CHAPTER 6

Strategy Formulation:
Situation Analysis &
Business Strategy

STRATEGIC MANAGEMENT & BUSINESS POLICY

12TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

6-1
 Situational Analysis

Strategy formulation --

–Strategic planning or long-range planning

•Develops mission, objectives, strategies, policies

--process of finding a strategic fit

between external opportunities and
internal strengths while working around
external threats and internal weaknesses

6-2
IFAS – Maytag as Example

6-3
EFAS – Maytag as Example

6-4
SFAS Matrix

6-5
Situational Analysis

Niche --

–Need in the marketplace that is currently

unsatisfied

Corporate Goal --

–Find propitious niche

–Strategic window

6-6
Situational Analysis

SWOT --

–Internal
•Strengths/Weaknesses

–External
•Opportunities/Threats

6-7
TOWS Matrix

6-8
Business Strategy

Focuses on improving competitive

position of company’s products or
services within the specific industry or
market segment

6-9
Porter’s Competitive Strategies

Competitive Strategy --

–Low cost
–Differentiation
–Direct competition
–Focus on niche

6-10
Porter’s Competitive Strategies

Generic Competitive Strategies --

–Lower Cost strategy

•Greater efficiencies than competitors

–Differentiation strategy
•Unique/superior value, quality, features,
service

6-11
Porter’s Competitive Strategies

Competitive
Advantage --
–Determined
by Competitive
Scope
•Breadth of
the target
market`

6-12
Porter’s Competitive Strategies

Cost Leadership --

–Low-cost competitive
strategy
–Broad mass market
–Efficient-scale facilities
–Cost reductions
–Cost minimization

6-13
Porter’s Competitive Strategies

Differentiation –

–Broad mass market

–Unique product/service
–Premiums charged
–Less price sensitivity

6-14
Porter’s Competitive Strategies

Cost-Focus –

–Low-cost competitive
strategy
–Focus on market
segment
–Niche focused
–Cost advantage in
market segment

6-15
Porter’s Competitive Strategies

Differentiation Focus –

–Specific group or
geographic market focus
–Differentiation in target
market
–Special needs of narrow
target market

6-16
Porter’s Competitive Strategies

Stuck in the middle –

–No competitive
advantage
–Below-average
performance

6-17
Risks of Generic Strategies

Risks of Cost Leadership Risks of Differentiation Risks of Focus

Risks
Cost of CostisLeadership
leadership not Risks of Differentiation
Differentiation is not Risks
The focusofstrategy
Focus is
Cost leadership
sustained: is not Differentiation
sustained: is not The focus strategy is
imitated:
• sustained:
Competitors imitate. • sustained:
Competitors imitate. imitated:
The target segment becomes
• Competitors
• Technology imitate.
changes. • Competitors
• Bases imitate.
for differentiation The targetunattractive:
structurally segment becomes
• •Other
Technology
bases forchanges.
cost •become
Bases less
for differentiation
important to • structurally unattractive:
Structure erodes.
•leadership
Other baseserode. cost
for become
buyers. less important to • •Demand
Structure erodes.
disappears.
leadership
Proximity erode.
in differentiation is Costbuyers.
proximity is lost. • Demand
Broadly disappears.
targeted competitors
Proximity
lost. in differentiation is Cost proximity
Differentiation is lost.
focusers Broadly targeted
overwhelm the segment: competitors
lost.focusers achieve even
Cost Differentiation
achieve focusers
even greater • overwhelm
The segment’s the segment:
Costcost
lower focusers achieve even
in segments. achieve eveningreater
differentiation segments. •differences
The segment’s from other
lower cost in segments. differentiation in segments. differences
segments narrow. from other
• Thesegments
advantages narrow.
of a
•broad
The advantages
line increase. of a
Newbroad
focuserslinesubsegment
increase.
New
the focusers subsegment
industry.
the industry.

6-18
8 Dimensions of Quality

6-19
Competitive Strategy

Industry Structure --

–Fragmented Industry
–Consolidated Industry

6-20
Competitive Tactics

Timing Tactics --
–First mover
–Late movers
Market Location Tactics --
–Frontal Assault
–Flanking Maneuver
–Bypass Attack
–Encirclement
–Guerrilla Warfare
Defensive Tactics --
–Raise structural barriers
–Increase expected retaliation
–Lower the inducement for attack

6-21
Cooperative Strategies

• Collusion
• Strategic Alliances
• Mutual service consortia
• Joint ventures
• Licensing arrangements
• Value-chain partnerships

6-22