1. Strategy Formulation: Situation Analysis and Business Strategy
Chapter 5
Strategy Formulation: Situation Analysis and Business Strategy

2. Situational Analysis Strategy formulation:
Strategic planning or long-range planning
Develops mission, objectives, strategies and policies

3. Situational Analysis Situational Analysis:
Process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses.

4. Situational Analysis Niche: Goal for the Corporation
A need in the marketplace that is currently unsatisfied.
Goal for the Corporation
Find a propitious niche
An extremely favorable niche
Strategic window
Unique market opportunity available for a limited time

5. Situational Analysis SWOT analysis: Internal External Strengths
Weaknesses
External
Opportunities
Threats

6. TOWS Matrix

7. Porter’s Generic Competitive Strategies

8. Porter’s Competitive Strategies
Cost Leadership:
Low-cost competitive strategy
Aimed at broad mass market
Aggressive construction of efficient-scale facilities
Cost reductions
Cost minimization

9. Porter’s Competitive Strategies
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price

10. Porter’s Competitive Strategies
Cost focus:
Low cost competitive strategy
Focus on particular buyer group or market
Niche focused
Seek cost advantage in target market

11. Porter’s Competitive Strategies
Differentiation focus:
Focus on particular group or geographic market
Seek differentiation in targeted market segment
Serve special needs of narrow target market

12. Porter’s Competitive Strategies
Stuck in the middle:
No competitive advantage
Below-average performance

13. Risks of Generic Competitive 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.