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Main Strategy |
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The plan that decides how an organisation will proceed in the future; it is usually the responsibility of top management. |
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Market Analysis
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An analysis of the markets in which the company operates, or wishes to operate, can serve to throw into focus the opportunities and threats facing the company. Those opportunities and threats stem from two main areas: the customers (both current and potential) and competitors (again both current and potential). |
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Market Awareness |
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Reflects how well the company and its products are known within the market, and the ability to increase this awareness.
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Market Challenger
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A firm that aggressively tries to expand its market share by attacking the leader, other runner-up firms, or smaller firms in the industry. |
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A runner-up firm that chooses not to rock the boat. |
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Market Leader
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The company that has the largest market share in the relevant market segment. Examples of market leaders include IBM, Coca-Cola, and McDonalds. |
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Market Position |
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The percentage of a specific market or market segment currently held by you, i.e. your turnover in percent of the total turnover of the entire market.
Your Ideal Market Position indicates where you want to go; your strategy will answer how to get there. Your current market share is an indication of whether an offensive or a defensive strategy is the best strategy for your company. But your strategy will also depend on your desired market position. Different marketing challenges and strategies face market leaders, challengers, followers and market penetrators. A Market Leader can generally strive to:
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Expand the total market generally through new users, new uses and more usage e.g. Johnson and Johnson produced an advertising campaign for their baby shampoo aimed at adults |
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Defend or protect its market share |
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Increase its market share even further |
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The Challenger will often in the pursuit of greater profitability aim to increase its market share by attacking other players within the market and exploring new opportunities. The Challenger may position its product to compete head-on with another brand. To successfully do so the challenger must have some advantages over the leader, either with regards to resources, competence, strength or endurance etc.
The Follower is generally not as aggressive as the Challenger but seeks its growth path through cloning, imitation or adaptation. The Follower must know how to retain current customers while attracting new customers. The Market Penetrator will generally aim to get a foothold on the market. The Penetrator may aim to expand sales of present products in the present market or specialise in some way in order to become a Niche Player. Improving quality or productivity and increasing marketing activities could all be means of achieving market penetration. |
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Market Share |
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It is the proportion of the total demand that is supplied by a particular company. Your company‘s market share is your turnover in percent of the total turnover. |
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Market Trends
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Market trend is a change towards doing or being something different, e.g. there is a trend towards equal opportunities, “greener” products/services etc. If you are unsure of the trends within your market segment, you should analyse these prior to making any strategic decisions.
It is important to be aware of the trends within your environment as the formulation of strategy is concerned with matching the capabilities of your company to its environment. Changes in the environment may signal the need for changes in strategy. |
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Marketing Mix
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In BusinessMap the marketing mix moves you into the decision-making process for defining the actual tactics you will utilise. Under the Marketing Mix you will define your 5 Ps, product, price, place, promotion and people. Remember where the elements of the mix do not pull in the same direction, the positioning achieved will be confused and confusing to customers. |
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Mission |
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For many companies a useful starting point in strategy formulation is to define its mission or purpose. Defining the business purpose or mission requires that the company asks the fundamental questions:
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What business are we in?
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What business do we want to be in? |
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Formulating the mission into a concise statement that can be communicated across the organisation can help engender a sense of common purpose. The mission statement is a visionary statement concerning the future. Mission is why a firm exists, its role in life, its values, what it can offer its customers. The mission statement should not address what the segment must do in order to survive, but what it has chosen to do in order to thrive. It should be positive, visionary and motivating. A good mission statement has 5 characteristics:
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It defines the business and what we can do for our customers |
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Measurable objectives |
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It differentiates the company from its competitors |
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It is relevant to all stakeholders, not just shareholders and managers |
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It is exciting and inspiring |
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If you in BusinessMap are working on a sub level your mission are copied across from level 1. If you make changes to either of these on a sub level the mission entered on level 1 will also be changed.
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Monitoring Results |
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Involves the comparison of planned performance against actual performance for a specified time. |
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NOPAT |
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Net Operating Profit After Taxes.
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Objectives |
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You must determine your business objectives in the light of your current position, opportunities and resources. Your objectives are measurable points which indicate how the organisation is making definite progress towards its broad purpose or mission. In BusinessMap we emphasise on the need to keep a close eye on environmental forces, but equally important is the need to understand your segment‘s strategic capability. Are the objectives realistic? Do you have the required resources to achieve your objectives e.g. physical, human and financial resources? |
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Porter's Five Forces |
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The fundamental determinant of a firm's profitability is industry attractiveness and competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry's attractiveness. Porter suggests that the rules of competition are embodied in five competitive forces: |
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Competitive Rivalry |
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Power of suppliers |
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Power of buyers |
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Threat of substitutes |
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Competitive Rivalry
If entry to an industry is easy then competitive rivalry is likely to be high. If it is easy for customers to move to substitute products then again rivalry will be high. Generally competitive rivalry will be high if: |
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There is little differentiation between the products sold between customers |
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Competitors are approximately the same size of each other |
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If the competitors all have similar strategies |
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It is costly to leave the industry hence they fight to just stay in ( exit barriers) |
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Bargaining Power of Suppliers
Suppliers are essential for the success of an organisation. Raw materials are needed to complete the finish product. Suppliers do have power, a power that comes from:
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If they are the only supplier or one of few suppliers who supply that particular raw material |
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If it costly for the organisation to move from one supplier to another (known also as switching cost) |
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If there is no other substitute for their product |
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Bargaining Power of Customers
Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when:
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There is little differentiation over the product and substitutes can be found easily |
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Customers are sensitive to price |
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Switching to another product is not costly |
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Threat of Substitutes
Are there alternative products that customers can purchase over your product that offer the same benefit for the same or less price? The threat of substitute is high when: |
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Price of that substitute product falls |
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It is easy for consumers to switch from one substitute product to another |
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Buyers are willing to substitute |
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Threat of New Entrants
The threat of a new organisation entering the industry is high when it is easy for an organisation to enter the industry i.e. entry barriers are low. An organisation will look at how loyal customers are to existing products, how quickly they can achieve economy of scales, would they have access to suppliers, would government legislation prevent them or encourage them to enter the industry.
These 5 forces shape competition and a systematic analysis of each can help managers identify the keys to competitiveness in a particular industry. The model is excellent for analysing the particular environment of an industry. The strength of the 5 forces varies from industry to industry and can change as the industry evolves. The 5 forces determine industry profitability because they influence the prices, costs and required investment.
The strategic business manager seeking to develop an edge over rival companies can use Porter‘s 5 forces to gain a better understanding of the industry context in which he operates. In BusinessMap we have used the model but developed 5 default questions to each factor. By scoring your business environment on the 5x5 questions you will obtain a total score that illustrates the competitive attractiveness of your particular environment. The higher the score the more difficult it will be for new companies to enter that market. In BusinessMap you also have the opportunity to give thought to how well your company and your competitors are geared up to respond to Porter‘s 5 forces. |
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Price Index |
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Shows variations in the prices of a group of specially chosen commodities.
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Product Acceptance |
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Expresses the company‘s ability to innovate and provide a product portfolio to match the requirements of the market. |
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