Strategy Formulation:

1
Chapter 5

• Strategy Formulation
• Situation Analysis and Business Strategy

2
Situational Analysis

• Strategy formulation
• Strategic planning or long-range planning
• Develops mission, objectives, strategies and
  policies

3
Situational Analysis

• Situational Analysis
• Process of finding a strategic fit between
  external opportunities and internal strengths
  while working around external threats and
  internal weaknesses.

4
Situational Analysis

• Niche
• A need in the marketplace that is currently
  unsatisfied.
• Goal for the Corporation
• Find a favourable niche
• Strategic window
• Unique market opportunity available for a limited
  time

5
Business Strategies

• Business Strategy
• Focuses on improving the competitive position of
  a companys or business units products or
  services within the specific industry or market
  segment that the firm serves.

6
Porters Competitive Strategies

• Competitive Strategy
• Low cost?
• Differentiation?
• Compete head to head in large market?
• Focus on niche?

7
Porters Competitive Strategies

• Generic Competitive Strategies
• Lower cost strategy
• Design, produce, market more efficiently than
  competitors
• Differentiation strategy
• Unique and superior value in terms of product
  quality, features, service
• Its okay to be different

8
Porters Competitive Strategies

• Stuck in the middle
• No competitive advantage
• Below-average performance

9
Competitive Strategy

• Industry Structure
• Fragmented Industry
• Many small and medium-sized local companies
  compete for small shares of total market
• Focus strategies predominate

10
Competitive Strategy

• Industry Structure
• Consolidated industry
• Mature industry dominated by a few large
  companies
• Cost Leadership or Differentiation predominate

11
Competitive Tactics

• Tactic
• Specific operating plan detailing how a strategy
  is to be implemented in terms of when and where
  it is to be put into action.
• Timing tactics
• Market location tactics

12
Competitive Tactics

• Timing Tactics
• First mover (pioneer)
• Reputation as industry leader
• High profits
• Sets standards for subsequent products in the
  industry
• Late mover
• Able to imitate technological advances of others
• Keeps RD costs down
• Keeps risks down

13
Cooperative Strategies

• Cooperative Strategies
• Collusion
• Active cooperation of firms to reduce output and
  raise prices
• Explicit
• Tacit
• Ethical dimensions

14
Cooperative Strategies

• Cooperative Strategies
• Strategic Alliance
• Partnership of two or more corporations or
  business units to achieve strategically
  significant objectives that are mutually
  beneficial.

15
Cooperative Strategies
Obtain technology
Access to markets
Strategic Alliance
Reduce financial risk
Reduce political risk
Achieve competitive advantage