business strategy dr. anton.ppt

7/23/2019 BUSINESS STRATEGY Dr. Anton.ppt

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USINESS STRATEGY

USINESS STRATEGY

Dr. ANTON WACHIDIN WIDJAJADr. ANTON WACHIDIN WIDJAJA


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CoreCore

CompetencCompetencyy

TheThe resourcesresourcesandand capabilitiescapabilities

that have been determined tothat have been determined to

be a source of competitivebe a source of competitiveadvantage for a firm over itsadvantage for a firm over its

rivals.rivals.


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StrategyStrategy

An integrated and coordinatedAn integrated and coordinatedset of actions taken to exploitset of actions taken to exploit

core competencies and gain acore competencies and gain a

competitive advantage.competitive advantage.

Core

Competency

The resources and capabilities that have been

determined to be a source of competitive

advantage for a firm over its rivals.


4/111

Strategy

An integrated and coordinated set of

actions taken to exploit core competencies

and gain a competitive advantage.

BusinessBusinessLevelLevel

StrategyStrategy

Actions taken to provide value toActions taken to provide value to

customers and gain a competitivecustomers and gain a competitive

advantage by exploiting coreadvantage by exploiting core

competencies in specific,competencies in specific,

individual product markets.individual product markets.

Core

Competency

The resources and capabilities that have been

determined to be a source of competitive

advantage for a firm over its rivals.


5/111

Strategic Logic At

trategic Logic At

usiness Unit Levelusiness Unit Level

A firms success is explained by two factors:A firms success is explained by two factors:

Attractiveness of the industryAttractiveness of the industry

Relative position of the firm ithin the industryRelative position of the firm ithin the industry

Relative profitability depends onRelative profitability depends on

Nature of the firm!s competitive positionNature of the firm!s competitive position

A"ility to create sustaina"le competitiveA"ility to create sustaina"le competitiveadvanta#eadvanta#e

Cost leadershipCost leadership

$roduct% service differentiation$roduct% service differentiation


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Strategic Logic At

trategic Logic At

usiness Unit Levelusiness Unit Level

firm success

relative position industry structure

sust. comp. adv.

value chain

drivers

m#mt. choices initial conditions


7/111

Advantage Creating

dvantage Creating

Resourcesesources

Contribute to Providing ValueContribute to Providing Value

for Customersfor Customers

Are UniqueAre Unique

to te !irmto te !irm

Are "ard forAre "ard for

Competitors toCompetitors to

Acquire orAcquire or#mitate#mitate

$ustainable$ustainable

CompetitiveCompetitive

AdvantageAdvantage


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eneric Business Level Strategieseneric Business Level Strategies

CostCost !ni"ueness!ni"ueness

Source of Competitive AdvantageSource of Competitive Advantage

Breadth ofBreadth of

CompetitiveCompetitive

ScopeScope

BroadBroad

TargetTarget

#arket#arket

$arro%$arro%

TargetTarget

#arket#arket

&ocused

'ifferen(

tiation

CostLeadership

'ifferen(tiation

&ocused

Lo% Cost

CostCostLeadershipLeadership


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Cost Drivers

ost Drivers

C%$&$

&cale

Institutional

'ocation

$olicy choices

Timin#

Inte#ration

()perience

Capacity*tilisation

'in+a#es

Inter,

relationships

&ource- "ased on $orter /0123


10/111

Product 'esignProduct 'esign

(o)!rillsProduct*$ervice

(o)!rillsProduct*$ervice

Production*%perations

Production*%perations

+xperience Curve+xperience Curve$cale +conomies$cale +conomies

,ow)Cost

$trategic &rust

,ow)Cost

$trategic &rust


11/111

)ey Criteria*

Cost LeadershipBusiness Level Strategy

Relatively standardized products

Features acceptable to many customers

Lowest competitive price


12/111

+e"uirements*Constant effort to reduce coststhrough*

Building efficient scale facilities

State of the art manufacturing facilities

Simplification of processes

Minimizing costs of sales, R& and service

Monitoring costs of activities provided by outsiders

!ight control of production costs and overhead

Cost LeadershipBusiness Level Strategy


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Evaluating A BusinesssEvaluating A Businesss CostCost

LeadershiLeadershi!ortunities!ortunitiesA. Skills and Resources Fostering Cost Leadership" Sustained capital investment and access to capital

" rocess engineering skills" -ntense supervision of labor or core technical operations

