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Strategic Analysis & Choice in Single or Dominant -Product Businesses : Building Sustainable Competitive Advantages

Evaluating & Choosing Business Strategies: Seeking Sustained


Competitive Advantage.

Selected Industry Environmental & Business Strategy Choices

Dominant Product/Service Businesses: Evaluating & Choosing to


Diversify to Build Value

Evaluating & Choosing Business Strategies:


Seeking Sustained Competitive Advantage.

Evaluating Cost Leadership Opportunities:


1. Low-cost advantages that reduce the likelihood of pricing pressure from buyers.

2.

Truly sustained low-cost advantages may push rivals into other areas.
New Entrants competing on price must face an entrenched cost leader without the experience to replicate every cost advantage. Low-cost advantages should lessen the attractiveness of substitute products.

3.

4.

Evaluating & Choosing Business Strategies:


Seeking Sustained Competitive Advantage. (Continue)

Evaluating Cost Leadership Opportunities:


5. Higher margins allow low-cost producers to withstand supplier cost increases and often gain supplier loyalty over time.

6.
7. 8.

Many-cost saving activities are easily duplicated


Exclusive cost leadership can become a trap. Obsessive cost cutting can shrink other competitive advantages involving key product attributes. Cost differences often decline over time.

9.

Evaluating & Choosing Business Strategies:


Seeking Sustained Competitive Advantage. (Continue) Evaluating Differentiation Opportunities:
1. Rivalry is reduced when a business successfully differentiates itself. Buyer are less sensitive to prices for effectively differentiated product. Brands loyalty is hard for new entrants to overcome. Imitation narrows perceived differentiation, rendering differentiation meaningless. Technological changes that nullify past investments or learning. The cost differences between low-cost competitors and the differentiated business become too great for differentiation to hold brand loyalty.

2.

3. 4.

5. 6.

Evaluating & Choosing Business Strategies:


Seeking Sustained Competitive Advantage. (Continue) Evaluating Speed as a Competitive Advantage:
1. 2. 3. 4. 5. Customer responsiveness. Product development cycle. Product or service improvement. Speed in delivery or distribution. Information sharing and technology.

Evaluating & Choosing Business Strategies:


Seeking Sustained Competitive Advantage. (Continue) Evaluating Market Focus as a way to Competitive Advantage:
1. A Business focused on a narrow niche market in which to build a strong competitive advantage. However, focus alone is not enough to build competitive advantage. A firm should create several value chain activities that achieve differentiation, low-cost, and rapid response competitive advantage within this niche market that would be hard for other firms, particularly mass-market-oriented firms, to replicate.

2.

3.

Selected Industry Environments & Business Strategy Choices. (Continue)


Competitive Advantage in Emerging Industries
1. 2. 3. 4. The ability to shape the industrys structure. The ability to rapidly improve product quality. Advantageous relationships. The ability to establish the firms technology as the dominant one. The early acquisition of a core group of loyal customers The ability to forecast future competitors

5. 6.

Selected Industry Environments & Business Strategy Choices. (Continue)


Competitive Advantage in the Transition to Industry Maturity
1. 2. 3. 4. Pruning the product line. Emphasis on process innovation. Emphasis on cost reduction. Careful buyer selection to focus.

5.
6.

Horizontal integration.
International expansion

Selected Industry Environments & Business Strategy Choices. (Continue)


Competitive Advantage in Mature & Declining Industries

1.

Focus on segment within industry that offer a chance for higher growth. Emphasize product innovation and quality improvement. Emphasize production and distribution efficiency. Gradually harvest the business.

2. 3. 4.

Selected Industry Environments & Business Strategy Choices. (Continue)


Competitive Advantage in Fragmented Industry
1. 2. 3. 4. Tightly managed decentralization. Formula facilities. Increased value added. Specialization.

5.

Bare Bones/ No Frills

Selected Industry Environments & Business Strategy Choices. (Continue)


Competitive Advantage in Global Industry
1. 2. 3. 4. Broad-line global competition. Global focus strategy. National focus strategy. Protected niche strategy.

Grand Strategy Selection Matrix


Overcome Weakness

Internal (Redirected resources within the firm)

Turnaround or retrenchment Divestiture Liquidation Concentrated growth Market development Product development Innovation

II III

I IV

Vertical integration Conglomerate diversification

Horizontal Integration Concentric Diversification Joint Venture

External (acquisition or merger for resource capability)

Maximize Strengths

Model of Grand Strategy Clusters


Rapid market growth

1. Concentrated growth 2. Vertical integration 3. Concentric diversification


Strong competition position

I IV
1. Concentric diversification 2. Conglomerate diversification 3. Joint venture

II III

1. Reformulation of Concentrated growth 2. Horizontal integration 3. Divestiture 4. Liquidation

Weak competition position

1. Turnaround or retrenchment 2. Concentric diversification 3. Conglomerate diversification 4. Divestiture 5. Liquidation

Slow market growth