Unit 4: Strategy Formulation LH 14

Concept, Business level strategy- Generic competitive

strategies, a resource-based view to strategy formulation, the
industry life-cycle; corporate level strategies- Growth
strategies, related and unrelated diversification, implementing
growth strategies, portfolio analysis- Boston Consulting Group
Matrix and The General Electric-Mckinsey Matrix, strategy
evaluation.
Generic Competative Strategy
 Strategic Clock- oriented Market- based
generic Strategies- By Bowman
1. Low price low value added
strategy: low price with no
concern quality.
2. Low price strategy: low price
without loss of quality.
3. Hybrid strategy: low price with
differentiation relative to
competitors.
4. Differentiation strategy: unique
dimensions with high percieve of
value.
5. Focused differentiation strategy:
combines high price withhigh percieve
value added.
6. Increased price with standard product
strategy: high price with standard
percieved added value.
7. Increased price with low value
strategy: high price with low percieved
added value.
8. Standard price with low value
strategy: standard price with low
percieved value added.
Corporate Strategy
 Stability Strategy
In this strategy, an organization continues its current activities without
any significance change in direction.
Pause strategy
No-change strategy
Profit strategy
 Combination/ Mixed Strategy
If an organization pursues stability, growth and retrenchment strategies
in the different business unit simultaneously at the same time, it it
called combination or mixed strategy. This strategy, generally, follows to
deal with diverse environment situation.
 The General Electricity Mckinsey Matrix
Market Attractiveness
• Market size and market growth
• Barriers to entry
• Industry profitability
• Technology
• Workforce availability
• Political-legal-social-
envionmental issues
Competative Position
• Market share
• Marketing and sales force
• Research and development
• Financial resources
• Manufacturing and distribution
• Competative position regarding-
Image, Product line, Customer
service
Process of Strategy Formulation
Review of Strategic Elemente- Vision, Mission, Objectives,
Objectives, and Strategy

SWOT Analysis- Internal and External Environment

Identify Strategic Options:

Corporate- stability, growth, Retrenchment and combination
Business- low cost, differentiation, focus and strategic clock

Evaluation Strategic option- suitable, acceptable and feasible

Strategic Choice
 Stratregy Evaluation
The evaluation of strategic options are ranked according to their potential
strategic advantage for the goals achievement. The evaluating components are:
• Suitability: The option should be suitable in terms of environmental conditions
of the organization. There should be evaluated the ranking in terms of cost,
quality, technology. Scenario planning and decision tree techniques are also
used.
• Acceptability: The option should be acceptable in terms of risk, return, and
stakeholders expectations. Ratio analysis, cost benifits analysis and stakeholders
expectatins are also evaluated.
• Feasible: The option should be feasible in terms of resources and copetencies
of the organzation. Financial feasibility such as funds flow analysis, break even
analysis are importants components for evaluationg the strategic options.