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Strategy Formulation : Business Strategy - Coggle Diagram
Strategy Formulation : Business Strategy
A Framework for Examining Business Strategy
Strategy Formulation, often referred to as strategic planning or long-range planning, is concerned with developing a corporation’s mission, objectives, strategies, and policies.
It begins with situation analysis: the process of finding a strategic fit between external opportunities and internal strengths while working around external threats and inter- nal weaknesses
Many executives prefer to present their analysis using a SWOT chart.
Populating a SWOT chart, by itself, is just the start of a strategic analysis. Some of the primary criticisms of SWOT
GENERATING A STRATEGIC FACTORS ANAlySIS SUMMARY (SFAS) MATRIX
The SFAS (Strategic Factors Analysis Summary) Matrix summarizes an organization’s strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table.
. The SFAS Matrix requires a strategic decision maker to condense these strengths, weaknesses, opportunities, and threats into fewer than 10 strategic factors.
The SFAS Matrix includes only the most important factors gathered from environmental scanning, and thus provides information that is essential for strategy formulation.
FINDING MARKET NICHES
A niche is a need in the marketplace that is currently unsatisfied.
The goal is to find a propitious niche—an extremely favorable niche—that is so well suited to the firm’s competitive advantages that other organizations are not likely to challenge or dislodge it
Mission and Objectives
A well-crafted mission statement has five common elements:
It must be short so that every employee can remember the statement.
The design must be simple so that everyone in the company can understand what
the senior leadership team desires.
It has to provide direction to the activities of company employees.
The statement should enable employees knowing exactly what the company does and what it does not do.
The statement should be measurable so that the company can visibly see progress.
Business Strategies
PORTER’S COMPETITIVE STRATEGIES
Cost leadership
Differentiation
Focus
Risks in Competitive Strategies
For exam- ple, a company following a differentiation strategy must ensure that the higher price it charges for its higher quality is not too far above the price of the competition, other- wise customers will not see the extra quality as worth the extra cost
Issues in Competitive Strategies
Porter argues that to be successful, a company or business unit must achieve one of the previously mentioned generic competitive strategies. Otherwise, the company or business unit is stuck in the middle of the competitive marketplace with no competi- tive advantage and is doomed to below-average performance.
Industry Structure and Competitive Strategy
In a fragmented industry, for example, where many small- and medium-sized local com- panies compete for relatively small shares of the total market, focus strategies will likely predominate.
As an industry matures, fragmentation is overcome, and the industry tends to become a consolidated industry dominated by a few large companies.
Hypercompetition and Competitive Advantage Sustainability
COOPERATIVE STRATEGIES
Collusion
the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand.
Strategic Alliances
a long-term cooperative arrangement between two or more inde- pendent firms or business units that engage in business activities for mutual economic gain
Mutual Service Consortia
Joint Venture
LicensingArrangements
Value-Chain Partnerships