STRATEGIC CHOICE

How do we get there?

What direction should we
take?
Need for a strategy/strategies
• No single strategy is the best in all
situations and at all times
• Avoid casual bench marking by aligning
your strategic choices to your situation
• We need a consistent set of
choices/decisions and actions/tactics in
order to outwit our rivals
• Without this consistent set of tactics,
synergy is lost
Selecting the best strategy that
will enable a firm achieve its
goals.
Some strategy options are
more appropriate than others.
Strategists should evaluate the
existing alternatives before
choosing the best strategy
Criteria for evaluation and selection of
strategy

• Sustainable competitive
advantage
• Corporate goals &
objectives
• Organization policies and
culture
• Ethical issues
• Cost of strategy failure
• Feasibility of the
strategy
 The Generic Strategy
Alternatives.
Are the common strategic
approaches that can give a firm
sustainable competitive advantage.
Michael Porter’s approach
Igor Ansoff’s approach
Glueck’s approach
Kotler’s approach
Tailor-made strategies
ichael Porter’s approac

1.Overall cost leadership

2.Differentiation
3.Focus strategy
1.Over all cost
leader
• Aim atship:
being the lowest
cost producer relative to
competitors
• Increases a firm’s
profitability
• The market can enjoy
affordable prices
2. Dif fer entiation
strate g y:
 Making oneself different
from others
 Adding to customers
perceived value of the firm
and its products
 Calls for continuous
innovations (customer-
centred)
 How can a firm differentiate
 Image building
 High quality and distinctive
products
 Superior customer
services
 Unique design and
packaging
 Convenient terms to
3. Focus str ate g y
 Involves segmenting the
market
 Focusing on a given market
segment
 Calls for specialization in a
specific market segment
(niche marketing)
 Why focus strategy?
Different groups of buyers with
different needs
No other rival is attempting to
specialize in the same segment
A firm’s resources don’t allow it
to spread over the entire
segment
Where some segments are more
attractive than others
ANSOFF’S
APPROACH
 Provides four strategic
approaches based on
product and market
information
 Came up with the
product/market matrix.
 Existing New
Products Products
Existing Strategies Strategies based
based on on launching
Markets existing new or
markets and improved
existing products into
existing
products markets
New Strategies
based on
Strategies based
on launching
Markets finding new new products
markets for into new
existing markets
products
 Existing Products-Existing Markets
1. Divestiture-It has reached maturity/you need money
for other ventures/in order to concentrate on your
core or more beneficial business
2. Consolidation-You are enjoying a comfort zone/need
to go back to the basic (status quo)
3. Retrenchment-You have over expanded or
diversified ,you need to reduce your operating costs;
sell part of the business
4. Market penetration-Enter new markets with a more
attractive offer/buy out your close rival through say
an acquisition/use a strategic alliance
 New products-Existing markets
 No or less resources needed to develop the
market

 You need to develop a new product or modify

the current one for that market
 A product development strategy is the best
strategy; refer to PLC as you craft this strategy
 Bench-mark this generic strategy and fine tune it
your competitive situation
 Existing products-New markets
 No or less resources needed to develop the
product
 You need to develop the new market for your
product (s)
 A market development strategy is needed using
say; CRM tactics/customer care practices/taking
your products (services) near your customers
 Refer to the current stage in the marketing cycle
as you fine tune this generic strategy
 New product-New market
 A lot of risks and uncertainties involved; you
need to develop the new product for the new
market
 Minimize such risks through using a competitive
stepping stone
 Commonly used strategies in such situations
include; buying franchises, strategic alliances, and
use of pilot projects among others
GLUECK’S APPROACH

