“Generic Strategy Process Model”

Academic Year 2015

A generic strategy process model

STRATEGIC ANALYSISSTAGE 1:

Stage 1: Strategic Analysis• Also known as situation analysis• Collection and review of information about an

organization’s internal and external environment to understand the organization’s capabilities

• Involves review of:– Micro Environment– Macro Environment

Micro vs Macro Environment• Micro in terms of business indicates the items a

company can control, often internal processes.– Micro issues can be the amount of skilled labor within the

company, production processes used to manufacture goods, facilities owned by the company and other related issues. All these issues fall under the direct control of the firm.

• Macro —In business, the macro represents items outside of the company’s control.– Availability of raw materials, government laws and

regulations, number of eligible employees available to hire and the threat of competition

Elements of strategic situation analysis for the e-business

SLEPT• Social

– Relates to pattern of change in consumer behavior

– An understanding of social change gives business a better feel for the future market situation

• Legal– Relates to the laws regarding

businesses e.g. consumer protection law, health and safety law

• Economic– Relates to the series of

fluctuations associated with general booms and slumps

– Economic changes may include inflation rate, wage rate and interest rate

• Political– Relates to the changes in

government influences• Technology

– Relates to the change in technological world

SLEPT Example for Tourism• Social: increased popularity of foreign travel leading to a boom in

demand for air travel. However, this has been adversely affected by international terrorism.

• Legal: there are increasingly tight rules about the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. This has had the impact of raising costs.

• Economic: lower interest rates have meant that people have more disposable income to spend on luxuries like long distance air travel.

• Political: the development of freedom of movement and trade in the European Union has led to greater levels of competition on European routes coupled with increased movement of people.

• Technological: modern aircraft are safer and more economic to run than in the past making possible cheap air travel.

Resource Analysis• Review of technological, financial and human

resources of an organization and how they are utilized in business processes

Application Portfolio Analysis• Application portfolio: enterprise IT software

applications and software-based services• Usually used to select the most appropriate future

Internet projects

SWOT Analysis• Alternatively SWOT matrix: structured planning method used to

evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture.

• E.g. Bay Area Rapid Transit

Demand Analysis• Research into the desire of consumers for a

particular product or service. • Used to identify:– who wants to buy a given product– how much they are likely to pay for it– how many units they might purchase– other factors that can be used to determine product

design, selling cost, and advertising strategy for a product.

Competitor Analysis• An assessment of the strengths and weaknesses of current and

potential competitors. • Competitor analysis has two primary activities,– obtaining information about important competitors– using that information to predict competitor behavior.

• Provides both an offensive and defensive strategic context to identify opportunities and threats.

• The goal of competitor analysis is to understand:– with which competitors to compete,– competitors' strategies and planned actions,– how competitors might react to a firm's actions,– how to influence competitor behavior to the firm's own

advantage.

Competitor Analysis Framework• Framework proposed by Michael Porter

Competitor’s Strategy• The two main sources of information about a competitor's

strategy is what the competitor says and what it does. • What a competitor is saying about its strategy is revealed

in: annual shareholder reports, interviews with analysts, statements by managers and press releases

• This stated strategy often differs from what the competitor actually is doing. What the competitor is doing is evident in where its cash flow is directed, such as in the following tangible actions: hiring activity, R & D projects, capital investments, promotional campaigns, strategic partnerships, mergers and acquisitions

Competitor’s Objective• Knowledge of a competitor's objectives facilitates a better

prediction of the competitor's reaction to different competitive moves.

• For example, a competitor that is focused on reaching short term financial goals might not be willing to spend much money responding to a competitive attack. Rather, such a competitor might favor focusing on the products that hold positions that better can be defended.

• On the other hand, a company that has no short term profitability objectives might be willing to participate in destructive price competition in which neither firm earns a profit.

Competitor’s Assumptions• The assumptions that a competitor's managers hold about their

firm and their industry help to define the moves that they will consider.

