Wheelen/Hunger

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Chapter 5

• Strategy Formulation Situation Analysis and
  Business Strategy
• PowerPoint Slides
• Anthony F. Chelte
• Western New England College

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Situational Analysis

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

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Situational Analysis

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

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Strategic Factor Analysis Summary (SFAS)
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1
2
3
4
6
Duration
Strategic Factors (Select the most important
opportunities/threats from EFAS, Table 3.4 and
the most important strengths and weaknesses from
IFAS, Table 4.2) Total Score
Rating
Weighted Score
INTERMEDIATE
Weight
Comments
SHORT
LONG
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Strategic Factor Analysis Summary (SFAS) Maytag
as Example
Duration
Strategic Factors (Select the most important
opportunities/threats from EFAS, Table 3.4 and
the most important strengths and weaknesses from
IFAS, Table 4.2) S1 Quality Maytag culture
(S) S3 Hoovers international orientation
(S) W3 Financial position (W) W4 Global
positioning (W) O1 Economic integration
of European Community (O) O2 Demographics favor
quality (O) O5 Trend to super stores (O
T) T3 Whirlpool and Electrolux (T) T5 Japanese
appliance companies (T) Total Score
Rating
Weighted Score
INTERMEDIATE
Weight
Comments
SHORT
LONG
X X
X X X
X X X X
.10 .10 .10 .15 .10 .10 .10 .15 .10
5 3 2 2 4 5 2 3 2
.50 .30 .20 .30 .40 .50 .20 .45 .20
Quality key to success Name recognition High
debt Only in N.A., U.K., and Australia Acquisitio
n of Hoover Maytag quality Weak in this
channel Dominate industry Asian presence
1.00
3.05
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Situational Analysis

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

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Situational Analysis

• SWOT analysis
• Internal
• Strengths
• Weaknesses
• External
• Opportunities
• Threats

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TOWS Matrix
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Resource-Based Approach

• Resource
• An asset, competency, process, skill, or
  knowledge controlled by the corporation.

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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.

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Porters Competitive Strategies

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

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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

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Porters Competitive Strategies

• Competitive Advantage
• Determined by Competitive Scope
• Breadth of the companys target market

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Porters Generic Competitive Strategies
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Porters Competitive Strategies

• Cost Leadership
• Low-cost competitive strategy
• Aimed at broad mass market
• Aggressive construction of efficient-scale
  facilities
• Cost reductions
• Cost minimization

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Porters Competitive Strategies

• Differentiation
• Broad mass market
• Unique product or service
• Charge premiums
• Lower customer sensitivity to price

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Porters Competitive Strategies

• Cost focus
• Low cost competitive strategy
• Focus on particular buyer group or market
• Niche focused
• Seek cost advantage in target market

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Porters Competitive Strategies

• Differentiation focus
• Focus on particular group or geographic market
• Seek differentiation in targeted market segment
• Serve special needs of narrow target market

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Porters Competitive Strategies

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

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Risks of Generic Competitive Strategies
Risks of Cost Leadership Cost leadership is not
sustained Competitors imitate. Technology
changes. Other bases for cost leadership
erode. Proximity in differentiation is lost. Cost
focusers achieve even lower cost in segments.
Risks of Differentiation Differentiation is not
sustained Competitors imitate. Bases for
differentiation become less important to
buyers. Cost proximity is lost. Differentiation
focusers achieve even greater differentiation in
segments.
Risks of Focus The focus strategy is
imitated The target segment becomes structurally
unattractive Structure erodes. Demand
disappears. Broadly targeted competitors
overwhelm the segment The segments
differences from other segments narrow. The
advantages of a broad line increase. New
focusers subsegment the industry.
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Competitive Strategy

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

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Competitive Strategy

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

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Dimensions of Quality

• Performance
• Features
• Reliability
• Conformance
• Durability
• Serviceability
• Aesthetics
• Perceived Quality

Dimensions
Quality
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Competitive Strategy

• Strategic rollup
• Quickly consolidate fragmented industry
• Money from venture capital
• Entrepreneur acquires hundreds of owner-operated
  firms
• Creates large firm with economies of scale

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Competitive Strategy

• Strategic rollup
• Differ from Conventional MAs
• Large number of firms
• Owner-operated firms
• Goal to reinvent entire industry

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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

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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

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Competitive Tactics

• Market Location Tactics
• Offensive Tactics
• Frontal assault
• Flanking maneuver
• Bypass attack
• Encirclement
• Guerrilla warfare

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Competitive Tactics

• Market Location Tactics
• Defensive Tactics
• Raise structural barriers
• Increase expected retaliation
• Lower the inducement for attack

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Cooperative Strategies

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

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Cooperative Strategies

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

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Cooperative Strategies
Obtain technology
Access to markets
Strategic Alliance
Reduce financial risk
Reduce political risk
Achieve competitive advantage
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Continuum of Strategic Alliances
Mutual Service

Joint Venture

Value-Chain

Consortia
Licensing Arrangement
Partnership
Weak and Distant
Strong and Close
Source Suggested by R. M. Kanter, Collaborative
Advantage The Art of Alliances, Harvard
Business Review (July-August 1994), pp. 96108.