• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Strategic choice
 

Strategic choice

on

  • 879 views

 

Statistics

Views

Total Views
879
Views on SlideShare
879
Embed Views
0

Actions

Likes
1
Downloads
68
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment
  • 5
  • 6

Strategic choice Strategic choice Presentation Transcript

  • 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 thatSelecting the best strategy that will enable a firm achieve itswill enable a firm achieve its goals.goals. Some strategy options areSome strategy options are more appropriate than others.more appropriate than others. Strategists should evaluate theStrategists should evaluate the existing alternatives beforeexisting alternatives before choosing the best strategychoosing 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.Overall cost leadership:• Aim at being the lowest cost producer relative to competitors • Increases a firm’s profitability • The market can enjoy affordable prices
  •  Making oneself differentMaking oneself different from othersfrom others  Adding to customersAdding to customers perceived value of the firmperceived value of the firm and its productsand its products  Calls for continuousCalls for continuous innovations (customer-innovations (customer- centred)centred) 2. Differentiation2. Differentiation strategy:strategy:
  • How can a firm differentiateHow can a firm differentiate  Image buildingImage building  High quality and distinctiveHigh quality and distinctive productsproducts  Superior customerSuperior customer servicesservices  Unique design andUnique design and packagingpackaging  Convenient terms toConvenient terms to
  • 3. Focus strategy3. Focus strategy  Involves segmenting theInvolves segmenting the marketmarket  Focusing on a given marketFocusing on a given market segmentsegment  Calls for specialization in aCalls for specialization in a specific market segmentspecific market segment (niche marketing)(niche marketing)
  • Why focus strategy?Why focus strategy? Different groups of buyers withDifferent groups of buyers with different needsdifferent needs No other rival is attempting toNo other rival is attempting to specialize in the same segmentspecialize in the same segment A firm’s resources don’t allow itA firm’s resources don’t allow it to spread over the entireto spread over the entire segmentsegment Where some segments are moreWhere some segments are more attractive than othersattractive than others
  • ANSOFF’S APPROACH  Provides four strategic approaches based on product and market information  Came up with the product/market matrix.
  • ExistingExisting ProductsProducts NewNew ProductsProducts ExistingExisting MarketsMarkets StrategiesStrategies based onbased on existingexisting markets andmarkets and existingexisting productsproducts Strategies basedStrategies based on launchingon launching new ornew or improvedimproved products intoproducts into existingexisting marketsmarkets NewNew MarketsMarkets StrategiesStrategies based onbased on finding newfinding new markets formarkets for existingexisting productsproducts Strategies basedStrategies based on launchingon launching new productsnew products into newinto new marketsmarkets
  • Existing Products-Existing MarketsExisting Products-Existing Markets 1.1. Divestiture-It has reached maturity/you need moneyDivestiture-It has reached maturity/you need money for other ventures/in order to concentrate on yourfor other ventures/in order to concentrate on your core or more beneficial businesscore or more beneficial business 2.2. Consolidation-You are enjoying a comfort zone/needConsolidation-You are enjoying a comfort zone/need to go back to the basic (status quo)to go back to the basic (status quo) 3.3. Retrenchment-You have over expanded orRetrenchment-You have over expanded or diversified ,you need to reduce your operating costs;diversified ,you need to reduce your operating costs; sell part of the businesssell part of the business 4.4. Market penetration-Enter new markets with a moreMarket penetration-Enter new markets with a more attractive offer/buy out your close rival through sayattractive offer/buy out your close rival through say an acquisition/use a strategic alliancean acquisition/use a strategic alliance
  • New products-Existing marketsNew products-Existing markets  No or less resources needed to develop theNo or less resources needed to develop the marketmarket  You need to develop a new product or modifyYou need to develop a new product or modify the current one for that marketthe current one for that market  A product development strategy is the bestA product development strategy is the best strategy; refer to PLC as you craft this strategystrategy; refer to PLC as you craft this strategy  Bench-mark this generic strategy and fine tune itBench-mark this generic strategy and fine tune it your competitive situationyour competitive situation
  • Existing products-New marketsExisting products-New markets  No or less resources needed to develop theNo or less resources needed to develop the productproduct  You need to develop the new market for yourYou need to develop the new market for your product (s)product (s)  A market development strategy is needed usingA market development strategy is needed using say; CRM tactics/customer care practices/takingsay; CRM tactics/customer care practices/taking your products (services) near your customersyour products (services) near your customers  Refer to the current stage in the marketing cycleRefer to the current stage in the marketing cycle as you fine tune this generic strategyas you fine tune this generic strategy
  • New product-New marketNew product-New market  A lot of risks and uncertainties involved; youA lot of risks and uncertainties involved; you need to develop the new product for the newneed to develop the new product for the new marketmarket  Minimize such risks through using a competitiveMinimize such risks through using a competitive stepping stonestepping stone  Commonly used strategies in such situationsCommonly used strategies in such situations include; buying franchises, strategic alliances, andinclude; buying franchises, strategic alliances, and use of pilot projects among othersuse 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? The 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 COMPETITOR OR POTENTIAL COMPETITOR Contraction or strategic withdrawal Market expansion Flanker strategy - Proactive Flanker strategy - Reactive LEADER Fortress or position defense strategy Confrontation strategy Proactive Reactive 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 MARKET LEADER Flanking attack Frontal attack Encirclement strategy Leapfrog strategy/By Pass 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. CHALLENGER
  • 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