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Business Strategy
Situational Analysis:
SWOT is an acronym used to describe the particular
Strengths,Weaknesses,Opportunities, and Threats
that are strategic factors for a specific company.
SWOT analysis should not only result in the
identification
of
a
corporations
distinctive
competenciesthe
particular
capabilities
and
resources that a firm possesses and the superior way
in which they are usedbut also in the identification
of opportunities that the firm is not currently able to
take advantage of due to a lack of appropriate
resources.
SA=O/(S W)
SWOT can thus be used to take a broader view of
strategy through the formula SA=O/(S W) that is,
(Strategic Alternative equals Opportunity divided by
Strengths minus Weaknesses). This reflects an
important issue strategic managers face: Should we
invest more in our strengths to make them even
stronger (a distinctive competence) or should we
invest in our weaknesses to at least make them
competitive?
As shown in Figure , you can create an SFAS Matrix by following these steps:
1. In Column 1 (Strategic Factors), list the most important EFAS and IFAS items. After each
factor, indicate whether it is a Strength (S), Weakness (W), an Opportunity (O), or a Threat
(T).
2. In Column 2 (Weight), assign weights for all of the internal and external strategic factors.
As with the EFAS and IFAS Tables presented earlier, the weight column must total 1.00.
This means that the weights calculated earlier for EFAS and IFAS will probably have to be
adjusted.
3. In Column 3 (Rating), assign a rating of how the companys management is responding to each
of the strategic factors. These ratings will probably (but not always) be the same as those
listed in the EFAS and IFAS Tables.
4. In Column 4 (Weighted Score), multiply the weight in Column 2 for each factor by its rating
in Column 3 to obtain the factors rated score.
5. In Column 5 (Duration), depicted in Figure, indicate short-term (less than one year),
intermediate-term (one to three years), or long-term (three years and beyond).
6. In Column 6 (Comments), repeat or revise your comments for each strategic factor from the
previous EFAS and IFAS Tables. The total weighted score for the average firm in an
industry is always 3.0
Business Strategies
Business strategy focuses on improving the
competitive position of a companys or business units
products or services within the specific industry or
market segment that the company or business unit
serves. Business strategy is extremely important
because research shows that business unit effects
have double the impact on overall company
performance than do either corporate or industry
effects.
Differentiation strategy
Differentiation strategy is the ability of a company
to provide unique and superior value to the buyer in
terms of product quality, special features, or aftersale service.
The company or business unit may then charge a
premium for its product. This specialty can be
associated with design or brand image, technology,
features, a dealer network, or customer service.
Advantage of Differentiation
Differentiation is a viable strat-egy for earning
above-average returns in a specific business because
the resulting brand loyalty lowers customers
sensitivity to price. Increased costs can usually be
passed on to the buyers. Buyer loyalty also serves as
an entry barrier; new firms must develop their own
distinctive competence to differentiate their
products in some way in order to compete
successfully
Issues of Differentiation
Differentiation is not sustained:
Competitors imitate.
Bases for differentiation become
less important to buyers.
Focus
Cost focus is a low-cost competitive strategy that
focuses on a particular buyer group or geographic
market and attempts to serve only this niche, to the
exclusion of others. In using cost focus, the company
or business unit seeks a cost advantage in its target
segment.
Differentiation focus, like cost focus, concentrates
on a particular buyer group, product line segment, or
geographic market.
Market-Follower Strategies
1. CounterfeiterThe counterfeiter duplicates the leaders product and
packages and sells it onthe black market or through disreputable
dealers. Music firms, Apple, and Rolex have been plagued by the
counterfeiter problem, especially in Asia.
2. ClonerThe cloner emulates the leaders products, name, and
packaging, with slight variations.For example, Ralcorp Holdings sells
imitations of name-brand cereals in look-alike boxes. .
3. ImitatorThe imitator copies some things from the leader but
differentiates on packaging, advertising, pricing, or location. The
leader doesnt mind as long as the imitator doesnt attack aggressively.
4. AdapterThe adapter takes the leaders products and adapts or
improves them. The adapter may choose to sell to different markets,
but often it grows into a future challenger, as many Japanese firms
have done after improving products developed elsewhere.
Market-Nicher Strategies
End-user specialist. The firm specializes in one type of end-use
customer.
Vertical-level specialist. The firm specializes at some vertical level
of the production-distribution value chain.
Customer-size specialist. The firm concentrates on either small,
medium-sized, or large customers. Many nichers serve small
customers neglected by the majors.
Specific-customer specialist. The firm limits its selling to one or a
few ustomers. Many firms sell their entire output to a single
company
.