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    Chap 006

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    Chap 006

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    heavenfire21
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    stra

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    stra

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    51 views23 pages

    Chap 006

    Uploaded by

    heavenfire21
    stra

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 23

    chapter

    SUPPLEMENTING THE CHOSEN COMPETITIVE STRATEGY OTHER IMPORTANT STRATEGY CHOICES


    Student Version
    McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

    Choosing Strategy Actions that Complement a Firms Competitive Approach

    Decisions regarding the firms operating scope and how to best strengthen its market standing must be made:
    Whether and when to go on the offensive and initiate aggressive

    strategic moves to improve the firms market position.


    Whether and when to employ defensive strategies to protect the

    firms market position.


    When to undertake strategic moves based upon whether it is

    advantageous to be a first mover or a fast follower or a late mover.

    6-2

    Choosing Strategy Actions that Complement a Firms Competitive Approach (contd)

    Decisions regarding the firms operating scope and how to best strengthen its market standing must be made:
    Whether to integrate backward or forward into more stages of the

    industry value chain.


    Which value chain activities, if any, should be outsourced. Whether to enter into strategic alliances or partnership

    arrangements with other enterprises.


    Whether to bolster the firms market position by merging with or

    acquiring another company in the same industry.

    6-3

    Launching Strategic Offensives to Improve a Companys Market Position


    Aggressive

    strategic offensives are called for when a firm:


    Spots opportunities to gain profitable market share

    at the expense of rivals Has no choice but to try to whittle away at a strong rivals competitive advantage Can reap the benefits a competitive edge offersa leading market share, excellent profit margins, and rapid growth
    The

    best offensives use a firms resource strengths to attack its rivals weaknesses.
    6-4

    Blue Ocean Strategy A Special Kind of Offensive


    Involves

    a firm seeking sizable and durable competitive advantage by abandoning its existing markets and, then, inventing a new industry or distinctive market segment in which that firm has exclusive access to new demand.
    By reinventing the circus, Cirque du Soleil annually

    attracts an audience of millions of people who typically do not attend circus events.

    6-5

    Using Defensive Strategies to Protect a Companys Market Position and Competitive Advantage
    Defensive

    strategies help fortify a competitive position by:


    Lowering the risk of being attacked. Weakening the impact of any attack that occurs. Influencing challengers to redirect their competitive

    efforts toward other rivals.


    Good

    defensive strategies help protect competitive advantage but rarely are the basis for creating it.
    6-6

    Signaling Challengers that Retaliation Is Likely


    Publicly

    announce managements strong commitment to maintain the firms present market share Publicly commit firm to policy of matching rivals terms or prices Maintain war chest of cash reserves Make occasional counterresponse to moves of weaker rivals

    6-7

    Timing a Companys Offensive and Defensive Strategic Moves


    When

    to make a strategic move is often as crucial as what move to make. First-mover advantages arise when:
    Pioneering helps build a firms image and reputation

    with buyers Early commitments (technology, market channels) produce an absolute cost advantage over rivals First-time customers remain strongly loyal in making repeat purchases Moving first constitutes a preemptive strike, making imitation extra hard or unlikely
    6-8

    The Potential for Late-Mover Advantages or First-Mover Disadvantages


    Moving

    early can be a disadvantage (or fail to produce an advantage) when:


    Pioneering leadership is more costly than imitation Innovators products are primitive, and do not live up

    to buyer expectations
    Potential buyers are skeptical about the benefits of

    new technology/product of a first mover


    Rapid changes in technology change or buyer needs

    allow followers to leapfrog pioneers

    6-9

    Deciding Whether to Be an Early Mover or Late Mover

    Key Issue:
    Is the race to market leadership a marathon or a sprint?

    Seeking first-mover competitive advantage involves addressing several questions:


    Does market takeoff depend on development of complementary

    products or services not currently available?


    Is new infrastructure required before buyer demand can surge? Will buyers need to learn new skills or adopt new behaviors?

    Are there influential competitors in a position to delay or derail

    the efforts of a first mover?

