CLASS OPINION

• Brands you trust • Brands you do not trust

IN-CLASS SURVEY

• What one brand would you not want to disappear?– How would that change your life?– What would you do to replace that item?

• What one brand would you not miss at all?– Why?

• What one new product that is not currently on the market would you really like to have?– Why?

BRAND MANAGEMENT AND NEW PRODUCT DEVELOPMENT

SECTION 2ABrand Management and the Firm

Corporate Strategy and Customer Orientation:Understanding Wants, Needs, and the Competitive Environment

ALAN L. WHITEBREAD

INNOVATION

INSIDE-OUT APPROACH:

THE SALES CONCEPT

OUTSIDE-IN APPROACH:

THE MARKETING CONCEPT

Product centered Market and customer centered

Technology provides opportunities Market knowledge provides opportunities

Driven by capabilities and competencies

Driven by fulfilling market needs

Create products the market should need and desire

Create innovative solutions for market needs and wants

INNOVATION

INSIDE-OUT APPROACH:

THE SALES CONCEPT

OUTSIDE-IN APPROACH:

THE MARKETING CONCEPT

New, more, and superior product features that outperform the competition

Meaningful benefits create emotional ties which increase brand loyalty

Understand the value of each benefit in rank order! Top 3!

Heavy reliance on competitive product performance

Focus on market attitudes and beliefs

Marketing is to sell what we create Marketing is to understand the markets to help us create relevant new products

Best use of our resources?

? ?The Tradition of Innovation – videoThe Innovative Culture of 3M – video

NEW PRODUCT DEVELOPMENTThe Strategy Formation School

• Prescribe how strategies should be formed.– Design School

• A process of conception

– Positioning School• An analytical process

MANAGEMENT TODAY

• Grow the business– Which businesses?– Which business models?

• Grow the brands– Which brands?– What product families / lines / products?– The hierarchy– How do brands /product families / lines grow change

and/or evolve over time?– Succeeding with new product development

THE STRATEGIC BUSINESS UNIT [SBU]

• A UNIT OF THE FIRM THAT HAS DIFFERENT OBJECTIVES AND CAN BE PLANNED SEPARATELY FROM OTHER UNITS OF THE FIRM.

• For instance, some of General Electric’s business units include– GE Commercial Finance -- GE Industrial– GE Consumer Finance -- GE Infrastructure– GE Healthcare -- NBC Universal

THE STRATEGIC BUSINESS UNIT [SBU]

• SBU ISSUES– RESOURCE COMPETITION

• People• Money • Development resources [corporate]

– FAIR PERFORMANCE MEASURES• How do you reward very different SBUs?

– WHAT IS THE ACCEPTABLE DEGREE OF AUTONOMY FOR EVERY SBU?

SBU – Transportation market

MARKETS /

SEGMENTS

TECHNOLOGIES (gas electric fuel cell) /

PRODUCTS /

SERVICES APPLICATIONSNorth America Europe Asia Export

Business Consumer Government

Trucks

Cars

Tanks

Delivery

Transportation

War

THE CONFIGURATION SCHOOL AND ORGANIZATIONAL BEHAVIOR

• TYPES OF BUSINESS UNITS [BU or SBU]

– PROSPECTOR [GE EcomaginationSM]• Seeks innovative new opportunities and ways of responding

to emerging needs• First-mover advantage problem

– ANALYZER [?] • Seeks to minimize risk and maximize the profit opportunity• Fast-follower or Follower

– DEFENDER [?] • Seeks stability; limited product development; narrow market

definitions

– REACTOR / LAGGARD [?]• New products are only developed in response to competitive

developments

STRATEGIC DIRECTION OF THE FIRM(“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE)

• CORE COMPETENCY* – The foundations [usually technologies] upon which

you build your business over a very long time.

• CORE COMPETENCY TESTS*

• Sustainable – Very long term [5+ years]

And• Competitive – Obvious customer benefits

And• Advantage – Access to additional markets or market

segments

CORE COMPETENCIES FOR THE BIONIC EXERSUIT

http://totallyabsurd.com/bionicexersuit.htm

What technologies will allow us to increase our competitive advantage over the next 10+ years?

A Bionic Exersuit automatically provides the exercise or workout out you need in a precisely controlled regimen.

KEY SUCCESS FACTORS*• THE DESIGN SCHOOL OF NPD

– Match the firm’s capabilities and the market– Tools: SWOT, competence, competitive advantage– Strategy-making not a process of learning

• NOT CORE COMPETENCIES

• YOU MUST DO BETTER ALL THE TIME TO STAY IN THE SAME POSITION RELATIVE TO YOUR COMPETITORS

• Customer Services, Design, ?

• ARE THEY COMPETENCIES?– Competencies provide long-term competitive advantage.

