Strategic Management Part 2

by Anjan Mohapatro
If you dont invest for the long term ,there is no short term

Examples of Strengths

Reputation/ brand image

Distribution channels

Research and
development

Experienced management

Experienced

skills

talent

sales force

SWOT ANALYSIS FORMULATE STRATEGY

Organizational weaknesses are skills and capabilities that prevent an organization to choose and implement strategies that support its mission.

Evaluating
Organisational

Weakness

Weaknesses can be overcome by: making investments to obtain the strengths needed. modifying the organizations mission so it can be accomplished with the current Workforce

Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors

Examples of Weaknesses

lack of the previous experience

High debt

Lack of manufacturing capacity/capability

Examples of Opportunities

Upturn in Consumer confidence

Trends in Consumer needs/wants

Demographic Trends

Changes in Distribution/Consumer shopping Demographic Trends

SWOT ANALYSIS FORMULATE STRATEGY

Organizational opportunities are areas in the organizations environment that may generate high performance.

Organizational threats are areas in the organizations environment that make it difficult for the organization to achieve high performance

Levels of Strategy
Corporate level

CORPORATE LEVEL STRATEGY

Business -Level Strategy: How do we compete?

IT

Financial Services

Construction

Manufacturing

Shipping

Finance

Marketing

FUNCTIONAL LEVEL STRATEGY

Sales

R&D

Levels of Strategy

Corporate level

Business Level

Functional Level

The level of strategy concerned with the question, What business are we in?. Pertains to the organization as a whole and the combination of business units and product lines that make it up.

The level of strategy concerned with the question, How do we compete?. Pertains to each business unit or product line within the organization

The level of strategy concerned with the question, How do we support the business-level strategy?. Pertains to all of the organizations major departments

Formulating Corporate level strategy

A type of corporate-level strategy that pertains to the organizations mix of SBUs and product lines that fit together in such a way as to provide the corporation with synergy and competitive advantage

Strategic Business Unit (SBU) A division of the organization that has a unique business mission, product line, competitors, and markets relative to other SBUs in the same corporation.

Formulating Corporate level Strategy

Single Product Strategy

A strategy in which an organization manufactures one product or service and sells it in a single geographic market

SBU
Each business or group of businesses within an organization engaged in serving the same markets, customers, or products

Diversification
The number of businesses an organization is engaged in and the extent to which these businesses are related to one another

Strategies to Improve sales

Intensive Growth

Strategy

Integrative

Growth

Diversificati on Growth

Strategies to Improve sales

Increase sales/Profit Marketing efforts of the company to offer their existing products in the current market is called market penetration strategy Attract Competitors Customer ,tap potential customer

Develop new market for new customer to Increase sales/Profit Geographical/Demogr aphical Pakistan state oil to Afghanistan Chinese Products

Penetrate into Existing Markets (Sony, Dell)

Intensive Growth
Develop New Products
Gramophone to CDS,Google Chrome, diet coke)

Develop New Markets (Bharati Airtel,

Pharma Companies)

Strategies to Improve sales

If a company operating in music systems takes over the manufacturing business of its plastic material supplier, bakery business buys wheat farm

Backward Integration

If a company acquires its intermediaries such as wholesale and retailers, when a farmer sells his crop at the local market instead of distributor
Forward Integration

Integrative Growth

If a company operating in music systems takes over the manufacturing business of its plastic material supplier

Horizontal Integration

Strategies to Improve sales

Developing new products for new markets when the current market is saturated Virgin Media from music to travel/mobile phones Walt Disney animated movies to theme parks and vacation properties Cannon cameras to Office equipments

Planned with New Products that have technological or marketing synergies with existing business to cater for a different group of customers

Concentric

Diversification Growth

Horizontal

Conglomerate

Printing press shift from offset printing to computer printing.

Company may choose new business that have nothing to do with the current technology, products or markets

Ansoffs Product Market Expansion Grid

Present

Market Penetrating Strategy

Product Development Strategy

Market

New

Market Development Strategy

Diversification

Present
Product

New

Related Diversification

A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.

Advantages of Related Diversification

Reduces organizations dependence on any one of its business activities and thus reduces economic risk. Reduces overhead costs associated with managing any one business through economies of scale and economies of scope. Allows an organization to exploit its strengths and capabilities in more than one business. Synergy exists among a set of businesses when the businesses value together is greater than their economic value separately.

UNRELATED DIVERSIFICATION

A strategy in which an organization operates multiple businesses that are not logically associated with one another. Advantages

Stable corporate-level performance over time due to business cycle differences among the multiple businesses. Resources can be allocated to areas with the highest return potentials to maximize corporate performance.

Disadvantages

The strategy does not usually lead to high performance due to the complexity of managing a diversity of businesses. Firms with unrelated strategies fail to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies.