Strategy basics
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STRATEGY Basics. STRATEGY Action Plan Future Competitors Advantage Sustained Environment Long term. Surpass close competitor ie . Nestle. Niche to Broad. Chocolate to “sweet dish to celebrate”. TYPES of STRATEGIES. Corporate level str. Business unit level str.

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STRATEGY Basics

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Strategy basics

STRATEGYBasics


Strategy basics

  • STRATEGY

  • Action Plan

  • Future

  • Competitors

  • Advantage

  • Sustained

  • Environment

  • Long term


Strategy basics

Surpass close competitor ie. Nestle.


Strategy basics

Niche to

Broad


Strategy basics

Chocolate to “sweet dish to celebrate”


Strategy basics

TYPES of STRATEGIES

  • Corporate level str.

  • Business unit level str.

  • Functional or departmental level str.


Strategy basics

Corporate Level Strategy

“Fundamentally it is concerned with the selection of businesses in which the company should compete and, with the development and coordination of that portfolio of businesses”.

Entry, M&A, Diversification, Concentration etc


Strategy basics

Corp. Level St. is concerned with:

Reach - Identifying the overall goals of the corporation, Types of businesses in which the corporation should be involved.

Managing Activities and Business Interrelationships - Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities.

Management Practices - Decides how business units are to be governed: centralization or decentralization.


Strategy basics

Business Unit Level Strategy

A strategic business unit may be a division, product line, or a profit center that can be planned independently from the other business units of the firm.

At the business unit level, the strategic issues are less about the coordination of the units and more about developing and sustaining a competitive advantage for the goods and services that are produced.


Strategy basics

  • At the business level, the strategy formulation phase deals with:

  • Positioning the business against rivals

  • Anticipating changes in demand and technologies and adjusting the strategy to accommodate them (to defend against the adverse effects of the five forces)

  • Influencing the nature of competition through strategic actions such as vertical integration and through political actions such as lobbying.


Strategy basics

Functional Level Strategy

The functional level of the organization is the level of the operating divisions and departments.

The strategic issues at the functional level are related to business processes and the value chain.


Strategy basics

  • Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively.

  • Functional level strategies provides input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based.


Strategy basics

5 Generic Competitive Strategies

by M Porter


By m porter

By M. PORTER

  • Five Generic Competitive Strategies or Grand Strg.

  • Also called red ocean strg.


4 generic competitive strategies

4 Generic Competitive Strategies

Type of Advantage Sought

Differentiation/ Branding

Lower Cost

Low Cost Leadership

Broad Differentiation

Strategy

Broad

Range of Buyers

(MASS)

Market Target

Focused

Low-Cost

Strategy

Focused

Differentiation

Strategy

Narrow

Buyer

Segment

(Niche)


5 generic competitive strategies

5 Generic Competitive Strategies

Type of Advantage Sought

Lower Cost

Differentiation

Low-Cost

Leadership

Strategy

Broad

Differentiation

Strategy

Broad

Range of Buyers

Best-Cost

Provider

Strategy

Market Target

Focused

Low-Cost

Strategy

Focused

Differentiation

Strategy

Narrow

Buyer

Segment

or Niche


1 low cost leadership

1. Low-Cost Leadership

  • Make achievement of low-cost relative to rivals

  • Find ways to drive costs out of business year-after-year

  • Low-cost leadership means total low costs, not just low manufacturing or production costs!


2 approaches to securing a cost advantage

1. Control costs!

2. By-pass

costs!

2 Approaches to Securing a Cost Advantage


When does a low cost strategy work best

When Does a Low-Cost Strategy Work Best?

  • Price competition is vigorous

  • Product is standardized

  • Product readily available from many suppliers

  • There are few ways to achieve differentiation that have value to buyers


Pitfalls of low cost strategies

Pitfalls of Low-Cost Strategies

  • Low cost methods are easily imitated by rivals--- MARUTI

  • Becoming too fixated on reducing costsand ignoring Buyer interest--- FORD


2 broad differentiation strategies

2. Broad Differentiation Strategies

Objective

  • Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals

    Find ways to differentiate that

  • create value for buyers

  • that are not easily matched orcheaply copied by rivals

Keys to Success


Benefits of successful differentiation

Benefits of Successful Differentiation

  • Command a premium price and/or

  • Increase unit sales and/or

  • Build brand loyalty


When does a differentiation strategy work best

When Does a DifferentiationStrategy Work Best?

