1. Prentice Hall, Inc. © 20066-1 STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 6 Strategy Formulation: Situation Analysis & Business Strategy

2. Prentice Hall, Inc. © 20066-2 Situational Analysis Strategy formulation -- –Strategic planning or long-range planning Develops mission, objectives, strategies, policies

3. Prentice Hall, Inc. © 20066-3 Situational Analysis -- process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses

4. Prentice Hall, Inc. © 20066-4 IFAS – Maytag as Example

5. Prentice Hall, Inc. © 20066-5 EFAS – Maytag as Example

6. Prentice Hall, Inc. © 20066-6 SFAS Matrix

7. Prentice Hall, Inc. © 20066-7 Situational Analysis Niche -- –Need in the marketplace that is currently unsatisfied

8. Prentice Hall, Inc. © 20066-8 Situational Analysis Corporate Goal -- –Find propitious niche –Strategic window

9. Prentice Hall, Inc. © 20066-9 Situational Analysis SWOT -- –Internal Strengths/Weaknesses –External Opportunities/Threats

10. Prentice Hall, Inc. © 20066-10 TOWS Matrix

11. Prentice Hall, Inc. © 20066-11 Business Strategy Focuses on improving competitive position of company’s products or services within the specific industry or market segment

12. Prentice Hall, Inc. © 20066-12 Porter’s Competitive Strategies Competitive Strategy -- –Low cost –Differentiation –Direct competition –Focus on niche

13. Prentice Hall, Inc. © 20066-13 Porter’s Competitive Strategies Generic Competitive Strategies -- –Lower Cost strategy Greater efficiencies than competitors –Differentiation strategy Unique/superior value, quality, features, service

14. Prentice Hall, Inc. © 20066-14 Porter’s Competitive Strategies Competitive Advantage -- –Determined by Competitive Scope Breadth of the target market

15. Prentice Hall, Inc. © 20066-15 Porter’s Competitive Strategies

16. Prentice Hall, Inc. © 20066-16 Porter’s Competitive Strategies Cost Leadership -- –Low-cost competitive strategy –Broad mass market –Efficient-scale facilities –Cost reductions –Cost minimization

17. Prentice Hall, Inc. © 20066-17 Porter’s Competitive Strategies Differentiation – –Broad mass market –Unique product/service –Premiums charged –Less price sensitivity

18. Prentice Hall, Inc. © 20066-18 Porter’s Competitive Strategies Cost-Focus – –Low-cost competitive strategy –Focus on market segment –Niche focused –Cost advantage in market segment

19. Prentice Hall, Inc. © 20066-19 Porter’s Competitive Strategies Differentiation Focus – –Specific group or geographic market focus –Differentiation in target market –Special needs of narrow target market

20. Prentice Hall, Inc. © 20066-20 Porter’s Competitive Strategies Stuck in the middle – –No competitive advantage –Below-average performance

21. Prentice Hall, Inc. © 20066-21 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.

22. Prentice Hall, Inc. © 20066-22 8 Dimensions of Quality

23. Prentice Hall, Inc. © 20066-23 Competitive Strategy Industry Structure -- –Fragmented Industry –Consolidated Industry

24. Prentice Hall, Inc. © 20066-24 Competitive Tactics Timing Tactics -- –First mover –Late movers

25. Prentice Hall, Inc. © 20066-25 Competitive Tactics Market Location Tactics -- –Frontal Assault –Flanking Maneuver –Bypass Attack –Encirclement –Guerrilla Warfare

26. Prentice Hall, Inc. © 20066-26 Competitive Tactics Defensive Tactics -- –Raise structural barriers –Increase expected retaliation –Lower the inducement for attack

27. Prentice Hall, Inc. © 20066-27 Cooperative Strategies Collusion Strategic Alliances Mutual service consortia Joint ventures Licensing arrangements Value-chain partnerships