IB Strategy Lecture 4: Strategic options Flashcards
internal analysis
strengths and weaknesses
external analysis
opportunities and threats
SWOT Analysis
given rough input for strategy formulation
- -> which are relevant
- find a unique solution for every Opportunity (OT)
What types of confrontation analysis are there?
SWOT, Directional Policy Matrix and BCG Matrix
watch video:
https://www.youtube.com/watch?v=ffRQwCzcXHM
generic strategies
- in an industry, make sure you have one of these strategies:
- cost leadership
- differentiation
- focus
cost leadership
- produce at lowest cost
- focus on efficiency
- minimum level of satisfaction
- limited set of value-adding product features
- does not always mean you are selling at a low price
How does the position of cost leadership protect from porter’s five forces?
the threats least affect you!
- Rivalry: low cost leaves you with enough margin to engage in rivalry
- Buyer power: even if can shop around they always end up with you
- Supplier power: if suppliers raise prices this affects profitability
- Threat of entrants:
- barrier to entry
- ability to engage in price wars= expected retaliation (Gegenschlag) - Threat of substitutes: determined by price/performance tradeoff of the substitutes, but as cost leader you are positioned to match
Differentiation Strategy
- be better than your competitor at something
protect from porters five forces?
- rivalry is not on price
- buyer power to enhance customer switching costs, brand loyality, reduce price sensitivity
- supplier power
- switching costs and loyality act as a barrier to entry
- switching costs and loyality discourages potential …
focus
addressing the needs of one particular group of buyers
What is a strategy statement?
A prescriptive notion that it would be good for firms to have:
“A simple, clear, succinct statement that everyone can internalize and use as a
guiding light for making difficult choices”
Consists of three elements:
- Strategic objective
- Scope
- Competitive advantage
Strategic objective
- a quantifiable target (in terms of market share, sales, sales growth, profitability, or innovativeness)
- timebound (in five years, continously, each year)
- can be used to evaluate performance
Scope
- a description of product and customers (markets or market segments; geographic location)
- choice for scope is constrained by industry definition and informed by choice for generic strategy
Competitive advantage
- value proposition
informed by choice for generic strategy (cost leader or
differentiated? How are you differentiated?)
explains why the targeted customer should buy your
product above all the alternatives; what product features
represent value to customers? (in other words: a logical
link between generic strategy and strategy statement!)
(e.g. McDonalds quality proposition: quick, dependable, seating)
internal alignment:
- a description of how internal activities are aligned
- so that only your firm can deliver value proposition
Strategy moves
- what moves can be made to achieve new strategic aims?
Vertical Integration: Backward
- integrate with supplier
- might prevent supplier from supplying competitors (antitrust laws)
