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Must memorize strategy before taking CPA exam - strategic choice
CPA Corporate Strategy and Risk Management - Chapter 3 Strategic Selection Notes, including the highest-level corporate strategy, basic competitive strategy, small and medium-sized enterprise competitive strategy, blue ocean strategy, functional strategy, etc.
Editado a las 2022-08-10 16:59:25,
Must memorize strategy before taking CPA exam - strategic choice
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Strategic Choice
overall strategy
Main types of overall strategy (3)
development strategy
integrated strategy
vertical integration
Advantages, Disadvantages and Main Risks of Vertical Integration
Advantages: 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.
Disadvantages: It will increase the internal management costs of the enterprise
Main risks (2)
Risks associated with unfamiliarity with new business areas
Vertical integration, especially backward integration, generally involves a large amount of investment and strong asset specificity, which increases the exit cost of the enterprise.
Type (2)
forward integration
Advantages: By controlling the sales process and channels, it helps enterprises control and master the market, enhance sensitivity to changes in consumer demand, and improve the market adaptability and competitiveness of enterprise products.
Applicable conditions (4)
The company's existing sellers have high sales costs or poor reliability and are unable to meet the company's sales needs.
The industry in which the company operates has great growth potential
The enterprise has the funds, human resources, etc. required for forward integration
The profit margin in the sales process is higher
backward integration
Advantages: It helps enterprises effectively control the cost, quality and supply reliability of key raw materials and other inputs, ensuring the steady progress of enterprise production and operation activities.
Applicable conditions (6)
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.
Few suppliers and many demand-side competitors
The industry in which the company operates has great growth potential
The enterprise has the funds, human resources, etc. required for backward integration
Higher profit margins in the supply chain
The 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
Advantages: The main purpose is to achieve economies of scale to gain competitive advantage
Applicable conditions (5)
The industry in which the company operates is highly competitive
Economies of scale in the industry in which the enterprise is located are 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 industry in which the company operates has great growth potential
The enterprise has the capital, human resources, etc. required for horizontal integration
intensive strategy
market penetration strategy
The difficulty of this strategy depends on the nature of the market and the market position of competitors
Applicable conditions (5)
market development strategy
Reasons (3)
Businesses find that the nature of the process for producing existing products makes it difficult to switch to producing entirely new products and wish to explore other markets
Market development is often combined with product improvement
Existing markets or market segments are saturated, and companies can only look for new markets
Applicable conditions (6)
There is an untapped or undersaturated market
Access to new, reliable, economical and high-quality sales channels
The company is very successful in its current business area
The enterprise has the capital and human resources needed to expand its operations
Enterprises have excess production capacity
The company's homepage belongs to an industry that is rapidly globalizing
product development strategy
Reasons (4)
Leverage your company’s understanding of the market
Maintain a leading position relative to competitors
Seek new opportunities from shortcomings in existing product portfolio
Enable companies to continue to maintain a solid position in existing markets
Applicable conditions (5)
Enterprise products have high market credibility and customer satisfaction
The industry in which the enterprise is located is a high-tech industry with rapid development that is suitable for innovation.
The industry in which the company is located is in a stage of rapid growth
The company has strong research and development capabilities
Major competitors offer higher quality products at similar prices
Diversification Strategy
Type (2)
Related diversification strategies (concentric diversification)
Unrelated diversification strategy (centrifugal diversification)
Reasons (3)
Goals cannot be achieved by continuing operations in existing products or markets
The capital retained by a business as a result of previous successful operations in existing products or markets exceeds the capital required for financial expansion in existing products or markets
A diversification strategy means higher profits than expansion in existing products or markets
Advantages (7)
Diversify risks. When existing products and markets fail, new products or markets may provide protection for the company.
Easier access to capital markets
When enterprises cannot grow in their original industries, they find new growth points
Leveraging underutilized resources
Use surplus funds
Receive funds or other financial benefits
Use the company's image and reputation in one industry or market to enter another industry or market. To succeed in another industry or market, corporate image and reputation are crucial.
Risk(5)
Risks from original operating industries
overall market risk
Industry entry risk
Industry exit risk
Internal business integration risks
stabilization strategy
contraction strategy
Reasons (2)
Proactive reasons - to meet the needs of corporate strategic restructuring
Passive reasons - external environmental reasons & internal environmental reasons
Ways (3)
austerity and concentration strategies
Mechanism change
Finance and Financial Strategy
cost cutting strategy
Turn to strategy
Reposition or adapt existing products and services
Adjust marketing strategy
Abandonment strategy – involves a change in the ownership of the business (or its subsidiaries)
Exit barriers (5)
Degree of specificity of fixed assets
exit cost
internal strategic connections
emotional disorder
Government and Social Constraints
Ways to realize development strategy
M&A strategy
Classification criteria (4)
Classification by industry where both parties to the merger and acquisition are located
horizontal merger
vertical merger
Diversified M&A
Classification according to the attitude of the acquired party
Friendly mergers and acquisitions
hostile takeover
Classified by the identity of the acquirer
Industrial capital mergers and acquisitions
Financial capital mergers and acquisitions
Classification by source of acquisition funds
LBO
non-leveraged buyout
Motives for mergers and acquisitions (3)
Avoid entry barriers, enter quickly, seize market opportunities, and avoid various risks
Obtain synergy effects (unified deployment of the same resources; complementation of superior resources; internal transfer to digest innovation)
Overcome negative externalities of enterprises, reduce competition, and enhance control over the market
Reasons for failed mergers and acquisitions (4)
poor decision making
After merger and acquisition, enterprise integration cannot be carried out well.
Paying exorbitant M&A fees
Crossing over mergers and acquisitions to face political risks
internal development
Motivation (10)
The process of developing new products enables companies to gain a deep understanding of the market and products
No suitable acquisition target exists
Maintain a unified management style and corporate culture
Provide career development opportunities for managers
The consideration is lower because no additional amount is paid for goodwill when acquiring the asset
Mergers and acquisitions often create hidden or unpredictable losses, whereas internal developments are less likely to create this
This may be the only reasonable way to achieve true technological innovation
Can be carried out in a planned manner, easy to obtain financial support from corporate resources, and costs can be spread over time
The risk is lower. In an acquisition, the buyer may also have to bear the consequences of previous decisions made by the acquiree
Internal development costs increase more slowly
Disadvantages (5)
Adding competitors to the market compared to buying existing businesses in the market may intensify competition within a market
Companies cannot have access to other companies’ knowledge and systems, which may be 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
Entry into new markets can involve very high barriers
Application conditions (3)
The industry is in an imbalanced situation and structural barriers have not yet been fully established.
The behavioral barriers of existing companies in the industry are easily restricted
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 entry.
Corporate strategic alliance
Reasons for formation (6)
Promote technological innovation
Avoid business risks
Avoid or reduce competition
Realize resource complementation
Open up new markets
Reduce coordination costs
Main types (3--from the perspective of equity participation and contractual linkage)
Joint venture
Mutual shareholding investment
functional protocol
Technology Exchange Agreement
Cooperative research and development agreement
Production Marketing Agreement
Industrial Coordination Agreement
Control
Enter into an agreement
Strictly define the goals of the alliance
Carefully design alliance structure
Accurately assess invested assets
Specify liability for breach of contract and dissolution clauses
Establish an alliance of cooperation and trust
business unit strategy
basic competitive strategy
Cost leadership strategy
Advantages (4)
create barriers to entry
Enhance bargaining power
Reduce the threat of substitutes
Stay ahead of the competition
Implementation conditions
Market conditions (4)
The product has high price elasticity and there are a large number of price-sensitive users in the market.
The products of all companies in the industry are standardized products, and it is difficult to differentiate products.
Buyers pay less attention to brands and most buyers use products in the same way
Price competition is the main means of market competition, and consumers' switching costs are low.
Resources and capabilities (7)
Equip corresponding production facilities in industries with significant economies of scale to achieve economies of scale
Reduce various factor costs
Improve productivity
Improve product process design
Improve production capacity utilization
Choose the appropriate trading organization form
Focus on gathering
Risk (3)
Changes in technology may wipe out past investments and accumulated experience in cost reduction (technology)
New entrants or followers in the industry achieve the same or even lower product costs by imitating or investing in higher-tech facilities (competition)
Market demand has shifted from focusing on price to focusing on the brand image of products, turning the company's original advantages into disadvantages (demand)
Differentiation Strategy
Advantages (4)
create barriers to entry
Reduce customer sensitivity
Enhance bargaining power
Defend against the threat of substitutes
Implementation conditions
Market conditions (3)
Products can be fully differentiated and recognized by customers
Customer needs are diverse
The industry in which the enterprise operates is experiencing rapid technological changes, and innovation has become the focus of competition.
