chapter - 6
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STMTRANSCRIPT
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STRATEGIC MANAGEMENT & BUSINESS POLICY10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 6Strategy Formulation: Situation Analysis & Business Strategy
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Situational Analysis
Strategy formulation --
–Strategic planning or long-range planning•Develops mission, objectives, strategies, policies
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Situational Analysis
--process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses
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IFAS – Maytag as Example
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EFAS – Maytag as Example
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SFAS Matrix
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Situational Analysis
Niche --
–Need in the marketplace that is currently unsatisfied
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Situational Analysis
Corporate Goal --
–Find propitious niche–Strategic window
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Situational Analysis
SWOT --
–Internal•Strengths/Weaknesses
–External•Opportunities/Threats
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TOWS Matrix
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Business Strategy
Focuses on improving competitive position of company’s products or services within the specific industry or market segment
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Porter’s Competitive Strategies
Competitive Strategy --
–Low cost–Differentiation–Direct competition–Focus on niche
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Porter’s Competitive Strategies
Generic Competitive Strategies --
–Lower Cost strategy•Greater efficiencies than competitors
–Differentiation strategy•Unique/superior value, quality, features, service
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Porter’s Competitive Strategies
Competitive Advantage --
–Determined by Competitive Scope•Breadth of the target market
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Porter’s Competitive Strategies
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Porter’s Competitive Strategies
Cost Leadership --
–Low-cost competitive strategy–Broad mass market–Efficient-scale facilities–Cost reductions–Cost minimization
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Porter’s Competitive Strategies
Differentiation –
–Broad mass market–Unique product/service–Premiums charged–Less price sensitivity
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Porter’s Competitive Strategies
Cost-Focus –
–Low-cost competitive strategy–Focus on market segment–Niche focused–Cost advantage in market segment
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Porter’s Competitive Strategies
Differentiation Focus –
–Specific group or geographic market focus–Differentiation in target market–Special needs of narrow target market
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Porter’s Competitive Strategies
Stuck in the middle –
–No competitive advantage–Below-average performance
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Risks of Generic Strategies
Risks of Cost LeadershipCost leadership is not sustained:• Competitors imitate.• Technology changes.• Other bases for cost leadership erode.Proximity in differentiation is lost.Cost focusers achieve even lower cost in segments.
Risks of DifferentiationDifferentiation is not sustained:• Competitors imitate.• Bases for differentiation become less important to buyers.Cost proximity is lost.Differentiation focusers achieve even greater differentiation in segments.
Risks of FocusThe focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.
Risks of Cost LeadershipCost leadership is not sustained:• Competitors imitate.• Technology changes.• Other bases for cost leadership erode.Proximity in differentiation is lost.Cost focusers achieve even lower cost in segments.
Risks of DifferentiationDifferentiation is not sustained:• Competitors imitate.• Bases for differentiation become less important to buyers.Cost proximity is lost.Differentiation focusers achieve even greater differentiation in segments.
Risks of FocusThe focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.
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8 Dimensions of Quality
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Competitive Strategy
Industry Structure --
–Fragmented Industry–Consolidated Industry
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Competitive Tactics
Timing Tactics --
–First mover–Late movers
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Competitive Tactics
Market Location Tactics --
–Frontal Assault–Flanking Maneuver–Bypass Attack–Encirclement–Guerrilla Warfare
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Competitive Tactics
Defensive Tactics --
–Raise structural barriers–Increase expected retaliation–Lower the inducement for attack
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Cooperative Strategies
•Collusion•Strategic Alliances•Mutual service consortia•Joint ventures•Licensing arrangements•Value-chain partnerships