Professional Documents
Culture Documents
Perform Customer
needs assessment
Strategic
Define Market
Business Define gross profit and
Size
Unit (SBU) net profit
Different Levels of Strategy
Levels of Management Levels of Strategy
Corporate
Corporate Office Corporate Level
Marketin
Functional Finance Operations HRM Information Functional Level
g
Roadmap to Strategic Management
Definition-
• Dynamic process of formulation, implementation, evaluation and
control of strategies to realise the organisation’s strategic intent.
• Set of managerial decisions and actions that determines the long-run
performance of a firm.
• Strategic management is the management of an organization’s
resources to achieve its goals and objectives.
• Strategic management involves setting objectives, analysing the
competitive environment, analysing the internal organization,
evaluating strategies, and ensuring that management rolls out the
strategies across the organization.
• It’s a dynamic Process. Its not a one-time, static or mechanistic
process.
Strategic Management
Globalization
• Internationalization of markets and corporations
• Global (worldwide) markets rather than national markets
Electronic Commerce
• Use of the Internet to conduct business transactions
• Basis for competition on a more strategic level rather than traditional focus on product
features and costs
Trends
• Internet forcing companies to transform themselves
• Balance of power shifting to the consumer
• Competition is changing and Pace of business increasing
drastically
• Internet purchasing corporations out of their traditional boundaries
• Knowledge becoming a key asset and source of competitive
advantage
Strategic Management
Not always a formal process:
Environmental
Strategy Strategy Evaluation
and Control
Scanning Formulation Implementation and Control
External Mission
Reason for
Societal
existence
Environment Objectives
General Forces
What results
to
Task Strategies
accomplish
Environment
by when Plan to
Industry Analysis
achieve the
Policies
mission &
Internal objectives Broad
guidelines for Programs
Structure decision Process
Chain of Command making Activities to monitor
needed to performance
Culture Budgets and take
accomplish
Beliefs, Expectations, a plan corrective
Cost of the
Values action
programs
Procedures
Resources
Sequence
Assets, Skills
of steps
Competencies,
needed to
Knowledge do the job Performance
Feedback/Learning
Vision Business Aspiration
Defined:
The monitoring, evaluating, and disseminating of information from the external
and internal environments to key people within the firm.
Environmental Scanning
Stages of Strategic Management
Environmental Scanning
Identify strategic factors
• SWOT Analysis
• Strengths, Weaknesses
• Opportunities, Threats
• Internal Environment
• Strengths & Weaknesses
• Within the organization but not subject to short-run control of
management
• External Environment
• Opportunities & Threats
• External to the organization but not subject to short-run control
of management
Stages of Strategic Management
• Strategy formulation
includes developing a vision and mission, identifying an
organization’s external opportunities and threats, determining
internal strengths and weaknesses, establishing long-term
objectives, generating alternative strategies, and choosing
particular strategies to pursue
Strategy Formulation
• Deciding what new businesses to enter,
• What businesses to abandon,
• How to allocate resources,
• Whether to expand operations or diversify,
• Whether to enter international markets,
• Whether to merge or form a joint venture,
• How to avoid a hostile takeover.
Stages of Strategic Management
• Strategy implementation
• Dave intends to extend his constrained furniture business by introducing a new product
category, i.e., all home decor goods.
• However, he is unsure how his brand would perform as it took years for him to establish
his furniture business due to a delay in identifying negative factors.
• Thus, to avoid any risk this time, Dave conducts SWOT (Strengths, Weaknesses,
Opportunities, and Threats) analysis as part of the strategic management.
Example #1
• He identifies the strong and weak points of business.
• He also analyzes potential opportunities and threats based on the current market
trend.
• Accordingly, Dave strategizes and plans the processes, starting from
manufacturing to advertising, ensuring that he allocates the right resources at the
right places.
Adapting to Change
• The second-largest bookstore chain in the United States, Borders
Group, declared bankruptcy in 2011 as the firm had not adapted well
to changes in book retailing from traditional bookstore shopping to
customers buying online, preferring digital books to hard copies
• Borders was on the brink of financial collapse before being acquired in
July 2011 by Direct Brands
Key Terms in Strategic Management
• Vision statement
• answers the question “What do we want to become?”
