Management Policy
Lecture 1
Part 2
• Components of a Strategy
• Intro to Diamond E
• Value Chain and PEST
Strategy and Critical Thinking
Strategy
Meet Goals subject to Constraints
Logical or Rational Thinking
Unbiased
Deductive
Identity of person not an issue
Strategy versus Tactics
Goal: Dominant Firm
Strategy: Low Cost
Tactics
Low Price
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1
THE ROLE OF STRATEGY
Hub for Analysis
Retrospective
Prospective
Link to Action
Goals – Value Proposition – Core
Activities - PMF
Business Strategy Components
GOALS
Value
Proposition
PRODUCT-MKT
FOCUS
CORE
ACTIVITIES
5
The Wal-Mart Business Strategy
• Dominate Markets
•Lowest cost System
•High Growth
•Do it the Wal-Mart way
GOALS
Value
Proposition
PRODUCT-MKT
FOCUS
CORE ACTIVITIES
6
2
The Wal-Mart Business Strategy
GOA:LS
• Everyday low prices
•Always in stock
•Courteous
•Reliable
Value
Proposition
PRODUCT-MKT
FOCUS
CORE ACTIVITIES
7
The Wal-Mart Business Strategy
GOA:LS
Value
Proposition
PRODUCT-MKT
FOCUS
CORE ACTIVITIES
• Integrated Logistics: Supplier
to checkout
•Intensely managed
•Local Tailoring
8
The Wal-Mart Business Strategy
GOA:LS
Value
Proposition
PRODUCT-MKT
FOCUS
CORE ACTIVITIES
• Branded general merchandise
•Value-oriented customers
•Develop easier markets first:
•work from regional hubs
9
3
The Wal-Mart Business Strategy
• Dominate Markets
•Lowest cost System
•High Growth
•Do it the Wal-Mart way
GOA:LS
• Everyday low prices
•Always in stock
•Courteous
•Reliable
Value
Proposition
PRODUCT-MKT
FOCUS
CORE ACTIVITIES
• Branded general merchandise
•Value-oriented customers
•Develop easier markets first:
•work from regional hubs
• Integrated Logistics: Supplier
to checkout
•Intensely managed
•Local Tailoring
10
The Diamond E Framework
Management
Preferences
Organization
The ability to
Analyze this
Is Key
Strategy
Capabilities
& Resources
Environment
Goals
Product/Mkt
Competitive Premise
Business System
11
Diamond E Framework: Tensions
Management
Preferences
Organization
Strategy
Environment
CAN DO
Capabilities
& Resources
4
Diamond E Framework: Tensions
Management
Preferences
WANT TO DO
Organization
Strategy
Environment
Capabilities
& Resources
Diamond E Framework: Tensions
Management
Preferences
Organization
Strategy
Environment
NEED TO DO
Capabilities
& Resources
Diamond E Framework: Tensions
Management
Preferences
WANT TO DO
Organization
Strategy
CAN DO
Environment
NEED TO DO
Capabilities
& Resources
5
Strategic Tension & The Business Model
WANT
Goals
Value
Proposition
CAN
Core
Activities
Product/
Market
NEED
Strategic Risks
TIME HORIZON
Short-Term
RISKS
Enviro
Long-Term
Errors in reading
the enviro
cause failure
Capability
17
Strategic Risks
TIME HORIZON
Short-Term
RISKS
Enviro
Long-Term
Enviro changes
Make the
Strategy
obsolete
Capability
18
6
Strategic Risks
TIME HORIZON
Short-Term
Long-Term
RISKS
Enviro
Capability
Strategic demands
Exceed the
Capacity to
execute
19
Strategic Risks
TIME HORIZON
Short-Term
Long-Term
RISKS
Enviro
Internal cap’y
Develop inconsit’y
With strategy
Capability
20
Strategic Risks
TIME HORIZON
Short-Term
RISKS
Enviro
Capability
Long-Term
Errors in reading
the enviro
cause failure
Enviro changes
Make the
Strategy
obsolete
Strategic demands
Exceed the
Capacity to
execute
Internal cap’y
Develop inconsit’y
With strategy
21
7
Strategic Tension
Management Preferences
Strategy
Environment
Org’n, Res. & Cap’s
Strategic Tension
Management Preferences
Individual
Strategic
Tension
Environment
Industry
Org’n, Res. & Cap’s
Firm
Strategic Tension
WANT
Management Preferences
Individual
Strategic
Tension
CAN
Org’n, Res. & Cap’s
Firm
NEED
Environment
Industry
8
The Process of Strategic Analysis
Step 1: Base Case Analysis 1. Identify and evaluate the
current strategy
Assess the strategic position
of the bus and the urgency for 2. Forecast future
action
performance under
current strategy
3. Assess past performance
4. Decide on the need,
nature, and speed of
change
The Process of Strategic Analysis
Step 2: Strategy
1. Work from the enviro and
Formulation and Testing
capabilities to generate
new proposals
Develop and evaluate
proposals to address business 2. Use the drill to shape and
opp’y and challenges
short-list proposals
3. Prepare performance
forecasts
The Process of Strategic Analysis
Step 3: Decision and
Implementation
Commit, implement, and
review
1. Decide on Proposals to
implement
2. Move to build
commitment and develop
required capabilities
3. Implement
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The Process of Strategic Analysis
Step 1: Base Case Analysis
Assess the strategic position of the bus
and the urgency for action
1.
