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Chapter 6 Strategy Formulation; Situation Analysis & Business Strategy. Strategic Management and Business Policy 11 th Edition Thomas L. Wheelen J. David Hunger. Strategies in Action. -- Quest for higher revenues -- Quest for higher profits. Companies Embrace Strategic Planning.

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chapter 6 strategy formulation situation analysis business strategy
Chapter 6Strategy Formulation;Situation Analysis & Business Strategy

Strategic Management and Business Policy

11th Edition

Thomas L. Wheelen

J. David Hunger

slide2

Strategies in Action

-- Quest for higher revenues

-- Quest for higher profits

Companies Embrace Strategic Planning

Situation Analysis & Business Strategy

slide3

Anatomy of Strategic Planning

Top-Down NEVER

Bottom-Up

Strategies

Objectives

Vision

Mission

SWOT

Strategic Planning

Situation Analysis & Business Strategy

slide4

Long-Term Objectives

  • Results expected from pursuing certain strategies.
  • Strategies represent actions to accomplish long-term objectives.

Situation Analysis & Business Strategy

slide5

Long-Term Objectives

SMART Objectives

  • Some is not a number
  • Soon is not a time
  • “May be” is not an answer

Situation Analysis & Business Strategy

slide6

Long-Term Objectives

SMART Objectives

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

Situation Analysis & Business Strategy

slide7

Long-Term Objectives

Smarter Objectives

  • Quantifiable
  • Measurable
  • Realistic
  • Understandable
  • Challenging
  • Hierarchical
  • Obtainable
  • Congruent
  • Time-line

Situation Analysis & Business Strategy

slide8

Long-Term Objectives

  • Objectives Necessary --
  • Corporate Level
  • Divisional Level
  • Functional Level

Situation Analysis & Business Strategy

slide9

Long-Term Objectives

Situation Analysis & Business Strategy

slide10

Long-Term Objectives

Strategic Objectives

  • Larger market share
  • Quicker on-time delivery than rivals
  • Quicker design-to-market times than rivals
  • Lower costs than rivals
  • Higher product quality than rivals
  • Wider geographic coverage than rivals

Situation Analysis & Business Strategy

slide11

SWOT Analysis

  • STRENGTHS: is a resource advantage relative to competitors and the needs of the market a firm serves or expects to serve.
  • WEAKNESSES: is a limitation or deficiency in one or more resources or competencies relative to competitors that obstructs a firms’ effective performance.

Situation Analysis & Business Strategy

slide12

SWOT Analysis

  • OPPORTUNITIES: is a major favorable situation in a firms’ environment; breakthrough technology, improved supplier relationships, changes in regulatory circumstances, identification of a previously overlooked market segment.
  • THREATS: is a major unfavorable situation in a firms’ environment; entrance of new competitors, slow market growth, increased bargaining power of key suppliers, technological changes, new regulations.

Situation Analysis & Business Strategy

slide13

Strategic Factors Analysis Summary (SFAS) Matrix

  • Generated mainly to deal with the cons ofSWOT analysis

Situation Analysis & Business Strategy

slide14

Generating Alternative Strategies Using TOWS Matrix

  • SWOT considers onlyOpportunities and
  • Strengths when thinking of alternative
  • strategies

Thus a TOWS Matrix is developed to generate further alternative strategies that might not be considered in a SWOT analysis

Situation Analysis & Business Strategy

slide15

Generating Alternative Strategies Using TOWS Matrix

Situation Analysis & Business Strategy

slide16

Generating Alternative Strategies through Business Strategies

Business Strategy focuses on improving the competitive position of a company

  • Business strategies could be either:
    • Competitive Strategies
    • Cooperative Strategies

Situation Analysis & Business Strategy

slide17

Porter’s Generic Competitive Strategies

Cost Leadership Strategies

DifferentiationStrategies

Focus Strategies

Strategies that allows org. to gain competitive advantage

Situation Analysis & Business Strategy

slide18

Porter’s Generic Competitive Strategies

Cost Leadership:

Producing standardized products at a low per-unit cost for a broad range of consumers who are price-sensitive.

