Strategy formulation - is often referred to as strategic

planning or long-range planning and is concerned with

developing a corporation’s mission, objectives, strategies, and
policies.
Situation analysis – is the process of finding a strategic fit
between external opportunities and internal strengths while
working around external threats and internal weaknesses.
Business strategy – focuses on improving the competitive
position of a company’s or business unit’s products or
services within the specific industry or market segment that
the company or business unit serves.
One desired outcome of analysing strategic factors is
identifying a niche where organization can use its core
competencies to take advantage of a particular market
opportunity. A niche is a need in the marketplace that is
currently unsatisfied.
A re-examination of an organization’s current mission and
objectives must be made before alternative strategies can
be generated and evaluated. Even when formulating
strategy, decision makers tend to concentrate on the
alternatives, the action possibilities, rather than on a
mission to be fulfilled and objectives to be achieved.
Michael Porter
proposes two “generic”
competitive strategies
for outperforming other
corporations in a
particular industry:
lower cost and
differentiation.
 Lower cost strategy – is the ability of a
business unit to design, produce, and market a
comparable product more efficiently that its
competitors.
 Differentiation strategy – is the ability to
provide unique and superior value to the buyer in
terms of product quality, special features, or after-
sale service.
 No one competitive strategy is guaranteed to
achieve success, and some companies that have
successfully implemented one of Porter’s
competitive strategies have found that they
could not sustain the strategy .
  Studies of decision making report that half the
decisions made in organizations fail because of poor
tactics.

Tactics – is a specific operating plan

detailing how a strategy is to be
implemented in terms of when where it is to
be put into action.
 The first company to manufacture and sell a new
product or service is called the first mover or
pioneer. Some of the advantages of being a firs
mover are that the company is able to establish a
reputation as an industry leader, move down the
learning curve to assume the cost leader position,
and earn temporarily high profits from buyers
who value the product or service very highly.
 A company or business unit can implement a
competitive strategy either offensively or defensively.

 Offensive tactic – usually takes place in

an established competitor’s market location.

 Defensive tactics – usually takes place in

the firm’s own current market position as a
defence against possible attack by a rival.
Offensive tactics are the methods used to attack a competitor’s position:

 Frontal Assault – the attacking firm goes head to head

with its competitor. It matches the competitor in every
category from price to promotion to distribution channel.
 Franking Maneuver – rather than going straight
for a competitor’s position of strength with a frontal
assault, a firm may attack a part of the market where
the competitors is weak.
 Bypass attack – rather than directly attacking the
established competitors frontally or on its flanks, a
company or business unit may choose to change the
rules of the game.
 Encirclement – usually evolving out of a frontal
assault or flanking maneuver, encirclement occurs as an
attacking company or unit encircle the competitor’s
position in terms of products or markets or both.
 Guerrilla warfare – instead of a continual and
expensive resource-expensive attack on a competitor,
a firm or business unit may choose to “hit and run”.
 Raise Structural Barriers – entry barriers
act to block a challenger’s logical avenues of
attack.
 Increase Expected Retaliation – this tactics is
any action that increases the perceived threat of
retaliation for an attack.

 Lower the Inducement for Attack – the

third type of defensive tactic is to reduce a
challenger’s expectations of future profits in the
industry.
 Collusion – is the active cooperation of firms
within an industry to reduce output and raise
prices in order to get around the normal economic
law of supply and demand.

 Strategic Alliance - is a partnership of two or

more corporations or business units to achieve
strategically significant objectives that are
mutually beneficial.
 Competitive strategies and tactics are used to gain
competitive advantage within an industry by battling
against other firm.

 The two type of cooperative are collusion and

strategic alliances.
 Mutual service consortium – is a partnership of
similar companies in similar industries who pool their
resources to gain a benefit that is too expensive to
develop alone, such as access to advanced technology.

 Joint venture – is a cooperative business activity,

formed by two or more separated organizations for
strategic purpose, that creates an independent
business entity and allocates ownership, operational
responsibilities, and financial risk and rewards to each
member, while preserving their separate
identity/autonomy.
 Licensing arrangement – is an agreement in
which the licensing firm grants rights to another
firm in another country or market to produce and
sell a product.

 Value-Chain partnership – is a strong and

close alliance in which one company or unit forms
a long-term arrangement with a key supplier or
distributor for mutual advantage.