Strategy & Marketing
Brand
"A brand is a brand name, a term, a symbol, a design or a combination of these, that aims at identifying the products or services of a company, or of a group of companies and at differentiating them from those of competitors" Brand role 1. Identify the product/service 2. Quality Image of the product/service 3. Quick reference for the customer 4. To bring more revenue to the company 5. To leverage different products or services 6. To reflect personality 7. As guarantee for the customers
External sources of change (competitive advantage): STEEP analysis
(External analysis - Opportunities and Threats in SWOT) Variables are grouped in: • S ocial • T echnological • E conomic • E cological • P olitical A practical way of carrying out this analysis is to: - Identify each possible factor - Give each factor a probability of occurrence in % and a rating for their impact in the coming 3-5 years
Internal sources of change (competitive advantage): cost/differentiation advantage - value chain
(Internal analysis - Strengths and Weaknesses in SWOT) these are the steps to perform an internal analysis: 1. Build the value chain (list of activities) 2. Define the metric 3. List the activities from the more expensive to the cheapest 4. Cut off the less expensive activities 5. Get the competitors' data 6. Understand if cost advantage/disadvantage 7. Get the reasons of advantage/disadvantage These same steps apply to the differentiation advantage but we need to substitute the value chain pareto analysis with a performance-relevance graph for the customer. (perceptual map based on the attributes that are more important to the customer)
Corporate Portfolio Matrixes
(from flipped class) Corporate Strategy formulation should start with Portfolio Analysis. (Portfolio = mapping of the products of a company.) Tool: Portfolio Matrixes - company's business area is represented in a simple visual model. They map: Business Area Attractiveness (from external analysis) vs. SBU competitive positioning in the B.A. (from internal analysis) Differently from the SWOT matrix, we don't map just 1 SBU, but the corporate portfolio as a whole. types: BCG Matrix, GE-McKinsey Matrix
GE-McKinsey Matrix
(from flipped class) Created by McKinsey consultancy for General Electric. Maps Market Segment Attractiveness vs. Business Strength (right to left); both these dimension are calculated from a large number of variables (multi-attributes approach) rated and weighted by the decision maker. top-left part of matrix - Desirable positioning: Invest/Grow diagonal - In-Between positioning: Selectivity/aim for Earnings bottom-right part - Undesirable positioning: Harvest/Divest
BCG Matrix
(from flipped class) Created by the Boston Consulting Group. Also known as Growth-Share matrix, as it maps Market Growth Rate vs. Relative Market Share (own market share/ biggest competitor's share) - share plotted from right to left! share > 1 --> SBU is a Market Leader share < 1 --> SBU is a Follower 4 cells top left: STAR - strong SBU in a growing market bottom left: CASH COW - strong SBU in a shrinking/stable market top right: QUESTION MARK - weak SBU in a growing market bottom right: DOG - weak SBU in a shrinking/stable market Dynamic Perspective------- - Financial dynamics: high market growth = high investments needed; high strength = high revenues. Redirect cash flows from CASH COWS to selected QUESTION MARKS and to STARS that need it. Divest from DOGS unless they have strong synergies with SBUs in other cells. - Lifecycle dynamics: A Startup SBU is born as a QUESTION MARK. Appropriately managed, it will become a STAR. When the market stops growing, it will become a CASH COW. In the long run, it will either disappear with the market, or become a DOG.
Red Oceans vs. Blue Oceans
*Red Oceans* - Industries already in existence, known market space - industry boundaries are defined and accepted - companies try to outperform their rivals, to grab a bigger share of the market *Blue Oceans* - Industries not already existing, unknown market space - no competition: demand is created, rather than fought over - ample opportunity for profitable and rapid growth - new customers, not a niche!
Related vs. Unrelated product portfolios
*Unrelated Portfolios* - Advantages: "bank effect", transfer of human resources, risk diversification, sharing of infrastructural activities - Disadvantages: very complex organisation, cultural heterogeneity, few synergies *Related Portfolios* - Advantages: sharing of resources (economies of scale, of scope, critical mass,...), sharing of competencies, similar target markets - Disadvantages: high risk, high managerial complexity
The Business Model developed through the BMC should have...
- *External Coherence*: a sustainable competitive advantage (e.g., check that the service product doesn't already exist) - *Internal Coherence*: an integrated set of partners/activities/resources to deliver the value to the customers - *Economic Pre-feasibility*: a potential profit in hands
Types of M&A transactions
- Acquisition: acquire a controlling stake in a company (target) - Joint venture (merger): join forces with another company - Divestiture: sell a whole business unit
Blue Ocean Strategy - tiers of customers ("reach beyond existing demand")
- First Tier: "Soon-to-be" noncustomers who are on the edge of your market, waiting to jump ship - Second Tier: "Refusing" noncustomers who consciously choose against your market. - Third Tier: "Unexplored" non customers who are in markets distant from yours.
