UNIVERSITY OF BATTAMBANG

Course:

STRATEGIC
MANAGEMENT

BY: Pin Chamnan

Tel: 098 664 456
 TEXT BOOK USED

David, Fred. Strategic Management: Concepts & Cases, 10th ed.

New Jersey: Prentice Hall, 2005
2
 Other books used
• Hunger, D; Wheelen, T. Strategic Management & Business Policy 7th
ed. New Jersey: Prentice Hall, 1999.
• John A. Pearce, Richard B. Robinson, Strategic Management:
Formulation, Implementation, and Control, International ed, North
America, McGraw-Hill, 2003.
• Strickland, A; Thompson, A. Strategic Management: Concept and
Cases 13th ed. International edition, Irwin McGraw-Hill, 2003.
• Gess, G; Lumpkin, G; Taylor, M. Strategic Management: Text &
Cases, International edition, North America, McGraw-Hill, 2004.

3
CHAPTER 1:

The Nature of
Strategic Management

March 23, 2024 4

 As this definition implies, strategic
management focus on integrating:

• Management
• Marketing
• Finance / Accounting • To achieve
• Production / Operation organizational
• Research and development success
• Computer information systems

March 23, 2024 5

 The term Strategic Management is used to
synonymously with the term Strategic
Planning.

 The purpose of Strategic Management is to

exploit and create new and different
opportunities for tomorrow, long-rang
planning, in contrast, tries to optimize for
tomorrow the trends of today.

March 23, 2024 6

Stages of Strategic Management

• The Strategic Management Process

consists of three stages:
 Strategy formulation
 Strategy implementation
 Strategy evaluation

March 23, 2024 7

1-Strategy formulation
 Strategy formulation includes:

– Developing a Vision, and Mission

statements.
– Identifying an organization’s external
opportunities and threats.
– Determining internal strengths and
weaknesses.
– Establishing long-term objectives.
– Generating alternative strategies.
– Choosing particular strategies to pursue.

March 23, 2024 8

 Strategy formulation issues includes
deciding:

 What new businesses to enter?

 What businesses to abandon?
 How to allocated resources?
 Whether to expand operations or diversify?
 Whether to enter international markets?
 Whether to merger or form a joint venture?

March 23, 2024 9

2-Strategy implementation
 Strategy implementation means mobilizing
employees and managers to put formulated
strategies into action.
 Strategy implementation requires a firm to:

• Establish annual objectives

• Devise policies So that formulated
• Motivate employees strategies can be
• Allocate resources executed.

March 23, 2024 10

 Strategy implementation includes:
• Developing a strategy-supportive culture.
• Creating an effective organizational structure
• Redirecting marketing efforts
• Preparing budgets
• Developing and utilizing information systems
• Linking employee compensation to organizational
performance

 Strategy implementation often is called Action

stage of strategic management.
 Successful strategy implementation hinges upon
manager’s ability to motivate employees.

March 23, 2024 11

3-Strategy evaluation
 Strategy evaluation is the final stage of
strategic management.
 Managers desperately need to know when
particular strategies are not working well.
 Strategy evaluation is the primary means for
obtaining this information.
 All strategies are subject to future
modification because external and internal
factors are constantly changing.

March 23, 2024 12

 There are 3 fundamental strategy evaluation
activities:
1- Reviewing external and internal factors that are
the bases for current strategies.
2- Measuring performance.
3- Taking corrective actions.

 Strategy evaluation is needed because

success today is no guarantee of success
tomorrow.

March 23, 2024 13

Who Formulate Strategy?
1-Strategists:
 Strategists are individuals who are most
responsible for the success or failure of an
organization.

 Strategists have various job titles:

– Chief executive officer, president, owner, chair of
the board, chancellor, executive director, dean or
entrepreneur.

March 23, 2024 14

 Strategists help an organization gather,
analysis, and organize information.

– Trucking industry and competitive trends.