Resources and capabilities (4)
Have strong R&D capabilities and product design capabilities
Have strong marketing capabilities
Have an incentive system, management system and a good creative culture that can inspire employees' creativity
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
Risk (3)
The cost for enterprises to differentiate their products is too high
Market demand changes
Competitors' imitation and attacks narrow or even divert established differences
centralization strategy
Implementation conditions (4)
There are differences in needs among buyer groups
The target market is relatively attractive in terms of market capacity, growth rate, profitability, competition intensity, etc.
No other competitor in the target market adopts a similar strategy
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 (3)
Risks caused by narrow target market
Differences in demand among buyer groups become smaller
Entry and competition of competitors
strategic clock
Competitive Strategies for Small and Medium Enterprises
Scattered industries
Reasons for industry fragmentation (3)
Strategic choices (3)
Overcome fragmentation—gain cost advantage (3 ways)
Franchise or franchise
Technological innovation to create economies of scale
Discover industry trends early
Increase added value - improve product differentiation
Specialization - Goal agglomeration
Potential strategic pitfalls (5)
Emerging industry
Common characteristics (5)
technological uncertainty
strategic uncertainty
Rapid changes in costs
Budding businesses and start-ups
first time buyer
Development barriers and opportunities
Obstacles (5)
Difficulties in selecting, acquiring and applying proprietary technology
Inadequacy of raw materials, parts, capital and other supplies
Customer confusion and wait-and-see
Reactions to substituted products
Lack of courage and ability to take risks
Opportunities (2)
Low barriers to entry
Competition structure is not established
Strategic choices (4)
Shape industrial structure
Correctly Treat the Externalities of Industrial Development
Pay attention to changes in industry opportunities and obstacles, and take the initiative in industrial development and changes
Choose the right time and field to enter
blue ocean strategy
connotation
Expand non-competitive market space and avoid competition
Create and capture new needs
Break the law of interchange between value and cost, pursue differentiation and low cost at the same time, and integrate corporate behavior into a system
six principles
Basic rules for reconstructing market boundaries (6)
Examine alternative industries
Across strategic groups
Redefining industry buyer groups
Look at complementary products or services
Reset customer functional or emotional appeals
across time
functional strategy
marketing strategy
market segmentation
Basis for consumer market segmentation (4)
Geographic segmentation
population segmentation
psychographic segmentation
behavioral segmentation
Basis for industrial market segmentation (4)
User's industry category
User scale
User's geographical location
buying behavior factors
Target market selection
undifferentiated marketing
differentiated marketing
centralized marketing
Market positioning
Strategies to seize or fill market gaps
Market positioning strategies to coexist and confront competitors
Market positioning strategies to replace competitors
Marketing mix (4Ps----product, price, distribution, promotion)
Product Strategy
Product Portfolio Strategy (Category 3)
Expand product portfolio
Reduce product portfolio
product extension
extend downward
extend upward
Two-way extension
Brand and Trademark Strategy
single brand name
Each product has a different brand name
private label
product development strategy
Price Strategy
Basic pricing methods (3)
cost oriented pricing
demand-based pricing
Competition Oriented Pricing
Main pricing strategies (4)
psychological pricing strategies
Product portfolio pricing strategy
Discounts and discount strategies
Geographical Spread Strategy
New product pricing strategy (3)
Penetration Pricing (Low Price)
Skimming pricing (high pricing)
Satisfied with pricing strategy
Distribution strategy
Traditional classification (2)
direct distribution
Indirect distribution (3)
exclusive distribution
selective distribution
intensive distribution
Internet era (2)
on-line
offline
promotion strategy
Components (4)
advertising promotion
Business promotion
personal selling
public relations
Strategy(3)
push strategy
pull strategy
push-pull strategy
research and development strategy
Type (2)
product research
process research
Sources of motivation for R&D (2)
demand pull
technology push
R&D positioning (4)
Become a company that introduces new technology products to the market
Become an innovative imitator of successful products
Become a low-cost producer of successful products
Become an imitator of low-cost producers of successful products
Strategic role (4)
basic competitive strategy
Porter's value chain
Ansoff matrix
product life cycle
Policies to encourage innovative ideas (7)
Financial support must be given to innovation, which can be achieved through funding for R&D and market research, as well as venture capital for new ideas
Employees must be given the opportunity to work in an environment that generates innovative ideas, which requires appropriate management styles and organizational structures
Management actively encourages new ideas from employees and customers
Form a development team and establish relevant management organizations
Where appropriate, corporate recruitment policies should focus on recruiting employees with innovative skills
Dedicated managers are responsible for obtaining information related to innovative ideas from the environment or from the company's internal communications.
Strategic plans should help achieve innovation goals; employees who successfully achieve goals should be rewarded
Production operations strategy
Procurement strategy
HR strategy
Function(8)
Precisely identify the types of talent the company needs to achieve its short-, medium- and long-term strategic goals
Unlock employee potential through training, development and education
Maximize the share of employees who perform well early in their tenure as a percentage of the total workforce
Recruit enough new young workers who have the potential to become outstanding workers
Recruit enough talents with certain experience and achievements and quickly adapt them to the new corporate culture
Make sure you take all possible steps to prevent competitors from poaching your talent
Motivate talented people to reach higher performance levels and inspire loyalty to the business
Create a corporate culture so that talents can be cultivated and able to display their talents in this culture
4 steps of human resource planning
Investigate, collect and organize various information related to corporate strategic decisions and operating environment
Determine the duration, scope and nature of human resource planning based on the actual situation of the enterprise or department. Establish an enterprise human resources information system to prepare accurate and detailed information for relevant forecasting work
On the basis of analyzing the factors affecting the supply and demand of human resources, various scientific forecasting methods that are mainly quantitative and combined with qualitative analysis are used to predict the future supply and demand of human resources of the enterprise.
Develop a master plan and various business plans to balance the supply and demand of human resources
Human resources training and development
When an enterprise adopts a cost leadership strategy, it usually emphasizes personal abilities, therefore emphasizing a limited range of knowledge and skills, and implements personal on-the-job training. Enterprises often improve employees' knowledge and abilities by setting up corporate universities or regular training.
Companies that adopt a differentiation strategy emphasize what makes the company different from other companies, and therefore require a wide range of knowledge, skills, and creativity. Companies that adopt this strategy often deliver external novel information, purchase required skills, or use external training institutions to Team training
Enterprises that adopt a centralized strategy have a more urgent need for knowledge in specialized fields and generally emphasize knowledge and skills with a moderate scope of application. This knowledge and skills become proprietary knowledge and cannot be easily transferred and shared. Companies may use on-the-job training or external training to develop skills themselves or purchase skills
HR performance evaluation
Enterprises that implement a cost leadership strategy advocate defeating opponents or becoming industry leaders through lower costs. Performance evaluation emphasizes result orientation and aims to control costs. The scope of evaluation is narrow and the information source for evaluation is single. Superiors serve as the main examiners.
The differentiation strategy emphasizes the production of distinctive products, focusing on innovation and novelty, and the evaluation content involves both behavioral and result indicators. The evaluation scope is wide and the evaluation information is rich. It is mainly used for employee development and quality improvement.
Compared with cost leadership and differentiation strategies, for enterprises that adopt centralized strategies, the purpose, content, scope and results application of performance management tend to be a combination of the two.
Corporate competitive strategy and compensation strategy
financial strategy
international business strategy
Motivation (4)
seek market
Seeking efficiency (rising production costs in investing countries, especially labor costs)
seek resources
Seek ready assets
Main methods (3)
Export trade
Foreign Direct Investment
non-equity arrangements
Export trade target market selection
Traditional method (continuous method)
New method (discontinuous method)
Non-equity forms (6)
contract manufacturing
service outsource
contract farming
Franchise
Licensed operation
management contract
International operations of enterprises in global value chains
role positioning
Leading companies
first grade supplier
Other tier suppliers
contract manufacturer
Upgrading with companies in developing countries
Process upgrade
product upgrade
Function upgrade
Value chain upgrade
Strategy types (4)
International strategy (no local decision-making power)
Multi-country localization strategy (local decision-making power)
Globalization strategy (unified decision by headquarters, product standardization)
Transnational strategy (two-way relationship between parent and subsidiary, subsidiary and subsidiary)
Corporate strategy for emerging markets
defender
expander
Dodger
counterbalancer