2.
3.
4.
Step 2: Strategy Formulation and
Testing
Develop and evaluate proposals to
address business opp’y and challenges
1.
2.
3.
Step 3: Decision and Implementation 1.
Commit, implement, and review
2.
3.
Assess past performance
Identify and evaluate the current
strategy
Forecast future performance under
current strategy
Decide on the need, nature, and
speed of change
Work from the enviro and
capabilities to generate new
proposals
Use the drill to shape and shortlist proposals
Prepare performance forecasts
Decide on Proposals to implement
Move to build commitment and
develop required capabilities
Implement
Value Chain
FIRM INFRASTRUCTURE
(e.g., Finance, Planning)
SUPPORT
ACTIVITIES
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
Value Chain
INBOUND OPERATIONS OUTBOUND MARKETING AFTER-SALE
LOGISTICS (Manufacturing) LOGISTICS AND SALES SERVICE
PRIMARY
ACTIVITIES
10
Value Chain
FIRM INFRASTRUCTURE
(e.g., Finance, Planning)
HUMAN RESOURCE MANAGEMENT
SUPPORT
ACTIVITIES
M
A
TECHNOLOGY DEVELOPMENT
R
G
PROCUREMENT
INBOUND OPERATIONS OUTBOUND MARKETING AFTER-SALE
LOGISTICS (Manufacturing) LOGISTICS AND SALES SERVICE
I
N
PRIMARY
ACTIVITIES
Supply Chain for Soft Drink
Industry
Concentrate
Producer
Inputs
Bottler
Distributors
The Soft Drink Industry Value Chain
Inputs
Players:
Value
added:
Packaging
Sweeteners
Operations
CP
Coke
Pepsi
Dr. Pepper
7-up
RC
Secret formula
Brand identity
Bottler
Distributors
Company owned
Independent
- exclusive
franchise
Foodstores
Fountain
Vending Machines
Convenience Stores
Marketing & Sales
- Distribution
11
Assessing the Environment
Macro Forces - PEST
Political
Economic
Social
Technological
Assessing the Environment
Micro Forces Supply
Competition
Demand
Assessing the Environment
Macro Forces - PEST
Political
Economic
Social
Technological
Micro Forces Supply
Competition
Demand
12
Strategy and Environment Linkage
New Strategy
Must Fit
MANAGEMENT
PREFERENCES
STRATEGIC
CHOICES
ORGANIZATION
ENVIRONMENT
RESOURCES &
CAPABILITIES
Strategy and Environment Linkage
New Strategy
Must Fit
MANAGEMENT
PREFERENCES
STRATEGIC
CHOICES
ORGANIZATION
RESOURCES &
CAPABILITIES
ENVIRONMENT
Strategic Choices
Repeatedly
Reviewed
Strategy and Environment Linkage
New Strategy
Must Fit
MANAGEMENT
PREFERENCES
STRATEGIC
CHOICES
ORGANIZATION
RESOURCES &
CAPABILITIES
ENVIRONMENT
Need to understand
Industry economics
and competitive
environment
13