Generic Strategy – Porter

THEME 8 GENERIC STRATEGIES 1. Introduction. 2. The doorkeepers sexual climax competitive strategies ( hail advantage, differentiation advantage and particular(a)ization). 3. The Ans rack ups come on the Growth Matrix ( trade penetration, crossway development, marketplace development, and diversification). 4. An integrating approach. Alfonso VARGAS SANCHEZ 1 Hope is non a dodge, speci ally when internationalizing the club is the pattern 2 strategic Analysis supreme Questions What traffic is the organisation in? manufacturing/retail, and so forth Who do they make do with, and how do they compete? Who ar the organisations stakeholders? mention stakeholders & their influence. What be the external drivers for counterchange? infestation model, macro environment. Five Forces model, micro/ manufacturing environment. How does the organisation gain place? alternative audit, tangible & intangible. entertain Chain and Value transcription compend. Assess the balance i n the embodied portfolio, BCG matrix. How should I compete? Porters generic strategies low be, differentiation, specialization. What are my strategical movements? Mergers/acquirements, etc. 3 committee Vision Values PEST analysis hawkish Forces P. C. Industry Attractiveness S C. C. S. P. B (threats & opportunities)Value Chain activities & linkages F. I. T. D. HH. RR. PR. Value System (linkages) other SBUs (synergies) & suppliers buyers value shackles dodging formulation, at three levels CBF Companys Competitive send (Resourceestablish View) make up advantage or uniqueness (strengths & weaknesses) I. L. OP. O. L. M&S A-S. S. schema ELEMENTS LEVELS BUSINESS SCOPE RESOURCES & CAPABILITIES COMPETITIVE ADVANTAGES SYNERGIES incorporated (1) (1) (1) BUSINESS (2) (2) (2) FUNCTION (3) (3) 5 strategic ADVANTAGE PORTERS coming Exclusivity comprehend by the customer Position of low costs COMPETITIVE SITUATIONBroad (the on the whole DIFFERENTIATION sector) Reduced (only peerle ss segment) cost LEADERSHIP FOCUS or foreshorten SEGMENTATION 6 THE LOW constitute PHENOMENON Two basic ways - crosswayivity. -Economies of plateful & learning/experience. 7 8 9 COSTS LEADERSHIP RESOURCES AND APTITUDES -Sustained investiture of detonating device and favourable access to financial markets. ORGANISATIONAL REQUIREMENTS -Strict insure of costs. -Detailed and frequent control reports. RISKS OR LIMITATIONS -Technological change that tidy sumcels out the experience gained or investing made. -Competitors who learn easily and rapidly. -Stagnation of the product or of the marketing. Inflation of costs that annuls the previous price differential. -Clearly defined organisation -Special aptitudes for and responsibilities. process engineering. -Incentives based on meeting -Close supervision of denary objectives. work and op durationtions. -Products designed for ease of manufacturing. -Low cost of distribution. 10 Reading Designers on hobby to build $12 computer 11 DIFF ERENTIATION RESOURCES AND APTITUDES ORGANISATIONAL REQUIREMENTS RISKS OR LIMITATIONS -Significant aptitudes -Coordination in the midst of the functions of R&D, product in marketing and in product engineering. development and marketing. Strong investment -Qualitative assessments in R&D. and incentives. -Prestige in character reference -Capacity for and technology. at a lower placestanding the market -Full cooperation of and how it changes. the distribution -Appropriate carry ons. organisational social structure for -Long tradition in the stimulating and honour sector, or a unique creativity. cabal of aptitudes obtained in other business activities. -Competitive levels of product prices, in accordance with a dodge of minimum global cost. -The customers no life bulky value the products factors of differentiation. -As the industry matures, imitation reduces the perceived ifferentiation. 12 Mention some brands for which you are willing to pay a support price 13 SPECIALISATION RE SOURCES AND APTITUDES -Resources and aptitudes of special application and interest in the companys celestial orbit of operation. -Dominance of the relevant technology and of the engineering of the product. - grocery storeing capacity. -Ability in the use of limited preferences. -Other competitors are vary in part of the market of the already specialise company. ORGANISATIONAL REQUIREMENTS -Flexible and efficient organisation structure. -Corporate socialisation relevant and particular proposition to its areas of specialisation (products and markets).RISKS OR LIMITATIONS -The differences in costs compared with nonspecialized companies are so wide that the advantages of specialisation are eliminated. -Close coordination between -The market in which the functions. company is specialized reduces its differences -Rapid response to changes with respect to the global market. in the environment. 14 15 16 A niche strategy within a declining industry Reading Cassettes linger long after ex pected demise 17 Segmentation variables Varieties of products. Types of purchaser. Distribution channels. Geographic areas. display case chromatic oil market. 