KNV-IBM(METODA)  BY: PRESCIENT GROUP STRATEGIC ANALYSIS AND CHOICE IN SINGLE- OR DOMINANT-PRODUCT BUSINESSES: BUILDING SUS...
<ul><li>Evaluating and Choosing Business Strategies: Seeking Sustained Competitive Advantage </li></ul><ul><li>Selected In...
1. What strategies are most effective at building sustainable competitive advantages for single business units? 2. Should ...
COST LEADERSHIP DIFFERENTIATION SPEED MARKET FOCUS KNV-IBM(METODA)  BY: PRESCIENT GROUP
<ul><li>A. Skills and Resources </li></ul><ul><li>Sustained capital investment and access to capital </li></ul><ul><li>Pro...
<ul><li>Low-cost advantages reduce likelihood of pricing pressure from buyers </li></ul><ul><li>Sustained low-cost advanta...
<ul><li>Many cost-saving activities are easily duplicated </li></ul><ul><li>Exclusive cost leadership can become a trap </...
<ul><li>A. Skills and Resources </li></ul><ul><li>Strong marketing abilities </li></ul><ul><li>Product engineering </li></...
<ul><li>Rivalry is reduced when a business successfully differentiates itself </li></ul><ul><li>Buyers are less sensitive ...
K.N.V. INSTITUTE OF BUSINESS MANAGEMENT – METODA (RAJKOT) By – PRESCIENT GROUP
<ul><li>Imitation narrows perceived differentiation, rendering differentiation meaningless </li></ul><ul><li>Technological...
<ul><li>A. Skills and resources </li></ul><ul><li>Process engineering skills </li></ul><ul><li>Excellent inbound and outbo...
Product or service improvements Product development cycles Information sharing and technology Speed in delivery or distrib...
<ul><li>Creates a way to lessen rivalry because firm has the availability of something a rival may not </li></ul><ul><li>A...
Speeding up activities that have not been conducted in a fashion prioritizing rapid response should only be done after att...
<ul><li>Involves building cost, differentiation, and/or speed competitive advantages targeted to a  narrow, market niche <...
KNV-IBM(METODA)  BY: PRESCIENT GROUP
<ul><li>Emerging Industries </li></ul><ul><li>Industries Transitioning to Maturity </li></ul><ul><li>Mature and Decline In...
<ul><li>Proprietary technology and technological uncertainty  </li></ul><ul><li>Competitor uncertainty regarding inadequat...
<ul><li>Ability to shape industry’s structure </li></ul><ul><li>Ability to rapidly improve product quality </li></ul><ul><...
<ul><li>Intense competition for market share </li></ul><ul><li>Increased sales to experienced, repeat buyers </li></ul><ul...
<ul><li>Prune the product line </li></ul><ul><li>Emphasize process innovation </li></ul><ul><li>Emphasize cost reductions ...
<ul><li>A middle-ground approach to selecting a generic competitive strategy </li></ul><ul><li>Sacrificing market share fo...
<ul><li>Demand grows more slowly than economy, or even declines </li></ul><ul><li>Slowing growth is caused by </li></ul><u...
<ul><li>Focus on key market segments offering growth opportunity </li></ul><ul><li>Emphasize product innovation and qualit...
Being overly optimistic about prospects for an industry revival Getting trapped in a profitless war of attrition Harvestin...
<ul><li>No firm has a significant market share </li></ul><ul><li>No firm can significantly influence industry outcomes </l...
<ul><li>Tightly managed decentralization  </li></ul><ul><ul><li>Intense local coordination, high personal service, local a...
<ul><li>Differences in prices and costs among countries due to </li></ul><ul><ul><li>Currency exchange fluctuations </li><...
Approach to gain global market coverage Generic competitive strategy KNV-IBM(METODA)  BY: PRESCIENT GROUP
<ul><li>License foreign firms to produce and distribute a firm’s products </li></ul><ul><li>Maintain a domestic production...
<ul><li>Broad-line global competition </li></ul><ul><li>Global focus strategy </li></ul><ul><li>National focus strategy </...
I II III IV Overcome weaknesses Maximize strengths Internal  (redirected resources within the firm ) External (acquisition...
I II IV III Rapid market growth Slow market growth Strong competitive position Weak competitive position <ul><li>Concentra...
Opportunities to build value via diversification, integration, or joint venture strategies are usually found in market-rel...
Strategy Final 12 Ch 007
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Strategy Final 12 Ch 007

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  • DDD
  • Strategy Final 12 Ch 007

    1. 1.
