COMPANY B ELEMENTS OF STRATEGY MANUAL Bus 691 Company B Elements of Strategy Manual Sean, Kranyak, Amanda Deal, Kulpreet Gill, & Morgan Parola California State University of the Monterey Bay 1 COMPANY B ELEMENTS OF STRATEGY MANUAL 2 Executive Summary Company B seeks to become the premier manufacturer for customers looking for an affordable and trustworthy vehicle. This Strategy Manual communicates our core values, and identifies our strategy for periods one through eight. Company B agrees to utilize this manual as a guide for future decisions. The manual employs Carpenter and Sanders’ Strategy Diamond (2008), and evaluates the five core tenets of strategy, economic logic, staging, arenas, vehicles, and differentiation. Our economic logic is characterized by ridding ourselves of debt in the early periods of our firm, and build our infrastructure as time progresses. This is characterized by steady staging, focused arenas, organic vehicles, and highlighting our differentiators of price and quality. COMPANY B ELEMENTS OF STRATEGY MANUAL 3 Company B Company B is focused on creating high-quality vehicles targeted towards customers seeking a safe and affordable vehicle. We seek to become the premier manufacturer for customers looking for an affordable and trustworthy vehicle. Our mission and vision statements below reflect these goals: Mission Statement To inspire every Company B driver to go the extra mile – safe, secure, and empowered. Vision Statement Company B’s vision is to become the most trusted manufacturer of high-quality and affordable vehicles. The Strategy Diamond Analysis of Company B The strategic diamond is made up of different choices that managers should consider when coming up with a strategy for their companies. These elements include the economic logic, staging, arenas, vehicles and differentiators (Carpenter & Sanders, 2008). Company B’s Economic Logic Economic logic is the core element in a firm’s strategy to generate profits. The economic logic must take into account costs and revenues, and must delineate a plan in which to maximize returns. In hopes of creating a sustainable and successful business, Company B has determined their economic logic to have a progressive path. The initial focus will be to reduce operational costs and rid unnecessary debt. Once the business is lean, stable, and operating profitably, Company B will strategically invest in infrastructure in hopes of equipping vehicles with up to date technology, with an emphasis on quality and safety. The idea is to ‘cut out some fat’ within the operations and later ‘pack on some muscle’. COMPANY B ELEMENTS OF STRATEGY MANUAL 4 To accurately structure our business strategy and staging, our company will specifically focus on boosting the economic standing of the company in the first few periods, as the company gains a better understanding of the target audiences. This will allow the firm time to assess the cost of marketing and production. We will be able to better assess our economic logic after we have better researched and analyzed credible insights into the state of the background research. Company B will focus on expansion of locations and products in later phases, depending on our simulation performance throughout the early phases. We want to grow between various regions in a close proximity to our current facilities within the first four years and expand further after we test our local economic markets. The arenas in which we position Company B, including our product categories, channels, market segments, geographic areas, and core-technologies, will have a synergistic relationship with our economic logic. Our decision to pursue these arenas is based on our commitment to manufacture high quality vehicles at a reasonable cost while minimizing company debt. We see the value in allocating capital to our marketing efforts, including Social Media, Advertising, and Promotions. From an economic standpoint, our logic focuses on efficiency, cost-effectiveness, and strategy. Company B recognizes the importance of research and testing, and we will use these results to support our economic decisions. To capitalize on our differentiation, we will invest heavily in marketing. This will increase our market share, draw new customer to our brands, and, therefore, increase sales. Our marketing will be tailored to attract our target segments of families, value seekers and singles who seek an affordable car or truck. As discussed more fully in the differentiation section of this strategy manual, we will appeal to our target segments by creating an affordable car that is both COMPANY B ELEMENTS OF STRATEGY MANUAL 5 safe and of high quality. To target particular interests, we will add low cost features, such as cargo space, cup-holders, and safety features. Staging Staging is an element that is used to determine the time it will take the company to achieve the objectives they have set (Ireland, et al., 2007). Staging is an element of strategy, which we define as the goals or objectives that our firm will put into place to help us achieve our goals and give us a competitive advantage over other competing firms. Staging is an important component within a firm's economic logic, which impacts everything from the firm's return on investment, the speed of