Strategy Formulation Situation Analysis and Business Strategy

The supervisor Dr.Radwan ALkharabsheh

By: Samya Mahmood Alghazo

26/oct/2014

The strategic planning or long range planning, is concerned with developing a corporation mission, objective, strategies, and policies.

Is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats, that are a strategic factors for a specific company.

Strategy formulation:

SWOT analysis:

TOWSMatrix:

Which is another way of saying SWOT, illustrates how the external Opportunities and Threats, can be matched with the company’s internal Strengths and Weaknesses.

•Definitions

•TOWS analysis

WO Strategies attempt to take advantage of Opportunities by overcoming weaknesses.

SO Strategies are generated when the company uses its strengths to take advantage of opportunities.

WT Strategies are basically defensive and act to minimize Weaknesses and avoid Threats.

ST Strategies are when the company’s or unit’s uses Strengths as a way to avoid threats.

1. Strong research and development.

2. Creative and known for its innovation,durability and reliability.

3. Is the globe’s biggest producer of mobile phones.

4. the biggest network of distribution .

1. In 2010 profits had dropped by 40%.

2. Weak presence in USA’ and Japan’s cellular market.

3. Higher prices as compared to China mobiles.

INTERNAL WEAKNESSES

• SWOT analysis for Nokia corporationAs an

example from

www.mba-lectures.comINTERNAL

STRENGTHS

1. Nokia has 50-50 joint venture with Siemens in Germany.

2. Has enormous demand potential in new developing markets like India and China.

3. In 2010 the global growth was 14.6.

1. Strong price pressure.2. Loosing after the arrival

of several Chinese manufacturers .

3. In the Asia/Pacific The five competitive forces are emerged.

4. Difficult to differentiate products.

• SWOT analysis for Nokia corporation

EXTERNAL OPPORTUNITIES

EXTERNAL THREATS

• Increase presence in Germany by offering innovative and reliable products/(o1,s1,s2,s3).

• increase presence in Asia Pacific by being customer driven/ (o2,o3,s1,s2,s3,

s4).

• Increase profit by penetrating in different markets by offering customer driven product/

(w1,o1,o3).• Focus on USA market s with

joint venture and new products/( w2,o3).• Improve position in Japanwith partnership/(w1,o2,o3)

• TOWS analysis for Nokia corporation

SO STRATEGIES WO STRATEGIES

• Make low overall cost/(t1,s1,s2,s3,s4).• Focus on customer-oriented

products/(t2,s1,s2,s3).• Offering cost-efficient

products and brand image/ (t3,t4,s1,s2,s3,s4)

• Offering customer specific products and giving periodical discounts/(t1, t3,t4,w1,w2,w3).

• Use brand image/(t2,w2).

• TOWS analysis for Nokia corporation

ST STRATEGIES WT STRATEGIES

1. It generates lengthy lists.2. It uses no weights to reflect

priorities.3. It uses ambiguous words and

phrases.4. The same factor can be

used in two categories.5. There is no obligation to

verify opinions with data or analysis.

6. It requires only a single level of analysis.

7. There is no logical link to strategy implementation.

•Primary criticisms of SWOT analysis

• Reexamination of an organization’s mission and objectives must be made before alternative strategies can be generated and evaluated

• When there is a gap between planned and achieved objectives; the strategies have to be changed to improve performance, or objectives need to be adjusted to be more realistic.

• Finding a propitious niche (which is a need in the market place that is currently unsatisfied) by the Strategic Window which is a unique market opportunity that is available only for a particular time.

• Business strategy focuses on improving the competitive position of a company’s products or services within a specific industry or market segment.

• Competitive strategies: battling against all competitors for advantage.

• Lower cost :is the ability to design, produce, and market the product more efficiently than its competitors.

• Differentiation: is the ability to provide unique and superior value to the buyers in terms of product quality, special features, or after sale service.

