Chapter Six Strategy Formulation: Situation Analysis and Business Strategy

Topics: Strategic management / Pages: 10 (2294 words) / Published: Sep 16th, 2012
This chapter is the first of three chapters dealing with the formulation of strategy. Following the strategic decision-making process introduced in Chapter One and depicted in Figure 1.5, these chapters emphasize steps 5(a), situation analysis of strategic factors, 5(b), the review and revision of a firm's current mission and objectives, 6(a), the generation and evaluation of strategic alternatives, and 6(b), the selection and recommendation of the best alternative. Situation analysis is conducted using S.W.O.T. in the form of generating a Strategic Factors Analysis Summary (SFAS) Matrix to summarize a corporation's strategic factors and to help identify propitious niches. Once a corporation's strengths, weaknesses, opportunities, and threats are identified, strategic managers should review and revise, if necessary, the mission and objectives before proceeding to developing feasible alternative strategies. The chapter then presents the TOWS Matrix as one way of generating alternative corporate and business unit strategies by using strengths to capitalize on opportunities and/or working around weaknesses to avoid threats. Business strategies are explained in terms of competitive and cooperative strategies. Competitive tactics are also discussed.


• Identifying a corporation's strategic factors using the SFAS Matrix.

• Finding a propitious niche.

• Using the TOWS Matrix to generate potential strategic alternatives.

• Using the competitive strategies of lower cost and differentiation.

• Competitive strategy, industry structure, and hypercompetition.

• The use of offensive and defensive competitive tactics.

• Using the cooperative strategies of collusion and strategic alliances.


1. What industry forces might cause a company's propitious niche to disappear?

Newman's argument for a propitious niche includes the implication that a corporation with such a niche will be successful so long as it

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