Session 13  14

Session 13 14 PowerPoint PPT Presentation

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Remember for the Case. Three Scenarios: Worst, Best, Most LikelyLong Term Objective (same for each)Two Competitive OptionsEach Containing:Corporate Level Strategy AlternativeBusiness Level Strategy AlternativeGeneric ThemePackage of (3-6) Grand Strategies. 2. 3. Types of Grand Strategie

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Session 13 14

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1. 1 Session 13 & 14 Concluding discussion of grand strategies

2. Remember for the Case Three Scenarios: Worst, Best, Most Likely Long Term Objective (same for each) Two Competitive Options Each Containing: Corporate Level Strategy Alternative Business Level Strategy Alternative Generic Theme Package of (3-6) Grand Strategies 2

3. 3 Types of Grand Strategies

4. 4 Concentrated Growth Concentrated growth directs its resources to the profitable growth of a single product, in a single market, with a single dominant technology

5. 5 Market Development Market development commonly ranks second only to concentration as the least costly and least risky of the 15 grand strategies It consists of marketing present products, often with only cosmetic modifications, to customers in related market areas by adding channels of distribution or by changing the content of advertising or promotion Frequently, changes in media selection, promotional appeals, and distribution are used to initiate this approach

6. 6 Product Development Product development involves the substantial modification of existing products or the creation of new but related products that can be marketed to current customers through established channels

7. 7 Innovation These companies seek to reap the initially high profits associated with customer acceptance of a new or greatly improved product Then, rather than face stiffening competition as the basis of profitability shifts from innovation to production or marketing competence, they search for other original or novel ideas The underlying rationale of the grand strategy of innovation is to create a new product life cycle and thereby make similar existing products obsolete

8. 8 Horizontal Integration When a firmís long-term strategy is based on growth through the acquisition of one or more similar firms operating at the same stage of the production-marketing chain, its grand strategy is called horizontal integration Such acquisitions eliminate competitors and provide the acquiring firm with access to new markets

9. 9 Vertical Integration When a firmís grand strategy is to acquire firms that supply it with inputs (such as raw materials) or are customers for its outputs (such as warehouses for finished products), vertical integration is involved The main reason for backward integration is the desire to increase the dependability of the supply or quality of the raw materials used as production inputs

10. 10 Vertical and Horizontal Integration

11. 11 Concentric Diversification Concentric diversification involves the acquisition of businesses that are related to the acquiring firm in terms of technology, markets, or products With this grand strategy, the selected new businesses possess a high degree of compatibility with the firmís current businesses The ideal concentric diversification occurs when the combined company profits increase the strengths and opportunities and decrease the weaknesses and exposure to risk

12. 12 Conglomerate Diversification Occasionally a firm, particularly a very large one, plans acquire a business because it represents the most promising investment opportunity available. This grand strategy is commonly known as conglomerate diversification. The principal concern of the acquiring firm is the profit pattern of the venture Unlike concentric diversification, conglomerate diversification gives little concern to creating product-market synergy with existing businesses

13. 13 Turnaround The firm finds itself with declining profits Among the reasons are economic recessions, production inefficiencies, and innovative breakthroughs by competitors Strategic managers often believe the firm can survive and eventually recover if a concerted effort is made over a period of a few years to fortify its distinctive competences. This is turnaround. Two forms of retrenchment: Cost reduction Asset reduction

14. 14 Elements of Turnaround A turnaround situation represents absolute and relative-to-industry declining performance of a sufficient magnitude to warrant explicit turnaround actions The immediacy of the resulting threat to company survival is known as situation severity Turnaround responses among successful firms typically include two stages of strategic activities: retrenchment and the recovery response The primary causes of the turnaround situation have been associated with the second phase of the turnaround process, the recovery response

15. 15 Divestiture A divestiture strategy involves the sale of a firm or a major component of a firm When retrenchment fails to accomplish the desired turnaround, or when a nonintegrated business activity achieves an unusually high market value, strategic managers often decide to sell the firm Reasons for divestiture vary

16. 16 Liquidation When liquidation is the grand strategy, the firm typically is sold in parts, only occasionally as a wholeóbut for its tangible asset value and not as a going concern Planned liquidation can be worthwhile

17. 17 Bankruptcy Liquidation bankruptcyóagreeing to a complete distribution of firm assets to creditors, most of whom receive a small fraction of the amount they are owed Reorganization bankruptcyóthe managers believe the firm can remain viable through reorganization Two notable types of bankruptcy Chapter 7 Chapter 11

