ch 5 situtaion analysis and business strategy

8/8/2019 Ch 5 Situtaion Analysis and Business Strategy

1/53

Prentice Hall, Inc. 2006 6-1

STRATEGIC MANAGEMENT & BUSINESS POLICY

9H EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 5

Strategy Formulation:

Situation Analysis &Business Strategy


2/53



3/53


Situational Analysis

Strategy = opportunity divided by capacityAsks in which industry (ies) the company should be

Opportunity by itself has no real value, if there are noresources (capacity) to take advantage of it

Not to be in the right place at the right time

BUT to be in the right place at the right time with theright amount of money

Strategy formulation --Strategic planning or long-range planning

Develops mission, objectives, strategies, policies

FIND distinctive competencies through SWOT analysis


4/53


primary criticisms of SWOT

analysis are:

It generates lengthy lists.

It uses no weights to reflect priorities.

It uses ambiguous words and phrases.

The same factor can be placed in two categories(e.g., a strength may also be a weakness).

There is no obligation to verify opinions withdata or analysis.

It requires only a single level of analysis.

There is no logical link to strategyimplementation


5/53



--process of finding a strategic fitbetween external opportunities andinternal strengths while working around

external threats and internal weaknesses

Strategic Alternative

SA = O ( S-W)


6/53


IFAS Maytag as Example


7/53


EFAS Maytag as Example


8/53


SFAS Matrix choose 10 or less strategic factors


9/53



Niche --

Need in the marketplace that is currently

unsatisfied


10/53



Corporate Goal --

Find propitious niche extremely favorable

niche that is so well suited to the firm's

internal and external environment that

other corporations are not likely to

challenge or dislodge it

Strategic window a unique market

opportunity available only for a particular time


11/53


Propitious Niche first to market

Sure, you know our little yellow box. But did you know that ARM &

HAMMER brand Baking Soda has been trusted for over 155 years, and is

an effective yet natural and gentle cleaner with no harsh chemicals, which

makes it great for use around food, pets and kids! It's also inexpensive and

environmentally sensible. Larger sizes (our 4 lb. box and 12 lb. Resealable

Pouch below) are perfect for your piled-high laundry, pool and head-to-toe"spring" cleaning chores.

Microsoft Word


12/53



GENERATING ALTERNATIVES

Re-evaluate current mission andobjectives

TOWS matrix

Internal Strength / Weaknesses

External Opportunities / Threats


13/53


TOWS Matrix


14/53


Business Strategy

Focuses on improving competitiveposition of companys products or

services within the specific industry ormarket segment

Competitive or Cooperative

Asks how the company or units shouldcompete or cooperate

TOWS MATRIX


15/53


Maytag TOWS matrix


16/53



17/53



18/53



19/53


Porters Competitive Strategies

Porters Competitive Strategy --

1. Low cost or Differentiation (quality, service,etc)

2. Direct competition orFocus on niche


20/53



Generic Competitive Advantage --

Lower Cost strategyGreater efficiencies than competitors

Differentiation strategyUnique/superior value, quality, features, service


21/53


Almaty Universities (not including

all other schools of higher learning) Adilet Law Academy [1] Almaty State University (named after Abay) Almaty Technological University [2] Almaty Institute of Power Engineering & Telecommunications [3] Kazakh National University (named after Al-Farabi) [4] Central Asian University International Academy of Business [5] Kainar University [6]

Kazakh-American University [7] Kazakh-British Technical University [8] Kazakh Academy of Sports & Tourism [9] Kazakh Academy ofTransport & Communication (named after M.Tynyshbayev) [10] Kazakh Economical University (named afterT.Ryskulov) [11] Kazakh National Academy of Arts (named afterT.K.Zhurgenov) [12] Kazakh National Conservatoire (named afterKurmangazy) [13] Kazakh National Medical University (named after Asfendiyarov) [14] Kazakh National Pedagogical University (named after Abay) [15]

Kazakh National Technical University (named afterK.I.Satpayev) [16] Kazakh University of International Relations & World Languages (named after Ablai-khan) [17] KIMEP: Kazakhstan Institute of Management, Economics and Strategic Research, [18] Suleyman Demirel University [19] Turan University [20]


22/53



Competitive Advantage --

Determined by Competitive Scope

Breadth of the target marketRange of product varieties

Distribution channels

Types of buyers

Geographic areas

Array of related industries in which to competeCompetitive scope


23/53



Combining the two generic strategies with two marketorientations, you get four possible combinations above


24/53



GOAL: higher market value and above-average profits

Cost Leadership --

Low-cost competitive strategy

Broad mass market

Efficient-scale facilities

Cost reductionsCost minimization


25/53



GOAL: higher profits

Differentiation

Broad mass market

Unique product/service

Premiums charged

Less price sensitivity (brand loyalty)


26/53



GOAL: to serve narrow strategic targetmore efficiently than competition

Cost-Focus

Low-cost competitive

strategy

F

ocus on marketsegment

Niche focused

Cost advantage in

market segment


27/53



GOAL: to serve the special needs of anarrow strategic target more effectively

than competitionDifferentiation Focus

Specific group or geographic market focus

Differentiation in targetmarket

Special needs of

narrow target market


28/53



Stuck in the middle

No competitive advantage

Below-average performance


29/53


Risks of Generic Strategies

Risks of Cost LeadershipCost leadership is notsustained:

Competitors imitate.

