Description

PART 1—Discuss the new principles of marketing according to Parise, Guinan, and Weinberg.Write a 3-4 page APA compliant research paper (does not include title page, Abstract, or References page).

You must use at least two (3) additional outside scholarly reference other than the course textbook. Accessing the Hodges Library databases provides excellent resources for this assignment.

PART 2—-Students will create 6-8 slides for the presentation. PowerPoint files will be sent as an attachment to the Professor through the Week 4 Assignment Module

In the fourth module, you will complete the analysis of a firm’s strategy. Key concepts such as implementation, and controls, and other models of analysis will be covered. During this module, you will complete your work with the strategic management model to guide you through this course. Next, you will work through the analysis phase of strategic planning and complete the implementation and controls section of the strategic management model. Finally, you will complete an analysis of the company you selected, present your research, and complete the final examination.

  • Explain why good ethics is good business in strategic management.
  • Explain why whistle-blowing, bribery, and workplace romance are strategic issues.
  • Discuss why social responsibility and policy are key issues in strategic planning.
  • Discuss the nature of environmental sustainability and why it is a key issue in strategic planning.
  • Explain why animal welfare has a strategic issue for firms.
  • Discuss the nature of doing business globally, including language and labor union issues.
  • Discuss the global challenge facing firms and why this is a strategic issue.
  • Discuss tax rates and tax inversions as strategic issues.
  • Compare and contrast American business culture versus foreign business cultures; explain why this is a strategic issue.
  • Discuss the business culture in Mexico, Japan, China, and India; explain why this is a strategic issue.
  • Discuss the business climate in Africa, China, Indonesia, India, Japan, Mexico, and Vietnam; explain why this is a strategic issue.

READING FOR PART 2–

The firm’s core competencies should be focused on satisfying customer needs or preferences through business-level strategies, which detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. In other words, business-level strategies are developed based on a firm’s core competencies and indicate how an organization chooses to compete in a particular market to gain a competitive advantage over competitors.

  • Cost leadership, a strategy that provides products—goods or services—with features acceptable to customers at the lowest competitive price. For example, many of Taiwan’s PC manufacturers target the low-priced segment of the PC market through extreme forms of the cost leadership strategy. To drive their costs lower and exploit the competitive advantage their low-cost structures provide, these companies rely on suppliers from China to supply low-priced components that allow the PC manufacturers to drive production costs still lower.
  • Differentiation, a strategy that provides products that customers perceive as being unique in ways that are important to them and, because this uniqueness offers value, customers are willing to pay a premium price for them. Jaguar is a manufacturer of high-prestige cars for which customers are willing pay high prices.

A customer focus requires that firms simultaneously evaluate or consider

  • Whom to serve,
  • What customer needs will be satisfied, and
  • How those needs will be satisfied through the strategy selected.

To survive and achieve strategic competitiveness in the contemporary competitive landscape, firms must:

  • Identify who their customers are
  • Determine customer needs or preferences
  • Focus on satisfying the needs of some group of customers
  • Determine how to compete (select a strategy) that enables them to satisfy customer needs

Key connections in managing customer relationships are as follows:

  • The firm’s relationships with its customers are strengthened when it delivers superior value to them.
  • Delivering superior value often results in increased loyalty from customers.
  • Customer loyalty is positively related to profitability.

A number of companies have become skilled at managing all aspects of their relationship with their customers.

  • com is known for the quality of information it maintains about its customers, the service it renders, and its ability to anticipate customers’ needs.
  • Cemex uses the Internet to link its customers, cement plants, and main control room, allowing the firm to automate orders and optimize truck deliveries in highly congested Mexico City.

In the Internet age, firms can maintain competitive advantage by:

  • Thinking continuously about accessing and connecting with customers (reach)
  • Maintaining information with depth and detail for (and from) customers (richness)
  • Facilitating useful interactions (affiliation)

The first step is to identify customers based on differences in needs or preferences (often called market segmentation). This enables the firm to have a better grasp on what might be important to customers because of the lack of any in-depth insights relevant for decision making that are provided by central tendencies (averages) of the market in general.

Dimensions that can be used to identify potential customers include the following factors:

For consumer markets:

· Demographic factors

· Socioeconomic factors

· Geographic factors

· Psychological factors

· Consumption patterns

· Perceptual factors

For industrial markets:

· End-use segments

· Product segments

· Geographic segments

· Common buying factor segments

· Customer size segments

It is imperative that firms pay careful attention to differences in customer needs among customer groups and not arbitrarily “lump” them together because:

  • Almost any identifiable human or organizational characteristic can be used to sub-divide a market into segments that differ from one another on a given characteristic.
  • Customer characteristics are often combined to segment markets into specific groups that have unique needs.
  • Demographic factors can also be used to segment markets into generations with unique interests and needs.