" roducts or services designed for ease of manufacture ordelivery

" Lo%(cost distribution system

B. Organizational Requirements Supporting Cost Leadership" Tight cost control

" &re"uent, detailed control reports" Continuous improvement and benchmarking orientation" Structured organiation and responsibilities" -ncentives based on meeting strict, usually "uantitative targets


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Advantages o" a Cost

dvantages o" a Cost

Leadershi Strateg#

eadershi Strateg#

Lo%(cost advantages reduce likelihood of pricingpressure from buyers

Lo%(cost advantages reduce likelihood of pricingpressure from buyers

Sustained lo%(cost advantages may push rivals into

other areas, lessening price competition

Sustained lo%(cost advantages may push rivals into

other areas, lessening price competition

$e% entrants must face an entrenched cost leader%ithout experience to replicate cost advantages

$e% entrants must face an entrenched cost leader%ithout experience to replicate cost advantages

Lo%(cost advantages should lessen attractiveness ofsubstitutes

Lo%(cost advantages should lessen attractiveness ofsubstitutes

/igher margins allo% lo%(cost producers to

%ithstand supplier cost increases

/igher margins allo% lo%(cost producers to

%ithstand supplier cost increases


15/111rimary Activities

Support

Activities

Technological 'evelopment

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rocurement

-nboun

d

Logistics

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Logistics

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1Sales

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#A+

-$

#A+

-$

Value Creating ActivitiesValue Creating Activities#ommon to a#ommon to a

Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy


16/111rimary Activities

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20/111



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22/111

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23/111

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24/111

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/uman +esource #anagementConsistent olicies to



to -mprove 3orker





25/111

rimary Activities

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+elatively &e%

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to +educe 0verhead

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ractices to +educe

lanning Costs




26/111

/o% to 0btain a Cost Advantage

$% etermine and #ontrol #ost rivers

% Reconfigure the Value Chainas needed

'lter production process

#hange in automation

(ew distribution channel

irect sales in place ofindirect sales

(ew advertising media

(ew raw material

Bac)ward integration

Forward integration

#hange location relativeto suppliers or buyers


27/111

+econfiguring the 5alue Chain

of -o%a Beef ackers 6-B7

+anch+anch

CattleCattle

Ship 8on theShip 8on the/oof9 to +ail/oof9 to +ail

CenterCenter

6Chicago76Chicago7

SlaughterSlaughterinto sidesinto sides

of beefof beef

88BoxedBoxed

Cuts9 atCuts9 at

#arkets#arkets

*ld+ay

Save on shipping and cattle weight loss

-tilize cheaper non.union rural labor

(ew+ay

(ew+ay

Locate largeLocate large

automatedautomated

plants nearplants near

ranchesranches

rocess intorocess into

8Boxed Cuts9 at8Boxed Cuts9 at

plantsplants

Ship cutsShip cuts

alreadyalready

8Boxed9 to8Boxed9 to

#arkets#arkets


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Choices That 'rive Costs

/conomies of scale/conomies of scale'sset utilization'sset utilization

#apacity utilization pattern#apacity utilization pattern

0alue chain lin)ages0alue chain lin)ages

1nterrelationships1nterrelationships

. 'dvertising & Sales. 'dvertising & Sales

. Logistics & *perations. Logistics & *perations

. Seasonal, cyclical. Seasonal, cyclical

. *rder processing. *rder processingand distributionand distribution

2roduct features2roduct features

2roduct features2roduct features2erformance2erformance

Mi3 & variety of productsMi3 & variety of products

Service levelsService levels

Small vs% large buyersSmall vs% large buyers

2rocess technology2rocess technology

+age levels+age levels

4iring, training, motivation4iring, training, motivation

Th ) : i


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Three )ey :uestions

%% 4ow can a group of lin)ed value4ow can a group of lin)ed value

activities be regrouped or reordered5activities be regrouped or reordered5

6%6% 4ow might coalitions with other4ow might coalitions with other

firms lower or eliminate costs5firms lower or eliminate costs5

7allo sold wine through grocery stores rather than li8uor

stores because they were more efficient distributors

$%$% 4ow can an activity be performed4ow can an activity be performed

differently or even eliminated5differently or even eliminated5


30/111

/ffective Cost Leaders can remain

profitable even when the

Five Forcesappear unattractive

2ffective Cost Leaders can remain profitable even %hen


31/111

Can frighten offCan frighten off $e% 2ntrants$e% 2ntrants

due to the need to*due to the need to*

2nter at large scale to2nter at large scale tobe Cost Competitivebe Cost Competitive

;

Take time to move do%nTake time to move do%n

the 8Learning Curve9the 8Learning Curve9

;


the Five Forcesappear unattractive

Threat of

$e%

2ntrants



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Can frighten off $e% 2ntrants dueto the need to*

