Chapter 9
Strategy Selection

A. Product/Market Strategy
1. Product/Market Strategy: Step-by-Step Procedure (TM 9-1)
2. Formulating Strategy
• Measuring the Momentum (TM 9-2)
• Filling the Gap (TM 9-3)
a. Issue Assessment (TM 9-4)
b. Common Issues (TM 9-5)
c. Identification of Key Variables (TM 9-6)
d. Strategy Selection (TM 9-7)
3. Core Marketing Strategies (TM 9-8)
4. Distinguishing Aspects of Different Core Marketing Strategies (TM 9-9)
B. SBU Strategy
1. Industry Maturity or Attractiveness Guide (TM 9-10 and 9-11)
2. Strategic Competitive Positions (TM 9-12)
3. Strategic Thrusts (TM 9-13)
C. Strategy Evaluation (TM 9-14)

15


16 CHAPTER 9: Strategy Selection

9-1

PRODUCT/MARKET STRATEGY:
STEP-BY-STEP PROCEDURE
1. Start with present. Predict momentum over the planning
period.

2. Forecast environment.
3. Modify 1 in light of 2.
4. Stop if the predicted performance is fully satisfactory.
Continue if not.
5. Measure strengths and weaknesses.
6. Evaluate difference between yours and competitive
marketing strategies.
7. Conceive more effective marketing strategy.
8. Evaluate 7 in terms of
(a)
(b)
(c)

Possible risks
Competitive response
Potential payout

9. Stop if 7 appears satisfactory.
10. If not, broaden definition of present business and repeat
7, 8, and 9. That is, look at other products that can be
supplied to market.
11. Continue 10 until:
(a)
(b)
(c)

Knowledge of the new area becomes thin.
Cost of studying the new area becomes too
expensive.
Prospects of finding a competitive opportunity

become remote.
12.

Lower the objectives, if necessary.


CHAPTER 9: Strategy Selection 17

9-2

MEASURING THE MOMENTUM
It refers to the company’s state of affairs into
the future, assuming the environment and the
strategy remain the same. Momentum may be
measured using
• forecasting
• modeling
• simulation


18 CHAPTER 9: Strategy Selection

9-3

FILLING THE GAP
• Issue assessment
• Common issues
• Identification of key variables
• Strategy selection



CHAPTER 9: Strategy Selection 19

9-4

ISSUE ASSESSMENT
Raise issues about the status quo to evaluate
competitive standing in view of present and
expected market conditions. The following
questions may be raised:
• How mature is the product/market segment
under review?
• What new avenues of market growth are
conceivable?
• Is the industry becoming more cyclical?
• Are competitive factors changing (e.g.,
product-line elaboration declining and cost
control gaining in importance)?
• Impact of inflation?
• Impending new regulation?
• Competitive position
— How mature is product line?
— Cost position.
— Performance.
— Marketing capability.
— Customers’ common criticism.
— Distribution channels.
— Technology lead.
— Record in new product introduction



20 CHAPTER 9: Strategy Selection

9-5

COMMON ISSUES
1. Profit economics analysis
How product costs are physically
generated and where the economic
leverage lies. Test profit sensitivity.
2. Market segmentation analysis
Alternative ways of segmenting market and
finding out segments not properly
cultivated. Project determinants of demand
and consider pricing patterns, relative
market shares, and other determinants of
profitability.
3. Competitor profiling
May involve examining their sales literature,
talking with industry association, and
interview-ing shared customers and former
employees. Compare competition in terms
of:
— Product features, performance
— Pricing
— Costs and profitability
— Service efforts
— Manufacturing facilities and efficiency
— Technology and product development
— Infer competitor’s basic strategy



CHAPTER 9: Strategy Selection 21

9-6

IDENTIFICATION OF KEY VARIABLES
• Things to do exceptionally well to win.
• Factors that can lead a company to fail.
• Unique competitive strengths.
• Risks of product obsolescence.
• Things to do to increase sales; market share.
• Major elements of costs and how each may
be reduced.
• Profit leverage points of the industry.
• Key recurring decisions in different functional
areas.
• Impact on profits of a good/bad decision.
• Likely competitive advantage.


