Uploaded byOsamaNur
PPTX, PDF16 views

STRATEGYFORMULATION.pptx

The document discusses various aspects of strategy formulation including generating alternatives, evaluating advantages and disadvantages, and selecting specific courses of action. It describes key components of strategic formulation such as the input and matching stage, internal and external factor analysis, and developing corporate, business unit, and functional strategies. Various growth, intensive, diversification, and defensive strategies are defined, such as forward integration, market penetration, and joint ventures, along with guidelines for implementing each type of strategy.

Embed presentation

Download to read offline
© 2001 Prentice Hall Ch. 5-1 STRATEGY FORMULATION • Making subjective decisions based on objective information • Generate feasible alternatives (INPUT & MATCHING STAGE) • Develop set of most attractive alternative strategies • Evaluate alternatives (determine for the set): • Advantages • Disadvantages • Trade-offs • Costs • Benefits
STRATEGY FORMULATION ANALYTICAL FRAMEWORK © 2001 Prentice Hall Ch. 5-2
Input Stage © 2001 Prentice Hall Ch. 5-3
For EFE matrix • Assign a rating between 1 and 4 to each key external factor to indicate how effectively • the firm’s current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and 1 = the response is poor. Ratings are based on effectiveness of the firm’s strategies. • Ratings are thus company-based, whereas the weights in Step 2 are industry-based. • It is important to note that both threats and opportunities can receive a 1, 2, 3, or 4. © 2001 Prentice Hall Ch. 5-4
Input Stage © 2001 Prentice Hall Ch. 5-5
For IFE matrix © 2001 Prentice Hall Ch. 5-6
Competitor Profile Matrix (CPM) © 2001 Prentice Hall Ch. 5-7
Competitor Profile Matrix (CPM) © 2001 Prentice Hall Ch. 5-8
© 2001 Prentice Hall Ch. 5-9 STRATEGY FORMULATION – Select specific course of action based on • Internal and external audit information • Firm’s vision-mission statements, objectives (STRATEGIC INTENTS) • Rank in order of attractiveness
© 2001 Prentice Hall Ch. 5-10 STRATEGIC INTENTS • VISION • MISSION • LONG TERM OBJECTIVES Based on vision, mission, long-term objectives and external-internal audits, the following will be formulated: – CORPORATE STRATEGY – SBU/BUSINESS LEVEL STRATEGY – FUNCTIONAL STRATEGY
© 2001 Prentice Hall Ch. 5-11 CORPORATE STRATEGY • SETS OVERALL DIRECTION FOR THE ORGANIZATION – GROWTH STRATEGIES - integration, intensive, and diversification strategies – STABILITY - maintaining status quo and reinforcing existing strategies – RETRENCHMENT - defensive strategies
© 2001 Prentice Hall Ch. 5-12 Growth Strategies Vertical Integration Strategies • Forward integration • Backward integration • Horizontal integration
© 2001 Prentice Hall Ch. 5-13 Growth Strategies Defined • Gaining ownership or increased control over distributors or retailers Example • General Motors is acquiring 10% of its dealers. Forward Integration
© 2001 Prentice Hall Ch. 5-14 Corporate Strategies Guidelines for Forward Integration  Present distributors are expensive, unreliable, or incapable of meeting firm’s needs  Availability of quality distributors is limited  When firm competes in an industry that is expected to grow markedly  Advantages of stable production are high  Present distributor have high profit margins
© 2001 Prentice Hall Ch. 5-15 Strategies in Action Defined • Seeking ownership or increased control of a firm’s suppliers Example • Motel 8 acquired a furniture manufacturer. Backward Integration
© 2001 Prentice Hall Ch. 5-16 Strategies in Action Guidelines for Backward Integration  When present suppliers are expensive, unreliable, or incapable of meeting needs  Number of suppliers is small and number of competitors large  High growth in industry sector  Firm has both capital and human resources to manage new business  Advantages of stable prices are important  Present supplies have high profit margins
© 2001 Prentice Hall Ch. 5-17 Strategies in Action Defined • Seeking ownership or increased control over competitors Example • Hilton recently acquired Promus. Horizontal Integration
© 2001 Prentice Hall Ch. 5-18 Strategies in Action Guidelines for Horizontal Integration  Firm can gain monopolistic characteristics without being challenged by federal government  Competes in growing industry  Increased economies of scale provide major competitive advantages  Faltering due to lack of managerial expertise or need for particular resources
© 2001 Prentice Hall Ch. 5-19 Strategies in Action Intensive Strategies • Market penetration • Market development • Product development
© 2001 Prentice Hall Ch. 5-20 Strategies in Action Defined • Seeking increased market share for present products or services in present markets through greater marketing efforts Example • Ameritrade, the on- line broker, tripled its annual advertising expenditures to $200 million to convince people they can make their own investment decisions. Market Penetration
© 2001 Prentice Hall Ch. 5-21 Strategies in Action Guidelines for Market Penetration  Current markets not saturated  Usage rate of present customers can be increased significantly  Market shares of competitors declining while total industry sales increasing  Increased economies of scale provide major competitive advantages
© 2001 Prentice Hall Ch. 5-22 Strategies in Action Defined • Introducing present products or services into new geographic area Example • Britain’s leading supplier of buses, Henlys PLC, acquires Blue Bird Corp. North America’s leading school bus maker. Market Development
© 2001 Prentice Hall Ch. 5-23 Strategies in Action Guidelines for Market Development  New channels of distribution that are reliable, inexpensive, and good quality  Firm is very successful at what it does  Untapped or unsaturated markets  Capital and human resources necessary to manage expanded operations  Excess production capacity  Basic industry rapidly becoming global
© 2001 Prentice Hall Ch. 5-24 Strategies in Action Defined • Seeking increased sales by improving present products or services or developing new ones Example • Apple developed the G4 chip that runs at 500 megahertz. Product Development
© 2001 Prentice Hall Ch. 5-25 Strategies in Action Guidelines for Product Development  Products in maturity stage of life cycle  Competes in industry characterized by rapid technological developments  Major competitors offer better-quality products at comparable prices  Compete in high-growth industry  Strong research and development capabilities
© 2001 Prentice Hall Ch. 5-26 Strategies in Action Diversification Strategies • Concentric diversification • Conglomerate diversification • Horizontal diversification
© 2001 Prentice Hall Ch. 5-27 Strategies in Action Defined • Adding new, but related, products or services Example • National Westminister Bank PLC in Britain bought the leading British insurance company, Legal & General Group PLC. Concentric Diversification
© 2001 Prentice Hall Ch. 5-28 Strategies in Action Guidelines for Concentric Diversification  Competes in no- or slow-growth industry  Adding new & related products increases sales of current products  New & related products offered at competitive prices  Current products are in decline stage of the product life cycle  Strong management team