One challenge for firms is to identify ways in which they can bundle their resources and capabilities to create value for customers, because given the choice, customers are most interested in purchasing products that both satisfy their needs and provide value. After the firm decides whom it will serve, it must identify the targeted customer group’s needs that its goods or services can satisfy. This is important in that successful firms learn how to deliver to customers what they want and when they want it. In a general sense, needs (wants) are related to a product’s benefits and features. Having close and frequent interactions with both current and potential customers helps the firm identify those individuals’ and groups’ current and future needs. From a strategic perspective, a basic need of all customers is to buy products that create value for them. The most effective firms continuously strive to anticipate changes in customers’ needs. Failure to do this results in the loss of customers to competitors who are offering greater value in terms of product features and functionalities. In any given industry, there is great variety among consumers in terms of their needs, e.g., high-quality, lower-cost with acceptable quality, quick delivery. Diversified food and soft-drink producer PepsiCo believes that “any one consumer has different needs at different times of the day.”

Core competencies are resources and capabilities that serve as a source of competitive advantage for the firm over its rivals. Firms use core competencies (how) to implement value-creating strategies and thereby satisfy customers’ needs. Only those firms with the capacity to continuously improve, innovate, and upgrade their competencies can expect to meet and hopefully exceed customers’ expectations across time.

Choosing to perform activities differently or to perform different activities from rivals is the essence of business-level strategy. Thus, the firm’s business-level strategy is a deliberate choice about how it will perform the value chain’s primary and support activities in ways that create unique value. Indeed, in the complex 21st century competitive landscape, successful use of a business-level strategy results only when the firm learns how to integrate the activities it performs in ways that create competitive advantages that can be used to create value for customers.

Fit among activities is a key to the sustainability of competitive advantage for all firms. As Michael Porter observes, “strategic fit among many activities is fundamental not only to competitive advantage, but also to the sustainability of that advantage. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular salesforce approach, match a process technology, or replicate a set of product features. Positions built on systems of activities are far more sustainable than those built on individual activities.”

Business-level strategy is concerned with a firm’s position in an industry, relative to competitors. Firms are challenged to select business-level strategies to position themselves favorably by performing activities differently or performing different activities as compared to its rivals. Thus, the firm’s business-level strategy is a deliberate choice about how it will perform the value chain’s primary and support activities in ways that create unique value. Firms can choose one of five strategies from the generic strategy matrix based on the source of competitive advantage—uniqueness or cost—and breadth of competitive scope—broad or narrow.

A firm choosing to compete across a broad market determines that it should compete in a number of customer segments. Competitive advantage is achieved either by offering unique products—a differentiation strategy—or by establishing a low-cost position and providing standardized products at the lowest competitive price—a cost leadership strategy. Firms that choose to compete in narrow customer segments select a focus strategy, which may be either a focused differentiation strategy (few segments, unique products) or a focused cost leadership strategy (narrow segment, standardized products at the lowest competitive price).

An integrated cost leadership/differentiation incorporates both of these emphases. The effectiveness of each strategy is contingent both on the opportunities and threats in a firm’s external environment and on the possibilities provided by the firm’s unique resources, capabilities, and core competencies. It is critical, therefore, for the firm to select a business-level strategy that is based on a match between the opportunities and threats in its external environment and the strengths of its internal environment as shown by its core competencies.

The cost leadership strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors. Firms that choose a cost-leadership strategy offer relatively standardized products with characteristics or features that typical customers accept (but with competitive levels of differentiation) at the lowest competitive price. Firms that wish to be successful by following a cost-leadership strategy must maintain constant efforts aimed at lowering costs (relative to rivals’ costs) and creating value for customers. Cost-reduction strategies can include:

  • Building efficient-scale facilities
  • Establishing tight control of production and overhead costs
  • Minimizing the costs of sales, product research and development, and service
  • Investing in state-of-the-art manufacturing technologies

Implementing and maintaining a cost leadership strategy means that a firm must consider its value chain of primary and secondary activities and effectively link those activities, if it is to be successful. As primary activities, inbound logistics and outbound logistics often account for much of the total cost to produce some goods and services. Research suggests that a competitive advantage in logistics creates more value with cost leadership strategies than with differentiation strategies, prompting cost leaders to focus on these primary activities. Cost leaders also carefully examine all support activities to find additional sources of potential cost reductions.

Walmart has been the world’s largest retailer for a number of years, however, recent same store sales in the US have been disappointing as a result of its shift in strategy. In an effort to attract more upscale customers from rivals like Target, Walmart deviated from its cost leadership strategy. In the process it alienated many of its core customers who have since migrated to low-cost retailers such as Family Dollar and Amazon. Only recently has Walmart realized its mistake and tried to win back defectors. To do this it is opening smaller stores in key areas and focusing on keeping prices low while providing larger product selection than competitors.

