Posts Tagged ‘growth strategies’

McKinsey Market Research Report: Growth Strategy Development in a Saturated Market

Thursday, November 10th, 2011

Growth strategy process has gone through a number of defining phases since the early 1900s. Business strategy development started with a focus on financial planning in the 1950s, moving to sustainable business planning in the 1960s, to strategic planning in the 1970s and eventually to a focus on strategic management in the present day. Much of growth strategy is also hinged on ideas in the 1970s, where the focus was around thinking strategically to beat competition and the business frameworks of alternative strategies, portfolio analysis, and the BCG Growth Share Matrix were actively used for the first time. Today, the strategic development theme is on integrating strategic planning and execution with a stress on the primary notions of core competencies, growth strategy planning and execution, and balance scorecard analysis. Shifts in strategic mindset represent an ever evolving, new business leaders, and emergence of disruptive technologies and changes.

Creativity is about thinking productively, not reproductively. There are numerous barriers to thinking creatively, including a dependence on what we know and repeating past experiences. Management groupthink and an avoidance with uncertainty often prevent creative thinking in the growth strategy development process. Productive thinking aims at a breakage from past experiences or procedures. To come up with creative ideas, we should evaluate an existing problem from different vantage points. Even after we come up with a creative solution, management must still look into existing alternatives that may prove viable. We must generate as many alternative approaches as we can to address an existing problem if we want to deliver an innovative recommendation. Creative thinking is not a natural process for human beings.

If you are do not have enough pricing data points, your other option is to quantitatively calculate pricing model. Depending on your product offering, only a subset of these drivers are truly relevant. Reference price effect is a common pricing driver. Evaluate the impact of each strategic price sensitivity driver. Determining a mathematical formula for pricing sensitivity is a 5 step process, beginning with deriving the key pricing sensitivity drivers. Switching costs effect typically effects consumer’s price sensitivity. Marketers have proposed 9 key drivers to price sensitivity. Perceived substitutes can vary by buyer segment, by situation, and other key drivers. Buyer’s price sensitivity for any product grows the higher the product’s price relative to complementary products. Determine those price drivers that are most relevant to your situation. The higher the offering-specific investment to the consumer applied to change the demand driver for consumption, the less price sensitive that buyer is when determining between substitute products.

In the growth strategy development process, it is noteworthy to point out that your company should conduct rigorous business market analysis. Doing proper market analysis involves the elements of supply analysis and demand analysis, the latter of which includes segmentation and segment analysis, understanding consumer buying behavior, and historical analysis. It is important to understand what makes a market unique, such as a high degree of government regulations, high competitive fragmentation, and importance of CapEx. Proper market analysis involves defining the market scope and the study scale, understanding the core industry issues, and planning for the future. There are also a number of market place evaluation factors, including market sizing, pricing changes, product development, market place characteristics, market force structure, and historical trends. There are a number of market environment evaluation characteristics, including ones that are socio-demographic, economic, legal, technological, and current trends.

Experience proves growth strategy development is a creative process. If a simple PowerPoint would do the trick in strategy development, then there would not be many opportunities for differentiating in the market. As we evaluate alternative strategic options, we must shape and adapt our conventional points of view by inventing new products. In developing a strategic response, the business often must solve never before seen problems and connect unconnected dots. When we begin the growth strategy development process, management must generate insights, which involve making sense of abstruse facts, seeing beyond the facts and generating creative conclusions.

Deloitte Corporate Growth Strategy Presentation Knowing the Market Drivers

Monday, October 31st, 2011

For traditional growth strategy thinking, many people rely on the time-tested business framework Porter’s Five Forces, developed by Porter. In Porter’s Five Forces, we look into various industry forces that affect any vertical, which include internal rivalry, threat of new entrants, customer power, supplier negotiation power, and threat of substitutive and complementary products. By evaluating these industry forces, an organization can decide on its competitive strategy, which falls into either one of four buckets: cost leadership, differentiation strategy, cost focus, or differentiation focus.

Many popular approaches to growth are used, which can be bucketized the two buckets of expanding existing business scope and increasing value from current revenue streams. To build the value from current business, a business can improve upon its value proposition, improve customer relationship management, optimize pricing, enter new markets with its existing offerings, and optimize its product mix. To expand the business scope, a company can expand into new segments, expand into new categories, create new offerings, develop new brands, launch new formats and distribution channels, and expand regionally.

In developing a business case template , there are a number of important goals. You should ensure your resources are allocated to the areas of highest leverage. You should create the rational foundation for making change necessary. You should establish the full range of benefits to be achieved through implementation activities. You should provide the basis for calculating the return on investment and tracking immediate benefits to the net profit during the implementation stage. You should measure major leverage opportunities for the business.

The Consolidation Curve is often a framework in line with the principle that all industrial sectors consolidate and adhere to a similar course through the Four phases of: Opening, Scale, Focus, and Balance & Alliance. The length of the curve is different from industry to market. Any important tactical and also functional move must be examined intended for the industry’s stage in the Consolidation Endgame Curve. With having said that, it generally continues 20-25 years. Moreover, endgames positioning has the benefit of a guide for portfolio optimization. Employing the Endgame Curve as guidance, a business can improve its consolidation techniques and help merger integrations. A niche competitor can also determine the appropriate niche strategy to use and when is the better time to be acquired. As an illustration, the auto sector has existed for 100+ years and only at the end of stage 2 (Scale). This particular framework is based on a study of 25,000 businesses around the world, which represents 98% of the world wide market cap. The Endgame Curve shows that merger pursuits plus consolidation developments can be estimated.

Any great consulting firm has a toolbox of standard and modern business frameworks. Over the past 50 years, top consulting firms, including McKinsey Quarterly and Booz & Co, have structured problems into frameworks that are pervasively used in the corporate world today. Firms and strategy consultants use these frameworks to look at, analyze, and think about an eclectic assortment of business issues, that take place in different business situations. Many such frameworks and business notions hinge on the original thought leadership of Michael Porter, the founder of contemporary business strategy.

When a engagement has been backed by the business case ( both financially and non-financially) and is approved by the management team, the business case template is then continuously maintained and adjusted to monitor the engagement’s progress compared with the initial financial metrics and keyassumptions. This powerpoint then becomes a working document used during the initiative tracking process. Developing a business case is a thorough process, requiring both data-driven and qualitative research and analysis.