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What is Strategy?

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Strategy Defined Strategy is about positioning an organization for competitive advantage. Competitive advantage Creating a Strategy Long term vision Flexible adapt

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Strategic Evolution Industrial Economic Prospective Resource based Prospective Human and Intellectual Prospective

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Competitive Advantage Cycle

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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

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Strategy Formulation Process

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Strategy and Performance

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4+2 Formula Strategy Execution Culture Structure Talent Innovation Leadership Mergers and Partnerships

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A Conceptual Framework 3 interrelated Components Purpose Strategy Leadership 5 Interacting components Structure Systems Processes People culture Performance/control

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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 companys shareholders?

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The Role Of The Board 1. Define its role, agenda, and information needs. 2. 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.

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Analyzing The External Strategic Environment

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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: 1. Political 2. Economic 3. technological

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12 Global trends 1. Population trends 2. Urbanization 3. Spread of infectious disease 4. Recourse management 5. Environmental degradation 6. Economic integration 7. Knowledge dissemination 8. Information technology 9. Biotechnology 10. Nanotechnology 11. Conflict 12. Governance

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A New Compact Between Business and Society? 1. Size means Scrutiny 2. Cutting cost raises compliance risk 3. Strategy must involve society 4. Reducing risks means building trust 5. Satisfying shareholders means satisfying stakeholders 6. Global growth requires global gains 7. Productivity requires sustainability 8. Differentiation relies on representation 9. Good governance needs good representation

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Analyzing An Industry

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Porters 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 Groves sixth force: complementary products

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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

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Strategic Segmentation, Targeting, and Positioning Competitor analysis Analyzing immediate competitors Leader Challengers Followers nichers Strategic groups

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Product and Market combination Analysis Future ProductsPresent Products Present Markets Future Markets Concentration Product Development Market Development Diversification

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Gap analysis Profit pool analysis Four steps

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Analyzing An Organizations Strategic Resource Base

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Strategic Resources Physical Financial Human Resource Organizational Assets

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Forces For Change Internal Forces Company Life Cycle Forces Strategic Forces

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Formulating Business Unit Strategy

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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

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The Value Chain Firm Infrastructure Human Resource Management Technology Development Procurement OperationsOutbound Logistics Marketing and Sales Service Inbound Logistics Primary Activities Support Activities Firm Infrastructure

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Generic Strategy Choices Focus Industry-wide Overall Cost Leadership Differentiation Particular segment only Strategic Target Uniqueness perceived by the customer Low-cost position Strategic Advantage

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Different Value Disciplines Call for Different Competencies Strategic FocusWork EnvironmentEmployee Competencies Customer intimacyValues-driven, dynamic, challenging, informal, service-oriented, qualitative, employee as customer, whatever it takes Relationship-building, listening, rapid problem- solving, independent action, initiative, collaboration, quality-focused Operational excellencePredictable, measurable, hierarchical, cost-conscious, team-based, formal Process control, continuous improvement, teamwork, analysis, financial/operational understanding Product leadershipExperimental, learning- focused, technical, informal, fast-paced, resource-rich Information sharing, creativity, group problem solving, breakthrough thinking, artistic, visionary

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Business Unit Strategy: Contexts and Special Dimensions

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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

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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

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Creating Culture of Innovation There are five common characteristics to creating a culture of innovation: 1. First, a business needs a top level commitment to innovation 2. Second, they need a long term focus 3. Third, a business needs a flexible organization structure 4. Fourth, a business needs a combination of loose and tight planning and control 5. Last, they need to create an environment for innovation and appropriate incentives

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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

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Global Strategy Formulation

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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

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Industry Globalization Drivers Market drivers Cost drivers Competitive drivers Government drivers

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The global Branding Strategy Global mix Global offer Global message Global change

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Global Strategy and Risk Types of risk: Political Legal Financial/economic risk Societal/ cultural risk

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Corporate Strategy: Shaping the Portfolio

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Economies of Scale and Scope Economics of learning 3 Decision opportunity classes: 1. Horizontal scope 2. Geographical scope 3. Vertical scope What is Core?

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Growth Strategies To formulate a successful growth strategy, a company must: Carefully analyze its strengths and weaknesses. Deliver value to its 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.

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Vertical and Horizontal Integration Vertical integration Backward integration Forward Integration Horizontal Integration

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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: 1. Tangible links between business units 2. Intangible resources 3. Gain or exercise market power 4. Strategic relatedness

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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

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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 New business alliances Cooperative alliances M&A like alliances Cooperative alliances M&A like alliances New business alliances Expertise alliances NarrowBroad Competitors Partnership Type Non-Competitors Alliance Scope

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Corporate Strategy: Managing the Portfolio

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The Boston Consulting Groups Approach to Portfolio Analysis

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Using a Portfolio Approach For Managing Alliances Business Alliances Strategic Alliances Relationship Alliances Corporate Alliances

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Five Attributes That Distinguish the Planning Process 1. 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.

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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.