Transcript MBA Prequel & Overview - University of Mississippi

MBA Prequel & Overview
* The Modeling Approach
* ‘Deliverables’ Discussion
Objectives of this Presentation
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Understand Industry Analysis
Understand Marketing Analysis
Understand Marketing Plan
Understand Cash Budget
Understand Pro Forma Financials
• Master the concept of ‘the environment’
• Understand ‘multiple models’ rationale
• Understand ‘framing’ and ‘chunking’
• Understand true marketing complexity
Master the concept
of ‘the environment’
Suggested in DeThomas textbook: (Covered later)
Industry Analysis (p. 45)
• Industry, market and competitive environment
• Economic environment
• Technological environment
• Social, legal, and political environment
• Demographic environment
Market Analysis & Sales Forecast (p. 65)
• Geographic boundaries
• Economic, competitive and social factors
• Firm’s market niche
• Target market specific characteristics for offering
• Sales potential
• Competitive firms & offerings
Master the concept
of ‘the environment’
• Specific
– Customer
– Competitors
– Channels (p. 109-110)
}
. . . . . . . . External
– Compliance: Legal/Regulatory . . .
Rule Framework
– Company/Firm . . . . . . . . . . . . . .
Internal
• General
– Technology . . . . . . Every digital/other advantage
– Economy . . . . . . .
Up the sand dune, or down?
– Ethics . . . . . . . . . . What would Mama say?
D
U
E
Secondary/Own Financials
replicate, create, emulate
Observed/Own Operations
replicate, create, emulate
Environment – Technical, Economic, Regulatory, Ethical, Users, Buyers,
Try-ers, Sales Data, Markets (Market Analysis), Segments/Niches, etc….
D
I
L
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G
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N
C
E
Your Industry
Your
Firm
Indirect
Competitors
Observed/Own Strategy
(Industry Analysis)
Direct
Competitors
Substitute
Industry
replicate, create, emulate (intended behaviors)
D
U
E
Secondary/Own Financials
replicate, create, emulate
Observed/Own Operations
replicate, create, emulate
Environment – Technical, Economic, Regulatory, Ethical, Users, Buyers,
Try-ers, Sales Data, Markets (Market Analysis), Segments/Niches, etc….
D
I
L
I
G
E
N
C
E
Your Industry
‘Creative
Destruction’
Your
Firm
(Industry Analysis)
Direct
Competitors
- Schumpeter
Indirect
Competitors
Observed/Own Strategy
Substitute
Industry
replicate, create, emulate (intended behaviors)
‘Forty-Second’ Boyd
John R. Boyd in the early 1950s was a
young U.S. Air Force fighter pilot at
Nellis Air Force Base NV – a figher pilot
cocky even by fighter-pilot standards.
He regularly issued a challenge to all
comers: “You get on my six and I’ll be
on your tail (he didn’t say ‘tail’) in forty
seconds or I’ll give you $40!”
Using the F-86 (later the F-100) he was
always on their ‘tail’ within 40 seconds.
It is said that he never lost. His ability
to win any dogfight in 40 seconds got
him his early nickname – ‘Forty-Second’
Boyd.
Cites from this book and from Hammond.
Details available – some editing done
‘Forty-Second’ Boyd
John R. Boyd in the early 1950s was a
young U.S. Air Force fighter pilot at
Nellis Air Force Base NV – a figher pilot
cocky even by fighter-pilot standards.
He regularly issued a challenge to all
comers: “You get on my six and I’ll be
on your tail (he didn’t say ‘tail’) in forty
seconds or I’ll give you $40!”
Using the F-86 (later the F-100) he was
always on their ‘tail’ within 40 seconds.
It is said that he never lost. His ability
to win any dogfight in 40 seconds got
him his early nickname – ‘Forty-Second’
Boyd.
Thrust - Drag
Most impressive:
* Velocity = Ps
Weight
or
Energy-Maneuverability
Boyd applied his intuitive understanding of energy maneuverability to the
study of aeronautics. In the 1970s, he helped design and champion the F-16,
an aluminum manifestation of everything he knew about competition.