2nter at Large Scale to be

Cost Competitive;

Take time to move do%n the

8Learning Curve9

;

Bargaining

o%er of

Buyers

Threat of

$e%

2ntrants

Can mitigate Buyer o%er by*

; 'riving prices far belo% competitors

may cause exit and shift po%er backto firm





33/111



Cost Competitive;


8Learning Curve9

;


Threat of

$e%

2ntrants

Bargaining

o%er of

Buyers

'riving prices far belo%

competitors %hich may

cause exit and shift po%er

back to firm

3ell positioned relative to3ell positioned relative to

SubstitutesSubstitutes in order to*in order to*

#ake investments to create#ake investments to create

substitutes firstsubstitutes first

99

Buy patents developed byBuy patents developed by

potential substitutespotential substitutes99

Lo%er prices to maintainLo%er prices to maintain

value positionvalue position

99

Threat of

Substitute

roducts





34/111



Cost Competitive;


8Learning Curve9

;

3ell positioned relative to

Substitutes in order to*

#ake investments to create substitutes;

Can buy patents developed by

potential substitutes;

Lo%er prices to maintainvalue position

;

Bargaining

o%er of

Suppliers

Threat of

$e%

2ntrants

Threat ofThreat of

SubstituteSubstitute

roductsroducts


Bargaining

o%er of

Buyers




back to firm

Can mitigate Supplier o%er by*

Lo% cost position makes them better

able to absorb cost increases

;

#ore likely to make very large purchases

%hich reduces chance of supplier po%er;





35/111



Threat of

$e%

2ntrants

Bargaining

o%er of

Suppliers

Threat of

Substitute

roducts



Cost Competitive;


8Learning Curve9

;


Substitutes in order to*

#ake investments to create substitutes;

Can buy patents developed by

potential substitutes;

Lo%er prices to maintainvalue position

;

Competitors avoidCompetitors avoid

price %ars %ith Costprice %ars %ith Cost

Leaders, %hichLeaders, %hichcreates higher profitscreates higher profits

for entire industryfor entire industry

+ivalry Among

Competing &irms

in -ndustry


Bargaining

o%er of

Buyers




back to firm

Can mitigate Supplier o%er by*Lo% cost position makes them

better able to absorb cost increases;

#ore likely to make very large

purchases %hich reduces chance

of supplier po%er

;


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#a


37/111

$e# Ris%s o" Cost

e# Ris%s o" Cost

Leadershi

eadershi

#any cost(saving activities are easily duplicated#any cost(saving activities are easily duplicated

2xclusive cost leadership can become a trap2xclusive cost leadership can become a trap

0bsessive cost cutting can shrink other competitive

advantages involving key product attributes

0bsessive cost cutting can shrink other competitive

advantages involving key product attributes

Cost differences often decline over timeCost differences often decline over time

eneric Business Level Strategies


38/111

Breadth of

Competitive

Scope

Source of Competitive Advantage

BroadTarget

#arket

$arro%

Target

#arket

Cost

CostLeadership

!ni"ueness




39/111

Breadth of

Competitive

Scope


BroadTarget

#arket

$arro%

Target

#arket

Cost

CostLeadership

'ifferen(tiation


!ni"ueness


40/111

A successful differentiation

strategy sould

ProvidePerceived

Value

-e 'ifficult

to Copy

.enerate

CustomerValue


41/111

Uni&ueness Drivers

ni&ueness Drivers

U(#/U+(+$$

Product'ifferentiation

Pricing'ifferentiation

Promotional'ifferentiation

'istribution'ifferentiation

-rand

'ifferentiation

i!! ti ti B i L l St t


42/111

)ey Criteria*

i!!erentiationBusiness Level Strategy

0alue provided by uni8ue featuresand value characteristics

#ommand premium price

Superior 8uality

Rapid innovation

2restige or e3clusivity

4igh customer service

i!! ti ti B i L l St t


43/111


+e"uirements*+e"uirements*

#onstant effort to differentiate products through#onstant effort to differentiate products through

eveloping new systems and processeseveloping new systems and processes

:uality focus:uality focus

Ma3imize 4uman Resource contributionsMa3imize 4uman Resource contributionsthrough low turnover and high motivationthrough low turnover and high motivation

#apability in Rapability in R&

Shaping perceptions through advertisingShaping perceptions through advertising


44/111

Evaluating A BusinesssEvaluating A Businesss

Di""erentiationDi""erentiation!ortunities!ortunitiesA. Skills and Resources Fostering i!!erentiation" Strong marketing abilities

