Lecture 1:
The Concept of Strategy
• The role of strategy in success.
• A framework for strategy analysis.
• Corporate strategy and business
strategy.
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
1
Common Elements in Successful Strategy
Successful
Strategy
EFFECTIVE IMPLEMENTATION
Long-term,
simple and
agreed
objectives
Fall 2000
Profound
understanding of
the competitive
environment
MGTO321 (L1 & L2) -- Dr. JT Li
Objective
appraisal of
resources
2
Sun Tzu: The Art of War
Know the other and know yourself:
Triumph without peril.
Know nature and know the situation:
Triumph completely.
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
3
Elements of Success
MADONNA
GOALS
• Single-minded quest for stardom.
UNDERSTANDING
ENVIRONMENT
• Identified emerging trends in popular culture.
• Understood showbiz distribution channels.
RESOURSE
APPRAISAL
• Recognized limited raw talent
• Relied on strengths in
- self-promotion
- image-creation
- relationship management
IMPLEMENTATION
• Commitment to hard work
• Disciplined, inspirational leadership
• Attention to detail
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
4
The Basic Framework:
Strategy, the Link between the Firm
And its Environment
THE FIRM
Goals and
Values
THE
INDUSTRY
ENVIRONMENT
STRATEGY
STRATEGY
Competitors
Customers
Suppliers
Resources
and Capabilities
Structure and
Systems
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
5
What is Strategy?
• Distinguishing strategy from tactics:
– Strategy is the overall plan for deploying resources to
establish a favorable position.
– Tactic is a scheme for a specific maneuvre.
• Characteristics of strategic decisions:
– Important.
– Involve a significant commitment of resources.
– Not easily reversible.
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
6
Sources of Superior Profitability
INDUSTRY
ATTRACTIVENESS
RATE OF PROFIT
ABOVE THE
COMPETITIVE
LEVEL
Which industries
should we be in?
CORPORATE
STRATEGY
How do we make
money?
COMPETITIVE
ADVANTAGE
How should we
compete?
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
BUSINESS
STRATEGY
7
Strategic Games/Business Concept
Where to compete
How to compete
• Products
• Geographic markets
• Customers
• Channels
• Competitors
• Customers (value proposition)
• Industry chain (Degree of rivalry)
• Internal/external participants
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
8
Levels of Strategy and Organization
Structure
Corporate
Head Office
Corporate
Strategy
Business
Strategy
Functional
Strategies
Division A
R&D
R&D
HR
HR
Finance
Finance
Production
Production
Marketing/Sales
Fall 2000
Division B
MGTO321 (L1 & L2) -- Dr. JT Li
Marketing/Sales
9
Strategy Making : Design or Process?
Strategy as
design
Strategy as
process
Planning and
rational choice
Many decision makers
responding to multitude of
external and internal forces
INTENDED
STRATEGY
EMERGENT
STRATEGY
REALIZED STRATEGY
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
10
Summary: Concept of Strategy
• Sustained performance is what strategy is all
about.
• Each business should have a clear business
concept:
– where to compete
– how to compete
• Firms have a multiple stakeholders / objectives
– Always clear about your assumptions
Fall 2000
MGTO321 (L1 & L2) -- Dr. JT Li
11
Structure Of The Course
The Concept of Strategy
The firm's mission
External Analysis
Internal Analysis
Industry Analysis
Resource/ Sustainability
Business-Level Strategies
Low Cost & Differentiation Strategies
Technology & Industry Evolution
Fall 2000
Corporate-Level Strategies
Diversification and Scope of the firm
MGTO321 (L1 & L2)
-- Dr. JT Li
International
Strategy
12