Strategic Management & Business Policy: Thomas L. Wheelen J. David Hunger

STRATEGIC MANAGEMENT & BUSINESS POLICY
12TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
Prentice Hall, Inc. 2009 6-2
Strategy formulation- concerns developing a
corporations mission, objectives, strategies and
policies
Situation Analysis- the process of finding a strategic

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

SWOT- Strengths-Weaknesses-Opportunities-Threats
Strategy = Opportunity / Capacity

Opportunity has no real value unless a company has
the capacity to take advantage of that opportunity

Generating a Strategic Factors Analysis
Summary (SFAS) Matrix
SFAS summarizes an organizations strategic factors by

combining the external factors from the EFAS Table
with the internal factors from the IFAS Table

Finding a Propitious Niche
Propitious niche- where an organization can use its

core competencies to take advantage of a
particular market opportunity and the niche is just
large enough for one firm to satisfy its demand
Strategic sweet spot- a company is able to satisfy

customers needs in a way that rivals cannot
Strategic window- a unique market opportunity that

is available for a particular time

Review of Mission and Objectives
A re-examination of an organizations current

mission and objectives must be made
before alternative strategies can be
generated and evaluated
Performance problems can derive from

inappropriate (narrow or too broad) mission
statements and objectives

TOWS Matrix- illustrates how the external opportunities
and threats can be matched with internal strengths and
weaknesses to result in 4 possible strategic alternatives
Provides a means to brainstorm alternative strategies

Forces managers to create various kinds of growth and
retrenchment strategies
Used to generate corporate as well as business
strategies

Business strategy focuses on improving the competitive
position of a companys or business units products or
services within the specific industry or market
segment it serves

Business strategy is comprised of:
Competitive strategy
Cooperative strategy

Porters generic competitive strategies
Lower cost strategy- the ability of a company or a business

unit to design, produce and market a comparable product
more efficiently than its competitors
Differentiation strategy- the ability of a company or a

business unit to provide a unique or superior value to the
buyer in terms of product quality, special features, or
after sale service

Cost leadership- a lower-cost competitive strategy that

aims at the broad mass market and requires efficient
scale facilities, cost reductions, cost and overhead
control; avoids marginal customers, cost minimization
in R&D, service, sales force and advertising
Provides a defense against competitors

Provides a barrier to entry
Generates increased market share

Differentiation- involves the creation of a product or

service that is perceived throughout the industry as
unique. Can be associated with design, brand image,
technology, features, dealer network, or customer
service
Lowers customers sensitivity to price

Increases buyer loyalty
Barrier to entry
Can generate higher profits
Cost Focus- low-cost competitive strategy that focuses

on a particular buyer group or geographic market and
attempts to serve only this niche to the exclusion of
others
Differentiation Focus- concentrates on a particular

buyer group, product line segment, or geographic
market to serve the needs of a narrow strategic
market more effectively than its competitors

Issues in Competitive Strategies
Stuck in the middle- when a company has no

competitive advantage and is doomed to below-
average performance

Issues in Competitive Strategies
Entrepreneurial firms follow focus strategies

where they focus their product or service on
customer needs in a market segment and
differentiate based on quality and service

Industry Structure and Competitive Strategy
Fragmented industry- many small- and medium-sized

companies compete for relatively small shares of the
total market
Products are typically in early stages of product life
cycle
Focus strategies are used

Industry Structure and Competitive Strategy
Consolidated industry- domination by a few large

companies
Emphasis on cost and service

Economies of scale
Regional and national brands
Slower growth over capacity
Knowledgeable buyers

Hyper-competition and Competitive Advantage
Sustainability
Competitive advantage in a hyper-competitive market is

characterized by a continuous series of multiple short-
term initiatives that replace current products with new
products before competitors can do so.
Leads to an over emphasis on short-term tactics

Competitive Tactics
Tactic- a specific operating plan that details how a

strategy is going to be implemented in terms of when
and where it is to be put into action
Narrower in scope and shorter in time horizon than
strategies

Timing Tactics: When to Compete
Timing Tactics- when a company implements a strategy
First movers
Late movers

Cooperative Strategies- used to gain a competitive
advantage within an industry by working with other
firms

Collusion- the active cooperation of firms within an
industry to reduce output and raise prices to avoid
economic law of supply and demand

Strategic Alliances- a long-term cooperative
arrangement between two or more independent firms
or business units that engage in business activities for
mutual economic gain
Used to:
Obtain or learn new capabilities
Obtain access to specific markets
Reduce financial risk
Reduce political risk

Types of Cooperative Agreements
Mutual Service Consortia

Joint Venture
Licensing Arrangements
Value-Chain Partnerships

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STRATEGIC MANAGEMENT & BUSINESS POLICY

Situation Analysis- the process of finding a strategic

Prentice Hall, Inc. 2009 6-3

Strategy = Opportunity / Capacity

Prentice Hall, Inc. 2009 6-4

SFAS summarizes an organizations strategic factors by

Prentice Hall, Inc. 2009 6-5

Propitious niche- where an organization can use its

Strategic sweet spot- a company is able to satisfy

Strategic window- a unique market opportunity that

Prentice Hall, Inc. 2009 6-9

A re-examination of an organizations current

Performance problems can derive from

Prentice Hall, Inc. 2009 6-11

Provides a means to brainstorm alternative strategies

Prentice Hall, Inc. 2009 6-12

Prentice Hall, Inc. 2009 6-17

Prentice Hall, Inc. 2009 6-18

Lower cost strategy- the ability of a company or a business

Differentiation strategy- the ability of a company or a

Prentice Hall, Inc. 2009 6-19

Cost leadership- a lower-cost competitive strategy that

Provides a defense against competitors

Prentice Hall, Inc. 2009 6-20

Differentiation- involves the creation of a product or

Lowers customers sensitivity to price

Cost Focus- low-cost competitive strategy that focuses

Differentiation Focus- concentrates on a particular

Prentice Hall, Inc. 2009 6-22

Stuck in the middle- when a company has no

Prentice Hall, Inc. 2009 6-25

Entrepreneurial firms follow focus strategies

Prentice Hall, Inc. 2009 6-26

Fragmented industry- many small- and medium-sized

Prentice Hall, Inc. 2009 6-28

Consolidated industry- domination by a few large

Emphasis on cost and service

Prentice Hall, Inc. 2009 6-29

Competitive advantage in a hyper-competitive market is

Prentice Hall, Inc. 2009 6-30

Tactic- a specific operating plan that details how a

Prentice Hall, Inc. 2009 6-31

Timing Tactics- when a company implements a strategy

Prentice Hall, Inc. 2009 6-32

Prentice Hall, Inc. 2009 6-34

Prentice Hall, Inc. 2009 6-35

Prentice Hall, Inc. 2009 6-36

Mutual Service Consortia

Prentice Hall, Inc. 2009 6-37

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