• often considered the first step in strategic planning
Key Terms in Strategic Management
• Mission statements
• enduring statements of purpose that distinguish one business from other
similar firms
• identifies the scope of a firm’s operations in product and market terms
• addresses the basic question that faces all strategists: “What is our business?”
Key Terms in Strategic Management
• External opportunities and external threats
• refer to economic, social, cultural, demographic, environmental, political,
legal, governmental, technological, and competitive trends and events that
could significantly benefit or harm an organization in the future
Some Opportunities and Threats
• Computer hacker problems are increasing.
• Intense price competition is plaguing most firms.
• Unemployment and underemployment rates remain high.
• Interest rates are rising.
• Product life cycles are becoming shorter.
• State and local governments are financially weak.
Key Terms in Strategic Management
• Internal strengths and internal weaknesses
• an organization’s controllable activities that are performed
especially well or poorly
• determined relative to competitors
Key Terms in Strategic Management
• Objectives
• specific results that an organization seeks to achieve in pursuing its basic
mission
• long-term means more than one year
• should be challenging, measurable, consistent, reasonable, and clear
Key Terms in Strategic Management
• Strategies
• the means by which long-term objectives will be achieved
Strategic flexibility:
Defined:
Development of long-range plans for the effective management
of environmental opportunities and threats in light of corporate
strengths and weaknesses.
Strategy Formulation
Mission Statement
• Purpose or reason for the organization’s existence
• Promotes shared expectations among employees
• Communicates public image important to stakeholders
• Who we are, what we do, what we’d like to become
Strategy Formulation
Maytag Corporation
Mission Statement
Objectives
•Corporate strategy
•Business strategy
•Functional strategy
Porter’s Generic Strategies
Porter’s Generic Strategies
• Porter’s Generic Strategies is an answer to one of two central
questions underlying the choices companies have with regard to
competitive strategy.
• The first question is about the attractiveness of industries for long-term
profitability and how to choose which industry to enter as a company.
• The second question is about the determinants of a company’s relative
competitive position in an industry after a certain industry is chosen to
enter.
Differentiation Strategy
• Differentiation is a type of competitive strategy with which a company
seeks to distinguish its products or services from that of competitors:
the goal is to be unique. A company may use creative advertising,
distinctive product features, higher quality, better performance,
exceptional service or new technology.
• Examples are: Apple, Harley-Davidson, Nike and Starbucks.
Cost Leadership Strategy
• Cost Leadership is a type of competitive strategy with which a company
aggressively seeks efficient large-scale production facilities, cuts costs,
uses economies of scale, gains production experience and employs tight cost
controls to be more efficient in the production of products or the offering of
services than competitors.
• Examples of companies with cost leadership positions are: Wal-Mart,
McDonald’s, Costco and Amazon.
Focus
• Focus is a type of competitive strategy that emphasizes concentration on a specific
regional market or buyer group: a niche,
• only for a narrow target market rather than offering it industry-wide
• the focus strategy has two variants: Differentiation Focus and Cost Focus
• Examples of companies with a differentiation focus strategy are: Rolls Royce,
Omega, Prada and Razer.
• Examples of companies with a cost focus strategy are: Claire’s, Home Depot and
Smart.
Stuck in the Middle
• A company that tries to engage in each generic strategy but fails to achieve any of
them, is considered ‘stuck in the middle’.
• Such a company has no competitive advantage regardless of the industry it is in.
• Such a company will compete at a disadvantage because the ‘cost leader’.
• however, that a company that is stuck in the middle still earns interesting profits
simply because it is operating in a highly attractive industry or because its competitors
are stuck in the middle as well.
Approaches of strategy formulation
Intended strategies vs Emergent strategies
• Global chains of restaurants such as fast food joints like KFC and Mc
Donald’s have existed since a very long time now. The aspect of a global
chain leaves a positive impression on the minds of the people since they tend
to believe that the product is of quality and hygiene.
