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.
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.