© 2001 Prentice Hall Ch. 5-29 Strategies in Action Defined • Adding new, unrelated products or services Example • H&R Block, the top tax preparation agency, said it will buy discount stock brokerage Olde Financial for $850 million in cash. Conglomerate Diversification
© 2001 Prentice Hall Ch. 5-30 Strategies in Action Guidelines for Conglomerate Diversification  Declining annual sales and profits  Capital and managerial talent to compete successfully in a new industry  Financial synergy between the acquired and acquiring firms  Exiting markets for present products are saturated
© 2001 Prentice Hall Ch. 5-31 Strategies in Action Defined • Adding new, unrelated products or services for present customers Example • The New York Yankees baseball team are merging with the New Jersey Nets basketball team. Horizontal Diversification
© 2001 Prentice Hall Ch. 5-32 Strategies in Action Guidelines for Horizontal Diversification  Revenues from current products/services would increase significantly by adding the new unrelated products  Highly competitive and/or no-growth industry w/low margins and returns  Present distribution channels can be used to market new products to current customers  New products have counter cyclical sales patterns compared to existing products
© 2001 Prentice Hall Ch. 5-33 Defensive Strategies Defensive Strategies • Joint venture • Retrenchment • Divestiture • Liquidation
© 2001 Prentice Hall Ch. 5-34 Defense Strategies Defined • Two or more sponsoring firms forming a separate organization for cooperative purposes Example • Lucent Technologies and Philips Electronic NV formed Philips Consumer Communications to make and sell telephones. Joint Venture
© 2001 Prentice Hall Ch. 5-35 Strategies in Action Guidelines for Joint Venture  Combination of privately held and publicly held can be synergistically combined  Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks  Distinctive competencies of two or more firms are complementary  Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline)  Two or more smaller firms have trouble competing with larger firm  A need exists to introduce a new technology quickly
© 2001 Prentice Hall Ch. 5-36 Strategies in Action Defined • Regrouping through cost and asset reduction to reverse declining sales and profit Example • Singer, the sewing machine company, declared bankruptcy. Retrenchment
© 2001 Prentice Hall Ch. 5-37 Strategies in Action Guidelines for Retrenchment  Firm has failed to meet its objectives and goals consistently over time but has distinctive competencies  Firm is one of the weaker competitors  Inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance.  When an organization’s strategic managers have failed  Very quick growth to large organization where a major internal reorganization is needed.
© 2001 Prentice Hall Ch. 5-38 Strategies in Action Defined • Selling a division or part of an organization Example • Harcourt General, the large US publisher, is selling its Neiman Marcus division. Divestiture
© 2001 Prentice Hall Ch. 5-39 Strategies in Action Guidelines for Divestiture  When firm has pursued retrenchment but failed to attain needed improvements  When a division needs more resources than the firm can provide  When a division is responsible for the firm’s overall poor performance  When a division is a misfit with the organization  When a large amount of cash is needed and cannot be obtained from other sources.
© 2001 Prentice Hall Ch. 5-40 Strategies in Action Defined • Selling all of a company’s assets, in parts, for their tangible worth Example • Ribol sold all its assets and ceased business. Liquidation
© 2001 Prentice Hall Ch. 5-41 Strategies in Action Guidelines for Liquidation  When both retrenchment and divestiture have been pursued unsuccessfully  If the only alternative is bankruptcy, liquidation is an orderly alternative  When stockholders can minimize their losses by selling the firm’s assets
© 2001 Prentice Hall Ch. 5-42 Strategy Analysis & Choice The TOWS Matrix • List the firm’s key external opportunities • List the firm’s key external threats • List the firm’s key internal strengths • List the firm’s key internal weaknesses
© 2001 Prentice Hall Ch. 5-43 Strategy Analysis & Choice The TOWS Matrix • Match internal strengths with external opportunities and record the resultant SO Strategies • Match internal weaknesses with external opportunities and record the resultant WO Strategies • Match internal strengths with external threats and record the resultant ST Strategies • Match internal weaknesses with external threats and record the resultant WT Strategies
© 2001 Prentice Hall Ch. 5-44 TOWS Matrix WT Strategies Minimize weaknesses and avoid threats ST Strategies Use strengths to avoid threats Threats-T List Threats WO Strategies Overcome weaknesses by taking advantage of opportunities SO Strategies Use strengths to take advantage of opportunities Opportunities-O List Opportunities Weaknesses-W List Weaknesses Strengths-S List Strengths Leave Blank
© 2001 Prentice Hall Ch. 5-45 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Enhances multidivisional firms’ efforts to formulate strategies • Autonomous divisions (or profit centers) constitute the business portfolio • Firm’s divisions may compete in different industries requiring separate strategy
© 2001 Prentice Hall Ch. 5-46 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Graphically portrays differences among divisions • Focuses on market share position and industry growth rate • Manage business portfolio through relative market share position and industry growth rate
© 2001 Prentice Hall Ch. 5-47 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Relative market share position defined:  Ratio of a division’s own market share in a particular industry to the market share held by the largest rival firm in that industry.
© 2001 Prentice Hall Ch. 5-48 BCG Matrix Dogs IV (Liquidate, Divest, Retrenchment) Cash Cows III (Product dev’t, concentric diversification = strong cows; Retrenchment for weal cows) Question Marks I (Intensive strategies, divest) Stars II (integration, intensive and joint ventures) Relative Market Share Position High 1.0 Medium .50 Low 0.0 Industry Sales Growth Rate High +20 Low -20 Medium 0
© 2001 Prentice Hall Ch. 5-49 Strategy Analysis & Choice BCG Matrix • Question Marks Low relative market share position yet compete in high-growth industry.  Cash needs are high  Cash generation is low Decision to strengthen (intensive strategies) or divest
© 2001 Prentice Hall Ch. 5-50 Strategy Analysis & Choice BCG Matrix • Stars High relative market share and high industry growth rate.  Best long-run opportunities for growth and profitability Substantial investment to maintain or strengthen dominant position  Integration strategies, intensive strategies, joint ventures
© 2001 Prentice Hall Ch. 5-51 Strategy Analysis & Choice BCG Matrix • Cash Cows High relative market share position, but compete in low-growth industry  Generate cash in excess of their needs  Milked for other purposes Maintain strong position as long as possible  Product development, concentric diversification  If becomes weak—retrenchment or divestiture
