WK78 Strategy Formulation


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WK78 Strategy Formulation

  1. 1. WK7 Agenda<br />News: Safari World Cup, World Expo, Chinese Enterprise and ROI, Lebron<br />ASEAN MNEs<br />CCTV: Chinese Enterprise<br />Wii discovery<br />Tows matrix discovery<br />Homework Update, mind map<br />1<br />MIB, BBA 2010<br />
  2. 2. Wii Discovery<br />Wii game, meet all teams.<br />Do your team have a competitive advantage?<br />Resources+capability+competencycompetitive advantage<br />SWOT of your team? Strategy use?<br />MIB, BBA 2010<br />2<br />
  3. 3. Alternative Strategies<br />Find news, video clip, article or reality role play of these alternatives. <br />Ask your friends what strategy that your team use as well as the probability of success.<br />MIB, BBA 2010<br />3<br />
  4. 4. Homework & Mind Map<br />Mind map, check understanding<br />Is Oishi an MNE?<br />MIB, BBA 2010<br />4<br />
  5. 5. WK7.2 Agenda<br />Hot topics: World Expo<br />AHA, our discovery moment<br />Mind map<br />SWOT homework and evaluation<br />MIB, BBA 2010<br />5<br />
  6. 6. SWOT Evaluation<br />Rate team work of SWOT homework (1-5). Give necessary comment.<br />
  7. 7. WK7.3 Agenda<br />Hot topics: Lao Timber, Telecom Industry growth, real estate bubble in China, labor work situation in Thailand, Cambodia day of anger?<br />SWOT homework continue<br />Lecture<br />MIB, BBA 2010<br />7<br />
  8. 8. Strategy Formulation <br />Situational Analysis: SWOT analysis<br />Strategy=opportunity/capacity (only strength and opportunity)<br />Strategic alternative=O/(S-W), what’s the minimum number that we’ll be happy?<br />Should we invest more in our strength to create a distinctive competence?<br />Should we invest more in our weakness to at least make them competitive?<br />SWOT criticism: lengthy list, no weight to reflect priorities, ambiguous words, same factor in two categories<br />MIB, BBA 2010<br />8<br />
  9. 9. Strategy Formulation<br />Find a niche using Strategic Factors Analysis Summary (SFAS) matrix.<br />List the most important items for each factor (SWOT) and recreate the matrix.<br />The SFAS matrix is the firm’s strategic factors.<br />Generate alternative strategies using a TOWS matrix<br />MIB, BBA 2010<br />9<br />
  10. 10. Strategy Formulation<br />MIB, BBA 2010<br />10<br />
  11. 11. I.Business Strategies<br />Focuses on improving competitive position of a company or business unit’s products or services within the specific industry or market segment.<br />MIB, BBA 2010<br />11<br />
  12. 12. Competitive Strategies<br />Porter’s Generic Competitive Strategies<br /><ul><li>Lower Cost strategy
  13. 13. Greater efficiencies than competitors
  14. 14. Differentiation strategy
  15. 15. Unique/superior value, quality, features, service</li></ul>Competitive Advantage<br /><ul><li>Determined by Competitive Scope
  16. 16. Breadth of the target market</li></ul>Resources+capability+competencycompetitive advantage<br />MIB, BBA 2010<br />12<br />Can we use both cost leadership and differentiation strategy?<br />Benz, BMW,<br />Apple, Bally<br />Wal-Mart, Dell, <br />Southwest<br />What is stuck in the middle?<br />No competitive advantage,<br />Below average performance<br />Sansabai Buffet, <br />Nunyang<br />Villa Supermarket<br />Bulavi Natural Treatment<br />Sport Club<br />
  17. 17. Risks of Generic Strategies<br />MIB, BBA 2010<br />13<br />
  18. 18. Requirements for Generic Strategies<br />MIB, BBA 2010<br />14<br />
  19. 19. Tactics<br />MIB, BBA 2010<br />15<br />
  20. 20. Cooperative Strategies<br /><ul><li>Collusion: reduce output and raise price: OPEC
  21. 21. Strategic Alliances: advantages include: obtain technology, access to specific market, reduce financial and political risks, learn new capabilities
  22. 22. Mutual service consortia: partnership with similar companies to share resource(too expensive to develop alone): IBM&Toshiba, Ford&Mazda
  23. 23. Joint ventures: most popular, but the disadvantages include: the loss of control, lower profit, conflict potential, possible technology transfer
  24. 24. Licensing arrangements
