Strategic Management - Basics

Description
basics of strategy management covering topics like strategic analysis, sustainable competitive advantage, customer analysis, environment analysis, growth strategies, winning strategies in hostile market.

Strategic Management
By David A. Aaker John Wiley & Son Inc. 5th Edition ISBN 9971-51-293-9

WHY STRATEGIC MANAGEMENT
? ? ? ? ? ? Precipitate the Choice of Strategies Enforce a Long-Range Perspective Make Resource Allocation Decisions Visible Provide Management Control System Provide All Directional Communications Help Cope with Changes

STRATEGIC ANALYSIS
External Analysis



Internal Analysis
• Performance Analysis
– – – – – – – – Profitability, Sales, Satisfaction Product Quality, Brand Product Portfolio Relative Costs Strategic Problems Organizational Capabilities Financial Resources Strengths & Weaknesses

Customer Analysis
Segments, Motivator, Unmet Needs


– – – –

Competitor Analysis
Identity, Groups Image, Objectives, Culture Strategies, Cost Structure Strengths & Weaknesses

• Strategic Options Determinants


– – – –

Market Analysis
Size, Growth, Profitability Barriers, Cost Structures Distribution Key Success Factors


– –

Environmental Analysis
Technology, Government Economics, Demography

What is a Business Strategy-1
1. THE PRODUCT MARKET IN WHICH TO COMPETE
1. 2. To be or Not to be Choice Versus Avoidance Invest to Grow, to Maintain, to Milk or to Recover Product Line Positioning Pricing Distribution Manufacturing Segmentation Manufacturing and Global

2.

LEVEL OF INVESTMENT
1.

3.

FUNCTIONAL AREA STRATEGIES FOR COMPETING
1. 2. 3. 4. 5. 6. 7.

4.

ASSETS & COMPETENCIES THAT PROVIDE SUSTAINABLE COMPETITIVE ADVANTAGE
1. 2. Resources, Brands, Customer Base, Knowledge etc Cost and Feasibility of generating or maintaining the advantage

What is a Business Strategy-2
For Multiple Businesses 5. ALLOCATION OF RESOURCES OVER BUSINESS UNIT
1. Financial Resources 2. Non-financial Resources of Plant, Equipment, People

6. DEVELOPMENT OF SYNERGY
1. Support and Complement Each Other

Search for Sustainable Competitive Advantage
Differentiation Versus Low Cost Strategy • Focus Strategy- Less Products or Customer Groups • Preemptive or First Mover Advantage • Synergy

Five Factor Model of Porter
1. 2. 3. 4. 5.
Market Profitability is Affected By Competition Amongst Existing Players Bargaining Power of Suppliers Threat of Potential Entrants Bargaining Power of Customers Threat of Substitute Products

Customer Analysis
• Segmentation
– Benefits, Usage Level, Application, Organization Type, Geographic Location, Loyalty, Price Sensitivity

• Motivations
– – – – What elements of the offering are valued the most What are their objectives, What are they really buying Segment wise Motivational Analysis Changes in Customer Motivations and Priorities

• Unmet Needs
– – – – Sources of Dissatisfaction Reasons for Change of Brands or Suppliers Unmet Needs / Customers Unawares of Some Needs Are competitors leveraging unmet needs

Structure for Competitor Analysis
• Identification of Competitors
– Intense competitors – Serious competitors – Substitution effect

• Evaluation of Competitors
– – – – – – Their Objectives, Strategies, Commitment, Exit Barriers Cost Structure and Advantages Image and Positioning Strengths and Weaknesses What Can they Leverage Their Assets and Competencies

Market Analysis
• Size & Growth
– Sub-markets, Size and Growth, Driving Forces, Declines

• Profitability
– – – – Areas for Making Money Intensity of Competition / New Entrants Threat of Substitute Product Cost Structure and Value Addition of Competitors

• Key Success Factors
– Identity of the Factors – Identity of the Key Assets – Identity of the Key Competencies

Environmental Analysis
• Technology
– Rate of Technology Maturity – Trends in Technology Development