© 2001 Prentice Hall Ch. 5-52 Strategy Analysis & Choice BCG Matrix • Dogs Low relative market share position and compete in slow or no market growth  Weak internal and external position Decision to liquidate, divest, retrenchment
© 2001 Prentice Hall Ch. 5-53 Strategy Analysis & Choice Internal-External (IE) Matrix Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 4.0 3.0 2.0 1.0 High 3.0 to 4.0 3.0 I II III Medium 2.0 to 2.99 2.0 IV V VI Low 1.0 to 1.99 1.0 VII VIII IX Grow and build Hold and Maintain Harvest or divest The EFE weighted scores The IFE Weighted Scores
© 2001 Prentice Hall Ch. 5-54 Grand Strategy Matrix Quadrant IV • Concentric diversification • Horizontal diversification • Conglomerate diversification • Joint ventures Quadrant III • Retrenchment • Concentric diversification • Horizontal diversification • Conglomerate diversification • Liquidation Quadrant I • Market development • Market penetration • Product development • Forward integration • Backward integration • Horizontal integration • Concentric diversification Quadrant II • Market development • Market penetration • Product development • Horizontal integration • Divestiture • Liquidation RAPID MARKET GROWTH SLOW MARKET GROWTH WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION
© 2001 Prentice Hall Ch. 5-55 SPACE Matrix
DECISION STAGE: QSPM © 2001 Prentice Hall Ch. 5-56
QSPM SCORING • Step 1 Make a list of the firm’s key external opportunities/threats and internal • strengths/weaknesses in the left column of the QSPM • Step 2 Assign weights to each key external and internal factor • Step 3 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing. © 2001 Prentice Hall Ch. 5-57
QSPM SCORING • Step 4 Determine the Attractiveness Scores (AS) defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. • By attractive, means the extent that one strategy, compared to others, enables the firm to either capitalize on the strength, improve on the weakness, exploit the opportunity, or avoid the threat © 2001 Prentice Hall Ch. 5-58
QSPM SCORING • Step 5 Compute the Total Attractiveness Scores. (WEIGHT X AS) • Step 6 Compute the Sum Total Attractiveness Score. The Sum Total Attractiveness Scores (STAS) reveal which strategy is most attractive in each set of alternatives (higher score) © 2001 Prentice Hall Ch. 5-59
© 2001 Prentice Hall Ch. 5-60
© 2001 Prentice Hall Ch. 5-61 SBU/BUSINESS-LEVEL STRATEGIES Michael Porter’s Generic Strategies Cost Leadership Strategies Differentiation Strategies Focus Strategies
© 2001 Prentice Hall Ch. 5-62 Porter’s Generic Competitive Strategies 5.7 Porter’s Generic Competitive Strategies (Fig. 5.4) Source: Reprinted with permission of The Free Press, an imprint of Simon & Schuster, from The Competitive Advantage of Nations by Michael E. Porter, p. 39. Copyright © 1990 by Michael E. Porter. Differentiation Competitive Advantage Cost Leadership Differentiation Cost Focus Focused Differentiation Competitive Scope Lower Cost
© 2001 Prentice Hall Ch. 5-63 Generic Strategy Commonly Required Skills and Common Organizational Resources Requirements Overall Cost Leadership Sustained capital investment Tight cost control and access to capital Frequent detailed control reports Process engineering skills Structured organization and Intense supervision of labor responsibilities Products designed for ease Incentives based on meeting strict of manufacture quantitative targets Low-cost distribution system Differentiation Strong marketing abilities Strong coordination among functions Product engineering in R&D Creative flair Subjective measurement and Strong capability in basic research incentives instead of quantitative Corporate reputation for quality or measures technological leadership Amenities to attract highly skilled Long tradition in the industry or unique labor, scientists, or creative combination of skills drawn from other people businesses Strong cooperation from channels Focus Combination of the above policies directed Combination of the above policies directed at the particular strategic target at the particular strategic target Requirements for Generic Competitive Strategies
© 2001 Prentice Hall Ch. 5-64 Functional Strategies Marketing strategy – Involved with pricing, selling, and distributing a product. Market development strategy – • Capture a larger share of existing market through market saturation and market penetration • Develop new markets for current products
© 2001 Prentice Hall Ch. 5-65 Product development strategy – •Develop new products for existing markets •Develop new products for new markets Advertising or Promotion strategy – Push marketing strategy Investing in trade promotion to gain or hold share Pull marketing strategy Investing in consumer advertising to build brand awareness Marketing strategy Functional Strategies
© 2001 Prentice Hall Ch. 5-66 Functional Strategies Financial strategy – – Examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. – Maximizes financial value of the firm Leveraged buy out (LBO) – – Company is acquired financed largely by debt (from a third party). • Debt paid by acquired company’s operations or sale of assets
© 2001 Prentice Hall Ch. 5-67 R&D Strategy – Deals with product and process innovation and improvement Choice: – Technological leader – Technological follower Functional Strategies
© 2001 Prentice Hall Ch. 5-68 Research and Development Strategy and Competitive Advantage Technological Leadership Technological Followership Cost Advantage Differentiation Pioneer the lowest cost product design. Be the first firm down the learning curve. Create low-cost ways of performing value activities. Pioneer a unique product that increases buyer value. Innovate in other activities to increase buyer value. Lower the cost of the product or value activities by learning from the leader’s experience. Avoid R&D costs through imitation. Adapt the product or delivery system more closely to buyer needs by learning from the leader’s experience.
© 2001 Prentice Hall Ch. 5-69 Operations strategy – Determines: • How and where product is manufactured • Level of vertical integration in process • Deployment of physical resources • Relationships with suppliers – Affected by product life cycle • Job shop • Connected line batch flow • Flexible manufacturing system • Dedicated transfer lines
© 2001 Prentice Hall Ch. 5-70 Manufacturing strategy – Movement from mass production to: • Continuous improvement • Modular manufacturing • Mass customization Purchasing strategy – Obtaining raw materials, parts and supplies • Basic Purchasing Choices: – Multiple sourcing – Sole sourcing – Parallel sourcing
© 2001 Prentice Hall Ch. 5-71 Logistics strategy – – Flow of products into and out of the process • Three current trends: – Centralization – Outsourcing – Use of the Internet
© 2001 Prentice Hall Ch. 5-72 HRM strategy – – Addresses issues of: • Low-skilled employees – Low pay – Repetitive tasks – High turnover • Skilled employees – High pay – Cross trained – Self-managing teams Information systems strategy – Technology to provide business units with competitive advantage