Resources-Competences Approach vs. Harvard Approach
- Long run vs short run competitiveness - Company as a portfolio of core competencies/resources vs a portfolio of SBU - Creative strategy vs evolutionary strategy (proactive approach) - Stretch strategy vs Fit strategy - Stretch in the company's aspirations in comparison to available resources (strengths/weaknesses) - "Subjective" vs "objective" sources of competitive advantage - based on human resources and organisational learning more than on value chain structure
Search results (marketing)
- Organic - Sponsored Get the best results in terms of organic search results with SEO = Search Engine Optimization.
Pareto Analysis
- Pareto analysis states that 80% of a project's benefit or results are achieved from 20% of the work, or conversely, 80% of problems are traced to 20% of the causes. - Each problem or benefit is given a numerical score based on the level of impact on the company. The higher the score, the greater the impact. - By allocating resources to the issues with higher scores, companies can solve problems more efficiently by targeting those having a higher impact on the business.
Segmentation approaches
- Segmentation by Product: simple, immediate and comprehensible but too simplistic and doesn't work well when there is competition - Segmentation by Customer, B2C: consider ◘ customer characteristics (socio-demographic, geographic, psychographic) ◘ customer behaviour (product usage, buying process) - marketers should move customers along the marketing funnel ◘ customer needs (benefits sought) - design product and marketing communication addressing the need - Segmentation by Customer, B2B: consider ◘ customer characteristics (just socio-demographic, which relate to the company not a person, and geographic) ◘ customer behaviour (product usage, buying process) ◘ customer needs (benefits sought, which will be different)
6 principles of Blue Ocean Strategy
---Formulation Principles 1. Reach beyond existing demand 2. Reconstruct market boundaries 3. Focus on the big picture, not the numbers 4. Get the strategic sequence right ---Execution Principles 5. Overcome key organizational hurdles 6. Build execution into strategy
5 ways to fill out the BMC
1- Customer Led (typical way) 2- Cost Driven (start by cutting the costs) 3- Resource Led ("start from what I have", first a resource, then customers) 4- Partnership Led 5- Price Led (start from VP: to make a low cost or high cost alternative)
Porter's Diamond of National Advantage
1. Factor conditions (skilled labor/ infrastructure/ raw materials/ regulation) 2. Demand conditions (current and expected. Is it growing?) 3. Related and supporting industries 4. Firm strategy, structure and rivalry
Reasons for making acquisitions
1. Increase market power (increase revenues/market share for target or existing segment) 2. Overcome entry barriers (due to: regulated industries / geography) 3. Cost of new product development (better technology/design/r&d significantly reduces cost of developing a new product) 4. Learn and develop new capabilities 5. Reshape firm's competitive scope (gain a leadership position; competitive strength gained) 6. Increase diversification (unrelated portfolio allows risk reduction) 7. Lower risk compared to developing new products
Blue Ocean Strategy - 6 paths to reconstruct market boundaries (Look across...)
1. Industry (look across alternative industries) 2. Strategic group (Groups of companies within an industry that pursue a similar strategy.) 3. Buyer group 4. Complementary product and service offerings (across the value chain - example: vertical integration) 5. Functional-emotional Appeal to Buyers 6. Time (offering content on demand instead of scheduling it)
Problems with acquisitions
1. Integration difficulties (differences in culture/technology/geography) 2. Inadequate evaluation of target (you need the track record to properly evaluate) 3. Large or extraordinary debt 4. Inability to achieve synergies (the larger the restructuring plan, the more risks there are) 5. Resulting firm is too large (overregulation/ too many additional costs) 6. Managers overly focused on acquisitions (too many acquisitions) 7. Too much diversification (too many unrelated products: no synergies)
Managing Disruptions
1. Spot the disruptive technology (build networking and scouting: open innovation through sources and antennas; develop organization culture: social support + performance management; put internal and external ideas at the same level) 2. Develop your market insight and conduct directed research (make your own version of the product, then transfer to it the advantages of your company). 3. Adapt your business model to the disruptive technology (treat the new technology as a "company within the company", you can test the new BM through an ambidextrous structure: A/B testing) 4. Invest into disruptive technologies (corporate investments; spinning out an independent organization; acquiring an appropriately small company)
Blue Ocean Strategy - 4 steps of visualizing strategy
1. Visual Awakening (draw current strategy canvas, see where strategy needs to change) 2. Visual Exploration (explore 6 paths to create blue oceans, use ERRC model) 3. Visual Strategy Fair (draw "to-be" strategy canvas, based on field insights and customers' and non-customers' feedback) 4. Visual Communication (distribute before-and-after strategic profile across your company, support projects and moves that allow your company to actualize the new strategy)
ERRC Model
4 actions to get to a new value curve: (strategically reduce cost:) Eliminate Reduce (strategically invest:) Raise Create
How to build a brand
> Target Positioning > Brand Identity = What the firm wants from the brand, its value, the mental associations linked to the brand, the firm's promise to its customers > Brand design & further marketing leverages > Signals (integrated communication) > Brand Image = what is perceived from a brand by customers and all the stakeholders. >> Brand Equity = The set of associations and behaviors on the part of the brand's customers, channel members, and parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name and that gives the brand a strong, sustainable and differentiated advantage over competitors. (Marketing Science Institute)
Buyer's Persona
A buyer persona is a semi-fictional representation of your ideal customer based on market research and real data about your existing customers. When creating your buyer persona(s), consider including customer demographics, behavior patterns, motivations, and goals. The more detailed you are, the better. Buyer personas provide tremendous structure and insight for your company. A detailed buyer persona will help you determine where to focus your time, guide product development, and allow for alignment across the organization. As a result, you will be able to attract the most valuable visitors, leads, and customers to your business.