" roduct engineering

" Creative talent and flair

" Strong capabilities in basic research

" Corporate reputation for "uality or technological leadership

" Long tradition in an industry or uni"ue combination of skills" Strong cooperation from channels and suppliers of ma


45/111

Advantages o" a

dvantages o" a

Di""erentiation Strateg#

i""erentiation Strateg#

+ivalry is reduced %hen a business successful

differentiates itself

+ivalry is reduced %hen a business successful

differentiates itself

Buyers are less sensitive to prices for effectively

differentiated products

Buyers are less sensitive to prices for effectively

differentiated products

Brand loyalty is hard for ne% entrants to

overcome

Brand loyalty is hard for ne% entrants to

overcome

Value Creating ActivitiesValue Creating Activities #ommon to a#ommon to a


46/111

rimary Activities

Support

Activities



&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perations

0utbound

Logisti

cs

#arket

ing

1Sales

Se

rvice

#A+-

$

#A+

-$


i!!erentiationi!!erentiationBusiness Level StrategyBusiness Level Strategy

Value Creating ActivitiesValue Creating Activities #ommon to a#ommon to a


47/111



&irm -nfrastructure

rocurement

-nbound

Logistics

0perat

ions

0utbound

Logistics

#arket

ing

1Sales

Se

rvice

#A+-

$

#A+-

$

A company%ide

emphasis on producing

high "uality products

/ighly 'eveloped -nformation

Systems to better understand

customers4 purchasing preferences

Compensation programs

intended to encourage %orker

creativity and productivity

2xtensive use of sub


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&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logisti

cs

#arket

ing

1Sales

Se

rvice

#A+-

$

#A+-

$

rimary Activities

Support

Activities

A company%ide











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&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logisti

cs

#arket

ing

1Sales

Se

rvice

#A+-

$

#A+-

$

rimary Activities

Support

Activities

A company%ide











50/111





&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logisti

cs

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











51/111





&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logisti

cs

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











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&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logistics

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











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&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logistics

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











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&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logistics

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











55/111



&irm -nfrastructure

rocurement

-nbound

Logist

ics

0perat

ions

0utbound

Logistics

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











56/111



&irm -nfrastructure

rocurement

-nbound

Logistics

0perat

ions

0utbound

Logistics

#arketing

1Sales

Service

#A+

-$

#A+-

$

rimary Activities

Support

Activities

A company%ide











57/111

/ffectiveness with DifferentiationDifferentiation

grows out of Value ChainValue Chainactivitiesactivities2xamples*2xamples*

4eine)en beer Raw materials

#aterpillar tractors Service buyers; needs 8uic)ly

anywhere in the world

1ntel microprocessors !echnological superiority

Steinway pianos Raw materials & +or)manship

Mercedes Benz autos !echnology and +or)manship



58/111

"#reating barriers by perceptions of uni8ueness

"#reating switching costs through differentiation

Raising Buyers; 2erformanceRaising Buyers; 2erformance

Lowering Buyers; #ostsLowering Buyers; #osts

#reating Sustainability through#reating Sustainability through

Create 5alue %ith 'ifferentiation by*

' i f 'iff ti ti' i f 'iff ti ti


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'rivers of 'ifferentiation'rivers of 'ifferentiation

-ni8ue product features

-ni8ue product performance

/3ceptional services

:uality of inputs

(ew technologies

/3ceptional s)ill or e3perience

etailed information

2xamples*2xamples*


60/111

/ffectivei!!erentiatorscan remain

profitable even when the

Five Forcesappear unattractive

2ffective 'ifferentiators can remain profitable


61/111

p

even %hen the Five Forcesappear unattractive

Threat of$e%

2ntrants

Can fend offCan fend off $e% 2ntrants$e% 2ntrants

because*because*

$e% products must$e% products mustsurpass proven productssurpass proven products

;

0r be e"ual to performance0r be e"ual to performance

at lo%er pricesat lo%er prices;



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Can mitigate Buyer o%er because*

3ell differentiated products reduce

customer sensitivity to price increases

Bargaining

o%er of

Buyers

Threat of

$e%

2ntrants

Can fend off $e% 2ntrants because*$e% products must

surpass proven products;

0r be e"ual to performance

at lo%er prices

;

p




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Threat of

$e%

2ntrants

Can fend off $e% 2ntrants because*$e% products must



at lo%er prices

;

Bargaining

o%er of

Suppliers


Su"stitutes because*

Brand loyalty tends to

reduce ne% product trial

and brand s%itching

;

