STRATEGIC

MANAGEMENT
PRINCIPAL DR THANT PYAE TUN
4.1 Use modelling tools to develop strategy
options for an organisation
 Generating and Evaluating Strategic
Options

Source: Johnson, et al (2008)

Porter’s Generic Strategies
Cost leadership
◦ Cost leadership strategy aims to reduce the firm’s costs at all
stages of the value chain. This will allow it to earn a higher
return on investment.
◦ The following tools can be used for cost-leadership:
◦ Obtain economies of scale in production and operations
◦ Use technology to leverage productivity or reduce costs
◦ Exploit the learning curve effect to achieve lower average
costs
◦ Concentrate on improving productivity of employees
◦ Minimize overhead costs
◦ Get favourable access to sources of supply
◦ Relocation to cheaper places
 Differentiation
◦ A differentiation strategy is based on equipping a product or service with
some perceived or tangible unique attribute that cannot be easily
replicated by competitors.
◦ Differentiation can be achieved through products:
◦ Breakthrough products
◦ Improved products
◦ Competitive products
◦ High quality can differentiate a smaller supplier from a volume-driven
supplier.
◦ Differentiation strategy must be applied consistently at all stages of the
value chain.
◦ Cost of differentiation must be lower than the premium buyers are
prepared to pay for the differentiated product.
Focus
◦ The objective of a focus strategy is to gain competitive advantage
by building on advantages of segment-specific specialisation, such
as a better understanding of the requirements of buyers in that
segment and the ability to respond to particularities of buyers. It is
also referred to as a niche strategy. (EIU, 2019)
◦ Cost-focus strategy aims to become the cost leader for the
particular segment. (e.g. printing, clothes manufacturing, car
repair)
◦ Differentiation-focus strategy aims to pursue differentiation for the
chosen segment. (e.g. luxury goods)
◦ Major threat is that bigger competitors with increased resources
may move in to the segment.
Strategies and required skills and resources
Ansoff Strategy Matrix
Ansoff Strategy Matrix
• sell more of the same to the same
Market penetration market

• seek out new markets for existing

Market development products

• sell new products to existing customers

Product development

• sell new products to new groups of

Diversification customers
 Market Penetration
◦ In market penetration strategy, the organization tries to increase
market share within existing segments by selling more
products/services to established customers or finding new
customers within existing markets. (EIU, 2019)
◦ This strategy is particularly relevant in industries with high fixed
costs and low marginal costs, such as hotels, railways and
utilities.
 Market Penetration (Cont’d)
◦ This can be achieved through:
◦ Price reduction
◦ Increase in promotion efforts
◦ Acquisition of a rival in the same market
◦ Product refinements or adjustments
◦ Encouraging increased use of products/services
(e.g. toothpaste)
◦ Increased rate of product innovation (e.g. mobile phones)
◦ Exploring other uses of existing products and introducing them
to customers