(Internationalization) Dynamic differentiation of local units roles and responsibilities
A critical aspect in the strategy globalization is the allocation of roles and responsibilities to geographically dispersed units. x axis: Level of local resources and capabilities y axis: Strategic importance of local environment Low Local Resources, Low Strategic Importance: IMPLEMENTER (implements what is created and decided somewhere else) Low Local Resources, High Strategic Importance: BLACK HOLE (you need to be present but you will invest a lot of money because there are no resources available) High Local Resources, Low Strategic Importance: CONTRIBUTOR (you don't need to be present, but there are very good resources -> build a small unit to support the strategic leader) High Local Resources, High Strategic Importance: STRATEGIC LEADER (you need to be present and there are the resources)
Disruption
A new business (usually based on digital technologies) quickly coming to a top position in an industry displacing existing players (incumbents). Types: - "Unintended" disruption - "Pure digital" disruption - "Asset based" disruption
SWOT Analysis
A planning tool used to analyze an organization's Strengths, Weaknesses, Opportunities, and Threats
Business Model Canvas
A tool to represent the ideas of the company about value generation 9 components: - Customer Segments - Customer Relationships - Channels - Value Proposition - Key Activities - Key Resources - Key Partners - Cost Structure - Revenue Streams
Advantages vs. disadvantages of external growth
ADVANTAGES • Rapid achievement of distribution and service networks • Acquisition of established brands • Availability of a suppliers and sub-suppliers network • Learning of different organizational and management cultures • Facilitation in the relationships with local governments DISADVANTAGES • Competition with existing brands and channels • Difficulty of matching among different cultures • Homogenization of production and management systems
Affiliate Marketing
Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company's products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.
Attribution Models
An attribution model tells your analytics program how you want to weigh the importance of different touchpoints. The attribution models define a set of deterministic rules or a statistical algorithm on the basis of which the results deriving from a certain action performed by the consumer are attributed to the different touchpoints (digital or physical). Attribution models can be classified according to: - number of touchpoints considered in the attribution - type of model used: > Rule Based (for which the attribution of each touchpoint to the conversion is based on rules defined a priori) > Algorithmic-Probabilistic (for which the attribution of what each touchpoint has contributed to the conversion is based on an algorithmic-probabilistic model of analysis of the consumer's past behavior) Some ruled-based attribution models • Last-click attribution: 100% to the last visited website • First-click attribution: 100% to the first visited website • First-and-last-click attribution: 50% to both first and last visited websites in the funnel • Simple decay attribution: weighted percentage of the credit to the most recent touchpoint • Linear attribution: every touchpoint receive an equal credit
Marketing
Analysis and understanding of the behaviour of customers and how to find a mutually profitable relationship with them.
Rules for Big Bang Disruption (shark fin phases)
Based on the 4 phases. THE SINGULARITY 1. Consult your truth-tellers 2. Pinpoint your market entry 3. Launch seemingly random experiments THE BIG BANG 4. Survive catastrophic success (the platform must still be available) 5. Capture winner-takes-all markets 6. Create bullet time (realize signs that the decline is coming) THE BIG CRUNCH 7. Anticipate saturation 8. Shed assets before they become liabilities 9. Quit while you're ahead ENTROPY 10. Escape your own black hole 11. Become someone else's components 12. Move to a new singularity
Measuring Brand Equity
Brand metrics measure return on branding investments. Attitudinal measures • Awareness - the extent to which consumers are familiar with the qualities or image of a particular brand • Recall - tested by asking questions such as "name as many smartphone models as possible" • Recognition - the extent to which a consumer can correctly identify a particular product or service just by viewing the product or service's logo, tag line, packaging or advertising campaign • Brand Image - the perception of your brand by consumers.
