Strategic Positioning 1

Strategy Formulation
LECTURE FOUR

What's ahead

Strategy formulation

SWOT

Competitor Analysis

Value chain competitive strategy

Introduction

After Internal & External analysis is complete we start with the

development of strategies

SWOT

GAP Analysis

Competitive strategy

The Corporate Appraisal

Environmental factors internal to the firm usually can be classified as

strengths (S) or weaknesses (W)

External to the firm can be classified as opportunities (O) or threats (T)

Such an analysis of the strategic environment is referred to as a SWOT

analysis

provides information that is helpful in matching the firm's resources and

capabilities to the competitive environment in which it operates

Strength (S)

A firm's strengths are its resources and capabilities that can be used as a
basis for developing a competitive advantage. Examples of such
strengths include:

patents

strong brand names

good reputation among customers

cost advantages from proprietary know-how

exclusive access to high grade natural resources

favorable access to distribution networks

Weakness (W)

The absence of certain strengths may be viewed as a weakness. For

example, each of the following may be considered weaknesses:

lack of patent protection

a weak brand name

poor reputation among customers

high cost structure

lack of access to the best natural resources

lack of access to key distribution channels

Opportunities (O)

The external environmental analysis may reveal certain new

opportunities for profit and growth. Some examples of such
opportunities include:

an unfulfilled customer need

arrival of new technologies

loosening of regulations

removal of international trade barriers

Threats (T)

Changes in the external environmental also may present threats to the

firm. Some examples of such threats include:

shifts in consumer tastes away from the firm's products

emergence of substitute products

new regulations

increased trade barriers

The SWOT Matrix

Firm may have a better chance at developing a

competitive advantage by identifying a fit between
the firm's strengths and upcoming opportunities

S-O strategies pursue opportunities that are a good

fit to the company's strengths.

W-O strategies overcome weaknesses to pursue

opportunities.

S-T strategies identify ways that the firm can use its
strengths to reduce its vulnerability to external
threats.

W-T strategies establish a defensive plan to prevent

the firm's weaknesses from making it highly
susceptible to external threats.

Activity

Take any known local business in Maldives, work in the group and do a
simple appraisal for the business of your choice.

Hint (SWOT matrix and recommendations)

GAP Analysis

Difference between the current performance and the desired

helps identify performance gap with respect to the strategy the company
follows to achieve its goals, whether the performance is aligned with the
mission and vision of the company

Strategic Gap = what the firm is doing - what the firm must do

When gaps are identified new strategies will have to be developed which
will close this gap, so that the organization can expect to achieve its targets
over the planning period.

Requirements for effective gap analysis

Clearly agreed indicators of overall corporate performance

KPI
An agreed time span
Target setting

Competitor Analysis Activity

Assume you are the strategic planning team of MAPS. Identify who will
be your competitors, what is their positioning in the market, their current
strategy, their strength and weakness?

Useful information for competitor

analysis

Estimated financial goals

Trade-offs in long term and short term objectives

Their attitudes & risks

Cultural belief

Structure

Incentive systems

Communication within the organization

The above information is needed to identify the competitor vulnerability

and to give a good fight

Competitive advantage

When a firm sustains profits that exceed the average for its industry, the firm is said to
possess a competitive advantage over its rivals

Michael Porter identified two basic types of competitive advantage:

A competitive advantage exists when the firm is able to deliver the same benefits as
competitors but at a lower cost (cost advantage)

deliver benefits that exceed those of competing products (differentiation advantage)

Segment focused cost or differentiation

Focus on segments
Eg: Hublot

Achieving cost leadership

Using latest technologies to cut cost

Improving productivity (training staff to be efficient)

Minimize overhead costs

Get access to supplies at low costs

Relocate to cheaper areas (China, India)

Achieving
differentiation

Breakthrough products

Improved Products

Competitive products

Any ???