Beruflich Dokumente
Kultur Dokumente
Madrid
Barcelona
Valencia
Strategic management
www.esic.edu
Sevilla
Zaragoza
Málaga
Galicia
Pamplona
Bilbao
Granada
D. Fernando Flores Bas AA: 2019-2020
Classes outline
5. Strategy formulation
7. Strategy implementation
2
Managing strategic tools
Initial assessment
T
H
E Environment analysis • Business &
corporate
P strategies
R
Strategy formulation
O
C
E
S Strategy implementation
S Tools
• BCG matrix
Monitoring and results
evaluation • GE – Mckinsey matrix
• Internal – External matrix
• Porter´s generic strategies
• Ansoff matrix
• Corporate type of strategies
• Evaluation strategy test
3
Strategy formulation
Competing in the present, preparing for the future…
4
Strategy formulation definition
● Method to design the firm strategy, both at corporate level and for each single
type of business
– Business unit strategy: how the firm competes within a particular industry or market. Is
concerned with establishing competitive advantage and the source of the competitive
advantage/s in a business
– Strategy at corporate level: where a firm competes; decisions over the scope of the firm´s
activities, including product scope, geographical scope, decisions regarding diversification,
acquisitions, new ventures, etc. and allocation of resources among them
5
BCG matrix
● Used to evaluate the strategic position of a firm´s brand portfolio, SBUs, business lines or
customers and determine its potential
● The general purpose of the analysis is to help understand, which brands the firm should invest
in and which ones should be divested
High
MARKET
GROWTH Medium
RATE
Low
Low Medium High
MARKET SHARE RATE
6
BCG matrix
High
MARKET
GROWTH Medium
RATE
Low
7
BCG matrix
Cash flow generation
High
8
BCG matrix
Dilemma
– High growth market but low market share
High – Consume large amount of cash and do not
generate much cash
– No consolidation has been achieved in a very
competitive, but growing market
MARKET – Potential to gain market share and become a
star for a later move to cash - cow
GROWTH Medium
– Because of the high growth environment they
RATE can be seen as a “cash sink”
Low
9
BCG matrix
High
Star
– High market share in a fast-growing market
MARKET – Require high investments to maintain
competitiveness and leadership
GROWTH Medium
– Re-invest profits to gain consumers (cash
RATE generators and cash users)
– Marginally profitable but as they reach a
mature status, returns becomes more
attractive
– Expected to become cash-cows and
Low positive cash flows
generate
10
BCG matrix
Cash cow
– High market share in a slow-growing
industry
– Generates cash in excess of the amount of
cash needed to maintain business
High
– As the market matures, the need for
investment reduces
– Loyal customers and low distribution cost
MARKET
GROWTH Medium
RATE
Low
11
BCG matrix
Dog
– Low market share in slow growth market
High – May well have been cash cows
– In general, they are not worth investing in
because they generate low or negative cash
– Often they enjoy misguided loyalty from
management, although some dogs can be
MARKET revitalised
GROWTH Medium – Profits are, at best, marginal
RATE
Low
12
BCG matrix highlights
Weak
MARKET GROWTH Growth
Declining Fast expansion Fast expansion
Invest for
Invest (to Invest (if
Liquidation or growth (will
STRATEGIC OBJECTIVES maintain current
divestment
potential) or
replace cash
level) or harvest divestment
cows)
13
BCG matrix; advantages and disadvantages
● Advantages
– Simple variables and fast analysis
– Businesses, products, channels, brands or clients can be graphically represented
– Provides priorities despite the enormous amount of information
– Good starting point for a further detailed analysis
● Disadvantages
– Centred in a coupled of variables and the use of “high” and “low” to form four categories is too simplistic
– Assumes that market share and profitability are directly related
– Considers every business as independent: ignores interdependence and synergies
– Many businesses are positioned in the middle of the matrix
– Considers the product or business in relation to the largest player only; ignores the impact of small
competitors whose market share is rising fast
14
BCG matrix exercise
15
GE/Mckinsey matrix
● Maps the business units on a grid of the industry and its strategic position in that industry
A 4 3 2 1
T
T High
Invest and
Invest and grow Hold and maintain
I R grow
(Strong) (Opportunistic)
(Selective)
N A
D C 3
U T Invest and grow
Hold and
Medium maintain Harvest or divest
S I (Selective)
(Selective)
T V 2
R E
Y N Hold and
Harvest or
maintain Harvest or divest
E (Protection)
divest
S Low 1
S Strong Average Weak
COMPETITIVENESS POSITION
16
GE/Mckinsey matrix
● Used to establish three main recommendations
– Growth, maintain or harvest
A 4 3 2 1
T
T High
Invest and
Invest and grow Hold and maintain
I R grow
(Strong) (Opportunistic)
(Selective)
N A
D C 3
U T Invest and grow
Hold and
Medium maintain Harvest or divest
S I (Selective)
(Selective)
T V 2
R E
Y N Hold and
Harvest or
maintain Harvest or divest
E (Protection)
divest
S Low 1
S Strong Average Weak
COMPETITIVENESS POSITION
17
GE/Mckinsey matrix; attractiveness assessment
● Select the elements or components to compare: business units, products, brands, etc.
