CHAPTER 6 Strategy Formulation: Situation Analysis & Business Strategy THOMAS L. WHEELEN J. DAVID HUNGER Prentice Hall 2006

Strategy formulation -- Situational Analysis Strategy formulation -- Strategic planning or long-range planning Develops mission, objectives, strategies, policies Prentice Hall 2006

Situational Analysis --process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses Prentice Hall 2006

IFAS – Maytag as Example Prentice Hall 2006

EFAS – Maytag as Example Prentice Hall 2006

SFAS Matrix Prentice Hall 2006

Niche -- Need in the marketplace that is currently unsatisfied Situational Analysis Niche -- Need in the marketplace that is currently unsatisfied Prentice Hall 2006

Corporate Goal -- Find propitious niche Strategic window Situational Analysis Corporate Goal -- Find propitious niche Strategic window Prentice Hall 2006

SWOT -- Internal External Strengths/Weaknesses Opportunities/Threats Situational Analysis SWOT -- Internal Strengths/Weaknesses External Opportunities/Threats Prentice Hall 2006

TOWS Matrix Prentice Hall 2006

Business Strategy Focuses on improving competitive position of company’s products or services within the specific industry or market segment Prentice Hall 2006

Generic Competitive Strategies -- Porter’s Competitive Strategies Generic Competitive Strategies -- Lower Cost strategy Greater efficiencies than competitors Differentiation strategy Unique/superior value, quality, features, service Prentice Hall 2006

Competitive Advantage -- Porter’s Competitive Strategies Competitive Advantage -- Determined by Competitive Scope Breadth of the target market Prentice Hall 2006

Porter’s Competitive Strategies Prentice Hall 2006

Cost Leadership -- Low-cost competitive strategy Broad mass market Porter’s Competitive Strategies Cost Leadership -- Low-cost competitive strategy Broad mass market Efficient-scale facilities Cost reductions Cost minimization Prentice Hall 2006

Differentiation – Broad mass market Unique product/service Porter’s Competitive Strategies Differentiation – Broad mass market Unique product/service Premiums charged Less price sensitivity Prentice Hall 2006

Cost Focus – Low-cost competitive strategy Focus on market segment Porter’s Competitive Strategies Cost Focus – Low-cost competitive strategy Focus on market segment Niche focused Cost advantage in market segment Prentice Hall 2006

Differentiation Focus – Porter’s Competitive Strategies Differentiation Focus – Specific group or geographic market focus Differentiation in target market Special needs of narrow target market Prentice Hall 2006

Stuck in the middle – No competitive advantage Porter’s Competitive Strategies Stuck in the middle – No competitive advantage Below-average performance Prentice Hall 2006

Competitive Strategies Best Cost Provider – A company has an ability to incorporate attractive or upscale attributes at a lower cost than rivals. Prentice Hall 2006

Timing Tactics -- First mover Late movers Competitive Tactics Prentice Hall 2006

Market Location Tactics -- Competitive Tactics Market Location Tactics -- Frontal Assault Flanking Maneuver Bypass Attack Encirclement Guerrilla Warfare Prentice Hall 2006

Defensive Tactics -- Raise structural barriers Competitive Tactics Defensive Tactics -- Raise structural barriers Increase expected retaliation Lower the inducement for attack Prentice Hall 2006

Mutual service consortia Joint ventures Licensing arrangements Cooperative Strategies Collusion Strategic Alliances Mutual service consortia Joint ventures Licensing arrangements Value-chain partnerships Prentice Hall 2006