22 CHAPTER 9: Strategy Selection

9-7

STRATEGY SELECTION
• Examine key factors with reference to current
status of product/market to define alternative
strategies.
• Evaluate each alternative for:

— Profit payoff
— Investment costs
— Feasibility
— Risk
• Choose a preferred strategy.


CHAPTER 9: Strategy Selection 23

9-8

CORE MARKETING STRATEGIES
(a) Operational Excellence:
Offering middle-of-the-market products at
the best price with the least inconvenience.
Example: Wal-Mart
(b) Product Leadership:
Offering products that push performance
boundaries. Example: Nike
(c) Customer Intimacy:
Focuses on what the specific customers
want by cultivating long-term relationships.
Example: Cable and Wireless.


24 CHAPTER 9: Strategy Selection

9-9

DISTINGUISHING ASPECTS OF DIFFERENT

CORE MARKETING STRATEGIES
Managerial
Attributes

Core Strategy
Operational
Excellence

Product
Leadership

Customer
Intimacy

Strategic
Direction

Sharpen distribution
systems and provide
no-hassle service

Nurture ideas,
translate them into
products, and
market them skillfully

Provide solutions
and help customers
run their businesses


Organizational
Arrangement

Has strong, central
authority and a finite
level of
empowerment

Acts in an ad hoc,
organic, loosely knit,
and ever-changing
way

Pushes empowerment close to
customer contact

Systems
Supports

Maintain standard
operating
procedures

Reward individuals’
innovative capacity
and new product
success

Measure the cost of
providing service

and of maintaining
customer loyalty

Corporate
Culture

Acts predictably and
believes “one size
fits all”

Experiments and
thinks “out-of-thebox”

Is flexible and thinks
“have it your way”


CHAPTER 9: Strategy Selection 25

9-10

INDUSTRY MATURITY OR ATTRACTIVENESS
GUIDE
STAGES OF INDUSTRY MATURITY

DESCRIPTIORS
EMBRYONIC
Accelerating.
Meaningful
rate cannot be

calculated
because base
is too small.
Usually
difficult to
determine.

GROWTH
Substantially
faster than GNP.
Industry sales
expanding
significantly.

Product Line

Line generally
narrow.
Frequent
changes
tailored to
customer
needs.

Product lines
undergo rapid
proliferation.
Some evidence
of products
oriented toward

multiple industry
segments.

Number of
Competitors

Few
competing at
first, but
number
increasing
rapidly.

Number and
types are
unstable.
Increase to peak,
followed by
shakeout and
consolidation.

Growth Rate

Industry
Potential

Demand
exceeds current
industry volume,
but is subject to

unforeseen
developments.

MATURE
Growing at rate
equal to or
slower than
GNP. More
subject to
cyclicality.
Well known.
Primary markets
approach
saturation.

Product line
turnover but
little or no
change in
breadth.
Products
frequently
oriented toward
narrow industry
segments
Generally stable
or declining
slightly.

AGING

Industry
volume
declining.

Saturation
is reached.
Supply
capability
exceeds
long-term
demands.
Product
line
shrinking,
but tailored
to major
customer
needs.

Declines,
or industry
may break
up into
many small
regional
suppliers.


26 CHAPTER 9: Strategy Selection


9-11

INDUSTRY MATURITY OR ATTRACTIVENESS
GUIDE (continued)
DESCRIPTIO
Market
Share
Stability

STAGES OF INDUSTRY MATURITY
EMBRYONIC
Volatile. Share
difficult to
measure. Share
frequently
concentrated.

Purchasing
Patterns

Varies. Some
customers have
strong loyalties;
others have
none.

Ease of
Entry
(Exclusive
of Capital

Consideation)

Usually easy.
Opportunity may
not be apparent.

Technology Important to
match
performance to
market needs.
Industries started
on technologi-cal
breakthrough or
application.
Multiple
competing
technologies.

GROWTH
Rankings can
change. A few
firms have major
shares.