– Develop forecasting models and scenario analysis.
– Evaluate corporate and division performance.
– Spot emerging market opportunities.
– Identify business threats
– Develop creation plans.

March 23, 2024 15

2-Board of Directors
 The Board represents the interests of the
stockholders (owners) of the company.

– Board members are elected by the Shareholders.

– Committees: Audit, Compensation, Nominating, etc.
– Chairman of the Board: Schedules Board Meetings
and presides over the annual shareholders meeting.
– In many U.S. Corporations, the CEO is also the
Chairman of the Board.

March 23, 2024 16

2-1-Board of Directors: IBM (1998)
1- Cathleen Black – President, Hearst Magazines
2- Kenneth Chenault – President & COO, American Express
Company
3- Juergen Dormann – Chairman of Management Board,
Hoechst AG
4- Louis Gerstner, Jr. – Chairman of the Board and CEO, IBM
5- Nannerl Keohane – President, Duke University
6- Charles Knight – Chairman and CEO, Emerson Electric Co.
7- Minoru Makihara – Chairman, Mitsubishi Corporation
8- Lucio Noto – Chairman and CEO, Mobil Corporation
9- John Slaughter – President, Occidental College
10- Alex Trotman – Retired Chairman and CEO, Ford Motor
Company
11- Lodewijk van Wachem – Chairman, Royal Dutch Petroleum
12- Charles Vest – President, Massachusetts Institute of
Technology

March 23, 2024 17

 2-2-Role of Board of Directors
 The role of the Board is to review and approve
the strategic plan prepared by the CEO and
other senior managers.
 Traditionally, Boards of Directors have not
been directly involved in the strategic
management process, though this is changing
as Boards are now taking a much more active
role with regards to strategic management..

March 23, 2024 18

Benefits of Strategic Management
 Strategic management allows an organization
to be more proactive than reactive in shaping
it own future..
 Historically, the principle benefit of strategic
management has been to help organizations
formulate better strategies.
 Research studies now indicate that the
process, rather than the decision or document
is the more important contribution of
strategic management.

March 23, 2024 19

 Financial benefit
– Organizations using strategic management
concept are more profitable and successful
than those do not.

 Non-financial benefit
– Enhanced awareness of external threats,
– Improved understanding of competitors’ strategies,
– Increased employee productivity,
– Reduced resistance to change,
– Clearer understanding of performance-reward
relationships.

March 23, 2024 20

Pitfalls in Strategic Planning

 Some pitfalls to watch for and avoid in

strategic planning are provided below:
– Using strategic planning to gain control over
decisions and resources.
– Doing strategic planning only to satisfy
accreditation or regulatory requirements.
– Too hastily moving from mission development to
strategy formulation.

March 23, 2024 21

 Failing to communicate the plan to employee, who
continue working in the dark.
 Top managers making many intuitive decisions that
conflict with the formal plan.
 Top managers not actively supporting the strategic
planning process.
 Failing to use plans a standard for measuring
performance.
 Delegating planning to a “planner” rather than involving
all managers.

March 23, 2024 22

 Failing to involve key employees in all phases of
planning.
 Failing to create a collaborative climate supportive of
change. r.
 Viewing planning to be unnecessary or unimportant.
 Becoming so engrossed in current problems that
insufficient or no planning is done.
 Being so formal in planning that flexibility and
creativity are stifled.

March 23, 2024 23

Strategic Management
CHAPTER 2

The Business
Vision & Mission

March 23, 2024 24

 Vision statement

Agreement on the basic vision for which the firm

strives to achieve in the long run is critically
important to the firm’s success.

“What do we want to
become?”

