Strategic Management

Strategic Analysis

Strategic Development

Strategy Implementation
Strategic Development
 What is the problem
with the organization?
EVR Gap Analysis Discussion
 Strategies
(sources)
for
Sustained
Competitive
Advantage
(positions)
Johnson, G. & Scholes, K., (1997), “Exploring Corporate Strategy”, Prentice Hall: Europe.
What Basis? Generic Strategies
Porter (1980)
What Basis – Generic Strategies

Generic competitive strategies

What sources of cost advantage are possible?
What possibilities exist to differentiate?
What segments exist within a focus strategy can be
sustained?

Analysis factors
What are the firm's capabilities?
What are the competitor capabilities, strategies and likely
future moves?
How is industry structure changing (KSFs)?
What Basis – Generic Strategies
Elements of Cost Leadership Strategy
Tight cost control
Invest in cost reduction
Go for volume to achieve economies of scale
Keep abreast of changes in technology
Invest in barriers to entry

Elements of Differentiation Strategy

Reinforce differential advantage
Build brand image
Respond aggressively to competitors or new entrants
Invest in barriers to entry
Monitor changes in the market

Elements of Focus Strategy

Monitor changes in market segment
Be aware of limits to niche
Be aware of global market
Invest in barriers to entry

Niche marketing involves

Selling a differentiated product to a well-targeted, narrow market segment
Emphasizing non-price elements of the marketing mix
Specializing in customers or products rather than methods of production
Stressing the inherent advantages of the firm over its competitors
Strategies and the Industry Lifecycle

Fragmented Industry
Where no one company has a strong market position and cannot
influence the industry outcome.

Industry Characteristics
Low over all entry Barriers
No great size economics
Diverse market needs
Exit barriers

Competitive strategies
Small well managed minimum cost SBUs
Increase the added value.
Specialise by customer, product, geography etc.
Strategies and the Industry Lifecycle
Emerging Industry
Newly formed or re-created by innovation, new customer needs or
other macro factors.

Industry Characteristics
Technological or strategic uncertainty.
Small production volumes
Newly formed companies
Very high short term demand
Strategic uncertainty
High initial costs, but steep cost reductions
First time, badly informed buyers.
State intervention – subsidy
Rapid growth.

Competitive strategies
Set the rules of the game – product policy, marketing approach.
Marketing including price.
Strike early agreements with suppliers and distribution channels.
Product development
Inducing substitution and attracting first time buyers.
Shifting mobility barriers.
Timing entry
Strategies and the Industry Lifecycle
Growth Industry
Growing rapidly, but customers, market share and technology are
better known and entry to the industry is more difficult.

Industry Characteristic
Widening buyer group.
Products have technical and performance differentiation.
Competition is through new entrants creating many competitors.
Shift towards mass production.
Continuous improvements in products.
Consumers will accept uneven quality.
Under capacity in manufacturing phase.
Mergers and acquisitions are prevalent
Major strategic thrust is to grow faster than the competition.

Competitive strategies
Major strategic thrust is to grow faster than competitors.
Mergers and takeovers are prevalent and some firms will be
causalities.
Market development.
The continuous updating of products and reduction in price.
Follower strategies in the growth stage may consist of development
through imitation of the leaders strategy.
Strategies and the Industry Lifecycle
Mature Industry

Industry Characteristic
Increasing rivalry based on cost and service.
Slow down in capacity additions.
No / few new products.
Entry of new international rivals.
Slowing growth means more competition for mkt share.
Selling to experienced repeat buyers.

Competitive strategies
Focus on one generic strategy.
Rationalise product range.
Cut costs.
Sell in new markets.
Process innovation.
Cross-selling opportunities.
Strategies and the Industry Lifecycle
Mature Industry

Leaders’ defensive strategies

Raise structural barriers – block channel access, scale of economies, coalitions
etc.
Increase expected retaliation – signal commitment to defend, vertical
integration etc.
Lower the inducement for attack – reduce challenger’s expected profits etc.

Avenues for attacking leaders

Pure spending = investment to buy market share, brand identification etc.
Reconfiguration = innovation in the value chain or even system
Redefinition = focus within the industry, integration aspects etc.
Strategies and the Industry Lifecycle
Declining Industry
Where capacity constantly outstrips demand and demand growth rate is
negative.

Industry Characteristics
Declining and uncertain demand.
Exit barriers.
Volatility of rivals.

