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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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slide2

STRATEGY

  • Action Plan
  • Future
  • Competitors
  • Advantage
  • Sustained
  • Environment
  • Long term
slide9

TYPES of STRATEGIES

  • Corporate level str.
  • Business unit level str.
  • Functional or departmental level str.
slide10

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

slide11

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.

slide12

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.

slide13

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.
slide14

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.

slide15

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.
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!
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

slide29

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
slide33

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

swot matrix
SWOT Matrix
  • Strength
  • Weakness
  • Opportunities
  • Threats
slide37

Strengths

Weaknesses

Opportunities Threats

slide38

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?

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

slide44

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
slide46

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.

slide47

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

slide51

Individual Decision making models

Economic Man Model

Emotional Man Model

Rational Man Model

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