• More and more restaurants are following this trend and opening up their
chains worldwide. This does affect the restaurant industry on a whole.
McDonalds entered Russian market in 1988. Now you can find Jollibee
(Filipinos), Teremok (Russia), Nando’s (South Africa), Ippudo (Japan), and a
lot of others.
Technological change and
Manufacturing process innovation
• Technological change is the invention of a technology (or a process),
the continuous process of improving a technology and its diffusion
throughout industry or society. In short, technological change is based
on both better and more technology.
Changing in societal concerns, attitudes and
lifestyles
• A lifestyle typically reflects an individual's attitudes, values or world
view. Lifestyle may include views on politics, religion, health,
intimacy, and more. All of these aspects play a role in shaping
someone's lifestyle.
electric automobiles
• As more automakers offer electric vehicles the impact these cars and trucks have
becomes increasingly visible. Besides reducing the demand for fossil fuel, electric
vehicles bring with them changing driving habits, new sectors of automotive
technology and a cleaner environment.
• The first electric car was built in 1884. As of September 2012, series production
highway-capable models available in some countries include the Tesla Roadster,
REVAi, Buddy, Mitsubishi i MiEV, Nissan Leaf, Smart ED, Wheego Whip LiFe,
Mia electric, BYD e6, Bolloré Bluecar, Renault Fluence Z.E., Ford Focus Electric,
BMW ActiveE, Coda, Tesla Model S, and Honda Fit EV. Electric Automobiles
Regulatory influences and government
policy changes
• Government policies and investments are a pervasive, important, and
often positive influence on the business environment and economic
development of any industrialized nation.
free trade pacts
• In its first tenure (2014-2019), the Modi government was reluctant on clinching
FTAs even as it sought foreign direct investment (FDI) by opening up all the
UPA-era trade pacts for a review to increase its exports. The existing pacts, the
government believed, only encouraged more imports.
• Porter's Five Forces is a model that identifies and analyses five competitive
forces that shape every industry and helps determine an industry's
weaknesses and strengths. Five Forces analysis is frequently used to identify
an industry's structure to determine corporate strategy.
• Porter's model can be applied to any segment of the economy to understand
the level of competition within the industry and enhance a company's
long-term profitability. The Five Forces model is named after Harvard
Business School professor, Michael E. Porter.
five forces are:
1. Supplier power- when there are many suppliers or low switching costs
between rival suppliers, a company can keep its input costs lower and
enhance its profits.
2. Buyer power - An assessment of how easy it is for buyers to drive prices
down. This is driven by the: number of buyers in the market; importance of
each individual buyer to the organisation; and cost to the buyer of switching
from one supplier to another. If a business has just a few powerful buyers,
they are often able to dictate terms.
3. Competitive rivalry- when competitive rivalry is low, a company has
greater power to charge higher prices and set the terms of deals to achieve
higher sales and profits.
five forces are:
4. Threat of substitution. Companies that produce goods or services for which
there are no close substitutes will have more power to increase prices and lock
in favourable terms.
5. Threat of new entry -An industry with strong barriers to entry is ideal for
existing companies within that industry since the company would be able to
charge higher prices and negotiate better terms.
Arguably, regulation, taxation and trade policies make by government is a sixth
force for many industries.
What benefits does Porter’s Five Forces
analysis provide?
• Five forces analysis helps organisations to understand the factors
affecting profitability in a specific industry, and can help to inform
decisions relating to :
whether to enter a specific industry;
whether to increase capacity in a specific industry;
developing competitive strategies.
Critical success factor (CSF)
• Critical Success Factors (also known as Key Results Areas or KRAs)
are the areas of your business or project that are vital to its success
• examples include increasing market share, attracting new customers,
or launching new products.
• Once you've determined your CSFs, you can set key performance
indicators (KPIs), which will establish deliverables and specific
criteria to measure project performance.
Competitor Analysis
• is the process of identifying competitors in your industry and
researching their different marketing strategies.