Technology changes.

Other bases for cost

leadership erode.

Proximity in differentiation islost.

Cost focusers achieve evenlower cost in segments.

Risks of DifferentiationDifferentiation is notsustained:


Bases for differentiation

become less important to

buyers.

Cost proximity is lost.Differentiation focusers

achieve even greaterdifferentiation in segments.

Risks of FocusThe focus strategy isimitated:

The target segment becomes

structurally unattractive:

Structure erodes.

Demand disappears.

Broadly targeted competitorsoverwhelm the segment:

The segmentsdifferences from other

segments narrow.

The advantages of a

broad line increase.

New focusers subsegment

the industry.

Risks of Cost LeadershipCost leadership is not

sustained:


Technology changes.

Other bases for cost

leadership erode.Proximity in differentiation is

lost.

Cost focusers achieve even

lower cost in segments.

Risks of Differentiation

Differentiation is notsustained:


Bases for differentiation

become less important to

buyers.

Cost proximity is lost.

Differentiation focusers

achieve even greaterdifferentiation in segments.

Risks of Focus

The focus strategy isimitated:

The target segment becomes

structurally unattractive:

Structure erodes.

Demand disappears.

Broadly targeted competitors

overwhelm the segment:

The segmentsdifferences from other

segments narrow.

The advantages of a

broad line increase.

New focusers subsegmentthe industry.


30/53


Can these strategies be merged?

Appears to be a temporary state; however,

some companies have successfully

achieved BOTH cost leadership and

differentiation broad market

Advance in technology leads to quality in

design (differentiation), which leads to high

market share (lowering costs)


31/53



32/53



33/53



34/53


8 Dimensions of Quality


35/53


Porters Five Generic Strategies

Type 1 Cost Leadership Low cost

Type 2 Cost Leadership Best

value

Type 3 Differentiation

Type 4 Focus Low cost Type 5 Focus Best value


36/53



37/53


Type 1 or 2 Cost Leadership

Strategy Conditions

Vigorous price competition

Plentiful supply of identical products

Little product differentiation Products used in same ways

Low cost to switch

Large buyers with power Industry newcomers use low prices to

attract buyers


38/53


Type 3 Differentiation Strategy

Conditions

Many ways to differentiate and buyers

perceive the differences as having

value Diverse buyer needs and uses

Few rival firms following similar

differentiation approach Fast paced technological change and

evolving product features


39/53


Type 4 or 5 Focus Strategy

Conditions

Large, profitable, and growing targetmarket niche

Industry leaders do not consider the niche

crucial to their success

Industry leaders consider it costly ordifficult to meet the needs of this niche

Industry has many niches and segments Few rivals are specializing on this target

segment


40/53


Means for Achieving Strategies

Cooperation among competitors

Joint venture / partnering

Merger / acquisition

First mover advantages

Outsourcing


41/53



42/53



43/53



44/53


C titi St t


45/53


Competitive Strategy

Industry Structure --

Fragmented Industry choose focus

Consolidated Industry choose cost leadershipor differentiation

Strategic roll-ups:

Large number of firms

Acquired firms are owner-operated

Objective is to reinvent entire industry

(ex: SCI funeral industry, Veterinary Centers of America)


46/53



47/53


Hypercompetition and competitive strategy

1) Compete on low cost and quality

2) Move to untapped markets

3) Raise entry barriers

4) Attack and destroy the strongholds of the

remaining players

5) Remaining large global competitors are stuck

in perfect competition with no one having areal advantage and minimal profits for all

RESULT: no sustainable competitive advantage


48/53



49/53


Strategies forCompeting in

Turbulent, High-Velocity markets

Reproduced off Harvard Business School

Press. From Competing on the Edge:

Strategy as Structured Chaos by Shona L.

Brown and Kathleen M. Eisenhardt,

Boston, MA, 1998, p.5.

Ch. 5. high-velocity markets.doc

Competitive Tactics


50/53


Competitive Tactics

Tactic specific operating plan detailing howa strategy is to be implemented and when andwhere it is to be put in action

Tactic can be timing (when) and market

(where)

Timing Tactics --

First mover reputation, learning curve, costleadership, setting standards

Late movers low costs (low R&D), low risk,service segments

Competitive Tactics


51/53


Competitive Tactics

Market Location Tactics

Gain / increase competitive advantage

All OFFENSIVE

Frontal Assault head to head

Flanking Maneuver attack the weaker point

Bypass Attack change the rules of the game

Encirclement embrace and extendGuerrilla Warfare hit and run

Competitive Tactics


52/53


Competitive Tactics

Defensive Tactics to sustain the competitiveadvantage

Raise structural barriers

Increase expected retaliation

Lower the inducement for attack

Cooperative Strategies


53/53


Cooperative Strategies

Collusion explicit or tacit but still ILLEGALStrategic Alliances to obtain technology /manufacturing capabilities or to obtain access tospecific markets

Mutual service consortia - to reduce financialrisk

Joint ventures to reduce financial and politicalrisks

Licensing arrangementsValue-chain partnerships key suppliers /distributors

ch 5 situtaion analysis and business strategy

Documents