More Related Content

PPT
Strategies in Action
byNoel Buensuceso
 
PPTX
9. Managing Strategy.pptxPrepared by: Rohail Jibran
byMuhammadYasir803544
 
PPT
david _sm14_inppt055.ppt
bySumayoAdan
 
PPT
Chp-05.ppt
byNasirMehmood666923
 
PPT
strategi generik david
byIKHTIAR SETIAWAN
 
PDF
chap05-140828144603-phpapp02 (1).pdf
byTadiMekonen
 
PPT
Tipos de EStratégias.pptsssssssssssssssssssssssssssss
bysalomaomiguel1
 
PDF
Chap05exp 110813194512-phpapp02
byWarmakpoorKpoor
 
Strategies in Action
byNoel Buensuceso
 
9. Managing Strategy.pptxPrepared by: Rohail Jibran
byMuhammadYasir803544
 
david _sm14_inppt055.ppt
bySumayoAdan
 
Chp-05.ppt
byNasirMehmood666923
 
strategi generik david
byIKHTIAR SETIAWAN
 
chap05-140828144603-phpapp02 (1).pdf
byTadiMekonen
 
Tipos de EStratégias.pptsssssssssssssssssssssssssssss
bysalomaomiguel1
 
Chap05exp 110813194512-phpapp02
byWarmakpoorKpoor
 

Similar to STRATEGYFORMULATION.pptx

PPT
CHAPTER 8 Strategy Formulation: Functional Strategy and Strategic Choic
bySamahAyad4
 
PPT
Chapter 2.2 Types of strategies (3).ppt teaching material
byTeferiGeta2
 
PPTX
L 4 strategy types and choices
bySudhir Upadhyay
 
PPT
ch 9- Strategic Management.pptnewuuuuuuu
byJPFreedom
 
PPT
Wheelen_smbp12_ppt_08.ppt
byjolliebra
 
PPTX
Strategic Management 7 information related to strategic amangement.pptx
byazlanshah866
 
PPT
ch 5.ppt
bywaleedelfeel
 
PPT
Management ch8 (2)
byFida Karim 🇵🇰
 
PPT
Strategies in Action
byNoel Buensuceso
 
PPT
Strategic Management overview and importance
byssusera93e6c
 
PDF
Ch4QUIZ strategic management concepts &cases 11th edition by Fred
byحمد بوجرادة
 
DOCX
STRATEGIC MANAGEMENT & BUSINESS POLICY 13TH EDITION THOM.docx
byrjoseph5
 
PPT
Lecture 4 generic alternative strategies
byPrathima Girish
 
PDF
strategic management 38 slides .pdf
byMUHAMMADANISSHEIKHA1
 
PPT
Strategy Analysis and Choice
byNoel Buensuceso
 
PPT
Chapter6 manajemen strategi pertemuan 6.ppt
byandresdharma1
 
PPTX
Management 11th Edition - Chapter 9 - Strategic Management
byshakkardaddy
 
PPT
marketing strategies
byShimranz Skillls
 
PPS
16243054 marketing-strategies
bydawnps
 
PPTX
Strategicmanagement 131123121857-phpapp02
byGeorge Ovobojere
 
CHAPTER 8 Strategy Formulation: Functional Strategy and Strategic Choic
bySamahAyad4
 
Chapter 2.2 Types of strategies (3).ppt teaching material
byTeferiGeta2
 
L 4 strategy types and choices
bySudhir Upadhyay
 
ch 9- Strategic Management.pptnewuuuuuuu
byJPFreedom
 
Wheelen_smbp12_ppt_08.ppt
byjolliebra
 
Strategic Management 7 information related to strategic amangement.pptx
byazlanshah866
 
