Outline 1. Level of Organization Strategy 2. Identifying
Current Corporate Strategy 3. Corporate Strategy Analysis
-Techniques for the Analysis of Strategy -The BCG Growth-Share
Matrix -The GE Business Portfolio Matrix 4. Business Strategy
Analysis -Generic Business Strategies -Strategies for Dominant
Firms -Strategies for Low Market-Share Firms -Strategies for Firms
in Stagnant Industries --Product Life Cycle 5. Functional Strategy
Analysis 6. Choosing an Organization Strategy -Internal
Consideration -External Consideration 7. Closing
Slide 3
Review of Previous Presentations A Model of the Strategic
Management Assesment of SWOT (Ch. 2) Formulation of Organization
Mission (Ch. 3) Formulation of Organization Philosophy and Policies
(Ch. 3) Determination of Strategic Objectives (Ch. 3) Determination
of Organization Strategy (Ch. 3 & 4) Determination of
Organization Strategy (Ch. 3 & 4) Implementation of
Organization Strategy (Ch. 5) Control of Organization Strategy (Ch.
5) Feedback, Feedforward, and Recycle
Slide 4
OUTLINE 1: Level of Organization Strategy
Slide 5
Levels of Organization Strategy Four levels in Organization
Strategy: Societal Strategy Corporate Strategy Business Strategy
Functional Strategies
Slide 6
What is Societal Strategy? Societal Strategy is concerned with
the relationships between an organization and its external
environment, as well as the board issues of corporate citizenship,
social responsibility and accountability, and business ethics. It
is formulated by the board of direction.
Slide 7
What is Corporate Strategy? Corporate Strategy is TOP
MANAGEMENTS grand design for managing the whole organization. The
aim of corporate strategy is to manage the companys current and
future portfolio of businesses to effect the fulfillment of the
companys strategic objectives.
Slide 8
What is Business Strategy? The Focus of Business Strategy is on
how to compete in a particular industry or product/market segment.
Business Strategy is to provide the firm with the competitive
approach that enables it to achieve its business objectives.
Slide 9
What is Functional Strategy? Functional Strategy is concerned
with the development of strategies in each the functional areas
within a business, for example: production, marketing, finance, and
research and development
Slide 10
Hierarchial Strategy Interrelationship Societal Objective
Societal Strategy Corporate Objective Corporate Strategy Business
Objective Business Strategy Functional Objective Functional
Strategy
Slide 11
OUTLINE 2: Identifying Current Corporate Strategy
Slide 12
Identifying Current Corporate Strategy It is important to
identify the current corporate strategy of single or multi business
enterprise. It is involved the evaluation of the current business
and making decision about which business deserves greater or fewer
resources in the future.
Slide 13
The Spokes of Corporate Strategy Current Corporate Strategy
Organizations attitude towards risk obtained from liquidity and
debt ratios Role assigned to each business in the total business
portfolio: growth, stability, retrenchment Types of strategic
advantages (if any) in various business Business acquired and why
Business divested or liquidated and why Nature of diversification:
concentric. conglomerate Strategic objectives of the organization:
growth, profitability, financial Degree of diversification Number
of different business in the portfolio Products and targeted market
segments of each business Relative sizes of different business
Profitability prospect of each business Market share each business
Growth rate of each business Vertical/horizontal integration
consummated Criteria used for allocating investment funds to
various business
Slide 14
OUTLINE 3: Corporate Strategy Analysis Techniques for the
Analysis of Strategy The BCG Growth-Share Matrix The GE Business
Portfolio Matrix
Slide 15
Corporate Strategy Analysis An effective corporate strategy
gives the firm balanced portfolio of business that enables it to
achieve its strategic objectives, especially those in the areas of
profitability, growth, and financial performance. Corporate
strategy must decide where to allocate the organizations resources
among the existing business in its portfolio or to enter new
business. Corporate Strategy Analysis are meant to help the
corporate strategist obtain such business portfolio
Slide 16
Techniques for the Analysis of Corporate Strategy Portfolio
analysis is the predominant approach of corporate strategy analysis
in diversified firms. -The Boston Consulting Group (BCG)
Growth-Share Matrix -The General Electric (GE) Business Portfolio
Matrix
Slide 17
The Boston Consulting Group (BCG) Growth-Share Matrix In 1968,
BCG created the BCG "Growth- Share Matrix", a simple chart to
assist the company in determining how to allocate cash among their
business units. BCG matrix is a set of strategies to provide
guidance on resource allocation decisions based on market share and
growth.
