TUNKU ABDUL RAHMAN UNIVERSITY COLLEGE © 2014

BACHELOR OF ACCOUNTING (HONOURS)

BACHELOR OF BUSINESS ADMINISTRATION (HONOURS)

BBDM2043 BUSINESS STRATEGY LECTURE 1

WHAT IS STRATEGY AND WHY IS IT

IMPORTANT?
(Thompson, Peteraf, Gamble & Strickland, 22nd edn, 2020)

1–1
 LEARNING OBJECTIVES
1. Learn what we mean by a company’s strategy.
2. Grasp the concept of a sustainable competitive
advantage.
3. Develop an awareness of the five most basic strategic
approaches for winning a sustainable competitive
advantage.
4. Understand that a company’s strategy tends to evolve
over time because of changing circumstances and
ongoing management efforts to improve the company’s
strategy.
5. Learn why it is important for a company to have a viable
business model that outlines the company’s customer
value proposition and its profit formula.
6. Learn the three tests of a winning strategy.
CORE CONCEPT
WHAT DO WE MEAN BY STRATEGY?
A company’s strategy is its action plan
for outperforming its competitors and
achieving superior profitability
WHAT IS STRATEGY ABOUT?
Strategy is all about: (Apple as e.g.)
● H
ow to attract and please customers.
● How to compete against
rivals.
●How to position the firm in the marketplace.
● How best to respond to changing economic and market
conditions. (Innovative features with new models)
● How to capitalize on attractive opportunities
to grow the business.
● How to achieve the firm’s performance targets. (Superior
financial results)
STRATEGY AND COMPETITORS
Strategy is about competing differently from
rivals —
• Doing what they don’t do or doing it better!
• Doing what they can’t do!
• Doing things in ways that attract customers and
set a firm apart from its rivals.
• Doing things in a manner calculated to
produce a competitive edge over rivals.
• Staking out a not crowded with
strong competitors.
FIGURE 1.1 Identifying a Company’s Strategy–What to Look For
 STRATEGY AND THE QUEST
FOR COMPETITIVE ADVANTAGE
Competitive Advantage
• Require meeting customer needs either more
effectively (with products or services that customers
value more highly) or more efficiently (by providing
products or services at lower cost).
• Superior value at higher prices (e.g. Starbucks).

Sustainable Competitive Advantage

• Requires giving buyers lasting reasons to prefer a
firm’s products or services over those of its competitors.

\
GAINING SUSTAINABLE
COMPETITIVE
ADVANTAGE
How to create a sustainable competitive
advantage:
• Develop valuable expertise and competitive
capabilities over the long-term that rivals cannot
readily copy, match or beat.
• Put the constant quest for sustainable competitive
advantage at center stage in crafting your strategy.
GOOGLE’S 8 INNOVATION
PRINCIPLES
(1) Think 10x
(2) Focus on the users, not competition
(3) Fail fast and learn
(4) Share everything you can
(5) Use data, not opinions: opinions or gut feelings are not enough
(6) Look for ideas everywhere, as long as they are aligned with the
purpose
(7) Hire the right people: Google has a very robust hiring process
(8) Use the 70/20/10 model
WHY A COMPANY’S
STRATEGY EVOLVES OVER
TIME
Managers modify strategy in response to:
• Changing market conditions.
• Advancing technology (Hand-phone replaced
camera)
• Fresh moves of competitors
• Shifting buyer needs
• Emerging market opportunities
• New ideas for improving the strategy (Blue ocean
strategy)
THE EVOLVING
NATURE OF A FIRM’S
STRATEGY
Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that
include both continued and new initiatives.
• Reactive (emergent) strategy elements that are
required due to unanticipated competitive
developments and fresh market conditions.
 A Company’s Strategy Is a Blend of
Proactive Initiatives and Reactive Adjustments

Realized (current) strategy is a blend of:

• Proactive (deliberate) strategy elements that
include both continued and new initiatives.
• Reactive (emergent) strategy elements that are
required due to unanticipated competitive
developments and fresh market conditions.
 DISCRIMINATE BETWEEN THE CONCEPTS OF
INTENDED AND EMERGENT STRATEGIES.