● Define key industry factors – criteria – that are relevant to determine the industry
attractiveness
A 4 3 2 1
T
T High
Invest and
Invest and grow Hold and maintain
I R grow
(Strong) (Opportunistic)
(Selective)
N A
D C 3
U T Invest and grow
Hold and
Medium maintain Harvest or divest
S I (Selective)
(Selective)
T V 2
R E
Y N Hold and
Harvest or
maintain Harvest or divest
E (Protection)
divest
S Low 1
S Strong Average Weak
COMPETITIVENESS POSITION
18
GE/Mckinsey matrix; attractiveness assessment
Possible key factors for industry attractiveness
Environment GO 4 -
Legal GO 4 -
Human 0.05 4 0.2
TOTAL 1 3.4
20
GE/Mckinsey matrix; competitiveness assessment
● Define key success factors that are relevant to determine the (strength) competitive
position of a firm within a market
A 4 3 2 1
T
T High
Invest and
Invest and grow Hold and maintain
I R grow
(Strong) (Opportunistic)
(Selective)
N A
D C 3
U T Invest and grow
Hold and
Medium maintain Harvest or divest
S I (Selective)
(Selective)
T V 2
R E
Y N Hold and
Harvest or
maintain Harvest or divest
E (Protection)
divest
S Low 1
S Strong Average Weak
COMPETITIVENESS POSITION
21
GE/Mckinsey matrix; competitiveness assessment
Possible key success factors for the firm competitive positioning
– …………….. – ………………
Market share 0.10 5 0.50 b. Weigh each success factor in terms of its relative
importance to profitability or achieving corporate
SBU growth rate 0.10 3 0.30 objectives (0 – 1.0 and total will be equal to 1.0)
Sales distribution effectiveness 0.20 4 0.60
Key account advantages - 4 - c. Rate the SBU / product strength competitive
positioning on each factor
Price competitiveness - 3 -
a. 1 = very weak competitiveness
Advertising & promotion b. 5 = very strong competitiveness
0.10 4 0.40
effectiveness
Facilities location 0.05 4 0.20 d. Calculate weighted score
Capacity and productivity - 3 -
Experience curve effect 0.15 4 0.60 (*) For any particular industry, there will be some factors
that, while important in general, will have little or no
Raw materials cost 0.05 4 0.20 effect on the relative competitive position of firms within
that industry. It is better to drop such factors from the
Relative product quality 0.15 5 0.75 analysis than to assign them very low weights
TOTAL 1 4.0
23
GE/Mckinsey matrix
4 3 2 1
COMPETITIVENESS POSITION
24
IFE/EFE matrix
● IFE matrix (internal factors evaluation) is an strategic tool to evaluate how a company is
performing in regards to identified internal strengths and weaknesses
● Steps
‒ List internal factors; strengths and weaknesses (10 factors max.)