Business Strategy vs. Corporate Strategy
Business Strategy - deals with Competitive Advantage ("How should we compete?"): decide best business model to compete in a certain area. Corporate Strategy - deals with Industry Attractiveness ("Which industries should we be in?"): decide how many and which areas/countries to be in.
Value Proposition Canvas
CUSTOMER PROFILE - Customer Jobs (what the customer needs to do with product/service) - Gains - Pains VALUE PROPOSITION - Product & services - Gain creators - Pain relievers
Big Data Marketing Tools
Clustering and Classification. Clustering (or Cluster Analysis) and Classification are the primary branches of what is called statistical learning, i.e., learning from data through statistical model fitting. Clustering: unsupervised learning - we do not know the outcome groupings but are attempting to discover them from structure in the data. Classification: supervised learning - a model is presented with observations whose outcome status (dependent variable) is known, with a goal to predict that outcome from the independent variables.
Modifying the Product Scope
Concentric Strategy - New related products (defensive approach) Horizontal Strategy - New unrelated products for the same customers (also somewhat defensive) Conglomerate Strategy - New unrelated products
Corporate Strategy - scopes
Corporate Strategy has to deal with the following scopes: - *Product scope*: how specialised should the company be in terms of the range of products it supplies - *Geographical scope*: what is the optimal geographical spread of activities for the company Changes in the product/geographical scope can be made either by internal (organic) growth or external growth (M&A)
Targeting (choice of target segments)
Criteria for target market: 1. Size 2. Expected Growth 3. Competitive position 4. Cost of reaching the market 5. Compatibility with the organization's objectives and resources Choice of target segments: build a matrix x axis: Compatibility of segments with the company's new strategies and resources y axis: Attractiveness of segments (size, expected growth, competition) - Low compatibility, Low attractiveness: Segments of no interest - Low compatibility, High attractiveness: High-interest segments, but high investment - High compatibility, Low attractiveness: Segments to defend only with marginal spaces (self-financing) - High compatibility, High attractiveness: Segments with high entry/presence priority
Customer Experience vs. User Experience vs. Usability
Customer Experience = The total experience with the entire organization User Experience = Experience that lasts before and after the single interactions with touchpoints Usability = relative to the single touchpoint
Digital Disruption vs. Digital Innovation
Digital Innovation and Digital Disruption are not the same thing! The role of technology in disruption is an *enabler*, changing business model is the real point. (For example, electric cars are not a disruption because they are made by incumbents, there are no newcomers that are changing the rules of the game.)
Disruption: collapse
Idle assets and marginal costs make possible the emergence of disruptive business that are very profitable until they are at the top of the curve. However, this system will collapse due to the absence of additional idle assets, or data (sold) or time (spent on the platform) available. This problem will come when there will be saturation of the demand. Also, once the resource at the marginal cost will be saturated, the number of employees in traditional businesses will be reduced significantly.
Segmentation
Marketing process through which the company divides the market into various sub-groups - with different demand profiles but internally homogenous - on the basis of which management develops specific marketing plans to best satisfy their requirements. Advantages • Reduction in diversity • More focus of resources & professionals • Possible creation of entry barriers • Improvement in customer satisfaction • Market share defense during maturity • Higher control on marketing actions • Risk hedging Disadvantages • Different products for different segments (R&D, engineering) • Increased production costs • Increased stocks • Fragmentation of advertising/promotion costs • Increased market research costs • Higher distribution costs • Inefficient resource exploitation (e.g. duplication)
Relationship between marketing and business strategies
Marketing strategy → Business strategy ♦ Undifferentiated → Cost leadership (cost advantage) ♦ Differentiated → Differentiations (differentiation advantage; you can reach different market segments) ♦ Concentrated → Focalization (focalization advantage, you have an important focus on this segment)
Roadmapping Strategy
On the basis of the SWOT analysis, strategic alternatives can be generated, and assessed against two conditions: • the expected *economic impact* (in terms of generated profit/reduced loss) • the expected *implementation problems* (in terms of organizational changes/number of activities involved/....) Low economic impact -Low implementation problems: "Marginal" Low economic impact -High implementation problems: "Stand-by" High economic impact -Low implementation problems: "Quick win" ** High economic impact -High implementation problems: "High Priority" **
Porter's five forces analysis
Porter's Five Forces is a framework for analyzing a company's competitive environment; it can be used to guide business strategy to increase competitive advantage. Porter's five forces are: 1. Competition in the industry 2. Potential of new entrants into the industry 3. Power of suppliers 4. Power of customers 5. Threat of substitute products
Programmatic ads & Real Time Bidding
Programmatic ads give advertisers the ability to target users with relevant content based on user data and to buy one impression at a time to increase efficiency and effectiveness of the buy, all without the cost incurred by manual human tasks. Real Time Bidding • The buying and selling of ad impressions through ad exchanges and platforms. • Price is determined by immediate demand. • Real-time bidding works within miliseconds: a person visits a website and their information is given to an ad exchange where an auction for that impression occurs.