KEY SUCCESS FACTORS FOR THE GARBAGE CAN CHAIR

US 4,387,927 June, 1983

What skills will we need to be really good at to succeed with this product that has no core competencies?

Do this two ways.

-from the company viewpoint

-from the consumer viewpoint

SWOT ANALYSIS*Your firm and your major competitors

STRENGTHSUse your

strengths to take advantage of opportunities

WEAKNESSES

Offset your weaknesses

OPPORTUNITIES

Use your strengths to offset competitive

threats

THREATS

Counter threats

LEVERAGE

PROBLEMS

CONSTRAINTS VULNERABILITIES

SWOT: SITUATIONAL ANALYSIS

• STRENGTHS / WEAKNESSES– Production costs; marketing acumen; financial

resources; technological requirements; market perception; …

• OPPORTUNITIES / THREATS– Economic; competitive; demographic;

technological; legal / political; social; …

TYING CORE COMPETENCIES AND SWOT ANALYSIS TO STRATEGY [FORTUNE BRANDS]

DISTILLED SPIRITS

OFFICE PRODUCTS

HOME & HARDWARE

GOLF & LEISURE

Bourbon Calendars Locks Golf clubs

Jim Beam Day-Timer Master Lock Cobra

Rum Binders Faucets Golf balls

Ron Rico Wilson-Jones Moen Titleist

BCG AND GE STRATEGIC PLANNING MODELS

• THE POSITIONING SCHOOL OF NPD– Only a few positions in any industry are

desirable– Tools: competitive analysis, portfolio analysis,

five forces, BCG I, GE/McKenzie Matrix– Positioning should support the strategy-

making process, not be the process.

• CONCEPTUALLY SIMILAR MODELS

Ma

rke

t G

row

th R

ate

LO

W

HIG

H

QUESTION MARKS / PROBLEM CHILD

CASH COWS DOGS

HIGH LOW Relative Market Share

STARS

BOSTON CONSULTING GROUP:GROWTH – SHARE MATRIX

Divest or discontinue – then redeploy key assets

Decide quickly to build, harvest, or

divest

Invest heavily in tomorrow [Build]

Harvest for cash for reinvestment in the firm

GE [McKenzie] STRATEGIC BUSINESS PLANNING MATRIX

• Market Attractiveness Index– Market size, growth

rate, potential– Competition– Profitability– Government regulation

• Business Strength Index– Market share– Customer & market

knowledge– Cost efficiency– Technology

MA

RK

ET

AT

TR

AC

TIV

EN

ES

SM

arke

t siz

e, g

row

th ra

te, p

oten

tial

Lo

wM

ediu

mH

igh

Strong Medium Weak

BUSINESS STRENGTHMarket share, Customer & market knowledge, Cost efficiency, Technology

Invest & grow Selective growth Harvest

GE [McKenzie] STRATEGIC BUSINESS PLANNING MATRIX

B

C

AD

Protect Invest

Build selectively Manage for earnings

Protect earningsand refocus

Build selectively

Manage for earnings

Limited expansionor Harvest earnings

Divest or dissolve

MA

RK

ET

AT

TR

AC

TIV

EN

ES

SM

arke

t siz

e, g

row

th ra

te, p

oten

tial

Lo

wM

ediu

mH

igh

Strong Medium Weak

BUSINESS STRENGTHMarket share, Customer & market knowledge, Cost efficiency, Technology

Invest & grow Selective growth Harvest

GE [McKenzie] STRATEGIC BUSINESS PLANNING MATRIX

OPTIMIZING THE ENTERPRISE

Naphtha

Gas Oil

Ethane

Propane

Butane OlefinsPlant

Ethylene

Propylene

Butylene

Butadiene

Other

Buy

Sell

Buy

Sell

Polyethylene-many products

Polypropylene-many products

EO/EG-many products

Market/App 1

Market/App 2

Market/App 3

Market/App 1

Market/App 2

Market/App 3

Market/App 1

Market/App 2

Market/App 3

RefiningStreams

Olefins Wedge Example – Primary Optimization by Monomer

Product Line/SBU 1

Product Line/SBU 3

Product Line/SBU 2

Demand InformationVolumes / Price

Secondary

Optimization

http://www.aspentech.com/publication_files/7

The speed of information flow among trading partners along with the introduction of marketplaces has changed the nature of planning in the chemicals

industry.

• How do you know if your decisions are optimum for the enterprise not just individual business units/product lines?

• How efficient is the current process for evaluating the impact of changes in the business units on the entire enterprise?

• Are metrics that drive individual business unit profitability decisions integrated and coordinated so that the overall enterprise profitability is maximized?

Stable

Unstable

Planning for theExpected

TraditionalBusiness

Environment

Planning for theUnexpected

The Future

Static

Dyn

amic

http://www.aspentech.com/publication_files/4