Then he focused his tenacious intellect on something grander, an expression
of agility that, for him and others, became a consuming passion: OODA loop.
Observation; orientation; decision; action - On the face of it, Boyd's loop is a
simple reckoning of how human beings make tactical decisions. But it's also an
elegant framework for creating competitive advantage.
Operating "inside" an adversary's OODA loop -- that is, acting quickly to out-think
and out-maneuver rivals -- will, Boyd wrote, "make us appear ambiguous, [and]
thereby generate confusion and disorder.“
The product of a singular, half-century-long journey through the realms of
science,history, and moral philosophy, Boyd's ideas both augment and
challenge conventional thinking about organizations and conflict.
Boyd himself, a cigar-smoking maverick, enjoyed distinctive unpopularity in official
Pentagon circles. But even among critics, his OODA loop was much harder to
dismiss.
The concept is just as powerful when applied to business. The convergence of
rapidly globalizing competition, real-time communication, and smarter information
technology has led to a reinvention of the meaning and practice of strategy.
What do you do in the semiconductor industry and other sectors where the time
advantage of proprietary technology is collapsing even as the cost of developing
it explodes?
Companies in manufacturing, telecommunications, retail – in nearly every business
– are discovering that fashion, fad, and fickle customers require constant
vigilance and adjustment. We operate in a video-game world where time is
compressing, information goes everywhere, and the ‘Rules of the Game’
change abruptly and continuously.
Creative Destruction
Destruction?
• Yes, even demolition and disassembly
• Disintermediation and reintermediation
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Child of the Internet
Processes revolutionized
Competing on time
Flanking
Cheng / Ch’i
Demolition/destruction is not the exception
Wrecking the market is every entrepreneurs goal
Joseph Schumpeter
…and … John Boyd
We are having a terrible time traveling in snow – what is available as a
vehicle to accomplish this travel from ANY SOURCE?
Let’s mentally PILE all the parts together after taking everything apart
?
Plus
others?
John Boyd: ‘Thought Experiment’
The outcome of this analysis and synthesis was very innovative:
Originally conceived by Karl Eliason of Wisconsin in 1924 in a toboggan form . . .
John Boyd: ‘Thought Experiment’
Then the snowmobile was produced by Joseph-Armand
Bombardier of Quebec in 1958 after being redesigned
and re-patented into the form we all know today.
V-22 Osprey Tilt Rotor in Hovering Flight
Helicopter, STOL, or Airplane….?
Yes
Joint effort: Boeing and Bell Helicopter Textron, Inc.
Hybrid
Satellite Imagery
and Analysis
Knowledge of tractor
position ‘to the foot’
What about ‘Farming by the Foot?’
Mississippi Delta MSU Test Site – Ed
Hood farm
Geographic Positioning System +
Geographic Information System +
Satellite Imagery + Modified Farm
Equipment
Combinations of hybrid technologies
Much less cost with more production
and hugely friendly to River and Gulf
Toasted Sliced Bread
Innovation can be mundane, but
still exciting. Bread was not
very ‘standard’ for many years,
then it was baked to size. But it
was sold by the loaf because
slicing the loaf ahead of time
caused it to dry out very quickly.
The airtight wrapping changed
that and it could be sliced. Soon
Wonder Bread led the way.
An inventor had created the
toaster but it was not selling
because inconsistent slicing by
the preparer caused a hassle.
Standard bread and slices
solved the problem. Sliced
bread met the toaster.
Voila!
‘Cell Phones’ and ‘Sat Com’
I am not going to insult your intelligence by explaining sat com and the cell phone.
Technologies are rapidly evolving, a better word may be ‘revolving,’ honoring an
evolution-revolution contrast! BUT…FYI it has been interesting…
Iridium has over 66 satellites in orbit and began service in late
1998. However, due to poor marketing, high charges, late
delivery of workable phones, gigantic debt load, spread of
terrestrial cell phone systems, etc., the company attracted only
63 thousand subscribers instead of the 100s of thousands
expected by mid-1999. It declared bankruptcy and even
planned to begin de-orbiting of the satellites.
In November 2000, however, an investor group purchased the
Iridium assets for $25 million. It received a 2 year contract with
the US Dept. of Defense to supply communications services.
Without a $4 billion debt to pay off, the new company, called
Iridium Satellite, only had to attract another 30k of subscribers
to break even.
Iridium
Globalstar
Thuraya
The company reported in June of 2005 that it was profitable
and had over 127,000 users. The company has said that it
intends to apply for a FCC license for a 96 satellite system to
replace the current constellation when it is expected to start
failing around 2010. They expect to fill the capacity of the
current system (guessing around 2 or 3 million users) before
then.
D
U
E
Secondary/Own Financials
replicate, create, emulate
Observed/Own Operations
replicate, create, emulate
Environment – Technical, Economic, Regulatory, Ethical, Users, Buyers,
Try-ers, Sales Data, Markets (Market Analysis), Segments/Niches, etc….
D
I
L
I
G
E
N
C
E
Your Industry
‘Creative
Destruction’
Your
Firm
(Industry Analysis)
Direct
Competitors
- Schumpeter
Indirect
Competitors
Observed/Own Strategy
Substitute
Industry
replicate, create, emulate (intended behaviors)
D
U
E
Secondary/Own Financials
replicate, create, emulate
Observed/Own Operations
replicate, create, emulate
Environment – Technical, Economic, Regulatory, Ethical, Users, Buyers,
Try-ers, Sales Data, Markets (Market Analysis), Segments/Niches, etc….
D
I
L
I
G
E
N
C
E
Your Industry
‘Creative
Destruction’
Your
Firm
(Industry Analysis)
Direct
Competitors
- Schumpeter
Indirect
Competitors
Observed/Own Strategy
Substitute
Industry
replicate, create, emulate (intended behaviors)
Discussion on Models
• Models extract key attributes of reality
– Model attributes are seldom wholly sufficient in representing reality
– Some model attributes may be erroneously included that meet iia criteria
– With proper variables included models behave ‘properly’
• Models create ‘framing’ so we can think and reason
– Frames are mental structures permitting human understanding
– Marketing ‘framing’ is an application of cognitive science
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Unconscious activation links to the ‘sensible’ and excludes ‘nonsense’
Frames define ‘common sense;’ what fits the frame ‘makes sense’
Repetition embeds frames in the brain and they are then very persistent
‘Frames’ facilitate effectiveness of ‘spreading activation’
– Models also are ‘chunks’ and often contain ‘chunks’ (composite parts)
– ‘Chunks’ (e.g., Segment) are how brain storage and retrieval works
– ‘Frames’ (e.g., Consumer Product Preference Space) – organize the
associated ‘chunks’ into a consistent and coherent assemblage; may be a
‘chunk’ in a larger assemblage.
–
Ref: Goffman, E. Frame Analysis. New York: Harper, 1974; Lakoff, G. Thinking Points. New York: Farrar, Straus, and Giroux, 2006
What Models ‘Speak’ for Marketing?
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Due Diligence Model
Demand (Q = ∫ (P, X1, X2, …, Xn) or Y = ∫ (β1Pi + β2Xj + e)
Kartajaya Triune Model
OODA Model
Person-Situation Segmentation Model
Fundamental Model
CPPS Model
– Segmentation
– Positioning-Differentiation
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PLC Model
Mental Attitude Model
Value Model
Diffusion of Innovation-Adaptation Model
Taguchi Loss Function Model
QFD Model
Tactical-Strategic Matrix
ИТД (and Хорошо)
Example: CPPS ‘Frame,’ Segment ‘Chunk’
A ‘high end’ segment
willing to pay for quick
relief for intense pain
$5.00/C
X = $4.75/C
Viewed from here
IP
60 minutes
5 minutes
Desired speed of relief
X = 12.3 min
IP
QFD required for formulation
$ .50/C
Cost per 100 tablets
Viewed from here
The Fundamental ‘Model’
Value culture
STRATEGY
Build FOCUS and
“Mind Share”
Segmentation
Macro/Micro
Methodology
Targeting
Size
Dynamic
Leverage
Positioning
Reason for Being
Offering
Loyalty/Love
VISION
Value creation and destruction
OPERATIONS
Build TRUST and
“Access Share”
IT/IM
Research/DD
Distribution/Logistics
VALUE
Build FRANCHISE
and “Heart Share”
Process
Service
Branding
Value Indicator
Belief/Behavior
TACTICS
Build CAPABILITY and
“Market Share”
Five P’s (Concept/Creativity)
Product/Promo/Price
Place/People
Selling (Capture)
B2B (Buyer-Seller/Promo)
B2C (Advertising)
C2C (Buzz/Virus/Referral)
Differentiation
Content (What)
Context (How)
Infrastructure (Enables)
Custom/Habituation
The Fundamental ‘Model’
Value culture
STRATEGY
Build FOCUS and
“Mind Share”
Segmentation
Macro/Micro
Methodology
Targeting
Size
Dynamic
Leverage
Positioning
Reason for Being
Offering
Loyalty/Love
VISION
Value creation and destruction
OPERATIONS
Build TRUST and
“Access Share”
IT/IM
Research/DD
Distribution/Logistics
VALUE
Build FRANCHISE
and “Heart Share”
Process
Service
Branding
Value Indicator
Belief/Behavior
TACTICS
Build CAPABILITY and
“Market Share”
Five P’s (Concept/Creativity)
Product/Promo/Price
Place/People
Selling (Capture)
B2B (Buyer-Seller/Promo)
B2C (Advertising)
C2C (Buzz/Virus/Referral)
Differentiation
Content (What)
Context (How)
Infrastructure (Enables)
Custom/Habituation
The Fundamental ‘Model’
Value culture
STRATEGY
Build FOCUS and
“Mind Share”
Segmentation
Macro/Micro
Methodology
Targeting
Size
Dynamic
Leverage
Positioning
Reason for Being
Offering
Loyalty/Love
VISION
Value creation and destruction
OPERATIONS
Build TRUST and
“Access Share”
IT/IM
Research/DD
Distribution/Logistics
VALUE
Build FRANCHISE
and “Heart Share”
Process
Service
Branding
Value Indicator
Belief/Behavior
TACTICS
Build CAPABILITY and
“Market Share”
Five P’s (Concept/Creativity)
Product/Promo/Price
Place/People
Selling (Capture)
B2B (Buyer-Seller/Promo)
B2C (Advertising)
C2C (Buzz/Virus/Referral)
Differentiation
Content (What)
Context (How)
Infrastructure (Enables)
Custom/Habituation
The Fundamental ‘Model’
Value culture
STRATEGY
Build FOCUS and
“Mind Share”
Segmentation
Macro/Micro
Methodology
Targeting
Size
Dynamic
Leverage
Positioning
Reason for Being
Offering
Loyalty/Love
VISION
Value creation and destruction
OPERATIONS
Build TRUST and
“Access Share”
IT/IM
Research/DD
Distribution/Logistics
VALUE
Build FRANCHISE
and “Heart Share”
Process
Service
Branding
Value Indicator
Belief/Behavior
TACTICS
Build CAPABILITY and
“Market Share”
Five P’s (Concept/Creativity)
Product/Promo/Price
Place/People
Selling (Capture)
B2B (Buyer-Seller/Promo)
B2C (Advertising)
C2C (Buzz/Virus/Referral)
Differentiation
Content (What)
Context (How)
Infrastructure (Enables)
Custom/Habituation
The Fundamental ‘Model’
Value culture
STRATEGY
Build FOCUS and
“Mind Share”
Segmentation
Macro/Micro
Methodology
Targeting
Size
Dynamic
Leverage
Positioning
Reason for Being
Offering
Loyalty/Love
VISION
Value creation and destruction
OPERATIONS
Build TRUST and
“Access Share”
IT/IM
Research/DD
Distribution/Logistics
VALUE
Build FRANCHISE
and “Heart Share”
Process
Service
Branding
Value Indicator
Belief/Behavior
TACTICS
Build CAPABILITY and
“Market Share”
Five P’s (Concept/Creativity)
Product/Promo/Price
Place/People
Selling (Capture)
B2B (Buyer-Seller/Promo)
B2C (Advertising)
C2C (Buzz/Virus/Referral)
Differentiation
Content (What)
Context (How)
Infrastructure (Enables)
Custom/Habituation
Value can be expressed several ways. Three of the clearest are:
Value =
Benefits (total ‘get)
---------Price (total ‘give’)
… or more specifically,
Value =
Fb + Eb
--------P + Oe
… where,
Fb =
Eb =
Functional benefits (utility)
Emotional benefits (psychology)
P =
Oe =
Price (charged) for acquisition
Other expenses/costs of acquisition … and finally
Value
=
You answered my question!