25
Vision & Mission

Clear Business
Vision

Comprehensive
Mission Statement

26
Vision & Mission
Many organizations develop both vision &
mission statements.

Vision statement--
• Should be established first and foremost
• Short – preferably one sentence
• Broad management involvement

27
Vision Statement Example
ក្រុមហ ៊ុនៈ​កូ កា កូ ឡា

ក្លាយជាក្រុមហ៊ុនដែលក្លរលរ់ នង ិ ម៉ា
ឃទ ិ ង
ី លអជាងគេ បងអស់ជាមួយនង ឹ
សមត្ថភាពក្បគសើរបំផ៊ុត្ គែម
ើ បប
ី គងកត្
ើ
នូវត្ម្មាជាអត្ិបរម
ិ ែល់អនរពារ់ពន ័ ធ
នានា។
28
Vision Statement Examples

The Bellevue Hospital: “Is the LEADER in

providing resources necessary to realize the
community’s highest level of HEALTH
throughout life”.

-- U.S POULTRY & EGG Association

29
Mission statement

-- 90% of all companies have used a mission

statement in the previous five years.

“What is our business?”

•Enduring statement of purpose

•Distinguishes one firm from another
•Declares the firm’s reason for being

30
Mission Statements

Also referred to as:

•Creed statement
•Statement of purpose
•Statement of philosophy
•Statement of business principles

31
Mission Statements

Reveal what an organization wants to be

and whom it wants to serve

Essential for effectively establishing

objectives and formulating
strategies.

32
Vision & Mission

Profit & vision are necessary to effectively

motivate a workforce

Shared Vision --
– Creates commonality of interests
– Reduce daily monotony
– Provides opportunity & challenge

33
Developing Vision & Mission

Clear mission is needed before alternative

strategies can be formulated and
implemented

Participation from diverse

managers is important in
developing the mission.

34
Developing Vision & Mission
Approach to developing --
– Select several articles about vision or
mission
– Read as background information
– Ask to prepare a draft statement
– A facilitator merge into document
– Request for modifications, Additions, and
deletions
– Revise the document
• Reach final agreement by consensus on
vision or mission of the company.

35
 Mission Statement Examples
Microsoft: “Since its inception in 1975, Microsoft’s
mission has been to create software for the
personal computer that empowers and enriches
people in the workplace, at school and at home.”

Coca-Cola: “As the world’s largest beverage

company, we refresh the world. We do this by
developing superior soft drinks, both carbonated
and non-carbonated, and profitable non-alcoholic
beverage systems that create value for our
company, our bottling partners and our
customers.”
36
Summary Values, Vision, Mission
 The reason for preparing Values, Vision and
Mission statements is to provide a sense of
purpose and direction for the organization
which is much greater than simply making a
profit.
 Once completed, these statements should be
shared with the company’s management,
employees and primary customers.
 These statements should also serve to both
motivate and guide the actions of the
company’s managers and employees.

37
Goals and Objectives
 Goals and objectives are statements focusing
on “what” the company or organization wants
to do, accomplish or achieve.

 Strategies are the methods or actions

necessary to achieve or accomplish goals and
objectives.

• Goals and objectives can have:

 Short-term range (1 year or less);
 Intermediate term range (1 to 2 years);
 Long-term range (2 to 5 years or more);
– Strategic goals/objectives have a long
term range.
38
Goals & Objectives
 It is important to note that for some people,
goals and objectives are slightly different.
– Some people define “goals” as being general
statements (usually long-term) of what a
company wants to do or accomplish, while
defining “objectives” as specific statements
(usually short-term).
 We can therefore use the terms strategic goals
or strategic objectives in an equivalent or
interchangeable manner.

39
Goals/Objectives should be SMART

 Specific
 Measurable
 Attainable
 Results-Oriented
 Time-Limited

40
Strategic Management
CHAPTER 3

The External
Assessment
March 23, 2024 41
The External Assessment
Prediction is very difficult,
especially about the
future.

-- Neils Bohr “Quote”

March 23, 2024 42

The External Assessment
 To be successful over time, an organization
needs to be in tune with its external
environment.
 There must be a strategic fit between
environment and the corporation.

