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Block 16: Strategy Formulation & Implementation - Coggle Diagram

- - - - Cost Leadership: This strategy involves becoming the lowest-cost producer in the industry. Companies like Ryanair and Walmart use this strategy to offer lower prices than competitors. Cost leadership can be achieved through economies of scale, efficient production processes, and low input costs.
      - Differentiation: This strategy involves offering unique products or services that justify higher prices. Companies like BMW, Apple, and Four Seasons use differentiation to stand out in their markets. Differentiation can be based on product features, brand reputation, or customer service.
      - Focus Strategy: This strategy involves targeting a narrow market segment. Companies using this strategy tailor their products or services to meet the specific needs of a particular group of customers. For example, Iceland supermarket focuses on frozen goods, while a local bookshop may cater to a specific community.
      - Porter’s generic strategies take the stance that sustainable competitive advantage arises from the selection of a generic strategy which best fits the organization's environment
    - - Input costs: Companies can reduce costs by sourcing cheaper labor or raw materials, often through offshoring or flexible contracts.
      - Economies of scale: Higher production levels can reduce the average cost per unit.
      - Experience: As companies gain experience, they become more efficient, reducing costs over time.
      - Product and process design: Efficient design can lower production costs. For example, McDonald’s designs its kitchens for maximum efficiency.
      - Critics:
        
        lack of differentiation/ unique selling point USP
        
        Compromised Quality: To achieve lower costs, companies might compromise on the quality of materials, production processes,
      - Making the product accessible to the mass market by being lowest-cost producer in its industry its prices EX: McDonald's
    - - Product/service attributes: Unique features or superior quality can differentiate a product. For example, the iPhone stands out due to its advanced technology and design.
      - Customer relationships: Strong relationships with customers can enhance perceived value. This includes after-sales service, customer engagement, and brand loyalty.
      - Complements: Products that work well together can enhance value. For example, Apple encourages customers to use its ecosystem of products (iPhone, Apple Music, Apple TV).
      - where a company seeks to distinguish its products or services from those of competitors by offering unique features, superior quality, exceptional service, or other distinctive attributes
      - Critics:
        
        Increased Expenses: Developing and maintaining unique features, superior quality, or exceptional service often requires significant investment in R&D
        
        Ease of Imitation: Competitors may quickly imitate or replicate unique features, especially in industries with low barriers to entry
        
        Premium Pricing: Differentiated products often command higher prices, which can make them less accessible to price-sensitive customers.
    - - Cost Focus:
        
        involves targeting a narrow, specific market segment (niche) and offering products or services at a lower cost than competitors. The goal is to achieve a cost advantae within that niche, appealing to price-sensitive customers in the segment. EX: Ryanair for travelers
        
        Advantages of Cost Focus:
        
        Competitive Pricing: By focusing on cost efficiency, the company can offer lower prices to a specific group of customers, making it attractive to price-sensitive buyers in the niche. ex: Raynair
        
        Reduced Competition: Since the company operates in a niche market, it may face less competition compared to broader markets.
        
        Efficient Resource Allocation: Resources are concentrated on serving the specific needs of the niche, allowing for better cost control and operational efficiency.
        
        Customer Loyalty: If the company consistently delivers low-cost products or services to the niche, it can build strong loyalty among its target customers
        
        Criticisms:
        
        Limited Market Size: The niche market may be small, limiting the company's growth potential and scalability.
        
        Vulnerability to Market Changes: If the niche market shrinks or disappears (e.g., due to changing consumer preferences or economic conditions), the company may struggle to survive.
        
        Price Wars: Competitors may enter the niche and engage in price wars, eroding profit margins.
        
        Quality Concerns: To maintain low costs, the company may compromise on quality, which can harm its reputation and customer satisfaction.
        
