2. 2
Study Question 1: What are the foundations of
strategic competitiveness?
Basic concepts of strategy (cont.):
– Strategy — a comprehensive action plan that
identifies long-term direction for an
organization and guides resource utilization to
accomplish organizational goals with
sustainable competitive advantage.
– Strategic intent — focusing all organizational
energies on a unifying and compelling goal.
3. 3
Study Question 1: What are the foundations of
strategic competitiveness?
Basic concepts of strategy (cont.):
– Strategic management — the process of
formulating and implementing strategies to
accomplish long-term goals and sustain
competitive advantage.
4. 4
Study Question 1: What are the foundations of
strategic competitiveness?
Goal of strategic management is to create
above-average returns for investors.
– Returns exceeding those for alternative
opportunities at equivalent risk.
– Earning above-average returns depends in part
on the organization’s competitive environment.
5. 5
Study Question 2: What is the strategic
management process?
Strategy formulation
– The process of creating strategy.
– Involves assessing existing strategies,
organization, and environment to develop new
strategies and strategic plans capable of
delivering future competitive advantage.
6. 6
Figure 9.1 Strategy formulation and
implementation in the strategic management
process.
8. 8
Study Question 4: How are strategies
formulated?
Porter’s generic strategies for gaining
competitive advantage:
– Differentiation strategy
– Cost leadership strategy
– Focused differentiation strategy
– Focused cost leadership strategy
9. Cost leadership strategy
Business success built on cost leadership
requires the business to be able to provide
its product or service at a cost below what
its competitors can achieve
9
11. Sustainable Low-Cost Activities
1. Some low-cost advantages reduce the
likelihood of buyers’ pricing pressure
2. Truly sustained low-cost advantages may
push rivals into other areas
3. New entrants competing on price must face an
entrenched cost leader
4. Low-cost advantages should lessen the
attractiveness of substitute products
5. Higher margins allow low-cost producers to
withstand supplier cost increases
11
12. Risks of a Cost Leadership
Strategy
1. Many cost-saving activities are easily
duplicated
2. Exclusive cost leadership can be a trap
3. Obsessive cost cutting can shrink other
competitive advantages
4. Cost differences often decline over time
12
14. Evaluating Speed as a
Competitive Advantage
Speed-based strategies, or rapid response
to customer requests or market and
technological changes, have become a
major source of competitive advantage for
numerous firms in today’s intensely
competitive global economy
14
16. Speed can be created by:
Customer responsiveness
Product development cycles
Product or service improvements
Speed in delivery or distribution
Information Sharing and Technology
16
17. Risks of Speed-based Strategy
Speeding up activities that haven’t been
conducted in a fashion that prioritizes
rapid response should only be done after
considerable attention to training,
reorganization, and/or reengineering
Some industries may not offer much
advantage to the firm that introduces some
forms of rapid response
17
18. Risks of Speed-based Strategy
Customers in such settings may prefer the
slower pace or the lower costs currently
available, or they may have long time
frames in purchasing
18
19. Emerging Industries
Emerging industries are newly formed or
re-formed industries that typically are
created by technological innovation,
newly emerging customer needs, or other
economic or sociological changes
19
20. Business Strategies in Emerging
Industries
Technologies that are most proprietary to
the pioneering firms and technological
uncertainty will unfold
Competitor uncertainty because of
inadequate information about competitors,
buyers, and the timing of demand
High initial costs but steep cost declines
20
21. Business Strategies in Emerging
Industries
First-time buyers requiring initial
inducement to purchase
Inability to obtain raw materials and
components until suppliers gear up to
meet the industry’s needs
Need for high-risk capital because of the
industry’s uncertain prospects
21
22. The Portfolio Approach
The portfolio approach is a historical
starting point for strategic analysis and
choice in multibusiness firms
Boston Consulting Group (BCG)
pioneered an approach called portfolio
techniques that attempted to help
managers
22
23. The Portfolio Approach
“balance” the flow of cash
resources among their various
businesses while identifying their
basic strategic purpose within the overall
portfolio
23
24. 24
Study Question 4: How are strategies
formulated?
Portfolio planning approach
– Designed to help managers decide on investing
scarce organizational resources among
competing business opportunities.
– Useful for multibusiness or multiproduct
situations.
25. 25
Study Question 4: How are strategies
formulated?
BCG matrix
– Ties strategy formulation to analysis of
business opportunities according to …
• Industry or market growth rate
– Low versus high
• Market share
– Low versus high
26. 26
Figure 9.7 The BCG matrix approach to
corporate strategy formulation.
27. 27
Study Question 4: How are strategies
formulated?
BCG matrix — business conditions and
related strategies:
– Stars
• High share/high growth businesses.
• Preferred strategy — growth.
– Cash cows
• High share/low growth businesses.
• Preferred strategy — stability or modest growth.
28. 28
Study Question 4: How are strategies
formulated?
BCG matrix—business conditions and
related strategies (cont.):
– Question marks
• Low share/high growth businesses.
• Preferred strategy — growth for promising question
marks and restructuring or divestiture for others.
– Dogs
• Low share/low growth businesses.
• Preferred strategy — retrenchment by divestiture.
29. 29
Study Question 4: How are strategies
formulated?
Types of adaptive strategies:
– Prospector strategy
• Pursuing innovation and new opportunities in the face of risk
and with prospects for growth.
– Defender strategy
• Protecting current market share by emphasizing existing
products and current share without seeking growth.
– Analyzer strategy
• Maintaining stability of a core business while exploring
selective opportunities for innovation and change.
– Reactor strategy
• Merely responding to competitive pressure in order to survive.
