Chapter 5 - Identify and Evaluate Strategic Options Flashcards
SWOT
Strength
Weakness
Opportunities
Threats
TOWS matrix
SO Strengthen Opportunities
ST Strategy to counter threats
WO address weakness, exploit opportunities
WT avoid threats to weakness or change rapidly
Three overall types
Competitive strategies
Product-market strategies
Method of growth
Strategy boundaries
horizontal
economical scale
vertical boundaries
outsourcing, across value chain
Product dependent strategies
Products
Search products: differentiated product features
Experience products: usage differentiation
Credence products: not evaluate because time sensitive (waitress service) or hard to evaluate
Product dependent strategies
Categories
Breakthrough products
Improved products
Competitive products
Market segmentation
Introducing variation in standard products allows market segmentation resulting in:
- Increased sales and profit
- extended life cycle
- increased market share
- survive competition
Competitive strategies - Definition: 3
favorable position in the industry to achieve superior return.
The main ones:
A. cost leadership
B. differentiation
C. niche aka focus (cost- or differentiation-focus)
Advantages and Issues with Porter’s strategy selection approach:
for cost leadership
- internal focus
- only one firm
- higher margin can be used for differentiation
for differentiation:
- no price premium
- choice of competitor to differentiate from
- choosing source of differentiation
Strategy clock (Bowman)
no frills low price hybrid differentiation focused differentiation
unsuccessful ones:
increased price, std value
increased price, low value
low value, standard price
Issues with Strategy Clock
problem defining industry
defining the strategic unit
Value Chain (Porter)
inbound, operations, outbound, marketing+sales, service
Infra, HR, Tech Dev, Procurement
Pricing strategies
Competitive Cost plus Market based Penetration Predatory pricing Skimming Range (fits to connected products) Selective: category (by brand segment), customer group, peak pricing (demand dependent), service level (dependent), time material (like cost plus)
Pricing objectives: 2
- market share
- maximise profit
loss leader (definition)
A loss leader (also leader) is a pricing strategy where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services.
Strategies in answering to price cuts: 4
- maintain price
- maintain price, but answer with non-price counter-attack
- reduce price
- raise price (and praise quality advantages)
Ansoff matrix extended by Lynch
Penetration (or withdraw, de-merge, privatize)
Product development
Market development
Diversification (related or unrelated->fin, risk, other)
Types of synergies: 4
marketing
operations
investment
management
Withdrawal
Exit barriers: 6
Reasons for exit: 6
Barriers: sale of assets, redundancy costs misses opportunity costing political barriers marketing may delay exit admitting failure assumption carrying on is low risk
Reasons: investment purpose only limited resources insolvency changed strategy declined market attractiveness better opportunities
Product-Market Guidelines
growth potential cash generation timing entering and exiting long term rational for market or product diversification by acquisition
Types of risk
market risk (or success, reaching customers)
product risk
managerial risk
financial risk
Methods of growth
From the bottom
Acquire or merge
Co-operate
Factors influencing growth method choice
resources complementary skills speed retaining control cultural fit risk
Methods of collaboration by Co’s
integrate
JV
contractual (franchising)
Expansion methods
Inside:
organic or export, foreign office, foreign mfg, multi national ops, global ops
Outside: merger, acquisition, JV, Alliance, franchise, licence, international contract mfg
Organic growth reasons:
new products create market understanding pure innovation no acquisition targets around sufficient internal resources mgmt and culture remains as is same operating systems less cash flow drain than acquisition fewer misses than hits
Arguments against organic growth
- time
- overcoming lack of access
- no risk sharing
Reasons for international expansion
cost or competence lead
market lead
Porter’s diamond
Attractiveness of a particular location
Firm strategy, structure, rivalry
Factor condition
Demand conditions
Related and support industry
Why expand overseas
Chance or unplanned introduction Life cycle Competition Reduce dependence Economies of scale Cheaper source of raw materials financial opportunities
Kotler’s market entry matrix
market attractiveness
risk
competitive advantage
International business risks
political
business (likelihood of successful business case)
currency risk
profit repatriation risk
BPP to be continue
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