 Environment uncertainty is a threat to

strategic managers to develop long-plans
and make strategic decisions to keep the
corporation in equilibrium with its external
environment.

March 23, 2024 44

External Strategic
Management Audit
– Identification and evaluation of trends
and events beyond control of single
firm
• Increased foreign competition
• Populations shifts
• Aging society
• Information technology
• Computer revolution

March 23, 2024 45

Nature of External Audit
Purpose:
– Development of Finite List:
• Opportunities
• Threats to be avoided

– Prior to the developing its strategy, a company

must perform a survey or audit of its External
environment in order to identify potential external
opportunities and threats to the company.

March 23, 2024 46

Key External Factors
Five (5) broad categories:
1. Economic forces
2. Social, cultural, demographic forces
3. Political, governmental, and legal
forces
4. Technological factors
5. Competitive forces

March 23, 2024 47

3.3 Scanning the External Environment (Fig. 3.1)

Scanning the External Environment

Analysis of Societal Environment
Economic, Sociocultural, Technological, Political-Legal Factors

Market
Analysis

Community Competitor
Analysis Analysis

Supplier
Analysis
Selection of
Interest Group Strategic Factors Governmental
Analysis Analysis
• Opportunities
• Threats

Prentice Hall, 2000 Chapter 3 59

March 23, 2024 48
 Relationships Between Key External
Forces and an Organization
Competitors
Suppliers
Distributors
Creditors
Key
External
Customers Opportunities
Employees
Forces
Communities
&
Managers Threats
Stockholders
Labor Unions
Special Interest Groups
Products
Services

March
Source: Fred 23, 2024
David, 2001. 49
Analyzing the External
Environment
 For purposes of gathering information
regarding the external environment, in
addition to conducting primary research
(surveys) and reading business and
trade journals.

 Quantitative and Qualitative forecasting

methods can also be used to help
predict future opportunities and threats.

March 23, 2024 50

Analyzing the External
Environment
Sources of information include:
– Internet
– Libraries (corporate, university, public)
– Suppliers
– Distributors
– Customers
– Competition

March 23, 2024 51

Strategic Management
CHAPTER: 4

Internal Assessment

(Note: Most of the slides for Lesson 3 are from: Anthony F.

Chelte / Fred David, Prentice Hall 2001)

March 23, 2024 52

Internal Factors
 Internal Factors are forces located inside
of the company which have an impact upon
the overall performance of the organization.
 Examples include: human resources,
products & services, finance, technology,
organizational culture, etc.
 Prior to developing its strategy, a company
must perform a survey or audit of its internal
environment in order to identify existing
strengths and weaknesses inside the
company.
March 23, 2024 53
 Strengths and Weaknesses
 Strength: Refers to a resource (e.g. asset,
competency, process, skill, knowledge) of a
company which provides the company with a
competitive advantage relative to its
competitors.

 Weakness: “A resource is a weakness if it is

something the corporation does poorly or
doesn’t have the capacity to do…” relative to
its competitors (Wheelen, p. 82)

March 23, 2024 54

 Internal Assessment (Cont’d)

Production/Operations
Design of facility

Choice of technology

Facility layout
Process
Process flow analysis

Facility location

Process control

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 55
 Internal Assessment (Cont’d)

Production/Operations
Forecasting

Facilities planning

Capacity Aggregate planning

Scheduling

Capacity planning

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 56
 Internal Assessment (Cont’d)

Production/Operations

Raw material

Work in process
Inventory
Finished goods

Materials handling

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 57
 Internal Assessment (Cont’d)

Production/Operations

Job design

Work measurement
Workforce
Work standards

Motivation techniques

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 58
 Internal Assessment (Cont’d)

Production/Operations

Quality control

Sampling

Quality Testing

Quality assurance

Cost control

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 59
Internal Assessment (Cont’d)
Production/Operations Audit Checklist

 Are suppliers of raw materials, parts, and

subassemblies reliable and reasonable?
 Are facilities, equipment, machinery, and
offices in good condition?
 Are inventory-control policies and
procedures effective?