  25. 25. Value-chain partnerships: alliance with key suppliers or distributors</li></ul>MIB, BBA 2010<br />16<br />Value chain partnership<br />Mutual Service<br />JV, Licensing<br />Strong&Close<br />Weak&Distant<br />
  26. 26. II. Corporate Strategy<br />MIB, BBA 2010<br />17<br /><ul><li>BCG Growth Share Matrix
  27. 27. GE Business Screen</li></li></ul><li>Directional Strategy<br />Model of Corporate Strategies<br />MIB, BBA 2010<br />18<br />
  28. 28. Growth Strategy<br />Concentration<br />Vertical growth(forward, backward integration)<br />Integration or outsource?<br />Horizontal growth<br />Existing Product New Market<br />Existing Market New Product Range <br />KLM&NWA, UBU, S KhonKaen<br />Diversification<br /><ul><li>Concentric Diversification</li></ul>Grow into related industry<br />Search for synergies<br />Thai-DanishTropicana JV<br /><ul><li>Conglomerate Diversification</li></ul>Grow into unrelated industry<br />Concern with financial considerations<br />RedbullPiyawet<br />KaonaSunee<br />Probability of success?<br />MIB, BBA 2010<br />19<br />Full<br />Integration<br />BP, Shell<br />Taper<br /><50% Self-made <br />Quasi<br />(partial control)<br />Buy stock of the supplier<br />Long term Contract<br />
  29. 29. WK8.2 Agenda<br />Revised homework on Friday 23, 2010.<br />Inflated presentation points<br />Use the slides diagram<br />Use the strategic audit sheet.<br />News, article, corporate website, competitor websites information search.<br />Bring all your information. Need better understanding of your business and industry.<br />Threat~highratinghandle well <br />Weakness~high rating???<br />Lecture<br />Mind map and Simulation Game/Start download<br />MIB, BBA 2010<br />20<br />
  30. 30. Stability Strategy<br />MIB, BBA 2010<br />21<br />
  31. 31. Retrenchment Strategy<br />MIB, BBA 2010<br />22<br />
  32. 32. Portfolio Analysis : BCG<br />BCG Matrix use growth rate and relative competitive position.<br />Relative Competitive position =market share/mk share of the largest competitor<br />The cut off position is at 1.5X. More than 1 means? <br />Question marks: new product with potential for success, but need lots of cash for development<br />Stars: market leader, peak of the product life cycle, generate lots of cash<br />Cash cows: decline stage of the product life cycle, generate cash to invest for question mark<br />Dogs: low market share and do not have market potential due to unattractive industry. <br />MIB, BBA 2010<br />23<br />
  33. 33. Portfolio Analysis : BCG<br />What should we do if we have a dog? <br />Dog farm…sell out<br />Limitations include:<br />Too simple(use high and low)<br />Market share does not always link to profitable<br />Growth rate is only one aspect of the industry attractiveness.<br />Market share is only one aspect of the overall competitive position.<br />Only consider the largest competitor (the divisor) ignore other firms.<br />MIB, BBA 2010<br />24<br />
  34. 34. Portfolio Analysis: GE Business Screen<br />MIB, BBA 2010<br />25<br />C<br />Winners<br />Winners<br />A<br />Question<br />B<br />High<br />Marks<br />D<br />Winners<br />E<br />Average<br />Businesses<br />F<br />Industry Attractiveness<br />Medium<br />Losers<br />H<br />Losers<br />G<br />Low<br />Profit<br />Producers<br />Losers<br />Strong<br />Average<br />Weak<br />Business Strength/Competitive Position<br />Industry Attractiveness: Market <br /> growth rate, comparable market share, industry profitability, size, and pricing practices<br /> Competitive position: market share, <br /> technological position, profitability, <br /> and size<br />A-H are the product lines.<br />Size of the circle represent the industry.<br />The highlighted area is the market share.<br />Limitations include:<br />Complicated and cumbersome<br />Subjective judgment rating<br />Not effective for depicting new product positions<br />
  35. 35. Parenting Strategy<br />Developing a corporate parenting strategy<br /><ul><li>Examine the business unit strategic factors
  36. 36. Examine the business unit to improve performance
