Mgtm 633 l6a Business Strategy

8/2/2019 Mgtm 633 l6a Business Strategy

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STRATEGY FORMULATION:

SITUATION ANALYSIS AND BUSINESS STRATEGY

Chapter 6


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Strategy formulation-concerns developing acorporations mission, objectives, strategies and

policies

Situation Analysis- the process of finding a strategicfit between external opportunities and internal

strengths while working around external andinternal weaknesses


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SWOT- Strengths-Weaknesses-Opportunities-Threats

Strategy= opportunity/capacityOpportunity has no real value unless a company has the

capacity to take advantage of that opportunity


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Generating a Strategic Factors AnalysisSummary (SFAS) Matrix

SFASsummarizes an organizations strategic factors bycombining the external factors from the EFAS Tablewith the internal factors from the IFAS Table


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TOWS Matrix- illustrates how the external opportunitiesand threats can be matched with internal strengths andweaknesses to result in 4 possible strategic alternatives

Provides a means to brainstorm alternative strategies

Forces managers to create various kinds of growth andretrenchment strategies

Used to generate corporate as well as businessstrategies


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Business strategy focuses on improving the competitiveposition of a companys or business units products or

services within the specific industry or marketsegment it serves


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Business strategy is comprised of:

Competitive strategy

Cooperative strategy


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Porters competitive strategies

Cost leadership- a lower-cost competitive strategy that

aims at the broad mass market and requires efficientscale facilities, cost reductions, cost and overheadcontrol; avoids marginal customers, cost minimizationin R&D, service, sales force and advertising

Provides a defense against competitors Provides a barrier to entry Generates increased market share


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Differentiation- involves the creation of a product orservice that is perceived throughout the industry asunique. Can be associated with design, brand image,technology, features, dealer network, or customerservice


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Types of Differentiation Themes

Unique taste-- Dr. Pepper Multiple features-- Microsoft Windows and Office

Wide selectionand one-stop shopping-- HomeDepot and Amazon.com

Superior service-- FedEx, Ritz-Carlton

Spare parts availability-- Caterpillar

More for your money-- McDonalds, Wal-Mart

Prestige-- Rolex Quality manufacture-- Honda, Toyota

Technological leadership-- 3M Corporation

Top-of-line image-- Ralph Lauren, Chanel, Cross


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Benefits of SuccessfulDifferentiation

A product / service with unique,

appealing attributes allows a firm to

Command a premium priceand/or

Increase unit salesand/or

Buildbrand loyalty

= Competitive Advantage

Whichhat is

unique?


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How to Achieve aDifferentiation-Based Advantage

Approach 1

Incorporate features/attributes that raise theperformance a buyer getsout of the product

Approach 2

Incorporate features/attributes that enhance buyersatisfactionin non-economic or intangible ways

Approach 3

Compete on the basis of superior capabilities

Approach 4

Incorporate product features/attributes thatlower buyers overall costs of using product


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Cost Focus- low-cost competitive strategy that focuseson a particular buyer group or geographic market andattempts to serve only this niche to the exclusion ofothers

Differentiation Focus- concentrates on a particularbuyer group, product line segment, or geographicmarket to serve the needs of a narrow strategicmarket more effectively than its competitors


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Geographic uniqueness

Specialized requirements inusing product/service

Special product attributesappealing only to niche buyers

Approaches to Defininga Market Niche


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Examples of Focus Strategies

eBay

Online auctions

Porsche

Sports cars

Jiffy Lube International

Maintenance for motor vehicles

Pottery Barn Kids Childrens furniture and accessories

Bandag

Specialist in truck tire recapping


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Risks in Competitive Strategies


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Timing Tactics: When to Compete

Timing Tactics- when a company implements a strategy

First movers

Late movers


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Offensive tactics

Frontal assault

Flanking maneuver

Bypass attack

Encirclement Guerrilla warfare

Defensive tactics

Raise structural barriers

Increase expectedretaliation

Lower the inducement forattack

Market Location: Where to Compete

Market location tactics- where a company implements a strategy


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Cooperative Strategies- used to gain a competitiveadvantage within an industry by working with otherfirms


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Collusion- the active cooperation of firms within anindustry to reduce output and raise prices to avoid

economic law of supply and demand


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Strategic Alliances- a long-term cooperativearrangement between two or more independent firmsor business units that engage in business activities for

mutual economic gainUsed to:

Obtain or learn new capabilities

Obtain access to specific markets

Reduce financial risk

Reduce political risk


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Types of Cooperative Agreements

Mutual Service Consortia

Joint Venture

Licensing Arrangements

Value-Chain Partnerships


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1. What industry forces might cause a propitious nicheto disappear?

2. Is it possible for a company or business unit to followa cost leadership and a differentiation strategysimultaneously? Why or why not?

3. Is it possible for a company to have a sustainable competitivadvantage when its industry becomes hyper-competitive?

4. What are the advantages and disadvantages of being afirst mover in an industry? Give some examples

of first movers and late mover firms.5. Why are strategic alliances temporary?


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Discuss some of the most popular business strategies(competitive) and tactics used in the fast food industryin Malaysia.

Assignment 5

Documents

Mgtm 633 l6a Business Strategy