Business and Multibusiness Strategy

Prepared by: Eka Darmadi Lim 3094802

Study Question 1: What are the foundations of strategic competitiveness?

Basic concepts of strategy (cont.):
Strategy a comprehensive action plan that

identifies long-term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage.

Strategic intent focusing all organizational energies on a unifying and compelling goal.
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Study Question 1: What are the foundations of strategic competitiveness?

Basic concepts of strategy (cont.):
Strategic management the process of

formulating and implementing strategies to

accomplish long-term goals and sustain competitive advantage.

Study Question 1: What are the foundations of strategic competitiveness?

Goal of strategic management is to create

above-average returns for investors.

Returns exceeding those for alternative opportunities at equivalent risk. Earning above-average returns depends in part on the organizations competitive environment.
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Study Question 2: What is the strategic management process?

Strategy formulation
The process of creating strategy. Involves assessing existing strategies, organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage.
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Figure 9.1 Strategy formulation and

implementation in the strategic management process.

Figure 9.6 Porters generic strategies

framework: soft-drink industry examples.

Study Question 4: How are strategies formulated?

Porters generic strategies for gaining

competitive advantage:
Differentiation strategy Cost leadership strategy Focused differentiation strategy Focused cost leadership strategy
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Cost leadership strategy

Business success built on cost leadership

requires the business to be able to provide its product or service at a cost below what its competitors can achieve

Cost leadership strategy

Management 8/e - Chapter 9

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Sustainable Low-Cost Activities

1. Some low-cost advantages reduce the likelihood of buyers pricing pressure 2. Truly sustained low-cost advantages may push rivals into other areas 3. New entrants competing on price must face an entrenched cost leader 4. Low-cost advantages should lessen the attractiveness of substitute products 5. Higher margins allow low-cost producers to withstand supplier cost increases
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Risks of a Cost Leadership Strategy

1. Many cost-saving activities are easily duplicated 2. Exclusive cost leadership can be a trap 3. Obsessive cost cutting can shrink other competitive advantages 4. Cost differences often decline over time

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Evaluating a Businesss Differentiation Opportunities

Management 8/e - Chapter 9

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Evaluating Speed as a Competitive Advantage

Speed-based strategies, or rapid response

to customer requests or market and technological changes, have become a major source of competitive advantage for numerous firms in todays intensely competitive global economy

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Management 8/e - Chapter 9

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Speed can be created by:

Customer responsiveness
Product development cycles Product or service improvements Speed in delivery or distribution Information Sharing and Technology

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Risks of Speed-based Strategy

Speeding up activities that havent been

conducted in a fashion that prioritizes rapid response should only be done after considerable attention to training, reorganization, and/or reengineering Some industries may not offer much advantage to the firm that introduces some forms of rapid response
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Risks of Speed-based Strategy

Customers in such settings may prefer the

slower pace or the lower costs currently available, or they may have long time frames in purchasing

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Emerging Industries
Emerging industries are newly formed or

re-formed industries that typically are created by technological innovation, newly emerging customer needs, or other economic or sociological changes

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Business Strategies in Emerging Industries

Technologies that are most proprietary to

the pioneering firms and technological uncertainty will unfold Competitor uncertainty because of inadequate information about competitors, buyers, and the timing of demand High initial costs but steep cost declines
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Business Strategies in Emerging Industries

First-time buyers requiring initial

inducement to purchase Inability to obtain raw materials and components until suppliers gear up to meet the industrys needs Need for high-risk capital because of the industrys uncertain prospects
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The Portfolio Approach

The portfolio approach is a historical starting point for strategic analysis and choice in multibusiness firms Boston Consulting Group (BCG) pioneered an approach called portfolio techniques that attempted to help managers
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The Portfolio Approach

balance the flow of cash resources among their various businesses while identifying their basic strategic purpose within the overall portfolio

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Study Question 4: How are strategies formulated?

Portfolio planning approach
Designed to help managers decide on investing scarce organizational resources among competing business opportunities. Useful for multibusiness or multiproduct situations.
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Study Question 4: How are strategies formulated?

BCG matrix
Ties strategy formulation to analysis of business opportunities according to
Industry or market growth rate
Low versus high

Market share
Low versus high
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Figure 9.7 The BCG matrix approach to

corporate strategy formulation.

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Study Question 4: How are strategies formulated?

BCG matrix business conditions and

related strategies:
Stars
High share/high growth businesses. Preferred strategy growth.

Cash cows
High share/low growth businesses. Preferred strategy stability or modest growth.
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Study Question 4: How are strategies formulated?

BCG matrixbusiness conditions and

related strategies (cont.):

Question marks
Low share/high growth businesses. Preferred strategy growth for promising question marks and restructuring or divestiture for others.

Dogs
Low share/low growth businesses. Preferred strategy retrenchment by divestiture.
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Study Question 4: How are strategies formulated?

Types of adaptive strategies: Prospector strategy
Pursuing innovation and new opportunities in the face of risk and with prospects for growth.

Defender strategy
Protecting current market share by emphasizing existing products and current share without seeking growth.

Analyzer strategy
Maintaining stability of a core business while exploring selective opportunities for innovation and change.

Reactor strategy
Merely responding to competitive pressure in order to survive.
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 Thank You For Your Attention

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