week 3 Flashcards
(12 cards)
What is strategy formulation?
Strategy formulation is the process of selecting the most appropriate courses of action to achieve the organisation’s defined goals and objectives.
What are Porter’s three generic strategies?
Cost Leadership – Becoming the lowest-cost producer in the industry.
Differentiation – Offering unique products/services valued by customers.
Focus Strategy – Targeting a specific market niche with either cost leadership or differentiation.
What does the ‘Focus Strategy’ entail?
It involves concentrating on a narrow market segment with a tailored strategy—either cost-based or differentiation-based.
What is the key risk of the Focus Strategy?
The niche may become unattractive or be outcompeted by broader market players.
What does it mean to be “Stuck in the Middle” (Porter)?
A firm is “stuck in the middle” if it tries to pursue cost leadership and differentiation simultaneously without achieving either effectively, leading to poor performance.
Why is being “Stuck in the Middle” problematic?
It creates strategic confusion, weakens brand identity, and makes cost control or differentiation less effective compared to competitors with clear strategies
What’s a real-world example of being “Stuck in the Middle”?
A mid-priced clothing brand that’s too expensive for budget shoppers and not unique enough for premium buyers.
What external analyses are important during strategy formulation?
PESTEL Analysis – Evaluates macro-environmental factors: Political, Economic, Social, Technological, Environmental, Legal.
Five Forces Analysis – Assesses industry competition: rivalry, new entrants, substitutes, buyer power, supplier power.
What is competitor analysis?
It involves identifying key competitors and evaluating their strategies, strengths, weaknesses, and likely future moves.
What are the benefits of competitor analysis?
Helps anticipate strategic threats.
Identifies gaps in the market.
Informs strategic positioning.
What factors should be considered when selecting a strategy?
Internal capabilities and resources
Market conditions
Competitor positioning
Long-term sustainability
Fit with mission and values
Can firms successfully blend strategies?
es, some firms succeed in hybrid strategies by leveraging operational efficiency while offering unique value—e.g. IKEA, which combines low costs with distinctive design.
