Download as PDF, PPTX
What is strategy
1. Strategy is the overall plan for deploying resources to establish a favorable position, while tactics are specific maneuvers. Strategic decisions are important, involve significant commitments, and are not easily reversible. 2. Successful strategies have long-term simple objectives, a profound understanding of competition, and an objective appraisal of resources. Resources and capabilities that are scarce, relevant, durable, immobile, and difficult to replicate can provide competitive advantages like differentiation or lower costs. 3. Firms conduct SWOT analyses to evaluate their internal strengths and weaknesses and external opportunities and threats to determine how to overcome weaknesses, diversify, restructure, or grow based on their positioning.
More Related Content
More from Research Scholar - HNB Garhwal Central University, Srinagar, Uttarakhand.
What is strategy
- 1. WHAT IS STRATEGY Manoj Patel Asst.Professor JHUNJHUNWALA BUSINESS SCHOOL
- 2. What Is Strategy? •Distinguishing strategy from tactics: • Strategy is the overall plan for deploying resources to establish a favorable position. • Tactic is a scheme for a specific maneuver. • Characteristics of strategic decisions: • Important. • Involve a significant commitment of resources. • Not easily reversible.
- 3. Successful Strategy Long-term, simple and agreed objectives Profound understanding of thecompetitive environment Objective appraisal of resources Common Elements in Successful Strategy EFFECTIVE IMPLEMENTATION
- 4. Sources of SuperiorProfitability RATE OF PROFIT ABOVE THE COMPETITIVE LEVEL How do we make money? INDUSTRY ATTRACTIVENESS Which industries should we be in? COMPETITIVE ADVANTAGE How should we compete? CORPORATE STRATEGY BUSINESS STRATEGY
- 5. Resources As theBasis for Superior Profitability Rate of Profit in Excess of the Competitive Level Industry Attractiveness Competitive Advantage Differentiation Advantage Cost Advantage Vertical Power Monopoly Barriers to Entry Brands Product technology Marketing capabilities Process technology Plant size Low-cost inputs Firm size Financial resources Market share Patents Brands Retaliatory capability
- 6. The Value Chain: TheMckinsey Business System TECHNOLOGY PRODUCT DESIGN MANUFACTURING MARKETING DISTRIBUTION SERVICE
- 7. The Porter ValueChain FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS & SALES PRIMARY ACTIVITIES SUPPORT ACTIVITIES
- 8. The Rent-earning Potential ofResources and Capabilities Scarcity Relevance Durability Mobility Replicability Property rights Relative bargaining power Embeddedness of resources THE EXTENT OF THE COMPETITIVE ADVANTAGE ESTABLISHED SUSTAINABILITY OF THE COMPETITIVE ADVANTAGE APPROPRIABILITY THE PROFIT EARNING POTENTIAL OF A RESOURCE OR CAPABILITY
- 9. The Framework forAnalyzing Resources and Capabilities 5. Identify resource gaps that need to be filled. 4. Select a strategy 3. Appraise the rent-earning potential of resources/ capabilities 2. Identify capabilities 1. Identify the firm’s resources. Appraise strengths and weaknesses STRATEGY CAPABILITIES RESOURCES POTENTIAL FOR SUSTAINABLE COMPETITIVE ADVANTAGE
- 10. SWOT Analysis • Acronymderived from Strengths, Weaknesses, Opportunities, and Threats. – Used for analyzing industry environments and firms’ internal strengths and weaknesses. • Performed in a 2-step process: – Managers thoroughly evaluate their firm’s internal strengths and weaknesses and its environmental (external) opportunities and threats. – Managers use the evaluation developed in the first step to place the firm in one of the quadrants of the SWOT matrix shown in Exhibit 5.
- 11. Exhibit 5: SWOTAnalysis Overcome Weakness Grow DiversifyRestructure Numerous Environmental Opportunities Major Environmental Threats Substantial Internal Strengths Critical Internal Weaknesses
- 12. SWOT Analysis (Cont.) •Advantages of SWOT analysis • Easy to use. • Can be helpful framework for getting managers to think constructively about their firms’ external environments and internal strengths and weaknesses. • Drawbacks of SWOT analysis • Subjective. • Biased by managers’ perceptions of their firms’ strengths and weaknesses
- 13. SWOT Analysis (Cont.) •For example, managers of strong firms will likely view environmental phenomena as opportunities, while their counterparts in weak companies will likely view them as threats. • The use of SWOT analysis is likely to yield few clear-cut recommendations.
- 14. The Emergence ofCompetitive Advantage How does competitive advantage emerge? External sources of change e.g.: •Changing customer demand •Changing prices •Technological change Internal sources of change Resource heterogeneity among firms means differential impact Some firms faster and more effective in exploiting change Some firms have greater creative and innovative capability
- 15. Sustaining Competitive AdvantageAgainst Imitation REQUIREMENTS FOR IMITATION ISOLATING MECHANISMS Identification - Obscure superior performance - Deterrence--signal aggressive Incentives for imitation intentions to imitators - Pre-emption--exploit all available investment opportunities - Rely upon multiple sources of Diagnosis competitive advantage to create “causal ambiguity” - Base competitive advantage upon Resource acquisition resources and capabilities that are immobile and difficult to replicate
- 16. Sources of CompetitiveAdvantage COST ADVANTAGE DIFFERENTIATION ADVANTAGE COMPETITIVE ADVANTAGE