The Discipline of Market Leaders

By Fred Wiersema and Mike Treacy

Chapter 1 : How to fail without trying

• Why does Casio sell a calculator cheaper than a box of cornflakes ?
• Why does it take a few minutes to rent a car at Hertz but twice the time to get a room at the Hilton?
• Why does Land's End remember your last order and family member's sizes, while America Express urges you to join after you have been a member for ten years?

The point is that different businesses focus on different aspects and that all firms need not be excellent at everything to succeed. They have to choose one dimension to excel in and be good on the other dimensions.

Strategy formulation - Michael Porter, Treacy and Wiersema

Three basic platforms for a winning strategy

• Overall Cost Leadership – eg. Walmart
• Economies of scale
• Experience curve
• Operational efficiency – invest in IT
• Other cost advantages – own raw material source
• Product Differentiation – eg. Sony
• Quality or feature based differentiation
• Perceptual differentiation
• Customer Intimacy – eg. Disney

BUSINESS STRATEGY

Steps in Setting Strategy

• What is a company's mission?
• Set goals and objectives - quantify, set time
• Design the business portfolio
• Operational details - 4P's

Strategy - basics

• Mission
• Business Objectives
• Marketing Objectives
• Marketing Strategy

Mission

• Who is the customer?
• What is the value to the customer ?
• What will our business be?
• What should our business be?

• Mission Should define
• Industry scope
• Products and services
• Competencies
• Segments
• Vertical scope
• Geographical scope

Portfolio Models

These models help a manager decide which of their existing businesses to invest more money and effort in, and which businesses to pull back from or even sell.

• Boston Consulting Group Matrix - (BCG Analysis)
• Plot Relative Market share on the X- axis and Industry growth rate on the Y-axis. – Classify businesses as Stars, Cash Cows, Dogs, and Question Marks.
• Limitations of BCG –
• Does not consider profits,
• Does not consider other competitive strengths of the firm such as marketing expertise, or quality of products, and
• Does not consider other industry factors such as nature of competition and its intensity, or market potential
• General Electric Grid
• Plot Business Strengths on the X- axis and Industry Attractiveness on the Y-axis.
• Business Strength is a weighted average index of factors such as Relative market share, quality, marketing effectiveness, brand name, and location based advantages
• Industry attractiveness is a weighted average index of factors such as Market size, growth rate, profits, number of competitors, intensity of competition etc.
• The weights are subjective based on industry norms and manager’s judgment.