    6-10

    Vertical Integration: Operating Across More Industry Value Chain Segments


    Involves

    extending a firms competitive and operating scope within the same industry
    Backward into sources of supply Forward toward end users of final product

    Can

    aim at either full or partial integration

    6-11

    Integrating Backward to Achieve Greater Competitiveness


    For

    backward integration to boost profitability a firm must be able to:


    Achieve the same scale economies

    as outside suppliers Match or beat suppliers production efficiency with no drop in quality

    6-12

    When Backward Vertical Integration Becomes a Consideration


    Potential

    situations that create opportunities for cost reduction through backward vertical integration:
    When suppliers have large profit margins

    Where the item being supplied is a major cost

    component
    Where the requisite technological skills are easily

    mastered or acquired
    When powerful suppliers are inclined to raise prices at

    every opportunity
    6-13

    Integrating Forward to Enhance Competitiveness


    Gain

    better access to end users Improve market visibility Include the purchasing experience as a differentiating feature

    6-14

    Forward Vertical Integration and Internet Retailing


    Direct

    selling and Internet retailing have appeal when there is potential to:
    Lower distribution costs Gain a cost advantage over rivals

    Produce higher margins


    Allow for lower prices charged to end users Competing directly against distribution allies can

    create channel conflict and signal a weak commitment to dealers.

    6-15

    Outsourcing Strategies: Narrowing the Scope of Operations

    Outsourcing an activity is a consideration when:


    It can be performed better or more cheaply by outside specialists.
    It is not crucial to achieve a sustainable competitive advantage

    and will not hollow out capabilities, core competencies, or technical know-how of a firm.
    It improves organizational flexibility and speeds time to market.
    It reduces a firms risk exposure to changing technology and/or

    buyer preferences.
    It allows a firm to concentrate on its core business, leverage its

    key resources and core competencies, and do even better what it already does best.

    6-16

    Outsourcing Strategies: Narrowing the Scope of Operations (contd)


    The

    Big Risk of Outsourcing:

    Farming out the wrong types of activities


    Hollowing out strategically important capabilities

    ultimately damages a firms competitiveness and longterm success in the marketplace

    6-17

    Strategic Alliances and Partnerships


    Strategic

    Alliance

    Is a formal collaborative agreement in which two or

    more firms join forces to achieve mutually beneficial strategic outcomes:


    A

    strategically relevant collaboration A joint contribution of resources An assumption of a shared risk An agreement to shared control A recognition of mutual dependence

    Is attractive in that it allows firms to bundle resources

    and competencies that are more valuable in a joint effort than when kept separate.
    6-18

    Reasons for Firms to Enter into Strategic Alliances

    To expedite development of new technologies or products To overcome deficits in technical or manufacturing expertise To bring together personnel of each partner to create new skill sets and capabilities To improve supply chain efficiency To gain economies of scale in production and/or marketing To acquire or improve market access through joint marketing agreements
    6-19

    Reasons for Firms to Continue in Strategic Alliances


    Alliances

    are likely to be long-lasting when:

    They involve collaboration with suppliers or

    distribution allies. Both parties conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning are emerging.
    Experience

    indicates that:

    Alliances stand a reasonable chance of helping a

    firm reduce its competitive disadvantage but very rarely have alliances proved a strategic option for gaining a durable competitive edge over rivals.
    6-20

    Failed Strategic Alliances and Cooperative Partnerships


    Common

    causes for the failure of 6070% of alliances each year:


    Diverging objectives and priorities An inability to work well together

    Changing conditions that make the purpose of the

    alliance obsolete
    The emergence of more attractive technological paths

    Marketplace rivalry between one or more allies

    6-21

    Merger and Acquisition Strategies


    An

    attractive strategic option for achieving operating economies, strengthening competencies, and opening avenues to new market opportunities:
    Merger
    The

    combining of two or more firms into a single entity, with the newly created firm often taking on a new name
    combination in which one firm, the acquirer, purchases and absorbs the operations of another, the acquired firm

    Acquisition
    The

    6-22

    Typical Objectives of Mergers and Acquisitions


    1. To create a more cost-efficient operation out of the combined firms 2. To expand a firms geographic coverage 3. To extend the firms business into new product categories 4. To gain quick access to new technologies or other resources and competitive capabilities 5. To lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities

    6-23

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