MATURE
Little share volatility.
Firms with major
shares are
entrenched.
Significant niche

competition. Firms
with major shares are
unlikely to gain major
shares.
Some customer
Suppliers are well
loyalty. Buyers
known. Buying
are aggressive,
patterns are estabbut evidence of
lished. Customers
repeat or add-on
generally loyal to
purchases. Some limited number of
price sensitivity.
acceptable suppliers.
In-creasing price
sensitivity.
Usually easy.
Difficult. Competitors
Presence of
are entrenched.
competitors is
Growth is slowing.
offset by vigorous
growth.

AGING
Some change as
marginal firms

drop out. As
market volume
declines, market
share generally
becomes more
concentrated.

Fewer competing
tech-nologies.
Significant
product line
refinements or
extensions likely.
Performance
enhance-ment is
important.

Minimal role in
ongoing products.
New technology
may be sought to
renew growth.

Process and
materials refinement.
Technologies
developed outside
this industry are used
in seeking
efficiencies.


Strong customer
loyalty as number
of alternatives
decreases.
Customers and
suppliers may be
tied to each other.
Little incentive.


CHAPTER 9: Strategy Selection 27

9-12

STRATEGIC COMPETITIVE POSITIONS
Dominant

Strong

•

Controls behavior and/or strategies of other competitors.

•

Can choose from widest range of strategic options, independent
of competitors’ actions.
Can take independent stance or action without endangering
long-term position


•
•

Favorable

Tenable

Weak

Nonviable

•

Can generally maintain long-term position in the face of
competitors’ actions.
Has strengths that are exploitable with certain strategies if
industry conditions are favorable.

•

Has more than average ability to improve positions.

•

If in a niche, holds a commanding position relatively secure from
attack.
Has sufficient potential and/or strengths to warrant continuation
in business.


•
•

May maintain position with tacit consent of dominant company
or the industry in general, but is unlikely to significantly improve
position.

•
•

Tends to be only marginally profitable.
If in a niche, is profitable, but clearly vulnerable to competitors’
actions.
Has currently unsatisfactory performance, but has strengths that
may lead to improvement.

•
•

Has many characteristics of a better position, but suffers from
past mistakes or current weaknesses.

•

Inherently short-term position; must change (up or out).

•

Has currently unsatisfactory performance and few, if any,
strengths that may lead to improvement (may take years to die).



28 CHAPTER 9: Strategy Selection

9-13

STRATEGIC THRUSTS
COMPETITI
VE
POSITIO
N
Domina
nt

EMBRYON
IC
Fast
Startgrow
up

Stron
g

StartDifferentiat
up
Fast
e
grow

Favorabl

e

StartDifferentiat
up
Focu
e
Fast
s
grow

Tenabl
e

StartGrow
with
up
Focu
industry
s

Wea
k

Find
Catchniche
Grow
with
up
industry


STAGES OF INDUSTRY
MATURITY
GROWT
MATUR
H
Fast
Attain
grow
cost
Rene
leadership
Defend
w
position
Fast
Catchgrow
Attain
up
cost ship
Differentiat
leader
e
Differentiate,
Catchfocus
Grow
with
up
industry
Harvest, catchHold
up niche,

Find
hang-in
Turnaroun
niche
Focu
d
Grow
with
s
industry
Turnaroun
Retrenc
d
h

E
Defend
Attain
position
cost
Rene
leadership
Fast
w
grow
Attain
cost
Renew,
leadership
Differentiat

focus
Grow
with
e
industry
Harvest,
Find
niche, hold
hang-in
Renew,
niche
Differentiate,
turnaround
Grow with
focus
industry
Harves
Turnaroun
t
Find
d
Retrenc
niche
h
Withdra
Dives
w
t

AGIN

G
Defend
Focu
position
Rene
s
Grow
with
w
industry
Find
Hold
niche
Hangniche
Grow
with
in
Harves
industry
t
Retrenc
Turnaroun
h
d

Dives
Retrenc
t
h


Withdra
w


CHAPTER 9: Strategy Selection 29

9-14

STRATEGY EVALUATION
• Suitability: Is there a sustainable advantage?
• Validity: Are the assumptions realistic?
• Feasibility: Do we have the skills, resources,
and commitments?
• Internal consistency: Does the strategy hang
together?
• Vulnerability: What are the risks and
contingencies?
• Workability: Can we retain our flexibility?
• Appropriate time horizon.