the initiatives and expansions, the premium price resulting from unmatchable services, and proprietary product features. The automotive industry refers to a wide array of industries that are involved in the manufacture and sale of motor vehicles. The different plants in the automotive industry have proven to be quite competitive through the years. Every plant creates a new brand, Cowhich is often better than the previous design with new features. In order to maintain the competitive advantage that an industry has, it is important that the management comes up with a strategy. Staging involves time it will take our company to achieve the goals we’ve set for ourselves. When making decisions on staging, it is important that that we consider the resources we have at our disposal. The urgency of the situation should also be considered, for instance, if the opportunity to dominate the market is likely to vanish, it is important that the company sets a shorter time limit so that they can be able to benefit from the opportunity. The pursuit of early wins and the achievement of credibility should also be considered when coming up with a time frame. In the automotive industry, the industry should consider the existing plants dominating the current market. For example, if Company X intends to take up a certain arena, research COMPANY B ELEMENTS OF STRATEGY MANUAL 6 should be done to find out what firms hold the market. This will also be beneficial, as it will give the plant an insight on what it is up against. Team B plans on slowly expanding our business based on market research and assessing our organization. After assessing our first report on our decisions, we have gained a more complete idea as to where our company stands and the appropriate decisions to make for a starting business. We understand that the first few years of business are critical, and we hope to move strategically and cautiously at first. Our strategic staging plan is to test our market strength and invest in research before we launch a new project and product. We will analyze our reports and determine which vehicles and features will provide the highest return, and what will have a positive impact on investors and shareholder sentiments. We know expanding is critical to remain competitive, and we plan to strategize and build capital for a few years before expanding in years 4 and 5. We plan on staying within our home locations and slowly expanding out within those areas. Based on our internal research, stage one and two will be characterized by focusing on family cars and trucks (SSM, 2016). In our next phases, we will take time to learn consumer preferences and market demand. We will also carry out advertisements to ensure that the target market understands our presence. After getting valid and reliable information and data concerning our competitors, stage three and four will see us introducing other automobiles such as an AEV model. Arenas A key element of our company’s success depends upon our strategy to identify the arenas in which we will compete. The areas we will focus on include product categories, channels, market-segments, geographic areas, and core technologies. COMPANY B ELEMENTS OF STRATEGY MANUAL 7 Product Categories As a company, we have strategically decided to pursue three different product categories. The following vehicles make up the product line for Company B:  Boffo (F - Family): The Boffo is a mid- sized car focused on safety and reliability.  Boss (T - Truck): The Boss is a durable truck designed for work as well as being a second vehicle option for consumers. The Boss is our highest priced product.  Buzzy (E - Economy): The Buzzy is our more basic and inexpensive model. Our decision to be active in these three product categories is in line with our mission and vision. As stated within our analysis of differentiation, our vision is to become the most trusted manufacturer of high-quality and affordable vehicles. Our product line of cars and trucks displays our company’s diversification technique and ability to manufacture and sell affordable, high-quality products to different market-segments. We hope this will prove to be a competitive advantage for Company B. Channels As the manufacturer and seller of these products, our channels to reach our marketsegments and consumers include promotion, advertising, and various dealerships. Market-Segments We have developed a strategic marketing plan based on our market-segments. Based on research and market studies, we are aware of consumer preferences; therefore, one of our main strategies is to align our products with consumer needs and strategically compete in various market-segments. Company B has decided to target the following market-segments: (1) Value Seekers, (2) Families, and (3) Singles. Our three product categories appeal to at least one or more of the aforementioned market-segments. Based on current market research, these three market- COMPANY B ELEMENTS OF STRATEGY MANUAL 8 segments make up the top three percent of sales across the industry. Value seekers are interested in vehicles that meet their basic transportation needs. Coming in third, value-seekers make up 18.5% of market sales. Families are concerned about safety, quality, and flexibility. This marketsegment currently