08 - Business Strategy

7/31/2019 08 - Business Strategy

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Dr. Harris [email protected]

harristk.blogspot.com


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1. What is Business Strategy

2. Market-Based and Resource-Based View of

Strategy

3. Formulating Competitive Strategy

4. Company Growth

AGENDA


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Vision

Mission

Goal

Objectives

Strategic Analysis:

External analysis (O & P)

Internal analysis (S & W)

Functional

StrategiesSTRATEGY

Strategy is the central integrated and

externally oriented concept of how we

will achieve our objectives (Hambrick &

Fredrickson, 2001)

Definition of Strategy

Implementation

and Review


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Elements of Strategy(Hambrick & Fredrickson, 2001)

ARENA DIFFERENTIATOR

VEHICLE STAGING

ECONOMIC LOGIC

Where will we be in?(which product categories, market

segments, geographic area, core

technologies?)

How will we win?(uniqueness, reputation,

advance technology, low cost?)

How the sequence of ourmoves?(penetration, market expansion,

brand awareness, go

international?)

How will we get there?(organic growth, M&A, joint

venture, franchise, licensing?)

How will we obtain our return?(lowest cost, premium price to uncomparable

services, economies of scale?)


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Example: IKEA

ARENA DIFFERENTIATOR

VEHICLE STAGING

ECONOMIC LOGIC

Inexpensive contemporary

furniture

Young, white-collar customers

Worldwide

Very reliable quality

Fun, non threatening

shopping experience

Instant fulfilment

Low price

Rapid international

expansion, by region

Early footholds in each

country; fill in later

Organic expansion

Wholly owned store

Economies of scale (global regional, and

individual-store scale)

Efficiencies from replication


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Realized

Strategy

Intended and Emergent Strategy

Deliberate StrategyIntended

Strategy

Unrealized

Strategy

Emergent

Strategy


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Insight/Idea

Strategy

Vision

Mission

Objectives

External

Environment

Business

Model

Internal

Environment

PEST analysis

Industrial analysis

Market analysis Competitive analysis

(Five Forces, Strategic

group), etc

O and T S and W

Resources

Process

Performance

General Framework


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Business Model

Critical Success Factors (CSF)

Value Configuration

Where do We Start From?


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Identify industry critical success factors (CSFs).

Analyze the strength of those CFSs in our company

(compare to rivals, especially within strategic group or

closest strategic group).

The weak CFSs should become the consideration to

build strategic initiatives.


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Summarize (list) all Opportunities and Threats

(external analysis) and Strengths and Weaknesses

(internal analysis).

Respond some or all list by selecting one or more

activities.

Depict them on the value configuration

Evaluate the connection between activities

so that they create logical thinking that

create unique and valuable value


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STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Improve

AnticipateGraps

Emphasize

From

Internal Analysis

From

External Analysis


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Strategy Formulation

Strategy Formulation is the process of choosing a setof different activities to:o create or preserve unique and valuable position

by:

o exploit opportunities (O) and strengths (S)

and in the same time:

o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a

set of different activities.

Those set of different activities can be

depicted on the value configuration

model.


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Uniqueness Low Cost Position

Industry

wide

Differentiation Overall Cost Leadership

Particular

segment

only

Focus Differentiation Focus Cost

Generic Competitive Strategy

There are three approaches to achieve valuable andunique position (Porter, 1980):

Strategic Advantage

Strategic

Market

Apple, Microsoft,

Nike, BMW

IKEA, Southwest

Walmart, Toyota, Dell

Ferrari, Louis Vuitton,

Rolex, Vertu


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Strategy Formulation

Strategy Formulation is the process of choosing a setof different activities to:o create or preserve unique and valuable position

by:

o exploit opportunities (O) and strengths (S)

and in the same time:

o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a

set of different activities.

Those set of different activities can be

depicted on the value configuration

model.


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Firm can be viewed as collection of activities thatare performed to design, produce, market, and

support its products (Porter, 1985).

All these activities can be represented using value

configuration model (value activities system).

There are three models of value configurations:

Value Configuration

o Value Chain: transform input into product

o Value Network: serve exchange between customers

o Value Shop: solve customer problem


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Basic Value Chain

Costs Selling

Price

C

U

S

TO

M

E

R

Value

Porter (1980)


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Example

Valuable

Unique

Competitive

Advantage (CA)

Superior

Performance

Different Set

of Activities

Source

of CA

Competitive Strategy

Customized

product Lower price

Dell Computer: Direct selling

JIT inventory

Integrated

process withglobal suppliers

Efficient working

capital

management, etc


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Inbound

Logistic:

No warehouse

Integrated

process

JIT inventory

36 days

payment

Production

(Operation):

Assembly

components

from supplier

Outbound

Logistic:

Immediate

delivery

No warehouse

Zero finished

product

inventory

Marketing

and Sales:

Direct selling

Direct

payment

7-10 days

delivery

After Sales

Service:

Online

Complain

handling

Support ActivitiesInfrastructure Exclusive agreement with Intel and Microsoft

Exclusive agreement with Samsung, Kodak, Fuji (for printer)

Manage network of suppliers around the world

HR Mgt Recruitment, training, performance management, etc.

