Chapter Six

Key Points

  • Strategic positioning is based on the principles that strategy is the creation of a unique and valuable position, requires trade-offs in competing, and involves creating a fit among activities so that they interact and reinforce each other.

  • The three levels of strategy are corporate, business, and functional

  • Strategic management works for both large and small firms

  • Strategic management process has five steps plus a feedback loop

    • Step 1 is to establish the mission, vision, and values statement.

    • Step 2 is to do a current reality assessment, to look at where the organization stands and see what is working and what is not.

    • Step 3 is to formulate corporate, business, and functional strategies.

    • Step 4 is strategy execution

    • Step 5 is strategic control

  • Among the tools for assessing the current reality are SWOT and VRIO analysis’

  • Forecasting is another tool for assessing current reality.

  • Benchmarking is a process by which a company compares its performance with that of high performing organizations

  • Three common corporate level strategies are

    • Growth Strategy: Focuses on increasing the company’s size and market share through expansion or acquisition.

    • Stability Strategy: Aims to maintain the current position of the organization and ensure steady performance without significant changes.

    • Renewal Strategy: Involves restructuring or revitalizing the organization to address declining performance or market challenges.

  • The BCG matrix is a means of evaluating strategic business units on the basis of their market growth rate and relative market share, helping organizations to allocate resources effectively and identify which units to invest in, divest, or maintain.

  • Formulating Business level strategy makes use of Porter’s five competitive forces and his four competitive strategies:

    • The five competitive forces are

    • Threat of New Entrants: The ease or difficulty with which new competitors can enter the market.

    • Bargaining Power of Suppliers: The influence suppliers have on the price of goods and services.

    • Bargaining Power of Buyers: The power customers have to affect pricing and quality.

    • Threat of Substitute Products or Services: The likelihood of customers finding a different way of doing what you do.

    • Industry Rivalry: The intensity of competition among existing firms in the industry.

    • The four competitive strategies are

    • Cost Leadership: Aiming to be the lowest cost producer in the industry, allowing for competitive pricing.

    • Differentiation: Offering unique products or services that stand out from competitors, justifying higher prices.

    • Cost Focus: Concentrating on a niche market while maintaining low costs to serve that segment effectively.

    • Differentiation Focus: Targeting a specific market segment with tailored products or services that provide unique value.

  • Strategic implementation is the process of putting strategic plans into effect.

Key Terms

  • BCG matrix

  • benchmarking

  • business-level strategy

  • corporate level strategy

  • cost focus strategy

  • cost leadership strategy

  • current reality assessment

  • defensive strategy

  • differentiation strategy

  • diversification

  • execution

  • focused-differentiation strategy

  • forecast

  • functional level strategy

  • growth strategy

  • innovation strategy

  • organizational opportunities

  • organizational strengths

  • organizational threats

  • organizational weaknesses

  • performance management

  • Porter’s four competitive strategies

  • Porter’s Model for Industry Analysis

  • Related Diversification

  • Scenario analysis

  • stability strategy

  • strategic control

  • strategic positioning

  • strategy formulation

  • strategy implementation

  • sustainable competitive advantage

  • SWOT analysis

  • trend analysis

  • unrelated diversifications

  • VRIO

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