        Dependency on Niche: Over-reliance on a single niche market can be risky if the company fails to diversify or adapt to changes.
      - Differentiation Focus:
        
        involves targeting a specific niche market and offering unique or specialized products or services that cater to the specific needs or preferences of that segment. The goal is to stand out by providing something that competitors do not offer, allowing the company to charge a premium price. EX: Rolls-Royce (a specific market with high quality)
        
        Advantages of Differentiation Focus:
        
        Premium Pricing: Unique or specialized offerings allow the company to charge higher prices, leading to better profit margins.
        
        Strong Brand Loyalty: Customers in the niche market are often willing to pay more for products or services that meet their specific needs, leading to strong brand loyalty.
        
        Reduced Price Sensitivity: Since the product is differentiated, customers are less likely to compare prices with competitors, reducing price sensitivity.
        
        Less Competition: By focusing on a niche, the company can avoid direct competition with larger players in the broader market.
        
        Innovation Opportunities: The focus on a specific segment encourages innovation and creativity to meet the unique needs of the niche.
        
        Criticisms:
        
        Higher Costs: Developing and maintaining unique features, superior quality, or specialized services often requires significant investment, which can increase costs.
        
        Limited Market Size: Like cost focus, differentiation focus targets a niche market, which may limit growth potential and scalability.
        
        Risk of Imitation: Competitors may attempt to replicate the unique features or offerings, reducing the company's competitive advantage.
        
        Changing Consumer Preferences: If the preferences or needs of the niche market change, the company may struggle to adapt quickly, risking obsolescence.
        
        Complexity in Execution: Managing a differentiated product or service for a niche market can be complex and resource-intensive, requiring specialized skills and knowledge.
  - - - Market Penetration: This involves increasing market share with existing products. For example, a sofa company might run a holiday promotion to sell more units. can be done through inc ads and promotion or price competitions
        
        Could lead to a greater market strength and better economies of scale but, does not increase diversification in any meaningful way
      - Product Development: This involves introducing new products to existing markets. For example, Apple introduced Airpds to complement its already established tech products. should be done through well made R&D
        
        to succeed the business should already have a good sense of who their customers are and what they desire. The biggest risk here is that product failure may damage the original brand.
      - Market Development: This involves taking existing products to new markets. For example, a brewery might start selling directly to consumers instead of through supermarkets
        
        market research may be required to overcome the lack of market knowledge. In addition, customer awareness may need to be generated in the new market through marketing initiatives.
        
        Netflix expanding globally – Offering its existing streaming service in new countries by adding local content and subtitles.
      - Diversification: This involves entering new markets with new products. Related diversification involves expanding into areas connected to the existing business (e.g., a car sensor manufacturer entering the tire sensor market). Unrelated diversification involves entering completely new markets (e.g., Virgin expanding from music to airlines).
- - - - Intended Strategy: This is the strategy that top management plans to implement. It is based on a rational, top-down approach.
      - Realized Strategy: This is the strategy that is actually implemented. It is often a subset of the intended strategy, as some elements may not be feasible or may need to be adjusted.
      - Emergent Strategy: This refers to the unplanned strategies that arise from real-time responses to market conditions. For example, Honda initially planned to sell large motorcycles in the US but found success with smaller bikes after customers showed interest in them.
    - - Honda’s intended strategy was to sell large motorcycles in the US, but this strategy failed because the bikes were not suited to American roads.
      - An emergent strategy arose when Honda employees started using smaller bikes for personal use, and customers showed interest. Honda capitalized on this opportunity, leading to success in the US market.
  - - - Strategy is a political process: The final strategy may be the result of power struggles and negotiations among senior managers.
      - Middle managers play a crucial role: They are responsible for implementing strategy and may adjust or block strategies based on their own knowledge and experience.
      - Strategic tools can be limiting: Tools like Ansoff’s Matrix and Porter’s Generic Strategies can become habitual, limiting managers’ ability to think creatively.
  - - - middle managers have to explain the strategy to junior members of the organisation, There are a crucial bridge between the different layers.
    - - If a strategy is created, and then deployed, circumstances may change which require a change in strategy implementation approaches, or even a change in the strategy itself
    - - middle managers have knowledge and experience of business realities in a way that senior managers often do not which may impact current strategy implementation and the development of future strategy.