makes up 38.9% of market sales. Lastly, singles are a typically a younger market willing to spend more money. They are looking for a vehicle with style and high performance. Singles are the second leading market-segment in sales at 19.9%. Table A defines which products we are marketing to which market-segments. Table A. Market-Segment Product Name (1) Value Seekers Buzzy (E), Boss (T) (2) Family (3) Singles Boffo (F), Buzzy (E) Boss (T) Geographic Areas Based on past performance, research, and consumer reports, we have decided to invest equally in each of the four regions: North, South, East and West. We are currently spending 10M dollars in corporate advertising per region. Each of the targeted market-segments exist in each region, therefore, we find it necessary to actively sell in each of these geographic areas. We are, however, aware that there are certain areas with dominant consumer preferences. For example, we are marketing the Boss product in the South region due to consumer demand for working vehicles and trucks. Core Technologies As a company, our focus is on safety and quality; therefore, our core technologies focus on designing and implementing innovative and high-performing safety features. In developing COMPANY B ELEMENTS OF STRATEGY MANUAL 9 our technologies, we are focused on creating quality products that meet the needs of our consumers. We have made the decision to invest more dollars in technology to ensure we are strategically and effectively developing high-quality technological features that meet the safety and quality standards of our market-segments. Our technologies support our mission to inspire our consumers to go the extra mile – safe, secure, and empowered. Vehicles In the aforementioned Arena section, it has been conveyed that Company B wants to be active in multiple product categories, market segments, and focus on core technologies. Furthermore, a value creation strategy has been identified. It is important to understand how we at Company B plan to achieve our goals that we have identified in our economic logic, and later in our arenas. As our economic logic supports, we will strive to first take measures to rid unnecessary costs and debt, and to create a stable, profitable economic engine. In doing so, we will hope to save money and to strategically invest to improve our products and operations when possible. With this economic logic, Company B is best suited to grow organically, and to internally develop through investments in R&D. In addition to our pursuit to grow organically, we hope to strategically align with alliances in the future in what we hope will be a mutually beneficial relationship. Company B will entertain the concepts of growing acquisitively as well, once the firm is established and well-versed in growing organically. Organic growth has been defined as the “growth rate a company can achieve by increasing output and enhancing sales internally” (Investopedia.com, n.d., n.p.). Growing organically makes the most sense for Company B as it is in alignment with our economic logic. Doing so has a unique set of challenges in that we must put together everything we need in order to fuel our growth. In growing organically it is imperative to focus on operational efficiency, COMPANY B ELEMENTS OF STRATEGY MANUAL 10 which we believe to be a healthy pursuit for our company and its future. As we have conveyed, we are not ruling out the possibility of growing acquisitively sometime in the future. Firms who want to grow acquisitively must have the ability to generate growth organically, “…To make acquisitions successful, acquirers must be able to stimulate organic growth in the business they buy” (Favaro, et al., 2012, n.p.). Ultimately, having a “hybrid” approach to growth is desirable to Company B. “A combination of both organic and inorganic growth is ideal as it diversifies the revenue base without relying solely on current operations to grow market share” (Investopedia.com, n.d., n.p.). Organic growth requires firms to only bite of what they can chew, and to allow each move to digest before expanding further (Kuntz, 2014). Transforming the company’s internal growth engine from organic to acquisitive (if that route is later pursued) will be possible once equipped with a solid foundation built on organic growth. Ultimately, in hopes of implementing our strategy effectively, Company B must constantly strive to spot opportunities, while never losing sight of the big picture. Differentiators Company B plans on differentiating from competitors by focusing on our quality and safety features. To do this, we will cultivate an image of trustworthiness, safety and a focus on families. One factor to separate Company B from the pack will be to create a brand image that emphasizes our focus on quality and safety. A brand’s image has been proven to have a strong effect on the customer’s perception of the vehicle and the manufacturer, including quality, performance, and expectations (Weidmann, et. al, 2011). Our image will rely on marketing that instills Company B as a brand based on longevity, track record, safety, and performance. We will focus on attributes of the car that are utilitarian and tied to care for the family through emotional and practical COMPANY B ELEMENTS OF STRATEGY