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Ch5Notes - Strategy Formulation Situation Analysis and...

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Unformatted text preview: Strategy Formulation: Situation Analysis and Business Strategy Cor pora te- and Bus iness-level Strat egy Bus iness Uni t 1 Com petitive Adv antag e Bus iness Uni t 2 Com petitive Adv antag e Bus iness Uni t 3 Com pet itive Adv antag e Cor pora te Hea dqu arters Com pany-wide strategy Strategy Formulation: Situation Analysis and Business Strategy Gain competitive advantage by exploiting core competencies in specific, individual product markets (Strategic Business Unit ). Success depends on “O’s” and “T’s” in external environment and leveraging of resources, capabilities – distinctive competencies – to meet the “O’s” and “T’s”. Cost Leadership Perform value chain activities cost effectively Differentiation Perform value chain activities in unique manner. Strategy Formulation: Situation Analysis and Business Strategy Competitive Advantage - Cost Leadership Drivers for Controlling Costs  Economies of Scale (longer production runs for fewer products, geographically organized sales forces, multiple product promotions, etc.)  Learning and experience curve effects (modify product design to enhance manufacturing efficiencies, on-going discussion with suppliers, responsiveness to changes in customer preferences, etc.)  Cost of key resource inputs (locational input factors, bargaining power vs. suppliers) Strategy Formulation: Situation Analysis and Business Strategy Competitive Advantage - Cost Leadership Revamping Makeup of Value Chain Simplifying product design Offering stripped down versions Shifting to streamlined or flexible manufacturing processes Using direct to end use approaches Relocating facilities close to suppliers, buyers, or both Strategy Formulation: Situation Analysis and Business Strategy Competitive Advantage - Cost Leadership Implications for Pursing Cost Leadership Strategy • Low-cost advantages that reduce the likelihood of pricing pressures from buyers • Truly sustained low-cost advantage may push rivals into other areas. • New entrants competing on price must face an entrenched cost leader without the experience to replicate every cost advantage • Low-cost advantages should lessen the attractiveness of substitute products. • Higher margins allow low-cost producers to withstand supplier cost increases and often gain supplier loyalty over time. Strategy Formulation: Situation Analysis and Business Strategy Competitive Advantage - Cost Leadership Risks of Cost Leadership Strategy > Many cost-saving activities are easily duplicated....
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Ch5Notes - Strategy Formulation Situation Analysis and...

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