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Seminar Structure
Theory
Strategic Managment
Practice
Discussion
Assoc Prof. Dr.ir. Srinivas Kumar Pinjala
Group T International University College Leuven
kumar.pinjala@groept.be
Open &
Interactive...
Closing
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Seminar on Strategic Management
Overview
•
•
•
•
•
•
•
Case studies workshop
Group work (3 to 4)
2
Strategy?
Strategy... What is it?
State of strategy
Strategy choices
Strategy in action
Case studies: workshop
Discussion
Conclusions
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Strategy: some definitions
4
Strategy: some definitions
• Strategy is...
“Strategy is a plan, pattern in actions over time, positioning of product and
services and perspective in vision and direction” (Mintzberg, 1995)
– Multidimensional
– Situation specific
“Strategy is a game played in different ways and at different levels. The focus
is on a continuous loop (discover-choose-act) followed by the player over
time”. (Stacey, 1996)
Strategy is “being different” than rivals by choosing to perform activities
differently so as to deliver a unique mix of value. (Porter, 1980)
• Strategy Dimesions:
–
–
–
–
“It is the pattern of decisions in a company that determines and reveals its
objectives, purposes, or goals, produces the principal policies and plans for
achieving these goals, and defines the range of business the company is to
pursue, the kind of economic and human organization it is or intends to be,
and the nature of economic and non-economic contributions it intends to
make to its shareholder, employees, customers and communities”
Establishment of organizational purpose and plan
Pattern of decisions
Contributions to the organization
Feedback system
(Andrew, 1980)
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Strategy: Characteristics
Levels of Strategy
Corporate strategy
Business
strategy A
Time Horizon
Business
strategy B
Functional
strategy
Business
strategy C
Functional
strategy
Dangeerous
proposition?
Functional
strategy
“concentration of efforts on the scope of the business, the business priority elements (e.g.
cost leadership, differentiation and focus) that has to or can be achieved by manufacturing or
other functions and the types of markets to be pursued, and making a pattern of decisions
based on which the company can achieve and maintain a competitive advantage in the
market”. ( Business Strategy based on Porter,1985)
“ the concentration of efforts on certain critical focus elements (constituting structural
and/or infrastructural elements) and making a pattern of decisions that are consistent with
the business strategy and other contextual situations of a business unit”.(Manufacturing
strategy, based on Hayes & Wheelwright,1984)
Based on Hayes & Wheelwright,1984)
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How to understand Strategy?
Need for a Strategy
Need for
Strategy
• Strategy is implicit
• Can be deduced about the organization
• Can have varied vocabulary (different sources)
– vision, mission, objective, core competences,...
Strategic
Thinking
Strategic
Management
• Strategic Thinking
– Integrated perspective
– Focus on interrelationships
– Response to competition,
environment, stakeholders
– Break and combine into
patterns
Understand Strategy (whatever terminology is used)
from the perspective of the characteristics it should
possess to be called as Strategy !!!
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Strategic Management: Elements
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State of Strategy: Environment
Purpose &
Culture
Environment
... But How?
The
Organization
Capabilities
Markets
State of
Strategy
Making sense of the complex world around the
organization and its status !!!
Corporate&
Business level
strategies
Strategy
Choices
Strategy in
Action
International
strategies
Innovation &
Evaluation
Processes &
Structuring
Context
Content
Change &
Practice
Current Strategy
Objectives
Decision areas
Capabilities
Resourcing
New Strategy
Process
State 1
Objectives
Decision areas
Capabilities
State 2
Based on Johnson et al, 2008
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State of Strategy : Environment
State of Strategy : Environment
Tools that can be applied...
Porter’s Five Force Model to understand Industrial Sector Influences
Potential
entrants
• Macro Environment : PESTEL
POLITICAL
ECONOMIC
TECHNOLOGICAL
SOCIAL
ENVIRONMENTAL
Suppliers
LEGAL
Competitive
rivalry
Buyers
– Remember... Scenarios, Key Drivers of Change
• Industry Sector:
Substitutes
– Competitive Rivalry ( Porter’s five forces)
– Industry Life cycle
– Cycles of Competition
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Comparative Industry Structure analysis
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State of Strategy : Environment
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State of Strategy : Environment
• Inner Organization Analysis
– Strategic Group analysis
– Market Segment analysis
– Strategy Canvas
Industry Life Cycle
Strategic groups are organisations within an industry with
similar strategic characteristics, following similar strategies or
competing on similar bases.
Product Diversity, Geography, Segments, Channels of distribution
A market segment is a group of customers who have similar
needs that are different from customer needs in other parts
of the market.
Cycles of Competition
A strategic customer is the person(s) at whom the strategy is
primarily addressed because they have the most influence
over which goods or services are purchased.
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State of Strategy: Purpose&Culture
• The purpose is influenced by expectations of shareholders
• Governance chains reveal the links between ultimate
beneficiaries and management
• The shareholder model and the stakeholder model are the
two generic governance systems
• Stakeholder analysis reveals the influence of different
stakeholders
• Ethical dimensions of organizational purpose are expressed
via organizational approach to corporate social responsibility
as well as by individual resolution of ethical dilemmas
• Managers must decide how the organization should express
its strategic purpose through values, vision, mission, and
objectives
Strategic
purpose
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Stakeholder
expectations
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State of Strategy: Purpose&Culture
Governance
structure
Social
responsibility
and ethics
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State of Strategy: Purpose&Culture
State of Strategy: Purpose&Culture
15 people killed
170 injured
$2billionincompensation
Damage of the organization’s image
Strategic
drift
Historical
influences
Cultural
influences
Cultural
web
Management
implications
• The history and culture of an organization may contribute to
its strategic capabilities as well as strategic drift.
• Historical analyses can be conducted to uncover the
influences driven by historical, path-dependent processes.
• Cultural and institutional influences inform and constrain the
strategic development of an organization.
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State of Strategy: Purpose&Culture
Stories
Rituals/
routines
Control
systems
State of Strategy: Purpose&Culture
Path dependency is where early events and decisions establish
policy paths that have lasting effects on subsequent events and
decisions.
Symbols
Paradigm
20
Power
structures
Structures
• Organizational culture operates unconsciously and defines the
an organization’s view of itself and its environment.
• The cultural web can be used to understand an organization’s
culture and its relationship to organizational strategy.
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State of Strategy: Capabilities
• Strategic capability deals with adequacy and suitability of
resources and competences required for success
• Tools for diagnosing organizational Capabilities
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Service
Marketing and
Sales
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Outbound
Logistics
Source: Value chain set up
• Goal is to establish core competences that lead to competitive
advantage
• Cost efficiency is vital
• In dynamic conditions, dynamic capabilities are important
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Value chain and value networks
Activity mapping
Benchmarking
SWOT analysis
Operations
–
–
–
–
Threshold Resources
Threshold competences
Core competences
Unique Resources
Support
Activities
–
–
–
–
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State of Strategy: Capabilities
Inbound
Logistics
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suggested by Porter (1985)
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Primary Activities
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State of Strategy: Capabilities
State of Strategy: Capabilities
Value Chain Analysis: Application steps
•
SWOT Analysis
Disaggregation
– Drawing boundaries (different segments have different sources of competitive
advantage)
•
Identifying Critical Value creating activities
•
Internal Cost Analysis
– Accounting methods play a significant role in identification
Strengths
Weaknesses
Opportunities
Threats
– Costs assignment for each value creating activity
– Identification of relevant cost drivers (structural & executional)
– Explore opportunities for strategic cost management
•
Internal differentiation analysis
– Rating of customer satisfaction
– Service attributes, customer support
•
•
Mapping out Profit pool --- cash flow with each activity
Vertical Linkage analysis
Application steps:
Identify
Draw conclusions
Translate into Strategic action
– Determining cost drivers and core competences driving the cost down
– Evaluation of existing capabilities, skills and technologies that drive cost down
– Exploring potential opportunities for cost advantages
•
Iteration
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• Many companies are made up of multiple business units
• Corporate strategy focuses on decisions of the corporate
parent
• Product diversity may be considered in terms of related and
unrelated diversification
• Performance tends to suffer when organizations become very
diverse
• Corporate parents may seek to add value by adopting
different parenting roles: portfolio manager, synergy manager,
or parental developer
• Several portfolio models are available to aid corporate
parents: the BCG matrix, the directional matrix, and the
parenting matrix
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Value creation
Corporate
parenting
Portfolio
management
Diversification
Penetration
Consolidation
Development
Scope decisions
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Strategy Choices:
Corporate &Business level strategies
Strategy Choices:
Corporate &Business level strategies
ANSOFF MATRIX
26
Strategy Choices:
Corporate &Business level strategies
Strategy Choices:
Corporate &Business level strategies
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Products
Existing
A
New
B
Existing
Market penetration
Consolidation
New products and
services
Markets
C
New
D
Market development
Diversification
Source: Adapted from H.Ansoff, Corporate Strategy, Penguin,1988, Chapter 6
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Strategy Choices:
Corporate &Business level strategies
Strategy Choices:
Corporate &Business level strategies
GROWTH SHARE:BCG MATRIX
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Strategy Choices:
Corporate &Business level strategies
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Strategy Choices:
Corporate &Business level strategies
Strategy Clock
• Managers must consider the bases upon which price-based or
differentiation strategies can be sustained on strategic capabilities
• Sustainable competitive advantage is difficult to achieve in
hypercompetitive conditions
• Strategies of collaboration may offer alternatives to or complement
competitive strategies
• Game theory provides a basis for examining possible competitive
moves
• Competitive strategy is concerned with seeking competitive
advantage
• Competitive strategy must be defined in terms of SBUs
• The bases of competitive strategy include no frills, low-price,
differentiation, hybrid, and focused differentiation strategies
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Strategy Choices:
Corporate &Business level strategies
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Strategy Choices:
Corporate &Business level strategies
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Strategy Choices:
Corporate &Business level strategies
Strategy Choices:
International Strategy
Similar customer needs
Global customers
Transferable marketing
To be different or the same? Debate questions
• To what extent do Universities compete by being different or
the same? Car manufacturers?
• Considering the nature of their industries and key players
within them, why might these organizations adopt these
approaches to conformity or differentiation?
Government
drivers
Trade policies
Technical standards
Host government policies
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•
•
State owned company to gradual
privatisation
Implementation of “One BrandOne face to the customer”
Globalisation of DP’s activities>>>
– Acquisition of Danzas, DHL
– Name change to DPWN (DP
World Net)
– Major contract from BMW
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•
Expansion into China >> joint
venture with Sinotrans
•
Long term licence for DP’s
subsidiary in UK “DP Global Mail”
•
Acquisition of UK post operator
Speedmail.
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Interdependence between
countries
Competitor’s global
strategies
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• What were the internationalisation drivers
associated with DPWN’s strategy?
Similar customer needs
Global customers Transferable
marketing
– Opportunities
– Pressures
•
Competitive
drivers
Strategy Choices:
International Strategy
The Case of Deutsche Post (DP) Germany
Reasons for DP’s
internationalisation
Cost
drivers
International
strategies
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Strategy Choices:
International Strategy
•
Scale enonomies
Country- specific
differences
Favourable logistics
Market
drivers
Government
drivers
International
strategies
Cost
drivers
Interdependence between
countries
Competitor’s global strategies
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Strategy Choices:
International Strategy
Market
drivers
Competitive
drivers
Trade policies
Technical standards
Host government policies
39
Scale enonomies
Country- specific
differences
Favourable logistics
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Strategy Choices:
International Strategy
• Market selection for international entry should be based on
attractiveness, multidimensional measures of distance and
expectations of competitor retaliation
• Modes of entry into new markets include export, licensing,
joint ventures, and foreign direct investment
• Internationalization has an uncertain relationship to financial
performance
• Sources of advantage can come from global sourcing through
the international value network and national sources of
advantage
• The main types of international strategy vary according to
extent of coordination and geographical configuration: simple
export, complex export, multi-domestic, and global
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Debate Questions?
• Make a list of products and services which are getting more
‘global’ over time.
• Now make a list of products and services which are getting
less global.
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Strategy in action:Processes
Strategy in action:Processes
Strategy development processes
• Decisions about an organization’s future
• The response to the internal and external influences
• Two distinct theories on Strategy process: Prescriptive and
Emergent theory
Situation
analysis
Identifying
options
Selecting
options
3
Unrealized
Strategy
Intended
strategy
Emergent Strategy
Implementation
Allocating
resources
Intended strategy formation process
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The concept of deliberate and emergent strategy of
Mintzberg
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Strategy Development routes
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Strategy in action:Processes
Realised
strategy
Un-realised
strategy
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Strategy in action:Processes
The case of Strategy planning in Shell
Strategic directions from prior decisions
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1
2
Source: Adapted from Mintzberg and Waters (1985)
Based on Ansoff,1965, Andrews,1971, Chakravarthy & Lorange,1991
Emergent
strategy
4
Realized Strategy
Making
action
plans
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Strategy in action:Processes
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Strategy in action:Processes
The case of Viacom
• The resource allocation process (RAP) explanation of strategy
development explains that realised strategies emerge as a
result of the way resources are allocated in organisations.
Sumner Redstone >> Chairman of
Viacom appointed Frank Biondi as
CEO
Biondi’s approach>> cultivate high
perf culture thru divisions &
operational autonomy, financial
incentives linked to results
Corporate level
Discrepancy
to resolve
Proposals
in line RAP
1990’s rethinking of European
strategy
Business level
Discrepancy
to resolve
Proposals
in line RAP
Divisions Paramount,
MTV/Nickelodoen
>> competitors … Businesses of
Rupert Murdoch’s Newscorp
Operating level
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News Corp’s style>> centralised
mgmt, interventionist style of
Rupert
>> competitors … Businesses of
Rupert Murdoch’s Newscorp
1995 strategic issues:
1. Paramount’s plan for next-gen
satellite-delivered programming
service thru partnership with Kirch
Group
2. MTV/Nickeledoen’s plan for wider
market thru locally tailored
broadcasting channels thru equity
based partnerships with several
companies instead of just one
Kirch Group
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Strategy in action:Processes
Strategy in action:Organizing for success
The case of Viacom contd...
Collaborate? Between two divisions
but what strategy to follow?
Paramount>> lead role in any
negotiations with prospective media
partners
MTV/Nickeledoen>> would clear it’s
strategic preferences
No involvement of Biondi
Desired market developments were
delayed>> increase in competition
Redstone’s entry>> Biondi’s departure
Introduced more centralised
corporate strategic mgmt style to
improve speed and efficiency.
How did Viacom’s strategy
development processes differ from
the formal strategic planning
approaches?
• Organizing for success is about an organization’s
configuration, built on three related strands: structures,
processes, and relationships
• Successful organizing means responding to the key challenges
facing the organization: control, change, knowledge and
internationalization
• There are many structural types, each with its own strengths
and weaknesses
How might the problems that
occurred at Viacom in 1995 have
been avoided?
Recognition that devolved approach
not working?
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Strategy in action:Organizing for success
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Strategy in action:Organizing for success
2007>>>Major restructuring after Porsche
car company took over controlling stake
Head Quarters
Head
Quarters
Finance
VW
AUDI
R&D
Sales
Mass
Scania
VW
VW
Audi
Skoda
Skoda
Seat
Seat
Bentley
Lamborghini
Finance
Prod’n
Luxury
Distrib’n
Scania
Audi
Bentley
Bugatti
Lamborghini
Bugatti
Aim is to > synergies between brands
Tech’cal & Mktg expertise clustered
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Strategy in action:Organizing for success
Expected benefits:
• There is a two-way relationship between resource
management and strategic success
• In all resource areas, the critical question is how resource
management systems contribute to the creation and
integration of knowledge
• People affect success both formally and informally
• Information is a key resource of particular importance given
the advances in information technology
Questions:
Comments by departing head of VW:
Which type of structure did the
old decentralised structure
resemble most and which type
of structure is VW moving closer
to?
• Cross-functional integration and
motivation has to be ensured
• Experstise needed with particular
brands
What pros and cons can you see
in the new VW structure?
