SG 8 Strategic Process - Formulation Flashcards
What are strategic alternatives?
Choices of resource allocations that show potential for achieving overall objective
What are corporate level strategies?
Strategies that affect the entire organization
What is a forward vertical/downstream integration strategy?
Expanding business to include next step in the value chain
What is a backward vertical integration strategy (upstream)?
Expanding business to include preceding steps in value chain
How does horizontal integration work?
Business increases capacity at some point along value chain
What is it called when a company reduces involvement integration?
Dis-integration.
Financial analysis of vertical integration strategies uses which two forms of analysis
Make or buy
Cost/benefit
Define concentric diversification
Adding new products or services that are related to current business, as they build on same skills and expertise.
Define horizontal diversification
Addition of new products or services that are not related to current product but likely appeal to same target market
Define conglomerate diversification
Adding new products or services that are completely unrelated to current product offering
When are defensive strategies usually undertaken?
When an entity needs to respond to external conditions, usually in form of competitive pressures.
Define divestitture
When a business segment is closed or sold off
Define retrenchment
Reorganization of business activities to reduce assets and expenses
How are intensive strategies undertaken?
Grow business by increasing sales volume through marketing strategies
Define market penetration strategy
Obtain or increase market share. Usually involves decreasing selling price or increasing perceived value of product
Define market development
Increasing sales by entering new region or market, or finding a new use for existing product and creating a new market
Define product development strategy
Modifying or improving an exisitng product, using R&D
What three levels are busniess level-strategies at?
Business-unit, profit-centre and/or product-line
What do business level strategies require?
Deep understanding of what customers want and need
What step is crucial in developing a business-level strategy?
Understanding target market
What does the CVP answer?
Why does my ideal customer buy this product or use this service rather than those of the competitor?
How does the CVP align with mission/strategy/values
It needs to be unique to a particular target market, but still be in line with overall vision/mission/values of company
Major goal of business-level strategy
Create and maintain competitive advantage
3 different generic strategy
Low cost - operational excellence
Differentiation - customer intimacy
Differentiation - product leaders
What companies are ideal for low-cost strategy?
High-volume, standardized production with no need for differentiation
What does customer intimacy allow for?
Customized solutions, customer-centricity. often expensive.
Goal of product leadership
Bring superior products to market. Requires corporate culture of excellence, problem solving and teamwork with commitment to R&D.
How do functional (departmental) strategies align with business strategies?
Addresses how the business strategies will actually be carried out and supported (e.g. reporting/a+p/qc strategies)
