Strategy formulation implementation and evaluation

diff strategy cont

Competitive Forces Rivalry - As customers tend to be loyal and price sensitivity is reduced, rivalry is less influential. Bargaining Power of Customers - Lack of alternatives will increases firm's power. Potential Entrants/Substitutes - substantial entry barrier and switching barrier to other product.

cost leadership cont

Competitive Forces Rivalry with existing competitors - offering products/service at prices nearly as low as its largest competitor with more convenience and service. Bargaining Power of Customers What to do must find ways to increase the value that its good/service provides to customers. must be careful setting prices - difficult to reverse

cost leadership

Cost Leadership Strategy is an integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to that of competitors, with features that are acceptable to customers. Successful implementation of the cost leadership strategy requires a consistent focus on driving costs lower, relative to competitor's costs. Firms that are fully committed to using the cost leadership strategy often drive their costs lower through investments in efficient-scale facilities, tight cost and overhead control, and cost minimizations in such areas as service, sales force, and research and development. The cost leadership strategy is not risk free. One risk is that competitors' innovations (equipment/tech) may allow rivals to produce at costs lower than those of the original cost leader. A second risk is that too much focus on cost reductions may occur at the expense of trying to understand customers' needs or concerns regarding issues and other competitive dimensions. A final risk of the cost leadership strategy concerns imitation. Using their own core competencies, competitors sometimes learn how to successfully imitate the cost leader's strategy. When this occurs, the cost leader must find ways to increase the value that its good or service provides to customers. Commonly, value is increased by selling the current product at an even lower price or by adding features that customers value while maintaining price. Even cost leaders must be careful when reducing prices to a still lower level. If the firm prices its good/service at an unrealistically low level (at level at which it will be difficult to retain satisfactory margins), customers' expectations about what they envision to be a reasonable price become difficult to reverse.

differentiation strategy

Differentiation Strategy to produce or deliver goods/services that customers perceive as being different in ways that are important to them. To sell nonstandardized products to customers with unique needs. Usually charge premium prices. What to do Be truly unique. Continuously investing in and developing features that differentiate goods/services in ways that customers value.

diversification growth opportunities

Diversification growth makes sense when good opportunities can be found outside the present businesses. A good opportunity is one where the industry is highly attractive and the company has the mix of business strengths to be successful. Concentric diversification involves moving into new lines of business by adding new, but related product, or service for present customer. For example, Wendy's introduced Java Fresh to respond customer's healthy eating needs. Second, Horizontal diversification strategy involves moving into new lines of business by adding new, but unrelated product, or service for present customer. For example, Hard Rock Café franchise sells restaurant logo clothing in their restaurant and found it is highly profitable. The clothing serves as an excellent advertising medium. Finally, the company may seek new businesses that have no relationship to the company's current technology, product, or markets for new customers. For example, Hyatt hotel chains have entered retirement homes market.

"It is more important to do the right things (being effective) than to do things right (being efficient)." - Peter Drucker

Environment are changing. The firm needs to track results and monitoring new developments in the environment. Peter Drucker pointed out "It is more important to do the right things (being effective) than to do things right (being efficient).

focus strategies

Focus Strategies To use its core competencies to serve the needs of a particular competitive segment. A particular buyer group (e.g., youths or seniors) A different segment of a product line A different geographic market

intensive growth strategies

Identify further opportunities to achieve growth within the company's current business. Market concentration strategy seeks to increase current products in current markets. Market development strategy looks for new markets in which current products can expand. Product development strategy considers new product possibilities

installing support system

Information Systems Customer data, operations data, employee data, supplier/partner/collaborative ally data, financial performance data. Strategy-supportive Reward System Financial Incentives Salary increases, performance bonuses, stock options, and retirement packages Non-financial Incentives Special recognition, job security, stimulating assignments, opportunities to relocation, increased job control, rapid promotion

financial and other control measures

Key Financial Measurements Profit: the net of all revenue less all expenses Cash Flow: the net of cash received minus the cash expanded Return on Investment: a measure of the level of payback on the use of capital Budgeting as a Vehicle of Control One of the most commonly used methods of control. The process of identifying, gathering, summarizing, and communicating financial and nonfinancial information about the organization's future activities.

risks of diff strategy

Risks of Differentiation Strategy Price difference can be too large between the differentiator's and cost leader's product Competitors can provide the same goods/services at lower price. Learning can narrow customers' perceptions of the value of a firm's differentiated features. Counterfeit goods can be provided at significantly reduced prices.

risks of focus strategies

Risks of Focus Strategies A competitor may be able to focus on a more narrowly defined segment. The needs of customer within a narrow competitive segments may become more similar to those of customers as a whole.

strategy implementation

Strategic Implementation The way a company structures itself in order to execute its strategic plan efficiently and achieve its objectives. The action that converts the strategic plan into reality and accomplishment. Strategic Implementation Is About How to assign tasks and responsibilities to members of the organization. How to group them into departments or divisions. Finding the best way to connect the activities of different people in various divisions.

control function

The Purpose of Control To measure outcomes or outputs to see whether they pass or fail according to the mission, objectives, and strategy. The Levels of Organizational Control Strategic control evaluates the strategies set at the corporate strategy level Management control ensures the objectives set in the business strategy level are implemented Operational control measures the performance of individuals or work groups.

risks

risks becoming "stuck-in-the-middle." Being stuck in the middle prevents the firm from dealing successfully with the five competitive forces and from earning above-average returns.

four generic strategies

-cost leadership -differentiation -focused cost leadership -focused differentiation

corporate level strategy

A corporate level strategy is an action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets. In essence, a corporate-level strategy is what makes the corporate whole add up more than the sum of its business unit parts. Corporate-level strategy is concerned with two key questions: what businesses the firm should be in and how the corporate office should manage its group of businesses. When managed effectively, corporate-level strategies enhance a firm's strategic competitiveness and contribute to its ability to earn above-average returns.

req for effective strategic implementation

Adequate Resources Must be adequate to support strategic intent. Well-aligned Organizational Structure Must be able to integrate a wide variety of specialized skills. Must be adaptable (able to learn). Motivations of Organizational Members Must be able to overcome the natural resistance of people. Must be more than just willing to enact strategy.

integrated cost leadership/ differentiation strategy

Advantages - be able to To adapt quickly to environmental changes To learn new skills and technologies more quickly To effectively leverage it s core competencies across business units and product lines

integrative growth opportunities

Backward integration: A hotel company acquiring one of its suppliers. - Marriott Distribution Systems Forward integration: A hotel company acquiring tour wholesaler or travel agents. Horizontal integration: A hotel company acquiring one or more competitors, provided the government does not bar the move.

business level strategy

Business-level strategies are concerned with a firm's industry position relative to those of competitors. To position itself, a firm must decide whether its intended actions will allow it to perform activities differently the way its rivals do so or to perform different activities than those of its rivals. Thus, favorably positioned firms may have a competitive advantage over their industry rivals. Firms choose from among four generic business-level strategies to establish and exploit a competitive advantage within a particular competitive scope: cost leadership, differentiation, focused cost leadership, and focused differentiation. A fifth generic business-level strategy, the integrated cost leadership/differentiation strategy, has evolved through firm's efforts to find the most effective ways to exploit their competitive advantages.