Threat of

Substitute

roducts

Can mitigate Buyer o%er

because %ell differentiated

products reduce customer

sensitivity to price increases

p




64/111

Bargainingo%er of

Suppliers

Threat of

$e%

2ntrants

Can fend off$e% 2ntrants because*$e% products must



at lo%er prices

;

BargainingBargaining

o%er ofo%er of

SuppliersSuppliers





p


Threat of

Substitute

roducts


Substitutes because*


reduce ne% product trial and

brand s%itching

;


Absorbing price increases due to

higher margins;

assing on higher supplier prices

because buyers are brand loyal;



65/111

+ivalry Among

Competing &irms

in -ndustry

Threat of

$e%

2ntrants

Bargaining

o%er of

Suppliers

Bargaining

o%er of

Buyers

Threat of

Substitute

roducts


Substitutes because*


reduce ne% product trial and

brand s%itching

;


;

;

Absorbing price increases

due to higher margins

assing on higher supplier prices

because buyers are brand loyal






Can fend off $e% 2ntrants because*

$e% products must



at lo%er prices

;

Brand loyalty

overcomes much

price competition

#a


66/111

Customers may decide that the

cost of 8uni"ueness9is too great

The means of uni"ueness mayno

longer be valued by customers

Competitors may learn ho% to

imitate 5alue Chain

#a


67/111

$e# Ris%s o"

e# Ris%s o"

Di""erentiation

i""erentiation

-mitation narro%s perceived differentiation,

rendering differentiation meaningless

-mitation narro%s perceived differentiation,

rendering differentiation meaningless

Technological changes that nullify past

investments or learning

Technological changes that nullify past

investments or learning

Cost difference bet%een lo%(cost competitors and

the differentiated business becomes too great for

differentiation to hold brand loyalty

Cost difference bet%een lo%(cost competitors and

the differentiated business becomes too great for

differentiation to hold brand loyalty

Different strategies call for


68/111

g

different competenciesCompetitive 'rivers*(eeds

(arrow product lines "ig expertise in cosen areas of focus 0oderate cange in tecnology or

structure !ocus on cost1 efficiency*volume

$trong customer focus Relationsip driven &wo competitive requirements

/uic2 movement in developing

mar2ets +fficient operations as mar2ets

mature

$earc for new products*new

mar2ets*new tecniques +xperiment wit trends #nitiate cange to wic competitors

must respond

%perational

+ffectiveness

Customer

#ntimacy

Product

,eadersip


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Creating a Co'etitive

reating a Co'etitive

Advantage ased on Seed

dvantage ased on Seed

Has "ecome a ma4or source of competitiveHas "ecome a ma4or source of competitive

advanta#e for many firmsadvanta#e for many firms

Involves the availa"ility of aInvolves the availa"ility of a rapid responserapid responsetoto

customers "ycustomers "y $rovidin# current products 5uic+er$rovidin# current products 5uic+er

Acceleratin# ne product development or improvementAcceleratin# ne product development or improvement

6uic+ly ad4ustin# production processes6uic+ly ad4ustin# production processes

7a+in# decisions 5uic+ly7a+in# decisions 5uic+ly


70/111

Evaluating A BusinesssEvaluating A Businesss RaidRaid

ResonseResonse !ortunities!ortunitiesA. Skills and Resources Fostering Speed" rocess engineering skills" 2xcellent inbound and outbound logistics" Technical people in sales and customer service" /igh levels of automation" Corporate reputation for "uality or technical leadership" &lexible manufacturing capabilities" Strong do%nstream partners" Strong cooperation from suppliers of ma


71/111

Breadth of

Competitive

Scope


BroadTarget

#arket

$arro%

Target

#arket

Cost

CostLeadership

'ifferen(tiation

!ni"ueness

gg

eneric Business Level Strategieseneric Business Level Strategies


72/111

Breadth of

Competitive

Scope


BroadTarget

#arket

$arro%

Target

#arket

Cost

CostLeadership

'ifferen(tiation

&ocused

'ifferen(

tiation

&ocused

Lo% Cost

!ni"ueness

gg

Focused Business Level Strategies


73/111

Focused Business Level Strategies involve the same basicFocused Business Level Strategies involve the same basic

approach as Broad Mar)et Strategies%approach as Broad Mar)et Strategies%4owever, opportunities may e3ist because