‒ Assign weights according to the relative importance of the factor to being successful in the firm´s
industry. Weights are industry based
‒ Rate factors on the scale from 1 to 4. Rating captures whether the factor represents a major weakness
(rating = 1), minor weakness (rating = 2), minor strength (rating = 3) and major strength (rating = 4)
‒ Weighted score; adding the weighted scores for each factor to construct the IFE matrix
● A real understanding of individual factors included in the IFE matrix is still more important
than the actual numbers
25
IFE matrix
WEIGHTED
Key internal factors WEIGHT RATING 1 – 4
SCORE
Strengths
iTunes platform is a good revenue stream 0.10 4 0.40
Customer loyalty that makes the customer price insensitive 0.10 3 0.30
No debts means Apple capacity of investing in other
0.15 4 0.60
sectors
Existing products are of high quality while compared to
0.10 3 0.30
competing products in the markets
Strong brand that is quite popular among customers 0.15 4 0.60
Apple products are hard to imitate 0.15 3 0.45
Weakness
Apple is too much dependent on product launches 0.15 2 0.30
Poor relations with other key players like Microsoft 0.05 1 0.05
Strong presence only limited to few countries 0.05 1 0.05
TOTAL 1 3.05
26
IFE/EFE matrix
● EFE matrix (external factors evaluation) is an strategic tool to visualise and prioritise the
opportunities and threats that the industry is facing
● Steps
– List external factors; opportunities and threats (10 max.)
– Assign weights according to the relative importance of the factor to being successful in the firm´s
industry. Weights are industry based
– Rate factors on the scale form 1 to 4. Rating indicates how effective the firm´s current strategies respond
to the factor. Respond is poor (rating = 1), respond is below average (rating = 2), respond is above
average (rating = 3) and respond is superior (rating = 4)
– Weighted score; adding the weighted scores for each factor to construct the EFE matrix
● Factors to be included should be those coming from political, economic, social, technological,
environmental and legal variables
27
EFE matrix
WEIGHTED
Key external factors WEIGHT RATING 1 – 4
SCORE
Opportunities
Increase presence in other countries 0.10 3 0.30
New product development 0.20 2 0.40
Increase virus and worn attack protection 0.10 3 0.30
Government crackdown on illegal downloading sites 0.10 3 0.30
Threats
Various existing illegal file sharing websites 0.05 3 0.15
Economic downturn 0.10 2 0.20
Competition from established competitors 0.15 2 0.30
Perception that Apple´s product are not compatible 0.10 2 0.20
Very few suppliers 0.10 3 0.30
TOTAL 1 2.45
28
IE/EFE matrix
4 3 2 1
High
WINNER
WINNER QUESTION MARK
Invest and
Invest and Grow Hold and maintain
Grow
(Selective) (Opportunistic)
(Strong)
E
F 3
E
WINNER AVERAGE
LOSER
Medium Invest and Grow Hold and maintain
S (Selective) (Selective)
Harvest or divest
C
O 2
R
E PROFIT
PRODUCER LOSER LOSER
Hold and maintain Harvest or divest Harvest or divest
(Protection)
Low
1
Strong Average Weak
IFE SCORE
29
IE/EFE matrix strategies
4 3 2 1
High Market penetration, market
development and product development
Grow and build
Backward integration, forward
E integration, horizontal integration
F 3
E
Market penetration and
S Medium Hold and maintain
product development
C
O 2
R
E Revitalise business or
Harvest or exit
aggressive cost management
Low
1
Strong Average Weak
IFE SCORE
30
Strategy formulation definition
● Method to design the firm strategy, both at corporate level and for each single
type of business
– Business unit strategy: how the firm competes within a particular industry or market. Is
concerned with establishing competitive advantage and the source of the competitive
advantage/s in a business
– Strategy at corporate level: where a firm competes; decisions over the scope of the firm´s
activities, including product scope, geographical scope, decisions regarding diversification,
acquisitions, new ventures, etc. and allocation of resources among them
31
Types of competitive strategies
Competitive advantage
M. Porter model
Low cost Uniqueness
32
Types of competitive strategies
● Differentiation leadership: involves the creation of products or services that are perceived
by customers (and even suppliers) as unique
– Lexus, Bang & Olufsen, TAG Heuer, Mckinsey & Co., Miele, BMW, etc.
33
Types of competitive strategies
● Cost leadership: product or services cheaper than those offered by competitors
– Wal-Mart, Ryanair, Southwest Airlines, Tata Motors, etc
● Characteristics
– Product with a weak consumer implication
– Massive distribution
– High inventory turnover
– High purchasing volume
– Efficient manufacturing: economies of scale, standardisation and production technology, capacity of
utilisation, learning curve, etc.
