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Chapter 4 - Strategy Formulation

The document outlines various business strategies including value chain analysis, supply chain management, market penetration, product development, low cost leadership, differentiation, and operational effectiveness. It also discusses lifecycle strategies of product introduction, growth, maturity, and decline. Corporate strategies include integrative growth through acquisitions, global strategies treating the world as one market, and considering market share and growth when developing strategies.

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Ianne Kristie Quider
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46 views3 pages

Chapter 4 - Strategy Formulation

The document outlines various business strategies including value chain analysis, supply chain management, market penetration, product development, low cost leadership, differentiation, and operational effectiveness. It also discusses lifecycle strategies of product introduction, growth, maturity, and decline. Corporate strategies include integrative growth through acquisitions, global strategies treating the world as one market, and considering market share and growth when developing strategies.

Uploaded by

Ianne Kristie Quider
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STRATEGY FORMULATION – DESIGNING STRATEGIES

A. BUSINESS STRATEGIES
VALUE CHAIN ANALYSIS – LOOKING AT EVERY PHASE OF THE BUSINESS FROM
PROCUREMENT OF RAW MATERIALS TO THE TIME PRODUCTS REACH ITS CONSUMERS OR
END USERS

SUPPLY CHAIN MANAGEMENT – BROAD CONTINUUM OF SPECIFIC ACTIVITIES EMPLOYED


BY A COMPANY

1. SUPPLY MANAGEMENT (ACTIVITIES: SOURCING AND ORDERING, INVENTORY


MANAGEMENT)
- FOCUS ON MANAGING SUPPLIER RELATIONSHIPS, IDENTIFYING STRATEGIC
SOURCES, ACCURATELY FORECASTING DEMAND REQUIREMENTS, UNDERSTANDING
INVENTORY MANAGEMENT
- GOAL IS TO OBTAIN THE RIGHT MATERIALS BY MEETING QUALITY REQUIREMENTS
IN THE RIGHT QUANTITY FOR DELIVERY AT THE RIGHT TIME AND THE RIGHT PLACE,
FROM THE RIGHT SOURCE, WITH THE RIGHT SERVICE, AND AT THE RIGHT PRICE.

2. PRODUCTION AND OPERATION (ACTIVITIES: MANUFACTURING, ASSEMBLY)


- FOCUS ON QUALITY RAW MATERIALS AND PARTS, EFFICIENT PRODUCTION LAYOUTS
AND PROCESS, AND EMPLOYEES WITH SKILLS AND MOTIVATION WHICH ARE
ESSENTIAL TO EFFECTIVE TRANSFORMATIONAL PROCESSES.

3. LOGISTICS (ACTIVITIES: WAREHOUSING, SCHEDULING, TRANSPORTATION, DELIVERY)


- GOAL IS TO MINIMIZE COSTS OF SAFEKEEPING AND TRANSFERRING INVENTORY
UNITS BY CONSIDERING LOCATION SITE, EASE, GRAVITY OF TRAFFIC, SAFETY AND
LABOR REQUIREMENTS

4. MARKETING AND SALES (ACTIVITIES: PROMOTION, SELLING)


- FOCUS ON OFFERING COMPETITIVE PRICING, SPECIAL OFFERS, QUANTITY
DISCOUNTS, AND VOLUME SALES THROUGH ADVERTISEMENTS
- DEVELOPING SALESPEOPLE THROUGH RESULT-ORIENTED SALES TRAININGS, GIVING
COMPETITIVE SALARIES

B. GROWTH STRATEGIES – INCREASING IN VOLUME AND TURNOVER


1. MARKET PENETRATION – SELLING MORE OF ITS PRODUCTS/SERVICES TO CURRENT
CUSTOMERS (EX. SELLING YAKULT IN 6 PACKS, THEN 12,ETC)
2. MARKET DEVELOPMENT – SEEKING AND TAPPING NEW MARKETS (EX. SELLING PASTEL
TO VISAYAS AND LUZON)
3. PRODUCT DEVELOPMENT – SELLING NEW PRODUCT TO EXISTING MARKET (EX. DOWNY
WITH PERFUME SCENT)
4. DIVERSIFICATION – CREATING NEW AND DIFFERENTIATED PRODUCTS FOR NEW
CUSTOMERS (EX. NIKE +RUN TRACKING SOFTWARE)

