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Multi business strategy


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Multi business strategy

  1. 1. Business and Multibusiness Strategy Prepared by: Eka Darmadi Lim 3094802
  2. 2. 2 Study Question 1: What are the foundations of strategic competitiveness? Basic concepts of strategy (cont.): – Strategy — a comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage. – Strategic intent — focusing all organizational energies on a unifying and compelling goal.
  3. 3. 3 Study Question 1: What are the foundations of strategic competitiveness? Basic concepts of strategy (cont.): – Strategic management — the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage.
  4. 4. 4 Study Question 1: What are the foundations of strategic competitiveness?  Goal of strategic management is to create above-average returns for investors. – Returns exceeding those for alternative opportunities at equivalent risk. – Earning above-average returns depends in part on the organization’s competitive environment.
  5. 5. 5 Study Question 2: What is the strategic management process? Strategy formulation – The process of creating strategy. – Involves assessing existing strategies, organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage.
  6. 6. 6 Figure 9.1 Strategy formulation and implementation in the strategic management process.
  7. 7. 7 Figure 9.6 Porter’s generic strategies framework: soft-drink industry examples.
  8. 8. 8 Study Question 4: How are strategies formulated? Porter’s generic strategies for gaining competitive advantage: – Differentiation strategy – Cost leadership strategy – Focused differentiation strategy – Focused cost leadership strategy
  9. 9. Cost leadership strategy Business success built on cost leadership requires the business to be able to provide its product or service at a cost below what its competitors can achieve 9
  10. 10. Cost leadership strategy Management 8/e - Chapter 9 10
  11. 11. Sustainable Low-Cost Activities 1. Some low-cost advantages reduce the likelihood of buyers’ pricing pressure 2. Truly sustained low-cost advantages may push rivals into other areas 3. New entrants competing on price must face an entrenched cost leader 4. Low-cost advantages should lessen the attractiveness of substitute products 5. Higher margins allow low-cost producers to withstand supplier cost increases 11
  12. 12. Risks of a Cost Leadership Strategy 1. Many cost-saving activities are easily duplicated 2. Exclusive cost leadership can be a trap 3. Obsessive cost cutting can shrink other competitive advantages 4. Cost differences often decline over time 12
  13. 13. Evaluating a Business’s Differentiation Opportunities Management 8/e - Chapter 9 13
  14. 14. Evaluating Speed as a Competitive Advantage Speed-based strategies, or rapid response to customer requests or market and technological changes, have become a major source of competitive advantage for numerous firms in today’s intensely competitive global economy 14
  15. 15. Management 8/e - Chapter 9 15
  16. 16. Speed can be created by:  Customer responsiveness  Product development cycles  Product or service improvements  Speed in delivery or distribution  Information Sharing and Technology 16
  17. 17. Risks of Speed-based Strategy  Speeding up activities that haven’t been conducted in a fashion that prioritizes rapid response should only be done after considerable attention to training, reorganization, and/or reengineering  Some industries may not offer much advantage to the firm that introduces some forms of rapid response 17
  18. 18. Risks of Speed-based Strategy  Customers in such settings may prefer the slower pace or the lower costs currently available, or they may have long time frames in purchasing 18
  19. 19. Emerging Industries  Emerging industries are newly formed or re-formed industries that typically are created by technological innovation, newly emerging customer needs, or other economic or sociological changes 19
  20. 20. Business Strategies in Emerging Industries  Technologies that are most proprietary to the pioneering firms and technological uncertainty will unfold  Competitor uncertainty because of inadequate information about competitors, buyers, and the timing of demand  High initial costs but steep cost declines 20
  21. 21. Business Strategies in Emerging Industries  First-time buyers requiring initial inducement to purchase  Inability to obtain raw materials and components until suppliers gear up to meet the industry’s needs  Need for high-risk capital because of the industry’s uncertain prospects 21
  22. 22. The Portfolio Approach  The portfolio approach is a historical starting point for strategic analysis and choice in multibusiness firms  Boston Consulting Group (BCG) pioneered an approach called portfolio techniques that attempted to help managers 22
  23. 23. The Portfolio Approach “balance” the flow of cash resources among their various businesses while identifying their basic strategic purpose within the overall portfolio 23
  24. 24. 24 Study Question 4: How are strategies formulated?  Portfolio planning approach – Designed to help managers decide on investing scarce organizational resources among competing business opportunities. – Useful for multibusiness or multiproduct situations.
  25. 25. 25 Study Question 4: How are strategies formulated? BCG matrix – Ties strategy formulation to analysis of business opportunities according to … • Industry or market growth rate – Low versus high • Market share – Low versus high
  26. 26. 26 Figure 9.7 The BCG matrix approach to corporate strategy formulation.
  27. 27. 27 Study Question 4: How are strategies formulated? BCG matrix — business conditions and related strategies: – Stars • High share/high growth businesses. • Preferred strategy — growth. – Cash cows • High share/low growth businesses. • Preferred strategy — stability or modest growth.
  28. 28. 28 Study Question 4: How are strategies formulated? BCG matrix—business conditions and related strategies (cont.): – Question marks • Low share/high growth businesses. • Preferred strategy — growth for promising question marks and restructuring or divestiture for others. – Dogs • Low share/low growth businesses. • Preferred strategy — retrenchment by divestiture.
  29. 29. 29 Study Question 4: How are strategies formulated?  Types of adaptive strategies: – Prospector strategy • Pursuing innovation and new opportunities in the face of risk and with prospects for growth. – Defender strategy • Protecting current market share by emphasizing existing products and current share without seeking growth. – Analyzer strategy • Maintaining stability of a core business while exploring selective opportunities for innovation and change. – Reactor strategy • Merely responding to competitive pressure in order to survive.
  30. 30. Thank You For Your Attention  30