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MindMap Gallery CPA Strategy Chapter 3 Strategic Choices
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CPA Strategy Chapter 3 Strategic Choices
The third chapter of the CPA strategy is the key point. The picture below is a self-organized framework that is very helpful for memory.
Edited at 2020-10-14 13:48:21
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CPA Strategy Chapter 3 Strategic Choices
- 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
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
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- Outline
Strategic Choice
Overall strategy (company level)
Main types of overall strategies
development strategy
integrated strategy (Classification, applicable conditions)
vertical integration (Strategic benefits > strategic costs)
Forward integration: manufacturers and sellers
Advantages (motivators)
Conducive to controlling and mastering the market
Increase sensitivity to changes in consumer demand
Improve the market adaptability and competitiveness of enterprise products
Applicable conditions: Use SWOT model
S: Have the funds, human resources, etc. required for forward integration
O: The industry has great potential and the sales link has high profit margins.
T: Existing sellers have higher sales costs or poor reliability. It is difficult to meet the sales needs of enterprises
Backward integration: manufacturers and suppliers
Advantages: Save transaction costs
Control the cost, quality and supply reliability of inputs such as key raw materials
Ensure the steady progress of enterprise production and operation activities
Disadvantages: increased management costs
Applicable conditions: Use SWOT model
S: Have the funds, human resources, etc. required for forward integration
O: The industry has great potential and the supplier link has high profit margins.
T: Existing sellers’ suppliers have higher costs or poor reliability, It is difficult to meet the company’s needs for raw materials and parts; There are a small number of suppliers and a lot of competition on the demand side; Stable product prices are critical to enterprises;
Risks of vertical integration
Beforehand: Risks posed by unfamiliarity with new business areas
After the fact: Vertical integration increases exit costs for companies
Horizontal integration: expansion in the same stage of the value chain
Advantage
S: The enterprise has horizontally integrated capital, human resources and other resources The company’s horizontal integration policy complies with antitrust regulations, Able to obtain a certain monopoly position in local areas
O: The industry in which the enterprise is located has greater growth potential
T: Competition in the industry where the company is located is relatively fierce Economies of scale in the industry in which the enterprise is located are relatively significant
Intensive strategy (type, applicable conditions)
Ansoff’s “Product-Market Strategy Portfolio” Matrix
product
Existing products
New product
market
existing market
new market
market penetration strategy
Meaning: existing products, existing markets, Get higher market share
Implementation approach
Expand market share: offer discounts, advertising, improve sales methods, change product packaging
Maintain market share--when the market declines
Develop undifferentiated niche markets
Applicable conditions: Use SWOT
S: The company is determined to limit its interests to existing products or market area; The business has a strong market position and is able to apply experience and capabilities to gain a strong and unique competitive advantage
O: The entire market is growing; Other businesses left the market for various reasons; Market penetration corresponds to lower risks and high senior management involvement. and requires relatively little investment
market development strategy
Meaning: Existing products, developing new markets
Reason: Unable to develop new products, there is no space in the market now
Applicable conditions
S: The company is very successful in its current business field; The enterprise has the capital and human resources needed to expand its operations; Enterprises have excess production capacity
O: There is an untapped or unsaturated market; Access to new, reliable, economical and high-quality sales channels; The main business of the company belongs to an industry that is rapidly globalizing
product development strategy
Meaning: Improve a product or develop a new product
reason
From the consumer: Leveraging business knowledge of the market
From the Competition: Staying Ahead, Staying Secure
From product: Seeking new opportunities from shortcomings in the existing product portfolio
Applicable conditions
S: The company's products have high market credibility and customer satisfaction; The company has strong research and development capabilities
O: The industry in which the enterprise is located is a high-tech enterprise with rapid development suitable for innovation; The industry in which the company is located is in a stage of rapid growth
T: Major competitors offer higher quality products at similar prices
Diversification Strategy
type
Related diversification strategies
unrelated diversification strategy
Reason (motivation)
Continuing operations in existing products or markets cannot achieve corporate goals
Capital retained from previous successful operations in existing products or markets exceeds the capital required to develop new markets or products
Get higher profits
advantage
Original business perspective (individual, 3 items)
Leveraging underutilized resources
Use surplus funds
Use the company's image or reputation in a certain industry or market to enter another market
New business perspective (individual, 2 items)
Find new growth points when the business cannot grow
Easier to obtain financing from the market (Full Story)
Overall angle (between individuals, 2 lines)
spread risk
Obtain funds or other financial benefits
risk
Original business perspective (individual)
Risks from original operating industries
New business perspective (individual)
Industry entry risk
Industry exit risk
Overall perspective (inter-individual)
Internal business integration risks
Overall angle (overall)
overall market risk
stabilization strategy
contraction strategy
Reasons for adopting a contraction strategy
active cause
Large Enterprises: The Need for Strategic Reorganization
Small businesses: short-term behavior
passive cause
External reasons: Environmental changes lead to corporate crises
Internal reason: loss of competitive advantage
Methods and specific practices of contraction strategy
Tightening and Concentration Strategies (Throttling)
Management: Mechanism reform-Adjustment of leadership team Develop new policy and management control systems from scratch
Production: Cost-cutting strategies such as cutting labor costs, assets or scale
Financial aspects: Introduce and establish effective financial control systems; Negotiate with key creditors, debt restructuring
Moving to Strategy (Open Source)
Products: Reposition or adapt existing products and services
Marketing: Adjust marketing strategy
abandon strategy
transfer franchise rights
Subcontract
sell out
Management and leveraged buyouts
Split into shares/split
Asset swaps and strategic trade
Difficulties with a contraction strategy
Judgment of enterprise or business conditions
exit barriers (direct-indirect, from inside to outside)
Fixed asset specificity degree
Exit costs: labor agreements, cost of relocation, spare parts repair capabilities
emotional disorder
internal strategic connections
Government and social constraints: Governments consider horizon issues and impacts on regional economies
Main approaches to development strategy
Development strategy options
External development (mergers and acquisitions): replacing market organization form with enterprise organization form
Internal development (new): replacing the corporate organizational form with a market organizational form
Strategic Alliance
M&A strategy
Types of mergers and acquisitions
Classification by the identity of the acquirer (from the acquirer’s perspective)
Industrial capital mergers and acquisitions (non-financial enterprises)
Financial capital mergers and acquisitions (financial enterprises)
According to the source of acquisition funds (from the perspective of the acquirer)
Leveraged M&A ((borrowing money)
Non-leveraged mergers and acquisitions (main entity’s own funds)
According to the attitude of the acquired party
Friendly mergers and acquisitions
hostile takeover
Classification by industry of the acquired parties
horizontal merger
vertical merger
Diversified M&A
Motives for mergers and acquisitions
Avoid barriers to entry
Gain synergy
The first level: After the merger, the time and space of the two companies' forces are arranged and optimized to obtain aggregation effects.
The second level: changing the overall function after the merger (technology, resources, brand complementation)
Level 3: Changing forces and forces (feedback again)
Overcome negative externalities of enterprises, reduce competition, and enhance control over the market
Reasons for failed mergers and acquisitions
Beforehand: Improper decision-making
In Progress: Paying Excessive M&A Premiums
Afterwards: Enterprise integration cannot be carried out well after mergers and acquisitions
Special: Navigating the Political Risks of Mergers and Acquisitions
Internal Development (New Build) Strategy
Advantages (motivators) of an internal development strategy
In the process of developing new products, enterprises can gain the most profound understanding of the market and products.
This may be the only reasonable way to achieve true technological innovation
Production
Reduce confusion by maintaining the same management style and corporate culture
Provide managers with career development opportunities to avoid stagnation
manage
Business aspects
The price may be lower and no consideration is required
Unpredictable losses usually do not occur
Internal development costs increase more slowly
Can be planned, easily obtain financial support from corporate resources, and can be spread out on a cost basis
financial aspects
No suitable acquisition target exists
external
lower risk
overall
Disadvantages of Internal Development Strategy
increase market competition
Entry into new markets can face very high barriers
When the market is developing very fast, internal development is too slow
From a market perspective
The enterprise cannot have access to the knowledge system of another well-known enterprise
Lack of economies of scale or experience curve effects from the outset
From an individual perspective
Conditions for application of internal development strategies
The industry is in an imbalanced state and structural barriers have not yet been fully established.
Behavioral barriers of existing companies in the industry can be easily overcome
The company has the ability to overcome structural barriers, or the costs are less than the benefits
Solving industry barrier issues
Ability to overcome obstacles:
There is a strong correlation between the company's existing assets, skills, and distribution channels and the new business field.
Firms have unique existing capabilities to influence industry structure and make it work for them
Conducive to developing the existing business content of the enterprise
manifestation of ability
Corporate strategic alliance
Basic characteristics of enterprise strategic alliances
From the perspective of economic organization form: the intermediate organization between the market and enterprises
Corporate Relations: Equality
From the perspective of corporate behavior: strategic cooperation
Reasons for the formation of enterprise strategic alliances
Avoid or reduce competitors
Promoting technological innovation: sharing the burden
Open up new markets
Reduce coordination costs
Avoid or reduce business risks
Realize resource complementation
Mantra: arena, becoming crazy (risk, resources)
Main types of corporate strategic alliances
Equity strategic alliance
Joint venture
Mutual shareholding investment
contractual strategic alliance
functional protocol
Main characteristics of the two types of strategic alliances
Equity strategic alliance
Advantages: It is conducive to expanding financial strength, enhancing the sense of trust and responsibility of both parties, and conducive to long-term cooperation.
Disadvantages: poor flexibility
contractual strategic alliance
Advantages: better flexibility
Disadvantages: Lack of control, low efficiency
Management and control of strategic alliances
Written: Enter into an agreement
Unwritten: Building an alliance of cooperation and trust
business unit strategy
basic competitive strategy (General, based on industry competition)
Choices of three basic competitive strategies
Cost leadership strategy (conditions apply)
Advantages (combined with the five forces model)
create barriers to entry
Enhance bargaining power of buyers
Enhance bargaining power with suppliers
Reduce the threat of substitutes
Stay ahead of the competition
Applicable conditions (external-internal)
External: Market conditions 4 items
Price: The product has great price elasticity, and there are a large number of price-sensitive users in the market
Products: The products of all companies in the industry are standardized products, and it is difficult to differentiate products.
Buyers: Buyers don’t pay much attention to the brand, most buyers use the product in the same way
Competition: Price competition is the main means of market competition, and consumers’ switching costs are low
Internal: Resources and Capabilities 7 Articles
Building production facilities to achieve economies of scale in industries where economies of scale are significant
Industry Characteristics 1
Reduce costs of various production factors
Choose the appropriate trading organization form
Factors of production 2
Improve productivity
R&D1
Improve product process design
Production process 1
Production
Improve production capacity utilization
Sales 1
Focus on gathering
Management 1
risk
Producer: Technological changes wipe out investment in cost reduction
Consumers: Market demand shifts from focusing on price to focusing on product brand
Competition: New entrants or followers imitate or invest in high-tech facilities to learn at lower cost
Differentiation strategy (applicable conditions)
Advantage
create barriers to entry
Reduce the bargaining power of buyers
Enhances the company's bargaining power with suppliers
Prevent the threat of substitutes
Reduce customer sensitivity and stay ahead of the competition
Applicable conditions
External: Market conditions 3 items
Product: The product can be fully differentiated and recognized by customers
Customers: Customers’ needs are diverse
Competition: The industry in which the company operates is experiencing rapid technological changes, and innovation has become the focus of competition.
Internal: Resources and Capabilities 4 Articles
Have large R&D capabilities and product design capabilities
R&D
Managers with strong marketing skills
Sales
Have an incentive system, management system and a good creative culture that can inspire employees' creativity
Management
Have the ability to improve the quality of a certain business as a whole, establish product image, maintain advanced technology and establish and improve distribution channels
Strategic Decision
Risk (3 items)
Producer: The cost for enterprises to differentiate is too high
Consumers: Market demand changes
Competition: Competitors’ imitation and attacks cause differentiation to shrink or even shift
centralization strategy
Meaning: Segment the market or regional market to achieve concentrated cost leadership and concentrated differentiation
Advantage
Able to withstand 5 types of competitiveness in the industry
Can avoid direct conflicts with competitors and enhance relative competitive advantages
Applicable conditions
External: Market conditions 3 items
Differences in needs among buyer groups
The market can be segmented
The target market is relatively attractive in terms of market capacity, growth rate, profitability, competition intensity, etc.
is attractive
No other competitor in the target market adopts a similar strategy
Have advantage
Internal: Resources and Capabilities 1
Enterprise resources and capabilities are limited, making it difficult to achieve cost leadership or differentiation in the entire industry, and can only select individual market segments.
risk
Producers: Risks caused by a narrow market
Consumers: Demand differentiation among buying groups is small
Competition: Entry and competition of competitors
Comprehensive Analysis of Basic Strategies (Strategy Clock) Classification
Competitive Strategies for Small and Medium Enterprises (Based on industry competition)
Competitive strategy in fragmented industries
Reasons for fragmented industry
Low barriers to entry or high barriers to exit
Diversified market demand leads to high product differentiation
Economies of scale do not exist or are difficult to achieve
Strategic choices for fragmented industries
Overcome fragmentation--obtain cost advantage (overcoming inability to achieve economies of scale)
Continuing or Franchise
Technological innovation to create economies of scale
Discover industry trends early
Increase added value - improve product differentiation
Deeper connotation beyond product functions (culture, other functions)
Specialization
Specialization by product type or product segment
Customer type specialization
Specialization in geographical areas
Beware of potential strategic pitfalls
Avoid seeking dominance
Avoid over-centralization
Avoid overreacting to new products
Maintain strict strategic constraints
Understand competitors' strategic goals and overhead costs
Competitive Strategies for Emerging Industries
Common characteristics of the internal structure of emerging industries
technological uncertainty
strategic uncertainty
Rapid changes in costs: first high, then low, learning curve
There are many budding companies and newly established companies
Customers are mostly first-time buyers
Obstacles and opportunities for the development of emerging industries
Difficulties in selecting, acquiring and applying proprietary technology
R & D capabilities
Inadequacy of raw materials, parts, capital and other supplies
production capacity
Customer confusion and wait-and-see
customer
Reactions to substituted products
product
Lack of courage and ability to take risks
management ability
Strategic choices for emerging industries
Shape industrial structure
Correctly Treat the Externalities of Industrial Development
Pay attention to changes in industry opportunities and barriers
Choose the right time and field to enter
blue ocean strategy (Starting from avoiding competition)
Blue Ocean Strategy Characteristics
Expand non-competitive market space
avoid competition
Create and acquire new needs
Breaking down the trade-off between value and cost
In order to pursue differentiation and cost at the same time
Fundamental rules for reconstructing market boundaries
Path 1: Examine alternative industries: different functions and forms but the same purpose, the purpose is not clear
Path 2: Across different strategic groups within the industry
Path 3: Redefine buyer groups
Path 4: Look at complementary products or services
Path 5: Reset customers’ functional or emotional appeals
Path 6: Participate in shaping external trends across time
functional strategy
marketing strategy
marketing strategy
market segmentation
Basis for consumer market segmentation
Geographic segmentation
population segmentation
Psychographic Segmentation: Includes Lifestyle
behavioral segmentation
Basis for industrial market segmentation
Customer scale
end user
Target market selection
undifferentiated marketing
Differential Marketing
centralized marketing
Market positioning
Positioning based on product attributes and benefits
Position based on price and quality
Target based on usage
Based on user targeting
Positioning based on product grade
Positioning based on competitive situation
combination positioning
Design marketing mix
Product Strategy
product mix strategy
Product portfolio depth, length, width
Product mix strategy types
Expanding product portfolio: width, depth
Reduce product portfolio
Product extension: mid-to-high-end price positioning
Brand and Trademark Strategy
single brand strategy
Multi-brand strategy: Procter & Gamble
Private brand strategy
product development strategy
promotion strategy
Advertising Promotions: Media
Business promotion: non-media, samples, discounts
Public relations: promote corporate image
personal selling
Distribution strategy
direct distribution
indirect distribution
Whether it has gone through the middleman link
exclusive distribution
intensive distribution
number of sellers
online distribution
Offline distribution
Whether through the network
Price Strategy
product differential pricing
Pricing based on market segments
Location-based pricing
Pricing based on product version differences
Pricing based on time difference: low and peak seasons
Dynamic Pricing: Demand, Airline
product launch pricing method
Penetration Pricing: Slowly start low and then go high
Skimming pricing: high first, low later
research and development strategy
R&D type
Product research--new product development
process research
Source of motivation for R&D
demand pull
technology driven
The strategic role of R&D
Porter's basic strategy
Porter's value chain
Ansoff matrix
product life cycle
R&D positioning
Strong R&D capabilities: companies that successfully withdraw new technology products from the market (higher risk)
In R&D capabilities: Become an innovative imitator of successful products (minimum startup risk and cost, requires excellent R&D personnel and marketing departments)
Weak R&D capabilities: Become a low-cost producer of successful products (requires constant investment in factory and equipment, but low R&D expenses)
The R&D strategy specifically requires management to specify policies that encourage innovative ideas.
give financial support
Encourage innovation
people oriented
Matrix cross-department collaborative operation
Recruit employees with innovative skills
dedicated managers
Reward when innovation goals are achieved
Production operations strategy
Main factors involved in production operations strategy (horizontal)
batch
type
demand changes
Visibility: Production Operations Process
Capacity planning
Types of capacity planning
Leading strategy: increasing production capacity ahead of increasing external market demand
Lag strategy: production capacity increases lag behind increases in external market demand
Matching strategy: Capacity increase is matched in scale and time
Ways to balance capacity with demand
Resource-to-order production
Order production
Inventory production
Just-in-time production system JIT
advantage
low inventory
Reduce operating costs
Reduce the likelihood of inventory deterioration, obsolescence and obsolescence
Avoid sudden changes in demand resulting in large quantities that cannot be sold
Focus on first-time success and reduce time spent inspecting and reworking products
shortcoming
There is little room to make up for errors in the production process
Production is highly dependent on suppliers
No spare finished goods to meet unexpected orders
Procurement strategy
Supply strategy
single source strategy
Multiple source strategy
The supplier is responsible for delivering a complete subcomponent (total outsourcing)
Advantages Disadvantages
Procurement mix
quality
quantity
price
delivery
HR strategy
Recruitment and selection
internal recruitment
External recruitment
Incentive and reward mechanisms
Grade
financial strategy
Dividend policy classification and characteristics
Fixed (steady growth) dividend policy
Fixed dividend payout rate policy: 3%
zero dividend policy
residual dividend policy
Financial strategy choices
Financial strategy selection based on product life cycle
Business characteristics of enterprises at different development stages in the product life cycle
Product cycle and risks, etc. (combined with table)
Financial strategies for different development stages of the product life cycle
Four combinations of operating risks and financial risks
The combination of high operational risk and high financial risk
The combination of high operating risk and low financial risk: introduction period
The combination of low operating risk and high financial risk: maturity stage
The combination of low operating risk and low financial risk
Choice of financial strategy based on value creation/growth rate (combination quadrant)
Main factors affecting value creation
Value added in the corporate market
Factors affecting enterprise market added value
Factors affecting value creation
Sales growth rate, financing needs and value creation
Cash shortage: sales growth rate > sustainable growth rate
Cash surplus: sales growth rate < sustainable growth rate
Value-added type: Return on invested capital > Weighted average cost
Loss-loss type: Return on invested capital < weighted average cost
Value Creation/Growth Matrix (Financial Strategy Matrix)
Value-added cash shortage (first quadrant)
Improve operational efficiency
change financial policy
Issue additional shares
Merger Cash Cow
Value-added cash surplus (second quadrant)
invest again
Distribute dividends
Impaired cash surplus (third quadrant)
Increase your rate of return
Reduce capital costs
Business unit for sale
Impairment cash shortage (fourth quadrant)
radical reorganization
sell
international business strategy
Motives for international business operations of enterprises
The optimal combination of international production factors (self)
monopoly advantage theory
Imperfectly competitive market, excess profits
location theory
Combine your own advantages
product life cycle theory
Innovation stage, maturity stage, standardization stage
internalization theory
Integrated management, pursuit of efficiency
eclectic theory of international production
Ownership advantage = technology transfer, ownership: ownership of technology
Ownership advantages Internalization advantages = export trade, internalization: company establishment
Ownership advantage, internalization advantage, location advantage = foreign direct investment, location advantage: regional supporting conditions
Motives for international operations of enterprises in developing countries (competition)
The main motivations for overseas investment by multinational corporations in developing countries
Resource-oriented motivation: seeking resources
Technical and management-oriented motivations: seeking ready assets
Market-oriented motivation: seeking markets and avoiding barriers
Cost-oriented motivation: seeking efficiency and reducing production costs
Have greater job creation opportunities
Greater likelihood of beneficial connections and technology uptake
More likely to directly contribute to improving the productive capacity of developing countries
International market entry modes
exit
Target market selection
Target market regional path
Traditional method, also known as continuous method (matched pair)
New model, also known as discontinuous model: developed first and then developing
Select target customers
Select entry strategy (4P strategy)
external equity investment
External stock (securities) investment
Foreign Direct Investment
Wholly-owned subsidiary (sole proprietorship)
advantage
fully control
Get rid of the conflict of interests and goals of all parties
shortcoming
Spend a lot of money
Taking up a lot of company resources, the risk is higher
Weak ability to avoid political risks
joint venture
advantage
Reduce capital investment in international operations
Conducive to making up for the shortcomings of insufficient business experience, absorbing and utilizing resources
shortcoming
Coordination costs may be too large
Non-equity form (contract model)
Types of strategies for international operations (global collaboration, local independence and adaptability)
International Strategy (Double Low)
Multi-country localization strategy (demand)
Globalization strategy (standardization)
Transnational Strategy (Double High)
Corporate strategies in emerging markets (globalization pressures, advantages of local companies in emerging markets)
Dodgers (avoid war by moving to new businesses or niche markets
Establish joint ventures and cooperative enterprises with multinational companies
Selling a business to a multinational company
Redefine your core business to avoid direct competition with cross-company
Focus on market segments based on its local advantages and shift business focus to certain links in the value chain
Produce products that are complementary to those of multinational companies, or adapt them to suit local tastes
Counterbalancer (attacking through global competition)
Find a market that is well positioned and easy to defend
Don’t just compete on cost
Find a suitable breakthrough in a globalized industry
Learn to obtain resources from developed countries to overcome your own lack of skills and lack of capital
Defender (defend by taking advantage of domestic market)
Focus on domestic customers
Frequently adapt products and services to customer needs
Strengthen the construction and management of distribution network
Expander (transfers corporate experience to surrounding markets)
Diversification Strategy
market development strategy
product development strategy
market penetration strategy
existing market
new market
New product
Existing products