CHAPTER 6
Strategy Formulation:
Situation Analysis &
Business Strategy
STRATEGIC MANAGEMENT & BUSINESS POLICY
11TH EDITION
THOMAS L. WHEELEN
Prentice Hall, Inc. © 2008
J. DAVID HUNGER
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Situational Analysis
Strategy formulation -–Strategic planning or long-range planning
•Develops mission, objectives, strategies, policies
--process of finding a strategic fit
between external opportunities and
internal strengths while working around
external threats and internal weaknesses
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IFAS – Maytag as Example
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EFAS – Maytag as Example
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SFAS Matrix
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Situational Analysis
Niche -–Need in the marketplace that is currently
unsatisfied
Corporate Goal -–Find propitious niche
–Strategic window
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Situational Analysis
SWOT -–Internal
•Strengths/Weaknesses
–External
•Opportunities/Threats
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TOWS Matrix
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Business Strategy
Focuses on improving competitive
position of company’s products or
services within the specific industry or
market segment
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Porter’s Competitive Strategies
Competitive Strategy -–Low cost
–Differentiation
–Direct competition
–Focus on niche
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Porter’s Competitive Strategies
Generic Competitive Strategies -–Lower Cost strategy
•Greater efficiencies than competitors
–Differentiation strategy
•Unique/superior value, quality, features,
service
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–Determined by Competitive Scope
•Breadth of the target market`
Competitive Advantage --
Porter’s Competitive Strategies
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Porter’s Competitive Strategies
Cost Leadership -–Low-cost competitive strategy
–Broad mass market
–Efficient-scale facilities
–Cost reductions
–Cost minimization
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Porter’s Competitive Strategies
Differentiation –
–Broad mass market
–Unique product/service
–Premiums charged
–Less price sensitivity
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Porter’s Competitive Strategies
Cost-Focus –
–Low-cost competitive strategy
–Focus on market segment
–Niche focused
–Cost advantage in market segment
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Porter’s Competitive Strategies
Differentiation Focus –
–Specific group or geographic market focus
–Differentiation in target market
–Special needs of narrow target market
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Porter’s Competitive Strategies
Stuck in the middle –
–No competitive advantage
–Below-average performance
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Risks of Generic Strategies
Risks of Cost Leadership
Risks
of CostisLeadership
Cost
leadership
not
Cost
leadership
is
not
sustained:
• sustained:
Competitors imitate.
•
Competitors
imitate.
• Technology
changes.
Technology
changes.
• •Other
bases for
cost
•leadership
Other bases
for
erode. cost
leadership
erode.
Proximity
in differentiation
is
Proximity
in
differentiation
is
lost.
lost.focusers achieve even
Cost
Costcost
focusers
achieve even
lower
in segments.
lower cost in segments.
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Risks of Differentiation
Risks of Differentiation
Differentiation
is not
Differentiation
is not
sustained:
• sustained:
Competitors imitate.
•
Competitors
imitate.
• Bases
for differentiation
•become
Bases less
for differentiation
important to
become
less
important to
buyers.
Costbuyers.
proximity is lost.
Cost
proximity
is lost.
Differentiation
focusers
Differentiation
focusers
achieve
even greater
achieve eveningreater
differentiation
segments.
differentiation in segments.
Risks of Focus
Risks
ofstrategy
Focus is
The
focus
The focus strategy is
imitated:
imitated:
The
target segment becomes
The
targetunattractive:
segment becomes
structurally
unattractive:
• structurally
Structure erodes.
Structure
erodes.
• •Demand
disappears.
• Demand
disappears.
Broadly
targeted
competitors
Broadly
targeted
competitors
overwhelm the segment:
the segment:
• overwhelm
The segment’s
•differences
The segment’s
from other
differences
from other
segments narrow.
segments
narrow.
• The
advantages
of a
•broad
The advantages
of a
line increase.
line subsegment
increase.
Newbroad
focusers
New
focusers subsegment
the
industry.
the industry.
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8 Dimensions of Quality
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Competitive Strategy
Industry Structure -–Fragmented Industry
–Consolidated Industry
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Competitive Tactics
Timing Tactics -–First mover
–Late movers
Market Location Tactics -–Frontal Assault
–Flanking Maneuver
–Bypass Attack
–Encirclement
–Guerrilla Warfare
Defensive Tactics -–Raise structural barriers
–Increase expected retaliation
–Lower the inducement for attack
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Cooperative Strategies
•Collusion
•Strategic Alliances
•Mutual service consortia
•Joint ventures
•Licensing arrangements
•Value-chain partnerships
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