Keller's Brand Equity Model (CBBE Model)
Pyramid. From the base to the top: - Brand Identity - Brand Meaning (performance, imagery) - Brand Response (judgements, feelings) - Resonance
Remarketing
Remarketing is a way to connect with people who previously interacted with a website or mobile app. It allows to strategically position ads in front of these audiences as they browse other websites, thus helping increase brand awareness or remind those audiences to make a purchase. Benefits: • Prompt reach/Well-timed targeting • Focused advertising • Large-scale reach • Efficient pricing • Campaign statistics Types ♦ Standard remarketing: Show ads to your past visitors as they browse sites and apps on the Display Network. ♦ Dynamic remarketing: Boost your results with dynamic remarketing, which takes remarketing to the next level with ads that include products or services that people viewed on your website or app. ♦ Remarketing lists for search ads: Show ads to your past visitors as they do follow-up searches for what they need on Google, after leaving your website. ♦ Video remarketing: Show ads to people who have interacted with your videos or YouTube channel as they use YouTube and browse Display Network videos, websites, and apps. ♦ Customer list remarketing: With Customer match, you can upload lists of contact information that your customers have given you. When those people are signed into Google, you can show them ads across different Google products.
Customer Experience
Sequence of interactions between an individual and a brand occurring throughout a series of touchpoints, encountered along the Customer Journey. These interactions generate cognitive, emotional, behavioral, and sensorial impacts and reactions.
Service Blueprint
Service blueprint connects customers' journey and companies' processes. It represent visually the set of activities to be accomplished to meet the customer expectations at every single touchpoint. Service blueprint map identifies also which are the processes with a direct impact on customer experience, and which are the supporting ones.
Technological Disruption vs. Strategic Disruption
Strategic disruption = new business model. The level of innovation of the technology used is not a prerequisite for this type of disruption. You can use technologies that already exist in a new way and have a disruption. -> shark fin. Technological disruption = The disruption comes from the fact that technology enables another value proposition. Instead of working on the BM, the BM is the same, but they are changing the VP through the use of technology. (Potentially cheaper and less easy to spot gain)
BMC - Value Propositions
The bundles of products and services that satisfy our customer segments' needs
BMC - Distribution Channels
The channels through which we communicate with our customers and through which we offer our value propositions. Channels for: - Awareness - Delivery (of your product/service)
Strategic-organizational model selection
The choice of the model comes from the prevalence of one of two determining forces: INTEGRATION = forces pushing for cost reduction through the adoption of a global standardisation strategy. • Presence of key international customers • Presence of international competitors • Investment intensity • Technological intensity • Needs/opportunities regarding cost reduction • Markets homogeneity • Concentration of raw materials sources LOCAL RESPONSIVENESS = forces pushing for tailoring product and service offerings to fit local customers and host-country requirements. • Differences about consumer needs • Differences about distribution channels • Presence of substitute local products • Market fragmentation • Needs of local governments
Strategic-organizational models of a global firm
The choice of the model comes from the prevalence of one of two determining forces: - Integration - Local responsiveness GLOBAL MODEL ➢ Low local responsiveness, high integration ➢ Building cost advantages through centralization and economies of scale ➢ Centralized on a global scale INTERNATIONAL MODEL ➢ Medium local responsiveness, medium integration ➢ Exploiting the company headquarters' knowledge and capabilities through the dissemination and adaptation of new products/services at global level ➢ Centralized distinctive competencies, others are decentralized MULTIDOMESTIC MODEL ➢ High local responsiveness, low integration ➢ Building flexibility in order to respond to national differences through the creation of autonomous, entrepreneurial local units with own resources ➢ Decentralized and self-sufficient at national level TRANSNATIONAL MODEL ➢ Hybrid model ➢ Developing efficiency, flexibility and learning at global level simultaneously ➢ Scattered, independent, and specialized
BMC - Cost Structure
The costs we incur to run our business model. In practice: Not the amount of costs, but their structure. (fixed vs. variable, internal vs. external)
Internationalization - benefits
The determinants of firms' international expansion are: - Expansion of the business (internal markets saturated/too small) - Access to resources and production input - Business portfolio balancing (balancing risk) - Search for efficiency (economies of scale/scope, efficiency in resources purchasing) - Market expansion - Competence development - Benefits of positioning (you can enter into a foreign market with low profits if you already have high profits somewhere else)
BMC - Customer Segments
The groups of customers with distinct characteristics. In practice: be very specific, and if needed make the difference between users (those who use a service) and customers (those who pay for a service)
VRIN Model
The important features for a resource to be strategically important are as below (VRIN model): Valuable (Relevance + Scarcity) Rare (competitors don't have it) Inimitable (competitors can't copy it: > unique physical resources > path dependent resources > causal ambiguity > economic deterrence ) Non-substitutable (can't be replaced)
Customer Journey
The journey consists of a three-step process: ♦ Awareness Stage: The buyer realizes they have a problem. ♦ Consideration Stage: The buyer defines their problem and researches options to solve it. ♦ Decision Stage: The buyer chooses a solution. For example, it could map: • The activities that the user has to accomplish at every stage • What does she think and how she feels at every stage • What are the touchpoints involved in each phase
BMC - Key Resources
The key resources on which our business model is built. The word "key" for activities/resources/partners means they are "crucial" for delivering value and "hard to find", not easily substituted. ( possible examples: data/brand/physical spaces...)