ch 5.ppt
bywaleedelfeel
 
Management ch8 (2)
byFida Karim 🇵🇰
 
Strategies in Action
byNoel Buensuceso
 
Strategic Management overview and importance
byssusera93e6c
 
Ch4QUIZ strategic management concepts &cases 11th edition by Fred
byحمد بوجرادة
 
STRATEGIC MANAGEMENT & BUSINESS POLICY 13TH EDITION THOM.docx
byrjoseph5
 
Lecture 4 generic alternative strategies
byPrathima Girish
 
strategic management 38 slides .pdf
byMUHAMMADANISSHEIKHA1
 
Strategy Analysis and Choice
byNoel Buensuceso
 
Chapter6 manajemen strategi pertemuan 6.ppt
byandresdharma1
 
Management 11th Edition - Chapter 9 - Strategic Management
byshakkardaddy
 
marketing strategies
byShimranz Skillls
 
16243054 marketing-strategies
bydawnps
 
Strategicmanagement 131123121857-phpapp02
byGeorge Ovobojere
 

More from OsamaNur

PPTX
internal_analysis.pptx
byOsamaNur
 
PPTX
Developing Sustainable Advantage (SCA).pptx
byOsamaNur
 
PPTX
sample strategy implementation 7-S.pptx
byOsamaNur
 
PPTX
strategies for managing growth.pptx
byOsamaNur
 
PPTX
strategies for going global.pptx
byOsamaNur
 
PPTX
VMOS_SLIDES.pptx
byOsamaNur
 
PPTX
strategies_ending the venture.pptx
byOsamaNur
 
PPTX
Production Possibility Frontiers.pptx
byOsamaNur
 
PDF
PCNC-Guidebook-on-the-Basics-of-NGO-Governance.pdf
byOsamaNur
 
PPTX
Buffer Stocks Schemes.pptx
byOsamaNur
 
PPTX
Road Pricing.pptx
byOsamaNur
 
PPTX
Cross Price Elasticity of Demand.pptx
byOsamaNur
 
PPTX
chap01-intro.pptx
byOsamaNur
 
PPTX
Developing Sustainable Advantage (SCA)-1.pptx
byOsamaNur
 
PPTX
external_analysis.pptx
byOsamaNur
 
PPTX
7-S Framework.pptx
byOsamaNur
 
PPTX
Commodity Markets.pptx
byOsamaNur
 
internal_analysis.pptx
byOsamaNur
 
Developing Sustainable Advantage (SCA).pptx
byOsamaNur
 
sample strategy implementation 7-S.pptx
byOsamaNur
 
strategies for managing growth.pptx
byOsamaNur
 
strategies for going global.pptx
byOsamaNur
 
VMOS_SLIDES.pptx
byOsamaNur
 
strategies_ending the venture.pptx
byOsamaNur
 
Production Possibility Frontiers.pptx
byOsamaNur
 
PCNC-Guidebook-on-the-Basics-of-NGO-Governance.pdf
byOsamaNur
 
Buffer Stocks Schemes.pptx
byOsamaNur
 
Road Pricing.pptx
byOsamaNur
 
Cross Price Elasticity of Demand.pptx
byOsamaNur
 
chap01-intro.pptx
byOsamaNur
 
Developing Sustainable Advantage (SCA)-1.pptx
byOsamaNur
 
external_analysis.pptx
byOsamaNur
 
7-S Framework.pptx
byOsamaNur
 
Commodity Markets.pptx
byOsamaNur
 

Recently uploaded

PPTX
14 Management Principles by Henri Fayol (Overview)
bySujan Chaudhary
 
PPTX
How to Choose the Right Compliance Management System for Your Business
byhepburnindia
 
PPTX
Kanban India 2025 | Mihir Rao | Continuous Improvement using Theory of Constr...
byLeanKanbanIndia
 
PDF
Kanban India 2025 |Vidhya Sathyamurthy & Samgnya Shamasunder | Shifting Left ...
byLeanKanbanIndia
 
PPTX
nursing care delivery model16_Scenarios_Tutorials.pptx
bysofiamansoor4
 
PPTX
Kanban India 2025 | Pramila Devi Sriram | Effective IT Support by Leveraging ...
byLeanKanbanIndia
 
PDF
Agile's Post-Transformation Era (RSG-Banff 2025).pdf
byRichard Dolman
 
PDF
PPST.RP_Module 9.pdf Selected, developed, organized and used appropriate teac...
byMARYJANEISRAEL3
 
PPTX
Kanban India 2025 | Avinash Rao & Ravishankar N | Kanban for Industry-Academi...
byLeanKanbanIndia
 
PPTX
Kanban India 2025 |Priyank Pathak & Parasuram Chandrasekaran | Intelligent Wo...
byLeanKanbanIndia
 
PPTX
Kanban India 2025 | Siddharth Chauhan | From Code to Flow: SOLID Thinking in ...
byLeanKanbanIndia
 
PPTX
global trend chapter three power point .
bydessiea134
 
PPTX
Kanban India 2025 | Ashish Kumar | From Friction to Flow: How AI Enhances Tru...
byLeanKanbanIndia
 
PDF
CISA-certification-252955007.pdf CISA-certification-252955007.pdf
byFernando Sanchez Risco
 
PPTX
Kanban India 2025 | Sachin Khurana | The Leader in Everyone: Cultivating Infl...
byLeanKanbanIndia
 
PDF
Future Trends in Knowledge Management Systems
byWritegenic AI
 
PPTX
APJ-Abdul-Kalam-The-Peoples-President 1v1.pptx
byNewMan34
 
14 Management Principles by Henri Fayol (Overview)
bySujan Chaudhary
 
How to Choose the Right Compliance Management System for Your Business
byhepburnindia
 
Kanban India 2025 | Mihir Rao | Continuous Improvement using Theory of Constr...
byLeanKanbanIndia
 
Kanban India 2025 |Vidhya Sathyamurthy & Samgnya Shamasunder | Shifting Left ...
byLeanKanbanIndia
 
nursing care delivery model16_Scenarios_Tutorials.pptx
bysofiamansoor4
 
Kanban India 2025 | Pramila Devi Sriram | Effective IT Support by Leveraging ...
byLeanKanbanIndia
 
Agile's Post-Transformation Era (RSG-Banff 2025).pdf
byRichard Dolman
 
PPST.RP_Module 9.pdf Selected, developed, organized and used appropriate teac...
byMARYJANEISRAEL3
 
Kanban India 2025 | Avinash Rao & Ravishankar N | Kanban for Industry-Academi...
byLeanKanbanIndia
 
Kanban India 2025 |Priyank Pathak & Parasuram Chandrasekaran | Intelligent Wo...
byLeanKanbanIndia
 
Kanban India 2025 | Siddharth Chauhan | From Code to Flow: SOLID Thinking in ...
byLeanKanbanIndia
 
global trend chapter three power point .
bydessiea134
 
Kanban India 2025 | Ashish Kumar | From Friction to Flow: How AI Enhances Tru...
byLeanKanbanIndia
 
CISA-certification-252955007.pdf CISA-certification-252955007.pdf
byFernando Sanchez Risco
 
Kanban India 2025 | Sachin Khurana | The Leader in Everyone: Cultivating Infl...
byLeanKanbanIndia
 