    2. 2. KNV-IBM(METODA) BY: PRESCIENT GROUP STRATEGIC ANALYSIS AND CHOICE IN SINGLE- OR DOMINANT-PRODUCT BUSINESSES: BUILDING SUSTAINABLE COMPETITIVE ADVANTAGES
    3. 3. <ul><li>Evaluating and Choosing Business Strategies: Seeking Sustained Competitive Advantage </li></ul><ul><li>Selected Industry Environments and Business Strategy Choices </li></ul><ul><li>Dominant Product/Service Businesses: Evaluating and Choosing to Diversify to Build Value </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    4. 4. 1. What strategies are most effective at building sustainable competitive advantages for single business units? 2. Should dominant-product/service businesses diversify to build value and competitive advantage? What grand strategies are most appropriate? KNV-IBM(METODA) BY: PRESCIENT GROUP
    5. 5. COST LEADERSHIP DIFFERENTIATION SPEED MARKET FOCUS KNV-IBM(METODA) BY: PRESCIENT GROUP
    6. 6. <ul><li>A. Skills and Resources </li></ul><ul><li>Sustained capital investment and access to capital </li></ul><ul><li>Process engineering skills </li></ul><ul><li>Intense supervision of labor or core technical operations </li></ul><ul><li>Products or services designed for ease of manufacture or delivery </li></ul><ul><li>Low-cost distribution systems </li></ul><ul><li>B. Organizational Requirements </li></ul><ul><li>Tight cost control </li></ul><ul><li>Frequent, detailed control reports </li></ul><ul><li>Continuous improvement and benchmarking orientation </li></ul><ul><li>Structured organization and responsibilities </li></ul><ul><li>Incentives based on meeting strict, usually quantitative targets </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    7. 7. <ul><li>Low-cost advantages reduce likelihood of pricing pressure from buyers </li></ul><ul><li>Sustained low-cost advantages may push rivals into other areas, lessening price competition </li></ul><ul><li>New entrants must face an entrenched cost leader without experience to replicate cost advantages </li></ul><ul><li>Low-cost advantages should lessen attractiveness of substitutes </li></ul><ul><li>Higher margins allow low-cost producers to withstand supplier cost increases </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    8. 8. <ul><li>Many cost-saving activities are easily duplicated </li></ul><ul><li>Exclusive cost leadership can become a trap </li></ul><ul><li>Obsessive cost cutting can shrink other competitive advantages involving key product attributes </li></ul><ul><li>Cost differences often decline over time </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    9. 9. <ul><li>A. Skills and Resources </li></ul><ul><li>Strong marketing abilities </li></ul><ul><li>Product engineering </li></ul><ul><li>Creative talent and flair </li></ul><ul><li>Strong capabilities in basic research </li></ul><ul><li>Corporate reputation for quality or technological leadership </li></ul><ul><li>Long tradition in an industry or unique combination of skills </li></ul><ul><li>Strong cooperation from channels/suppliers </li></ul><ul><li>B. Organizational Requirements </li></ul><ul><li>Strong coordination among functions in R&D, product development, and marketing </li></ul><ul><li>Subjective measurement and incentives instead of quantitative measures </li></ul><ul><li>Amenities to attract highly skilled labor, scientists, and creative people </li></ul><ul><li>Tradition of closeness to key customers </li></ul><ul><li>Some personnel skilled in sales and operations – technical and marketing </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    10. 10. <ul><li>Rivalry is reduced when a business successfully differentiates itself </li></ul><ul><li>Buyers are less sensitive to prices for effectively differentiated products </li></ul><ul><li>Brand loyalty is hard for new entrants to overcome </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    11. 11. K.N.V. INSTITUTE OF BUSINESS MANAGEMENT – METODA (RAJKOT) By – PRESCIENT GROUP
    12. 12. <ul><li>Imitation narrows perceived differentiation, rendering differentiation meaningless </li></ul><ul><li>Technological changes that nullify past investments or learning </li></ul><ul><li>Cost difference between low-cost competitors and the differentiated business becomes too great for differentiation to hold brand loyalty </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    13. 13. <ul><li>A. Skills and resources </li></ul><ul><li>Process engineering skills </li></ul><ul><li>Excellent inbound and outbound logistics </li></ul><ul><li>Technical people in sales and customer service </li></ul><ul><li>High levels of automation </li></ul><ul><li>Corporate reputation for quality or technical leadership </li></ul><ul><li>Flexible manufacturing capabilities </li></ul><ul><li>Strong downstream partners </li></ul><ul><li>Strong cooperation from suppliers of major components </li></ul><ul><li>B . Organizational Requirements </li></ul><ul><li>Strong coordination among functions in R&D, product development, and marketing </li></ul><ul><li>Major emphasis on customer satisfaction in incentive programs </li></ul><ul><li>Strong delegation to operating personnel </li></ul><ul><li>Tradition of closeness to key customers </li></ul><ul><li>Some personnel skilled in sales and operations – technical and marketing </li></ul><ul><li>Empowered customer service personnel </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    14. 14. Product or service improvements Product development cycles Information sharing and technology Speed in delivery or distribution KNV-IBM(METODA) BY: PRESCIENT GROUP
    15. 15. <ul><li>Creates a way to lessen rivalry because firm has the availability of something a rival may not </li></ul><ul><li>Allows firm to charge buyers more, engender loyalty, or enhance its position relative to its buyers </li></ul><ul><li>Generates cooperation and concessions from suppliers since they benefit from increased revenues </li></ul><ul><li>Substitutes and new entrants are trying to keep up with the rapid changes rather than introducing them </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    16. 16. Speeding up activities that have not been conducted in a fashion prioritizing rapid response should only be done after attention to training, reorganization, and/or reengineering Some industries – stable, mature ones – may not offer much advantage to a firm introducing some forms of rapid response KNV-IBM(METODA) BY: PRESCIENT GROUP
    17. 17. <ul><li>Involves building cost, differentiation, and/or speed competitive advantages targeted to a narrow, market niche </li></ul><ul><li>Allows a firm to </li></ul><ul><ul><li>“ Learn” its target customers </li></ul></ul><ul><ul><li>Build up organizational knowledge of ways to satisfy its target market better than larger rivals </li></ul></ul><ul><li>Risks of focus strategies </li></ul><ul><ul><li>Can attract major competitors to the segment </li></ul></ul><ul><ul><li>Believing a focus, by itself, creates success, rather than a form of low cost, differentiation, or speed </li></ul></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    18. 18. KNV-IBM(METODA) BY: PRESCIENT GROUP
    19. 19. <ul><li>Emerging Industries </li></ul><ul><li>Industries Transitioning to Maturity </li></ul><ul><li>Mature and Decline Industries </li></ul><ul><li>Fragmented Industries </li></ul><ul><li>Global Industries </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    20. 20. <ul><li>Proprietary technology and technological uncertainty </li></ul><ul><li>Competitor uncertainty regarding inadequate information </li></ul><ul><li>High initial cost structure </li></ul><ul><li>Few entry barriers </li></ul><ul><li>First-time buyers require initial inducements </li></ul><ul><li>Inability to easily obtain raw materials and components </li></ul><ul><li>Need for high-risk capital </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    21. 21. <ul><li>Ability to shape industry’s structure </li></ul><ul><li>Ability to rapidly improve product quality </li></ul><ul><li>Establish favorable relations with key suppliers </li></ul><ul><li>Ability to establish technology as dominant force </li></ul><ul><li>Acquire a core group of loyal customers </li></ul><ul><li>Ability to forecast future competitors </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    22. 22.