• For example, if in the past the industry introduced a new type of product that failed, the industry executives may assume that there is no market for the product. – Honda was able to enter the U.S. motorcycle market with a small

motorbike because U.S. manufacturers had assumed that there was no market for small bikes based on their past experience

• A competitor's assumptions may be based on a number of factors, including any of the following:– beliefs about its competitive position– past experience with a product– regional factors

Competitor’s Resources and Capabilities• Knowledge of the competitor's assumptions,

objectives, and current strategy is useful in understanding how the competitor might want to respond to a competitive attack. However, its resources and capabilities determine its ability to respond effectively

STRATEGIC OBJECTIVESTAGE 2:

Stage 2: Strategic Objectives• Statement and communication of an

organization’s mission, vision and objectives– The strategy definition and implementation

elements of strategy must be directed at how best to achieve the objectives

– The overall success of e-business strategy will be assessed by comparing actual results against objectives and taking action to improve strategy

– Clear, realistic objectives help communicate the goals and significance of an e-business initiative to employees and partners

Vision and mission• Vision or mission statement –

– Concise summary defining the scope and broad aims of an organization’s digital channel aim the future

– Explains how they will contribute to the organization and support customers and interactions with partners

• A mission statement should provide definition of:– Business Scope (where?) – Markets including products, customer

segments and geographies where the company wants to compete online– Unique competencies (how?) – A high-level view of how the company

will position and differentiate itself in terms of e-business products or services

– Values (why?) – Less commonly included, this is an emotional element of the mission statement which can indicate what inspires the organization or its e-business initiative

Example vision or mission statement• Amazon.com: – Our vision is to be earth’s most customer-centric company, to

build a place where people can come to find and discover anything they might want to buy online.

• Google:– Google’s mission is to organize the world’s information and

make it universally accessible and useful.• eBay: – eBay pioneers communities built on commerce, sustained by

trust, and inspired by opportunity. eBay brings together millions of people every day on a local, national and international basis through an array of web sites that focus on commerce, payments and communications.

Dell’s mission statement• “Dell listens to customers and delivers innovative technology

and services they trust and value.”• “Our core business strategy is built around our direct customer

model, relevant technologies and solutions, and highly efficient manufacturing and logistics; and we are expanding that core strategy by adding new distribution channels to reach even more commercial customers and individual consumers around the world. Using this strategy, we strive to provide the best possible customer experience by offering superior value; high-quality, relevant technology; customized systems and services; superior service and support; and differentiated products and services that are easy to buy and use.”

SMART • Specific. Is the objective sufficiently detailed to measure

real-world problems and opportunities?• Measurable. Can a quantitative or qualitative attribute be

applied to create a metric?• Actionable. Can the information be used to improve

performance? If the objective doesn’t change behavior in staff to help them improve performance, there is little point in it!

• Relevant. Can the information be applied to the specific problem faced by the manager?

• Time-related. Does the measure or goal relate to a defined timeframe?

STRATEGIC DEFINITIONSTAGE 3:

Stage 3: Strategy definition• Formulation, review and selection of strategies

to achieve strategic objectives.• The definition of strategy is driven by the

objectives and vision referred to in the previous sections.

• The key strategic decisions faced by a management team developing e-business strategy are reviewed:

Decision 1: E-business channel priorities• Prioritization of different communications channels to achieve

different e-business objectives • Necessary to identify which strategies will be pursued, set

objectives for them and then define approaches to encourage customers to adopt the appropriate channel

• “Right-channeling” involves devising a contact strategy and tactics which integrate different channels, supported by technology to reach:– The Right Person , At the Right Time, Using the Right

Communications Channel, With a Relevant Offer, Product or Message

Decision 2: Market and product development strategies• Deciding on which markets to target through digital channels to

generate value is a key strategic consideration for e-commerce strategy in the same way as it is key to marketing strategy.

• The market and product development matrix can help identify strategies to grow sales volume through varying what is sold (the product dimension on the horizontal axis) and who it is sold to (the market dimension on the y-axis).

A. Market penetration• This strategy involves using digital channels to sell more existing

products into existing markets.– Market share growth: companies can compete more effectively

online if they have web sites that are efficient at converting visitors to sale and online marketing communications techniques such as search engine marketing, affiliate marketing and online advertising.

