Strategy

According to Michael Porter, the essence of strategy is choosing what ————

not to do

Market segments and geographic areas represent which of the 5 elements of strategy?

Arenas

Speed of expansion and intervals between events refer to the ———— of the 5 elements of strategy

economic logic

To start your strategy, Roger Martin recommends

Do not make it complicated or leghty. Keep it short

Which strategic planning stage involves developing a mission and a vision and completing a SWOT analysis?

Strategy formulation

Motivating employees is a function of ————-

strategy implementation

Business Model

A story about how an organization created, delivers, and captures value is a simple explanation

purpose

why an organization exists

Internal factors

opportunities and threats are ———- to the organization

cost leadership

low profit margins per unit with large sales volumes to maximize profit

differentiation

exemplified by goods significantly different from competitors, higher prices, and higher margins

The focus (narrow market) concentrated on cost (cost focus) is best represented by which of the following examples

Neither Palacio de Hierro nor The Apple Store

Which of the following statements is not representative of a niche market

Weak market demand

In the 2×2 Matrix Guy Kawasaki presented in his TED Talk, in which quadrant do we want our company to be?

Lower right quadrant

In which Key Industry Success Factor do we find a superior work force and design expertise?

Skills related

examples of manufacturing- related Key Success Factors

Low cost production and lost cost plant locations

Purchasing high volumes and the availability of substitute products represents

Higher buyer bargaining power

Barriers to entry a market

Economies of scale, capital requirements, access to distribution channels

Industries characterized by increased investment, the creation of new jobs, and expanding market opportunities

expansion

Characteristics an organization developed over its years of operation that has made it a benchmark in the sector

resources and capabilities

A baseline against which performance can be evaluated to determine if improvements are needed/objectives met

benchmark

primary activities in the value chain

1. Inbound logistics

2. Operations

3. Outbound logistics

4. Marketing and sales

5. Service

• The goal of the five sets of activities is to create value that exceeds the cost of conducting that activity, therefore generating a higher profit

support activities in the value chain

firm infrastructure, human resource management, technology development, procurement

Key aspects of dynamic capabilities

• sensing opportuntities and threats

• seizing opportunities

• reconfiguring resources

strategy definition

The term comes from the Greek strategos - general of war or to plan the destruction of the enemy through the effective use of resources.

5 elements of strategy

1. arena

2. vehicles

3. differentiators

4. staging

5. economic logic

arena

where will be achieve?

• which market segment?

• which product categories?

• which channels?

• which geographic areas?

• which core technologies?

• which value creation stages?

vehicles

how will we get there?

• joint ventures?

• internal development?

• strategic alliances?

• licensing?

• franchising?

• mergers and acquisitions?

differentiators

how will we win in the marketplace?

• image?

• customization?

• price?

• styling?

• reliability?

• speed to market?

stage

what will be our speed and sequence of moves?

• speed of expansion?

• sequence of initiatives?

• interval between events?

economic logic

how will we obtain our returns?

• lowest costs through scale advantages?

• lowest costs through scope and replication advantages?

• premium prices due to proprietary product features?

• premium prices due to unmatchable services?

ways to start a strategy

• Accept angst (nervousnesss)

  • Can’t prove in advance that your strategy will work

• Layout the logic of your strategy clearly

  • Watch the world unfold

  • Tweak,tone, and refine

  • Strategy is a journey

• Keeit it shot (ideally fits on one page)

  • Do it, tweak it

strategic planning stages

• Strategic formulation

• Strategy implementation

• Strategy evaluation

competitive advantage

• Outperform rivals

• These advantages allow a company to achieve and maintain superior margins, a better growth profile, or greater loyalty among current customers

Examples:

• Access to natural resources not available to competitors

• Highly skilled labor

• Strong brand awareness

• Access to new or proprietary technology

purpose

why do we exist?

mission

a plan for fulfilling your purpose

• who we are

• what we value

vision

what will the world look like when we’ve

• what we want to become

goals and objectives

how we gauge our degree of success

business model

A story about how an organization creates, delivers, and captures value

SWOT analysis

A framework used to evaluate a company’s competitive position and to develop strategic planning

Internal factors: strengths, weaknesses

External factors: opportunities, threats

Cost leadership

• The lowest cost manufacturer or provider of a good or service

• Producing goods that are of standard quality for consumers, at a price that is lower and more competitive than other comparable products

• Combine low profit margins per unit with large sales volumes to maximize profit

• ex. Walmart

Cost Focus

• Identifying the needs of a niche market and then developing products to align the specific need area

• Lowest-cost producer in a concentrated market segment

• ex. Whole Foods

• Products are unique

• Niche market with higher disposable income

Differentiation focus

• Identifying the needs of a niche market and then developing products to align the specific need area

• Customized or specific value-add products in a narrow-targeted market segment

Niche

• Minimal competition

• Professionally and personally satisfying

• High profile potential

• Solves a practical need

• Strong market demand

Product positioning

• Target audience

• Unique selling propositions

• Product benefits

• Competitors

• Promotion

• Position statement

• What place do they occupy in the market?