• can use this information as a point of comparison to identify
company's strengths and weaknesses relative to each competitor.
• This analysis provides both an offensive and defensive strategic
context to identify opportunities and threats.
• Defining a market, knowing your relative performance on the
competitive landscape and driving healthy, repeatable customer
experiences are all vital elements of competitor analysis.
Key Factors of Competitive Success
• Competitive elements most affecting every industry
member’s ability to prosper
• Product attributes
• Resources
• Competencies
• Competitive capabilities
• One technique for revealing the different competitive positions of industry rivals is strategic group mapping. A
strategic group consists of those rivals with similar competitive approaches in an industry.
• Firms in same strategic group have two or more competitive characteristics in common
• Sell in same price/quality range
• Cover same geographic areas
• Be vertically integrated to same degree
• Have comparable product line breadth
• Emphasize same types of distribution Channels
• Offer buyers similar services
• Use identical technological approaches
Procedure for Constructing a Strategic Group
Map
• STEP 1: Identify competitive characteristics that differentiate firms in an industry from one
another
• STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics
• STEP 3: Assign firms that fall in about the same strategy space to same strategic group
• STEP 4: Draw circles around each group, making circles proportional to size of group’s
respective share of total industry sales
• Variables selected as axes should not be highly correlated, and should expose big
differences in how rivals compete
• Drawing sizes of circles proportional to combined sales of firms in each strategic group
allows map to reflect relative sizes of each strategic group
• If more than two good competitive variables can be used, several maps can be drawn
Likely Strategic Moves of Rivals
• Current strategies
• Announced plans
Module IV
Competency Analysis and Strategy
Some Definitions
• Strategic Competitiveness
When firm successfully formulates and implements a value-creating
strategy
• Sustainable Competitive Advantage
When competitors are unable to duplicate a company’s value creating
strategy
• Strategic Management Process
The full set of commitments, decisions and actions required for a firm
to achieve strategic competitiveness and earn above-average returns.
Competitive Advantage
• Firms achieve strategic competitiveness and earn above-average
returns when their core competencies are effectively:
• Acquired.
• Bundled.
• Leveraged.
• Over time, the benefits of any value-creating strategy can be
duplicated by competitors.
Competitive Advantage (cont’d)
• Sustainability of a competitive advantage is a function of:
• The rate of core competence obsolescence due to environmental changes.
• The availability of substitutes for the core competence.
• The difficulty competitors have in duplicating or imitating the core
competence.
External Analyses’ Outcomes
Opportunities
and threats
Unique resources,
capabilities, and
competencies
(required for sustainable
competitive advantage)
3–114
The Context of Internal Analysis
• Global Economy
• Traditional sources of advantages can be overcome by competitors’
international strategies and by the flow of resources throughout the global
economy.
• Global Mind-Set
• The ability to study an internal environment in ways that are not dependent on
the assumptions of a single country, culture, or context.
• Analysis Outcome
• Understanding how to leverage the firm’s bundle of heterogeneous resources
and capabilities.
FIGURE 3.1 Components of Internal Analysis Leading to Competitive
Advantage and Strategic Competitiveness
Creating Value
• By exploiting their core competencies or competitive advantages,
firms create value.
• Value is measured by:
• Product performance characteristics
• Product attributes for which customers are willing to pay
• Firms create value by innovatively bundling and leveraging their
resources and capabilities.
• Superior value Above-average returns
Creating Competitive Advantage
• Core competencies are the defining products, services, skills and
capabilities that give a business advantages over its competitors
• Core competencies, in combination with product-market positions, are
the firm’s most important sources of competitive advantage.
• Core competencies of a firm, in addition to its analysis of its general,
industry, and competitor environments, should drive its selection of
strategies.
The Challenge of Internal Analysis
• Strategic decisions in terms of the firm’s resources, capabilities, and
core competencies:
• Are non-routine.
• Have ethical implications.
• Significantly influence the firm’s ability to earn above-average returns.
