CHAPTER 6

Strategy Formulation:
Situation Analysis &
Business Strategy
STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN

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J. DAVID HUNGER

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Situational Analysis

Strategy formulation -Strategic planning or long-range planning

Develops mission, objectives, strategies, policies

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Situational Analysis

--process of finding a strategic fit

between external opportunities and

internal strengths while working around
external threats and internal weaknesses

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IFAS Maytag as Example

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EFAS Maytag as Example

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SFAS Matrix

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Situational Analysis

Niche -Need in the marketplace that is currently

unsatisfied

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Situational Analysis

Corporate Goal -Find propitious niche

Strategic window

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Situational Analysis

SWOT -Internal
Strengths/Weaknesses

External
Opportunities/Threats

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TOWS Matrix

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Business Strategy

Focuses on improving competitive

position of companys products or
services within the specific industry or
market segment

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Porters Competitive Strategies

Competitive Strategy -Low cost

Differentiation
Direct competition
Focus on niche

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Porters Competitive Strategies

Generic Competitive Strategies -Lower Cost strategy

Greater efficiencies than competitors

Differentiation strategy
Unique/superior value, quality, features, service

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Porters Competitive Strategies

Competitive Advantage -Determined by Competitive Scope

Breadth of the target market

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Porters Competitive Strategies

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Porters Competitive Strategies

Cost Leadership -Low-cost competitive strategy

Broad mass market
Efficient-scale facilities
Cost reductions
Cost minimization

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Porters Competitive Strategies

Differentiation
Broad mass market
Unique product/service
Premiums charged
Less price sensitivity

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Porters Competitive Strategies

Cost-Focus
Low-cost competitive strategy
Focus on market segment
Niche focused
Cost advantage in market segment

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Porters Competitive Strategies

Differentiation Focus
Specific group or geographic market focus
Differentiation in target market
Special needs of narrow target market

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Porters Competitive Strategies

Stuck in the middle

No competitive advantage
Below-average performance

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Risks of Generic Strategies

Risks of Cost Leadership

Risks
of CostisLeadership
Cost
leadership
not
Cost
leadership
is
not
sustained:
sustained:
Competitors imitate.

Competitors
imitate.
Technology
changes.
Technology
changes.
Other
bases for
cost
leadership
Other bases
for
erode. cost
leadership
erode.
Proximity
in differentiation
is
Proximity
in
differentiation
is
lost.
lost.focusers achieve even
Cost
Costcost
focusers
achieve even
lower
in segments.
lower cost in segments.

Risks of Differentiation
Risks of Differentiation
Differentiation
is not
Differentiation
is not
sustained:
sustained:
Competitors imitate.

Competitors
imitate.
Bases
for differentiation
become
Bases less
for differentiation
important to
become
less
important to
buyers.
Costbuyers.
proximity is lost.
Cost
proximity
is lost.
Differentiation
focusers
Differentiation
focusers
achieve
even greater
achieve eveningreater
differentiation
segments.
differentiation in segments.

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Risks of Focus
Risks
ofstrategy
Focus is
The
focus
The focus strategy is
imitated:
imitated:
The
target segment becomes
The
targetunattractive:
segment becomes
structurally
unattractive:
structurally
Structure erodes.
Structure
erodes.
Demand
disappears.
Demand
disappears.
Broadly
targeted
competitors
Broadly
targeted
competitors
overwhelm the segment:
the segment:
overwhelm
The segments
differences
The segments
from other
differences
from other
segments narrow.
segments
narrow.
The
advantages
of a
broad
The advantages
of a
line increase.
linesubsegment
increase.
Newbroad
focusers
New
focusers subsegment
the
industry.
the industry.

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8 Dimensions of Quality

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Competitive Strategy

Industry Structure -Fragmented Industry

Consolidated Industry

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Competitive Tactics

Timing Tactics -First mover

Late movers

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Competitive Tactics

Market Location Tactics -Frontal Assault

Flanking Maneuver
Bypass Attack
Encirclement
Guerrilla Warfare

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Competitive Tactics

Defensive Tactics -Raise structural barriers

Increase expected retaliation
Lower the inducement for attack

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Cooperative Strategies

Collusion
Strategic Alliances
Mutual service consortia
Joint ventures
Licensing arrangements
Value-chain partnerships

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