Prentice Hall, Inc. © STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 6 Strategy Formulation: Situation Analysis & Business Strategy
Prentice Hall, Inc. © Situational Analysis Strategy formulation -- –Strategic planning or long-range planning Develops mission, objectives, strategies, policies
Prentice Hall, Inc. © Situational Analysis -- process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses
Prentice Hall, Inc. © IFAS – Maytag as Example
Prentice Hall, Inc. © EFAS – Maytag as Example
Prentice Hall, Inc. © SFAS Matrix
Prentice Hall, Inc. © Situational Analysis Niche -- –Need in the marketplace that is currently unsatisfied
Prentice Hall, Inc. © Situational Analysis Corporate Goal -- –Find propitious niche –Strategic window
Prentice Hall, Inc. © Situational Analysis SWOT -- –Internal Strengths/Weaknesses –External Opportunities/Threats
Prentice Hall, Inc. © TOWS Matrix
Prentice Hall, Inc. © Business Strategy Focuses on improving competitive position of company’s products or services within the specific industry or market segment
Prentice Hall, Inc. © Porter’s Competitive Strategies Competitive Strategy -- –Low cost –Differentiation –Direct competition –Focus on niche
Prentice Hall, Inc. © Porter’s Competitive Strategies Generic Competitive Strategies -- –Lower Cost strategy Greater efficiencies than competitors –Differentiation strategy Unique/superior value, quality, features, service
Prentice Hall, Inc. © Porter’s Competitive Strategies Competitive Advantage -- –Determined by Competitive Scope Breadth of the target market
Prentice Hall, Inc. © Porter’s Competitive Strategies
Prentice Hall, Inc. © Porter’s Competitive Strategies Cost Leadership -- –Low-cost competitive strategy –Broad mass market –Efficient-scale facilities –Cost reductions –Cost minimization
Prentice Hall, Inc. © Porter’s Competitive Strategies Differentiation – –Broad mass market –Unique product/service –Premiums charged –Less price sensitivity
Prentice Hall, Inc. © Porter’s Competitive Strategies Cost-Focus – –Low-cost competitive strategy –Focus on market segment –Niche focused –Cost advantage in market segment
Prentice Hall, Inc. © Porter’s Competitive Strategies Differentiation Focus – –Specific group or geographic market focus –Differentiation in target market –Special needs of narrow target market
Prentice Hall, Inc. © Porter’s Competitive Strategies Stuck in the middle – –No competitive advantage –Below-average performance
Prentice Hall, Inc. © Risks of Generic Strategies Risks of Cost Leadership Cost 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 Differentiation Differentiation 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 Focus The 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 Leadership Cost 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 Differentiation Differentiation 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 Focus The 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.
Prentice Hall, Inc. © Dimensions of Quality
Prentice Hall, Inc. © Competitive Strategy Industry Structure -- –Fragmented Industry –Consolidated Industry
Prentice Hall, Inc. © Competitive Tactics Timing Tactics -- –First mover –Late movers
Prentice Hall, Inc. © Competitive Tactics Market Location Tactics -- –Frontal Assault –Flanking Maneuver –Bypass Attack –Encirclement –Guerrilla Warfare
Prentice Hall, Inc. © Competitive Tactics Defensive Tactics -- –Raise structural barriers –Increase expected retaliation –Lower the inducement for attack
Prentice Hall, Inc. © Cooperative Strategies Collusion Strategic Alliances Mutual service consortia Joint ventures Licensing arrangements Value-chain partnerships