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 60
 Strategic
Management
CHAPTER 5:

Strategies in Action

March 23, 2024 61

 Intensive Strategies

Intensive strategies require intensive efforts to improve a

firm’s competitive position with existing products.

Intensive Strategies:
• Market penetration
• Market development
• Product development

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 62
 Intensive Strategies
Market
Penetration
Example

Defined • Ameritrade, the on-

Seeking increased line broker, tripled its
market share for annual advertising
present products expenditures to $200
or services in million to convince
present markets people they can make
through greater their own investment
marketing efforts decisions.

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 63
 Intensive Strategies
Guidelines for Market Penetration –
 Current markets not saturated.
 Usage rate of present customers can be
increased significantly.
 Market shares of competitors declining while
total industry sales increasing.
 Increased economies of scale provide major
competitive advantages.

March 23, 2024 64

 Intensive Strategies
Market
Development
Example

• Britain’s leading
Defined supplier of buses,
Henlys PLC, acquires
• Introducing
Blue Bird Corp. North
present products
America’s leading
or services into
school bus maker.
new geographic
area

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 65
 Intensive Strategies
Guidelines for Market Development –
 New channels of distribution that are reliable,
inexpensive, and good quality.
 Firm is very successful at what it does.
 Untapped or unsaturated markets.
 Capital and human resources necessary to
manage expanded operations.
 Excess production capacity.
 Basic industry rapidly becoming global.

March 23, 2024 66

 Intensive Strategies
Product
Development

Defined Example

• Seeking increased • Apple developed the

sales by improving G4 chip that runs at
present products 500 megahertz.
or services or
developing new
ones

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 67
 Intensive Strategies
Guidelines for Product Development –
 Products in maturity stage of life cycle.
 Competes in industry characterized by rapid
technological developments.
 Major competitors offer better-quality
products at comparable prices.
 Compete in high-growth industry.
 Strong research and development
capabilities.

March 23, 2024 68

Diversification Strategies

Concentric
Diversification

Conglomerate
Diversification
Strategies Diversification

Horizontal
Diversification

March 23, 2024 69

 Diversification Strategies
Diversification strategies –
– Diversification occurs when a company
expands outward from its core business.

– Diversification strategies are becoming less

popular as organizations are finding it more
difficult to manage diverse business
activities.

March 23, 2024 70

 Diversification Strategies
Concetric
Diversification

Example

• BB.SMilEON (Qualifed
Defined pure water) opening
the Global Water shop
 Adding new, but to sale the bottle,
related, products or
services.
filters, cap, seal, and
plastic.

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 71
 Diversification Strategies
Guidelines for Concentric Diversification –
 Competes in no- or slow-growth industry.
 Adding new & related products would
increases sales of current products.
 New & related products offered at
competitive prices.
 Current products are in decline stage of the
product life cycle.
 Strong management team.

March 23, 2024 72

 Diversification Strategies
Conglomorate
Diversification

Defined
Example

 Adding new, but

unrelated, products or
services.

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 73
 Diversification Strategies
Guidelines for Conglomerate Diversification
 Declining annual sales and profits
 Capital and managerial talent to compete
successfully in a new industry
 Exiting markets for present products are
saturated

March 23, 2024 74

 Diversification Strategies
Horizontal
Diversification

Example
Defined • The New York Yankees
baseball team are
• Adding new,
merging with the New
unrelated products
Jersey Nets basketball
or services for
team.
present customers

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 75
 Diversification Strategies
Guidelines for Horizontal Diversification –
 Revenues from current products/services
would increase significantly by adding the
new unrelated products
 Highly competitive and/or no-growth
industry, as low profit margins and returns.
 Present distribution channels can be used to
market new products to current customers

March 23, 2024 76

 Integration Strategies

Vertical Integration Strategies allow a

firm to gain control over:

