The Concept of Strategy

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 What is a strategy?
A SET OF DECISIONS ABOUT THE TYPE OF BUSINESS ACTIVITIES AND MARKETS THAT ARE SERVED
• Where is the business trying to get to in the long-term (direction)
• Which markets should a business compete in and what kind of activities are involved in such markets?
(markets; scope)
• How can the business perform better than the competition in those markets? (advantage)?
• What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order
to be able to compete? (resources)?
• What external, environmental factors affect the businesses' ability to compete? (environment)?
• What do the stakeholders expect?
• (according to Johnson and Scholes (Exploring Corporate Strategy),www.tutor2u.net/business/strategy)
The Cola Wars
https://www.youtube.com/watch?v=jtwkKrjHlhc&ab_channel=WeirdHistoryFood

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Dr. John Pemberton Versus Dr. Caleb
Bradham
Up WW 2

Coca Cola launches Diet Coke 1975 Pepsi Cola – Pepsi Challenge 1975

•65% • 25%
Celebrity Marketing – Appeal to different
generations
Back to the Future 1 & 2 – Pepsi Prevails
Coke maintained its edge only through soda vending machines and fast food restaurants.
 Coca Cola
Strikes back
with the
“New Coke”
 But there is a problem
Association “Old Cola Drinkers of America
Three months later – the Coca Cola is back
with the “Classic Coke”
• Made if even worse- Just like
having two actresses nominated
in the same category

• The sales dropped both for the

“Classic” and for the “New”
There are several theories about the reasons for such a huge
strategic blunder including some conspiracy speculations:

• (i) The company intentionally changed the formula in order to upset

loyal consumers who will demand the return to the original formula
causing sales to increase rapidly,

• (ii) The retreat was a plan to cover up the change from sugar-
sweetened Coke to cheaper high fructose corn syrup. Here the
theory is based on the allegations from the U.S. Sugar Trade
Association saying that after the retreat and the return to the old
formula, corn syrup was still being used.

• (iii) The retreat provided cover for the final removal of all coca
derivatives from the drink in order to calm down the mood in the
Drug Enforcement Administration (DEA).
Coca Cola Mistakes – How “surveys” can make
mistakes and the Distribution Channel Issues
• The interesting issue is not about the failure or • Bottlers working for the company were uneasy with
success of a marketing strategy, but about the the introduction and promotion of varuius Coca
unexpected and crucial reaction of the public. Cola tastes in a short period.
•
• Market studies can assess consumers‘ preferences, • “Sergeants and Captains win the war, not The
and Coke did expend time and resources to do so. Generals”
• According to such studies, the new product was
supposed to become a best seller because it was
better. However, it did not.
• The main issue here was that the loyal consumers
were honestly outraged by the replacement of the
formula and took the initiative to boycott the
product.
Pepsi Cola Mistake
• Pepsi market studies proved equally wrong.
• After the introduction of the new Coke, market research suggested to Pepsi top-management that an
immediate (and considerable) number of Coke‘s consumers would be gained.
• However, this study also failed to measure the abiding emotional attachment‖ of Coke consumers as
expressed by Keough.

• Consumers opted to stop drinking Coke at all rather than to consume the new product or to switch to Pepsi.

• Eventually, as a result of the Coke retreat, Pepsi will decrease its market share.
The Simple fact – “Human
Emotions”
• The simple fact is that all the time and
money and skill poured into consumer
research on the new Coca-Cola could not
measure or reveal the deep and abiding
emotional attachment to original Coca-
Cola felt by so many people."
The Concept of
Strategic Fit

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Madonna
https://www.youtube.com/watch?v=PCxgi9WzaM8&ab_channel=ESCStuff