18Segmentation matrix (1) fount OF PURCHASER VARIETIES OF PRODUCTS (QUALITY) chromatic oil color perfect(a) Olive inunct Extra complete(a) Olive inunct Final customer (bottled product) Restaurants, etc. (bulk product) 19 Segmentation matrix (2) TYPE OF DISTRIBUTION air VARIETIES OF PRODUCTS (QUALITY) Olive petroleum consummate(a) Olive Oil Extra Virgin Olive Oil Generic Specific 20 claim segmentation matrixes (1+2) TYPE OF DISTRIBUTION CHANNEL VARIETIES OF PRODUCTS (QUALITY) Virgin Olive Oil for last customers (bottled product) Extra Virgin Olive Oil for final customers (bottled prod. ) Generic Specific 21 Segmentation matrix (3)GEOGRAPHIC AREA VARIETIES OF PRODUCTS (QUALITY) Virgin Olive Oil for final customers utilise a generic distribution channel Extra Virgin Olive Oil for final customers victimization a spe cific distribution channel National grocery store (a) external trade (c) (b) (d) 22 The selection of a segment/s draw within the same industry in that location are segments with different levels of attractiveness. INTERRELATIONSHIPS choose the most(prenominal) beneficial combination of segments. SUSTAINABILITY your business area should lead to a strong (defensible) position. (1) morphologic attractiveness (competitive forces). (2) Size and growth. 3) Position of the company. (4) Advantages in costs or in differentiation. (5) be of coordination, of commitment and of inflexibility. Against (6) Competitors with looseer objectives. (7) Imitation. (8) Substitution. 23 Example olive oil market SEGMENTS / CRITERIA ATTRACTIVENESS INTERRELATIONS SUSTAINABILITY (1) (2) (3) (4) (5) (6) (7) (8) (a) (b) (c) (d) 24 Criticisms of Porters framework hybridization strategies could be employed without stuck in the affection. speak to leadership alone does not sell products. Differentiation strategies can be used to increase sales volumes alternatively than to charge a premium price.Price can sometimes be used to differentiate. A generic strategy can not give a competitive advantage. Arguably, the resource based strategy has superseded this generic strategy framework. 25 A company moldinessiness produce at low cost, slice alike innovating it must deploy the massed resources of a large corporation, turn showing the entrepreneurial flair of a small start-up it must chance upon high levels of reliability and consistency, while also being flexible (Grant, 2012). 26 OPTIONS FOR GROWTH ANSOFFS fire accredited PRODUCTS NEW PRODUCTS ANSOFFS APPROACH contemporary PRODUCTS NEW PRODUCTS CASE STUDYstream MARKETS Market Penetration Product maturement CURRENT MARKETS involution of Products NEW MARKETS Market Development variegation NEW MARKETS of Markets diversification 27 The Growth Matrix Sub-strategies active Market Penetration -Intensification. -Relaunching. -Imitat ion. - drop-off of costs/prices. -Disaggregation. Product Development -New products (R&D, innovation). -New product lines. -New run. MARKETS New Market Development -New territories internationalisation. -New segments of purchasers. -New distribution channels. -New possibilities for utilization. diversification - concentrical (or related). By conglomerates (or orthogonal). Existing PRODUCTS New 28 INTERNATIONALIZATION & globalization 29 INTERNATIONALIZATION & GLOBALIZATION Reading Chinas develop food industry faces scrutiny 30 outside(a) schema Opportunities and Outcomes Identify International Opportunities Explore Resources and Capabilities delectation Core competency Strategic Competitiveness Management Outcomes Problems and Risks International Strategies Increased Market Size counter on Investment Economies of Scale and knowledge Location Advantage International commerce-Level outline (*) Multidomestic strategy worldwide Strategy multinational StrategyModes of Entry Exporting Licensing Strategic Alliances Acquisition Establishment of New Subsidiary higher(prenominal) Performance Returns Innovation (*) Low cost or Differentiation. Standardization vs Adaptation. Multidomestic vs global. Management Problems and Risks intensity of Market Drivers Aircraft Computers Automobiles Soft Drinks Toothpaste sell Banking hold in Publishing Baked Goods Low Multidomestic lofty Global Strength of Cost Drivers Pharmaceuticals Aircraft Computers Automobiles Toothpaste Retail Banking Baked Goods Soft Drinks Low Multidomestic blue Global Corporate-Level International StrategiesMulti-Domestic Strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in separately country. Products and serve are tailored to local anesthetic markets. Business units in each country are independent of each other. It assumes markets differ by country or regions. Focus on competition in each market. great strategy among European firms due to br oad variety of cultures and markets in Europe. Corporate-Level International Strategies Global Strategy Products are standardized crosswise national markets. Decisions regarding business-level strategies are centralized in the home office.Strategic business units (SBU) are fictive to be interdependent. Emphasizes economies of scale. Often lacks responsiveness to local markets. Requires resource sharing and coordination across borders (which also makes it difficult to manage). Corporate-Level International Strategies Transnational Strategy Seeks to come upon both global efficiency and local responsiveness. Difficult to achieve because of cooccurring requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness. moldiness pursue organizational learning to achieve competitive advantage.International Corporate Strategy When is each strategy appropriate? game Global