1. Strategy Formulation: Situation Analysis and Business Strategy
Chapter 5
Strategy Formulation: Situation Analysis and Business Strategy
Dr.Vijaya Kumar
Skyline College
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2. Situational Analysis Strategy formulation:
Strategic planning or long-range planning
Develops mission, objectives, strategies and policies
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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.
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4. Strategic Factor Analysis Summary (SFAS)1 2 3 4 5 6
Duration
Strategic Factors
(Select the most important opportunities/threats from EFAS, Table 3.4 and the most important strengths and weaknesses from IFAS, Table 4.2)
Total Score
Rating
Weighted Score
INTERMEDIATE
Weight
SHORT
Comments
LONG
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5. Strategic Factor Analysis Summary (SFAS): Maytag as Example
Duration
Strategic Factors
(Select the most important opportunities/threats from EFAS, Table 3.4 and the most important strengths and weaknesses from IFAS, Table 4.2)
S1 Quality Maytag culture (S)
S3 Hoover’s international orientation (S)
W3 Financial position (W)
W4 Global positioning (W)
O1 Economic integration of
European Community (O)
O2 Demographics favor quality (O)
O5 Trend to super stores (O + T)
T3 Whirlpool and Electrolux (T)
T5 Japanese appliance companies (T)
Total Score
Rating
Weighted Score
INTERMEDIATE
Weight
SHORT
Comments
LONG
.10
.15 5 3 2 4
.50
.30
.20
.40
.45 X X X
Quality key to success
Name recognition
High debt
Only in N.A., U.K., and Australia
Acquisition of Hoover
Maytag quality
Weak in this channel
Dominate industry
Asian presence
1.00
3.05
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6. 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
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7. Situational Analysis SWOT analysis: Internal External Strengths
Weaknesses
External
Opportunities
Threats
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8. TOWS Matrix
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9. Resource-Based Approach
An asset, competency, process, skill, or knowledge controlled by the corporation.
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10. Business Strategies Business Strategy:
Focuses on improving the competitive position of a company’s or business unit’s products or services within the specific industry or market segment that the firm serves.
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11. Porter’s Competitive Strategies
Competitive Strategy:
Low cost?
Differentiation?
Compete head to head in large market?
Focus on niche?
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12. Porter’s Competitive Strategies
Generic Competitive Strategies:
Lower cost strategy
Design, produce, market more efficiently than competitors
Differentiation strategy
Unique and superior value in terms of product quality, features, service
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13. Porter’s Competitive Strategies
Competitive Advantage:
Determined by Competitive Scope
Breadth of the company’s target market
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14. Porter’s Generic Competitive Strategies
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15. 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
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16. Porter’s Competitive Strategies
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price
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17. 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
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18. 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
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19. Porter’s Competitive Strategies
Stuck in the middle:
No competitive advantage
Below-average performance
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20. 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.
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21. Competitive Strategy Industry Structure: Fragmented Industry
Many small and medium-sized local companies compete for small shares of total market
Focus strategies predominate
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22. Competitive Strategy Industry Structure: Consolidated industry
Mature industry dominated by a few large companies
Cost Leadership or Differentiation predominate
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23. Dimensions of Quality Performance Features Reliability Dimensions
Conformance
Durability
Serviceability
Aesthetics
Perceived Quality
Dimensions
Quality
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24. Competitive Strategy Strategic rollup:
Quickly consolidate fragmented industry
Money from venture capital
Entrepreneur acquires hundreds of owner-operated firms
Creates large firm with economies of scale
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25. Competitive Strategy Strategic rollup: Differ from Conventional M&A’s
Large number of firms
Owner-operated firms
Goal to reinvent entire industry
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26. Competitive Tactics Tactic:
Specific operating plan detailing how a strategy is to be implemented in terms of when and where it is to be put into action.
Timing tactics
Market location tactics
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27. Competitive Tactics Timing Tactics: First mover (pioneer) Late mover
Reputation as industry leader
High profits
Sets standards for subsequent products in the industry
Late mover
Able to imitate technological advances of others
Keeps R&D costs down
Keeps risks down
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28. Competitive Tactics Market Location Tactics: Offensive Tactics
Frontal assault
Flanking maneuver
Bypass attack
Encirclement
Guerrilla warfare
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29. Competitive Tactics Market Location Tactics: Defensive Tactics
Raise structural barriers
Increase expected retaliation
Lower the inducement for attack
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30. Cooperative Strategies
Collusion
Active cooperation of firms to reduce output and raise prices
Explicit
Tacit
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31. Cooperative Strategies
Strategic Alliance:
Partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.
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32. Cooperative Strategies
Obtain technology
Access to markets
Strategic
Alliance
Reduce financial risk
Reduce political risk
Achieve competitive
advantage
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33. Continuum of Strategic Alliances
Mutual Service
Joint Venture
Value-Chain
Consortia
Licensing Arrangement
Partnership
Weak and Distant
Strong and Close
Source: Suggested by R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business Review (July-August 1994), pp. 96–108.
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