• Government
– Changes in Regulations and Their Impact – Tax and Other Concessions – Political Risk

• Economics
– Inflation and Economic Prospects

• Culture
– Trends in Lifestyle, Fashions and their Implications

• Demographics • General
– Significant Trends and Future Events – Threats and Opportunities – Key Uncertainty Areas

Internal Analysis
• • • • • • Customer Satisfaction / Brand Loyalty Product / Service Quality Brand / Firm Associations Relative Cost New Product Activity Management / Employee Capability and Performance

Sustainable Competitive Advantage • Way You Compete
– – – – Product Strategy Positioning Strategy Manufacturing Strategy Distribution Strategy

• Characteristics of SCA
– Substantial – Sustainable – Leveraged

• Strategic Vision, Opportunism, Drift and Stubbornness

Capability Analysis
• Strength: Advantage that is so strong and positive that it provides basis for Sustainable Competitive Advantage • Weakness: Lack of strength in an area that is crucial • Constraint: Realistic appraisal will show a clash with the base rules of the game

Sustainable Competitive Advantage
• Low Cost Thrust
– – – – – No Frills Product / Service Product Design Scale Economies Experience and Learning Curves Production and Operations

• Focus Strategies
– Focusing the Product Line – Targeting a Segment – Limited Geographic Area

• Preemptive Move
– – – – Supply Security and Logistics Dominance Dominant Product Design, Superior Design Personnel Vertical Integration, Greater Control Occupy Prime Locations, Key Outlets

Differentiation
• Generate Customer Value
– Apparent Versus Actual Value – Create Differentiations from Customer Perspective – Systematic Testing of Ideas / Products

• Provide Perceived Value
– Branding and Advantages – Manage Cues and Signals for Perception

• Be Difficult to Copy
– Be Creative or So Expensive that Others Are Not Tempted to Copy – Brand Equity – Awareness, Associations, Loyalty and Perceived Quality

Growth Strategies
• In existing Markets and Present Products
– Increase Market Share – Increase Product Usage with Frequency, Quantity Used, New Applications

• New Products in Current Markets
– Addition of Product Features and Refinements – New Generation of Products

• New Markets and Present Products
– Expand Geographically – Target New Segments

• New Products and Markets
– Related and Unrelated Expansions

• Vertical Integration Forward / Backward

Diversification
• Related Diversification
– Sharing Assets / Competencies Across

• Brand Name
– – – – Quality Image Helpful in the New Market Avoid Negative Attributes Associations with Product Class

• Unrelated Diversifications
– High Return, Bargain Price Business, Risk Reduction, Taxation, Liquid Assets, Defense Against Takeover

Strategies in Declining and Hostile Markets
• Revitalizing Stagnant Markets
– New Markets, Products, Applications, Revitalized Marketing, Government Stimulated Growth, Growth Subsegments

• Milk or Harvest
– Pronounced decline unlikely to change but not precipitous – Stable & Profitable Prices for Efficient Producer – Enough loyalty at least in Pockets – Business Not Central to Current Firm

Hostile Markets
1. 2. 3. 4. 5. 6. Margin Pressure Share Shifts Product Proliferation Self-Defeating Cost Reduction Consolidation and Shakeout Rescue

Wining Strategies In Hostile Markets
• • • • Focus on Large Customers Differentiate on Reliability Cover Broad Spectrum of Price Points Turn Price Into Commodity and you Score on Quality • Effective Cost Structure

Storm Riders in Declining Markets
• Primark: Low Prices but Latest Fashions. Speed to the Market • Hyundai Motors: Flexibility to Buy Back the Car If You Lose the Job • Acer: Continuous introduction of Simpler, Smaller and Cheaper Computers • Fielmann: Matching the Lowest Prices in the Market with Low Cost Procurement

Global Strategies • • • • • • • Motivations for Global Strategies Access to Low Cost Labour / Materials Access to National Incentives Cross-Subsidy Dodge Trade Barriers Obtain Economies of Scale Create Global Associations Access Strategic Markets

Sustainable Competitive Advantages
• Quality Reputation • Customer Service • Retention



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