– Tight cost control and low level of general expenses
– Part of the economies of scales are transferred to the customers or consumers
– Manufacturing plants located in countries with low purchasing power
34
Types of competitive strategies
Using value chain in cost analysis
Approach to perform a value chain analysis depending on the
competitive advantage a company wants to create
Step 2 – Establish the relative importance of each Step 2 – Evaluate the differentiation strategies
activity in the total cost of the product for improving customer value
35
Types of competitive strategies
Automobile manufacturing company that competes on cost advantage
Infrastructure: corporate strategy, planning, finance, information systems, legal services
Using value chain in cost analysis
Technology, research and development
Purchasing Assembly
Design and Sales and Distribution and
materials testing and
Step 1 engineering marketing dealer support
& components quality control
Advertising
AVG
expenditure ratio Number of dealers
Step 3 Sales per model purchases per Capacity utilisation
versus sales or sales per dealer
supplier
volume
1. High quality assembling process reduces testing and control activities; 2. Locating plants near suppliers
Step 4 or dealers reduces purchasing or distribution costs; 3. Fewer model designs reduce assembling costs; 4.
Higher order size increase warehousing cost
1. Create just one model design for different regions to cut cost in design and engineering, to increase
Step 5 order sizes, simplify assembling and quality control and to lower marketing costs;
2. Manufacture components inside facilities to eliminate transaction costs of buying them in the market
and to optimise plant utilisation
36
Types of competitive strategies
● Differentiation leadership: involves the creation of products or services that are perceived
by customers (and even suppliers) as unique
– Lexus, Bang & Olufsen, TAG Heuer, Mckinsey & Co., Miele, BMW, etc.
● Characteristics
– Product with high consumer implication
– Selective distribution
– Intensity of marketing activities
– Design and technology
– Quality, product/service guarantee, brand image, complementary services, etc.
– Skills and experience of employees
– High level of investment in the development of new products, new features for current products and
services, location (retail stores)
37
Types of competitive strategies
Using value change to identify differentiation
Advantages: Advantages:
● Barriers to entry with economies of scale and ● Differentiation acts as a barrier entry
experience ● Creates customer loyalty
● Strong positioning in front of competitors and also ● High prices and margins
customers and suppliers
● Bargaining power with customers and suppliers
Disadvantages: Disadvantages:
● Product and processes obsolescence in case of lack ● Usually, difficulties to obtained high market share
of investments ● Attracts imitators – followers
● Substitute products developed by competitors ● Very sensible to consumer preferences
● Technology changes could have substantial impact ● Price and differentiation could be imbalanced
in economies of scale and experience
● Changes on costs might be sensible to profitability
39
Business strategy growth
Ansof Matrix
MARKET PRODUCT
M Current
A PENETRATION DEVELOPMENT
R
K
E
T MARKET
DIVERSIFICATION
S New DEVELOPMENT
Current New
PRODUCTS
40
Business strategy growth
Current New
● Attract new users: margarine consumers to butter, wine consumers to
beer, banking products
PRODUCTS
Market penetration strategy is the least risky since it leverages many of the firm's existing resources and capabilities. In a
growing market, simply maintaining market share will result in growth, and there may exist opportunities to increase market share if
competitors reach capacity limits. However, market penetration has limits, and once the market approaches saturation another
strategy must be followed if the firm is to continue to grow
41
Business strategy growth
● New market segments: Coffee, water, sport drinks, milk, cars, etc.
M MARKET PRODUCT ● Geographical expansion: regional, national, international
A Current
R
PENETRATION DEVELOPMENT ● New distribution channels: a strategy between market penetration and
market development
K
E
MARKET
‒ Pharma “traditional” products (cosmetic products, oral care)
T through hypermarkets, supermarkets and convenient stores
New DIVERSIFICATION
S DEVELOPMENT
‒ Books through new-stands, airports, , etc.
‒ Sandwiches, drinks, chocolates in vending machines, convenient
Current New
stores or petrol stations
PRODUCTS
‒ Internet, eCommerce
Market development options include the pursuit of additional market segments or geographical regions. The development of new
markets for the product may be a good strategy if the firm's core competences are related more to the specific product than to its
experience with a specific market segment. A market development strategy typically has more risk than a market penetration strategy
42
Business strategy growth
Develop new products for current markets:
Product development
● Additional features: ABS, Airbag, hybrid...
● Enlarge product range: Gillette – female depilation range of products; Coca –
MARKET PRODUCT
M Cola with the launch of “Zero”, Mars confectionary, Mars ice – cream, Mars
A Current drinks, etc.
PENETRATION DEVELOPMENT
R
K ● Improve quality: courtesy car when the vehicle is under repair, all inclusive
E price of some cars – i.e. Lexus, car pick – up and/or delivery when checking is
MARKET
T needed
New DIVERSIFICATION
S DEVELOPMENT
● New flankers or product refreshment: new packaging for beers, ice –
creams, etc.
Current New ● New products: tablets, smart – phone, voice service devices, etc.
PRODUCTS
● New services: private houses for tourists, freelance drivers… under a market
place model
Product development strategy may be appropriate if the firm's strengths are related to its specific customers rather than to the specific
product itself. In this situation, it can leverage its strengths by developing a new product targeted to its existing customers. Similar to the
case of new market development, new product development carries more risk than simply attempting to increase market share
43
Business strategy growth
Ansof Matrix
Market penetration
Current New
PRODUCTS
44
Business strategy growth
Diversification is the most risky of the four growth strategies since it requires both product and market development. Going into an
unknown market with an unfamiliar product offering..., lack of experience in the new skills and techniques required…., significant expanding
of human and financial resources, which may detracts focus, commitment and sustained investments in the core business….. Diversification
may be a reasonable choice if the high risk is compensated by the chance of a high rate of return
45
Mergers and acquisitions
● Diversification occurs also when a firm looks outside of its current operations and buys
access to new products or markets
– Mergers: two or more firms combine operations to form one corporation, perhaps with a new
name. This requires the agreement by the shareholders of the two companies. These firms are
usually of similar size. One goal of a merger is to achieve management synergy by creating a
stronger management team
46
Competitive advantage from diversification
● Economies of scope
– Efficiencies when using a resource across multiple activities; uses less of that resource than
when the activities are carried out independently
● Economies of scale
– Economies of scope are cost economies from increasing the output of multiple products
– Economies of scale are related to cost economies from increasing output of a single product
47
When diversification will truly create shareholder value
Porter´s test
3. The better–off test: the new business must obtain a competitive advantage that do not exit at
corporate level
The new business must either gain competitive advantage from its link with the corporation or vice-versa.
How will the acquisition provide advantage to either the acquirer or the acquired?
48
Strategy formulation definition
● Method to design the firm strategy, both at corporate level and for each single
type of business
– Business unit strategy: how the firm competes within a particular industry or market. Is
concerned with establishing competitive advantage and the source of the competitive
advantage/s in a business
– Strategy at corporate level: where a firm competes; decisions over the scope of the firm´s
activities, including product scope, geographical scope, decisions regarding diversification,
acquisitions, new ventures, etc. and allocation of resources among them
49
Types of corporate strategy
● Comprises all businesses that belongs to the firm, markets and industries in
which business is developed with appropriate distribution of resources
50
Types of corporate strategy
Ansoff Matrix
Products Technologically Technologically
related non related
Customers
M MARKET PRODUCT N
A Current PENETRATION DEVELOPMENT E
R W Same type Horizontal Diversification
K
E
T MARKET M
Same type
S New DIVERSIFICATION
A Supplier – Customer
Vertical Diversification
DEVELOPMENT
R
K
New Similar type Concentric Diversification
Current E
PRODUCTS
T
S
Concentric Conglomerate
Different type
Diversification Diversification
NEW PRODUCTS
51
Types of corporate strategy
● Concentration strategy – most of the turnover comes from a primary line of business
– McDonald's – centred in fast food - burgers
– Boeing – centred on aviation manufacturing activities
● In a concentration strategy a firm directs all or most of its resources to a single market
(business), to a single product or a single technology
● In this strategy, a company chooses to pursue a large share of one or a few markets
(businesses)
● An inherent risk for this kind of strategy occurs when the demand in the market
suddenly drops or if a strong competitor enters the same market
52
Types of corporate strategy
● Vertical integration strategy – the degree to which a firm owns its upstream suppliers
and its downstream buyers
– Expansion of activities downstream is known as forward integration and expansion upstream is
known as backward integration
Raw materials
Intermediate goods
Manufacturing
After-sales services
53
Types of corporate strategy
● Vertical integration strategy – the degree to which a firm owns its upstream suppliers
and its downstream buyers
– Expansion of activities downstream is known as forward integration and expansion upstream is
known as backward integration
Level of integration
Industry
None Partial Full
value chain
Raw materials
Intermediate goods
Manufacturing
After-sales services
54
Types of corporate strategy
● Vertical integration strategy – the degree to which a firm owns its upstream
suppliers and its downstream buyers
– Expansion of activities downstream is known as forward integration and expansion upstream
is known as backward integration
● Avon – its primary line of business has been the selling of cosmetics door–to–door. Avon achieved a
backward form of vertical integration by entering into the production of its cosmetics
● ESPN is a key element of Disney’s operations within the television business. Rather than depend on
outside production companies to provide talk shows and movies centered on sports, ESPN created its
own production company achieving a backward integration
● Levi Strauss & Co – traditionally a manufacturer of clothing, has diversified forward by opening retail
stores to market its textile products rather than producing them and selling them to another firm to retail
● Apple ownership of its own branded stores. Apple stores are popular in part because store employees
are experts about Apple products. The opening of Apple stores in relevant cities all over the world is a
forward integration
55
Types of corporate strategy
Benefits of vertical integration
● Technical economies from the
physical integration of processes
Vertical integration is effective when:
Value chain for steel cans – Few distributors/suppliers are available in the industry
– Suppliers/distributors or retailers have high profit margins
Iron ore
mining Market
– Suppliers/distributors are unable to meet firm´s needs
Steel
contracts
– Industry is expected to grow significantly
production Vertical – Pricing instability
integration
Steel trip – There are benefits of stable production and distribution
production
Market
contracts
– The firm has enough resources and capabilities to manage the
Can making integration
Vertical
integration &
market
Canning of contracts
food, drinks,
oil, etc.
57
Types of corporate strategy
Smartphones Industry Automotive Industry
Software Components
Apple, Google, RIM, Denso, Bosch, Aisin,
Microsoft & others Seiki, Continental,
Hyundai, Magna
Value chain
Manufacturing integration...
Flextronic, Foxconn, HTC, Assembly
LG, Samsung & others Ford, GM, Hyundai,
Nisan, Toyota, VW
After-sales services
Verizon, Telefónica, China Marketing & Sales
AT&T, Mobile, Vivo, Ford, GM, Hyundai,
Vodafone, etc. Nisan, Toyota, VW
58
Types of corporate strategy
Informal
Low supplier/ Vertical
customer Integration
relationships
Supplier/
customer
partnerships
Formalisation
59
Types of corporate strategy
● Horizontal integration strategy – the acquisition of additional business activities at
the same level of the value chain
– Horizontal growth can be achieved by internal expansion or by external expansion through
mergers and acquisitions of firms offering similar products and services
● Disney-Pixar: Mickey and Nemo, Pinocchio and “Toy Story”, “Cinderella” and “Cars”… The
merger of legendary Walt Disney and Pixar was a match made in cartoon heaven. Disney
had released all of Pixar’s movies before, but with their contract about to run out after the
release of “Cars,” the merger made perfect sense. With the merger, the two companies could
collaborate freely and easily
60
Types of corporate strategy
● Horizontal integration strategy can be effective when:
– Organisation competes in growing industry
– Competitors lack of some capabilities, competencies, skills or resources
– Economies of scale with significant impact
– High industry concentration is allowed by governments
– Organisation with enough resources to manage M&A
61
Types of corporate strategy
● Concentric diversification strategy – expansion through the set – up or acquisition of
new businesses related with the core business
– Microsoft – operating system, soft. tools, security, antivirus, media, web, etc.