  • There are many ways to differentiate a product that have value to the customers

  • Buyer needs and uses are diverse

  • Few rivals are following a similar differentiation approach


Pitfalls of differentiation strategies

Pitfalls of Differentiation Strategies

  • Trying to differentiate on a feature buyers do not perceive as valuable

  • Charging a price premium that buyers perceive is too high


3 4 focus niche strategies

(3 & 4) Focus/Niche Strategies

  • Involve concentrated attention on a narrow piece of the total market ie. niche

    Serve niche buyers better than rivals

    Ex. ALL Store, West Side, HeroHonda She.

Objective


Strategy basics

Sub-Approach 1

3.Focused Low Cost

  • Achieve lower costs than rivals in serving the segment -- Focused low-cost strategy

  • Better knowledge of small niche than the Mass players

Offer niche buyers something different from rivals – Focused differentiation strategy

Sub-Approach 2

4. Focused Differentiation


5 best cost provider strategies

5. Best Cost Provider Strategies

  • Combine a strategic emphasis on both low-cost and differentiation

    • Make an upscale product at a lower cost

    • Give customers more value for the money

  • Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations

Objectives


How a best cost strategy differs from a low cost strategy

How a Best-Cost StrategyDiffers from a Low-Cost Strategy

  • Aim of a low-cost strategy--Achieve lower costs than any other competitor in the industry

  • Intent of a best-cost strategy--Make a more upscale productat lower costs than the makers of other brands with comparable features and attributes


Strategy basics

Strategic Planning Process


Strategy basics

Strategic Planning Process 1

Activities

Stages

(Consultants

Experience

Research)

Envt. Analysis

Analysis

+

Intuitions

Strategy Formulation

Make Decision

Strategy Implementation

Establish annual Objectives

(SMART)

Allocate Resources

Strategy Evaluation

Review internal and external factors

Take Corrective Action

Measure Performance


Strategy basics

Strategic Management Process 2

Analysis


Strategy basics

Tools for ANALYSIS


Swot matrix

SWOT Matrix

  • Strength

  • Weakness

  • Opportunities

  • Threats


Strategy basics

Strengths

Weaknesses

Opportunities Threats


Strategy basics

TOWS Matrix

TOWS matrix is a variant of the classic business tool, SWOT matrix.

Basic Approach is……

Make the most of your strengths?

Circumvent your weaknesses?

Capitalize on your opportunities? and

Manage your threats?


Strategy basics

TOWS Matrix


Strategy basics

BCG portfolio Matrix


Strategy basics

Effective Implementation of Strategies


Why do organizations struggle so hard with strategy

Why Do Organizations Struggle So Hard With Strategy?

1 in 10 organizations execute/ implement their strategies successfully

72% of CEOs believe that executing/ implementing their chosen strategy is more difficult than formulating a good strategy

Fortune Magazine, 1998

Malcolm Baldrige CEO Survey, 2002


Strategy formulation or strategy implementation organizations need both

Sound

Flawed

Strategy Formulation or Strategy Implementation? Organizations Need Both

1

Missed

Opportunity

Strategic

Success

Strategy Formulation

Doomed From

The Start

At Risk

Flawed

Sound

Strategy Implementation


Strategy basics

Principles for Implementing Strategy

Effectively

Principles of Planning & Strategy same……

What does differ ……. FRAMEWORK for Implementing


Framework for implementing strategy effectively

Framework for Implementing Strategy Effectively

  • Building an organization with the competencies, capabilities and resource strengths to execute strategy successfully : organizational implementation

  • MarshallingResource allocation

  • Creating Policies and procedures (standardization) for excellence: Plan & Policy implementation

  • Installing information and operating systems: System implementation

  • Rewards and incentives, Work environment: LEADERSHIP implementation


Strategy basics

Policy

Guide to decision making in problems of recurrent nature, to bring uniformity.

Are broad statements/not specific in nature…

Do not suggest what to be done in specific situation.


Strategy basics

  • Types of Policies

  • Originated

  • Implied

  • By Fiat

  • Appealed

  • Externally Imposed


Policy formulation principles

Policy Formulation Principles

Principle of contribution to objectives

Be definite and in written

Be stable and flexible

Hierarchy

Complementary & coordinated

Equity

Periodic review


Decision making

Decision Making

Selecting optimum alternative……….


Decision making process

Decision Making Process

Identifying Problem

Analyzing problem

Developing alternative solutions

Evaluating alternative solutions

Choosing best (in practice optimum) solution- decision

Implementing & Verifying decision


Strategy basics

Individual Decision making models

Economic Man Model

Emotional Man Model

Rational Man Model


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