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Madonna - Madonna 06:30 – 07:51
• Modest talent
• Relentless drive
• Single goal – CONQUER THE
WORLD
• Worcholic
• Utilizing talents of many: writers,
composers, choregrpahers…
• Personal life and business
effects: DJ, Sean Penn & Waren
Beatty
• “Maverick INC.” Partnership with
Warner – she launched many
artists
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Strategic fit - General Giap ”Red Napoleon”
https://www.youtube.com/watch?v=JKiDr3foQqc&ab_channel=CNN

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General Giapp –
https://www.youtube.com/watch?v=JKiDr3foQqc&ab_channel=CNN

• Fantastic strategists – based on • He udnersatood the main

Mao Tse Tung competitve advantage:
• 1) Passive ressistance • 1) Morale, and
• 2) Guerilla • 2) Time and the effect of the
• 3) Massive offensive prolongued war

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Some Basic Issues

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The Planning Process
Planning is the process used by managers to identify
and select goals and courses of action for the
organization.
•The organizational plan that results from the planning
process details the goals to be attained.
•The pattern of decisions managers take to reach
these goals is the organization’s strategy.
Three Stages of the Planning Process
Figure 7.1
Determining the Organization’s
mission and goals
(Define the business)

Strategy formulation
(Analyze current situation &
develop strategies)

Strategy Implementation
(Allocate resources & responsibilities
to achieve strategies)
Determining Mission and Goals and Why is
Mission so important
• Why is Mission statement so
• This is the first step of the planning process and is important
accomplished by setting:

A. Mission Statement – It defines the business: • First, it outlines a company's

seeks to identify our customers and the needs goals and position in the industry
we can and should satisfy.
• This also pinpoints competitors.
for its customers, competitors,
and other stakeholders.
• It also helps the organization
B. Establishing major goals: states who will compete
in the business.
focus and stay on track to make
• Should stretch the organization to new
the right decisions about its
heights. future.
• Goals must also be realistic and have a time
period in which they are achieved.
• Furthermore, the mission
statement helps clarify a
company's purpose.
 Why is Mission statement so important?
• They Are Active
• The word “active” in this context refers to active verbs that make readers feel as
if something is happening now rather than in the past. For example, instead of
writing, “These products are made by our company to improve your life,” you
should write, “Our company makes these products to enhance your quality of
life.” Notice how the transition from passive to active verbs, and substituting
“enhance your quality of life” for “improve your life” conveys a stronger message?
• They Are Positive
• It’s important that you avoid negative messages because mission statements are
all about how your business solves a problem, fulfills a want or need, or makes
life easier for your target audience.
• They Are Adaptable
• A strong mission statement is something that your marketing and product
development teams can also use for motivation and direction
• It’s important to remember that mission statements are expressed to your target
audience, so the message must match the wants and needs of that audience.
Going back to the Zappos example, the company knew that customer service was
a huge deal among women who shopped for shoes, so it tailored its statement to
match the desires of that audience.
• They Are Short
• The U.S. Navy adopted an adage in the early 1960s that said, “Keep it simple,
stupid,” also known by the acronym KISS.
• They Are Unique to Your Business
• Mission statements should never be generalized in such a way that any other
company could steal what you wrote and use it as their own. When crafting these
statements it’s vital to remember what makes your company different, unique, and
special.
• They Create Expectations
• A good mission statement embraces the expectations of a target audience for
something they truly crave. For example, Zappos’ mission statement is “To provide
the best customer service possible.” That creates the expectation in Zappos’
customers that they will deliver superior customer service each and every time.
• They Are Realistic
• Some companies fall into the trap of crafting mission statements that are so
grandiose and philosophical that they lose all touch with reality. Mission statements
must be grounded in what your company provides customers in the present. Save
the inspirational and future-based language for your vision statement.
• They Are Memorable
• What are the key phrases and terminology you can use in your mission statement to
make it memorable? That doesn’t mean that readers must be able to recite your
mission statement in whole as if it’s a catchphrase, but it does mean that people
should be able to associate key aspects of that statement with your company.
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Examples of good mission statements
• “To offer low fares that generate • The Mission of General Electric in the
increased passenger traffic while 1980-s
maintaining a continuous focus on
cost containment and efficiency
operation.” • #1 or #2
• This mission statement has the • Fix Sale or Close
following key points that provide
the company’s strategic viewpoint.
Here is a complete breakdown of • General Electric in the 1990-s
Ryanair’s mission statement:
1.Reduced air ticket fare #1 or #2 – Worldwide
2.Enhance passenger traffic
3.Cost efficiency
4.Operational Proficiency
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Strategy Formulation
• SWOT analysis: a planning to identify:
• Organizational Strengths and Weaknesses.

