SM , Parluhutan, Prof. Dr. Hapzi Ali, CMA Multi Business Strategy ” Universitas Mercu Buana, 2018
- 1. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-1 Beyond Competitive StrategyBeyond Competitive Strategy Other Important Strategy ChoicesOther Important Strategy Choices 66 Chapter Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy State University-Florida and Western Region
- 2. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-2 Chapter RoadmapChapter Roadmap Strategic Alliances and Collaborative Partnerships Merger and Acquisition Strategies Vertical Integration Strategies Outsourcing Strategies Using Offensive Strategies to Secure Competitive Advantage Using Defensive Strategies to Protect the Company’s Position Strategies for Using the Internet as a Distribution Channel Choosing Appropriate Functional-Area Strategies First-Mover Advantages and Disadvantages
- 3. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-3 Fig. 6.1: A CompanyFig. 6.1: A Company’’s Menu of Strategy Optionss Menu of Strategy Options
- 4. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-4 Strategic Alliances andStrategic Alliances and Collaborative PartnershipsCollaborative Partnerships Companies sometimes use strategic alliances or collaborative partnerships to complement their own strategic initiatives and strengthen their competitiveness. Such cooperative strategies go beyond normal company-to-company dealings but fall short of merger or full joint venture partnership.
- 5. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-5 Alliances Can Enhance aAlliances Can Enhance a FirmFirm’’s Competitivenesss Competitiveness Alliances and partnerships can help companies cope with two demanding competitive challenges Racing against rivals to build a market presence in many different national markets Racing against rivals to seize opportunities on the frontiers of advancing technology Collaborative arrangements can help a company lower its costs and/or gain access to needed expertise and capabilities
- 6. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-6 Why Are StrategicWhy Are Strategic Alliances Formed?Alliances Formed? To collaborate on technology development or new product development To fill gaps in technical or manufacturing expertise To acquire new competencies To improve supply chain efficiency To gain economies of scale in production and/or marketing To acquire or improve market access via joint marketing agreements
- 7. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-7 Why Alliances FailWhy Alliances Fail Ability of an alliance to endure depends on How well partners work together Success of partners in responding and adapting to changing conditions Willingness of partners to renegotiate the bargain Reasons for alliance failure Diverging objectives and priorities of partners Inability of partners to work well together Changing conditions rendering purpose of alliance obsolete Emergence of more attractive technological paths Marketplace rivalry between one or more allies
- 8. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-8 Merger and Acquisition StrategiesMerger and Acquisition Strategies Merger – Combination and pooling of equals, with newly created firm often taking on a new name Acquisition – One firm, the acquirer, purchases and absorbs operations of another, the acquired Merger-acquisition Much-used strategic option Especially suited for situations where alliances do not provide a firm with needed capabilities or cost-reducing opportunities Ownership allows for tightly integrated operations, creating more control and autonomy than alliances
- 9. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-9 Objectives of MergersObjectives of Mergers and Acquisitionsand Acquisitions To pave way for acquiring firm to gain more market share and create a more efficient operation To expand a firm’s geographic coverage To extend a firm’s business into new product categories or international markets To gain quick access to new technologies To invent a new industry and lead the convergence of industries whose boundaries are blurred by changing technologies and new market opportunities
- 10. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-10 Pitfalls of MergersPitfalls of Mergers and Acquisitionsand Acquisitions Combining operations may result in Resistance from rank-and-file employees Hard-to-resolve conflicts in management styles and corporate cultures Tough problems of integration Greater-than-anticipated difficulties in Achieving expected cost-savings Sharing of expertise Achieving enhanced competitive capabilities
- 11. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-11 Vertical Integration StrategiesVertical Integration Strategies Extend a firm’s competitive scope within same industry Backward into sources of supply Forward toward end-users of final product Can aim at either full or partial integration Internally Performed Activities, Costs, & Margins Activities, Costs, & Margins of Suppliers Buyer/User Value Chains Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners
- 12. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-12 Strategic AdvantagesStrategic Advantages of Backward Integrationof Backward Integration Generates cost savings only if volume needed is big enough to capture efficiencies of suppliers Potential to reduce costs exists when Suppliers have sizable profit margins Item supplied is a major cost component Resource requirements are easily met Can produce a differentiation-based competitive advantage when it results in a better quality part Reduces risk of depending on suppliers of crucial raw materials / parts / components
- 13. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-13 Strategic AdvantagesStrategic Advantages of Forward Integrationof Forward Integration To gain better access to end users and better market visibility To compensate for undependable distribution channels which undermine steady operations To offset the lack of a broad product line, a firm may sell directly to end users To bypass regular distribution channels in favor of direct sales and Internet retailing which may Lower distribution costs Produce a relative cost advantage over rivals Enable lower selling prices to end users
- 14. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-14 Strategic DisadvantagesStrategic Disadvantages of Vertical Integrationof Vertical Integration Boosts resource requirements Locks firm deeper into same industry Results in fixed sources of supply and less flexibility in accommodating buyer demands for product variety Poses all types of capacity-matching problems May require radically different skills / capabilities Reduces flexibility to make changes in component parts which may lengthen design time and ability to introduce new products
- 15. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-15 Whether vertical integration is a viable strategic option depends on its Ability to lower cost, build expertise, increase differentiation, or enhance performance of strategy-critical activities Impact on investment cost, flexibility, and administrative overhead Contribution to enhancing a firm’s competitiveness Pros and Cons ofPros and Cons of Integration vs. De-IntegrationIntegration vs. De-Integration Many companies are finding that de-integrating value chain activities is a more flexible, economic strategic option!