BMC - Key Activities
The most important activities performed to implement our business model. The word "key" for activities/resources/partners means they are "crucial" for delivering value and "hard to find", not easily substituted.
Ads revenue model (affiliate marketing)
The online advertising model could be based on: • PPV (pay-per-view): the publisher is compensated on the basis of the number of views of the pages where the banner is published; • PPC (pay-per-click): the publisher is compensated on the basis of the number of clicks on the banner; • PPA (pay-per-activity): the publisher is compensated with a percentage of sales generated by customers who clicked on the banner.
Blue Ocean Strategy - testing
The only way to test a blue ocean strategy is to make a real-world small-scale entry. If the *customers like it*, (product fits needs and desires of customers) -> test the *size* of the market, if it's large enough to be considered an ocean -> then test *economic feasibility*, and consider how to *keep p./s. updated/working* Overall process: Design value proposition -> Define and target the customer -> test on a small scale the product/service -> design the new business model around it.
BMC - Key Partners
The partners and suppliers we work with. (players external to the company crucial to the delivery of the value proposition) The word "key" for activities/resources/partners means they are "crucial" for delivering value and "hard to find", not easily substituted.
BMC - Revenue Streams
The streams through which we earn our revenues from our customers for value creating and customer facing activities. In practice: remember there are many options (Selling products/services, Usage fees, Subscription fees, Renting, Licence, Brokerage fees, Advertising fees)
Shark Fin Paradox
The traditional distribution curve of the market is clearly shrinking. -- Roger's Market Segments: Innovators - Early Adopters - Early Majority - Late Majority - Laggards -- Big Bang Market Segments: Trial users - Everybody else It can boom but also disappear very quickly. (Singularity) Until you make profit it's good that you stay on the market, when the company starts losing it's better to exit the market. (due to: just variable cost and revenues, a very limited amount of assets)
BMC - Customer Relationships
The types of relationships we entertain with each customer segment.
Internationalization - How to select a geographical location ("where?")
Three main factors: • Influence of national resources (see: Porter's Diamond) • Specificity of the competitive advantage (if your strengths are country-specific and cannot be transferred they become weaknesses) • Assets transferability (adjust your SWOT consequently)
Value Creation Potential in Acquisition
To acquire a company, you have to pay running value + entrepreneurial risk. What you pay (actual data) is: the current market value of the company + a premium (which is usually 10-30%). What you get back (estimation you make) is: the value "as-is" of the company (close to market value) + Stand-alone improvements + integration benefits (synergies) The value creation potential is the difference between what you get back and what you pay.
Marketing strategies (segmentation & targeting)
Undifferentiated: a single marketing plan for the whole market Differentiated: various market plans for the different segments Concentrated: a single marketing plan concentrated on only one segment 5 different strategies: (matrix with segments on the x axis and products on the y axis) 1. A single segment (= single square) 2. Product specialization (= horizontal line) - a product, in many different markets 3. Market specialization (= vertical line) - specialized in a market, with different products 4. Selective specialization (= unrelated squares) - different products for different market segments 5. Total coverage (= all squares) from no segmentation to complete segmentation: - Mass marketing (no segmentation, 1 marketing plan for all) - Segment marketing - Niche marketing - Micro marketing (complete segmentation)
VRIO Model
Valuable (Relevance + Scarcity) Rare (competitors don't have it) Inimitable (competitors can't copy it: > unique physical resources > path dependent resources > causal ambiguity > economic deterrence ) Organized to Capture Value - A firm must organize its management systems, processes, policies, organizational structure and culture to be able to fully realize the potential of its valuable, rare and costly to imitate resources and capabilities.