The firm’s focus throughout each of its value chain activities and support functions is on the following:

  • Simplification of processes and procedures
  • Achieving efficiency and effectiveness
  • Reducing costs
  • Monitoring costs of activities provided by others that interface with the firm’s inbound or outbound logistics

A firm that successfully implements a cost leadership strategy can earn above-average returns even when the five competitive forces are strong.

Achieving the lowest cost position means that a firm’s rivals will hesitate to compete based on price because, in a price war, the low cost firm will still earn profits even after its competitors compete away all profits. Having the low-cost position is a valuable defense against rivals. For example, Walmart controls and reduces costs so well that rivals cannot compete against it based on price. To build its cost position, the discount retailer achieves strict cost control in several ways. Kmart’s decision to compete against Walmart on the basis of cost contributed to the firm’s failure and subsequent bankruptcy filing. Its inferior distribution system—an inefficient and high-cost system compared to Walmart’s—is one of the factors that prevented Kmart from having a competitive cost structure relative to Walmart.

Bargaining Power of Buyers (Customers)

Achieving the low cost position provides some protection against powerful customers who attempt to drive down prices. If customers attempt to drive prices below the cost of the next most efficient firm, that firm might choose to exit the market (rather than remain and earn below average profits), leaving the low cost firm with a monopoly position. If that happens, customers would lose any bargaining power as the monopoly firm would be in a position to raise prices.

Bargaining Power of Suppliers

Because they have achieved the lowest cost position in the industry, the cost leadership strategy enables a firm to absorb a greater amount of cost increases from powerful suppliers before it must raise prices charged to customers. This may enable the firm to be alone among its competitors in earning above-average returns. In addition, a low-cost leader that also has a dominant market share may be in a position to force suppliers to reduce prices or to hold down the level of price increases, and thus reduce the power of suppliers. Again, Walmart is a good example of a firm that follows this pattern.

Potential Entrants

Firms successfully following cost leadership strategies generally must produce and sell in large volumes to earn above-average returns. And with a continuous focus on efficiency and reducing costs, cost leadership firms create barriers to entry. New entrants must either enter the industry at a large scale (large enough to achieve the same economies of scale as the next lowest cost firm) or be satisfied with average profits until they move sufficiently far down the experience curve to match the efficiencies of the low-cost leader.

Product Substitutes

The cost leader is in a more attractive position relative to substitute products than are other firms in the industry. To retain customers, the cost leader can more easily reduce prices to maintain the price-value relationship and retain customers.

Competitive Risks of the Cost Leadership Strategy

Despite the attractiveness of the cost leadership strategy, it is accompanied by risks such as the following:

  • Technological innovations by competitors could eliminate the cost leader’s cost advantage.
  • Overly focusing on process efficiency may cause the cost leader to overlook needed differentiation features.
  • Competitors may successfully imitate the low-cost leader’s value chain configuration.

In the event of any of the above, the low-cost leader is challenged to increase value to customers. This may mean reducing prices or adding product features without raising prices. However, if prices are reduced too low, it may be difficult for the firm to earn satisfactory margins and customers may resist any price increases.

Differentiation Strategy

In contrast to the cost leadership strategy, implementation of a differentiation strategy means that value is provided to customers through the unique features and characteristics of a firm’s products rather than by the lowest price. Because differentiated products satisfy customers’ unique needs or preferences, firms can charge a premium price for differentiated products. But the premium cannot exceed what customers are willing to pay. For the firm to be able to outperform its competitors and earn above-average returns, the price charged for the differentiated product must exceed the cost of differentiation. In other words, the price charged must exceed total product cost. Because of this, the differentiated product’s premium prices generally exceed the low price of the standard product. Firms that follow a differentiation strategy concentrate or focus on product innovation and developing product features that customers value rather than on maintaining the lowest competitive price (the case for cost leadership strategy). Often this strategy seeks to differentiate the product/service on as many dimensions as possible.

Products can be differentiated in a number of ways so that they stand apart from standardized products:

  • Superior quality
  • Unusual or unique features
  • More responsive customer service
  • Rapid product innovation
  • Advanced technological features
  • Engineering design and performance
  • Additional features
  • An image of prestige or status

Some examples of differentiation strategies include the following:

  • Ralph Lauren differentiates its clothing lines through image.
  • Lexus cars are differentiated by prestige and image.
  • Apple (iPod and iPhone) are differentiated by innovative design.
  • McKinsey and Company offers differentiated consulting services.

Successfully implementing (and maintaining) a differentiation strategy requires a firm to consider its value chain of primary and secondary activities and effectively link those activities.

