Prentice Hall, 2002 Chapter 5 Wheelen/Hunger 1 Chapter 5 Strategy Formulation: Situation Analysis and Business Strategy
Jan 18, 2016
Prentice Hall, 2002 Chapter 5Wheelen/Hunger
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Chapter 5Strategy Formulation: Situation Analysis and Business Strategy
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Situational Analysis
Strategy formulation:– Strategic planning or long-range
planning• Develops mission, objectives, strategies
and policies
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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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51 2 3 4
Strategic Factor Analysis Summary (SFAS)
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
Weight RatingWeighted Score Comments
SH
OR
T
INT
ER
ME
DIA
TE
LO
NG
Duration 6
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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
Weight RatingWeighted Score Comments
1.00
SH
OR
T
INT
ER
ME
DIA
TE
LO
NG
Duration
3.05
.10
.10
.10
.15
.10
.10
.10
.15
.10
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
5
3
2
2
4
5
2
3
2
.50
.30
.20
.30
.40
.50
.20
.45
.20
Strategic Factor Analysis Summary (SFAS): Maytag as Example
X
X
X
X
X
X
X
X
X
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Situational Analysis
Niche:– 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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Situational Analysis
SWOT analysis:– Internal
• Strengths• Weaknesses
– External• Opportunities• Threats
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TOWS Matrix
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Resource-Based Approach
Resource:
An asset, competency, process, skill, or knowledge controlled by the corporation.
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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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Porter’s Competitive Strategies
Competitive Strategy:–Low cost?
–Differentiation?
–Compete head to head in large market?
–Focus on niche?
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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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Porter’s Competitive Strategies
Competitive Advantage:–Determined by Competitive Scope
• Breadth of the company’s target market
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Porter’s Generic Competitive Strategies
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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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Porter’s Competitive Strategies
Differentiation:–Broad mass market
–Unique product or service
–Charge premiums
–Lower customer sensitivity to price
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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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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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Porter’s Competitive Strategies
Stuck in the middle:–No competitive advantage
–Below-average performance
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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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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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Competitive Strategy
Industry Structure:–Consolidated industry
• Mature industry dominated by a few large companies– Cost Leadership or Differentiation predominate
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Dimensions of Quality
Quality
• Performance• Features• Reliability• Conformance• Durability• Serviceability• Aesthetics• Perceived Quality
Dimensions
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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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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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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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Competitive Tactics Timing Tactics:
–First mover (pioneer)• 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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Competitive Tactics
Market Location Tactics:–Offensive Tactics
• Frontal assault• Flanking maneuver• Bypass attack• Encirclement• Guerrilla warfare
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Competitive Tactics
Market Location Tactics:–Defensive Tactics
• Raise structural barriers• Increase expected retaliation• Lower the inducement for attack
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Cooperative Strategies
Cooperative Strategies:–Collusion
• Active cooperation of firms to reduce output and raise prices– Explicit– Tacit
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Cooperative Strategies
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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Cooperative Strategies
StrategicAlliance
Access to markets
Achieve competitiveadvantage
Obtain technology
Reduce financial risk
Reduce political risk
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Continuum of Strategic Alliances
Mutual Service Consortia
Joint Venture Licensing Arrangement
Weak and Distant
Value-Chain Partnership
Strong and Close
Source: Suggested by R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business Review (July-August 1994), pp. 96–108.