What is Strategy

Foundation of Business : Value Creation

• Value is created when Output > Input (raw material, capital etc)

• Stakeholder needs to value the output

• Value needs to be captured besides creating it

• Starbucks captures it at the Barista

Today Not limited to surplus/ profits but societal impact

Porter’s value chain
Strategy Origins
Strategy sprung from the need of
people to defeat their enemies

One of the Greatest strategist – Sun

Tzu : book Art of War (400 BC or
abouts)

Greek word STRATEGOS (330 A.D.)

– which mean Art of the General
Strategy Origins
Poem by Lao Tzu, the father of Tao-ism:
Once grasp the great form without a form and you will roam where
you will with no evil to fear, calm, peaceful, at ease.
The hub of the wheel runs upon the axle. In a jar, it is the hole that
holds water.
So advantage is had from whatever there is; but usefulness rises
from whatever is not.

Choices : While at first glance it may be difficult to identify an element

of strategy, a key principle found here is the importance of “not,” as
business strategy demands trade-offs—choosing your “not’s.” What
products will we not offer? What customers will we choose not to
serve? etc.
Carl Von Clausewitz on strategy
Strategy Key Milestones :
1950 : building blocks Joe Bain’s book on barriers to entry (1956), Philip Selzinck
introduction of SWOT (1957), Igor Ansoff’s matrix (1958)
1960 : Bruce Henderson (BCG), Bill Bain (Bain & Company), and Fred Gluck
(McKinsey & Company). PESTLE – Francis Aguilar scanning the external
environment
First steps from planning only to operationalize – Anatomy of Corporate planning
HBR
1970 : BCG Matrix ; Porters five forces model ; OKR – Andy Grove and John Doerr (
Druckers MBO)
1980 : Tom Peters in search of excellance and Jim Collins Built to last
Porters Competitive Advantage
1990 : Core Competence of Corporation ( Hamel and Prahlad) ; VRIO framework – J
Barney ; Balanced Scorecard – Norton & Kaplan
2000 : Chann Kim & Reene Mougborn Blue Ocean strategy - creating new markets
Is Strategy
• Aspirations : Our strategy • Deploying new technology
• is to be #1 or #2 • Building a culture
• grow x%
• provide a better ROI • Innovations
• be a world leader • Vision/ Mission/Values
• Be # 1 in customer service /NPS • Operational Effectiveness
• Particular Action : Our strategy
• Internationalize
• Double our R&D budget
• Consolidate our manufacturing
• Outsource or service
• Cut cost
Is Strategy about being the best ?
Strategy is still about winning : battle field customer
• Strategy aims to create Competitive Advantage

• Competitive advantage : when a business has driven a wide wedge

between the amount customer is willing to pay and costs it incurs – a
wider wedge than a competitor

• Key Terms
• Willingness to Pay
• Suppliers opportunity cost
• Added value
 Strategic position – choosing the who
• Variety Based positioning : a subset of an industry’s product or service
• Example Jiffy lube only automotive lubricants

• Needs based positioning : serving most or all needs of a particular group of

customers in a category
• IKEA

• Access based positioning : customers here are accessible in different ways

• Rural & Urban
Strategy Position – choosing the how

• Value Proposition in its most generic

sense will be differentiation or low
cost
• Target market the scope can be
broad or narrow

Porter’s generic strategies

 Strategic Positioning key to strategy
Serving your chosen customers with the right value proposition allows
businesses to take completive advantage through strategic positioning
• Strategic positioning means
performing different activities
from rivals’ or performing similar
activities in different ways.’

• Strategic positioning attempts to

achieve sustainable competitive
advantage by preserving what is
distinctive about a co
Strategy Rests on Unique actions
Competitive Strategy means
deliberately choosing a different set of
activities to deliver a unique mix of
value.
• Where do we compete
• What unique value do we bring for our
customer to choose us
• Cost or Differentiation
• What Resources and capabilities do
we utilize to deliver that value
• How do we sustain that unique value
https://youtu.be/iuYlGRnC7J8
HBS – Strategy is not planning
 Definition of Strategy
• A plan of action designed to achieve a long-term or overall aim - Oxford dictionary
• The goal of strategy is the pursuit of sustainable competitive advantage - BCG
• Strategy as competitive position, “deliberately choosing a different set of activities to
deliver a unique mix of value.” - Michael Porter
• The sole purpose of strategy is to enable a company to gain, as efficiently as possible,
a sustainable edge over its competitors - Keniche Ohmae, Japanese business strategist
& author of The Mind of the Strategist
• Value Creation through a set of choices
• How we will get there ( from where we are to where we want to reach)
The intentional means through which one seeks to achieve a set of objectives, guided
by a particular vision and direction

When no competition exists, there is no need to strategize. In business, the

activities executed in an environment featuring a lack of competition are
What creates a Successful Strategy
• A unique proposition compared to competitors
• A distinctive value chain embodying choices about how the
organization will operate differently to deliver uniqueness
• Making clear tradeoff and choosing what not to do
• Sustain your Advantage
• Connecting the systems and the reinforce each other – design,
production, logistics, retail to customer service
• Continuity in strategy and Continuity in OE
Ikea Strategic Positioning
Value Proposition
• Customers who seek quality and
sophisticated design but at a low
cost
• A wide array of stylish and space
efficient furniture and accessories
lines with compatible design at low
prices
Distinctive activities
• Modular, ready to assemble easy to
set up furniture designs
• In house design of all products
• Wide range of styles which are
displayed in huge warehouses with
large onsite inventory
• Self selection by customer
• All assets for self help including for
billing
• Long hours of operation
• On site low cost restaurants
• Child care provided in store
• Self delivery by most customers
IKEA vs Traditional Furniture store
Product
• Low Priced modular ready to
assemble designs
• No customization
• Design driven by low cost,
manufacturing simplicity and
Value Chain
• In house design
• Shipments inbound in flat boxes
• All on display with big inventory
• Limited sales but lot of self help
• Long hours of operation
Product
• Higher priced fully assembled
• Customization on multiple front
from color
• Design driven for variety including
a catalogue of what was
Value Chain
• Design hybrid
• Full size shipments in most cases
• Limited inventory impacted by size
of retail warehouse
• Lot of sales people
• Regular operation hours