The firm’s core competencies should be focused on satisfying customer needs or preferences through business-level strategies, which detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. In other words, business-level strategies are developed based on a firm’s core competencies and indicate how an organization chooses to compete in a particular market to gain a competitive advantage over competitors.

  • Cost leadership, a strategy that provides products—goods or services—with features acceptable to customers at the lowest competitive price. For example, many of Taiwan’s PC manufacturers target the low-priced segment of the PC market through extreme forms of the cost leadership strategy. To drive their costs lower and exploit the competitive advantage their low-cost structures provide, these companies rely on suppliers from China to supply low-priced components that allow the PC manufacturers to drive production costs still lower.
  • Differentiation, a strategy that provides products that customers perceive as being unique in ways that are important to them and, because this uniqueness offers value, customers are willing to pay a premium price for them. Jaguar is a manufacturer of high-prestige cars for which customers are willing pay high prices.

A customer focus requires that firms simultaneously evaluate or consider

  • Whom to serve,
  • What customer needs will be satisfied, and
  • How those needs will be satisfied through the strategy selected.

To survive and achieve strategic competitiveness in the contemporary competitive landscape, firms must:

  • Identify who their customers are
  • Determine customer needs or preferences
  • Focus on satisfying the needs of some group of customers
  • Determine how to compete (select a strategy) that enables them to satisfy customer needs

Key connections in managing customer relationships are as follows:

  • The firm’s relationships with its customers are strengthened when it delivers superior value to them.
  • Delivering superior value often results in increased loyalty from customers.
  • Customer loyalty is positively related to profitability.

A number of companies have become skilled at managing all aspects of their relationship with their customers.

  • com is known for the quality of information it maintains about its customers, the service it renders, and its ability to anticipate customers’ needs.
  • Cemex uses the Internet to link its customers, cement plants, and main control room, allowing the firm to automate orders and optimize truck deliveries in highly congested Mexico City.

In the Internet age, firms can maintain competitive advantage by:

  • Thinking continuously about accessing and connecting with customers (reach)
  • Maintaining information with depth and detail for (and from) customers (richness)
  • Facilitating useful interactions (affiliation)

The first step is to identify customers based on differences in needs or preferences (often called market segmentation). This enables the firm to have a better grasp on what might be important to customers because of the lack of any in-depth insights relevant for decision making that are provided by central tendencies (averages) of the market in general.

Dimensions that can be used to identify potential customers include the following factors:

For consumer markets:

· Demographic factors

· Socioeconomic factors

· Geographic factors

· Psychological factors

· Consumption patterns

· Perceptual factors

For industrial markets:

· End-use segments

· Product segments

· Geographic segments

· Common buying factor segments

· Customer size segments

It is imperative that firms pay careful attention to differences in customer needs among customer groups and not arbitrarily “lump” them together because:

  • Almost any identifiable human or organizational characteristic can be used to sub-divide a market into segments that differ from one another on a given characteristic.
  • Customer characteristics are often combined to segment markets into specific groups that have unique needs.
  • Demographic factors can also be used to segment markets into generations with unique interests and needs.

One challenge for firms is to identify ways in which they can bundle their resources and capabilities to create value for customers, because given the choice, customers are most interested in purchasing products that both satisfy their needs and provide value. After the firm decides whom it will serve, it must identify the targeted customer group’s needs that its goods or services can satisfy. This is important in that successful firms learn how to deliver to customers what they want and when they want it. In a general sense, needs (wants) are related to a product’s benefits and features. Having close and frequent interactions with both current and potential customers helps the firm identify those individuals’ and groups’ current and future needs. From a strategic perspective, a basic need of all customers is to buy products that create value for them. The most effective firms continuously strive to anticipate changes in customers’ needs. Failure to do this results in the loss of customers to competitors who are offering greater value in terms of product features and functionalities. In any given industry, there is great variety among consumers in terms of their needs, e.g., high-quality, lower-cost with acceptable quality, quick delivery. Diversified food and soft-drink producer PepsiCo believes that “any one consumer has different needs at different times of the day.”

Core competencies are resources and capabilities that serve as a source of competitive advantage for the firm over its rivals. Firms use core competencies (how) to implement value-creating strategies and thereby satisfy customers’ needs. Only those firms with the capacity to continuously improve, innovate, and upgrade their competencies can expect to meet and hopefully exceed customers’ expectations across time.

Choosing to perform activities differently or to perform different activities from rivals is the essence of business-level strategy. Thus, the firm’s business-level strategy is a deliberate choice about how it will perform the value chain’s primary and support activities in ways that create unique value. Indeed, in the complex 21st century competitive landscape, successful use of a business-level strategy results only when the firm learns how to integrate the activities it performs in ways that create competitive advantage