  • Considered effective when:
  • Low switching costs
  • Buyers have high bargaining power
  • Rivals introduce low prices to build a customer base
  • No product differentiation

Situation Analysis & Business Strategy

slide19

Porter’s Generic Competitive Strategies

Differentiation

Producing P/S considered unique to consumers who are price-insensitive.

Considered effective when:

  • There are many ways to differentiate the product.
  • Buyers needs & uses are diverse
  • Few rival firms are following a similar approach
  • Technological change is fast paced.

Situation Analysis & Business Strategy

slide20

Porter’s Generic Competitive Strategies

Focus:

Producing P/S that fulfill the needs of small groups of customers, e.g. mkt. penetration, mkt. development strategies. Essential when consumers have distinctive preferences that rivals cannot provide.

  • Low-cost focus
  • Offering P/S to a small range of consumers (niche group) at the lowest P available.
  • Differentiation Focus (Best-value focus)
  • Offering P/S to a small range of consumers at the best-price value; lowest P available compared to those of rivals’ given the quality attributes.

Situation Analysis & Business Strategy

slide21

Porter’s Generic Competitive Strategies

Considered effective when:

  • Industry leaders do not consider the niche to be crucial.
  • The industry has many different niches, thus allowing focuser to pick a competitive attractive niche.
  • The target mkt. niche is large, profitable, & growing.

Situation Analysis & Business Strategy

slide22

Cooperative Strategies - Means for Achieving Strategies

Joint Venture/Partnering

  • Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity.
  • Globalization is the major reason why firms use partnering to achieve strategies.

Situation Analysis & Business Strategy

slide23

Cooperative Strategies - Means for Achieving Strategies

Joint Venture/Partnering

  • Why Joint Ventures Fail -
    • Managers who must collaborate daily; not involved in developing the venture
    • Benefits the company not the customers
    • Not supported equally by both partners
    • May begin to compete with one of the partners

Situation Analysis & Business Strategy

slide24

Cooperative Strategies - Means for Achieving Strategies

Joint Venture/Partnering

Considered an effective strategy when:

  • Synergies between private and publicly held
  • Domestic with foreign firm, local management can reduce risk
  • Complementary distinctive competencies
  • Resources & risks where project is highly profitable (e.g. Alaska Pipeline)
  • Two or more smaller firms competing w/larger firm
  • Need to introduce new technology quickly

Situation Analysis & Business Strategy

slide25

Cooperative Strategies - Means for Achieving Strategies

Mergers & Acquisitions

Reasons for M&A:

  • Provide improved capacity utilization
  • Better use of existing sales force
  • Reduce managerial staff
  • Gain economies of scale
  • Smooth out seasonal trends in sales
  • Gain new technology
  • Access to new suppliers, distributors, customers, products, creditors

Situation Analysis & Business Strategy

recent mergers
Recent Mergers

Situation Analysis & Business Strategy

slide27

Cooperative Strategies - Means for Achieving Strategies

First Mover Advantages

The benefits a firm may achieve by entering a new market or developing a new product/service prior to rival firms.

  • Potential Advantages
    • Securing access to rare resources
    • Gaining new knowledge of key factors & issues
    • Carving out market share
    • Easy to defend position & costly for rival firms to overtake

Situation Analysis & Business Strategy

slide28

Cooperative Strategies - Means for Achieving Strategies

First Mover Advantages

  • Considered effective when:
  • Build a firm’s image with buyers.
  • Produce cost advantages (new tech., distribution channels, etc.)
  • Create strong loyal customers

Situation Analysis & Business Strategy

slide29

Cooperative Strategies - Means for Achieving Strategies

Outsourcing

Business-process outsourcing (BPO)

Companies taking over the functional operations of other firms, e.g. HR, customer service.

Why Outsourcing?

  • Less expensive
  • Allows firm to focus on core business
  • Enables firm to provide better services

Situation Analysis & Business Strategy

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