• Suppliers
• Distributeors
• Competitors

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 77
 Defensive Strategies

Defensive Strategies

• Retrenchment
• Divestiture
• Liquidation

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 78
 Defensive Strategies

Retrenchment

Defined Example

• Regrouping • Singer, the sewing

through cost and machine company,
asset reduction to declared bankruptcy.
reverse declining
sales and profit

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 79
 Defensive Strategies
Guidelines for Retrenchment –

 Firm has failed to meet its objectives and

goals consistently over time but has
distinctive competencies.
 Firm is one of the weaker competitors.
 Inefficiency, low profitability, poor employee
morale, and pressure from stockholders to
improve performance.
 When an organization’s strategic managers
have failed.
 Very quick growth to large organization
where a major internal reorganization is
needed.

March 23, 2024 80

 Defensive Strategies

Divestiture

Example
Defined
• Harcourt General, the
• Selling a division large US publisher, is
or part of an selling its Neiman
organization Marcus division.

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 81
 Defensive Strategies
Guidelines for Divestiture –
 When firm has pursued retrenchment but
failed to attain needed improvements.
 When a division needs more resources than
the firm can provide.
 When a division is responsible for the firm’s
overall poor performance.
 When a division is a misfit with the
organization.
 When a large amount of cash is needed and
cannot be obtained from other sources.

March 23, 2024 82

 Defensive Strategies

Liquidation

Defined Example

• Selling all of a • Ribol sold all its assets

company’s assets, and ceased business.
in parts, for their
tangible worth

(Source: Anthony F. Chelte / Fred David, 2001)

March 23, 2024 83
 Defensive Strategies
Guidelines for Liquidation –

 When both retrenchment and divestiture

have been pursued unsuccessfully.
 If the only alternative is bankruptcy,
liquidation is an orderly alternative.
 When stockholders can minimize their losses
by selling the firm’s assets.

March 23, 2024 84

How to Implement a Growth
Strategies!
 “ A corporation can grow internally by
expanding its operations both globally and
domestically, or it can grow externally
through Joint venture, mergers,
acquisitions, and strategic alliances.”
(Wheelen, p. 134.)

March 23, 2024 85

 Strategies in Action

Joint Venture

Example
Defined • Lucent Technologies
and Philips Electronic
• Two or more
NV formed Philips
sponsoring firms
Consumer
forming a separate
Communications to
organization for
make and sell
cooperative
telephones.
purposes
(Source: Anthony F. Chelte / Fred David, 2001)
March 23, 2024 86
Means for Achieving Strategies
Guidelines for Joint Ventures –
 Combination of privately held and publicly held can be
synergistically combined.
 Domestic forms joint venture with foreign firm, can
obtain local management to reduce certain risks.
 Distinctive competencies of two or more firms are
complementary.
 Overwhelming resources and risks where project is
potentially very profitable (e.g., Alaska pipeline).
 Two or more smaller firms have trouble competing
with larger firm.
 A need exists to introduce a new technology quickly.

March 23, 2024 87

Merger and Acquisition (M&A)
 Mergers and acquisitions have been a very
common occurrence in the U.S. since the early
1980’s.
 Mergers involve the joining together of 2 or
more companies into one organization.
 Mergers can be described as a “corporate
marriage” in that the ownership and top
management of both companies usually agree
to the merger which they view as creating a
stronger entity.
 Examples: Coopers & Lybrand + Pricewaterhouse =
PriceWaterhouseCoopers (PWC)

March 23, 2024 88

Merger and Acquisition
 Acquisitions involve one company buying or taking
over another company (I.e. through direct purchase
or an offer to purchase common shares at above
market rates). Such actions often occur without the
agreement/consent of the management of the
acquired firm (e.g. hostile takeover).
 The rationale for M&A is that it can be used as a
quick way to achieve growth strategies such as
diversification and integration.
 In addition, mergers can also be used as a defensive
strategy (I.e. a weak company merges with a strong
company in order to ensure its survival.)

