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STRATEGY Basics

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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  1. STRATEGYBasics

  2. STRATEGY • Action Plan • Future • Competitors • Advantage • Sustained • Environment • Long term

  3. Surpass close competitor ie. Nestle.

  4. Niche to Broad

  5. Chocolate to “sweet dish to celebrate”

  6. TYPES of STRATEGIES • Corporate level str. • Business unit level str. • Functional or departmental level str.

  7. 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

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 5 Generic Competitive Strategies by M Porter

  14. By M. PORTER • Five Generic Competitive Strategies or Grand Strg. • Also called red ocean strg.

  15. 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)

  16. 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

  17. 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!

  18. 1. Control costs! 2. By-pass costs! 2 Approaches to Securing a Cost Advantage

  19. 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

  20. Pitfalls of Low-Cost Strategies • Low cost methods are easily imitated by rivals--- MARUTI • Becoming too fixated on reducing costsand ignoring Buyer interest--- FORD

  21. 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

  22. Benefits of Successful Differentiation • Command a premium price and/or • Increase unit sales and/or • Build brand loyalty

  23. 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

  24. 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

  25. (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

  26. 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

  27. 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

  28. 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

  29. Strategic Planning Process

  30. 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

  31. Strategic Management Process 2 Analysis

  32. Tools for ANALYSIS

  33. SWOT Matrix • Strength • Weakness • Opportunities • Threats

  34. Strengths Weaknesses Opportunities Threats

  35. 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?

  36. TOWS Matrix

  37. BCG portfolio Matrix

  38. Effective Implementation of Strategies

  39. 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

  40. 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

  41. Principles for Implementing Strategy Effectively Principles of Planning & Strategy same…… What does differ ……. FRAMEWORK for Implementing

  42. 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

  43. 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.

  44. Types of Policies • Originated • Implied • By Fiat • Appealed • Externally Imposed

  45. Policy Formulation Principles Principle of contribution to objectives Be definite and in written Be stable and flexible Hierarchy Complementary & coordinated Equity Periodic review

  46. Decision Making Selecting optimum alternative……….

  47. Decision Making Process Identifying Problem Analyzing problem Developing alternative solutions Evaluating alternative solutions Choosing best (in practice optimum) solution- decision Implementing & Verifying decision

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