Competitive strategies
Seek strong leadership.
Increase investment and seek dominance.
Create or defend a niche.
Exit slowly – maximising cash flow at exit last iceman.
Or exit ASAP.
 What Basis? Value Disciplines
Treacy & Wiersema’s Value Disciplines
Operational excellence: most streamlined value chain, lowest cost, provide product / service at
lower cost or with more convenience to customer; These companies deliver a combination of quality,
price and ease of purchase to their target market that no one else can match.

Product leadership: innovative, leading edge products / service, constant renewal, push products
into the market (customers don’t demand them, because the don’t know they need them yet),
patents, design, etc.; These companies compete on the basis of their reputation and product
development, design and quality capabilities. They should be able to command a premium price.

Customer Intimacy: provide customers with exactly what they want, i.e. total solutions, can be
expensive strategy, customisation, strong relationships with customers, loyal customers, good
market intelligence needed; These companies build bonds with customers; they know well the
people they sell to and the products and services they need. They seek to build service based
relationships.

M Treacy, F Wiersema - Customer Intimacy and Other Value Disciplines. Harvard Business Review, 1993.
Johnson, G. & Scholes, K., (1997), “Exploring Corporate Strategy”, Prentice Hall: Europe.
 Which Direction?
Ansoff Product-Market Growth Matrix
Which Direction?
Johnson, G. & Scholes, K., (1997), “Exploring Corporate Strategy”, Prentice Hall: Europe.
 Which Direction?

Review Marketing Strategies

by Philip Kotler
Johnson, G. & Scholes, K., (1997), “Exploring Corporate Strategy”, Prentice Hall: Europe.
 How?
Advantages Possible drawbacks

Internal development lower risk slow growth

(RBV, KBV etc.) allows for ongoing learning lack of early knowledge
more control

Merger | (horizontal fast growth premium price may

integration) market share and expertise have to be paid
high risk
preferred org may not
be available

Strategic alliance / cheaper than takeover possible lack of control

Joint venture access to market knowledge potential managerial
useful if Acquisition differences
impractical
 Options: TOWS Matrix

Weihrich, H., (1982) The TOWS Matrix - A Tool for Situational Analysis. LONG RANGE PLANNING, Vol. 15, No. 2, 1982, pp. 54-6
Produce Strategic Options

Prioritize suitable options

extracted from all syntheses conducted.

They must be CREDIBLE, CREATIVE and DISTINCT

There has to be a TIMELINE for change.
Comment on limitations and constraints

Some sample strategic options:

Compete on product quality
Diversify into other businesses
Move into a foreign Market
Stop producing the product
Acquire a competitor
Exit the Market
Compete on delivery times
Rationalise the product line
Enter a new market segment
Increase the product line
etc........
Evaluation of Strategy
Strategy Evaluation Frameworks

Lynch: p. 374 – 379

Thompson: p. 526 - 532

Suitability
Feasibility
Acceptability
NPV Comparison Example
NPV Comparison Example
 Select the Right Strategy
Appendix analysis:

Suitability Feasibility Acceptability Score

- - -
- - -

Option1:

Option2:

Option3:
 Strategic Proposal (in body)

What's the solution?

Strategic Definition based on analytical logic:

(Prescriptive?)

(Emergent?)
 Evaluation of Strategy

Review assignment brief...

Assess in depth the SFA of the selected strategy.

Briefly discuss rejected options.

 Assignment Progress
This is just an example format...

• Organisational Overview
• Organisational Framework
• External Analysis and KSFs
• Internal Analysis
• SWOT
• EVR Congruence and Gaps (Strategic Fit etc.)
• Strategy Proposal and Logic (Options analysis in appendix)
• Brief Discussion of Rejected Options (100 and less words)
• Evaluation and Justification of Selected Strategy
Word count: 4500 words (excluding supporting appendices)
 One Example of a TOC
 Task One
 Introduction - Organisational Overview
 Organisational Framework (VMOST)
 External Analysis
 Internal Analysis
 SWOT
 Strategic Fit Analysis - EVR Congruence and Gaps
 2500 Words

 Task Two
 Strategy Proposal and Logic
 Evaluation and Justification of Selected Strategy
 Brief Discussion of Rejected Options
 Statement of Main Strategy Objectives (VMOST, POT etc)
 Formulation of Specific Plans for Implementation
 Resource Allocation and Budgeting
 Monitoring and Control Processes
 Conclusion
 2500 Words