Slide 18
The BCG Growth-Share Matrix STARSQUESTION MARK DOGSCASH COWS
High 10% Low Busines Growth rate (percent) HighLow1,0 Relative
Market Share
Slide 19
The BCG Growth-Share Matrix STARS A STARS is a business that is
growing rapidly and has high market-share. When the growth rate of
business slows, as it does in al business, the stars drop into COW
CASH category. And also, it may slip into DOG category STARS
QUESTION MARK DOGSCASH COWS High 10% Low Busines Growth rate
(percent) HighLow1,0 Relative Market Share
Slide 20
The BCG Growth-Share Matrix CASH COW A CASH COW business has
high market-share position, but it is in low- growth business.
STARSQUESTION MARK DOGSCASH COWS High 10% Low Busines Growth rate
(percent) HighLow1,0 Relative Market Share
Slide 21
The BCG Growth-Share Matrix QUESTION MARK A QUESTION MARK
businesses are high-growth businesses, but with a low market-share.
Their low share often means low profits and weak cash flows from
operation. STARS QUESTION MARK DOGSCASH COWS High 10% Low Busines
Growth rate (percent) HighLow1,0 Relative Market Share
Slide 22
The BCG Growth-Share Matrix DOGS A DOG business have low growth
rate and low market- share. Their poor competitive position puts
them in a poor profitability situation. STARSQUESTION MARK DOGS
CASH COWS High 10% Low Busines Growth rate (percent) HighLow1,0
Relative Market Share
Slide 23
The Basic Postulate of the BCG Growth-Share Matrix BCG
recommends that a companys business portfolio should be balanced,
that is, there should be enough cash cow business to support the
star. Furthermore, there should be an ample of number of stars
because they will eventually turn into cash cow.
Slide 24
Limitations of the BCG Matrix -The High-low classification
system does not give enough attention to businesses in an
intermediate position, in other words, not all business fall neatly
within one cell -The two factor comparisons do not give explicit
considerations to other important strategic factor, such as
strategic fit across product, competitive advantage, and the like.
-Growth rate and market-share factor are not always good indicator
of cash flow, profitability, and business attractiveness. -The
matrix is not helpful in comparing relative opportunities across
business, for example, is a star always better than cash cow?
Slide 25
The GE Business Portfolio Matrix The GE business portfolio
matrix consist of nine cells with long-term product/market
attractiveness on one axis and business strength /competitive
position on the other axis
Slide 26
The GE Business Portfolio position Green = invest and grow
Yellow = selective investment Red = harvest /divest Orange =
situational investment
Slide 27
INVEST and GROW A business that fall within the boundaries of
those cells that call for an invest and grow strategy is expected
to grow and have considerable profit potential
Slide 28
SELECTIVE INVESTMENT A business is that qualifies for a
selective investment strategy receives investments in order to
maximize the returns nits exiting assets, resources, and skill
Slide 29
HARVEST or DIVEST A business that falls in this group is a
loser.it should be harvested by selling idle equipment lightening
up spending,cutting cost, aggressively reducing working capital,
and investing proceeds in more promising areas.
Slide 30
Situational investment The level of investment in a business
that falls in this category is based on the judgment and experience
of the manager who make this decision.
Slide 31
OUTLINE 4: Business Strategy Analysis
Slide 32
As stated earlier,the focus of business strategy is how the
firm should compete in a particular industry or product/market
segment to obtain a strategic advantage over the competition.
porter has identified three generic strategy approach to obtain a
competitive advantage designed to outperform competitors.
Slide 33
Generic Business Strategies
Slide 34
Overall cost leadership A low cost position yields above
average returns in the industry in spite competition. Strategy to
obtain cost leadership involves construction of efficient scale
facilities.