The Challenge of Internal Analysis
(cont’d)
• To develop and use core competencies, managers must have:
• Courage
• Self-confidence
• Integrity
• The capacity to deal with uncertainty and complexity
• A willingness to hold people (and themselves) accountable for their work
FIGURE 3.2 Conditions Affecting Managerial Decisions about
Resources, Capabilities, and Core Competencies
Resources, Capabilities and Core Competencies
• Resources
Discovering • Are the source of a firm’s
Core capabilities.
Competencies
• Are broad in scope.
• Cover a spectrum of
Core individual, social and
Competencies organizational phenomena.
• Alone, do not yield a
Capabilities
competitive advantage.
Resources
•Tangible
•Intangible
3–123
Resources
• Resources • Types of Resources
• Are a firm’s assets, including • Tangible resources
people and the value of its brand • Financial resources
name. • Physical resources
• Represent inputs into a firm’s • Technological resources
production process, such as: • Organizational resources
• Capital equipment • Intangible resources
• Skills of employees
• Human resources
• Brand names
• Innovation resources
• Financial resources
• Reputation resources
• Talented managers
TABLE 3.1 Tangible Resources
Resources
•Tangible
•Intangible
Resources, Capabilities and Core Competencies
• Core Competencies
Discovering • Resources and capabilities that are
Core
the sources of a firm’s competitive
Competencies
advantage:
• Distinguish a company
Core competitively and reflect its
Competencies
personality.
Capabilities
• Emerge over time through an
organizational process of
accumulating and learning how to
Resources deploy different resources and
•Tangible
•Intangible capabilities.
Resources, Capabilities and Core Competencies
• Core Competencies
Discovering • Activities that a firm performs
Core
especially well compared to
Competencies
competitors.
• Activities through which the firm
Core adds unique value to its goods or
Competencies
services over a long period of time.
Capabilities
Resources
•Tangible
•Intangible
Building Core Competencies
Discovering • Four Criteria of Sustainable
Core
Competencies
Competitive Advantage
• Valuable capabilities
Four Criteria of • Rare capabilities
Sustainable
Advantages • Costly to imitate
• Non substituable
• Valuable
• Rare
• Costly to imitate
• Nonsubstitutable
TABLE 3.4 The Four Criteria of Sustainable Competitive Advantage
Discovering
Core
Competencies • Valuable capabilities
• Help a firm neutralize
threats or exploit
Four Criteria of
Sustainable
opportunities.
Advantages • Rare capabilities
• Are not possessed by many
others.
• Valuable
• Rare
• Costly to imitate
• Nonsubstitutable
Building Sustainable Competitive Advantage
Discovering • Costly-to-Imitate Capabilities
Core • Historical
Competencies • A unique and a valuable
organizational culture or brand name
Four Criteria of
• Ambiguous cause
Sustainable • The causes and uses of a competence
Advantages are unclear
• Social complexity
• Interpersonal relationships, trust, and
• Valuable friendship among managers, suppliers,
• Rare and customers
• Costly to Imitate
• Nonsubstitutable
Building Sustainable Competitive Advantage
Discovering
Core
• Non substitutable Capabilities
Competencies • No strategic equivalent
• Firm-specific knowledge
• Organizational culture
Four Criteria of
Sustainable • Superior execution of the chosen
Advantages business model
• Valuable
• Rare
• Costly to imitate
• Nonsubstitutable
Outcomes from Combinations of the Four
Criteria
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Inbound Logistics
Activities, such as materials handling, warehousing, and inventory control, used to receive, store, and disseminate inputs to a
product.
Operations
Activities necessary to convert the inputs provided by inbound logistics into final product form. Machining, packaging, assembly,
and equipment maintenance are examples of operations activities.
Outbound Logistics
Activities involved with collecting, storing, and physically distributing the final product to customers. Examples of these activities
include finished goods warehousing, materials handling, and order processing.
Marketing and Sales
Activities completed to provide means through which customers can purchase products and to induce them to do so. To effectively
market and sell products, firms develop advertising and promotional campaigns, select appropriate distribution channels, and select,
develop, and support their sales force.