Blue Ocean Strategy - Break the value/cost trade-off: Value Innovation
Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers. - Cost savings are made by eliminating and reducing the factors an industry competes on. - Buyer value is lifted by raising and creating elements the industry has never offered
Competitive Advantage
When two or more companies compete within the same market, one firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn) a persistently higher rate of profit.
Differences between Disruption and Blue Ocean
While the disruption is based on the idea that the company knows its customers and targets them with different business models, the Blue Ocean, instead, is not about technology (which can be an enabler) but has the idea of finding new customers around existing customers, fishes in an uncontested space. To fish in those spaces is needed a specific ship, a specific business model.
Strategy
an integrated, comprehensive plan which - identifies the scope and the direction of the organisation (decision maker) - is aimed at obtaining long term performance superior to competitors (in relation to the goal) - integrates a coherent set of strategic decisions
Blue Ocean Strategy - get the Strategic Sequence Right
in red oceans it was: cost-price-utility-adoption Blue Ocean: > Buyer Utility > Price > Cost > Adoption Hurdles After having your VP, understand the price that the customer is willing to pay for it. Then, realize if the costs allow you to sell your product/service for that price. (Test economic feasibility. If it's not there, at the beginning you might operate at a loss/invest) Next step: Growth Strategy. It is essential in order to avoid being contrasted by the competitors.
strategic decision
is a decision that has long term, significant, multi-dimensional and non-reversible effects on the final goal of the organization. It usually requires large amounts of resources and it usually requires top management involvement.
Difference between strategy and tactic decision
while in strategy you set long term objectives and you plan to achieve such objectives, tactics refer to how you concretize and implement your strategy by means of actions performed on a daily basis
Blue Ocean Strategy - Strategy Canvas
x axis: Competing Factors - Factors in which the industry competes & invests, also potential areas where customer value could be created. y axis: Offering Levels - Degree in which each competitor offers/invests in each factor For each competitor: Value Curve
Core Resources - alternative assessment
x axis: Strategic importance y axis: Relative strengths right side: up - key strengths, down - key weaknesses
Harvard Approach
«Harvard» approach: existing products and industries are the starting point «Resource-based» approach: competences are the starting point
Main types of synergies
• *Cost Saving* = "hard synergies". easy to estimate; cutting unneeded expenses/ economies of scale • *Revenue Enhancements* = "soft synergies". hard to estimate; sales improve due to complementary products on wider distribution channels • *Process Improvements* = transfer of best practices and core competencies • *Financial Engineering* = refinancing debt at the acquirer's more favourable borrowing rate
Modes of international expansion (how to enter into a foreign market)
• Export (spot contracts, long-term contracts, use of agents and foreign distributors) • Trademarks and technology licensing • Direct investment: > External growth: shareholding / joint ventures / acquisitions > Internal growth (owned subsidiary): with only sales and marketing functions / fully integrated (i.e. including production)
Disruption: megatrends that made it possible
• Growth of the «sharing economy» model (ownership of assets is not necessary anymore, use of idle assets) • Growth of the «product servitization» model (use vs. ownership: the products/services are free or pay per use) • The momentum growth of the «entrepreneurial» dynamic • The reduction of creation, marketing and experimentation cost
Benefits of Brand Equity
• Higher prices, margins • Channel power • Additional retail shelf space • Reduces customer switching • Prevents erosion of market share
(Internationalization) International Model
• It aims to centrally develop new products/processes which are then exploited on a global scale. • centralization of the critical resources for the conception, development and production of products at the headquarters • Main advantage: Ability to take advantage of the wealth of knowledge, expertise and reputation of the parent company on a global scale, Low cost of implementation (export, licensing) • Main disadvantage: Poor flexibility and efficiency compared to the multinational and global models, No or very limited local responsiveness, Risk of expropriation of IP
(Internationalization) Multidomestic Model
• It leverages on the existing differences among different countries, trying to differentiate their products/processes in line with local customers needs and with economic and institutional factors • Localisation of the firm's business units in different countries (geographically dispersed resources), which manage the business locally, develop innovations locally and perform activities (from production to sales) with relative autonomy • Main advantage: High flexibility and strong ability to effectively respond to local needs with a strong increase of differentiation, Perception of the company as a local company • Main disadvantage: Low efficiency and difficulty in exploiting on a global scale knowledge and expertise held by the parent company and the local subsidiaries (no learning across subsidiaries), Risk of duplication of resources and activities, Risk of expropriation of IP
(Internationalization) Global Model
• It tries to maximize efficiency on a global scale by exploiting the economies of scale and neglecting the differences among the various countries in which the firm operates • significant resources and activities concentration (from production to R&D) in a single country (where best-in-class capabilities reside at lowest costs). Geographically dispersed units have a role only regarding sales and customer support activities • Main advantage: High efficiency obtained by the exploitation of economies of scale, Location economies: global division of labor based on wherever best-of-class capabilities reside (often searching for lowest cost), Economies of standardization. • Main disadvantage: Limited flexibility (no differentiation), risks related to the protectionist policies by the countries that import the firm's products and risk related to the exchange rates fluctuations.
