Strategy

Organizations and their environment

Strategy

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

• An integrated set of choices that positions you on a playfield of your choice in a way that helps you win

• Strategy has a theory:

  • Why we should be on this playing field

  • How we’re going to be better than anyone else serving the customers on that playing field

  • A strategy must be coherent (logical and consistent) and doable

5 Elements of strategy

An integrated, overarching concept of how business will achieve its objectives

1. Arena - where will be achieve?

   • which market segment?

   • which product categories?

   • which channels?

   • which geographic areas?

   • which core technologies?

   • which value creation stages?

2. Vehicles - how will we get there?

   • joint ventures?

   • internal development?

   • strategic alliances?

   • licensing?

   • franchising?

   • mergers and acquisitions?

3. Differentiators - how will we win in the marketplace?

   • image?

   • customization?

   • price?

   • styling?

   • reliability?

   • speed to market?

4. Staging - what will be our speed and sequence of moves?

   • speed of expansion?

   • sequence of initiatives?

   • interval between events?

5. 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?

Strategy - how to start

• 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

1. Strategic formulation

2. Strategy implementation

3. Strategy evaluation

developing a vision and a mission - identifying opportunities and threats external to the company - determining internal strengths and weaknesses - establishing long-term objectives - generating alternative strategies - choosing the strategies to be followed

Implementation of strategies

• set annual goals

• create policies

• motivate employees

• allocate resources

Evaluation of strategies

• reviewing the external and internal factors based on which current strategies are formulated

• measuring performance

• applying collective actions

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, Mission, and Vision

• Purpose: why do we exist?

• Mission: a plan for fulfilling your purpose

• Vision: what will the world look like when we’ve completed our mission

Bussiness Model, SWOT, PESTEL

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: Strengths, weaknesses

• External: Opportunities, threats

PESTEL ANALYSIS:

Differentiation and Positioning

Competitive Advantage

1. 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

3. Focus

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

   • Two version:

     • Cost focus: Lowest-cost producer in a concentrated market segment

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

     • ex. Whole Foods

   • Products are unique

   • Niche market with higher disposable income

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

Contrasts

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

Type of Key Success Factors

Porter’s 5 Forces

Porter’s Model

• Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry’s weakness and strengths

• Frequently used to identify an industry’s structure to determine corporate strategy, Porter’s model con be applied to any segment of the economy to search for profitability and attractiveness

• Porter’s Five Forces is a framework for analyzing a company’s competitive environment

• The number and power of a company’s competitive rivals, potential new market entrants, suppliers, customers, and substitute products influence a company’s profitability

• Analyzing these elements can be used to guide business strategy to increase competitive advantage

Understanding Porter’s 5 Forces Model

• Competitive Rivarly

  • Walmart has a significant reach, a strong brand identity, a physical and online presence, and low prices that make it difficult for small challengers in the retail space to compete

  • Walmart does face sustained challenges from large, established competitors such as Target, Costco, and Amazon

  • Overall, Walmart faces a moderately competitive rivalry space

• Bargaining power of suppliers

  • A diverse supplier base limits supplier bargaining power

  • Additionally, due to Walmart’s size, purchasing power and consumer reach, each individual supplier exerts very little influence on the company

• Threat of new Entrants

  • Walmart maintains a substantial edge in sales, marketing, distribution and established business locations

  • It also has a highly developed and developed online presence to complement its physical location

  • Due to its size and established network, Walmart also has the advantage of selling to multiple customers while being able to purchase at scale from various suppliers

  • All these factors, as well as the established nature of large rivals such as Amazon, make the threat of new entrants low

Resources and Capabilities

Economic Phases

• 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 services

• 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

Resources

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

• Assets that it uses to achieve its objectives

Capabilities

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

Examples

Operational: Supply Chain Management

Technology: Information Technology (IT) Infrastructure

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

Value Chain Analysis

• Analyzes all business activities to create more value to customers

• Primary Activities:

  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

Value Chain into competitive advantage

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

  Dynamic capabilities Key aspects

• Sensing opportunities and threts

• Seizing opportunities

• Reconfiguring resources

Dynamic Capabilities - Components

• Learning and Innovation

• Entrepreneurial Management

• Strategic Flexibility

Dynamic capabilities

Can be seen as an emerging and potentially integrative approach to understanding the newer sources of competitive advantage

Competitive Matrix

Oceans

Red Oceans

Prospects in most established market places are steadily shrinking

• Technological advances have substantially improved industrial productivity, per

• As trade barriers fall and information on products and prices become instantly and globally available, niche markets and monopoly havens disappear

5 principles

1. compete

2. Beat

3. Exploit

4. Make

5. Align the whole system of a company’s activities with its strategic

Corporate Strategy

• Limited terrain

Blue Ocean

• eliminate: which factor that the industry has long competed on should be eliminated?

• raise: which factors should be raised well above the industry’s standard?

• reduce: which factors should

• create: