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The strategic planning process - III



By Phil Phillips



Published November 2, 2005
In last month's column, we discussed the use of SWOT and TOWS as useful models from which to draw accurate pictures of both your as well as your competitors' relative strengths and possible strategies.

Before moving ahead, let's remember an important precept concerning industry structure: profitability is determined by the characteristics of its inudstry. Therefore, different competitive conditions in different industries equals different average profitabilities.

The topic of this month's column pertains to the relative attractiveness of the industry's structure and its market segments versus the strengths of the enterprise serving it.

Chemark typically uses two tools to measure a client's position. First, is the product, or market, lifecycle model and the second is the GE 9-Square.




PRODUCT LIFE CYCLE MODEL

The thesis of a lifecycle model is to measure which portions of the product line are new (embryonic), growing, mature or declining. By placing the existing product lines of a specific segment into the appropriate "life stage" one can interpret product and market dynamics. Further, the lifecycle model can be used for planning and control purposes. The chart below shows two curves, one representing total industry revenue, the other total industry profit.

In each of the "cycle" quadrants, the chart shows the key elements associated with that position. For example, in a new product introduction phase, the marketing objective would be to "gain awareness"; direct competition is probably nil; product line is one; Price point is either skimming (high profit, high-end of market) or penetration (price to gain share); promotion is focused on transforming information and educating the potential buyers; and place, or distribution, would be limited at the outset.

Once you and your competitors' products are positioned within the lifecycle model, the first outputs can be placed into the second analysis model.

THE GE-9-SQUARE

The GE-9-Square is a disciplinary tool that forces a business into one or more of the nine squares determined by following a set of criteria screens. The vertical leg of the square measures the attractiveness of a market segment opportunity via 15 specific input elements. The horizontal leg measures the strength of your company in that market segment via 12 specific input elements.

Opportunities can be clustered onto one 9-Square model, thus showing the relative position of your offerings versus the competition in each market.

The GE-9-Square tool helps form the basic market elements of a strategic plan by considering four attributes simultaneously:

Attractiveness of market
Your strengths in that market
Size of market segment
Average growth rates


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