Strategy Part 2 1110

8/8/2019 Strategy Part 2 1110

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1. Framework for Analysis

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Scholes - 2006

1. Simple or complex, static or dynamic – evaluate uncertainty (diversity of

influences, knowledge required, extent of interaction) - contingency approach,

incremental approach

2. PESTEL

3. Five Forces

4. Strengths and Weaknesses

5. Opportunities and Threats

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Waitrose Pestel (2008)

o ca :

Uncertainty due to the financial crisis

Increased government borrowing

Changes in taxation of bonuses

Planning changes – move back into town centres

Forthcoming election

Economic:

Recession to potentially lead to lost market share to budget supermarkets? – introduced their own value line

Lower prices for commodities coould lead to lower prices in store.

Credit crunch led to developers pulling out of new retail developments

Sociocultural

Demographic:

Aging population could benefit waitrose

Increasing awareness of sustainability and other ethical issues

Technology

Growth of internet shopping – tie in with Ocado and their own delivery service

Environment

Stated commitment to meeting governments carbon reduction targets

Implementation of green IT

BREEAM stores

Legal

Competition commission ruled on large supermarkets holding landbanks to prevent competitor expansion

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Scholes - 2006




2. PESTEL

3. Five Forces



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Competitive Rivalry:

Supermarkets fiercely competitive – ASDA, Sainsbury’s, Tesco & Morrisons

Waitrose at the premium end

Barriers to entry:

Small number of successful companies with good brand recognition.

High start up costs and aggressive tactics and plentiful economies of scale.

Threat of substitutes

Internet shopping

Buyer Power

Very high – customers tend to have a number of local options

Waiotros has strong customer loyalty

Supplier power

Low because of limited differentiation

Loss leaders

ALSO CONSIDER SWOT: strengths, weaknesses and opportunities and threats.

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Scholes - 2006




2. PESTEL

3. Five Forces



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Use a TOWS matrix to develop options

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EXPECTATIONS AND PURPOSES

Why is the strategy being developed – what are the goals and vision of the

organisation and of it’s stakeholders?

For private enterprise, profit will always be a key objective, but their may be other

objectives or goals that are motivated by stakeholders – employees, customers,

suppliers, government etc.

Social or ethical objectives may be formalised in the companies CSR report

Corporate governance may influence strategy.

The organisation’s paradigm will also influence the strategic position and so should

be considered.

Tools –

1. Stakeholder mapping – How interested is the stakeholder in the organisations

choice of strategies, and how much power does it have to influence strategic

decisions. Mapping helps direct political priorities.

2. The cultural web

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Paradigm: collective, taken for granted assumptions and beliefs

Useful when attempting to identify an organisation’s culture – forms a framework

of questions to ask and things to look for.

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Strategic business unit (Scholes) – is part of an organisation for which there is a

distinct market for goods or services different from another SBU – and this will

require differing strategies.

Competitive strategies (See Porter):

1. Cost leadership – to have the lowest costs – consistently over a period of time

but to sell at or near the market price

2. Differentiation - to offer something above the industry standard, for which

customers are prepared to pay a premium

3. Focus – to concentrate on one segment of the market to the exclusion of the

remainder, and then concentrate on either cost or differentiation.

Expanded by Bowman – The strategy clock

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1, No Frills: commodity-like, price sensitive customers, high buyer power & low

switching costs

2, Low price: Requires a low cost base for success, may lead to margin reductin oran inabiolity to invest

3, Hybrid: Differentiation and a lower price than competitors – IKEA

4, Differentiation: Offer benefits different “better” products or services than those

of competitors at the same or slightly higher prices

5,Focused differentiation: Provide products/services that offer high perceived

benefits and justify a substantial price premium

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CORPORATE LEVEL STRATEGY

Many companies are multi-business, through product or geographic diversity.

Product/Market diversification – a strategy that takes the company into new markets and products or services

Aims:

1) Efficiency gains – Economies of scope utilised for both tangible and intangible resources2) Applying corporate managerial capabilities to new markets – Parenting skills

3) Increase market power – Cross-subsidisation for competitive advantage

4) response to environmental change – technological convergence

5) Spread risk

6) Pressure from stakeholders

Related Diversification – strategy development beyond current products and markets but within the capabilities or value network of theorganisation.

Vertical integration relating to the organisation’s inputs and outputs.

Horizontal integration relating to activities complementary to the existing.

Unrelated Diversification – “conglomerate strategy”

Why:

1) To exploit a dominant logic

2) To exploit underdeveloped markets

International diversification

Why?

1. Market based reasons:

• Globalisation of markets and competition – Homogenisation of demand

• Follow customers

• Bypass limits of home market

• Exploit differences in regions

2. To exploit strategic capabilities

• In new underdeveloped markets

• Outsourcing

• Enhance knowledge base

3. Economic Benefits

• Economies of scale

• Stabilisation of earnings

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Direction and methods

Ansoff’s Matrix:

Protect/Build

Market development

Product development

Diversify

Can be achieved by:

1. Internal development of existing or new resources

2. Merger or acquisition

3. Joint development or strategic alliance

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Ansoff’s Matrix

Consolidation: may mean continued growth in a growing market or protective

strategies in a mature market

Market penetration: Increasing market share in existing market

Withdrawal may also be a sensible option.

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Ansoff’s Matrix

Consolidation: may mean continued growth in a growing market or protective

strategies in a mature market

Market penetration: Increasing market share in existing market

Withdrawal may also be a sensible option.

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Levers for change:

Turnaround (focus on speed):

Crisis stabilisation

Management changes

Gaining stakeholder support

Clarifying the target markets

Re-focusing

Financial restructuring

Prioritisation of critical improvement areas

Changing the paradigm:

Challenge the taken for granted

Changing organisational routines

Symbolic processes

Power and political processes

Communicating and monitoring change

Change tactics

Documents

Strategy Part 2 1110