What is Strategy?
Strategy Defined
 Strategy is about positioning an organization for
competitive advantage.
 Competitive advantage
 Creating a Strategy
 Long term vision
 Flexible
 adapt
Strategic Evolution
 Strategic Evolution
 Industrial Economic Prospective
 Resource based Prospective
 Human and Intellectual Prospective
Competitive Advantage Cycle
Levels Of Strategy
 Corporate- Concerned with the types of businesses a firm
should compete in and how the overall portfolio should be
managed
 Business unit-Focused on deciding what product or
service to offer, how to create it, and how to get it to the
marketplace
 Functional-Often used in a narrow division such as
marketing, human resources, or technology
Strategy Formulation Process
Strategy and Performance
4+2 Formula
 Strategy
 Execution
 Culture
 Structure
 Talent
 Innovation
 Leadership
 Mergers and Partnerships
A Conceptual Framework
 3 interrelated Components
 Purpose
 Strategy
 Leadership
 5 Interacting components
 Structure
 Systems
 Processes
 People
 culture
 Performance/control
The Balanced Scorecard
 4 basic questions:
1. How do customers see us?
2. At what must we excel?
3. Can we continue to improve and create value?
4. How do we look to our company’s shareholders?
The Role Of The Board
Define its role, agenda, and information needs.
Ensure that management not only performs, but
performs with integrity.
3. Set expectations about the tone and the culture of the
company.
4. Formulate corporate strategy with management
5. Ensure that the corporate culture, the agreed strategy,
management incentive compensation, and the
companies approach to audit and accounting, internal
controls, and disclosure are consistent and aligned.
6. Help management understand the expectations of
shareholders and regulators.
1.
2.
Analyzing The External Strategic Environment
Globalization
 Globalization as a political, economic, social, and
technological force, seems unstoppable. In this era the
lines between countries has been broken and the flow
of information is being shared at and incredibly fast
pace.
 3 reasons for globalization:
Political
2. Economic
3. technological
1.
12 Global trends
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Population trends
Urbanization
Spread of infectious disease
Recourse management
Environmental degradation
Economic integration
Knowledge dissemination
Information technology
Biotechnology
Nanotechnology
Conflict
Governance
A New Compact Between Business
and Society?
1.
2.
3.
4.
5.
6.
7.
8.
9.
Size means Scrutiny
Cutting cost raises compliance risk
Strategy must involve society
Reducing risks means building trust
Satisfying shareholders means satisfying
stakeholders
Global growth requires global gains
Productivity requires sustainability
Differentiation relies on representation
Good governance needs good representation
Analyzing An Industry
Porter’s Five Forces
 The threat of entry
 Six major barriers to
market entry
 Powerful suppliers and
buyers
 Substitute products and
services
 HBO and Pay-per-view
 Rivalry among participants
 Andrew Grove’s sixth
force: complementary
products
Trajectories of Industry Change
 Industry structure,
concentration, and
product differentiation
 Vertical vs. horizontal
 “rule of three and four”
 Product life cycle
 New patterns
 Three phase model
Strategic Segmentation, Targeting,
and
Positioning
 Competitor analysis
 Analyzing immediate




competitors
Leader
Challengers
Followers
nichers
 Strategic groups
Product and Market combination
Analysis
Present Products
Future Products
Present
Markets
Concentration
Product
Development
Future
Markets
Market
Development
Diversification
Gap analysis
 Gap analysis
 Profit pool analysis
 Four steps
Analyzing An Organizations Strategic Resource Base
Strategic Resources
 Physical
 Financial
 Human Resource
 Organizational Assets
Forces For Change
 Internal Forces
 Company Life Cycle Forces
 Strategic Forces
Formulating Business Unit Strategy
Formulating a Competitive Strategy
1.
Analyzing the competitive environment


With whom will we compete?
What relative strengths do we have as a basis for creating a
sustainable competitive advantage?
2. Anticipating key competitors’ actions

Understanding how competitors will react to our competitive
strategy
3. Generating strategic options

Balancing opportunities and constraints to create options
4. Choosing among the alternatives

Analysis of the long-term impact of different strategy options
The Value Chain
Firm Infrastructure
Support
Activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing
Logistics
Logistics and Sales
Primary Activities
Primary Activities
Service
Generic Strategy Choices
Strategic Advantage
Strategic Target
Uniqueness perceived
Low-cost position
by the customer
Industry-wide
Particular
segment only
Differentiation
Overall
Cost Leadership
Focus
Different Value Disciplines Call for
Different Competencies
Strategic Focus
Work Environment
Employee Competencies
Customer intimacy
Values-driven, dynamic,
challenging, informal,
service-oriented, qualitative,
employee as customer,
“whatever it takes”
Relationship-building,
listening, rapid problemsolving, independent action,
initiative, collaboration,
quality-focused
Operational excellence
Predictable, measurable,
hierarchical, cost-conscious,
team-based, formal
Process control, continuous
improvement, teamwork,
analysis,
financial/operational
understanding
Product leadership
Experimental, learningfocused, technical, informal,
fast-paced, resource-rich
Information sharing,
creativity, group problem
solving, breakthrough
thinking, artistic, visionary
Business Unit Strategy: Contexts and Special
Dimensions
Strategy in Various Industries
(Emerging, Growth, Mature,
Declining)
 Speed
 pace of progress that a company displays in responding
to current or anticipated business needs
 Newest and lease understood of the critical success
factors
 Speed merchants


Build their strategies on the rapid pace of their operations
AAA, Dell, Dominoes
Value and Innovation
 Value creation greatly depends on innovation
 Companies recognize that they need to generate more
value from core businesses and leverage their core
 Sustaining innovation and disruptive innovation
Creating Culture of Innovation
 There are five common characteristics to creating a
culture of innovation:
1.
2.
3.
4.
5.
First, a business needs a top level commitment to
innovation
Second, they need a long term focus
Third, a business needs a flexible organization
structure
Fourth, a business needs a combination of loose and
tight planning and control
Last, they need to create an environment for
innovation and appropriate incentives
Innovation, Performance,
Profitability
 Evidence on the relationship between research and
development (R&D), innovation, and financial
performance is inconsistent.
 Studies have shown that the single biggest growth
inhibitor for large companies was “mismanagement of
the innovation process.”
 Half of all companies do not closely track the
efficiency of their innovation process
Global Strategy Formulation
Porters National Diamond
 Factor conditions
 Natural vs. created
 Home country demand
 Related and supporting
industries
 Competitiveness in the home
industry
 Porters 5 forces
 Chance
 Outside the control of the
firm
 Public policy
 Deregulation
 Local, regional, national
Industry Globalization Drivers
 Market drivers
 Cost drivers
 Competitive drivers
 Government drivers
The global Branding Strategy
 Global mix
 Global offer
 Global message
 Global change
Global Strategy and Risk
 Types of risk:
 Political
 Legal
 Financial/economic risk
 Societal/ cultural risk
Corporate Strategy: Shaping the Portfolio
Economies of Scale and Scope
 Economics of learning
 3 Decision opportunity classes:
1. Horizontal scope
2. Geographical scope
3. Vertical scope
 What is “Core”?
Growth Strategies
 To formulate a successful growth strategy, a company
must:
 Carefully analyze its strengths and weaknesses.
 Deliver value to it’s customers.
 Ask what growth strategies its culture can effectively
support.
 3 avenues to grow revenue base
1. Organic or internal growth
2. Growth through acquisition
3. Growth through alliance-based initiatives.
Vertical and Horizontal Integration
 Vertical integration
 Backward integration
 Forward Integration
 Horizontal Integration
Diversification Strategies
 Diversification is defined as a strategy of entering
product markets different from those in which a
company is currently engaged
 4 different forms of relatedness:
Tangible links between business units
2. Intangible resources
3. Gain or exercise market power
4. Strategic relatedness
1.
The Strategic Logic of Alliances
 4 different alliance models based on the role the alliance
plays in the participates’ corporate strategy and structure
of the leadership of joint venture:
 Franchise model
 Portfolio model
 Cooperative model
 Constellation model
The Strategic Logic of Alliances
continued…
 4 groups alliances are divided into on the basic of
whether participants are competitors and on the relative
depth/breadth of the alliance:
 Expertise alliances
Competitors
 New – business alliances
 Cooperative alliances
Cooperative
alliances
M&A – like
alliances
New business
alliances
Expertise
alliances
Partnership Type
 M&A – like alliances
Non-Competitors
Narrow
Broad
Alliance Scope
Corporate Strategy: Managing the Portfolio
The Boston Consulting Group’s
Approach to Portfolio Analysis
Using a Portfolio Approach For
Managing Alliances
 Business Alliances
 Strategic Alliances
 Relationship Alliances
 Corporate Alliances
Five Attributes That Distinguish the
Planning Process
A well understood conceptual framework that sorts out
the many inter related types of strategic issues.
2. Strategic-thinking capabilities that are widespread
throughout the company, not limited to the top echelons.
3. A process for negotiating tradeoffs among competing
objectives that involves the series of feedback loops
rather than a sequence of planning submissions.
4. A performance review system that focuses attention on
top mangers.
5. A motivational system and management values that
reward and promote the exercise of strategic thinking.
1.
Creating a Learning Organization
 Encouraging more systems thinking
 Fostering a shared vision
 Challenging existing mental models
 Enhancing team learning
 Motivating employees to improve their personal
mastery of their job.