STRATEGIC STRATEGIC CAPABILITYCAPABILITY

1. Position audit is examination 1. Position audit is examination of an organization’s strategic of an organization’s strategic

capabilitycapability► Strategic capability is defined by the adequacy Strategic capability is defined by the adequacy

and suitability of resources and competencies.and suitability of resources and competencies.► Organization’s resources: men, money, Organization’s resources: men, money,

materials, markets, management, methodsmaterials, markets, management, methods► Unique resource is better than that of Unique resource is better than that of

competitor and difficult to imitate.competitor and difficult to imitate.► Limiting factor: shortage or difficulty of supplyLimiting factor: shortage or difficulty of supply► Resource based strategy: distinctive resource Resource based strategy: distinctive resource

can be a source of sustained competitive can be a source of sustained competitive advantage.advantage.

2. Cost Efficiency2. Cost Efficiency

Economies of scale: reducing cost per Economies of scale: reducing cost per unit by increasing sales volume.unit by increasing sales volume.

Supply costs: transport costs; quantity Supply costs: transport costs; quantity of purchaseof purchase

Design of products and processes: Design of products and processes: reducing wastage, efficient designs.reducing wastage, efficient designs.

Experience: learning curve, experience Experience: learning curve, experience curvecurve

3. Sustainable Competitive 3. Sustainable Competitive AdvantageAdvantage

►Value to buyers: satisfying customer Value to buyers: satisfying customer needsneeds

►Rarity: De BeersRarity: De Beers►Robustness: AppleRobustness: Apple►Non-substitutability: not easily Non-substitutability: not easily

substitutedsubstituted►Dynamic capabilities: change, Dynamic capabilities: change,

innovate and learninnovate and learn

4. Knowledge4. Knowledge

► Organizational knowledge is the collective and Organizational knowledge is the collective and shared experience accumulated through shared experience accumulated through systems, routines and activities of sharing systems, routines and activities of sharing across the organizationacross the organization

► Tangible knowledge and Intangible KnowledgeTangible knowledge and Intangible Knowledge► Data, information and knowledgeData, information and knowledge► Knowledge Management: is the process by Knowledge Management: is the process by

which organizations generate value from their which organizations generate value from their intellectual and knowledge-based assets.intellectual and knowledge-based assets.

4. Knowledge4. Knowledge

►Knowledge management systemsKnowledge management systems►Office automationOffice automation►GroupwareGroupware► IntranetIntranet►ExtranetExtranet► InternetInternet►Expert systemExpert system►DatabaseDatabase

5. Value Chain5. Value Chain

►The value chain describes those The value chain describes those activities of the organization that add activities of the organization that add value to purchase inputs.value to purchase inputs.

►Value activities are the means by Value activities are the means by which a firm creates value in its which a firm creates value in its products.products.

►Value Chain DiagramValue Chain Diagram►Value Network DiagramValue Network Diagram

6 & 7. The Product Portfolio6 & 7. The Product PortfolioNew Products and innovationNew Products and innovation

1.1. Must develop new productsMust develop new products2.2. Consumer needsConsumer needs3.3. Source of growth for the companySource of growth for the company4.4. Response to environment and technologyResponse to environment and technology5.5. Every product is born, has its stages and Every product is born, has its stages and

then diesthen dies6.6. New Product Development strategies: 1. New Product Development strategies: 1.

acquisition 2. new product development acquisition 2. new product development (original products, product improvements, (original products, product improvements, product modifications, new brands)product modifications, new brands)

New Product OddsNew Product Odds► Up to 90 % of new products meet failureUp to 90 % of new products meet failure► New Coke, Eagle Snacks, Zap Mail, Premier New Coke, Eagle Snacks, Zap Mail, Premier

“Smokeless” cigarettes, Arch Deluxe“Smokeless” cigarettes, Arch Deluxe► Reasons:Reasons:► Market overestimationMarket overestimation► Actual product poorly designedActual product poorly designed► Incorrectly positionedIncorrectly positioned► Wrong timing for launchWrong timing for launch► Price too highPrice too high► Poor advertisementPoor advertisement

ProcessProcess

► Idea generationIdea generation► Idea screeningIdea screening►Concept development and testingConcept development and testing►Marketing strategy developmentMarketing strategy development►Business analysisBusiness analysis►Product developmentProduct development►Test marketingTest marketing►CommercializationCommercialization

Product Life CycleProduct Life Cycle

►Product launch – happy lifeProduct launch – happy life►Cover costsCover costs►Earn profitsEarn profits►Length not know in advanceLength not know in advance►Coca-Cola, Gillette, Budweiser, Coca-Cola, Gillette, Budweiser,

American Express, Wells-Fargo, and American Express, Wells-Fargo, and TabascoTabasco

