Chap. 5
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Transcript of Chap. 5
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Chapter 5
Strategy Formulation: Situation Analysis and Business Strategy
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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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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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Porter’s Generic Competitive Strategies
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Porter’s 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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Porter’s Competitive Strategies
Differentiation:–Broad mass market
–Unique product or service
–Charge premiums
–Lower customer sensitivity to price
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Porter’s 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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Porter’s 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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Porter’s 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 segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.