MANUAL 11 marketing channels, as “…specific car manufacturers try to position themselves as the best choice for the hedonic or utilitarian-minded driver” (Marketing Schools, 2012, para. 24). To create our brand image, Company B will identify our target audience, define our firm’s persona, and develop on-target messaging (Walker Sands, 2016). We will accomplish the first by targeting families, value seekers and singles, as discussed in the arena section of this strategy manual. Company B will also use training and communication to target internal groups, like employees and critical partners. To create a persona that our audience will be drawn to and trust, we will market heavily to the aforementioned segments, and utilize these platforms to promote our differentiators of price and quality. These messages will prominent feature the ideas of trust, safety and quality. As discussed briefly above, another factor of differentiation Company B will pursue is that of low price. We seek to provide a wide range of customers with the perfect vehicle for their needs at a reasonable price. This does not mean being cheaper than the competition, as this could be a losing proposition. Basing your differentiation on underbidding competitors can cut into profits, and may undermine customer confidence. This occurs as,” …consistently underbidding the competition undercuts the value of what you do, both in your own estimation and, eventually, in the eyes of your prospects” (Witt, 2013, para. 7). To appeal to our family and value seeking markets, we will differentiate ourselves by manufacturing vehicles with high safety features, reliability, and styling that suits family needs. Company B has begun this process by increasing the attractiveness of our vehicles with increasing safety and quality features. Some affordable features that can be added to appeal to families include space for car seats, cupholders in the back seat, extra pockets, power ports for back seat games and devices, and of course, cargo capacity. To market Boss, we will tie these COMPANY B ELEMENTS OF STRATEGY MANUAL 12 values into the preferences of truck drivers, who view themselves as working people who need a tough vehicle. These consumers, largely male, “…take pride in their blue-collar necessity,” and, “…want to feel independent and self-reliant” (Marketing Schools, 2012, para. 7). Stockburger, Director of Operations at Consumer Reports’ Auto Test Center, summarizes, “The safety and functional aspects are most important…But the niceties make travel enjoyable” (Consumer Reports, 2014, para. 21). In using these differentiators, Company B will attract customers and fulfill our mission to become the premier manufacturer for customers seeking an affordable vehicle they trust. COMPANY B ELEMENTS OF STRATEGY MANUAL 13 References Consumer Report. (2014). Best Pickup Truck Buying Guide. Retrieved on October 23, 2016 from http://www.consumerreports.org/cro/cars/pickup-trucks/buying-guide.htm Consumer Report. (2014). Kid-Friendly Vehicles: How to Choose the Best Car for Your Family. Retrieved on October 23, 2016 from http://www.consumerreports.org/cro/2012/04/kidfriendly-vehicles/index.htm. Favaro, K., Meer, D., Sharma, S. (2012). Creating an Organic Growth Machine. Retrieved October 21, 2016, from https://hbr.org/2012/05/creating-an-organic-growth-machine Investopedia. (N.d.). Organic Growth. Retrieved October 21, 2016, from http://www.investopedia.com/terms/o/organicgrowth.asp Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2007). Understanding business strategy: Concepts and cases. Mason, OH: Thomson South-Western. Kuntz, B. (2014). Organic vs. Inorganic: Which Way To Grow? Retrieved October 21, 2016, from http://www.forbes.com/sites/ey/2014/01/14/organic-vs-inorganic-which-way-togrow/#6d2e15b42ac0 Marketing Schools. (2012). Marketing Cars. Retrieved on October 22, 2016 from http://www.marketing-schools.org/consumer-psychology/marketing-cars.html. Marketing Schools. (2012). Marketing Trucks. Retrieved on October 23, 2016 from http://www.marketing-schools.org/consumer-psychology/marketing-trucks.html. Strat Sim Management (SSM). (2016). Market Reports. Accessed October 24, 2016 from, http://schools.interpretive.com/fsui2/index.php?token=0 COMPANY B ELEMENTS OF STRATEGY MANUAL 14 SSM. (2016). StratSim Student Manual – Even Start. Accessed October 24, 2016 from, http://schools.interpretive.com/fsui2/index.php?token=0 Walker Sands Communications (2016). How to Build Strong Brand Image. Retrieved on October 22, 2016 http://www.walkersands.com/How-To-Build-A-Strong-Brand-Image. Weidmann, K., Hennigs, N., Schmidt, S., and Wuestfold, T. (2012). Drivers and Outcomes of Brand Heritage: Consumers’ Perceptions of Heritage Brands in the Automotive Industry. Journal of Marketing Theory and Practice. 19(2) Witt, C. (2013). Compete on Differentiators: Not on Price or Quality. Witt: Communication Matters. Retrieved on October 21, 2016 from http://christopherwitt.com/compete-ondifferentiators-not-on-price-or-quality/. COMPANY B ELEMENTS OF STRATEGY MANUAL Appendix Table A. Market-Segment Product Name (1) Value Seekers Buzzy (E), Boss (T) (2) Family Boffo (F), Buzzy (E) (3) Singles Boss (T) *Data from StratSim Student Manual 15
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