7/27/2019 CHAPTER 5 STRATEGY.pdf

1/14

CHAPTER 5: STRATEGY

7/27/2019 CHAPTER 5 STRATEGY.pdf

2/14

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.

7/27/2019 CHAPTER 5 STRATEGY.pdf

3/14

FORMULATING STRATEGYA plan that indicates in which industries

and national markets an organization

intends to compete.

CORPORATE-

LEVEL STRATEGY

BUSINESS- LEVEL

STRATEGY

FUNCTIONAL-

LEVEL STRATEGY

A plan that indicates how a division

intends to compete against its rivals in

an industry.

7/27/2019 CHAPTER 5 STRATEGY.pdf

4/14

FORMULATING CORPORATE- LEVELSTRATEGIES

CONCENTRATION IN SINGLE BUSINESS

- Can become a strong competitor but can be risky

- Develop new kinds of products or expand its location

- Logical strategyif downsizing organization to increase

performance

- Eg: Mc Donald- focuses in fast food business

7/27/2019 CHAPTER 5 STRATEGY.pdf

5/14

FORMULATING CORPORATE- LEVELSTRATEGIES

VERTICAL INTEGRATION Backward vertical integration: the firm produces its own inputs. Forward vertical integration: the firm distributes its outputs or

products.

Intermediate

Manufacturing

RawMaterials

Assembly

DistributionCustomer

Backward Forward

7/27/2019 CHAPTER 5 STRATEGY.pdf

6/14

FORMULATING CORPORATE- LEVELSTRATEGIES

DIVERSIFICATION

-Organization moves into new businesses and services.

Related diversification: firm diversifies in similar areas to build uponexisting 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 aportfolio of unrelated firms to reduce risk or trouble in one industry.

Very hard to manage.

Eg: Sime Darby Berhad

7/27/2019 CHAPTER 5 STRATEGY.pdf

7/14

FORMULATING CORPORATE- LEVELSTRATEGIES

INTERNATIONAL EXPANSION- Global StrategySelling the same standard product andusing the same basic marketing approachin 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

7/27/2019 CHAPTER 5 STRATEGY.pdf

8/14

FORMULATING BUSINESS- LEVELSTRATEGIES

THE FIVE FORCES

Bargaining

Power of

Suppliers

Bargaining

Power of

Buyers

Threat of

Substitutes

Threats of

New Entrants

7/27/2019 CHAPTER 5 STRATEGY.pdf

9/14

FORMULATING BUSINESS- LEVELSTRATEGIES

Low-Cost Differentiation

Focused

Low-Cost

Focused

Differentiated

Strategy

Many

Few

Low Cost Differentiation

N

umberof

mark

etsegme

nts

POSITIONING STRATEGY

7/27/2019 CHAPTER 5 STRATEGY.pdf

10/14

FORMULATING BUSINESS- LEVELSTRATEGIES

Low-cost: Driving the organizations total costs down below thetotal 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 yourproducts 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 becomedifferentiated and low cost.

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

7/27/2019 CHAPTER 5 STRATEGY.pdf

11/14

FORMULATING BUSINESS- LEVELSTRATEGIES

Firms also choose to serve the entire market or focus ona 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.

7/27/2019 CHAPTER 5 STRATEGY.pdf

12/14

7/27/2019 CHAPTER 5 STRATEGY.pdf

13/14

A plan that indicates how an organizational function intends toachieve 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.

FORMULATING FUNCTIONAL- LEVELSTRATEGIES

7/27/2019 CHAPTER 5 STRATEGY.pdf

14/14

THANK YOU