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MindMap Gallery 02. Strategic choice-overall strategy and competitive strategy
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02. Strategic choice-overall strategy and competitive strategy
Note: Comprehensive, content refined, 02. Strategic choice - overall strategy and competitive strategy, such as cost leadership strategy: a strategy for an enterprise to become a [cost leader in the industry] by strengthening cost control internally.
Edited at 2023-09-03 23:05:35
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02. Strategic choice-overall strategy and competitive strategy
- bacteria
This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
- Plant asexual reproduction
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
- Reproductive development of animals
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- Outline
third chapter Strategic Choice- Overall strategy Competitive strategy
overall strategy
development strategy
integrated strategy
horizontal integration
definition
Acquisition, merger or alliance with competing companies - same stage of the value chain
Advantages/Purpose
The main purpose is to achieve [economies of scale] to gain competitive advantage
vertical integration
The answer is specific to the front and back
Classification
backward integration strategy
To gain ownership or increase control over a supplier
forward integration strategy
To obtain [ownership] of distributors or sellers or to strengthen [control] over them
Advantages/Purpose
By enhancing bargaining power, it is helpful to save transaction costs with upstream and downstream enterprises, control scarce resources, ensure the quality of key inputs, or obtain new customers.
shortcoming
Will increase the company's internal management costs
Main risks
1. Risks associated with unfamiliarity with new business areas
2. The generally involved [larger investment amount and strong asset specificity] increases the exit costs of enterprises in this industry.
intensive strategy (Ansoff Strategy)
definition
Differentiation strategies based on product innovation and market expansion
Classification
Diversification Strategy (Not an intensive strategy)
definition
new products new markets
Classification
Related diversification strategies (Concentric Diversity)
Refers to the strategy of an enterprise to enter related industries or markets based on its existing business or market.
unrelated diversification strategy (Centrifugal Diversification)
Refers to a company's strategy of entering areas that are unrelated to its current business and market.
Diversification Strategy Benefits/Purpose
Two branches profit and win honors
1. [Risk diversification] When existing products and markets fail, new products or new markets may provide protection for the company.
2. When enterprises cannot grow in the original industry, they find [new growth points].
3. [Taking advantage of underutilized] resources.
4. Use【Surplus Funds】
5. Can more easily obtain financing from capital markets.
6. Using a company's image and reputation in one industry or market to enter another industry or market to obtain capital or other financial benefits, such as accumulated tax losses.
Diversification strategy risks
The original city's advance and retreat, internal rectification
[Risk from the original business industry].
[Market overall] overall risk.
【Industrial Entry】Risk.
[Industry Exit] Risk.
Internal Operations [Integration Risk]
company culture
Main approaches to development strategy
External development (mergers and acquisitions) strategy
definition
Refers to the strategy of an enterprise seeking development by obtaining external operating resources.
Types of mergers and acquisitions
Classification by industry where both parties to the merger and acquisition are located
horizontal merger
Refers to the acquiring party and the acquired party being in the same industry
vertical merger
Refers to mergers and acquisitions between enterprises that are closely related to their business objects but are at different stages of production and marketing. [Forward M&A and Backward M&A]
Diversified M&A
Mergers and acquisitions between companies that are not closely related in business operations
Classification according to the attitude of the acquired party
Friendly mergers and acquisitions
Refers to a type of merger and acquisition in which the acquiring party and the acquired party determine the terms of the merger and acquisition through [friendly negotiation] and realize the transfer of property rights when both parties basically agree on the opinions.
hostile takeover
Also called a hostile merger, it usually refers to a type of merger and acquisition in which the acquiring party takes coercive measures to acquire the other party's enterprise regardless of the wishes of the acquired party after friendly negotiations are rejected.
Classified by the identity of the acquirer
Industrial capital mergers and acquisitions
The acquirer is a non-financial enterprise
Financial capital mergers and acquisitions
The acquirer is an investment bank or non-bank financial institution
Classification by source of acquisition funds
LBO
The acquirer’s main source of funds is external liabilities (generally 70%]
non-leveraged buyout
The acquirer’s main source of funds is its own funds
Motivation for mergers and acquisitions
Seeking advantages and avoiding disadvantages
1. Avoid entry barriers, enter quickly, and seize market opportunities
2. Overcome corporate [negative externalities], reduce [competition], and enhance control over the market
3. Gain synergy
Operation, financial capital, technology, product and market aspects
Internal development (new build) strategy
definition
Refers to the strategy of an enterprise using its own internal resources to seek development.
Strategic Alliance
definition
Refers to a [cooperative relationship] established between two or more business entities in order to [achieve a certain strategic purpose]
Strategic alliance type
equity alliance
Joint venture
Mutual shareholding investment
contractual alliance
functional protocol
Reasons for the formation of enterprise strategic alliances
Develop and complement each other, the kite becomes new (1 rise, 3 falls)
Open up [new markets]
Realize [resource complementarity]
Avoid【Business Risk】
Avoid or reduce [competition]
[Reduce coordination costs]
Promote [technological innovation]
contraction strategy (also called retreat strategy)
austerity and concentration strategies
1. Mechanism Change Strategy
Adjust the corporate leadership team; re-formulate new policies and management control systems, etc.
2. cost cutting strategy
Reduce labor costs, material costs, administrative expenses and assets (internal abandonment or lease, sale and leaseback), etc.; reduce the size of divisions and functional departments
3. Finance and Financial Strategy
Strictly control cash flow; debt restructuring; debt-for-equity swaps, etc.
Turn to strategy
Reposition or adjust existing products and services and adjust marketing strategies
abandon strategy
Sell, transfer or cease operations of one or several departments of the enterprise
competitive strategy
3 types of competitive strategic relationships and shared advantages
relation
Competitive strategic advantage (Five Forces Model 5)
create barriers to entry
Reduce the threat of substitutes
Enhance bargaining power
Compared with no cost advantage, both suppliers and buyers have bargaining power.
Stay ahead of the competition
Make profits when competitors have no profits and maintain absolute competitive advantage
Cost leadership strategy
definition
The company's strategy to become a "cost leader in the industry" by strengthening cost control internally
Implementation conditions
Market conditions (external conditions)
sign playing kite
The products of all companies in the industry are [standardized products], and it is difficult to differentiate products.
Buyers [pay less attention to the brand] and most buyers use the product in the same way.
The product has high price elasticity, and there are a large number of price-sensitive users in the market.
[Price competition] is the main means of market competition; consumers’ [switching costs are low]
Resources and capabilities (internal conditions)
Regulations and rates should be changed to "capital and profit" payment
Equip corresponding production facilities in industries with [significant economies of scale] to [achieve economies of scale].
【Improve productivity】
Productivity is the output of unit factors, which is the reciprocal of the cost of unit product, thereby reducing unit cost (new technology, learning curve)
Reduce various [factor costs]
Materials, labor, costs
[Improve product process design]
Use simple product designs to reduce costs by reducing the functionality of the product while still fully meeting consumer needs.
Centralized allocation of resources
Resources are concentrated on a certain market segment (customer, product type, etc.)
[Improving production capacity utilization]
Choose the appropriate [Transaction Organization Form]
(Produced in-house or outsourced)
risk
Technology transfer to mold
Changes in technology may wipe out past investments and accumulated experience.
Market demand has shifted from focusing on price to focusing on the brand image of products, turning the company's original advantages into disadvantages
New entrants or followers in the industry achieve the same or even lower product costs by investing in imitation or higher-tech facilities.
Differentiation Strategy
definition
The products and services provided by the company to customers are [unique] within the industry
Implementation conditions
Market conditions (external conditions)
Multi-fork【Chicken Heart】/
Customers’ [needs are diverse];
[Product] can fully realize [differentiation] and be [recognized by customers;]
The industry in which the company is located has rapid [technological changes], and [innovation] has become the focus of competition.
Resources and capabilities (internal conditions)
Chicken/hard/soft
There is an [incentive system], management system and good innovative culture that can ensure the stimulation of employee creativity;
Have [strong] [marketing ability]
soft power
Have strong R&D capabilities and [product design capabilities]
(hard power)
risk
Become [reverse]
Market [Changes in demand]
Enterprises form product differentiation [cost is too high].
Competitors' imitation and attacks make established [differences narrow or even turn]
Same cost leadership
centralization strategy
meaning
A strategy that uses cost leadership or product differentiation to gain competitive advantage for a specific buying group, product segment, or regional market
Implementation conditions
Market conditions (external conditions)
No special power
[There are differences in demand among buyer groups]
The target market has [relative attractiveness] in terms of profitability, competition intensity, etc.
In the target market, there are no other competitors [adopting a similar strategy]
Resources and capabilities (internal conditions)
Enterprise resources and capabilities are limited, [difficult to achieve cost leadership or differentiation in the entire industry], and can only [select individual market segments]
risk
cramped
Risks caused by [narrow target market].
[Demand differences among buyer groups become smaller].
[Entry of competitors] and competition.
Comprehensive analysis of basic competitive strategies - "Strategy Clock"
strategic clock chart
horizontal axis
price low to high
vertical axis
Customer recognition value low to high
starting point
low price low value
Basic strategy types
Low price and low value strategy (Path 1)
Low price strategy (Path 2)
Cost leadership strategy
Mixed Strategy (Pathway 3)
cost leadership differentiation
Hybrid strategy refers to approach 3, where companies can gain [cost advantages] while providing higher recognition value to customers.
Reasons for obtaining [Two Advantages]
1) Economies of scale
Companies that offer high-quality products increase market share, which in turn lowers average costs due to economies of scale
2) Experience curve
The [speed at which experience accumulates to reduce costs] in producing [high-quality products] is faster than the production of [low-quality products] (the average cost is reduced due to the experience curve)
3) Production efficiency
Focusing on [improving production efficiency] can reduce costs in the production process of high-quality products (quasi economies of scale)
High Value Strategy (Pathway 4)
High Price, High Value Strategy (Path 5)
Differentiation Strategy
failure strategy
Path 6, Path 7, Path 8
- In general, it may be a strategy that leads to business failure.
Centralization strategy implementation conditions
Advantages = Purpose, Disadvantages = Risks
vertical integration risks
third chapter Strategic Choice- overall strategy
Main types of overall strategies
development strategy
definition
Emphasis on making full use of opportunities in the external environment and fully exploring the superior resources within the enterprise in order to develop the enterprise in a higher-level direction based on the existing basis.
integrated strategy
definition
Integration strategy means that for products or businesses with [advantages and growth potential], the company extends the depth and breadth of the business along the [vertical or horizontal direction of the business chain], expands the scale of operations, and achieves corporate growth.
Classification
vertical integration
Features
advantage
Enterprises adopting a vertical integration strategy can help save transaction costs in purchasing or selling with upstream and downstream enterprises in the market, control scarce resources, ensure the quality of key inputs, or obtain new customers.
shortcoming
Will increase the company's internal management costs
Main risks
risks associated with unfamiliarity with new business areas;
Vertical integration, especially backward integration, generally involves [larger investment amounts and strong asset specificity], which increases the exit costs of enterprises in this industry.
Classification
forward integration strategy
Purpose
Obtain [ownership] of distributors or sellers or increase [control] over them
advantage
By controlling the sales process and channels, it is helpful for enterprises to control and master the market, enhance sensitivity to changes in consumer demand, and improve the market adaptability and competitiveness of enterprise products.
Applicable conditions
Double height and great ability
The profit margin in the sales process is relatively [high]
The company's existing sellers have high sales costs or poor reliability and are unable to meet the company's sales needs;
The enterprise [has] the funds, human resources, etc. required for forward integration;
The growth potential of the industry in which the enterprise is located is [large];
backward integration strategy
Purpose
Gain ownership or increase control over suppliers
advantage
It is helpful for enterprises to effectively control the cost, quality and supply reliability of key raw materials and other inputs, and ensure the steady progress of enterprise production and operation activities.
Applicable conditions
Double height and difference, great ability, less stable
The profit margin in the supply chain is relatively [high]
The company's existing suppliers have high supply costs or poor reliability and are unable to meet the company's needs for raw materials, parts, etc.;
The enterprise [has] the funds, human resources, etc. required for backward integration;
The growth potential of the industry in which the enterprise is located is [large];
The number of suppliers [is small] and the demand-side competitors are many;
[Stability] of enterprise product prices is very critical to enterprises. Backward integration is conducive to controlling raw material costs, thereby ensuring the stability of product prices.
horizontal integration
definition
Refers to the strategy of enterprises to expand towards the same stage of the industrial value chain (i.e. acquisition, merger or joint competing enterprises)
Purpose
The main purpose is to achieve [economies of scale] to gain competitive advantage
Applicable conditions
Disputing regulations does not mean possessing great power
The industry in which the enterprise is located [competition] is relatively fierce;
The [economy of scale] of the industry in which the enterprise is located is relatively significant;
The horizontal integration of enterprises complies with [anti-monopoly laws and regulations] and can obtain a certain monopoly position in local areas;
The enterprise [has] the funds, human resources, etc. required for horizontal integration
The growth of the industry in which the enterprise is located [has great potential];
intensive strategy
definition
It refers to the strategy of an enterprise to fully utilize the potential of [existing products or services] and strengthen the [competitive position] of existing products or services.
product-market strategy mix (Ansoff matrix)
specific strategies
market penetration
Content and objectives
Emphasis on the development of a single product, trying to gain greater [market share] through stronger marketing methods, and the goal is to increase the [frequency of use] of the product through various methods
methods to achieve goals
Expand insurance
Expand market share
Develop niche markets
maintain market share
Applicable situations
The needle thread is low and low from the ground
When the overall [market is growing], companies that want to increase market share can achieve their goals faster
If a company decides to limit [interests] to existing products or market areas and does not allow sales to decline even if the overall market declines, then the company must adopt a market penetration strategy
If other companies [leave the market] due to various reasons, it is easier to succeed using a market penetration strategy
If a company has a strong market position and can use its experience and capabilities to gain a strong and unique competitive advantage, it is easier to implement market penetration.
The market penetration strategy is also more suitable when the risk of the market penetration strategy is lower, senior management involvement is higher, and less investment is required.
Market Development
Content and approach
The main way to penetrate existing products into new markets is to open up other regional markets and market segments.
Market development strategy reasons
Difficult to combine
Companies find that the nature of the processes used to produce existing products makes it difficult to switch to producing entirely new products, so they look to develop other markets.
Market development is often combined with product improvement.
The existing market or market segment has been [saturated], and companies can only look for new markets.
Applicable conditions
The heart beats the golden ball
Access to [new, reliable, economical and high-quality sales channels];
The enterprise has [excess production capacity];
The existence of untapped or undersaturated markets;
The enterprise is very successful in [existing business fields];
The enterprise has the [funding and human resources] needed to expand operations;
The company's [main business] belongs to a rapidly [globalizing industry]
product development
Content and features
In the original market, new products are developed through technological improvement and development; it can extend the product life cycle and improve product differentiation.
Product Development Strategy Reasons
Xin'an, Liaoning
Make full use of the company’s understanding of the [market];
·Maintain [leading position] relative to competitors;
Seek [new opportunities] from the shortcomings of the existing product portfolio;
Enable enterprises to continue to maintain a solid position in the existing market
Applicable conditions
Full of skills and good looks
The company's products have high [market credibility and customer satisfaction];
The industry in which the enterprise is located is a [high-speed developing high-tech industry] suitable for innovation;
③The industry in which the enterprise is located is in the [rapid growth stage];
④The enterprise has strong [research and development capabilities];
⑤Major competitors offer products of higher quality at similar prices
Diversification
Content and type
content
Refers to an enterprise entering an area that is different from its existing products and markets.
type
Related diversification strategies (Concentric Diversity)
Refers to the strategy of an enterprise to enter related industries or markets based on its existing business or market (Integration Advantage 1 1>2)
unrelated diversification strategy (Centrifugal Diversification)
Refers to a company's strategy of entering an area that is unrelated to its current business and market (the current market is unattractive)
Diversification strategy reasons
Project profit
In existing products or markets [continuing operations cannot achieve the goal]
The business retains funds due to previous successful operations in [existing products or markets] in excess of the funds required for financial expansion in existing products or markets
A diversification strategy means [higher profits] compared to expansion within existing products or markets.
Advantages of diversification strategy
Two branches profit and win honors
[Risk diversification] When existing products and markets fail, new products or new markets may provide protection for the company.
When enterprises cannot grow in the original industry, they find [new growth points].
[Taking advantage of underutilized] resources.
Use【Surplus Funds】
Can more easily obtain financing from capital markets.
Using the company's image and reputation in a certain industry or [a certain market] to enter another industry or market, and obtain funds or other financial benefits in another industry, such as accumulated tax losses.
Diversification strategy risks
The original city's advance and retreat, internal rectification
[Risk from the original business industry].
[Market overall] overall risk.
【Industrial Entry】Risk.
[Industry Exit] Risk.
Internal Operations [Integration Risk]
stabilization strategy
meaning
Also known as the maintenance strategy, it means that within the [business environment and internal conditions], the operating conditions that the company expects to achieve during the strategic period are basically maintained within the scope (referring to the business without adjustments) and levels (referring to various economic indicators) of the strategic starting point. (unchanged)] strategy
Applicable situations
It is suitable for enterprises whose environment in the strategic period [forecast will not change much] and the enterprise has been quite successful in the early stage.
risk
Change to civilization
Once an enterprise [the external environment undergoes major changes], the balance among the enterprise's strategic goals, external environment, and enterprise strength will be lost, and the enterprise will be in trouble.
The stabilization strategy can also easily cause enterprises to "weaken their risk awareness" and even form a corporate culture of fearing and avoiding risks, reducing their "sensitivity and adaptability" to risks.
contraction strategy
definition
Also known as retreat strategy, it refers to the strategy of enterprises to reduce [original business scope and scale]
Reasons for adopting shrinkage strategy
active cause
①The need for strategic reorganization of large enterprises
②Short-term behavior of small businesses
passive cause
External causes
Due to a variety of factors, such as changes in the overall economic situation, industry cycles, etc.
The enterprise (or a certain business of the enterprise) loses [competitive advantage]
Due to the internal operating mechanism of the enterprise, poor decision-making, poor management and other reasons, the enterprise is in trouble and has to take defensive measures.
contraction strategy
Retrenchment and focus strategies (focus on short-term benefits)
Mechanism change
Adjust the corporate leadership team; re-formulate new policies and management control systems, etc.
Finance and Financial Strategy
Strictly control cash flow; debt restructuring; debt-for-equity swaps, etc.
cost cutting strategy
Reduce labor costs, material costs, administrative expenses and assets (internal abandonment or lease, sale and leaseback), etc.; reduce the size of divisions and functional departments
Shift to strategy ([business direction] or change in business strategy)
Reposition or adapt existing products and services
Adjust marketing strategy
Abandonment strategy (involving changes in enterprise (or subsidiary) [property rights])
Special sale and purchase packages (buy new packages)
Franchise
【Split】for shares/split
[Asset swap] and strategic trade
Management and leveraged buyouts
sell out
Subcontract
Difficulties with a contraction strategy
Judgment of enterprise or business conditions
Timing: when to contract
exit barriers
I will make money by withdrawing from my heart
Degree of specificity of fixed assets
exit cost
internal strategic connections
emotional disorder
Government and social constraints (the government opposes or discourages)
Main approaches to development strategy
External development (M&A strategy)
definition
Refers to the strategy for enterprises to seek development through [obtaining external business resources]
Types of mergers and acquisitions
Classified by the industry in which both parties to the merger and acquisition are located (class integration)
horizontal merger
Refers to the acquiring party and the acquired party being in the same industry
vertical merger
Refers to mergers and acquisitions between enterprises that are closely related to their business objects but are at different stages of production and marketing. [Forward M&A and Backward M&A]
Diversified M&A
Refers to mergers and acquisitions between companies in different industries and not closely related in business operations.
Classification according to the attitude of the acquired party
Friendly mergers and acquisitions
Refers to a type of merger and acquisition in which the acquiring party and the acquired party determine the terms of the merger and acquisition through [friendly negotiation] and realize the transfer of property rights when both parties basically agree on the opinions.
hostile takeover
Also called a hostile merger, it usually refers to a type of merger and acquisition in which the acquiring party takes coercive measures to acquire the other party's enterprise regardless of the wishes of the acquired party after friendly negotiations are rejected.
Classified by the identity of the acquirer
Industrial capital mergers and acquisitions
Generally carried out by non-financial companies. The purpose is to obtain [industrial profit]
Financial capital mergers and acquisitions
Generally, acquisitions are carried out by investment banks or non-bank financial institutions (such as financial investment companies, private equity funds, venture capital funds, etc.). The purpose is to obtain [investment profits]
Classification by source of acquisition funds
LBO
During the acquisition, if the acquirer's main source of funds is external liabilities (generally 60%), it will be completed with the support of bank loans or financial market borrowings.
non-leveraged buyout
The acquirer’s main source of funds is its own funds
Motives for mergers and acquisitions
Avoid [entry barriers], enter quickly, [strive for market opportunities and avoid various risks]
Gain synergy
Operation, financial capital, technology, product and market aspects
Overcome corporate [negative externalities], reduce [competition], and enhance control over the market
Reasons for failed mergers and acquisitions
Not complete high risk
poor decision making
Enterprise integration cannot be carried out well after mergers and acquisitions.
Pay [exorbitant M&A fees].
Cross-border mergers and acquisitions face [political risks]
Internal development (greenfield strategy)
definition
Refers to the strategy of an enterprise using [its own internal resources] to seek development
Motives for companies to adopt internal development
I want to add new articles without losing my grace.
The process of developing new products enables companies to gain the deepest understanding of the market and products;
There is no suitable [merger and acquisition target];
Cost of internal development [slower growth rate]
This may be the only reasonable way to achieve true [technological innovation];
Maintain a unified [management style and corporate culture;]
Provide career development opportunities for managers to avoid [stagnation]
Mergers and acquisitions often create hidden or unpredictable [losses], whereas internal developments are less likely to create this;
[Lower risk]. In a merger and acquisition, the acquirer may also have to bear the consequences of the acquired party's previous decisions;
It can be carried out in a planned manner, it is easy to obtain [financial support] from the enterprise, and the cost can be spread over time;
Disadvantages of Internal Development
Hair extension cream
Compared with existing companies in the M&A market, there are [increased competitors] in the market, which may intensify competition within a certain market;
Companies [cannot have access] to other companies’ knowledge and systems, which may be even more risky;
[lack of economies of scale or experience curve] effects from the start;
When the market is developing very fast, internal [development appears too slow];
Entering new markets can involve very [high barriers]
Conditions for application of internal development strategies
No restraint
The industry is in an "unbalanced situation" and structural barriers have not yet been fully established.
The enterprise has the ability to [overcome structural and behavioral obstacles], or the cost to the enterprise of overcoming the obstacles is less than the profit after the enterprise enters.
[Behavioral barriers are easily restricted] by existing companies in the industry.
Strategic Alliance
definition
Refers to a [cooperative relationship] established between two or more business entities in order to [achieve a certain strategic purpose]
Basic characteristics of enterprise strategic alliances
Usually open to each other
[Equality] in mutual exchanges
[Long-term nature of the cooperative relationship]
[Complementarity] of overall interests
Openness of organizational form
Reasons for the formation of enterprise strategic alliances
Improve skills and make new kites
[Reduce coordination costs]
——No integration required (as opposed to mergers and acquisitions
Promote [technological innovation]
—— Share investment
Realize [resource complementarity]
Open up [new markets].
—— Product increase and market expansion
Avoid【Business Risk】
——Information communication
Avoid or reduce [competition].
——Coopetition and avoid excessive competition
Main types of corporate strategic alliances
Equity participation
Joint venture
Mutual shareholding investment
contractual bond
Functional Protocol (Production Acting)
[Technical Exchange] Agreement
——Alliance members exchange technical information with each other and enhance their competitiveness through "knowledge" learning
Cooperation [Research and Development] Agreement
——Share existing scientific research results, jointly use scientific research facilities and production capabilities, and jointly develop new products
[Production and Marketing] Agreement
——Jointly produce and sell a certain product
【Industrial Coordination】Agreement
——Establish an industrial alliance system with comprehensive collaboration and division of labor, which is often seen in high-tech industries.