PLC – S CurvePLC – S Curve

Introduction StageIntroduction Stage

►Product launchProduct launch►Takes timeTakes time►Slow growthSlow growth►Negative profitsNegative profits►High promotion and distribution costHigh promotion and distribution cost

Growth StageGrowth Stage

► Product, if satisfies market, enters growth stageProduct, if satisfies market, enters growth stage► Sales climb quicklySales climb quickly► Early adopters continue, new join through favorable Early adopters continue, new join through favorable

word of mouthword of mouth► New competitors enter marketNew competitors enter market► Competition – increase in sale pointsCompetition – increase in sale points► Spread of sales, unit cost reducesSpread of sales, unit cost reduces► Sustain rapid growthSustain rapid growth► New market segmentsNew market segments► Prices may be lowered to attract more customers Prices may be lowered to attract more customers

(iPod)(iPod)

MaturityMaturity

► At some point sale slows down, product At some point sale slows down, product enters maturity stageenters maturity stage

► Lasts longerLasts longer► Marketing management most of the time Marketing management most of the time

deals with mature productsdeals with mature products► More producers selling the same productMore producers selling the same product► Greater competitionGreater competition► Prices down, increase in sales promotionPrices down, increase in sales promotion► Drop in profitDrop in profit► Well established competitors stayWell established competitors stay

MaturityMaturity

►Product manager should modify Product manager should modify market, product and marketing mixmarket, product and marketing mix

►Market: increase consumption of Market: increase consumption of product, new users, present usersproduct, new users, present users

►Product: quality, features, style (milk Product: quality, features, style (milk pak, Honda City)pak, Honda City)

►Four PsFour Ps

Decline StageDecline Stage

► Eventually dipEventually dip► Oat meal, VHS tapes, VCR, Tape recordersOat meal, VHS tapes, VCR, Tape recorders► Reasons: technology, consumer tastes, increased Reasons: technology, consumer tastes, increased

competition, profits decline, withdrawal from marketcompetition, profits decline, withdrawal from market► Furthermore: Furthermore: ► Weak product costly to firmWeak product costly to firm► Management timeManagement time► Price adjustmentsPrice adjustments► Advertising/sales effortsAdvertising/sales efforts► Reputation of other co products affectedReputation of other co products affected► Old Spice/ co can sell brandsOld Spice/ co can sell brands

8. Benchmarking8. Benchmarking

► Benchmarking is the process of gauging the internal Benchmarking is the process of gauging the internal practices and activities within a firm to an external practices and activities within a firm to an external reference or standard. It is a continuous process of reference or standard. It is a continuous process of measuring one’s own products, services, systems, and measuring one’s own products, services, systems, and practices against the world’s toughest competitors to practices against the world’s toughest competitors to identify areas for improvement. identify areas for improvement.

► Managers while benchmarking their practices should Managers while benchmarking their practices should set realistic goals and gradually increase the level of set realistic goals and gradually increase the level of difficulty to encourage employees. This technique is difficulty to encourage employees. This technique is also known as shaping. For example, if an organization also known as shaping. For example, if an organization wants to meet the 1 % defects benchmark from its wants to meet the 1 % defects benchmark from its existing 20 %. It would be appropriate to set 15 % existing 20 %. It would be appropriate to set 15 % goals in the first place. Once this goal is achieved the goals in the first place. Once this goal is achieved the manager can set a new target of 10 % and gradually manager can set a new target of 10 % and gradually meet the benchmark of 1 %. To use shaping effectively meet the benchmark of 1 %. To use shaping effectively in benchmarking practices, the following tips can be in benchmarking practices, the following tips can be considered:considered:

8. Benchmarking8. Benchmarking► Identify a benchmark (product, service or Identify a benchmark (product, service or

process)process)► Identify comparables.Identify comparables.► Collect data to accurately define goals.Collect data to accurately define goals.► Collect data to determine the current Collect data to determine the current

performance of the organization against the performance of the organization against the benchmark.benchmark.

► Make the target specific.Make the target specific.► Train the staff to meet set goals.Train the staff to meet set goals.► Provide feedback and reinforce set goals.Provide feedback and reinforce set goals.► Review progress periodically.Review progress periodically.

9. Managing Strategic 9. Managing Strategic CapabilityCapability

► Competencies can be extendedCompetencies can be extended► Things that do not create value should Things that do not create value should

ceasecease► Best practices to be extendedBest practices to be extended► Activities that add value should be extendedActivities that add value should be extended► New and improved way of working should be New and improved way of working should be

introducedintroduced► Weakness should be remediedWeakness should be remedied► External links should be improvedExternal links should be improved

10. SWOT analysis10. SWOT analysis

►Environmental analysisEnvironmental analysis► Internal appraisalInternal appraisal►TOWS MatrixTOWS Matrix