Service
Activities designed to enhance or maintain a product’s value. Firms engage in a range of service-related activities, including
installation, repair, training, and adjustment.
Each activity should be examined relative to competitors’ abilities. Accordingly, firms rate each activity as superior, equivalent,
or inferior.
Table 3.7 Examining the Value-Creating Potential of
Support Activities
Procurement
Activities completed to purchase the inputs needed to produce a firm’s products. Purchased inputs include items fully consumed
during the manufacture of products (e.g., raw materials and supplies, as well as fixed assets—machinery, laboratory equipment,
office equipment, and buildings).
Technological Development
Activities completed to improve a firm’s product and the processes used to manufacture it. Technological development takes many
forms, such as process equipment, basic research and product design, and servicing procedures.
Human Resource Management
Activities involved with recruiting, hiring, training, developing, and compensating all personnel.
Firm Infrastructure
Firm infrastructure includes activities such as general management, planning, finance, accounting, legal support, and governmental
relations that are required to support the work of the entire value chain. Through its infrastructure, the firm strives to effectively and
consistently identify external opportunities and threats, identify resources and capabilities, and support core competencies.
Each activity should be examined relative to competitors’ abilities. Accordingly, firms rate each activity as superior,
equivalent, or inferior.
Outsourcing
• The purchase of a value-creating activity from an external supplier
• Few organizations possess the resources and capabilities required to achieve
competitive superiority in all primary and support activities.
• By performing fewer capabilities:
• A firm can concentrate on those areas in which it can create value.
• Specialty suppliers can perform outsourced capabilities more efficiently.
Outsourcing Decisions
A firm may outsource
all or only part of one
M
or more primary and/or gin
ar
gin
ar
support activities. M
Technological Development
Human Resource Mgmt.
Service
Firm Infrastructure
Support Activities
Marketing and Sales
Procurement
Outbound Logistics
Operations
Inbound Logistics
Primary Activities
Strategic Rationales for Outsourcing
• Improving business focus
• Helps a company focus on broader business issues by having outside experts
handle various operational details.
• Providing access to world-class capabilities
• The specialized resources of outsourcing providers makes world-class
capabilities available to firms in a wide range of applications.
Strategic Rationales for Outsourcing
(cont’d)
• Accelerating re-engineering benefits
• Achieves re-engineering benefits more quickly by having outsiders—who
have already achieved world-class standards—take over process.
• Sharing risks
• Reduces investment requirements and makes firm more flexible, dynamic and
better able to adapt to changing opportunities.
• Freeing resources for other purposes
• Redirects efforts from non-core activities toward those that serve customers
more effectively.
Outsourcing Issues
• Seeking greatest value
• Outsource only to firms possessing a core competence in terms of performing
the primary or supporting the outsourced activity.
• Evaluating resources and capabilities
•Do not outsource activities in which the firm itself can create and capture
value.
• Environmental threats and ongoing tasks
•Do not outsource primary and support activities that are used to neutralize
environmental threats or to complete necessary ongoing organizational tasks.
Outsourcing Issues (cont’d)
• Nonstrategic team resources
•Do not outsource capabilities critical to the firm’s success, even though the
capabilities are not actual sources of competitive advantage.
• Firm’s knowledge base
•Do not outsource activities that stimulate the development of new
capabilities and competencies.
Cautions and Reminders
• Never take for granted that core competencies will continue to provide a source of
competitive advantage.
• All core competencies have the potential to become core rigidities—former core
competencies that now generate inertia and stifle innovation.
• Determining what the firm can do through continuous and effective analyses of its
internal environment will increase the likelihood of long-term competitive
success.