• Managers analyze the current situation to develop strategies achieving the

mission.
• Strengths: manufacturing ability, marketing skills.
• Weaknesses: high labor turnover, weak financials.

• Environmental Opportunities and Threats.

• Opportunities: new markets.

• Threats: economic recession, competitors

Corporate and • Corporate Strategies
refer to the question:
• Business Strategies
refer to the question:
Business “Where the firm will
compete? Which
“How will the firm
compete”?
Strategies markets, which
territories shall it
• Superior value or low
cost?
tackle?
• Imitation or innovation
and thus like

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Corporate and Business Strategies…Cont’d

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Corporate and • The business strategy
addresses how we should
Business compete, while
Strategies…Cont’d • The corporate strategy is
concerned with in which
businesses we should
compete.
• Specifically, business
strategy refers to the ways
in which a firm plans to
achieve its objectives within
a particular business
• The corporate
strategy addresses issues
related to three main
questions:
1. In what businesses
will we compete?
1. How can we, as a
corporate parent,
add value to our
various lines of
business (often
called subsidiaries)?
2.
3. How can diversifying
our business or
entering a new
industry, help us
compete in our other
industries?
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Business Strategies According to Porter

• Low-cost: gain a competitive advantage by driving down organizational

costs.
• Managers manufacture at lower cost, reduce waste.
• Lower costs than competition mean lower prices.

• Differentiation: gain a competitive advantage by making your products

different from competitors.
• Differentiation must be valued by the customer.
• Successful differentiation allows you to charge more for a product.
• Stuck in the middle: It is difficult to simultaneously become
differentiated and low cost.
Some Business Marketing Strategies –
Philp Kotler
• Market segmentation: dividing a market into • Market Skimming
distinct groups of buyers who have different, • Market Penetration
needs, characteristics or behavior and who might
require separate products or marketing programs. • Market Harvesting
• Market targeting is the process of evaluating each • Market Divestiture
market segment’s attractiveness and selecting one
or more segments to enter.
• Positioning is arranging for a product to occupy a
clear, distinctive and desirable place relative to
competing products in the minds of consumers.
• Differentiation is actually differentiating the
market offering to create superior -customer value.
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Some Business Marketing Strategies
–
• Here are some examples of great business strategies:
• 1. Cross-sell more products
• 2. Most innovative product or service, or
• 3) Being a good market follower
• 3. Improve customer service
• 5. Cornering a young market / New Market – Facebook purchasing Instagram
• 8. Technological advantage
• Obtaining a technological advantage, you can often achieve better sales, improved
productivity or even market domination.

• https://www.indeed.com/career-advice/career-development/business-strategy-examples

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VIEWS ON PLANNING AND
STRATEGY

