What is strategy? Rapeeporn Rungsithong, PhD Rapeeporn@cbs.chula.ac.th Asst.Prof. Rapeeporn Rungsithong, PhD. • Lecturer in Strategic Management, Chulalongkorn Business School • PhD in Management, University of Bath, UK • Bachelor of Economics & Master of Economics, Chulalongkorn University • Project commercial officer, Siemens Ltd. • Corporate lending officer, Bangkok Bank Course Syllabus Office Hour: By appointment Email: Rapeeporn@cbs.chula.ac.th - Textbook Rothaermel, F. (2023). Strategic management: Concept and Cases. McGraw-Hill. - Evaluation criteria - Class activities Lecture, class discussion, project presentation 3 Course objectives • Understanding the concepts of business strategy • Analyzing external & internal environment • Identify business strategy that fit with the situation • Identify implementation plan and evaluation 4 Course objectives 5 Rules of the class • Being professionals • Being on time • Case examples for class discussion • Class Feedback are allowed any time. 6 Outline • What is Strategy? • What Strategy is not? • What is Competitive Advantage? • Formulating Strategy Across Levels 7 Why do some companies success while others fail? 8 What is Strategy? • Strategy: the creation of a unique and valuable position involving a unique set of activities; being different • Activities: the basic units of competitive advantage • Competitive Advantage: grows out of the entire system of activities; capacity to outperform rivals by establishing a difference it can preserve over time Strategy as a Theory of How to Compete to Create Superior Value, While Containing the Cost to Create It 9 Where are we now? Where do we want to go? How will we get there? What is Strategy? • Strategy as a Theory of How to Compete • Strategy is about making choices 11 Who need a Strategy? To achieve superior performance, companies compete for resources: • • • • • • • New ventures: financial and human capital Existing companies: profitable growth Charities: donations Universities: the best students and professors Sports teams: championships Celebrities: media attention What about us? Do we need a strategy? 12 Do these Concepts Equal Strategy?? • “We want to be number one or two in the market” • ‘My strategy to win the 400 meters at the Olympics is by running faster than anyone else’ • We need to promote our products on social medias to increase our market share. • Management tools (i.e. benchmarking, best practices, outsourcing). • Operational effectiveness (OE) - productivity, speed, quality 13 Strategic Positioning • A unique position within an industry that allows the firm to provide value to customers, while controlling costs. • Value creation minus costs equal economic contribution. • The greater, the better. • Enhances the likelihood of competitive advantage. Trade-offs Example: The retail industry • Walmart – Cost Leader (Big box outlet / low prices) • Nordstrom – Differentiator (Professional salespeople / luxury setting) Formulating Strategy into actions 16 Competitive Advantage • Superior performance relative to other competitors in the same industry or the industry average. • Competitive advantage is relative, not absolute. • To assess competitive advantage, benchmark: • Compare the firm to competitors in the same industry. • Compare the firm to the industry average. Competitive Disadvantage • Competitive Disadvantage: a firm that underperforms: • Its rivals. • The industry average. • For example, is 15% ROIC superior? • It depends on the industry. Long-Term Trends Revealed by Analyzing ROIC By Sector www.forbes.com/sites/greatspeculations/2019/06/19/long-term-trends-revealed-by-analyzingroic-by-sector/?sh=991f3002e874 Sustainable Competitive Advantage • A firm that is able to outperform its competitors or the industry average over a prolonged period. What Is a Good Strategy? A good strategy enables a firm to achieve superior performance relative to its competitors. A diagnosis of the competitive challenge. • Analysis •A guiding policy to address the competitive challenge. • Formulation A set of coherent actions to implement the firm’s guiding policy. • Implementation Crafting a Good Strategy at Tesla • The Competitive Challenge: • Tesla must manufacture attractive and affordable vehicles using its new technology. • It also needs the required infrastructure for electric vehicles. • A Guiding Policy: • Tesla is building cost-competitive mass-market vehicles. • They have made significant investments in lithium-ion battery production. • They have just broken ground for another factory in Shanghai, China. • Coherent Actions: • Tesla is attempting to ramp up production volumes to achieve economies of scale. • Tesla has made some of its proprietary technology available to the public. AFI Framework: Tesla 24 The AFI Strategy Framework Consists of interdependent relationships This framework: 1. Explains and predicts differences in firm performance 2. Helps managers formulate and implement a strategy In each section, managers focus on specific questions • These are addressed in each chapter. Role of Leadership • Focus on creating distinctiveness • Make tough decisions on trade-offs • Define the company’s position • Manage the entire organizational system to create fit • Focus on the long term and sustainability Strategic Thinking Implications for the Strategist STRATEGY is the SCIENCE of SUCCESS and FAILURE. • Strategists are challenged by competition, complexity, uncertainty and volatility. • The strategist is empowered by: • The universality of strategic management principles. • Knowledge that the actions they create have more influence on firm performance than does the external environment. • Following the 3-step AFI framework. Strategic Planning and Analysis • Planning how to achieve superior performance requires these steps: • • • • • • • • Scanning the overall environment Scanning and researching the industry environment Researching direct competitors Researching your organization's skills and resources Analyzing current strategy SWOT analysis Competitive strategy Implementation plan Case study based learning • • • • • Describes an actual situation in narrative form Requires a decision of a problem or opportunities It’s not a problem with a “unique” solution There are different alternatives Critical thinking/Decision Making 30 Steps in Doing Case Analyses 1. 2. 3. 4. Identify dimension of problem or opportunity What caused problem/opportunity to exist? Possible solutions to the problem What is the “best” solution/ recommendation and why? Describe Diagnose Frame prescription options Prescribe 31 Rapeeporn@cbs.chula.ac.th Facebook: Strategy In Trends 32