Strategy Need for G lobal integrating Transnational MultiDomestic Low Low High Need for Local Market reactivity rough-and-ready Standardization Coca-Cola McDonalds Barbie The All-American Girl Goes foreign Barbie is more than 40 years old. change in 130 countries. National adaptations physiologic features. Costumes. Activity sets. Standardized physique scaley to 62, 110 lbs. 38-18-28. Effective Adaptation McMutton Pie in Australia. Wendys pewee sandwich in Japan. Campbells noncondensed soups in the UK. Coca-Colas 175 ml containers in Japan.Cadillac Seville 1997 Asian edition Right-hand drive, shorter seats, circumferent pedals, 10 shorter & retractable mirrors. Limits to International Expansion (beyond political and economic jeopardizes) Management Problems Cost of coordination across diverse geographical business units. Institutional and cultural barriers. Understanding strategic intent of competitors. The overall complexity of competition. diversification Why? Growth, Profitability an d Risk Reduction Dont put all your eggs in one ring 42 DIVERSIFICATION Three all-important(a) foot races for judging diversification (Porter) -The attractiveness ravel Is the target industry attractive?Use the 5forces model to assess its attractiveness. -The cost-of-entry test Is the cost of the diversification worth it? allow for the diversify firm create enough excess value to justify the cost? -The better-off test Does the diversification move produce opportunities for synergies? Will the company be better off after the diversification than it was before? How and why? Potential advantages 1. Economies of scope (cost savings from using a resource in dual activities carried out in combination). 2. Internal market (for capital and staff). Reading Perils of diversification. The era of diversification, 50s-80s. Refocusing, 90s-onwards. 43 DIVERSIFICATION Because of its high risk, galore(postnominal) companies attempting to diversify have led to failure. However, in that resp ect are some unattackable examples of made diversification -Virgin Group move from medicament production to travel and mobile phones. -Walt Disney moved from producing animated movies to theme parks and spend properties. -Canon diversified from a camera-making company into producing an solely new range of office equipment. 44 DIVERSIFICATION Reading Toyota tunes up violinplaying golem 45 Diversification & PerformanceThe findings of empirical enquiry How do diversified firms perform coition to specialised firms? -No consistent, systematic relationship has been emerged. -High levels of diversification are associated with deteriorating gainfulness. -Timing is key. Does related diversification pass unrelated diversification? -Diversification into related industries should be more profitable than diversification into unrelated industries. -Peters and Watermans golden regulation Stick to the Knitting. Empirical studies have defined relatedness in terms of similarities functiona l relatedness.Strategic relatedness. 46 Related Diversification Businesses are distinct but their value chains possess strategic fit in operations, marketing, management, R&D. distribution, labor, etc. Therefore, they tend to wreak economies of scope. Tend to (historically) outperform unrelated diversifications. 47 Unrelated Diversification No green linkage or element of strategic fit among SBUs i. e. , no meaningful value chain interrelationships. Dominant logic spreads businesses risk over multiple industries, stabilizing corporate profitability (in theory).Strategic approach any company that can be acquired on good financial terms & offers good prospects for profitability is a good business for diversification. Conglomerates (clusters of businesses under central, mainly financial, management control), such as GE. 48 Example GE Diversification helps to strengthen General Electric when one business is going badly, the other goes well, which contributes to the perceptual constan cy and growth of the company. These words of Ricardo Artigas, fault President of the General Electric Company, intelligibly reflect the sense behind this trategic option, the return of which is a company configured into xii divisions 1. Aircraft Engines 2. Appliances (domestic electrical appliances) 3. Capital Services (financing services for customers) 4. Lighting 5. Medical Systems 6. NBC (television channel) 7. Plastics 8. Power Systems (electrical efficiency generation) 9. Electrical Distribution and Control (power cables, transformers, etc. ) 10. Information Services 11. Motors & Industrial Systems 12. transportation system Systems. 49 AN INTEGRATING APPROACH leaders in costs Differentiation nutriment Growth Restructuring Internal External ExpansionDiversification of Products of Markets homocentric Conglomerate Vertical Integration level Integration 50 AN INTEGRATING APPROACH GROWTH STRATEGIES Expansion Internal Diversification Expansion External Diversification of Prod ucts of Markets Concentric Conglomerate of Products of Markets Concentric Conglomerate Strategic Advantage Costs Differentiation Readings from the text Pascual & Lagasa -internal growth based on diversification- Fontaneda & La Casera -external 51 growth based on the expansion of products and markets-. Progress is when things get simpler, not more complicated Bruno Munari, Italian artist. 52