Tech Dev. Little spending on R&D

Total quality management to improve

supply chain mgt and assembly line

Online communication (e.g.

internet, phone)

Procurement Global sourcing for generic component

Local sourcing for microprocessor & OS

Value Chain: Dell Computer


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Basic Value Network

Stabell & Fjedstad (1998)

o Infrastructure

o HR Management

o Technology Development

o Procurement

Primary

Activitie

s

Su

pport

Activities

Network promotion & contract mgt

Service provisioning

Infrastructure operation


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Basic Value Shop

Stabell & Fjedstad (1998)

o Infrastructure

o HR Management

o Technology Development

o Procurement

Problem Finding

and Acquisition

Problem

Solving

Control

(Evaluation)Execution

Choice

Prim

ary

Activ

ities

Support

Ac

tivities


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Comparing Chain and Shop #2

Medicine

Patient

Inbound

logistic

Examination

Surgery

Consultation

Operation

Prescription

Healthy

patient

Outbound

logistic

Web

Brochure

WOM

Marketing

& Sales

Progress

Report

After

Sales

Patient data

Examination

Diagnose

Problem Finding

Consultation

Generate

treatment plans

Problem Solving

Consultation

Next treatment

Progress report

Control

Prescription

Inpatient

Surgery

Execution

Select treatment

plan

Choice


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Inpatient and Surgery

Examination

Diagnose

Problem Finding

Choice

Surgery

Control

Consultation

Progress report

Execution

Check up

Surgery

Inpatient

Choice

Consultation

Progress report

Control

Open room

Prescription

Execution

Consultation

Alternative treatment

Problem Solving

Consultation

Other treatment

Problem Solving

Registration

Next diagnosis

Problem Finding


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Example

Stroke Rehabilitation Clinic

Two successful medium-up clinics:

Mandiri Clinic (Rp. 140.000 / therapy / hour) Wijaya Clinic (Rp. 257.000 / therapy / hour)

What are their value drivers that make them have

unique position?

We have to decompose those companies into activities

that contribute to create a value (uniqueness).


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General Flow of Activities

Monitor & record

the progress

Diagnose severity

Record

clinical data

Start

Treatment

Execution

Refer to

rehabilitation?

N

Determine:

Set for rehab

Type of teraphy

Y

Discuss with

Family

Approved?N

Rehabilitation PlanY

Recommend

to go to hospital

StopMake

Adjustment

Problem

Finding

Problem

Solving

Choice

Execution

Control


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Mandiri Clinics Value Drivers

Support Activities

INFRA Exclusive agreement with Mt. Elizabeth hospitalMember of Yastroki (Yayasan Stroke Indonesia)

Two branches in Jakarta

HR Experiencedtherapists

TECH Standardequipment

PROC

Problem

Finding

Problem

SolvingChoice Execution Evaluation

Record data

Consultation

Outpatient

Physio, speech,

occupacy

Social therapy

Home care

Brain stroke

rehabilitation

Design

combination

of therapies

Therapies

execution

Improve

social

interaction

(stroke club)

Progress

report

Regular

sharing

session


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Wijaya Clinics Value Drivers

Support Activities

INFRA Owned by senior and reputational physiciansMore strategic location, wider treatment room and parking area

HR Senior medic rehabilitationspecialist in charged

Self training

for therapists

TECH RoboticAssistance

PROC

Problem

Finding

Problem

SolvingChoice Execution Evaluation

Record data

Consultation

Outpatient

Physio, speech,

occupacy

Design

combination

of therapies

More

accurate

prediction

Therapies

execution

More

accurate data

Progress

report


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Comparison

Mandiri Clinic:

More various therapy choices

Experienced therapists

Emphasize social therapy and interaction between stroke

survivors More branches

Wijaya Clinic:

Linkage with hospital network in Jakarta

Senior and reputable rehab medic physician better

diagnostic, treatment plan design, more accurate prediction

RAT (robotic assistance therapy)more accurate progress data

Self-trained therapists

More comfortable service environment


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Generic Growth Strategy

Ansoff (1965)

Existing Market New Market

Existing

Product

New

Product

Igor Ansoff Market Penetration

Increase sales percustomer

Find new customer inexisting segment

Market Development

Offer product to newmarket segment (geo-graphic or customertype)

Product Development

Develop new productwith different charact-eristics to existing

market segments

Diversification

Develop new productto new marketsegment


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08 - Business Strategy

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