People
• New structure a mimic of one brand
Porsche structure
Finance
Organizational
strategies
Technology
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Strategy in action: Resourcing Strategies
• Sharing of engines & components
• Optimization of usage >>centralized
production
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Information
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Strategy in action: Resourcing Strategies
Strategy in action: Resourcing Strategies
Two-way relationship between business and HR strategies
Balancing Business and Financial Risk
Managing
for value
Strategy
Funding
strategies
Financial
expectations
Competitive advantage through people
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Strategy in action: Resourcing Strategies
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Resource Integration in New Product Launch
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Strategy in action: Resourcing Strategies
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Strategy in action: Implementation
Managing the Change process
Strategy and Information resources
Shared diagnosis
• external
• internal
Competitive Positioning
Routinization – Cost Reduction
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Strategy in action: Resourcing Strategies
Matching Technology Strategies to Markets
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Using data mining to improve
competitive performance
STEP 1
STEP 2
Review of:
Support through:
• roles
• training
• responsibilities
• mentoring
• relations
STEP 4
STEP 3
Systems/structures
Personal movement
• reporting
•assessment
• measurement
•fluctuation
•controlling
Mass customization – more Product Features
Customization – advanced information
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Strategy in action: Implementation
Case Studies: Workshop
Case study 1: AIR LINE INDUSTRY
Case study 2: COLRUYT
Case study 3: KH VATEC
Case study 4: HONDA AND US MOTOR CYCLE MARKET
Case study 5: AOL-TIME WARNER
Be tenacious
•
•
•
•
Analyse resistance and intervene on it
Interventions on individual, group, organization level
Increase trust by awareness, training, communication and involvement of people
Group level: negotiating, reduction of conflict and teamwork
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Discussion
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Discussion
Case study 1: AIR LINE INDUSTRY
Case study 3: KH VATEC
• What are the issues faced by Airline industry? Why these
issues can be described as strategic? How can you analyze the
macro and micro situation facing the Airline industry?
• Does the managers in the case study exhibit strategic
thinking? What strategic choices/decisions, the airline
industry is planning to pursue?
• Perform a SWOT analysis for KH Vatec. What does SWOT
analysis tell us about the competitive position of KH Vatec
with the industry as a whole?
• Describe and explain the strategy being followed by KH Vatec
in terms of competitive strategy
• Explain the relationship between business strategies and
people at KH Vatec using the model: “Competitive advantage
through people”. What implications can you draw from the
case study for managers generally?
Case study 2: COLRUYT
• What competitive strategy does Colruyt has? Support your
answer with necessary arguments given in the article?
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Conclusions
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Conclusions
• The concept of Strategy is multi-dimensional.
• Strategy needs to be understood from the perspective of its
characteristics
• Strategic thinking needs Strategic planning and management
• Macro and Micro environmental analysis is the first step for
strategic management
• In the current industrial world understanding and defining the
purpose and cultural aspects cannot be underestimated
• Understanding/ exploiting and positioning the organizational
capabilities is key for success and future strategy development
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• Understanding Corporate strategy and the tools to manage it
are necessary in big corporations
• Organizations should make a trade-off of benifits versus
transaction costs by having corporate structures
• Competitive advantage requires the understanding of strategy
clock.
• Positioning, moving and maintaining the competitive position
on the strategy clock is crucial... Beware of lock-in-aspect.
• International strategy carries both opportunities and risks.
Timing, understanding of the culture is crucial for success.
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Conclusions
• Strategy development processes are prescriptive and
emergent
• Formal strategy planning enables managers to get prepared
and face the dynamic world much better
• History plays a vital role in developing future strategic actions
• Organizing and resource allocation cannot be under estimated
for strategy success
• Deployment of strategy may have constraints... Strategy
deployment also requires deployment of change management
system.
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Sources
Main Source
•
Johnson,G.,Scholes,K.,Whittington,R. 2008, Exploring Corporate strategy, Text and Cases, Prentice Hall
publications.
Other sources
•
Stacey, R. (1996). Strategic Management and Organizational Dynamics, Pitman, London.
•
Mintzberg, H., J. B. Quinn and S. Ghoshal (1995). The strategy process, Prentice Hall, London.
•
Chakravarthy, B. S. and P. Lorange (1991). Managing the Strategy Process: A Framework for a
Multibusiness Firm, Prentice Hall, Englewood Cliffs, NJ, U.S.A.
•
Mintzberg, H. and J. A. Waters (1985). "Of strategies deliberate and emergent." Strategic Management
Journal 6: pp. 257-272.
•
Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press,
New York
•
Hayes, R. H. and S. C. Wheelwright (1984). Restoring our competitive edge: Competing through
manufacturing John Wiley & Sons Inc, New York.
•
Andrews, K. R. (1980). The concept of corporate strategy, Homewood, Irwin, IL, U.S.A.
•
Porter, M. (1980). Competitive Strategy, Free Press, New York.
•
Andrews, K. R. (1971). The Concept of Corporate Strategy, Richard D.Irwin, Homewood, IL, U.S.A.
•
Ansoff, H. I. (1965). Corporate Strategy: An analytical Approach to Business Policy for Growth and
Expansion McGraw-Hill, New York, U.S.A.
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