Future Trends in Knowledge Management Systems
byWritegenic AI
 
APJ-Abdul-Kalam-The-Peoples-President 1v1.pptx
byNewMan34
 

STRATEGYFORMULATION.pptx

  • 1.
    © 2001 PrenticeHall Ch. 5-1 STRATEGY FORMULATION • Making subjective decisions based on objective information • Generate feasible alternatives (INPUT & MATCHING STAGE) • Develop set of most attractive alternative strategies • Evaluate alternatives (determine for the set): • Advantages • Disadvantages • Trade-offs • Costs • Benefits
  • 2.
  • 3.
    Input Stage © 2001Prentice Hall Ch. 5-3
  • 4.
    For EFE matrix •Assign a rating between 1 and 4 to each key external factor to indicate how effectively • the firm’s current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and 1 = the response is poor. Ratings are based on effectiveness of the firm’s strategies. • Ratings are thus company-based, whereas the weights in Step 2 are industry-based. • It is important to note that both threats and opportunities can receive a 1, 2, 3, or 4. © 2001 Prentice Hall Ch. 5-4
  • 5.
    Input Stage © 2001Prentice Hall Ch. 5-5
  • 6.
    For IFE matrix ©2001 Prentice Hall Ch. 5-6
  • 7.
    Competitor Profile Matrix (CPM) ©2001 Prentice Hall Ch. 5-7
  • 8.
    Competitor Profile Matrix (CPM) ©2001 Prentice Hall Ch. 5-8
  • 9.
    © 2001 PrenticeHall Ch. 5-9 STRATEGY FORMULATION – Select specific course of action based on • Internal and external audit information • Firm’s vision-mission statements, objectives (STRATEGIC INTENTS) • Rank in order of attractiveness
  • 10.
    © 2001 PrenticeHall Ch. 5-10 STRATEGIC INTENTS • VISION • MISSION • LONG TERM OBJECTIVES Based on vision, mission, long-term objectives and external-internal audits, the following will be formulated: – CORPORATE STRATEGY – SBU/BUSINESS LEVEL STRATEGY – FUNCTIONAL STRATEGY
  • 11.
    © 2001 PrenticeHall Ch. 5-11 CORPORATE STRATEGY • SETS OVERALL DIRECTION FOR THE ORGANIZATION – GROWTH STRATEGIES - integration, intensive, and diversification strategies – STABILITY - maintaining status quo and reinforcing existing strategies – RETRENCHMENT - defensive strategies
  • 12.
    © 2001 PrenticeHall Ch. 5-12 Growth Strategies Vertical Integration Strategies • Forward integration • Backward integration • Horizontal integration
  • 13.
    © 2001 PrenticeHall Ch. 5-13 Growth Strategies Defined • Gaining ownership or increased control over distributors or retailers Example • General Motors is acquiring 10% of its dealers. Forward Integration
  • 14.
    © 2001 PrenticeHall Ch. 5-14 Corporate Strategies Guidelines for Forward Integration  Present distributors are expensive, unreliable, or incapable of meeting firm’s needs  Availability of quality distributors is limited  When firm competes in an industry that is expected to grow markedly  Advantages of stable production are high  Present distributor have high profit margins
  • 15.
    © 2001 PrenticeHall Ch. 5-15 Strategies in Action Defined • Seeking ownership or increased control of a firm’s suppliers Example • Motel 8 acquired a furniture manufacturer. Backward Integration
  • 16.
    © 2001 PrenticeHall Ch. 5-16 Strategies in Action Guidelines for Backward Integration  When present suppliers are expensive, unreliable, or incapable of meeting needs  Number of suppliers is small and number of competitors large  High growth in industry sector  Firm has both capital and human resources to manage new business  Advantages of stable prices are important  Present supplies have high profit margins
  • 17.
    © 2001 PrenticeHall Ch. 5-17 Strategies in Action Defined • Seeking ownership or increased control over competitors Example • Hilton recently acquired Promus. Horizontal Integration
  • 18.
    © 2001 PrenticeHall Ch. 5-18 Strategies in Action Guidelines for Horizontal Integration  Firm can gain monopolistic characteristics without being challenged by federal government  Competes in growing industry  Increased economies of scale provide major competitive advantages  Faltering due to lack of managerial expertise or need for particular resources
  • 19.
    © 2001 PrenticeHall Ch. 5-19 Strategies in Action Intensive Strategies • Market penetration • Market development • Product development
  • 20.
    © 2001 PrenticeHall Ch. 5-20 Strategies in Action Defined • Seeking increased market share for present products or services in present markets through greater marketing efforts Example • Ameritrade, the on- line broker, tripled its annual advertising expenditures to $200 million to convince people they can make their own investment decisions. Market Penetration
  • 21.
    © 2001 PrenticeHall Ch. 5-21 Strategies in Action Guidelines for Market Penetration  Current markets not saturated  Usage rate of present customers can be increased significantly  Market shares of competitors declining while total industry sales increasing  Increased economies of scale provide major competitive advantages
  • 22.
    © 2001 PrenticeHall Ch. 5-22 Strategies in Action Defined • Introducing present products or services into new geographic area Example • Britain’s leading supplier of buses, Henlys PLC, acquires Blue Bird Corp. North America’s leading school bus maker. Market Development
  • 23.
    © 2001 PrenticeHall Ch. 5-23 Strategies in Action Guidelines for Market Development  New channels of distribution that are reliable, inexpensive, and good quality  Firm is very successful at what it does  Untapped or unsaturated markets  Capital and human resources necessary to manage expanded operations  Excess production capacity  Basic industry rapidly becoming global
  • 24.
    © 2001 PrenticeHall Ch. 5-24 Strategies in Action Defined • Seeking increased sales by improving present products or services or developing new ones Example • Apple developed the G4 chip that runs at 500 megahertz. Product Development
  • 25.
    © 2001 PrenticeHall Ch. 5-25 Strategies in Action Guidelines for Product Development  Products in maturity stage of life cycle  Competes in industry characterized by rapid technological developments  Major competitors offer better-quality products at comparable prices  Compete in high-growth industry  Strong research and development capabilities
  • 26.
    © 2001 PrenticeHall Ch. 5-26 Strategies in Action Diversification Strategies • Concentric diversification • Conglomerate diversification • Horizontal diversification
  • 27.
    © 2001 PrenticeHall Ch. 5-27 Strategies in Action Defined • Adding new, but related, products or services Example • National Westminister Bank PLC in Britain bought the leading British insurance company, Legal & General Group PLC. Concentric Diversification
  • 28.
    © 2001 PrenticeHall Ch. 5-28 Strategies in Action Guidelines for Concentric Diversification  Competes in no- or slow-growth industry  Adding new & related products increases sales of current products  New & related products offered at competitive prices  Current products are in decline stage of the product life cycle  Strong management team
  • 29.
    © 2001 PrenticeHall Ch. 5-29 Strategies in Action Defined • Adding new, unrelated products or services Example • H&R Block, the top tax preparation agency, said it will buy discount stock brokerage Olde Financial for $850 million in cash. Conglomerate Diversification
