mobpres

1
LEVELS OF STRATEGY
Corporate Level What businesses are we in?
ORGANIZATION
Business Level How do we compete?
Strategic Business Unit 1
Strategic Business Unit 2
Strategic Business Unit 3
Functional Level How do we support
business-level strategies?
R D Manufacturing, Distribution, Marketing, Fina
nce, HR
Sales Marketing, Customer service Purchasing, Acco
unting HR
MIS, Operations, Forecasting, Finance, Govt
affairs, HR
2
Identify Current Mission, Objectives, Strategy
1
THE STRATEGIC MANAGEMENT PROCESS
2
3
6
Analyze Environment
Note Threats and Opportunities
Formulate Strategies
7
Implement Strategies
4
5
Analyze Resources
Note Weaknesses and Strengths
8
Evaluate Results
3
EXAMPLES OF STRENGTHS, WEAKNESSES, OPPORTUNITIES,
THREATS

• Potential Strengths
• Market leadership
• Strong reputation
• High-quality products
• Cost advantages
• Patents

• Potential Weaknesses
• Large inventories
• Obsolete facilities
• No strategic direction
• Management turnover
• Weak market image

• Potential Opportunities
• New untapped markets
• Falling trade barriers
• Competitors failing
• Diversification possibilities
• Economy rebounding

• Potential Threats
• Market saturation, slow growth
• Threat of takeover
• New competition, substitutes
• Poor economic outlook
• Growing govt regulation

4
CORPORATE-LEVEL STRATEGIES

• GROWTH
• Vertical (backward,
• forward), or horizontal
• integration
• Related or conglomerate
• diversification

STABILITY
Strengths
Organizational Status
STABILITY

• INVESTMENT
• REDUCTION
• Retrenchment
• Divestment

Weaknesses
Environmental Status
Threats
Opportunities
5
CORPORATE-LEVEL GROWTH STRATEGIES

• Vertical Integration acquiring suppliers or
  distributors to gain process control
• Forward Integration enter business of customers,
  moving closer to ultimate customer
• Backward Integration enter business of
  suppliers, to control quality, delivery, or
  costs
• Horizontal Integration acquiring competitors to
  consolidate and extend market share
• Related Diversification expanding to related
  products/services or market segments
• Conglomerate Diversification adding unrelated
  products/services

6
BOSTON CONSULTING GROUP FRAMEWORK FOR CORPORATE
LEVEL BUSINESS PORTFOLIO
High

• QUESTION MARKS
• Small share of
• expanding market
• Risky
• Prize heifer or problem
• child

• STAR
• Large share of expanding
• market
• Rapid growth and
• expansion

MARKET GROWTH

• DOG
• Small share of mature
• market
• Consider divestment

• CASH COW
• Large share of mature
• market
• Milk cash to fund new
• venture (question marks)

Low
High
Low
MARKET SHARE
7
PORTERS BUSINESS-LEVEL COMPETITIVE STRATEGIES
Cost Leadership tight cost controls efficient
productions, sales force,
advertising competitive pricing
Differentiation premium quality brand
image technological leadership customer service
Broad Target
COMPETITIVE SCOPE
Cost Focus
Differentiation Focus
Narrow Target
Identification of target market (niche) Constant
review of customer demand
Lower Cost
Uniqueness
VALUE ADDED
8
FIVE FORCES DRIVING COMPETITON AND
BUSINESS-LEVEL STRATEGIES

• 1. Threat of New Entrants
• inversely related to need for investment in
  plants/equipment, customers switching costs
• 2. Intensity of Competitor Rivalry
• potential for price wars, advertising wars,
  customer service battles
• 3. Pressure from Substitute Products
• - frozen yogurt for ice cream Pop Tarts for
  cereal
• 4. Buyers Bargaining Power Over Suppliers
• buyers purchase high volume, products are
  undifferentiated, buyers do not face high
  switching costs
• 5. Suppliers Bargaining Power Over Buyers
• few substitutes, buyer not important customer
  group, suppliers products important input to
  buyers business

9
Example Issues for Developing Functional
Strategies

• Human Resources
• Finance
• Marketing

• What type of reward system is needed?
• How should we recruit talented people?
• What proportion of profits should be reinvested
  or paid out as dividends?
• What is the criteria for allocating financial
  resources to projects?
• What goods/services should we emphasize?
• What corporate image or services should we
  emphasize to customers?
• How should products be distributed (direct
  selling, wholesalers, retailers)?

Goal is to support business-level strategies
10
HYPERCOMPETITION

• HypercompetitionA condition of constant
  disequilibrium and change caused by the
  frequence, boldness and aggressiveness of
  competitors
• Hypercompetitive EnvironmentsCharacterized by
  high levels of uncertainty, dynamism, hostility
  and heterogeneity of competition

11
STRATEGIES IN HYPERCOMPTITIVE ENVIRONMENTS

• Disrupting the status quo
• Creating transient change
• Sustaining the momentum
• Collective strategies, as appropriate

12
COMPETITIVE STRATEGY TAKE HOME POINTS

• Differentiate three levels of strategy
• Identify explain the eight basic steps in
  strategy formulation
• Know how to conduct a SWOT analysis
• Know what factors affect the development of
  corporate- and business-level strategies
• Understand BCG GE Screen Models of
  corporate-level strategies
• Know generic business-level strategies