  37. 37. Analyze the characteristic fit between parent corporation and the business unit</li></ul>MIB, BBA 2010<br />26<br />
  38. 38. III. Functional Strategy<br />The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.<br />MIB, BBA 2010<br />27<br />
  39. 39. Marketing Strategy<br />MIB, BBA 2010<br />28<br />
  40. 40. Financial Strategy<br />Leverage buyout: acquire the company with the borrowed money from the third party organizations.<br />Reverse stock splits: each share is worth only half as much to raise the stock price<br />Tracking stock: Common stock issued by a parent company that tracks the performance of a particular division without having claim on the assets of the division or the parent company. The objective is to separate a high-growth division from a larger parent company. <br />MIB, BBA 2010<br />29<br />
  41. 41. R&D Strategy<br />MIB, BBA 2010<br />30<br />
  42. 42. Operation Strategy<br />Job shop: skilled labor<br />Connected line batch flow: components are standardized<br />Flexible manufacturing systems: parts are grouped into manufacturing families to produce a wide variety of mass-produced items<br />Dedicated transfer lines: highly automated assembly lines, use little human labor<br />Mass production: produce a large number of low cost, standard goods and services<br />Continuous improvement system: improve production process, manager is a coach<br />Modular manufacturing: JIT to a company’s assembly line<br />Mass productionmass customization: Dell<br />Six sigma<br />MIB, BBA 2010<br />31<br />
  43. 43. Purchasing Strategy<br />MIB, BBA 2010<br />32<br />
  44. 44. Logistics Strategy<br />MIB, BBA 2010<br />33<br />
  45. 45. HRM Strategy<br />MIB, BBA 2010<br />34<br />
  46. 46. Information Strategy<br />Key driver of a business.<br />Must align to the company vision and satisfy the business need.<br />Support better business decision.<br />Balance cost, convenience and security.<br />CRM, EDI,ERP, SAP, SAS, E-commerce etc.<br />MIB, BBA 2010<br />35<br />
  47. 47. Strategy to Avoid<br /><ul><li>Blindly follow the leader: Fujitsu follow IBM in maturing mainframe business
  48. 48. Hit another home run: Polaroid instant movie camera
  49. 49. Arms race: market share fight but the result is offset by the increase in advertising, promotion, R&D, and manufacturing cost. Chang and Singh
  50. 50. Do everything: Jump into all opportunities. Disney company increasing sales but decreasing net income.
  51. 51. Losing hand: Unwilling to accept its failure. Throw good money after bad. Pan American Airlines</li></ul>MIB, BBA 2010<br />36<br />
  52. 52. Strategic Choice<br />Create three scenarios(Optimistic, Pessimistic, and Most Likely) and cost estimation.<br />Select the alternative that use the least resource and fewest negative side effects as well as minimize cost and risk.<br />MIB, BBA 2010<br />37<br />
  53. 53. Subjective Factor Affecting Decisions<br />Management’s attitude toward risk<br />Pressures from stakeholders<br />Pressures from corporate culture<br />Needs and desires of key managers<br />Avoiding the consensus trap<br /><ul><li>Devil’s Advocate
  54. 54. Dialectical Inquiry: debate two proposals using different assumptions</li></ul>MIB, BBA 2010<br />38<br />
  55. 55. Evaluation of Strategic Alternatives<br />Mutual exclusivity<br />Success: doable, high probability of success<br />Completeness: include all key strategic issues<br />Internal consistency: make sense, not contradict key goals, policies, and current strategies<br />MIB, BBA 2010<br />39<br />
  56. 56. Mind Map &Simulation<br />Prepare the mind map of this lecture.<br />In 4 groups, download Industry Player. <br />http://www.industryplayer.com/download.php<br />Start playing level 1.<br />What did you learn from this simulation?<br />MIB, BBA 2010<br />40<br />
  57. 57. Redo SWOT Homework<br />Use the slides diagram<br />Use the strategic audit sheet.<br />News and article information search.<br />Bring all your information.<br />Need better understanding of your business and industry.<br />MIB, BBA 2010<br />41<br />
  58. 58. WK8.3 Agenda<br />Mind map<br />Group work<br />MIB, BBA 2010<br />42<br />