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Chapter 5. Strategy Formulation: Situation Analysis and Business Strategy PowerPoint Slides Anthony F. Chelte Western New England College. Situational Analysis. Strategy formulation: Strategic planning or long-range planning Develops mission, objectives, strategies and policies.

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chapter 5

Chapter 5

Strategy Formulation: Situation Analysis and Business Strategy

PowerPoint Slides

Anthony F. Chelte

Western New England College

Chapter 5

Wheelen/Hunger

situational analysis
Situational Analysis

Strategy formulation:

  • Strategic planning or long-range planning
    • Develops mission, objectives, strategies and policies

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situational analysis3
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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Strategic Factor Analysis Summary (SFAS)

1

2

3

4

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6

Duration

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

Rating

Weighted Score

INTERMEDIATE

Weight

Comments

SHORT

LONG

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Strategic Factor Analysis Summary (SFAS): Maytag as Example

Duration

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

Rating

Weighted Score

INTERMEDIATE

Weight

Comments

SHORT

LONG

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X

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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

1.00

3.05

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situational analysis6
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 analysis7
Situational Analysis

SWOT analysis:

  • Internal
    • Strengths
    • Weaknesses
  • External
    • Opportunities
    • Threats

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tows matrix
TOWS Matrix

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resource based approach
Resource-Based Approach

Resource:

An asset, competency, process, skill, or knowledge controlled by the corporation.

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business strategies
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
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 strategies12
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 strategies13
Porter’s Competitive Strategies

Competitive Advantage:

  • Determined by Competitive Scope
    • Breadth of the company’s target market

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porter s competitive strategies15
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 strategies16
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 strategies17
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 strategies18
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 strategies19
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
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 strategy22
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
Dimensions of Quality
  • Performance
  • Features
  • Reliability
  • Conformance
  • Durability
  • Serviceability
  • Aesthetics
  • Perceived Quality

Dimensions

Quality

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competitive strategy24
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 strategy25
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
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 tactics28
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

Cooperative Strategies:

  • Collusion
    • Active cooperation of firms to reduce output and raise prices
      • Explicit
      • Tacit

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cooperative strategies31
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 strategies32
Cooperative Strategies

Obtain technology

Access to markets

Strategic

Alliance

Reduce financial risk

Reduce political risk

Achieve competitive

advantage

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Continuum of Strategic Alliances

Mutual Service

Joint Venture

Value-Chain

Consortia

Licensing Arrangement

Partnership

Weak and Distant

Strong and Close

Source: Suggested by R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business Review (July-August 1994), pp. 96–108.

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