Establish Long-Term Objectives
& Business Strategy
Establish Long-Term Objectives &
Business Strategy
Establish Long-Term Objectives
2-5 years.
Nature of long-term objectives:
quantitative.
measurable.
realistic.
understandable.
challenging.
2
Establish Long-Term Objectives &
Business Strategy
Establish Long-Term Objectives…(cont’d)
Type of long-term objectives
expansion.
growth in sales.
profitability.
market share.
diversification.
integration. 3
Establish Long-Term Objectives &
Business Strategy
Establish Long-Term Objectives…(cont’d)
Clearly established objectives offer many
benefits:
provide direction.
allow synergy.
aid in evaluation.
establish priorities.
minimize conflicts.
aid in allocation of resources and the design of jobs.
4
Strategy Formulation : Situation Analysis and
Business Strategy
Situational analysis: SWOT analysis strategy
formulation
Strategic planning or long-range planning
Develops mission
Objectives
Strategies
Policies
Strategy Formulation : Situation Analysis and
Business Strategy
Situational analysis: SWOT analysis strategy
formulation …(cont’d)
It is the process of finding a strategic fit between external
opportunities and internal strengths, while working
around external threats and internal weaknesses.
Strategy Formulation : Situation Analysis and
Business Strategy
Situational analysis: SWOT analysis strategy
formulation …(cont’d)
Finding a propitious niche
One desired outcome of analyzing strategic factors is
identifying a niche where an organization can use its core
competencies to take advantage of a particular market
opportunity. A niche in the market place that is currently
unsatisfied.
Strategy Formulation : Situation Analysis and
Business Strategy
Situational analysis: SWOT analysis strategy
formulation …(cont’d)
Finding such a niche is not always easy. A firm’s
management must be always looking for a strategic
window-that is, a unique market opportunity that is
available only for a particular time.
Strategy Formulation : Situation Analysis and
Business Strategy
Situational analysis: SWOT analysis strategy
formulation …(cont’d)
SWOT Analysis
Internal
Strengths and weaknesses.
External
Opportunities and threats
Strategy Formulation : Situation Analysis and
Business Strategy
Generating alternative strategies by using a TOWS matrix
External Internal Strengths (S) List 5-10 internal Weaknesses (W) list 5-10 internal
Factors (EFAS) Factors (IFAS) strengths here weaknesses here
Opportunities (O) SO Strategies WO Strategies
Generate strategies here that use Generate strategies here that take
List 5-10 external opportunities
strengths to take advantage advantage of opportunities by
here
of opportunities overcoming weaknesses
Threats (T) ST Strategies WT Strategies
Generate strategies here that
List 5-10 external opportunities Generate strategies here that use
minimize weaknesses and
here strengths to avoid threats.
avoid threats
Strategy Formulation : Situation Analysis and
Business Strategy
Business Strategies
Focus on improving competitive position of company’s
products or services within the specific industry or market
segment.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategies
1. Low cost (greater effectiveness than competitors)
2. Differentiation (Unique/superior value, quality, features, services)
3. Direct competition
4. Focus on niche market
Porter’s Competitive advantage
Determined by competitive scope (breadth of the target market).
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies
Porter’s Competitive strategies
Competitive Advantage
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Michael Porter proposes 2 “generic” competitive
strategies for outperforming other corporations in a
particular industry:
Lower cost (the ability of a company to design, produce and market a
comparable product more efficiently than its competitors)
Differentiation (the ability of a company to provide unique and superior
value to the buyer in terms of product quality, special features, or after
sales services)
These strategies are called generic because they can be pursued by any
type or size of business firm, even by not-for-profit organizations.
Strategy Formulation : Situation Analysis and
Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
When the lower-cost and differentiation strategies have
a broad mass-market-target, they are simply called: cost
leadership and differentiation.
When they are focused on a market niche (narrow
target), however, they are called cost focus and
differentiation focus.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
Cost leadership
1. Low-cost competitive strategy.
2. Broad mass market
3. Efficient-scale facilities
4. Cost reductions
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
Differentiation
[Link] mass market
[Link] product/service
[Link] price sensitivity
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
Cost-focus
[Link]-cost competitive strategy
[Link] on market segment
[Link] focused
[Link] advantage in market segment.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
Differentiation-focus
1. Specific group or geographic
2. Differentiation in target market
3. Special needs of narrow target market
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Porter’s Competitive strategy
Stuck in the middle?!
1. No Competitive Advantage
2. Below-average performance
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Risks of generic strategies
1. Risks of cost leadership
In case cost leadership is not sustained:
1. Competitors imitate
2. Technology changes
3. Proximity in differentiation is lost
4. Cost focusers achieve even lower cost in segments.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Risks of generic strategies
2. Risks of differentiation
In case differentiation is not sustained:
1. Competitors imitate
2. Bases of differentiation become less important to buyers.
3. Cost proximity is lost
4. Differentiation focusers achieve even greater differentiation
in segments.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
Risks of generic strategies
3. Risks of focus
The focus strategy is imitated:
1. The target segment becomes structurally unattractive:
Structure erods
Demand Disappears
2. Broadly targeted competitors overwhelm the segment.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
8 Dimensions of quality
1. Performance-operating characteristics.
2. Features-bells and whistles, such as cruise control in a car.
3. Reliability-probability that the product will continue
functioning without any significant maintenance.
4. Conformance-degree to which a product meet standards.
Strategy Formulation : Situation Analysis
and Business Strategy
Business Strategies….(cont’d)
8 Dimensions of quality
5. Durability-number of years of service a consumer can
expect from a product before it significantly deteriorates.
6. Serviceability-product’s ease of repair.
7. Aesthetics-how a product looks, feels, sounds, tastes or
smell.
8. Perceived quality-product overall reputation.
Thank you