Solved my problem!
How YOU Add Value
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Exceptional due diligence in your work
Write a clear, concise, complete plan
Incorporate all component parts required
Professional format and organization
Establish a dialogue to avoid missteps
Provide sources on everything not your own
Work for a quality result not a grade (attitude)
Be an exemplary group member
Exhibit professional, quality behavior
Demand professional, quality behavior
Deliverables
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Industry analysis (IA) (pp. 45-64)
Market analysis (MA) (pp.65-82)
Sales forecast (SF) (pp.82-96)
Marketing plan (MP) (pp. 97-126)
Cash budget (CB) (pp. 178-184)
Pro-forma financials (PFF) (pp. 184-215)
and other credible sources may be used for these purposes, but
please discuss substantial deviations in content or format!
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
IA - Suggestions
• Characteristic attributes and processes of the industry
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Conceptual and geographic boundaries – What business are we in?
Customer attributes and characteristics
Competitive intelligence
Source availability, credibility, reliability, validity
Offerings, offering categories, and detailed market share rationales
• Firm-affecting drivers in the industry (search for better schema)
– Economic, competitive, social, legal, and political
– Distributive, logistical, technological, ethical, regulatory
– Trends toward clusters, alliances, contractual relationships
• Revenues and Profitability
– History in industry overall and in the ‘most-like-us’ firms
– Factors driving historical performance
– Environmental factor analysis of future trends and possibilities
• Intelligence-based (Duly Diligent) Strategic Intent
– Role of timing and location/place in market success
– Specific documented opportunities presenting
– Linkage between intended behaviors (long-term) and anticipated revenues
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
MA - Suggestions
• Characteristic attributes and processes of the market
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Conceptual and geographic boundaries and successful firm congruence
Target market attributes and segments and niches of choice
Competitive intelligence including their scope, behaviors, and outcomes
Source availability, credibility, reliability, validity
Offerings, offering categories, and detailed market share rationales
• Key influences on firms in the market (search for better schema)
– Economic, competitive, social, legal, and political
– Distributive, logistical, technological, ethical, regulatory, and cooperative
• Revenues and profitability specific to the targeted market
– History in market with the ‘most-like-us’ firms
– Factors driving historical performance of like firms in market
– Environmental factor analysis of future market trends and possibilities
• Intelligence-based (Duly Diligent) Strategic Market Intent
– Role of timing and location/place in target market success
– Specific documented opportunities presenting in the targeted market
– Linkage between intended market behaviors and long-term revenues
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
MP - Suggestions
• Description of the targeted segments, niches, and offerings that ‘FIT’
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Formulate clear vision and mission
Encompass targeted offering mix with goals and strategic initiatives
Strategic commitment to definable, accessible customer base with means
Document target market attributes of segments and niches of choice
Create supported, persuasive, credible customer base positioning
Competitive intelligence including their scope, behaviors, and outcomes
Document all source availability, credibility, reliability, validity for ‘revisit’
• Key influences on firms in the target market (search for better schema)
– ‘Situational Review’ incorporating all deliverables
– Economic, competitive, social, legal, and political
– Distributive, logistical, technological, ethical, regulatory, and cooperative
MP – Suggestions
(Continued)
• Specific targeted market opportunities
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History in target or similar markets of the ‘most-like-us’ firms
Factors driving historical performance of like firms serving customer base