Emergent
4 strategy 3

Intended/ 1
Deliberate Realised
strategy strategy

Unrealised
strategy
rate success
ure of deliberateness

WHAT MAKES A STRATEGY A

WINNER?
A winning strategy must pass three tests:

• The Fit Test

• Does it exhibit dynamic fit with the external and internal aspects of
the firm’s overall situation?

• The Competitive Advantage Test

• Can it help the firm achieve a significant and sustainable competitive
advantage?

• he Performance Test
• Can it produce good performance as measured by the firm’s
profitability, financial and competitive strengths, and market
standing?
 WHY CRAFTING AND EXECUTING
STRATEGY ARE IMPORTANT
TASKS

Strategy provides:
• A prescription for doing business.
• A road map to competitive advantage.
• A game plan for pleasing customers.
• A formula for attaining long-term standout
marketplace performance.
Good Strategy + Good Strategy Execution =
Good Management
 RATIONAL PLANNING
APPROACHES TO
STRATEGY

1. Strategic Analysis
- External analysis to identify opportunities and
threats.
- Internal analysis to identify strengths and
weaknesses.
- Stakeholder analysis to identify key objectives to
assess power and interest of different groups
- Gap analysis to identify the difference between
desired and expected performance.
Rational Planning Approach (cont’d)
2. Strategic Choice
- Strategies are required to ‘close the gap’.
- Competitive strategy – for each business
unit.
- Directions for growth – which
markets/products should be invested in.
- Whether expansion should be achieved by
organic growth, acquisition of some form or
joint venture agreement.
Rational Planning Approach
(cont’d)
3. Strategic Implementation
- Formulation of detailed plans and budgets.
- Target setting for KPIs.
- Monitoring and Control.

• Different authors have different strategic

planning models.
• 3 models are illustrated on the following
slides.
 The Strategy-Making, Strategy-Executing Process
FIGURE 2.1 – by Thompson

Strategic Plan
Task 1 Task 2 Task 3 Task 4 Task 5

Develop a
strategic Crafting a
Monitoring
vision, strategy to
Setting Executing developments,
mission & achieve the
objectives strategy evaluating
core value objectives &
performance, &
vision
initiating
corrective
adjustments

Revise as needed in light of the company’s

actual performance, changing conditions, new
opportunities, & new ideas
 Enviro The Exploring
n-ment Strategy model by
JSW
The
Capabi Strategic
-lity Purpos
Position e

Culture
s
Busine
ss level Proces
Intern
s-es
Corpo- ational
rate Strategic i- Organi Resour
level Choices sation sing cing
Strategy
In
Action
Innova Evalua
-tion -tion Chang- Practic
ing es
 1 –202121
Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, © Pearson Education Limite d
 Strategic Management Process (Rational Model)
(Pearce & Robinson, 2013)
Premise
Control
Strategic
Formulation Su
rv
eil
Strategic la
Choice nc
e
co
ntr
Strategic
Implementation
 Im 1–23
STRATEGIC
CONTROL pl
e
m
en
tat
io
n
co
ADVANTAGES OF
RATIONAL PLANNING
• Rational strategic planning procedures can challenge complacent
acceptance of the status quo
• Rational strategic planning procedures can ensure top managers are on
the same page!
• Rationalizing strategic planning is more likely to result in top
managers paying attention to the same important matters at the same
time
• Without the structure that comes with rational strategic planning
contributions may become unbalanced
• The procedures of rational strategic planning can moderate the use of
power in a planning group
• Rational strategic planning systems can help groups to deal
effectively with conflicts
• The procedures of formal strategic planning can help to give a sense
of direction to meetings
• Rational planning procedures enable evaluation of progress
1-24
1–24
TEXT BOOK
1–25
 Framework for CW
Vision, Mission,
CSR

Environmental Analysis Internal Analysis

PEST - Value chain
Porter’s 5 Forces - Resource & competence
etc, etc Financial
-
- etc, etc
SW

OT

Key issues
(Max. 4) Corporate Appraisal

Strategic Choice
- Business level
- Corporate level
1–26