This chapter is the first of three chapters dealing with the formulation of strategy. Following the strategic decision-making process introduced in Chapter One and depicted in Figure 1.5, these chapters emphasize steps 5(a), situation analysis of strategic factors, 5(b), the review and revision of a firm's current mission and objectives, 6(a), the generation and evaluation of strategic alternatives, and 6(b), the selection and recommendation of the best alternative. Situation analysis is conducted using S.W.O.T. in the form of generating a Strategic Factors Analysis Summary (SFAS) Matrix to summarize a corporation's strategic factors and to help identify propitious niches. Once a corporation's strengths, weaknesses, opportunities, and …show more content…
Customers either leave the market by buying a substitute product or stay in the market by buying a competitor's product. Such unfulfilled demand encourages competitors which may drive the original company/SBU out of the niche. 2) Expands - Its own success in the niche may cause the company/SBU to move into nearby niches. The need for resources in the battle for new niches may cause the company/SBU to take its original niche for granted. Small competitors may take advantage of the lack of concern by fighting to expand their piece of the market, thereby squeezing the company/SBU out of the original market and thus out of its niche. If a company/SBU loses its niche, it is likely to become much less profitable unless it can find a new niche. The specifics of what might happen depend upon how the company/SBU originally lost its niche. The possibilities for class discussion can be almost endless. 2. Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy simultaneously? Why or why not? Michael Porter argues that a business unit which is unable to achieve one of the competitive strategies is likely to be "stuck in the middle" of the competitive marketplace with no competitive advantage. That unit, according to Porter, is doomed to below-average performance. (See Porter's Competitive Advantage, page 16.) Research by Greg Dess and Peter Davis as well as by Rod White,
Porter, M. E. (1985). The competitive advantage: creating and sustaining superior performance. NY: Free Press
Chapter 6 – Strategy Formulation: Situation Analysis and Business StrategyChapter 7 – Strategy Formulation: Corporate StrategyChapter 8 – Strategy Formulation: Functional strategy and Strategic Choice
There are three areas in which a niche player can chip away at a larger competitor’s base: go after a different way of delivering a product; provide a premium product or service; and specialize in a one product line.
7. Which one of the following generic types of competitive strategy is typically the best strategy for a company to employ?
As a result, historically small niche markets are gaining an increasing prevalence within the U.S. marketplace and have substantially higher buying power. If companies are to continue to thrive in this modern economic environment they must be able to recognize and understand the implications of these demographic shifts. This includes the ability of a company to improve marketplace understanding as well as to implement business practices that will retain a diverse and talented
The strong competition among rivals pursuing a similar strategy is vastly based on product differentiation and a niche market attraction, as companies are constantly working to surpass their competitors and seek to provide just what certain consumers want.
Because of the nature of the distinctiveness of the products offered, once a market niche is saturated it because very difficult for competition to enter.
Also, strategic decision making carried out through the process of strategic management. Like the other terms in business policy, strategic management has also been defined and interpreted differently by various author. There are also differences of opinion regarding the phases of the strategic management process and the elements they contain. These authors include 3 sub processes overall strategic management process. Through the strategy scenario analysis, strategy formulation, strategy implementation, and strategy analysis ( Azhar Kozami, 2005).
Determine the strategic factors of the company 70 12. Generating alternative strategies by using a TOWS matrix 73 13. Evaluate strategic alternatives – pros and cons. 74 14. Recommend strategic for company (short, medium, and long term) 81 1.
The purpose of this Case Study Analysis is to implement the knowledge that was gained during the course MBA 555 Business strategy. In the first part of the analysis will be described the history of the company, its products, the key success factors and the changes that were
Entrants erode the market and rarely grow it enough to the incumbent’s advantage. New entrants have an impact on the industry business but at a moderate level. This is mainly because new firms will find it difficult to compete against the incumbents’ strong brand, like Starbucks and McDonalds, and because the market is saturated. However, the costs of entry are relatively low. Most of the raw materials are cheap and the distribution chain is not complicated. This makes it easy for new companies to enter the market. Also, established companies might leverage their brands as they enter the industry to compete against the incumbents.
There are two schools of thought pertaining to how firms should choose the competitive strategy that best suits them. One is of the opinion that firms should choose one of the generic strategies and commit all resources to making it work. Porter belongs to this category. They believe that the value chain necessary for cost leadership is quite different from that of differentiation strategy and that while differentiation deals with better quality, cost leadership deals with lowering costs wherever possible.(DESS and DAVIES 1984) What porter articulated here is that there is need for strategic clarity.
“Competitive strategy involves positioning a business to maximize the value of the capabilities that distinguish it from its competitor’s” (Porter 1980:47). A successful business plan requires first and foremost the formation of an appropriate strategy. Through the implementation of a suitable strategy, the company is able to obtain its own industry niche and gain an understanding of its customers (Porter 1985). Whichever strategy is adopted it must be adequately integrated within the firms goals and missions to achieve a competitive advantage (Parker and Helms 1992).
The threat of substitutes is the availability of a product that the consumer can purchase instead of the industry’s product (Free management books, n,d ). A substitute product is a product that produced by other industry and offer similar benefits to the customer as the product produced by the firms within the industry. The threat of substitutes can affect the competitive environment for the firm in that industry and also influence the profitability of the industry. This threat affects profitability of the industry because the consumers can choose to purchase similar product from other industry to instead of the company’s product. Besides that, the more the close substitute product can make the industry more competitive and decrease the profit potential of the firm in the industry whereas the less the close substitute product can make the industry less competitive and
A company that conversely was very successful in finding its niche is Geek Squad. When given the opportunity to expand they were hesitant, and took their time. They built their brand, then expanded, while GovWorks expanded before having a chance to see how the company would grow in the long-term.