Chapter Five
Concepts and Context of Business Strategy
Authors’ Comments
This chapter provides a look at corporate and business strategy. Our purpose in doing
this was to give the business marketer a sense of the internal company context that
he would have to work within. Concepts of strategy continue to evolve. The
business-to-business marketer will be called upon to contribute to and participate in
corporate and business unit strategy development. An understanding of some of the
key concepts concerning the nature of strategy and strategy development will help the
marketer be influential in these planning efforts.
Key ideas that we present are, first, the current context of strategy making, a la
Hamel and Prahalad–competing by changing the rules and by development of
differentiation through a focus on core competencies−doing what you do well. We also
revisit the familiar growth-share matrix and strength-attractiveness matrix, show how
they remain useful and suggest how the might be updated to reflect current ideas on
Opening Vignette
Siemens Changes Its Strategy
Through the past decade, Siemens has had its share of ups and downs. The vignette
describes former CEO Heinrich von Pierer’s efforts to restructure the company,
focusing on new technologies where Siemens could see growth while maintaining a
presence in “stodgy” markets that other conglomerates were abandoning.
Chapter 5: Concepts and Context of Business Strategy 2
Siemens kept its power generation and locomotive businesses, though short-term
prospects were not inspiring. Eventually, energy demand would outstrip the world’s
Learning Objective
Understand the value of strategy and its role in a complex
organization.
The chapter starts with a discussion of mission, goals, objectives, strategies and
tactics. Students have a natural tendency to think tactically, though they may
not always understand the distinctions.
In the discussion of what “strategy” and “planning” are, consider an emphasis
A discussion of how each succeeding phase−goals, objectives, strategies and
tactics must support the mission is probably appropriate. Ideally, every
organization wants all contributors pulling in the same direction. PowerPoint 5.2
demonstrates this progression, each step increasing specificity in development
Chapter 5: Concepts and Context of Business Strategy 3
Learning Objective
Understand the planning process for defining and executing business
strategy.
Four Critical Elements of Strategy Development (PowerPoint 5.4)
1. Set Goals and Objectives
Goals are not time-limited.
Objectives are specific targets, expressed in quantifiable terms.
2. Understand the Environment in Which the Business Operates
Learning Objective
Relate mission, goals and objectives of an organization to the process
of developing strategy.
Strategy Making and Strategy Management Processes
While we resist “lists” of things to do to achieve a particular business
function, the Strategic Management Process, Exhibit 5-3 (PowerPoint 5.5) is
presented as a template rather than a recipe. Our research has led us to
believe that, with some adaptation, the methodology has changed only
modestly.
Assuming a mission is clearly understood: A good mission statement should
assist all members of the organization to understand “where they are going.”
(“what does the company want to be when it grows up?!”)
Chapter 5: Concepts and Context of Business Strategy 4
A Critique of the Model
Time Consuming, but forces examination of what is out there and what
Learning Objectives
Develop an understanding of how an entrepreneurial approach to
marketing is not limited to small, start-up organizations.
Be able to identify ways in which a marketing organization can be
made more entrepreneurially oriented.
Key Strategy Concepts
Seek to establish a fit between the business environment and the
strategy. (PowerPoint 5.6)
Summary of Strategy Concepts (PowerPoint 5.8)
• Change in customers, channels and competitors interact to create
Chapter 5: Concepts and Context of Business Strategy 5
Consider whether to discuss Market Ownership now or after the discussion of
matrix analysis tools. Many of the tools define “winning” or “success” as a large
market share. Market Ownership is not market share. The key may be whether
or not you believe that students will pick up on the tools as inconsistent with
the “ownership” philosophy or whether you use the discussion to demonstrate
Learning Objective
Be able to demonstrate an understanding of different strategy tools
(growth-share and business-attractiveness matrices and balanced
scorecards).
You may want to tailor the content of this discussion to the character of
industry in your region. Here in Silicon Valley, very large multi-division
companies participating in different markets are not common. Students are
most familiar with startups, small companies, and/or single product/product line
organizations. The question of applicability to growth industries versus mature
industries often arises. I have found that there are three key factors in the
development of this discussion:
1. Point out that matrix analysis is a resource allocation tool and does
not fit well with single-product single-market companies.
2. Use a multinational, multi-business, diverse company as an example,
Chapter 5: Concepts and Context of Business Strategy 6
Resource Allocation (PowerPoint 5.9)
Includes infrastructure, personnel, finances, technologies, relationships
and so on.
Business Portfolio and Strategic Business Unit Management
Consider a discussion of personal investment portfolios, education
portfolios, etc., to develop a sense of competencies related to each and
what is obtainable and what is not.
A portfolio is a set of businesses and products that make up the firm.
manufacturing as a parameter to define SBUs?
The Boston Consulting Group Growth-Share Matrix
Exhibit 5-5 and PowerPoint 5.10.
Good analysis of existing businesses
Star: (PowerPoint 5.11)
High growth, High share
Chapter 5: Concepts and Context of Business Strategy 7
Cash Cows: (PowerPoint 5.12)
Low growth, High share
Established, successful, invest enough to hold
market
Cash generators
Harvest to increase short term cash
Dogs: (PowerPoint 5.14)
Low growth, Low share
May be self-supporting
Growth-Share Matrix Relationship to the Product Life Cycle
As noted in earlier, the PLC can be an effective anchor to relate various
marketing tools. Continuing this approach, develop the relationship between
the BCGs matrix and the PLC.
PowerPoint 5.15 shows the PLC with the related positioning of growth–
share elements.
• Product Development/Introduction Stage of PLC = Question Mark.
Chapter 5: Concepts and Context of Business Strategy 8
investment is needed.
• Maturity Stage of PLC = Cash Cow.
Note that profits often peak at the end of the growth stage, and
investment needs are substantially reduced. The offering begins to
develop excess greater cash reserves.
between market share driven companies and market owners.
• Decline Stage of PLC = Dog.
While at this point, the relationship may be self-evident, the opportunity
exists to point out one of the weaknesses of the Growth-Share matrix.
(See sidebar in the text, “General Electric Leaves Small Appliance
Business.”)
Learning Objective
Recognize what it means to create a strategy that “changes the rules”
for a market or for an industry.
An Entrepreneurial Approach
The Organization Mission
Fostering Ownership
Changing the Rules
Consider an emphasis on the “whole organization” proceeding toward
The Strategy of Market Ownership
Depending on the arrangement of your course, you may find it more
appropriate to hold off on this discussion of Market Ownership until Chapter 11,
Chapter 5: Concepts and Context of Business Strategy 9
1. Define: Market owners define a market niche as theirs and
work toward dominating it. Their brand is immediately identified
3. Collaborate: Market owners benefit from other organizations
developing ancillary products and markets that serve the owners’
customer base. Third parties define their products as compatible
with market owner. The owner thus gains insight to other points
of view about its market.
Consider a discussion of the fluidity of Market Ownership as related
evolving markets and customer needs–reinforced by the PLC and TALC.
The Balanced Scorecard
Intended to not rely solely on quantifiable factors; ROI, market share,
etc.
Focus on forward-looking measures in four core areas: (PowerPoint
5.21)
• Financial Performance Perspective
Learning Objective
Understand the importance of agility, adaptability and alignment in
pursuing integrated value network or supply chain strategies.
Special Issues In Business Strategy (PowerPoint 5.22)
• Strategy Implications of Value Networks and Integrated Supply Chains
Chapter 5: Concepts and Context of Business Strategy 10
(PowerPoint 5.23)
Successful strategies hinge on developing a portfolio of core
competencies, including changing strategies and models rapidly
Strategy Development and the Internet (PowerPoint 5.24)
The Internet can be used to
o Manage customer relationships
Key Terms
balanced scorecard
business model
business portfolio
core competencies
Answers to Questions for Review and Discussion
Chapter 5: Concepts and Context of Business Strategy 11
1. What is the difference between corporate strategy and marketing strategy? What
are the similarities?
Differences:
concepts and tools
2. What is the process by which marketing strategy ought to be formulated?
Formulation differences:
3. How can a company mission statement be made to provide motivation and
guidance for a company, rather than just giving lip service to a set of unrealistic
values and goals?
A company mission statement can provide motivation and guidance rather than simple lip
4. Suppose you are working on constructing a portfolio of businesses for your
company to pursue in the next three to five years. What makes for a good
portfolio of businesses? What makes for a good portfolio of products?
A good business portfolio will identify current strong performers as well as future winners within
Chapter 5: Concepts and Context of Business Strategy 12
5. Is the balanced scorecard consistent with the strategic management process
outlined in Exhibit 5-3? Explain any inconsistencies.
The balanced scorecard is consistent with the strategic management process, but it adds in
6. Suppose you are involved in starting a new business in a fast-changing
environment, such as RFID products (radio frequency identification). To what
extent would the strategic management process be useful in planning strategy for
such a new business?
The strategic management process will be useful in planning strategy for a new business in that
7. Suppose a company follows the strategic management process with a degree of
diligence. Yet, the company executives recognize that the business environment is
rapidly changing. How might such a company adapt the strategic management
process for such an uncertain environment?
First, management must recognize that everything changes. The strategic management
8. To what extent are entrepreneurial marketing and the strategic management
process consistent? Inconsistent? Explain.
Entrepreneurial marketing is consistent with the strategic management process in that a clear
Chapter 5: Concepts and Context of Business Strategy 13
9. Discuss the relationship between market ownership, value networks and the trend
toward integrated supply chains in today’s market.
Market ownership gives the owner a great deal of leverage within the value network. The
market owner can then obtain cooperation that enhances value for customers and directs much
10. Discuss typical planning cycles other than the often-used annual cycle. How
should rapid innovation and fast-paced change impact the frequency and duration
of strategy planning?
Planning cycles, to be effective and efficient, should be better tuned to the uniqueness of any
specific market. Rapid innovation and fast-paced change in highly competitive markets that are
11. The chapter related the BCG Growth-Share Matrix to the Product Life Cycle. Other
than the pace of changes in the market, what are the similarities in the marketing
mix between stars/the growth stage, cash cows/maturity, question
marks/introduction and dogs/decline?
Product Development/Introduction Stage of PLC = Question Mark
o
Low or non-existent sales
Chapter 5: Concepts and Context of Business Strategy 14
12. How can moving from a question mark to a star (in the counterclockwise evolution
around the Growth-Share Matrix) be compared to crossing the chasm?
Many factors changes when an offering makes this transition, whether the offering is a single
product from a startup company or a new product from an established organization.