Strategic Management

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What is Strategy?

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 Definitions
 What is a Strategy ?
 Strategy: a plan, method, or series of actions designed to achieve a
specific goal or effect (Wordsmyth Dictionary).

 The determination of the long-run goals and objectives of an

enterprise, and the adoption of courses of action and the allocation
of resources necessary for carrying out these goals (Alfred
Chandler, Strategy and Structure; Cambridge, MA: MIT Press,
1962).

 Strategy is the pattern of objectives, purposes, or goals and the

major policies and plans for achieving these goals, stated in such a
way as to define what business the company is in or is to be in and
the kind of company it is or is to be (Kenneth Andrews, 1971).

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 Definitions
 Strategy Basic
 Derived from Greek Word Strategos “The art of general”.
 A strategy—a central, integrated, externally oriented concept of how
the business will achieve its objectives. Without a strategy, time and
resources are easily wasted on piecemeal, disparate activities; mid-
level managers will fill the void with their own, often parochial,
interpretations of what the business should be doing; and the result will
be a potpourri of disjointed, feeble initiatives.

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 Definitions
 What is a Strategy ?
 Competitive strategy is about being different. It means deliberately
choosing a choosing a different set of activities to deliver a unique
mix of value (Porter, 1966). It answers about the target customer,
product or services offered and efficiently offering product and
service.

 Strategy of an organization is match between its internal

capabilities and external relationships, that is, the match between
what an organization is capable of doing and its relationship with
it’s stakeholders: employees, customer, shareholders and suppliers
(Kay, 1993).

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 Strategy Framework
 Strategy Framework

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What are various business questions an
organization needs to answer?

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 Why Business is Necessary
 Business Questions

WHY HOW WHAT

How to create value What Product

What market segment
Low cost through scale advantage what geographic area
Low cost trough scope and What technology
replication advantage
Primium pricing due to
unmatchable services
Premium prices through proprietary
product features

How to develop business and expand

(Internal development, joint venture,
licensing, franchaising, acquisitions etc)
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 Basic Definitions
 Fundamental Business Questions

Why we exists How to What we want

Conduct to be in the
Business future
(Guidelines)

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 Basic Definitions
 Few Basic Definitions

Mission Core Values Vision

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 Strategy Overview
 Strategy Overview
 Mission Statement: It gives answer to the question “Why we exists”.
This defines the way in which the organization communicate the
business it is in to the outside world.

 Statement of Principle: How we should we behave based on our

beliefs.

 Vision Statement: “What we want to be in future”. Defining future

does not depend on intelligence, but imagination, intuition and
ability to synthesize disparate information.

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 Strategy Overview
 Strategy Overview

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Why is Strategy Necessary?

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 Strategy: Balancing of Force
 Balancing of Opposing Forces

Finances

Sales Marketing
STRATEGY

Operations

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 Strategy: Failure Stories
 Strategic Failures
 Tata Nano

 Black Berry

 Lenovo Yoga

 Dilorian Car

 Fiat India

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 Role of Strategy
 Strategy Role
 It simplify the decision making by focusing the attention in a narrow
range, knowledge integration and facilitator of analytics tool.

 It helps in co-ordination among various stake holders.

 Improve resource utilization: Leverage and stretch available

resources.

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 Strategy Framework
 Strategy Framework

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 Analysis of Industry Environment
 Strategy Framework

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 How to Make Profit
 Strategy Framework

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 What is Strategy
 Strategy Threads
 Low cost

 Global Strategy

 First Mover

 Defence to Industrial Application

 Pricing

 Capacity Decisions

 But Threads are not strategy, Strategy is combination of all. It is a

“Coherent Whole”

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 What is Strategy
 Operational Effectiveness is Not Strategy
 Strategy:
 Winning
 Provide direction to planning process.
 It is analysis of external environment (Industry Analysis) and internal
environment (resources and capability) of the firm.
 Flexibility to respond market change.
 Benchmark to achieve best practices and efficiency.
 Develop core competencies.
 Positioning (It is controversial) and companies have to be leaner and
nimble.
 Establish difference it can preserve to deliver greater value at low cost.
 Strategic positioning means performing different activities from rivals or
similar activities in different ways.

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 What is Strategy
 Operational Effectiveness is Not Strategy
 Operational Efficiency
 Improving the process productivity by use of tools.
 Performing similar activities better than rivals perform them.
 Aim is to improve quality than rivals with lower cost.
 Sound operational practices can provide strategic advantage
(Japanese Example).
 Constant improvement is necessary for it.

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 What is Strategy
 Operational Effectiveness is Not Strategy
 Comment:
 Both work in different way, although the aim of both is superior performance.
 Best practices can be easily diffused, which leads to mutual destruction.
 It can not provide relative benefit and everything works in absolute terms.
 Competitive convergence is more subtle and insidious, where as bench marking
makes every company similar.
 Outsourcing makes edge in operational efficiency irrelevant.
 Mergers can improve the operational efficiency, but it does not work in absence
of strategy.

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 What is Strategy
 Strategy Rests on Unique Activities to Create Value
 Strategy is about being different: Southwest Airlines; IKEA

 Origin of Strategic Positions:

 Positioning can be based on producing a subset of industries product or
services (Variety-Based Positioning) and not on customer segment – Jiffy Lube,
vanguard group.

 Second basis of positioning can be of servicing a needs of particular group of

customers (Need based positioning) – IKEA, Bessemer Trust Company/citibank

 Third is called access-based positioning.

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 From Strategy to Implementation
 Southwest Airlines Activities

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 What is Strategy
 A Sustainable Strategy Position Requires Trade-Offs
 It is not practically possible to imitate the competitors process or
methods.

 It can create inconsistencies in image or reputation.

 Different tailored activities require different product configuration,

equipment, employee behaviour, skills and different management
systems.

 Strategy essence is choosing what not to do.

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 What is Strategy
 Fit Drives Both Competitive Advantage and
Sustainability

 Strategy is about combining activities, which demand better fit

among the activities (Southwest Airlines)

 Everything matters in core competence.

 Various types of fit (Whole matters more than individual parts)

 Simple consistency: Low cost
 Activities should be reinforcing.
 Effort should be optimized for result – Gap

 Strategic fit allows sustainability in long run.

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 What is Strategy
 Alternative Views of Strategy (Past Decade Model)

 One ideal competitive position in the industry

 Benchmarking of all activities and achieving best practices

 Aggressive outsourcing and partnering to gain efficiencies

 Advantage rests of few key resources or factors

 Flexibility and rapid response to all competitive and market change

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 What is Strategy
 Alternative Views of Strategy (Sustaining Advantage)

 Unique competitive position for the company

 Activities tailored to strategy

 Clear trade-offs and choices vis-a-vis competitors

 Competitive advantages arises from fit across activities

 Sustainability comes from the activity system, not the parts

 Operational effectiveness a given

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 What is Strategy
 Re-Discovering of Strategy
 Greater risks to strategy comes from within the company.

 It is important to know, what not to do like following new

technology.

 The growth trap should be avoided –

 Compromise and inconsistencies in the pursuit of growth will erode competitive
advantage

 Leadership Role
 Should not concentrate on operational activities only
 They should define and communicate the company’s unique position, making
trade-offs and forging fit among activities.
 They should able to say “NO”.
 They should be disciplined and able to communicate properly.
 They should not be distracted or compromising in nature.

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