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Chapter 6 - Strategy Formulation: Business Strategy

Terms in this set (37)

A Framework for Examining Business Strategy

concerned with developing a corporation's mission, objectives, strategies, and policies
Strategy formulation
A Framework for Examining Business Strategy

the process of finding a strategic fit between external opportunities and internal strengths while working around external and internal weakness
Situation analysis
A Framework for Examining Business Strategy

acronym used to describe the particular strengths, weaknesses, opportunities, and threats that are potential strategic factors for a specific company
SWOT
A Framework for Examining Business Strategy

= opportunity/capacity
opportunity has no real value unless a company has the capacity to take advantage of said opportunity
Strategy
Criticisms of SWOT analysis

it is simply the ________ of those filling out the boxes
opinion
summarizes an organization's strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table
SFAS (Strategic Factors Analysis Summary) Matrix
so well suited to the firm's internal and external environment that other corporations are not likely to challenge or dislodge it
Propitious niche
a unique market opportunity that is available for a particular time
Strategic window
the mission statement must enable a ____________ ___________ to highlight and focus the energy of everyone in the organization in the direction that the top management team believes is best for the business
common thread
Business Strategies
When looking at a strategy for the Business:
- The focus should be on improving the ____________ _____________ of it's (company or business unit) products or services within the specific industry or market segment that it (company or business unit) serves
- competitive, cooperative
competitive position
____________ ____________ raises the following questions regarding "how should we compete?"
competitive strategy
Competitive Strategy

Should we compete on the basis of:
- _______ _______ (and thus price), or
- differentiate our products or services on some basis other than cost, such as quality or service?
lower cost
Competitive Strategy

How should we focus out efforts:
-_______ to _______ with our major competitions for the biggest but most sought-after share of the market or
- on a niche in which we can satisfy a less sought-after but also profitable segment of the market
head to head
Micheal Porter's Competitive Strategies

ability of a company or a business unit to design, produce and market a comparable product more efficiently than its competitors
cost leadership
Micheal Porter's Competitive Strategies

ability of a company to provide unique and superior value to the buyer in terms of product quality, special features or after-sale service
differentiation
Micheal Porter's Competitive Strategies

ability of a company to provide unique and superior value to a particular buyer, segment of the market line or geographic market
focus
Determining competitive advantage

Porter proposed that a firm's competitive advantage in an industry (what sets the firm apart from other in the industry) is determined by its _________ ________ - that is, the breadth of the company's or business unit's target market (is it focused on a niche or the entire market)
competitive scope
lower-cost competitive strategy that aims at the broad mass market and requires "aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization"
cost leadership
Cost Leadership Strategy
- provides a defense against rivals
- provides a barrier to entry
- generates increased market share
more about cost leadership
involves the creation of a product or service that is perceived throughout the industry as unique
differentiation strategy
Differentiation strategy
- lowers customers sensitivity to price
- increases buyer loyalty
- can generate higher profits
benefits of differentiation strategy
Focus Strategy

low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche to the exclusion of other
Cost focus
Focus Strategy

concentrates on a particular buyer group, product line segment or geographic market to serve the needs of a narrow strategic market more effectively that its competitors
Differentiation focus
Risks in Competitive Strategies

A company following a __________ _________ must ensure that the higher price it charges for its higher quality is not too far above the price of the competition, otherwise customers will not see the extra quality as worth the extra cost
differentiation strategy
Issues in Competitive Strategies

when a company has no competitive advantage and is doomed to below-average performance
stuck in the middle
Issues in Competitive Strategies

they differentiate their produce or service from those of other by focusing on customer wants in a segment of the market, thereby achieving a dominant share of the part of the market
Successful entrepreneurial ventures follow focus strategies
Industry Structure and competitive strategy

many small- and medium-size companies compete for relatively small shares of the total market

-products are typically in early stages of product life cycle
-focus strategies are used
Fragmented industry
Industry Structure and competitive strategy

- domination by a few large companies
-premium on a firm's ability to achieve cost leadership
consolidation industry
Industry Structure and competitive strategy

developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry

1. they involve large numbers of firms
2. they acquired firms are typically owner operated
3. the objective is to reinvent an entire industry
Strategic rollup
Used to gain a competitive advantage within an industry by working with other firms
cooperative strategies
Cooperative Strategies

_____________ - the active cooperation of firms within an industry to reduce output and raise prices to avoid economic law of supply and demand
Collusion
_________ _________ - a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain
Strategic alliance
Reasons for form an _________
- obtain or learn new capabilities
- obtain access to specific markets
- reduce financial risk
- reduce political risk
Alliance
Types of Alliance

partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone, such as access to advance technology
Mutual service consortium
Types of Alliance

cooperative business activity, formed by tow or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and reward to each member, while preserving their separate identity/autonomy
joint venture
Types of Alliance

an agreement in which the licensing firm grants right to another firm in another country or market to produce and/or sell a product
licensing arrangement
Types of Alliance

a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage
value-cain partnership
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