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Growth Strategies
Meeting 10
Perceived Value Pricing
Low Premium
High Relative Value Position
alue
a l V
u
Price ($) Eq
High
Relative Value
Discount
Low Position
Low High
Perceived Performance
Relative Value Drives Market Share
Low Value
Sales Lag
Inventory Builds Premium
High Discount Price Position
alue
a l V
u
Price ($) Eq
High Value
Sales Build
Discount Stockouts
Low Position Shortage Pricing
Low High
Perceived Performance
Measure Market Price
Sensitivity
Differentiated
Market
Relative
Price
Commodity
Market
Relative Performance
Reading_M9.pdf
Price-Performance Calculations
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Competitor Rankings 7=Great 1= Poor
Relative
Attributes Importanc A B C D
e
1 Little wait 30.00% 6 4 5 3
2 Will run Pr 40.00% 4 4 6 3
3 Not Obsol 20.00% 6 4 3 4
4 Serv 10.00% 7 5 3 0
5
6
Total = 100.00%
Weighted Ratings
Competitor Rankings 7=Great 1= Poor
Relative
Attributes Importanc A B C D
e
1 Little wait 0.3 1.8 1.2 1.5 0.9
2 Will run Pr 0.4 1.6 1.6 2.4 1.2
3 Not Obsol 0.2 1.2 0.8 0.6 0.8
4 Serv 0.1 0.7 0.5 0.3 0
5 0 0 0 0 0
6 0 0 0 0 0
A 1295 5.3
B 1495 4.1
C 995 4.8
D 1149 2.9
Price Performance
1500
1400
1300
Price
1200
1100
1000
900
1 2 3 4 5 6 7
Performance
Goal = Customer Satisfaction
• Product and Price = Performance
• Price: Customer wants at bottom of range
• MTBF: Customer wants at top of range
• Age: Customer wants near Ideal
• Positioning: Customer wants near ideal
• Satisfaction Index = Total Performance *
Awareness Adjustment * Accessibility Adjustment
• Awareness Adjustment = TotalPerf * (1-(100% -Awareness%)/2)li
• Accessibility Adjustment = Sat*AwAdj* (1-(100-Asses))
Modes of Growth
Strategic
Acquisitions
Alliances
Internal
Development
Product Diversification
Development
Market Market
Penetration Development
Growth Options
New
Product
Development Diversification
Products
Market Market
Penetration Development
Existing
Existing New
Markets
Market Penetration Process
Advertising Fuller Utilization Intensive
Of Excess Capacity Distribution
Economies
Of Scale
Lower
Prices
Increase in
Market Share
Lower Variable
Operating Costs
Increase in
Profit Margin
Investment in Plant
And Equipment
Market Development
New Markets
High
Do Not
?
Invest
Competitors
Strength
?
Develop
Market
Low
Low High
Market Attractiveness
Product Development
Existing Markets
High ? New
Product
Development
R&D Consider
Expense Product
Medium Revise Products
Line
Elimination
Revise Products
Low
Diversification
New Markets
Technology Competition
New
Product Diversification
Development
Products
Market Market
Existing Penetration Development
Existing New
Markets
Two Strategic Logics
Conventional Logic Value Innovation Logic
• Industry’s conditions are given • Industry’s conditions can be shaped
• A company should build competitive • Competition is not the benchmark The
advantages. The aim is to beat the company should pursue a quantum leap
competition in value to dominate the market.
• A company should retain and expand • A value innovator targets the mass of
its customer base through further buyers and willingly lets some existing
segmentation and customization. customers go. It focuses on the key
commonalities in what customers value.
• A company must not be constrained by
• A company should leverage its existing
existing assets and capabilities. It must
assets and capabilities.
ask, What would we do if we were
starting anew?
• An industry’s traditional boundaries • A value innovator thinks in terms of
determine the products and services a the total solution customers seek, even
company offers. The goal is to
if that takes the company beyond its
maximize the value of those offerings.
industry’s traditional offerings.
Red vs. Blue Ocean Strategy
Red ocean strategy Blue ocean strategy
• Compete in existing market space. • Create uncontested market space.
• Beat the competition. • Make the competition irrelevant.
• Exploit existing demand. • Create and capture new demand.
• Make the value/cost trade-off. • Break the value/cost trade-off.
• Align the whole system of a • Align the whole system of a
company’s activities with its company’s activities in pursuit of
strategic choice of differentiation differentiation and low cost.
or low cost.
Examples of Blue Ocean
CRT Calculator >IBM 360 > Apple PC > Compac PC Server > Dell Built to Order
Ford Model T > GM Variety > Japanese Fuel Efficient > Chrysler Minivan
Structure of Markets
Market Share
Log e
K ratio
1 2 3
Share
1
Share
1
Time
Structure of Markets over Time
Markets Form Equilibriums
Share
1
Big
Earthquake
2