Week 23

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Week 23

• Identifying strategies
• Evaluation
• Implementation

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Identifying strategies

• Prof Michael Porters generic strategies
• Cost Leadership
• Differentiation
• Focus

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Cost Leadership

• A strategy aimed
• Producing standard products
• At a low per unit cost for consumers
• Who are price sensitive
• Firm sells at the average industry price earning
  a higher profit than rivals
• Sells below average price to gain market share.

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Differentiation

• A strategy aim
• Producing product/service
• Considered unique industry wide
• Directed at consumers who are not price sensitive
• The firm distinguishes itself from other
  products/service
• Thus charging a premium price

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Focus

• The strategy aim
• To concentrate on a narrow segment
• Buyer group
• Market segment
• Geographical region
• Service need
• Within the segment the firm will attempt to
  achieve either a cost advantage or
  differentiation.

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New Thinking

• The new thinking on strategic management
• Concentrated on
• Challenge of combining organisational flexibility
• Coordination capabilities of innovation and
  continuity in a fast changing market.
• Utilising networking concepts.
• Work by Chris Bartlett and Sumantra Ghoshal

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Direction of growth

• Some organisations choose to operate differently
• Different markets hoping their product is more
  attractive.
• Ansoff s product/market mix attempts to measure
  products offered by firms and the market it sells
  into.

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Ansoffs Matrix
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Ansoffs Matrix

• Four strategic possibilities are
• Market penetration
• Market development
• Product development
• Diversifciation

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Market penetration

• Selling more of current products to existing
  customers
• Building market share
• Develop niches
• Hold market share
• Withdrawal

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Market development

• New markets sought for existing products, however
  there are few products which appeal to all
  markets.
• Hence a firm may attempt to
• Develop its sales force to spot net markets
• Brand to create niche markets
• Overseas markets i.e. franchising or exporting

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Product development

• Here new products are developed for existing
  markets.
• Improved products or refinements
• Products designed to compete on price or quality
• Products altered to meet changing tastes of
  customers
• Reactive development to competitors products or
  new technology.

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Diversifciation

• Placing new products in new markets.
• Aiming to create value or wealth in excess of
  what firms would enjoy without diversification.
• Reasons for diversification
• Growth
• Utilisation of existing resources and
  capabilities.
• Escape form undesirable or unattractive
  environments
• Use surplus cash flows.

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Diversifciation

• High risk strategy
• Requires the greatest resource backup
• Two main types
• Conglomerate growth strategies
• Takeover of totally different business
• Integrative growth strategies
• Vertical integration
• Horizontal integration.

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Vertical integration

• Deciding which part of the supply chain to
  compete in.
• Classic example is the Oil industry
• Major oil companies involved in
• Oil exploration
• Refining oil
• Petrol stations
• Thus having a hand in the entire supply chain.

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Horizontal integration.

• Horizontal integration is aimed at the takeover
  of
• One manufacturer/retailer in the same market.
• Creates less competition
• Yet might cause monopolistic situation

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Evaluation

• For an organisation to develop a strategy it must
  know its strategic capability
• Traditionally using the SWOT analysis
• Porter stated that by looking at the
  organisations value chain

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Porters Value Chain

• Porter argued that
• A firms resources should be arranged to enhance
  least cost production or differentiation
  strategies.

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Key primary areas

• Inbound logistics
• Operations
• Outbound logistics
• Marketing and sales
• Service.

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Life cycle analysis

• The output of the value chain is a good or
  service.
• Some products can have a life cycle
• In other words a identifiable life through which
  the product passes generating sales
• At the end of the cycle its becomes obsolete and
  consumers turn to alternative product.

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Life Cycle Analysis
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Implementation

• Refer also to week 17 slides
• Strategic Implementation
• Resource planning
• Operations planning
• Review and Control

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Resource planning

• Resource plans
• Set out CSFs
• Key Tasks
• Immediate priorities

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Operations planning

• Deciding what is to be accomplished
• By whom
• By when
• At what cost
• Short term planning
• Flexiblity required for change of use

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Review and Control

• Checkpoints to ensure senior management have
  control
• Milestones set for staff
• Control reports
• Responsibility charts
• Activity schedules