FocusedBusiness Level Strategies

Large firms may overloo) small niches

Firm may lac) resources to compete industry.wide

May be able to serve a narrow mar)et segment

more effectively than industrywide competitors

Focus can allow you to direct resources to certain

value chain activities to build competitive advantage

Focused Business Level Strategies


74/111

Bang & *lufsen -pscale electronic components

1ams #ompany 2remium pet foods

Snap.on tools 4igh 8uality mechanics; tools




#$amples%#$amples%

May be able to retrofit old factories to )eep costs

down

Minimize R& costs by copying innovators



75/111

#ustom manufacturers of parts for#ustom manufacturers of parts for

/arley('avidson/arley('avidson motorcyclesmotorcycles

ocused S g



#$ample%#$ample%

Focused ifferentiators may thrive by selecting a

small mar)et that is underserved by large players

#a


76/111

&irm may be 8outfocused9by competitors

Large competitor may set its sights on your

niche market

referencesof niche marketmay change to

match those of broad market

. &ocus on key market segments offeringgro%th opportunities

>.&ocus on key market segments offeringgro%th opportunities

?. 2mphasie product innovation and"uality improvement

?.2mphasie product innovation and

"uality improvement

@. 2mphasie production and distribution

efficiency

@.2mphasie production and distribution

efficiency

. radually harvest the business.radually harvest the business

)it"alls to Avoid in Co'eting in)it"alls to Avoid in Co'eting in


90/111

)it"alls to Avoid in Co'eting in)it"alls to Avoid in Co'eting in

(ature*Declining Industries(ature*Declining Industries

Being overly optimistic about prospects for an

industry revival

etting trapped in a profitless %ar of attrition

/arvesting from a %eak position

Grand Strateg# Selection

rand Strateg# Selection


91/111

(atri+

atri+

0vercome %eaknesses

#aximie strengths

2xternal6ac"uisition

or merger forresource

capability7

-nternal6redirectedresources%ithin the

firm7

Turnaround or retrenchment'ivestitureLi"uidation

5ertical integrationConglomerate diversification

Concentrated gro%th#arket developmentroduct development-nnovation

/oriontal integrationConcentric diversificationDoint venture

###

#V###


92/111

(odel o" Grand Strateg#

odel o" Grand Strateg#

Clusters

lusters

+apid market gro%th

Slo% market gro%th

3eakcompetitive

position

Strongcompetitive

position

>. Concentratedgro%th

?. 5ertical integration

@. Concentric

diversification

>. +eformulation ofconcentrated gro%th

?. /oriontal integration

@. 'ivestiture

. Li"uidation

>. Concentric

diversification

?. Conglomeratediversification

@. Doint venture

>. Turnaround or retrenchment

?. Concentric diversification

@. Conglomerate diversification

. 'ivestiture

. Li"uidation

###

####V


93/111

T#es o" Grand

#es o" Grand

Strategies

trategies

ConsortiaConsortia

Concentrated .rowtConcentrated .rowt

0ar2et 'evelopment0ar2et 'evelopment

Product 'evelopmentProduct 'evelopment

#nnovation#nnovation

"ori7ontal #ntegration"ori7ontal #ntegration

Vertical #ntegrationVertical #ntegration

Concentric 'iversificationConcentric 'iversification

Conglomerate 'iversificationConglomerate 'iversification

&urnaround&urnaround

'ivestiture'ivestiture

,iquidation,iquidation

-an2ruptcy-an2ruptcy

8oint Ventures8oint Ventures

$trategic Alliances$trategic Alliances

Characteristics o" a

haracteristics o" a


94/111

Concentrated Gro,th

oncentrated Gro,th

Strateg#trateg# InvolvesInvolves focusing resourcesfocusing resourceson the profita"le #rothon the profita"le #roth

of a sin#le product: in a sin#le mar+et: ith a sin#leof a sin#le product: in a sin#le mar+et: ith a sin#le

dominant technolo#ydominant technolo#y

RationaleRationale, 9irm develops and e)ploits its e)pertise in, 9irm develops and e)ploits its e)pertise ina delimited competitive arenaa delimited competitive arena

DeterminantsDeterminantsof competitive mar+etof competitive mar+et successsuccess

A"ility to assess mar+et needsA"ility to assess mar+et needs


95/111

Concentrated Gro,th Strateg#

oncentrated Gro,th Strateg#

&irm4s industry is resistant to ma


96/111

)roduct Develo'ent

roduct Develo'ent

7ar+et development7ar+et development

Consists of mar+etin# present products: often ith onlyConsists of mar+etin# present products: often ith only

cosmetic modifications: to customers in related mar+et areascosmetic modifications: to customers in related mar+et areas