Pure Digital Disruption
• It's (almost) free, but it is based on the two-sided platform business model (balancing users and advertisements payments) • It leverages existing assets and technologies (App) • It creates value, stealing it from disrupted players, but its growth strategy is "being acquired" (short term view) • Can be copied, but not contrasted
Segmentation methods
• Mathematical Using statistical-mathematical techniques and algorithms; it requires data (a representative sample) on which to make an analysis. Survey research, Data analysis, Segment profiling (Digitalization of business have strongly improved and reduced the cost of these activities.) • Heuristic Empirical (generally qualitative) methods based on the experience of the marketer. 1. Successive elimination approach: starting from a list of possible segmentation variables, they are compared by pairs and the unimportant "crossovers" and contradictions are eliminated; variables are then combined; lastly, products are entered and a final product-market matrix is built. 2. Two-phase approach: macro-segmentation, based on the external characteristics and purchase situations (mainly demographic and operational variables); then for obtained macro-segments, micro-segmentation based on the characteristics of the individuals (mainly behavioural variables) 3. Multi-phase or nested approach: 5 step hierarchical approach - Demographic variables (e.g., activity type, sector, micro-sector, size, location , age, etc....) - Operational variables (Technology, technical, operational and financial characteristics, existing customer or not, etc.) - Buying process (roles in purchase processes, phases of buying process, buying methods, criteria, etc.) - Situational factors (Quantity purchased, benefits sought, etc.) - Personal factors (Individual motivations, risk inclination, etc.)
Characteristics of a market segment
• Measurability: it must be possible to measure the size and buying power of the segments • Accessibility: real possibility of obtaining the segment using marketing actions • Homogeneity: within the segment as regards one or more characteristics (describers); heterogeneity compared with other segments • Importance: a segment large enough to justify a targeted marketing action • Duration: possibility of exploiting the segment for a particular period of time
(Internationalization) Transnational Model
• based on an integrated network of resources and widespread but interdependent competences • simultaneously attempt to minimize costs and maximize revenues • tries to take advantage of all other types of models, which requires a suitable and very complex assets and capabilities configuration • The key resources are centralized at the company headquarters in order to exploit economies of scale and to protect the distinctive competencies (e.g. the design capability) • Other resources can be centralized, even not at the company headquarters - the so-called "excentralisation" (e.g. labor intensive processes that are concentrated in areas with low labor costs or R&D activities that are concentrated close to centers of excellence in a specific discipline) • Finally, other resources can be decentralized to different countries, if economies of scale are not relevant and there is an opportunity of local differentiation, a need for flexibility or for risk reduction (e.g. delocalized production plants reduce the risks associated with exchange rates or strikes) • Each local unit is independent, but it is a source of ideas and competences for the whole company • Local units can reach a global scale, focusing on specific products, components or activities in favor of the whole company • The headquarter manages the global network by defining the role of each local unit and developing a common culture and effective communication systems The transnational model is a development direction rather than a specific organizational form. It represents a synthesis of different multinational strategic configurations. Companies that adopted traditional configurations have gradually moved to a transnational model, following different patterns.
Marketing: single-channel, multi-channel, omni-channel
• single-channel: If you have just one channel (e.g. just the physical points of sale) you are a single-channel company. • multi-channel: If you are using different channels to reach your customers (main activities: communication, selling, customer care), you are adopting a multichannel approach; each channel is treated indepently. • omni-channel: Multiple channels; every touchpoint between the company and the user should be designed as part of an integrated system because the brand image is unique. Nowadays the customer journey is more and more complex. - Showrooming = trying the product offline, in the physical point of sale, and then buying it online. - Webrooming = searching for information online, then going to physical point of sale to buy the product.
Asset Based Disruption
•It's cheaper (but not free) and still leverages on the two sided platform business model (users and suppliers) • It leverages IDLE RESOURCES (from non professional suppliers) and therefore just need to cover marginal costs • It creates value, stealing it from disrupted players and has its own growth strategy • Can be copied, and contrasted (by incumbents)
Unintended Disruption
•It's free • It's a bundle in an existing product But ... • destroys value, rather than transferring it to the disruptor And ... • can not be prevented or contrasted
