Introduction

• Speaker: Fabrice Leggett
• Focus of Previous Lectures:
  • Definition of business and business models
  • Foundation of economic systems
  • Entrepreneurs and the entrepreneur's mindset
  • External drivers impacting a business (analyzed with tools like Estelle and Porter's Five Forces)
  • Internal drivers and sustainable competitive advantage (Resource-Based View)

Today's Topics

• Corporate Level Strategy: Definition and tools available for managers.
  • Review of strategies using Baumann's Strategy Clock
  • Designing strategic direction over time
  • Managing a portfolio of activities

Understanding Corporate Level Strategy

• Business Unit Definition:
  • A business unit supplies goods or services for a distinct domain of activity.
  • Synonyms: Division, profit center, organizational unit.
• Diversified Corporations:
  • Examples include Nestlé with multiple business units focusing on fictional products, beverages, and dairy.
  • Each business unit has its own strategy and profit responsibility.

Baumann's Strategy Clock

• Key Features:
  • Focus on customer prices rather than organizational costs. Prices are more visible and easier for comparison than costs.
  • Clock design allows for continuous choices compared to Porter's distinct strategies of cost leadership and differentiation.
• Incremental Adjustments:
  • The Strategy Clock allows movement between positions 1 and 6 from low price to differentiation, allowing for hybrid strategies.
• Feasibility and Failure Zones:
  • Strategy Clock identifies six zones of feasible strategies and three zones likely to lead to failure.

Positions on the Strategy Clock

• Position 1 (Low Price, Low Utility):
  • Example: Save-a-Lot, which offers standard products at low prices without frills.
• Position 2 (Low Price but Added Value):
  • Example: EasyJet maintaining lower prices with similar benefits to competitors.
  • Example: Walmart—success derived from high volumes allowing for low margins.
• Position 3 (Hybrid Strategy):
  • Example: IKEA, offering affordable prices alongside enhanced benefits through Swedish design.
  • Success depends on margins that allow for reinvestment.
• Position 4 (Differentiation):
  • Companies offer unique benefits differing from competitors using quality, innovation, and responsiveness.
  • Example: DS Car Brand transitioning from Citroen; desirability is crucial for success.
• Position 5 (Focused Differentiation):
  • Premium products targeted at niche segments; requires deep understanding of customer needs.
  • Examples: Porsche and BMW focusing on branding and exclusivity.
• Position 6 to 8 (Unsustainable Positions):
  • Companies here fail to provide expected value for the money.
  • Example: Air France with high operational costs and Nokia failing to adapt to technology changes.

Corporate Level Strategies and the Three Horizons Framework

• Long-Term Perspective on Strategy:
  • Strategies are typically measured over several years (a decade or more).
• Three Horizons Framework:
  • Horizon 1: Current core activities, expected to be flat or declining in profitability.
  • Horizon 2: Emerging activities expected to provide new sources of profit but often requiring high investments.
  • Horizon 3: Risky ventures, research, and pilots with uncertain timelines; may take many years to yield profits (e.g., pharmaceutical R&D).
  • Managers need to focus on pushing out Horizon 1 while exploring Horizons 2 and 3.

Levels of Strategy within Organizations

• Corporate Level Strategy:
  • Overall scope and added value to business units.
• Business Level Strategy:
  • Competitive strategy for successful market competition; involves innovation, scale, and responses to competitors.
  • Alignment with corporate level strategies is crucial.
• Operational Strategies:
  • Concerned with effective delivery of corporate and business level strategies using resources, processes, and people.
  • Successful strategies depend on operational decisions.

Example Case Study: News Operation

• At the corporate level, the strategy was to expand from print journalism to social networking (diversification).
• This corporate level strategy triggers specific questions at the business level (market positioning) and operational level (improving processing capacities and capabilities).
• Flow of Decisions:
  • Corporate managers assess overall direction (where the company is heading).
  • Business managers strategize on implementation (how to maneuver in the market).
  • Operational managers organize necessary actions.

Importance of Integration in Strategy

• Corporate strategy involves portfolio management including geographical scope, product diversity, acquisitions, and resources allocation.
• Clear corporate strategy forms the basis for strategic decisions regarding acquisitions and alliances.
• Business level strategy requires alignment with corporate level strategy to effectively build competitive advantage.
• Integration across all strategy levels is critical for organizational success, emphasizing the interconnection between corporate, business, and operational strategies.