"y"y

Addin# channels of distri"ution orAddin# channels of distri"ution or Chan#in# content of advertisin# or promotionChan#in# content of advertisin# or promotion

$roduct development$roduct development

Involves su"stantial modification of e)istin# products orInvolves su"stantial modification of e)istin# products or

creation of ne "ut related productscreation of ne "ut related products

=ased on penetratin# e)istin# mar+ets "y=ased on penetratin# e)istin# mar+ets "y Incorporatin# product modifications into e)istin# items orIncorporatin# product modifications into e)istin# items or

Developin# ne products connected to e)istin# productsDevelopin# ne products connected to e)istin# products

Seci"ic !tions "or Selected GrandSeci"ic !tions "or Selected Grand

St t iSt t i


97/111

StrategiesStrategiesConcentration* -ncreasing use of present products in present markets

>. -ncreasing present customers4 rate of use*

a.-ncreasing sie of purchase

b.-ncreasing rate of product obsolescence

c.Advertising other uses

d.iving price incentives for increased use?. Attracting competitors4 customers

a.2stablishing sharper brand differentiation

b.-ncreasing promotional effort

c.-nitiating price cuts

@. Attracting nonusers to buy the producta.-nducing trial use through sampling, price incentives, and so

on

b.ricing up or do%n

c.Advertising ne% uses



98/111


Strategies .continued/Strategies .continued/

#arket 'evelopment* Selling present products in ne% markets

>.0pening additional geographic markets

a.+egional expansion

b.$ational expansion

c.-nternational expansion

?. Attracting other market segments

a.'eveloping product versions to appeal to other segments

b.2ntering other channels of distribution

c.Advertising in other media



99/111

Seci"ic !tions "or Selected GrandSec c !t o s o Se ected G a d

Strategies .concluded/Strategies .concluded/roduct 'evelopment* 'eveloping ne% products for present markets

>.'eveloping ne% product features

a.Adapt 6to other ideas, developments7

b.#odify 6change color, motion, sound, odor, form, shape7

c.#agnify 6stronger, loner, thicker, extra value7d.#inify 6smaller, shorter, ligher

e.Substitute 6other ingredients, process, po%er7

f.+earrange 6other patterns, layout, se"uence, components7

g.+everse 6inside out7h.Combine 6blend, alloy, assortment, ensembleE combine units,

purposes, appeals, ideas7

?. 'eveloping "uality variations

@.'eveloping additional models and sies 6product proliferation7


100/111

Innovation Strateg#

nnovation Strateg#

-nvolves creating a ne%

product life cycle, thereby

making similar existing

products obsolete

Deca# o" Ne, )roduct Ideas

eca# o" Ne, )roduct Ideas


101/111

$umberofid

eas

F

?F

>F

>

Cumulative time 6percent7

>F ?F @F F F F GF HF IF >FF

Screening

Business analysis

'evelopment Testing

Commercialiation

0ne successful

ne% product


102/111

Strategies o" 0ori1ontal

and 2ertical Integration

nd 2ertical Integration

"ori7ontal integration"ori7ontal integration

=ased on=ased on growth via acquisitiongrowth via acquisitionof one or more similar firmsof one or more similar firms

operatin# at the same sta#e of the production,mar+etin# chainoperatin# at the same sta#e of the production,mar+etin# chain

Involves eliminatin# competitors: providin# ac5uirin# firm ithInvolves eliminatin# competitors: providin# ac5uirin# firm ith

access to ne mar+etsaccess to ne mar+ets

Vertical integrationVertical integration

Involves ac5uirin# firmsInvolves ac5uirin# firms

To supply ac5uirin# firm ith inputs ,To supply ac5uirin# firm ith inputs , backwardbackwardinte#rationinte#ration

oror Are customers for firm!s outputs ,Are customers for firm!s outputs , forwardforwardinte#rationinte#ration

2ertical and 0ori1ontal

ertical and 0ori1ontal


103/111

Acquisitions or mergers of suppliers or customerbusinesses arevertical integrationsvertical integrations

Acquisitions or mergers of competing

businesses arehorizontal integrationshorizontal integrations

&extile producer

$irt manufacturer

Cloting store

&extile producer

$irt manufacturer

Cloting store

Integrations

ntegrations

(otivations Related to

otivations Related to


104/111

Diversi"ication Strategies

iversi"ication Strategies

-ncrease gro%th rate of firm

-nvestment is better use of funds than using them for internalgro%th

-mprove stability of earnings and sales

Balance or fill out product line

'iversify product line

Ac"uire a needed resource "uickly

Achieve tax savings

-ncrease firm4s stock value

-ncrease efficiency and profitability

Diversi"ication

iversi"ication


105/111

Strategies

trategies

Concentric diversificationConcentric diversification

Involves ac5uisition of "usinessesInvolves ac5uisition of "usinesses relatedrelatedto ac5uirin# firm into ac5uirin# firm in

terms of technolo#y: mar+ets: or productsterms of technolo#y: mar+ets: or products