• Cooperative strategies:

Is used to gain competitive advantage within an industry by working with other firms.

•Business strategies

Competitive strategies

Industry structure and competitive strategy

•Fragmented industry where many small and medium sized local companies compete for relatively small shares of the total market ,Focus strategies will likely predominate. Ex: Indian Sugar Industry.

•Consolidated industry dominated by a few large companies with large market share and has the ability to achieve cost leadership or differentiation.

Competitive tactics

A tactic is a specific operating plan that details how a strategy is to be implemented in terms of when and where it is to be put into action.

By there nature Tactics are narrower in scope and shorter in time horizon than are strategies.

Competitive Tactics

• Market location tactics :

2.Defensive tactic usually takes place in the firm’s own current market position .

Where to compete and where the company implements a strategy.

1.Offensive tactics usually takes place in an established competitor’s market location

• Frontal assault: the attacking firm goes head to head with its competitor ,it matches the competitor in every category, from price to promotion to distribution channels.

• Flanking maneuver: rather than going head to head, a firm may attack a part of the market where the competitor is weak.

• Bypass attack: change the rule of the game, by offering a new type of product that makes the competitor’s unnecessary.

• Encirclement: the firm has a greater product variety and/or serves more markets.

• Guerrilla warfare: a new entrant or small firm can make some gains without seriously threatening a large established competitor and evoking some form of retaliation.

Offensive tactics

Raise structural barriers:• Offer a full line of products in every profitable market segment to

close off any entry (ex:CocaCola).• Block channel access by signing exclusive agreements with

distributors.

• Raise buyer switching costs by offering low-cost training to users.

• Raise the cost of gaining trial users by keeping prices low on items new users are most likely to purchase.

• Increase scale economies to reduce unit costs.

• Foreclose alternative technologies through patenting or licensing.

Defensive tactics

• Limit outside access to facilities and personnel;• Tie up suppliers by obtaining exclusive contracts or purchasing key

locations.• Avoid suppliers that also serve competitors.• Encourage the government to raise barriers, such as safety and

pollution standards or favorable trade policies.

Increase expected retaliation:this tactic is any action that increase the perceived threat of retaliation for an attack.

Lower the inducement for attack:Reduce a challenger's expectations of future profits in the industry.

Defensive tactics

Establish a reputation as an industry leader

Move down the learning curve to Assume the cost leader position

Earn temporarily high profits from buyer who value the product or service very highly.

A successful first mover can also set the standard for all subsequent products in the industry.

First mover or pioneer:

is the first company to manufacture and sell a new product or service .

The advantages:

•Competitive advantageTiming tactics : deals with when to compete and when a company implements a strategy.

Keep risks down by waiting until a new market is established.

Take advantage of the first mover’s natural inclination to ignore market segments.

Imitate the technological advances of others .

Successful late movers tend to be large firms with considerable resources and related experiences.

Late mover :

The advantages:

•Competitive advantageTiming tactics : deals with when to compete and when a company implements a strategy.

•Cooperative strategies

collusion

• Is the active cooperation of firms within the industry to reduce output and raise prices to get around the normal economic low of supply and demand .

Strategicalliances

• Is a partnership of two or more corporations or business units to achieve strategically significant objectives .

Mutual service consortia

• Is a partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone.

Jointventures

• Formed by two or more separate organizations to create an independent business entity and allocate ownership, financial risks and rewards to each member.

•Cooperative strategies

Licensing arrangements

• Is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and sell a product.

Value chain partnership

• Is a strong and close alliances in which one company or unit forms a long term arrangement with a key supplier or distributor for mutual advantage.

3.To reduce financial risks.

Number of reasons to form Strategic Alliances

1.To obtain technology and/or manufacturing capabilities.

2.To obtain access to specific markets.

4.To reduce political risks.

5.To learn new capabilities.

Thank youthe reference :Strategic management and Business Policy, 11th

Ed. Wheelen, Th. L. and Hunger,