Chapter 2 Strategic Market Planning in High-Tech Firms

Chapter 2 Strategic Market Planning in High-Tech Firms

Application Questions

1. Can a strategic planning system, such as Medtronic’s, be a source of competitive advantage? Explain.

Yes. In this case, the competitive advantage would be created by a competency, as opposed to a tangible asset. Medtronic's planning process includes an environmental assessment, an assessment of potentially disruptive technologies that may be on the horizon, an identification of key macro business trends, and a financial outlook. This process is valuable in that it provides comprehensive picture of the market in which Medtronic competes. By testing the plan against Medtronic's vision statement, management ensures that Medtronic's strategic activities will remain focused on areas where Medtronic has the capability to succeed. While the basics of this planning system might not be unique, it very difficult for competitors to imitate both because of the experience that Medtronic has in developing and refining the system in all its details and because the process does not lend itself to observation.

2. What configuration of resources (i.e., tangible assets, intangible assets, competencies) are necessary for a Fast Follower, such as Microsoft, to be successful?

The Fast Follower, as a creative imitator, must be adept at monitoring the Product Leader's moves and assessing the reasons why it has succeeded or failed. The Fast Follower must also clearly understand which market segments the Product Leader has targeted and which it has neglected. The Fast Follower also must be able to evaluate why customers like or dislike the Product Leader's offering. Thus, the Fast Follower must have both a strong customer orientation and a strong competitor orientation. The Fast Follower must possess the processes, capabilities, and infrastructure that enable it to rapidly develop, produce, and bring to market an improved offering, hopefully at a lower cost.

3. Write a “Resonating Focus” value proposition for the Nintendo Wii.

This value proposition addresses the buyer’s key needs by addressing the few elements that matter most to buyers in the target market and documenting the worth of the superiority.

The Wii’s revolutionary controller design offers unique motion-sensitive game play, its built-in Wi-Fi delivers free online services and game play, while its Virtual Console has major nostalgia appeal. Compared to the Xbox 360 ($299.99) and the PS3 ($399.99), at $249.99 the Wii also is the most affordable home game console.

Reference:

http://reviews.cnet.com/consoles/nintendo-wii/4505-10109_7-31355104.html

4. Wired magazine recently named Netflix as one of the 25 “Most Innovative Companies in the World.” Clearly, Netflix’s early success was largely based on first-mover advantage as a Product Leader. However, Netflix launched its service in 1999. What configuration of strategies (Product Leader, Fast Follower, Customer Intimacy, Operational Excellence) has enabled Netflix to maintain its position.

Netflix, as a Product Leader, invented online DVD rental in 1999. Since then, their subscriber base has grown at a compound annual rate of 70 percent. Netflix has continued with its Product Leader strategy by, for example, providing streaming movies via the internet at no extra cost to subscribers. Netflix incorporates elements of the Customer Intimacy strategy by offering more than 100,000 titles on DVD and a separate library of over 12,000 choices instantly streamed to the consumer's computer or TV. Netflix also has developed proprietary software that offers personal movie recommendation based on each subscribers individual movie preferences. Netflix also practices Operational Excellence by providing over 95% of its subscribers with generally one-day service. Subscribers love the Netflix experience as shown by its having been rated Number 1 in retail customer satisfaction in independent surveys by Nielsen Online and other rating agencies.

References: Mason, A. Mail Order Movies. Equities. September 2008

King, D. Netflix Subs Grow 25%. Video Business. July 2008

http://www.netflix.com/MediaCenter?id=5379#about

5. Advances in information technology have the potential to transform how businesses organize to innovate and create customer value. Read “Virtualizing the Corporation”, by Wim Elfrink, Chief Globalization Officer, Cisco (http://tools.cisco.com/dlls/tln/media/perspective/2008/wim-elfrink-01/Virtualizing-the-Corporation.pdf) and compare the ideas in that article to the concepts from this chapter. Where are they consistent? Inconsistent?

Consistent

Bulleted points are from the chapter, the other material is from the article:

· Today’s innovative organizations have a multi-dimensional focus on customers, flexibility, and speed.

· There is a shift away from organizing around products to organizing around customers or customer groups.

Offices will be able to tap global talent and react to customers and changing environments quickly and more effectively. Employees in one office can focus on excelling at a select task area. They will understand their customers intimately and produce customized, and hence more competitive, offerings for them.

· The most successful innovative firms utilize relatively few formal rules and procedures, and delegate—or decentralize--decision-making authority.

The increasing pervasiveness of broadband networks have facilitated the slicing and dispatching of corporate functions around the globe. In the future, the network of ubiquitous devices, collaborative technologies, and omnipresent and enormous bandwidth will be so strong and seamless that thousands of geographically decentralized offices and people will actually feel and act like one, dense, centralized entity.

· Less bureaucracy means improved horizontal communication, which in turn, leads to more effective information sharing.

Corporations that couple these technological advancements with the re-thinking and reorganizing of various internal structures will be able to enjoy the benefits of real-life, in-person collaboration and knowledge-sharing between geographically dispersed offices and people.

Inconsistent

While this way of organizing will require substantial investments in information technology, it will not be particularly difficult for larger, well-established competitors to imitate. Thus, while this way of organizing may be a source of temporary competitive advantage will not be a source of sustainable competitive advantage. However, this way of organizing will not be difficult to imitate.

6. Develop a Marketing Dashboard comprised of 10-15 key metrics for a Product Leader such as W.L. Gore.

Metrics for a Product Leader might include:

1. % of sales from new products

2. % of profits from new products

3. Revenue growth due to new products or services

4. # of employee suggestions

5. # of customer suggestions

6. New product success rate

7. % of sales from new customers

8. Number of product concepts in the pipeline

9. Time from concept to market

10. Adherence to the development budget

11. Number of formal customer visits made

12. Average number of new product introductions per year over a 3 year period

13. Average number of patents granted per year over a 3 year period

14. Customer perceptions of meaningfulness and novelty

15. Customer satisfaction with new products or services

16. Brand awareness

17. R&D spending as % of sales