• How do their products or services rank against their competitors

Key Industry Success Factors

• Key success factors (KSFs) are areas of critical performance, necessary for success in a specific industry

• A firm cannot expect to be competitive in its industry without an understanding of the industry’s key success factors

• Key success factors are a function of both customer needs and competitive pressures

technology-related

scientific research expertise, product innovation capability, expertise in a given technology, capability to use internet

manufacturing related

low-cost production efficiency, quality of manufacture, high use of fixed assets, low-cost plant locations, high labor productivity, low-cost product design

distribution-related

strong network of wholesale distributors/dealers, gaining ample space on retailer shelves, having company-owned retail outlets, low distribution costs, fast delivery

marketing-related

fast, accurate technical assistance, courteous customer service, accurate filling of orders, breadth of product line, merchandising skills, attractive styling

skills-related

superior workforce talent, quality control know-how, design expertise, expertise in a particular technology, ability to develop innovative products, ability to get new products to market quickly

Organizational capability

superior information systems, ability to respond quickly to shifting market conditions, superior ability to employ internet to conduct businesses, more experience and managerial know-how

other types

favorable image/reputation with buyers, overall low-cost, convenient locations, pleasant, courteous employees, access to financial capital

Porter’s 5 forces

1. threat of new entry

2. power of buyer

3. threat of substitution

4. power of supplier

capabilities

• skills, routine, or process

• deploy and/or combine resources

The organization’s ability to effectively make use of its resources

resources

• asset used as input in “production process”

• foundation or building blocks

• any factor that is necessary to accomplish a goal or carry out an activity

• Assets that it uses to achieve its objectives

economic phases

1. expansion

2. recession

3. stable

4. contracting

expansion

• Sectors of the economy that are experiencing rapid growth and development, driven by various factors such as innovation, consumer demand, technological advancements, or societal shiefts

• These industries are often characterized by increased investment, the creation of new jobs, and expanding market opportunities

• As these industries grow, they often reshape existing market, disrupt traditional industries, and create new economic opportunities

• ex. Technology & software, renewable energy & sustainability, healthcare & biotechnology, e-commerce & digital retail, financial technology (FinTech)

recession

• Sectors of the economy that are experiencing declined or stagnation

• This can result from reduced consumer demand, technological disruption, changing market conditions, or external factors like regulatory changes or global events (ex. pandemics or geopolitical crises)

• During a recession, industries in decline often face reduced revenues, layoffs, closures, and less investment

• ex. Traditional retail, fossil fuels (coal and oil), print media, cable tv, automobile (traditional vehicles)

stable

• Sectors of the economy that tend to remain resilient and maintain consistent demand, even during economic downturns or periods of volatility

• These industries are often characterized by essential products or services that people or businesses need regardless of economic conditions

• As a result, they experience relatively steady growth, predictable revenue streams, and lower susceptibility to market fluctuations

• ex. healthcare, utilities, consumer staples, public sector and government services, funeral and death

contracting

• Sectors of the economy that are shrinking or experiencing prolonged decline in terms of revenue, job opportunities, or market demand

• These industries face significant challenges due to factors like technological disruption, changing consumer preferences, regulatory changes, or shits in global trade dynamics

• As a result, businesses in these sectors may close down, lay off workers, or face reduced investment

• ex. Blockbuster

resources and capabilities

These characteristics that the organization has established and developed over its years of operation have made it a benchmark in the sector(s) in which it operates

benchmark

• A standard or point reference used for measuring and comparing the performance, quality, or process of an organization, product, or service

• A baseline against which current or future performance can be evaluated to determine if improvements are needed or if objectives have been met

• ex. customer-related, HR related, finance-ROI, sustainability-related

activist investor

• An activist investor is an individual or institutional investor who buys a significant stake in a publicly traded company with the aim of influencing how the company is run

• Rather than being passive shareholders, activist investors actively push for changes in management, strategy, or operations to improve the company’s value, governance, or financial performance

hedge fund

A hedge fund is a type of investment fund that pools capital from accredited or institutional investors to engage in a wide range of strategies aimed at generating high returns, regardless of market conditions. Hedge funds are typically more and less regulated than mutual funds, allowing them to use advanced and sometimes riskier investment techniques

dynamic capabilities

• An organization’s ability to integrate, build, and reconfigure its internal and external competencies to respond rapidly to changing environments

• This concept is rooted in strategic management and emphasizes the firm’s capacity to adapt, innovate, and remain competitive in fast-moving or uncertain markets

• Allow businesses not just to survive, but to thrive by consistently evolving their resources, processes, and strategies in alignment with external changes

• It is important to identify what these capabilities are within the company and promote/exploit them

• Dynamic capabilities allow companies to change and evolve the company

components of dynamic capabilities

• Learning and Innovation

• Entrepreneurial Management

• Strategic Flexibility