– AT&T acquisition of cable companies to control communication distribution
● Technological similarity between the industries which means that the firm is able to leverage
its technical know-how to gain some advantage
– A manufacturer of an industrial adhesives might decide to diversify into adhesives to be sold via
retailers. The technology would be the same, but marketing effort will have to change; i.e. 3M
62
Types of corporate strategy
● Conglomerate diversification occurs when a firm diversifies into areas that are unrelated
to its current line of business managing a portfolio of businesses not related to each other
– Mitsubishi – banks, chemical, automobile, electronic, air conditioned, industrial automation, industrial
visual information systems, elevators, hotels, aluminium...
– Union Pacific – railway industry, gas and oil, mining, optic fibre, etc.
● The firm operates in the market with products and/or services that have no technological or
commercial synergies between them, but which may appeal to new groups of customers
– Even if this strategy is very risky, it could if successful, provide increased growth and profitability
63
Types of corporate strategy
● Alliance: a collaborative agreement between two or more firms, that decide to act
together in order to obtain future common benefits
● Why an alliance?
– Fast and frequent technological changes
– Share know – how: R&D, customers, market knowledge, distribution channels, etc.
– Creation of a network of inter-firms relationships (Zara, Toyota, Benetton)
– Risks in product development (In petroleum most upstream projects are joint ventures)
– Access to new markets
– Share financial support and costs
● Examples
– Star Alliance, Oneworld
– Nissan, Daimler – Benz and Renault
– Google and NASA developing Google Earth
– Starbucks JV with Tata Beverages to break into the Indian retail market
– Nike with Apple to offer real biometric data to an iPhone
– Bulgari Hotels and Resorts; a JV between Marriot and Bulgari
64
Types of corporate strategy
PEUGEOT
and 7% ownership
Joint development
AVTOVAZ
SAAB
40% investment
IBC Vehicles
Ltd. (UK)
SAIC
(Makes vans in UK)
65
Types of corporate strategy
STRATEGIC ALLIANCES
Strategic alliances (capital investment) ● Joint venture (50/50, minority, management control)
66
Types of corporate strategy
Fast
1. Market development
Market development Grand
1. Market penetration
M 2. Market penetration Strategy
A 2. Product development
3. Product development
3. Forward integration Matrix
R 4. Horizontal integration
K 4. Backward integration
5. Divestment
E 5. Horizontal integration
6. Liquidation
T 6. Concentric diversification
Medium
1 2 3 4
2. External coherence – respond to key success factors as an answer to the market environment
3. Internal coherence – between strategic design and operating design; between execution of activities
and the mission
4. Organisation structure – resources, control and follow – up of objectives and action plan
68
Evaluation strategy test
● Best formulated strategies have no value if an implementation plan is not effectively put in
place – evaluation strategy test
6. Management leadership – their words and personal example do have significant influence on the
behaviours, thoughts and feelings of those working with them
69
Classes outline
5. Strategy formulation
7. Strategy implementation
70
Blue ocean versus red ocean strategy
71
Blue ocean versus red ocean strategy
72
Blue ocean versus red ocean strategy
Productions
73
Blue ocean versus red ocean strategy
74
Blue ocean versus red ocean strategy
Make competitors
Strategy Beat competitors
irrelevant
75
Blue ocean versus red ocean strategy
76
Blue ocean versus red ocean strategy
77
Blue ocean versus red ocean strategy
78
Blue ocean versus red ocean strategy
79
Blue ocean versus red ocean strategy
80
Blue ocean versus red ocean strategy
81
Blue ocean versus red ocean strategy
82
Blue ocean versus red ocean strategy
83
Blue ocean strategy; shifting the focus
84
Blue ocean strategy; where to look for inspiration
• Divergence
85
Blue ocean strategy; innovation tools
86
Blue ocean strategy; innovation tools
Four actions framework tool (ERRC grip)
Regional
circus
Low cost
Low
• When the curve of value converges with competitors curve, we are in the middle of a red ocean
• If the curve shows a high positioning among all factors, that implies high level of investments and
therefore we should ask ourselves if a high return for the investment is reflected
• A zigzag curve should rise some question marks about the coherence of the strategy or the
existence of contradictions (high levels in some of the factors and the ignorance of other factors)
88
Blue ocean strategy; differentiation and low cost?
89
Thank you very much
for your attention
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