March 23, 2024 89

Strategic Alliances
 An alliance occurs when two or more companies
unite for purposes of achieving a common goal.
 Examples of common goals include:
 Influencing government policy (e.g. taxation, trade,
etc.).
 Product promotion with regards to a particular industry
(e.g. dairy industry).
 Improving competitiveness of two or more companies
(e.g. Star Alliance – Airline Industry).
 Entry into new markets (Joint Ventures).
 To obtain technology or reduce financial risks.

March 23, 2024 90

Michael Porter’s Generic Strategies

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies

March 23, 2024 91

Cost leadership strategy
 A cost leadership strategy places a strong
emphasis on achieving the lowest possible cost
levels relative to industry competitors.
 The idea is to reduce costs throughout the
company (in every department) through such
means as economies of scale, cost controls,
reducing the bargaining power of labor and
suppliers, etc.

March 23, 2024 92

Cost leadership strategy
 Pursuing a corporate level strategy of vertical
integration can help a company to achieve a
cost leadership position in that it enables a
company to control its supply and distribution
networks, which also translates into better
control over costs/prices.
– An example of a company which pursues a
cost leadership strategy would be the
Korean car company Hyundai.

March 23, 2024 93

Cost leadership strategy
Cost Leadership Strategies –

 Pursued in conjunction with differentiation.

 Economies or diseconomies of scale.
 Capacity utilization achieved.
 Linkages with suppliers and distributors.

March 23, 2024 94

Cost leadership strategy
Low Cost Producer Advantages –
 Market of many price-sensitive buyers.
 Few ways of achieving product
differentiation.
 Buyers not sensitive to brand differences.
 Large number of buyers with bargaining
power.

March 23, 2024 95

Differentiation strategy
 A differentiation strategy places a strong
emphasis on product / service “uniqueness.”
 A product or service can be considered
different or unique based on brand image,
quality, special product features, special or
extra customer service/support, etc.
 Advertising is important in pursuing a
differentiation strategy as it is important to
convince the customer that your product is
different (i.e. better) than the competitors’
products, even if in reality it is very similar.
March 23, 2024 96
Differentiation strategy
 Remember that Customer perception
determines the degree of product/service
uniqueness.
– Examples of companies which pursue a
differentiation strategy includes Levi’s and
Coca-Cola.
 Generally, there is a good fit between a
corporate level strategy of concentration
(Product Development) and a business level
strategy of differentiation.

March 23, 2024 97

Differentiation strategy

Differentiation Strategies –

 Allow firm to charge higher price

 Gain customer loyalty
(Because customers may become strongly
attached to the differentiation feature).

March 23, 2024 98

Focus strategy
 A focus strategy places a strong emphasis on
serving a narrow target group or small market
segment / niche.
 A seccessful focus strategy depends upon:
 Industry segment that is of sufficient size
 Has good growth potential
 Not crucial to the success of other major
competitors

March 23, 2024 99

Focus strategy
 Focus strategies most effective:
– Consumers have distinctive preferences or
requirements.
– Rival firms not attempting to specialize in the
same target segment.

 Focus strategies can be classified into the

following 2 categories:
 Cost Focus
 Differentiation Focus

March 23, 2024 100

Focus strategy
 A Cost Focus strategy serves a small market
segment by offering lower cost / priced
products/services relative to industry
competitors.
 An example would include Oshkosh Truck
which produces heavy-duty trucks for the
military.

March 23, 2024 101

Focus strategy
 A differentiation focus strategy serves a
small market segment by offering more
differentiated or unique products/services
compared to industry competitors.
Examples include: Rolls-Royce, Ferrari,
Rolex watches, etc.
 Focus strategies are used by small firms
which are better able to pay attention to the
specific needs of a small market segment.

March 23, 2024 102