Strategic Management
Code:22MBACC401
IV Semester
Business and Functional
Strategies
Strategy Formulation
Step 1: Frame the corporate mission, values and goals; Conduct SWOT analysis
Step 2: Create the Business Model for Competitive Advantage
Step 3: Formulate best strategies:; business level; function level; corporate
level
Strategy Implementation
Step 4: Frame a Corporate Governance and Business Ethics Code
Step 5: Frame the best Organization Structure and Organization Culture
Step 3: Formulate best strategies: function level; business level; corporate level
Functional-level strategies are strategies
aimed at improving the effectiveness of a
company’s operations.
Identifying the Components of a Single-Business
Company’s Strategy
Approaches to Assess How Well the
Present Strategy Is Working
• Qualitative assessment – • Quantitative assessment –
What is the strategy? What are the results?
– Completeness – Is company achieving its
financial and strategic
– Internal consistency objectives?
– Rationale – Is company an above-
– Relevance average industry performer?
Key Indicators of How Well
the Strategy Is Working
• Trend in sales and market share
• Acquiring and/or retaining customers
• Trend in profit margins
• Trend in net profits, ROI, and EVA
• Overall financial strength and credit ranking
• Efforts at continuous improvement activities
• Trend in stock price and stockholder value
• Image and reputation with customers
• Leadership role(s) – Technology, quality,
innovation, e-commerce, etc.
3
Four Functional-level Strategies in a Company
• Assessing whether a firm’s costs are competitive wit
those of rivals is a crucial part of company analysis
• Key analytical tools
– Value chain analysis
– Benchmarking
The Concept of a
Company Value Chain
• A company’s business consists of all activities
undertaken in designing, producing, marketing,
delivering, and supporting its product or service
• A company’s value chain consists of a linked set of
value-creating activities performed internally
• The value chain contains two types of activities
– Primary activities – where most of
the value for customers is created
– Support activities – facilitate
performance of the primary activities
Representative
Company Value Chain
Characteristics of
Value Chain Analysis
• Combined costs of all activities in a company’s
value chain define the company’s internal cost
structure
• Compares a firm’s costs activity
by activity against costs of key rivals
– From raw materials purchase to
– Price paid by ultimate customer
The Value Chain System
• Assessing a company’s cost competitiveness
involves comparing costs all along the industry’s
value chain
• Suppliers’ value chains are relevant because
– Costs, performance features, and quality of inputs
provided by suppliers influence a firm’s own costs
and product performance
• Forward channel allies’ value chains are relevant
because
– Costs and margins are part of price paid
by ultimate end-user
– Activities performed affect end-user satisfaction
Representative Value Chain for an Entire Industry
Strategy and
Competitive Advantage
• Competitive advantage exists when a firm’s
strategy gives it an edge in
– Attracting customers and
– Defending against competitive forces
Key to Gaining a Competitive Advantage
• Convince customers firm’s product / service offers
superior value
– A good product at a low price
– A superior product worth paying more for
– A best-value product
Pitfalls of Low-Cost Strategies
• Being overly aggressive in cutting price
• Low cost methods are easily imitated by rivals
• Becoming too fixated on reducing costs
and ignoring
– Buyer interest in additional features
– Declining buyer sensitivity to price
– Changes in how the product is used
• Technological breakthroughs open up cost
reductions for rivals
Differentiation Strategies
Objective
• Incorporate differentiating features
that cause buyers to prefer firm’s
product or service over brands of rivals
Benefits of Successful Differentiation
A product / service with unique, appealing
attributes allows a firm to
🡺 Command a premium price and/or
🡺 Increase unit sales and/or Which
hat is
🡺 Build brand loyalty
unique?
= Competitive Advantage
Sustaining Differentiation: Keys to Competitive
Advantage
• Most appealing approaches to differentiation
– Those hardest for rivals to match or imitate
– Those buyers will find most appealing
• Best choices to gain a longer-lasting, more
profitable competitive edge
– New product innovation
– Technical superiority
– Product quality and reliability
– Comprehensive customer service
– Unique competitive capabilities
Pitfalls of
Differentiation Strategies
• Buyers see little value in unique attributes of product
• Appealing product features are easily copied by rivals
• Differentiating on a feature buyers do not perceive as
lowering their cost or enhancing their well-being
• Over-differentiating such that product
features exceed buyers’ needs
• Charging a price premium
buyers perceive is too high
• Not striving to open up meaningful gaps in quality,
service, or performance features vis-à-vis rivals’
products
