, new opportunities and ideas.
The 6DS of strategy framework:
What does it show us?It is very important framework
which shows us on which stage of the strategy-making
process a company has to focus on when setting up its
strategy, and it depends on the context or environment the
company is operating in.
The first 4DS relate to the stages we discussed which
are:
1.Direction: stage one
6.Diagnosis:stage two- environment and looking at
organisational culture
7.Decision:stage three
8.Delivery:stage four
Two others which correspond to the characteristics of the environment
1. Dynamism:change and the rate of change in which we are operating. We have to ask is my environment
changing? Is it a high velocity environment or high competitive environment? Are my customer’s tastes
changing?is innovation important, is technology important, is my competition very intense, are legal
formalities changing?
2. Disorder:Disorder will be low when the big competitors stay the same over time and the companies will employ
similar resources and capabilities like you over time. So, is our degree of competition and complexity low?
The 6Ds in a slow moving contexts: dynamism and disorder is low:
progressive change
Change is progressive, slow and predictable in this case, but change
always exists.
In this context, all four traditional steps will be taken.
Here, the classic views will do well(Porters framework and the RBV), so
we have a lot of time to put into our diagnosis => Traditional strategy
process.
An example of such a slow moving context we find in the automobile
sector = EMPHASIS ON DIAGNOSIS
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