Slide 35
Differentiation This strategy focuses on creating a product or
service perceived by the customer as unique. The idea is to attract
the customer and increase sales volume.differentiation can make
many forms
Slide 36
Focus This strategy involves focusing the firms attention on
particular buyer group, segment of the product line, or graphic
area.
Slide 37
Slide 38
Several authors have recommended specific business strategies
for firm in specific situation 1. Strategies for dominant firms. 2.
Strategies for low market share firms. 3. Strategies for firms in
stagnant industries. 4. Stratgies contingent on competitive
strenght and product life cycle stage.
Slide 39
Strategies for dominant firms. A firm with dominant position in
the industry is concerned mainly about maintaining or improving its
position in the industry Philip Kotler suggest the following for
dominant firms: Be on the offensive Fortify against enemy
Confrontation
Slide 40
Strategies for Low Market Share Firms Companies with low
market-share position are most concerned aboout improving their
competitive position and market standing. Segment Markets Efficient
use of R&D Think Small The Vacant Niche Our is better than
their Distinctive image Channel innovation
Slide 41
Strategies for Firms in Stagnant Industry Hamermesh and Silk
suggest that successful firms in stagnant industries do the
following: Identify,create, and exploit the growth segment in the
industry Emphasize Systematically and constantly improve efficiency
of production and distribution system
Slide 42
Situational Business Strategies Dominant Positition Be on the
offensive fortify againts the enemy confrontation Low Market value
position Segment markets efficient use of R&D think small fill
the vacant niche "Ours is Better than theirs" channel Innovation
Stagnant Industry Lowest delivered cost position Product/ service
quality differentation Identity and exploit growth segments
Emphasize product quality and innovation constantly improve
production and distribution efficiency
Slide 43
Strategy Contingencies: Competitive strenght and product life
cycle stage Patel and Younger have developed a contingency model
that proposes strategies contingent on the position of the business
or product in its life cycle and the competitive position of the
firm.
Slide 44
Strategy, Product Life Cycle, and Competitive position
Slide 45
OUTLINE 5: Functional Strategy
Slide 46
Functional Strategy Analysis Analysis of fuctional strategy
focuses on the evaluation and selection of strategies in areas such
as Finance, Production, R&D, marketing, personnel, industrial,
and labor relations,goverment affairs, and public relations.
Slide 47
OUTLINE 6: Choosing an Organization Strategy
Slide 48
Choosing An Organization Strategy There were several questions
about consideration performed in selecting strategies in this
functional level be it internal or external considerations
consideration. The question is one of the clues to choose the right
strategy for implementation. When these questions give a negative
response does not mean that the company chose the wrong strategy to
be implemented, there may be no strategy that can be found for each
of these questions. Internal considerations reflect the strengths
and weaknesses of the company, while the external considerations
reflect the opportunities and threats that are likely to be
obtained by the company.
Slide 49
Internal Consideration Does the Strategy effectively utilize
the financial, human, and physical resources of the company? Is the
strategy consistent with the strategic objectives? Is the strategy
consistent with the personel value of the managers and employess of
the company? Is there a direct relationship between the market
expectation resulting from the strategy and the internal
capabilities of the company? Does the strategy provide sufficient
flexibility to change or alter it if it proves inappropriate? Is
the company capable of the planning and development required from
the strategy, for example, is the strategy consitent with
managerial abilities?
Slide 50
External Consideration Does the strategy lead to a market niche
or niches now by unfilled by others? Does the strategy improve
competitive conditions for current market or product lines? Is the
minimum attainable market sufficient to produce the minimum return
of investment? Does the Strategy utilize or take advantage of
existing market and product strenght? Does the strategy include
product and market outside the current sphere of product and
markets so that the risk of threats is spread? Does the strategy
fit within the legal and political framework so that the success of
the strategy will not raise legal or political questions? Will the
strategy be perceived by society as a responsible and ethical
ones?
Slide 51
OUTLINE 7: Closing
Slide 52
Summary The focus of this chapter is on corporate and business
strategy. Corporate strategy is top managements grand design for
the total organization. There are three generic business
strategies: overall cost leadership,differentation, and focus. The
key to getting a strategic advantage in the market is to adapt the
generic business strategies to the situations of the industry and
the firms position.