Con#lomerate diversificationCon#lomerate diversification

Involves ac5uisition of a "usiness "ecause it represents aInvolves ac5uisition of a "usiness "ecause it represents a

promisin#promisin# investment opportunityinvestment opportunity

$rimary motivation is profit pattern of venture$rimary motivation is profit pattern of venture

Difference "eteen the approachesDifference "eteen the approaches

Concentric diversification emphasi>esConcentric diversification emphasi>es commonalitycommonalityhereashereascon#lomerate diversification emphasi>escon#lomerate diversification emphasi>esprofitsprofitsfor eachfor each

individual unitindividual unit


106/111

Turnaround Strateg#

urnaround Strateg#

-nvolves a concerted effort over

a period of time to fortify a

firm4s distinctive competencies,

returning it to profitability

A (odel o" the Turnaround

(odel o" the Turnaround


107/111

'eclining

sales or

margins

-mminent

bankruptcy

Lo%

/igh

Cost

reduction

Asset

reduction

2fficiency

maintenance

2ntrepreneurial

reconfiguration

Stability

+ecovery

-nternal

factors

2xternal

factors

Turnaround situation Turnaround response

Cause Severity +etrenchment phase +ecovery phase

6operating7

6strategic7

)rocess

rocess

Divestiture and Li&uidation

ivestiture and Li&uidation


108/111

Strategies

trategies

'ivestiture strategy'ivestiture strategy

Involves sellin# a firm or a ma4or component of a firmInvolves sellin# a firm or a ma4or component of a firm

Reasons for divestitureReasons for divestiture

$artial mismatches "eteen ac5uired firm and parent firm$artial mismatches "eteen ac5uired firm and parent firm

Corporate financial needsCorporate financial needs

;overnment antitrust action;overnment antitrust action

,iquidation strategy,iquidation strategy Involves sellin# parts of a firm: usually for its tan#i"le asset value andInvolves sellin# parts of a firm: usually for its tan#i"le asset value and

not as a #oin# concernnot as a #oin# concern

The Strateg# o" an%rutc#

he Strateg# o" an%rutc#


109/111

&wo approaces&wo approaces

LiquidationLiquidation, Involves complete distri"ution of a firm!s assets, Involves complete distri"ution of a firm!s assets

to creditors: most of hom receive a small fraction of amountto creditors: most of hom receive a small fraction of amount

oedoed

ReorganizationReorganization, Involves creditors temporarily free>in# their, Involves creditors temporarily free>in# their

claims hile a firm reor#ani>es and re"uilds its operationsclaims hile a firm reor#ani>es and re"uilds its operations

more profita"lymore profita"ly

AdvantageAdvantageof aof a reorganizationreorganization"an+ruptcy"an+ruptcy

Proactive optionProactive optionofferin# ma)imum repayment of a firm!sofferin# ma)imum repayment of a firm!s

de"t in the future if a recovery strate#y is successfulde"t in the future if a recovery strate#y is successful

ororate Co'3ination Strategies


110/111

Cororate Co'3ination Strategies

Joint ventureJoint venture

Involves esta"lishin# aInvolves esta"lishin# a third companythird companychild3: operated forchild3: operated for

the "enefit of the co,oners parents3the "enefit of the co,oners parents3

&trate#ic alliance&trate#ic alliance

Involves creatin# aInvolves creatin# apartnershippartnership"eteen to or more"eteen to or morecompanies that contri"ute s+ills and e)pertise to a cooperativecompanies that contri"ute s+ills and e)pertise to a cooperative

pro4ectpro4ect

()ists for a defined period()ists for a defined period

Does not involve the e)chan#e of e5uityDoes not involve the e)chan#e of e5uity

Consortia:


111/111

ggStrateg# toStrateg# to

Achieve a Co'etitive AdvantageAchieve a Co'etitive Advantage&ocusing on key sources ofcompetitive advantage re"uiring

total, consistent commitment

3eighing skills, resources,organiational re"uirements, and

risks of each source ofcompetitive advantage

Considering uni"ue effects of the

generic industry environment on a

Selection of

appropriatebusiness

strategie6s7

involves

business strategy dr. anton.ppt

Documents