- 16. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-16 Outsourcing StrategiesOutsourcing Strategies Outsourcing involves withdrawing from certain value chain activities and relying on outsiders to supply needed products, support services, or functional activities Concept Internally Performed Activities Suppliers Support Services Functional Activities Distributors or Retailers
- 17. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-17 When Does OutsourcingWhen Does Outsourcing Make Strategic Sense?Make Strategic Sense? Activity can be performed better or more cheaply by outside specialists Activity is not crucial to achieve a sustainable competitive advantage Risk exposure to changing technology and/or changing buyer preferences is reduced Operations are streamlined to Cut cycle time Speed decision-making Reduce coordination costs Firm can concentrate on “core” value chain activities that best suit its resource strengths
- 18. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-18 Strategic AdvantagesStrategic Advantages of Outsourcingof Outsourcing Improves firm’s ability to obtain high quality and/or cheaper components or services Improves firm’s ability to innovate by interacting with “best-in-world” suppliers Enhances firm’s flexibility should customer needs and market conditions suddenly shift Increases firm’s ability to assemble diverse kinds of expertise speedily and efficiently Allows firm to concentrate its resources on performing those activities internally which it can perform better than outsiders
- 19. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-19 Pitfalls of OutsourcingPitfalls of Outsourcing Farming out too many or the wrong activities, thus Hollowing out capabilities Losing touch with activities and expertise that determine overall long-term success
- 20. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-20 Offensive and Defensive StrategiesOffensive and Defensive Strategies Used to build new or stronger market position and/or create competitive advantage Used to protect competitive advantage (rarely used to create advantage) Offensive Strategies Defensive Strategies
- 21. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-21 Types of Offensive StrategiesTypes of Offensive Strategies 1. Initiatives to match or exceed competitor strengths 2. Initiatives to capitalize on competitor weaknesses 3. Simultaneous initiatives on many fronts 4. End-run offensives 5. Guerrilla offensives 6. Preemptive strikes
- 22. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-22 Using Offensive Strategy toUsing Offensive Strategy to Achieve Competitive AdvantageAchieve Competitive Advantage Strategic offensives offering strongest basis for competitive advantage entail An important core competence A unique competitive capability Much-improved performance features An innovative new product Technological superiority A cost advantage in manufacturing or distribution Some type of differentiation advantage
- 23. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-23 Defensive StrategyDefensive Strategy Objectives Lessen risk of being attacked Blunt impact of any attack that occurs Influence challengers to aim attacks at other rivals Approaches Block avenues open to challengers Signal challengers vigorous retaliation is likely
- 24. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-24 Strategies forStrategies for Using the InternetUsing the Internet Strategic Challenge – What use of the Internet should a company make in staking out its position in the marketplace? Five Approaches Use company web site solely to disseminate product information Use company web site as a minor distribution channel for accessing customers and generating sales Use company web site as one of several important distribution channels for accessing customers Use company web site as primary distribution channel for accessing buyers and making sales Use company web site as the exclusive channel for accessing buyers and conducting sales transactions
- 25. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-25 Brick-and-Click Strategies: AnBrick-and-Click Strategies: An Appealing Middle Ground ApproachAppealing Middle Ground Approach Approach Sell directly to consumers and Use traditional wholesale/retail channels Reasons to pursue a brick-and-click strategy Manufacturer’s profit margin from online sales is bigger than that from sales through traditional channels Encouraging buyers to visit a firm’s website educates them to the ease and convenience of purchasing online Selling directly to end users allows a manufacturer to make greater use of build-to-order manufacturing and assembly
- 26. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-26 Strategies forStrategies for Online EnterprisesOnline Enterprises Approach – Use Internet as the exclusive channel for all buyer-seller contact and transactions Success depends on a firm’s ability to incorporate following features Capability to deliver unique value to buyers Deliberate efforts to engineer a value chain that enables differentiation, lower costs, or better value for the money Innovative, fresh, and entertaining website Clear focus on a limited number of competencies and a relatively specialized number of value chain activities Innovative marketing techniques Minimal reliance on ancillary revenues
- 27. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-27 Choosing AppropriateChoosing Appropriate Functional-Area StrategiesFunctional-Area Strategies Involves strategic choices about how functional areas are managed to support competitive strategy and other strategic moves Functional strategies include Research and development Production Human resources Sales and marketing Finance Tailoring functional-area strategies to support key business-level strategies is critical!
- 28. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-28 First-Mover AdvantagesFirst-Mover Advantages When to make a strategic move is often as crucial as what move to make First-mover advantages arise when Pioneering helps build firm’s image and reputation Early commitments to new technologies, new-style components, and distribution channels can produce cost advantage Loyalty of first time buyers is high Moving first can be a preemptive strike
- 29. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-29 First-Mover DisadvantagesFirst-Mover Disadvantages Moving early can be a disadvantage (or fail to produce an advantage) when Costs of pioneering are sizable and loyalty of first time buyers is weak Innovator’s products are primitive, not living up to buyer expectations Rapid technological change allows followers to leapfrog pioneers
- 30. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.6-30 Principle 1 Being a fast follower can sometimes yield as good a result as being a first mover Principle 2 Being a late-mover may or may not be fatal -- it varies with the situation Principle 3 Being a fast follower can sometimes yield as good a result as being a first mover Timing and Competitive AdvantageTiming and Competitive Advantage