– Customer loyalty improvement: companies can increase their value to customers and so increase loyalty by migrating existing customers online

– Customer value improvement: the value delivered by customers to the company can be increased by increasing customer profitability by decreasing cost to serve and at the same time increasing purchase or usage frequency and quantity.

B. Market Development• Here online channels are used to sell into new

markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customer’s country.

• The Internet has helped low-cost airlines such as easyJet and Ryanair to enter new markets served by their routes cost-effectively.

C. Product Development• The web can be used to add value to or extend

existing products for many companies. • For example, a car manufacture can potentially

provide car performance and service information via a web site.

D. Diversification• The Internet alone cannot facilitate these high-risk business

strategies, but it can facilitate them at lower costs than have previously been possible. The options include:– Diversification into related businesses (for example, a low-

cost airline can use the web site and customer e-mails to promote travel-related services such as hotel booking, car rental or travel insurance at relatively low costs).

– Diversification into unrelated businesses – again the web site can be used to promote less related products to customers – this is the approach used by the Virgin brand, although it is relatively rare.

Decision 3: Positioning and differentiation strategies• Once segments to target have been identified,

organizations need to define how to best position their online services relative to competitors according to four main variables: product quality, service quality, price and fulfilment time.

• There are four options for strategic focus to position a company in the online marketplace:1. Product Performance excellence2. Price Performance excellence3. Transactional excellence4. Relationship excellence

1. Product performance excellence. Enhance by providing online product customization.

2. Price performance excellence. Use the facilities of the Internet to offer favorable pricing to loyal customers or to reduce prices where demand is low

3. Transactional excellence. A site such as software and hardware e-tailer Dabs.com offers transactional excellence through combining pricing information with dynamic availability information on products listing number in stock, number on order and when expected.

4. Relationship excellence. Personalization features to enable customers to review sales order history and place repeat orders, for example RS Components

Decision 4: Business, Service and revenue models• Business model: A summary of how a company will generate

revenue, identifying its product offering, value-added services, revenue sources and target customers.

• Revenue models: Describe methods of generating income for an organization.

• Example, holiday company Thomson (www.thomson.co.uk)– innovates to improve the quality of the purchase experience. – Innovations have included: travel guides to destinations, video tours of

destinations and hotels, ‘build your own’ holidays and the use of e-mail alerts and RSS feeds with holiday offers.

– Such innovations can help differentiate from competitors and increase loyalty to a brand online.

Innovation in the Dell business model• Dell gained early-mover advantage in the mid-1990s when it

became one of the first companies to offer PCs for sale online. Its sales of PCs and peripherals grew from the mid-1990s with online sales of $1 million per day to 2000 sales of $50 million per day.

• In September 2000, Dell announced plans to become a supplier of IT consulting services (Dell’s Premier)

• In 2007 Dell launched “Ideastorm” - a site encouraging user participation site where anyone can suggest new products and features which can be voted on

Decision 5: Marketplace restructuring• Electronic communications offer opportunities for new

market structures to be created through disintermediation, reintermediation and countermediation within a marketplace.– Disintermediation is the removal of intermediaries in

a supply chain, or "cutting out the middlemen“– Reintermediation can be defined as the reintroduction of an

intermediary between end users (consumers) and a producer– Countermediation is the creation of a new intermediary by

an established company.

Decision 6: SCM capabilities• The main e-business strategy decisions that need to be

reviewed are:– How should we integrate more closely with our suppliers, for

example through creating an extranet to reduce costs and decrease time to market?

– Which types of materials and interactions with suppliers should we support through e-procurement?

– Can we participate in online marketplaces to reduce costs?

Decision 7: Internal knowledge management capabilities• Organizations should also review their internal e-

business capabilities and in particular how knowledge is shared and processes are developed.

• Questions which can be answered in this category are:– How can our intranet be extended to support different

business processes such as new product development, customer and supply chain management?

– How can we disseminate and promote sharing of knowledge between employees to improve our competitiveness?

Decision 8: Organizational resourcing and capabilities• Once the e-business strategy decisions that have

described have been reviewed and selected, decisions are then needed on how the organization needs to change in order to achieve the priorities set for e-business.

STRATEGIC IMPLEMENTATIONSTAGE 4: