CHAPTER 5: STRATEGY

DEFINE ORGANISATION STRATEGY

Strategy- adoption of courses of action and the allocation of

resources necessary to achieve the organization's goal.

FORMULATING STRATEGY
Strategic Formulation

- Managers work to develop the set of strategies (corporate, business, and functional) that will allow an organization to accomplish its mission and achieve its goals.

FORMULATING STRATEGY
CORPORATELEVEL STRATEGY

A plan that indicates in which industries and national markets an organization intends to compete. A plan that indicates how a division intends to compete against its rivals in an industry.

BUSINESS- LEVEL STRATEGY

FUNCTIONALLEVEL STRATEGY

FORMULATING CORPORATE- LEVEL STRATEGIES

CONCENTRATION IN SINGLE BUSINESS

- Can become a strong competitor but can be risky

- Develop new kinds of products or expand its location
- Logical strategy if downsizing organization to increase performance - Eg: Mc Donald- focuses in fast food business

FORMULATING CORPORATE- LEVEL STRATEGIES

VERTICAL INTEGRATION

Backward vertical integration: the firm produces its own inputs. Forward vertical integration: the firm distributes its outputs or products.
Raw Materials Intermediate Manufacturing Assembly Distribution
Backward

Customer
Forward

FORMULATING CORPORATE- LEVEL STRATEGIES

DIVERSIFICATION -Organization moves into new businesses and services.

Related diversification: firm diversifies in similar areas to build upon existing divisions.
Synergy: obtain two divisions working together to perform better than the

sum of their individual performance (2+2=5). Eg: Media Prima Berhad

Unrelated diversification: buy business in new areas.

Build a portfolio of unrelated firms to reduce risk or trouble in one industry. Very hard to manage. Eg: Sime Darby Berhad

FORMULATING CORPORATE- LEVEL STRATEGIES

INTERNATIONAL EXPANSION - Global Strategy Selling the same standard product and using the same basic marketing approach in all countries. -Lowers production cost. -But ignores national differences -Eg: Nestle, Kelloggs - Multi-Domestic Strategy Customize products and marketing strategies to specific national conditions. -Helps gain local market share. -Raises production costs. -Eg: KFC
Exporting

Importing

Licencing

Franchising

Strategic Alliance

Joint Venture

FORMULATING BUSINESS- LEVEL STRATEGIES

THE FIVE FORCES

Threats of New Entrants

Bargaining Power of Suppliers Threat of Substitutes Bargaining Power of Buyers

FORMULATING BUSINESS- LEVEL STRATEGIES

POSITIONING STRATEGY

Number of market segments

Many
Few

Low-Cost

Differentiation

Focused Low-Cost

Focused Differentiated

Low Cost

Differentiation

Strategy

FORMULATING BUSINESS- LEVEL STRATEGIES

Low-cost: Driving the organizations total costs down below the

total costs of rivals.

Managers manufacture at lower cost, reduce waste. Lower costs than competition mean lower prices and still be profitable.

Differentiation: gain a competitive advantage by making your

products different from competitors.

Differentiation must be valued by the customer. Successful differentiation allows you to charge more for a product.

Stuck in the middle: It is difficult to simultaneously become

differentiated and low cost.

But Toyota does, using savings to feed diffrentiation- lexus, Scion, Hybrid,etc

FORMULATING BUSINESS- LEVEL STRATEGIES

Firms also choose to serve the entire market or focus on a few segments.
Focused low-cost: try to serve one segment of the market but be

the lowest cost in that segment.

Focused differentiated: Firm again seeks to focus on one market

segment but is the most differentiated in that segment.

FORMULATING BUSINESS- LEVEL STRATEGIES

ADAPTIVE STRATEGIES
Defenders
seek moderate growth retain customers

Prospectors
seek fast growth
emphasize risk-taking & innovation

Analyzers
blend of defender & prospector strategies imitate others successes

Reactors
use an inconsistent strategy respond to changes

FORMULATING FUNCTIONAL- LEVEL STRATEGIES

A plan that indicates how an organizational function intends to

achieve its goals. -Seeks to have each department add value to a good or service.

-Marketing, service, and production functions can all add value to a good or service through: Lowering the costs of providing the value in products. Adding new value to the product by differentiating.
-Functional strategies must fit with business level strategies.

THANK YOU