  • 30.
    © 2001 PrenticeHall Ch. 5-30 Strategies in Action Guidelines for Conglomerate Diversification  Declining annual sales and profits  Capital and managerial talent to compete successfully in a new industry  Financial synergy between the acquired and acquiring firms  Exiting markets for present products are saturated
  • 31.
    © 2001 PrenticeHall Ch. 5-31 Strategies in Action Defined • Adding new, unrelated products or services for present customers Example • The New York Yankees baseball team are merging with the New Jersey Nets basketball team. Horizontal Diversification
  • 32.
    © 2001 PrenticeHall Ch. 5-32 Strategies in Action Guidelines for Horizontal Diversification  Revenues from current products/services would increase significantly by adding the new unrelated products  Highly competitive and/or no-growth industry w/low margins and returns  Present distribution channels can be used to market new products to current customers  New products have counter cyclical sales patterns compared to existing products
  • 33.
    © 2001 PrenticeHall Ch. 5-33 Defensive Strategies Defensive Strategies • Joint venture • Retrenchment • Divestiture • Liquidation
  • 34.
    © 2001 PrenticeHall Ch. 5-34 Defense Strategies Defined • Two or more sponsoring firms forming a separate organization for cooperative purposes Example • Lucent Technologies and Philips Electronic NV formed Philips Consumer Communications to make and sell telephones. Joint Venture
  • 35.
    © 2001 PrenticeHall Ch. 5-35 Strategies in Action Guidelines for Joint Venture  Combination of privately held and publicly held can be synergistically combined  Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks  Distinctive competencies of two or more firms are complementary  Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline)  Two or more smaller firms have trouble competing with larger firm  A need exists to introduce a new technology quickly
  • 36.
    © 2001 PrenticeHall Ch. 5-36 Strategies in Action Defined • Regrouping through cost and asset reduction to reverse declining sales and profit Example • Singer, the sewing machine company, declared bankruptcy. Retrenchment
  • 37.
    © 2001 PrenticeHall Ch. 5-37 Strategies in Action Guidelines for Retrenchment  Firm has failed to meet its objectives and goals consistently over time but has distinctive competencies  Firm is one of the weaker competitors  Inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance.  When an organization’s strategic managers have failed  Very quick growth to large organization where a major internal reorganization is needed.
  • 38.
    © 2001 PrenticeHall Ch. 5-38 Strategies in Action Defined • Selling a division or part of an organization Example • Harcourt General, the large US publisher, is selling its Neiman Marcus division. Divestiture
  • 39.
    © 2001 PrenticeHall Ch. 5-39 Strategies in Action Guidelines for Divestiture  When firm has pursued retrenchment but failed to attain needed improvements  When a division needs more resources than the firm can provide  When a division is responsible for the firm’s overall poor performance  When a division is a misfit with the organization  When a large amount of cash is needed and cannot be obtained from other sources.
  • 40.
    © 2001 PrenticeHall Ch. 5-40 Strategies in Action Defined • Selling all of a company’s assets, in parts, for their tangible worth Example • Ribol sold all its assets and ceased business. Liquidation
  • 41.
    © 2001 PrenticeHall Ch. 5-41 Strategies in Action Guidelines for Liquidation  When both retrenchment and divestiture have been pursued unsuccessfully  If the only alternative is bankruptcy, liquidation is an orderly alternative  When stockholders can minimize their losses by selling the firm’s assets
  • 42.
    © 2001 PrenticeHall Ch. 5-42 Strategy Analysis & Choice The TOWS Matrix • List the firm’s key external opportunities • List the firm’s key external threats • List the firm’s key internal strengths • List the firm’s key internal weaknesses
  • 43.
    © 2001 PrenticeHall Ch. 5-43 Strategy Analysis & Choice The TOWS Matrix • Match internal strengths with external opportunities and record the resultant SO Strategies • Match internal weaknesses with external opportunities and record the resultant WO Strategies • Match internal strengths with external threats and record the resultant ST Strategies • Match internal weaknesses with external threats and record the resultant WT Strategies
  • 44.
    © 2001 PrenticeHall Ch. 5-44 TOWS Matrix WT Strategies Minimize weaknesses and avoid threats ST Strategies Use strengths to avoid threats Threats-T List Threats WO Strategies Overcome weaknesses by taking advantage of opportunities SO Strategies Use strengths to take advantage of opportunities Opportunities-O List Opportunities Weaknesses-W List Weaknesses Strengths-S List Strengths Leave Blank
  • 45.
    © 2001 PrenticeHall Ch. 5-45 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Enhances multidivisional firms’ efforts to formulate strategies • Autonomous divisions (or profit centers) constitute the business portfolio • Firm’s divisions may compete in different industries requiring separate strategy
  • 46.
    © 2001 PrenticeHall Ch. 5-46 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Graphically portrays differences among divisions • Focuses on market share position and industry growth rate • Manage business portfolio through relative market share position and industry growth rate
  • 47.
    © 2001 PrenticeHall Ch. 5-47 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Relative market share position defined:  Ratio of a division’s own market share in a particular industry to the market share held by the largest rival firm in that industry.
  • 48.
    © 2001 PrenticeHall Ch. 5-48 BCG Matrix Dogs IV (Liquidate, Divest, Retrenchment) Cash Cows III (Product dev’t, concentric diversification = strong cows; Retrenchment for weal cows) Question Marks I (Intensive strategies, divest) Stars II (integration, intensive and joint ventures) Relative Market Share Position High 1.0 Medium .50 Low 0.0 Industry Sales Growth Rate High +20 Low -20 Medium 0
  • 49.
    © 2001 PrenticeHall Ch. 5-49 Strategy Analysis & Choice BCG Matrix • Question Marks Low relative market share position yet compete in high-growth industry.  Cash needs are high  Cash generation is low Decision to strengthen (intensive strategies) or divest
  • 50.
    © 2001 PrenticeHall Ch. 5-50 Strategy Analysis & Choice BCG Matrix • Stars High relative market share and high industry growth rate.  Best long-run opportunities for growth and profitability Substantial investment to maintain or strengthen dominant position  Integration strategies, intensive strategies, joint ventures
  • 51.
    © 2001 PrenticeHall Ch. 5-51 Strategy Analysis & Choice BCG Matrix • Cash Cows High relative market share position, but compete in low-growth industry  Generate cash in excess of their needs  Milked for other purposes Maintain strong position as long as possible  Product development, concentric diversification  If becomes weak—retrenchment or divestiture
  • 52.