C. COMPETITIVE STRATEGIES – LONG TERM ACTION PLANS PREPARED TO GAIN COMPETITIVE


ADVANTAGE
1. LOW COST LEADERSHIP STRATEGY – OFFER PRODUCTS AT LOWEST POSSIBLE COST (EX.
PISO FARE)
2. BROAD DIFFERENTIATED STRATEGY – PROVIDE VARIETY OF PRODUCTS/SERVICES AND
FEATURES THAT COMPETITORS CANNOT OFFER TO COSTUMERS (EX. AMAYA’S
PARAGLIDING)
3. BEST COST PROVIDER STRATEGY – COMBINATION OF LOW COST LEADERSHIP AND
BROAD DIFFERENTIATED STRATEGIES (EX. KAKING)
4. FOCUSED LOWER COST STRATEGY – CONCENTRATES ON LIMITED MARKET SEGMENT
AND CREATES MARKET NICHE BASED ON LOWER COSTS (EX. PURCHASE STOCKS IN BULK,
AVAIL DISCOUNTS, TO SELL AT LOW PRICES, ETC)
5. FOCUSED DIFFERENTIATED COST STRATEGY - CONCENTRATES ON LIMITED MARKET
SEGMENT AND CREATES A MARKET NICHE BASED ON DIFFERENTIATED FEATURES (EX.
BRANDED, HIGH-END PRODUCTS)
6. INNOVATION STRATEGY – NEW AND ORIGINAL PRODUCTS/SERVICES; DIFFICULT TO
IMPLEMENT
7. OPERATIONAL EFFECTIVENESS STRATEGY – AVOID FINANCIAL LEAKS AND
INEFFICIENCIES, HARNESSING BETTER FACILITY AND EQUIPMENT MAINTENANCE,
INCREASING WORK FORCE PRODUCTIVITY
8. ECONOMIES OF SCALE – LOWERS COSTS BECAUSE OF VOLUME IN PRODUCTION
9. TECHNOLOGY STRATEGY – GOING DIGITAL (ACCOUNTING, MARKETING,ETC)
- ENTERPRISE RESOURCE PLANNING – FACILITATES PROCESSES TO RADICAL SPEED BY
SHORTENING COMPLETION TIME

D. LIFECYCLE STRATEGIES – LIFESPAN OF A COMMODITY OR SERVICE I.E FROM INTRODUCTION


STAGE TO ITS GROWTH, MATURITY THEN DECLINE STAGE
1. INTRODUCTION STAGE – LAUNCHING THE PRODUCT/SERVICE FOR ACCEPTANCE
(PROMOTION, GIVING DISCOUNTS, MARKET DEVELOPMENT)
2. GROWTH STAGE – GAINS ACCEPTANCE BY THE CONSUMERS, SALES SLOWLY INCREASE
(BRANDING, CUSTOMER LOYALTY)
3. MATURITY STAGE – ESTABLISHED PRODUCTS TENDS TO BE STEADY (REINVENTING,
FORMULATE NEW MARKET STRATEGIES)
4. DECLINE STAGE – REACH ITS LOWEST POINT, SALES AND PROFITS DECLINE (AGGRESSIVE
MARKETING OR SIMPLY EXIT THE MARKET)

E. STABILITY STRATEGIES – COMFORTABLE WITH CURRENT MARKET NICHE; NOT ADOPTING


ANY GROWTH OR COMPETITIVE STRATEGY

F. RETRENCHMENT STRATEGIES – WHEN A COMPANY ENCOUNTER SERIOUS DIFFICULTIES


1. LIQUIDATION – BUSINESS MAY BE TERMINATED AND ASSETS ARE SOLD
2. DIVESTMENT – WHEN COMPANY DOES NOT FIT WELL IN THE ORGANIZATION,
STOCKHOLDERS WOULD SELL IT OR SET AS SEPARATE CORPORATION

G. CORPORATE STRATEGIES – WIDER SCALE OF GROWTH STRATEGIES


1. INTEGRATIVE GROWTH STRATEGY – EXTERNAL GROWTH STRATEGY; INVOLVES
INVESTING RESOURCES TO ANOTHER COMPANY; ACQUISITION STRATEGIES

HORIZONTAL INTEGRATION – ACQUIRES ANOTHER COMPETING BUSINESS (JOLLIBEE


BOUGHT MANG INASAL)
VERTICAL INTEGRATION – CONSOLIDATION INTO AN ORGANIZATION THE ASPECTS OF A
PRODUCT’S PROCESS (BUYING ONE OF ITS RAW MATERIAL SUPPLIERS – BACKWARD
INTEGRATION; BUY ITS DISTRIBUTORS – FORWARD INTEGRATION)

2. GLOBAL STRATEGIES – TREATS OR CONSIDER THE WORLD AS A WHOLE, ONE MARKET


AND ONE SOURCE OF SUPPLY WITH SLIGHT LOCAL VARIATIONS (MCDONALDS, JOLLIBEE)

INTERNATIONAL STRATEGY – SELLS EXCESS PRODUCTS OUTSIDE HOME MARKETS (RED


BULL (AUSTRIA) STRATEGY IS HOSTING EXTREME SPORTS EVENTS ALL OVER THE
WORLD)
MULTINATIONAL STRATEGY – INVOLVED IN A NUMBER OF MARKETS OUTSIDE THE
HOME COUNTRY (NESTLE)

2 FACTORS THAT IS CONSIDERED IN CORPORATE STRATEGIES


1. MARKET SHARE – RELATIVE TO SALES PERCENTAGE OF A COMPANY IN RELATION TO
TOTAL SALES PERCENTAGE OF THE MARKET CONSIDERED
2. MARKET GROWTH – INCREASE IN DEMAND OVER TIME

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