Estimated probability and outcomes of establishing a solid niche/segment
Specific acquisition histories and purchase habits of customer base
• Intelligence-based (Duly Diligent) Strategic Positioning
– Role of timing and location/place in target market positioning
– Respond to documented opportunities identified in the targeted market
– Establish linkage from goals to tracking customer outcomes and revenues
Goals
Strategy
Tactics
McCarthy’s Marketing Mix – 4 P’s
Tracking
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
SF - Suggestions
• Most fundamental data points determined
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Essential information for many other parts of the plan
Every estimation should be supportable and linked to process
Segment/niche analysis falling short of break-even is a red flag
Realization of a profitable forecasted revenue flow is $ucce$$’
Tracking defines the Product Life Cycle
• Sales Forecast Boundaries
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National economy
Firm’s industry
Targeted segments/niches
Firm’s offering revenue forecasts
• Sales Forecasting Methods
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Extrapolation (smoothed curve, cyclicity, seasonality) if past has worked
Market build-up by segment/niche by sales force/management
Sales-correlated factors (variables)
Customer survey
Expert opinion, judgment
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
CB - Suggestions
• Realistic periodic cash inflow/outflow stream from operations
– Inflows: cash receipts, accounts, asset sales, tax back
– Outflows: purchases, wages/salaries, taxes, dividends, debt service
• Inflows: Going concern differs from proposed business
– Cash sales and Receivables Collection Patterns can be extrapolated
– Specific methodologies apply
– Proposed business requires estimates
• Outflows: Should be driven by plans and budgets
– Fixed: salaries, leases, debt service, etc.
– Variable: labor, advertising, purchasing, etc.
Deliverables
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Industry analysis
Market analysis
Marketing plan
Sales forecast
Cash budget
Pro-forma financial statements
PFF - Suggestions
• Envision an historical income statement and balance sheet (but
cash flows based in planned future events as if already over)
– Income Statement: sales, expenses, profits
– Balance Sheet: Assets, liabilities, owner’s equity (retained earnings)
• Total fund sources compared to total fund expenditures
– Reveals surpluses to be deployed if revenues exceed expenditures
– Treat forecasts, projections, budgets as ‘diligently known’ (p. 184 ff.)
– Reveals financing required if expenditures exceed revenues – THIS is the
raison d’etre of the pro forma, the ‘plug figure’ – a shortfall you must meet
– Assumes relationships between revenues and all other items
• Useful in assessing and tracking risk
– Business risk – sales and cash flow fluctuations
– Financial risk – probability of penalties related to debt
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Financial and business risk must be viewed as inversely related
Debt service is relatively constant, while projected revenues may be ‘off’
Justifies every ounce of due diligence: competitors, segments, positioning, etc.
Internal (operations costs) and external factors (economy) will fluctuate
Marketing Complexity
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You have seen a few models – ‘extracts’ of reality
Marketing is comprised of scores of models
Many models are borrowed (stolen) from other areas
Marketers have differing views of models (components)
Marketing ‘essence’ is diversely perceived: (among others)
– Exchange processes
– Customer relationships
– Stakeholders
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Marketers very seldom agree on one viewpoint, or focus, or model
McKenna said ‘marketing was everything’
Levitt said marketing had become ‘globally homogeneous’
A question to answer: What business are we in, and why?
Another question: Who is our customer…really?
It is, at the core, a grand adventure… enjoy
If you needed proof, we will finish with an interesting model, a matrix…
The ‘Strategic’ (Tactical) Matrix
Customer Competitor Channels Compliance Company
Product
Price
Promotion
Place
Now a slightly more traditional
approach to defining marketing…