Three generic strategies, including advantages and disadvantages (cost, differentiation and focus - major emphasis)
Overall cost leadership is based on creating a low-cost position relative to a firm’s peers, managing relationships throughout the entire value chain to lower costs. (McDonalds, Walmart)
Pitfall: Too much focus on one or a few value chain activities. Increase in the cost of the inputs on which the advantage is based. The strategy is imitated too easily. A lack of parity on differentiation. Reduced flexibility. Obsolescence of the basis of a cost advantage.
Differentiation implies products and services that are unique & valued, emphasis on non-price attributes for ...view middle of the document...
Maturity: Aggregate industry demand slows, market becomes saturated, few new adopters, direct competition becomes predominant, marginal competitor begin to exit.
Strategies: Create efficient manufacturing operations, lower costs as customers become price-sensitive, adopt reverse or breakaway positioning.
Decline: Industry sales and profits begin to fall, price competition increases, industry consolidation occurs.
Strategies: Maintaining the product position, harvesting profits & reducing costs, exiting the market, consolidating or acquiring surviving firms.
- Turn-around strategies
A turnaround strategy involves reversing performance decline & reinvigorating growth toward profitability through asset & cost surgery, selected market & product pruning, piecemeal productivity improvements.
- Corporate-level strategy
- Vertical integration
Vertical integration becoming its own supplier or distributor through backward integration, forward integration.
- Transaction costs
Every market transaction involves some transaction costs, search costs, negotiation cost, contract cost, monitoring costs, enforcement costs, need for transaction specific investments, administrative costs.
- Portfolio management and the BCG matrix (major emphasis)
Portfolio management involves a better understanding of the competitive position of an overall portfolio or family of businesses by suggesting strategic alternatives for each business, identifying priorities for the allocation of resources, using Boston Consulting Group’s Growth/share matrix.
- Means of diversification (related and unrelated), including M&A, JVs and strategic alliances and internal development (major emphasis)
Related diversification enables a firm to benefit from horizontal relationships across different businesses.
Unrelated diversification enables a firm to benefit from vertical or hierarchical relationships between the corporate office & individual business units.
- Divesting businesses
Cutting the financial losses of a failed acquisition, redirecting focus on the firm’s core businesses, freeing up resources to spend on more attractive alternatives, raising cash to help fund existing businesses.
- Porter's "Diamond Framework"
Factor endowments involve factors of production: land, capital, labor, factors of production must be industry & firm specific, must be rare, valuable, difficult to imitate, and rapidly & efficiently deployed.
Demand conditions: refer to the demands that consumers place on an industry. Demanding consumers drive firms in that country to meet high standards, upgrade existing products and services, create innovative products and services, better anticipate future global demand, proactively respond to product & service requirements.
Related and supporting industries enable firms to manage inputs more effectively, a competitive supplier base, reduces manufacturing costs,...