    © 2001 PrenticeHall Ch. 5-52 Strategy Analysis & Choice BCG Matrix • Dogs Low relative market share position and compete in slow or no market growth  Weak internal and external position Decision to liquidate, divest, retrenchment
  • 53.
    © 2001 PrenticeHall Ch. 5-53 Strategy Analysis & Choice Internal-External (IE) Matrix Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 4.0 3.0 2.0 1.0 High 3.0 to 4.0 3.0 I II III Medium 2.0 to 2.99 2.0 IV V VI Low 1.0 to 1.99 1.0 VII VIII IX Grow and build Hold and Maintain Harvest or divest The EFE weighted scores The IFE Weighted Scores
  • 54.
    © 2001 PrenticeHall Ch. 5-54 Grand Strategy Matrix Quadrant IV • Concentric diversification • Horizontal diversification • Conglomerate diversification • Joint ventures Quadrant III • Retrenchment • Concentric diversification • Horizontal diversification • Conglomerate diversification • Liquidation Quadrant I • Market development • Market penetration • Product development • Forward integration • Backward integration • Horizontal integration • Concentric diversification Quadrant II • Market development • Market penetration • Product development • Horizontal integration • Divestiture • Liquidation RAPID MARKET GROWTH SLOW MARKET GROWTH WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION
  • 55.
    © 2001 PrenticeHall Ch. 5-55 SPACE Matrix
  • 56.
    DECISION STAGE: QSPM ©2001 Prentice Hall Ch. 5-56
  • 57.
    QSPM SCORING • Step1 Make a list of the firm’s key external opportunities/threats and internal • strengths/weaknesses in the left column of the QSPM • Step 2 Assign weights to each key external and internal factor • Step 3 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing. © 2001 Prentice Hall Ch. 5-57
  • 58.
    QSPM SCORING • Step4 Determine the Attractiveness Scores (AS) defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. • By attractive, means the extent that one strategy, compared to others, enables the firm to either capitalize on the strength, improve on the weakness, exploit the opportunity, or avoid the threat © 2001 Prentice Hall Ch. 5-58
  • 59.
    QSPM SCORING • Step5 Compute the Total Attractiveness Scores. (WEIGHT X AS) • Step 6 Compute the Sum Total Attractiveness Score. The Sum Total Attractiveness Scores (STAS) reveal which strategy is most attractive in each set of alternatives (higher score) © 2001 Prentice Hall Ch. 5-59
  • 60.
    © 2001 PrenticeHall Ch. 5-60
  • 61.
    © 2001 PrenticeHall Ch. 5-61 SBU/BUSINESS-LEVEL STRATEGIES Michael Porter’s Generic Strategies Cost Leadership Strategies Differentiation Strategies Focus Strategies
  • 62.
    © 2001 PrenticeHall Ch. 5-62 Porter’s Generic Competitive Strategies 5.7 Porter’s Generic Competitive Strategies (Fig. 5.4) Source: Reprinted with permission of The Free Press, an imprint of Simon & Schuster, from The Competitive Advantage of Nations by Michael E. Porter, p. 39. Copyright © 1990 by Michael E. Porter. Differentiation Competitive Advantage Cost Leadership Differentiation Cost Focus Focused Differentiation Competitive Scope Lower Cost
  • 63.
    © 2001 PrenticeHall Ch. 5-63 Generic Strategy Commonly Required Skills and Common Organizational Resources Requirements Overall Cost Leadership Sustained capital investment Tight cost control and access to capital Frequent detailed control reports Process engineering skills Structured organization and Intense supervision of labor responsibilities Products designed for ease Incentives based on meeting strict of manufacture quantitative targets Low-cost distribution system Differentiation Strong marketing abilities Strong coordination among functions Product engineering in R&D Creative flair Subjective measurement and Strong capability in basic research incentives instead of quantitative Corporate reputation for quality or measures technological leadership Amenities to attract highly skilled Long tradition in the industry or unique labor, scientists, or creative combination of skills drawn from other people businesses Strong cooperation from channels Focus Combination of the above policies directed Combination of the above policies directed at the particular strategic target at the particular strategic target Requirements for Generic Competitive Strategies
  • 64.
    © 2001 PrenticeHall Ch. 5-64 Functional Strategies Marketing strategy – Involved with pricing, selling, and distributing a product. Market development strategy – • Capture a larger share of existing market through market saturation and market penetration • Develop new markets for current products
  • 65.
    © 2001 PrenticeHall Ch. 5-65 Product development strategy – •Develop new products for existing markets •Develop new products for new markets Advertising or Promotion strategy – Push marketing strategy Investing in trade promotion to gain or hold share Pull marketing strategy Investing in consumer advertising to build brand awareness Marketing strategy Functional Strategies
  • 66.
    © 2001 PrenticeHall Ch. 5-66 Functional Strategies Financial strategy – – Examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. – Maximizes financial value of the firm Leveraged buy out (LBO) – – Company is acquired financed largely by debt (from a third party). • Debt paid by acquired company’s operations or sale of assets
  • 67.
    © 2001 PrenticeHall Ch. 5-67 R&D Strategy – Deals with product and process innovation and improvement Choice: – Technological leader – Technological follower Functional Strategies
  • 68.
    © 2001 PrenticeHall Ch. 5-68 Research and Development Strategy and Competitive Advantage Technological Leadership Technological Followership Cost Advantage Differentiation Pioneer the lowest cost product design. Be the first firm down the learning curve. Create low-cost ways of performing value activities. Pioneer a unique product that increases buyer value. Innovate in other activities to increase buyer value. Lower the cost of the product or value activities by learning from the leader’s experience. Avoid R&D costs through imitation. Adapt the product or delivery system more closely to buyer needs by learning from the leader’s experience.
  • 69.
    © 2001 PrenticeHall Ch. 5-69 Operations strategy – Determines: • How and where product is manufactured • Level of vertical integration in process • Deployment of physical resources • Relationships with suppliers – Affected by product life cycle • Job shop • Connected line batch flow • Flexible manufacturing system • Dedicated transfer lines
  • 70.
    © 2001 PrenticeHall Ch. 5-70 Manufacturing strategy – Movement from mass production to: • Continuous improvement • Modular manufacturing • Mass customization Purchasing strategy – Obtaining raw materials, parts and supplies • Basic Purchasing Choices: – Multiple sourcing – Sole sourcing – Parallel sourcing
  • 71.
    © 2001 PrenticeHall Ch. 5-71 Logistics strategy – – Flow of products into and out of the process • Three current trends: – Centralization – Outsourcing – Use of the Internet
  • 72.
    © 2001 PrenticeHall Ch. 5-72 HRM strategy – – Addresses issues of: • Low-skilled employees – Low pay – Repetitive tasks – High turnover • Skilled employees – High pay – Cross trained – Self-managing teams Information systems strategy – Technology to provide business units with competitive advantage