Professional Documents
Culture Documents
Strategy Formulation
Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies
Strategy Selection
Strategies in Action
Strategies for taking the hill wont necessarily hold it. Amar Bhide
The early bird may get the worm, but the second mouse gets the cheese. Unknown
Strategies in Action
Long-Term Objectives
Results expected from pursuing certain strategies Strategies represent actions to accomplish long-term objectives
Objectives are commonly stated in terms such as growth in assets, growth in sales, profitability, market share, degree and nature of diversification. Long-term objectives are needed at the corporate, divisional, and functional levels in an organization. They are an important measure of managerial performance.
Long-Term Objectives
Objectives -Quantifiable Measurable Realistic Understandable Challenging Hierarchical Obtainable Congrugent (fit- together) Time-line
Strategic Objectives
Larger market share Quicker on-time delivery than rivals Quicker design-to-market times than rivals Lower costs than rivals Higher product quality than rivals
Types of Strategies
Vertical Integration Strategies Intensive Strategies Diversification Strategies Defensive Strategies
Types of Strategies
Forward Integration
Backward Integration
Horizontal Integration
Types of Strategies
Market Penetration
Intensive Strategies
Market Development
Product Development
Market Penetration Strategies: Increased Market Share of Present products/services or Present markets
Current markets not saturated Rate of present customers can be increased significantly Shares of competitors declining; industry sales increasing
Increased economies of scale (increase units of production cause reduction in average cost to produce a unit) provide major competitive advantage
Market Development Strategies: New Markets -- Present products/services to new geographic areas Strategy should be adopted when :
Product Development Strategies: Increased Sales -- Improving present products/services or developing new products/services
Products in maturity stage of life cycle Industry characterized by rapid technological development Competitors offer better-quality products @ comparable prices Strong R&D capabilities
Types of Strategies
Related Diversification
Diversification Strategies
Unrelated Diversification
Diversification
Related When their value chains posses competitively valuable cross-business strategic fits Unrelated When their value chains are so dissimilar that no competitively valuable cross-business relationships exist
Unrelated Diversification
Favors capitalizing on a portfolio of businesses that are capable of delivering excellent financial performance Entails hunting to acquire companies:
Whose assets are undervalued That are financially distressed With high growth potential but are short on investment capital
Types of Strategies
Retrenchment
Defensive Strategies
Divestiture
Liquidation
Defensive Strategies
Retrenchment: reduce Costs & assets to reverse declining sales & profit
Retrenchment Strategies
Guidelines -Failed to meet objectives & goals consistency; has distinctive competencies
Firm is one of weaker competitors
Divestiture Strategies
Guidelines -Retrenchment failed to attain improvements
Division needs more resources than are available Division responsible for firms overall poor performance Division is a mis-fit with organization Large amount of cash is needed and cannot be raised through other sources
Liquidation Strategies
Guidelines -Retrenchment & divestiture failed Only alternative is bankruptcy Minimize stockholder loss by selling firms assets
Differentiation Strategies
Focus Strategies
Generic Strategies
Low Cost strategy: the basic idea
underprice competitors or offer a better value
Cost Leadership
Ways of ensuring total costs across value chain are lower than competitors total costs
1. Perform value chain activities more efficiently than rivals and control factors that drive costs 2. Revamp the firms overall value chain to eliminate or bypass some cost-producing activities
Cost Leadership
Can be especially effective when:
1. Price competition among rivals is vigorous 2. Rivals products are identical and supplies are readily available 3. There are few ways to achieve differentiation 4. Most buyers use the product in the same way 5. Buyers have low switching costs 6. Buyers are large and have significant power 7. Industry newcomers use low prices to attract buyers
Generic Strategies
Differentiation: (Type 3)
producing products that are considered unique
allows a firm to charge higher prices Or gain customer loyalty risk of differentiation strategy: unique product may not be valued highly enough by customers to justify the higher price. requirements for a successful differentiation strategy: strong coordination among the R&D and marketing functions and substantial amenities to attract scientists and creative
people.
Differentiation
Can be especially effective when:
1. There are many ways to differentiate and many buyers perceive the value of the differences 2. Buyer needs and uses are diverse 3. Few rival firms are following a similar differentiation approach 4. Technology change is fast paced and competition revolves around evolving product features
Generic Strategies
Focused Strategies (Type 4 & 5)
producing products and services that fulfill the needs of small groups of consumers (niche market).
two types:
products or services to a small range (niche) of customers at the lowest price available on the market. products or services to a small range (niche) of customers at the lowest price available on the market. (focused differentiation)
Focused Strategy
Can be especially effective when:
1. The target market niche is large, profitable, and growing 2. Industry leaders do not consider the niche crucial 3. Industry leaders consider the niche too costly or difficult to meet 4. The industry has many different niches and segments 5. Few, if any, other rivals are attempting to specialize in the same target segment
Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity
Provide improved capacity utilization Better use of existing sales force Reduce managerial staff Gain economies of scale Smooth out seasonal trends in sales Gain new technology Access to new suppliers, distributors, customers, products, creditors
Recent Mergers
Acquiring Firm IBM Philip Morris Acquired Firm Ascential Software PT Hanjaya Mandala Samp National Steel Corp PeopleSoft Brookstone
U.S. Steel Oracle OSIM International Ltd Adobe Systems Macromedia US Airways American West United Parcel Service Overnight Corp.
Outsourcing
Less expensive Allows firm to focus on core business Enables firm to provide better services
Questions
Discuss three different types of strategies, not including porters three strategies, firms can adopt and discuss how to achieve these strategies. Discuss integrative, intensive and diversification strategies and their relationship to Porters strategies: low-cost, differentiation and focus. Discuss the type of strategy: integration, intensive, diversification or defensive, which you would consider to be most appropriate for a the D.I.T. Discuss the different means of achieving a strategy and propose which one an organisation of your choice may use in order to pursue a strategy of their choice.