18. 18 Joint Ventures Occasionally two or more capable firms lack a necessary component for success in a particular competitive environment The solution is a set of joint ventures, which are commercial companies (children) created and operated for the benefit of the co-owners (parents) The joint venture extends the supplier-consumer relationship and has strategic advantages for both partners

19. 19 Strategic Alliances Strategic alliances are distinguished from joint ventures because the companies involved do not take an equity position in one another In some instances, strategic alliances are synonymous with licensing agreements Outsourcing arrangements vary

20. 20 Consortia, Keiretsus, and Chaebols Consortia are defined as large interlocking relationships between businesses of an industry In Japan such consortia are known as keiretsus, in South Korea as chaebols Their cooperative nature is growing in evidence as is their market success

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23. 23 Key Issues: Strategic Choice in Single Businesses

24. 24 Prominent Sources of Competitive Advantage

25. 25 Evaluating A Businessís Cost Leadership Opportunities

26. 26 Evaluating A Businessís Cost Leadership Opportunities -- C. Examples of Ways Businesses Achieve Competitive Advantage

27. 27 Advantages of a Cost Leadership Strategy

28. 28 Key Risks of Cost Leadership

29. 29 Evaluating A Businessís Differentiation Opportunities

30. 30 Evaluating A Businessís Differentiation Opportunities -- C. Examples of Ways Businesses Achieve Competitive Advantage

31. 31 Advantages of a Differentiation Strategy

32. 32 Key Risks of Differentiation

33. 33 Creating a Competitive Advantage Based on Speed Has become a major source of competitive advantage for many firms Involves the availability of a rapid response to customers by Providing current products quicker Accelerating new product development or improvement Quickly adjusting production processes Making decisions quickly

34. 34 Evaluating A Businessís Rapid Response Opportunities

35. 35 Evaluating A Businessís Rapid Response Opportunities -- C. Examples of Ways Businesses Achieve Competitive Advantage

36. 36 Advantages of a Speed-Based Strategy

37. 37 Key Risks of a Speed-Based Strategy

38. 38 Creating a Competitive Advantage Based on Market Focus Involves building cost, differentiation, and/or speed competitive advantages targeted to a narrow, market niche Allows a firm to ďLearnĒ its target customers Build up organizational knowledge of ways to satisfy its target market better than larger rivals Risks of focus strategies Can attract major competitors to the segment Believing a focus strategy, by itself, creates success, rather than a form of low cost, differentiation, or speed

39. 39 Industry Environments and Strategy Choices

40. 40 Characteristics of Markets in Emerging Industries Proprietary technology and technological uncertainty Competitor uncertainty regarding inadequate information High initial cost structure Few entry barriers First-time buyers require initial inducement Inability to easily obtain raw materials and components Need for high-risk capital

41. 41 Strategic Options for Emerging Industries

42. 42 Characteristics of Industries Transitioning to Maturity Intense competition for market share Increased sales to experienced, repeat buyers Greater emphasis on cost and service Declining profitability

43. 43 Strategic Options for Maturing Industries

44. 44 Pitfalls to Avoid in Competing in Maturing Industries

45. 45 Characteristics of Mature/Declining Industries Demand grows more slowly than economy, or even declines Slowing growth is caused by Technological substitution Demographic shifts Shifts in consumer needs

46. 46 Strategic Options for Mature/Declining Industries

47. 47 Pitfalls to Avoid in Competing in Mature/Declining Industries

48. 48 Characteristics of Fragmented Industries No firm has a significant market share No firm can significantly influence industry outcomes Examples Professional services Retailing Wood and metal fabrication Agricultural products Funeral industry

49. 49 Strategic Options for Fragmented Industries

50. 50 Characteristics of Global Industries Differences in prices and costs among countries due to Currency exchange fluctuations Differences in wage and inflation rates Other economic factors Differences in buyer needs across countries Differences in competitors and ways of competing among countries Differences in trade rules and governmental regulations across countries

51. 51 Strategic Options: Pursuing Global Market Coverage

52. 52 Strategic Options: Choosing a Generic Competitive Strategy

53. 53 Grand Strategy Selection Matrix

54. 54 Model of Grand Strategy Clusters

55. 55 Conclusion: Selecting a Business Strategy to Achieve a Competitive Advantage

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