 Stability strategy
 Expansion strategy

 Retrenchment strategy

 Combination
 Stability Strategies:
• Strategies pursued with no
or few changes made in
the firm’s products,
markets or functions.
• Ideal for those firms that
are already consolidated
in the market.
Why stabilize?
T he strategy is less risky
When a firm is doing well
Executives aren't creative
and innovative
Fear to disrupt routines
Environment is relatively
stable
Fear of inefficiencies due to
Expansion Strategies
 A firm serves the market with
additional offers, adds to its
markets and functions.
 Firm increases the pace of its
activities
 Ideal where a firm wants to
improve its growth
performance
 Why Expand?
To survive in a volatile
environment
To provide variety to the
market
Sign of good performance
Need to re-invest profits
To enjoy economies of scale
Motivates the firm
Retrenchment strategies:
A firm reduces its product lines,
abandons some market territories,
reduces its functions.
Looks like lean management
Firm reduces activities in those
units with negative or little cash
flows.
The pace of operation and scope
of activities greatly reduces.
Why retrench?
• The firm is performing poorly
• The firm has tried all strategies and
still failed to succeed
• The firm needs funds to pursue
better opportunities elsewhere
• Turbulent environment
• External pressure
Combination strategies:
• A firm uses several of
the above strategies
simultaneously to
different portfolios of a
firm.
 Kotler’s strategies.
• Looks at market positions (shares) of
competing firms
• The competitors are at war over these
competitive positions
• Different competitive positions require different
competitive strategies
• The positions include; market leader,
challenger, follower, and nicher mainly
Market leader’s strategies

• Those you lead also want to get where you

are and/or even overtake you; you are the
target for the challenger’s strategic attacks
• Use strategies that may help you to expand
or protect your market share
• The best science and art of war/the general
(strategy) depends on your situation at hand
in your internal and external environment
a) Expanding your total market

1. Acquisitions and mergers

2. Franchises and/or international trade
3. Increase usage of your products
4. Finding new users/creating new
demand
Protecting your market share
(strategies involved)

1. Defending your leading position and

competitive business walls
2. Pro-reactive protection of your weak
flanks/Pre-emptive defending
3. Counter offensive defense
4. Enter new markets for future defense
5. Strategic withdrawal
Exhibit 17.9
Strategic Choices for Share Leaders in Growth Markets

Flanker strategy - Proactive

Flanker strategy - Reactive

Fortress
COMPETITOR Confrontation or position Contraction
OR strategy defense or strategic
POTENTIAL Proactive strategy withdrawal
COMPETITOR Reactive

LEADER

Market expansion

Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
Market Challengers’ strategies

• They want to overtake the share leaders

BUT should also aggressively differentiate
themselves from fellow challengers using
the following alternatives;
1. Frontal/head-on/direct attack (strengths)
2. Flanking/indirect attack ( weak points)
3. By pass/ Leapfrogging
4. Encirclement/Guerrilla attack
Note

• The market leader is usually better than you in

terms of resources/expertise
• They are also watching your attacking activities and
looking for strategies of how to deal with your
challenge
• Some market share leaders’ reactions may shallow
the attacker/challenger
• To improve your market share, you need to build a
distinctive competitive advantage of your own; not
just imitating your market leader
Exhibit 17.12
Strategic Choices for Challengers in Growth Markets
Leapfrog
strategy/By Pass

Flanking
attack

Frontal
MARKET LEADER attack CHALLENGER

Encirclement strategy
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
Market followers' strategies

• Sometimes overlooked by the market

leader and challenger BUT may become
challenger and/or even overtake the
market share leader
• Their commonly used strategies;
1. Cloner
2. Imitator
3. Adaptor
Market Followers-cont

• Commonly found in oligopolistic

industries
• Try to compete on dimensions other than
price (avoid price competition)
– Product value/quality
– Customer service
– Promotional effectiveness
– Distribution, etc
Market nichers

• Operate on high profit margins vs. high

volume
• Compete in well-defined market segments
(niches)
• They tend to specialize in that niche in
terms of customer category,
products/services, geographical area
• Successful nichers usually have a large
How to select a few from the
many generic/bench-marked
strategies
• The common approaches;
1. The strategic choice matrix
2. SWOT analysis
3. Portfolio analysis
Factors determining the final
acceptance of the proposed
strategy by top management
1. Top management’s attitude towards risk
2. Top executives’ preference for past strategy in
relation to past performance
3. Their values including the shared values,
chief executive's beliefs and personal
intentions
4. CEO’s power relationship with other top
executives and surdodinates