Focus strategy
• In a focus strategy the firm concentrates on one (or at most a limited number of)
segments of the market
• The premise behind this strategy is that the needs of the group can be bettered
served by focussing entirely on it
• The firm might feel more secure in the niche with greater insulation from
competition
• A focus strategy means that the firm’s efforts are not spread too thinly
• Focus strategies are
• Cost focus: cost leader in a particular segment
• Focus differentiation: differentiation in the chosen segment
Requirements of a focus strategy
A focus strategy requires…
• The identification of a suitable target customer group
• Identification of the specific needs of that group
• Confirmation that the market is sufficiently large to sustain the business
• Estimation of the extent of competition within the segment
• Production of products to meet the specific needs of that group
• A decision on whether to opt for cost leadership or differentiation within the
segment
Benefits of a focus strategy
• It involves lower investment in resources
• The firm benefits from specialisation
• It provides scope for greater knowledge of a segment of the market
• It makes entry to new markets easier and less costly
• Firms using a focus strategy often enjoy a high degree of customer
loyalty
Focused cost leadership
A strategy that aims…
• To attract one type of customer with a low cost product
• To be the lowest cost operator in one particular niche segment of the
market
Example :Hyundai
Focused differentiation
• A strategy that aims to attract one type of customer with a
differentiated product
• It involves distinctiveness in one segment
• Aims to exploit unique position in a niche segment of the market
• Not the cheapest but the best or most distinctive in that segment
• Example: BMW, Mercedes
The five forces and a focus strategy
Problems associated with focus
strategy
• Limited opportunities for growth
• Sacrifice of economies of scale that would be available from a larger market
• The firm could outgrow the market
• Danger of decline in the chose segment or niche
• A reputation for specialisation inhibits move into new sectors
• Risk of imitation
• Risk of changes in the target segment
Multiple strategies
• Firms that are able to succeed at multiple strategies create separate
business units for each strategy
• By separating the strategies into
• Different units
• Each with its own culture
• Each with its own brands
Summary
• Cost leadership
• Being the lowest cost producer in the industry as a whole
• Differentiation
• The exploitation of a product or service which is believed to be unique
• Focus
• Restricting activities to only part of the market through:
• Providing goods or services at lower cost to that segment (cost focus)
• Providing a differentiated product or service to that segment (differentiation
focus)
Cost Driver Analysis
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What Is Blue Ocean Strategy?
• A regional grocer
• Eliminate
• Sales people
• After sales service
• Reduce
• Warranties
• Raise
• Offers tens of thousands of home furnishing items
• Create
• New way to shop for furniture
Value Innovation
Exhibit 6.8
SOURCE: Adapted from C.W. Kim and R. Mauborgne (2005), Blue Ocean Strategy: How to Create Uncontested Market Space and
Make Competition Irrelevant (Boston, MA: Harvard Business School Publishing).
To Achieve Successful Value Innovation,
Answer These Questions
• Lowering costs
• Eliminate: Which of the factors that the industry takes for granted should be
eliminated?
• Reduce: Which of the factors should be reduced well below the industry’s
standard?
• Increasing perceived consumer benefits
• Raise: Which of the factors should be raised well above the industry’s
standard?
• Create: Which factors should be created that the
industry has never offered?
Adjacency moves
• a company's continual moves into related segments or businesses that
utilizes and, usually, reinforce the strength of the profitable core.
• a strategy that works well for brands that can take what they are
best at into markets where that facet is lacking.
• Doing so means the brand continues to work from within a skill set
where it has marked superiority, and to apply it, with advantage, to
unprecedented places.
• According to a Bain & Company study on adjacency growth, only one
in four adjacency moves is successful. That's right—just 25%.
Module VI
Space Matrix
Stage 2 : Matching
BCG Matrix
Stage
IE Matrix
Formulation Framework
Matching Stage
Excess Working capacity + 20% annual growth in the cell = Acquire Cellfone.Inc
phone industry (opportunity)
Strong R&D (strength) + Decreasing numbers of young = Develop new products for older
adults (threat) adults
Poor employee morale + Strong union activity (threat) = Develop a new employee benefits
(weakness) package
Matching Stage
• Management hierarchy
• Career Aspirations
• Allocation of scarce resources
Politics of Strategy Choice
Political tactics for Strategists –
• Equifinality
• Satisfying
• Generalization
• Focus on High – order issues
• Provide Political Access on Important issues
Role of Board of Directors
• Duties and Responsibilities –