    23. 23. <ul><li>Intense competition for market share </li></ul><ul><li>Increased sales to experienced, repeat buyers </li></ul><ul><li>Greater emphasis on cost and service </li></ul><ul><li>Industry capacity “tops” out </li></ul><ul><li>New products and new applications harder to come by </li></ul><ul><li>Increase in international competition </li></ul><ul><li>Declining profitability </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    24. 24. <ul><li>Prune the product line </li></ul><ul><li>Emphasize process innovation </li></ul><ul><li>Emphasize cost reductions </li></ul><ul><li>Focus on selecting loyal buyers </li></ul><ul><li>Pursue horizontal integration </li></ul><ul><li>Expand internationally </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    25. 25. <ul><li>A middle-ground approach to selecting a generic competitive strategy </li></ul><ul><li>Sacrificing market share for short-term profits </li></ul><ul><li>Waiting too long to respond to price reductions </li></ul><ul><li>Retaining unneeded excess capacity </li></ul><ul><li>Engaging in sporadic or irrational efforts to boost sales </li></ul><ul><li>Placing hopes on “new” products </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    26. 26. <ul><li>Demand grows more slowly than economy, or even declines </li></ul><ul><li>Slowing growth is caused by </li></ul><ul><ul><li>Technological substitution </li></ul></ul><ul><ul><li>Demographic shifts </li></ul></ul><ul><ul><li>Shifts in consumer needs </li></ul></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    27. 27. <ul><li>Focus on key market segments offering growth opportunity </li></ul><ul><li>Emphasize product innovation and quality improvement </li></ul><ul><li>Emphasize production and distribution efficiency </li></ul><ul><li>Gradually harvest the business </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    28. 28. Being overly optimistic about prospects for an industry revival Getting trapped in a profitless war of attrition Harvesting from a weak position KNV-IBM(METODA) BY: PRESCIENT GROUP
    29. 29. <ul><li>No firm has a significant market share </li></ul><ul><li>No firm can significantly influence industry outcomes </li></ul><ul><li>Examples </li></ul><ul><ul><li>Professional services </li></ul></ul><ul><ul><li>Retailing </li></ul></ul><ul><ul><li>Wood and metal fabrication </li></ul></ul><ul><ul><li>Agricultural products </li></ul></ul><ul><ul><li>Funeral industry </li></ul></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    30. 30. <ul><li>Tightly managed decentralization </li></ul><ul><ul><li>Intense local coordination, high personal service, local autonomy </li></ul></ul><ul><li>“ Formula” facilities </li></ul><ul><ul><li>Standardized, efficient, low-cost facilities at multiple locations </li></ul></ul><ul><li>Increased value added </li></ul><ul><ul><li>Difficult to differentiate products/services </li></ul></ul><ul><li>Specialization </li></ul><ul><ul><li>Product type, customer type, type of order, geographic areas </li></ul></ul><ul><li>Bare bones/no frills </li></ul><ul><ul><li>Intense low margin competition (low overhead, minimum wage) </li></ul></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    31. 31. <ul><li>Differences in prices and costs among countries due to </li></ul><ul><ul><li>Currency exchange fluctuations </li></ul></ul><ul><ul><li>Differences in wage and inflation rates </li></ul></ul><ul><ul><li>Other economic factors </li></ul></ul><ul><li>Differences in buyer needs across countries </li></ul><ul><li>Differences in competitors and ways of competing among countries </li></ul><ul><li>Differences in trade rules and governmental regulations across countries </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    32. 32. Approach to gain global market coverage Generic competitive strategy KNV-IBM(METODA) BY: PRESCIENT GROUP
    33. 33. <ul><li>License foreign firms to produce and distribute a firm’s products </li></ul><ul><li>Maintain a domestic production base and export products </li></ul><ul><li>Establish foreign-based plants and distribution in foreign countries </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    34. 34. <ul><li>Broad-line global competition </li></ul><ul><li>Global focus strategy </li></ul><ul><li>National focus strategy </li></ul><ul><li>Protected niche strategy </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    35. 35. I II III IV Overcome weaknesses Maximize strengths Internal (redirected resources within the firm ) External (acquisition or merger for resource capability ) Turnaround or retrenchment Divestiture Liquidation Vertical integration Conglomerate diversification Concentrated growth Mkt. Development Prod. Development Innovation Horizontal integration Concentric diversification Joint venture KNV-IBM(METODA) BY: PRESCIENT GROUP
    36. 36. I II IV III Rapid market growth Slow market growth Strong competitive position Weak competitive position <ul><li>Concentrated growth </li></ul><ul><li>Vertical Integration </li></ul><ul><li>Concentric diversification </li></ul><ul><li>Reformulation of concentrated growth </li></ul><ul><li>Horizontal integration </li></ul><ul><li>Divestiture </li></ul><ul><li>Liquidation </li></ul><ul><li>Concentric diversification </li></ul><ul><li>Conglomerate diversification </li></ul><ul><li>Joint venture </li></ul><ul><li>Turnaround or retrenchment </li></ul><ul><li>Concentric diversification </li></ul><ul><li>Conglomerate diversification </li></ul><ul><li>Divestiture </li></ul><ul><li>Liquidation </li></ul>KNV-IBM(METODA) BY: PRESCIENT GROUP
    37. 37. Opportunities to build value via diversification, integration, or joint venture strategies are usually found in market-related, operating-related, and management activities. Such opportunities center around reducing costs, improving margins, or providing access to new revenue sources more cost effectively than traditional internal growth options via concentration, market development, or product development KNV-IBM(METODA) BY: PRESCIENT GROUP

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