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TABLE 1-4 Excerpts from Sun Tzu’s The Art of War Writing –
(Note: Substitute the words strategy or strategic planning for war or warfare)
• • War is a matter of vital importance to the state: a
matter of life or death, the road either to survival or ruin.
Hence, it is imperative that it be studied thoroughly.
• • Warfare is based on deception. When near the enemy,
make it seem that you are far away; when far away, make
it seem that
you are near. Hold out baits to lure the enemy. Strike the
enemy when he is in disorder. Avoid the enemy when he is
stronger.
• If your opponent is of choleric temper, try to irritate him.
If he is arrogant, try to encourage his egotism. If enemy
troops are well prepared after reorganization, try to wear
them down. If they are united, try to sow dissension
among them.
• Attack the enemy where he is unprepared, and appear
where you are not expected.
• These are the keys to victory for a strategist. It is not
possible to formulate them in detail beforehand.
• • A speedy victory is the main object in war. If this is long
• • He who occupies the field of battle first and
awaits his enemy is at ease, and he who comes
later to the scene and rushes into the fight is weary
And therefore, those skilled in war bring the
enemy to the field of battle and are not brought
there by him.
• Thus, when the enemy is at ease, be able to tire
him; when well fed, be able to starve him; when at
rest, be able to make him move.
• • Analyze the enemy’s plans so that you will know
his shortcomings as well as his strong points.
Agitate him to ascertain the pattern of his
movement. Lure him out to reveal his dispositions
and to ascertain his position.
• Launch a probing attack to learn where his
strength is abundant and where deficient. It is
according to the situation that plans are laid for
victory, but the multitude does not comprehend
this.
Helmuth van Moltke. ...
• “No plan survives first
contact with the
enemy:
• A piece of military
wisdom deriving from a
formulation by the
nineteenth-century
Prussian military
commander Helmuth
van Moltke. ...

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 What is a strategy?
A SET OF DECISIONS ABOUT THE TYPE OF BUSINESS ACTIVITIES AND MARKETS THAT ARE SERVED
• Where is the business trying to get to in the long-term (direction)
• Which markets should a business compete in and what kind of activities are involved in such markets?
(markets; scope)
• How can the business perform better than the competition in those markets? (advantage)?
• What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order
to be able to compete? (resources)?
• What external, environmental factors affect the businesses' ability to compete? (environment)?
• What do the stakeholders expect?
• (according to Johnson and Scholes (Exploring Corporate Strategy),www.tutor2u.net/business/strategy)
Strategy answers the following questions
• Market — what problem are you trying to solve? who has that problem? how many of them are there? where are they?
who are your competitors?

• Product — what solution are you offering to that problem? what channels are you using to connect potential customers
to the product? how are you offering it? how are you pricing it? what’s the feedback on your product?

• People — what’s your team? How are they organized? what are their roles? who is helping you deliver the product?
who are your partners? how are you engaging with them?

• Money — how are you making money? how are you spending it? what are your expenses and overheads? what are your
targets? what is your strategy for leveraging a better return? what investment do you require?

• Think of these as one axis of your business strategy.

• Use the market → product → people → money mantra to conduct quick reviews of the situation and determine strategy.

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Strategy is a dynamic process M. Bojadjiev
• Strategy is a dynamic process of permanent adjustment of the
organization to its environment and interactions of both.

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Strategic Planing is (not) the same as Strategic
Management
• Some sources will tell you that strategic • A strategic planning is an activity, which
management and strategic planning are determines the objectives and considers both
the same thing. internal and external environment to design,
implement, analyze and adjust the strategies,
• Strategic planning is the process of to gain competitive advantage.
formulating a direction for an
organization, while strategic management
is the process of determining how this • Strategic Planning is not exactly same
direction can be achieved. as strategic management, which implies a
stream of decisions and actions taken by the
• Strategic planning and management are top level managers to achieve organizational
so consistently used together that they goals.
are often referred to simply as “strategic
management.” But the differences are
very important for an organization that is
attempting to develop a reliable strategy.

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What is Strategy in our
model?

• In its broadest sense,

strategy is the means by
which individuals or
organizations achieve their
objectives.

40
 • Fundamental to this view of strategy as a
link between the firm and its external
environment is the notion of strategic fit.
• For a strategy to be successful, it must be
What is consistent with the firm’s external
environment, and with its internal
Strategy in environment—
our model? • its goals and values, resources and
capabilities, and structure and systems.
Strategic • As we shall see, the failure of many
Fit!!! companies is caused by lack of consistency
with either the internal or external
environment.

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 • General Motors’ long-term decline is a consequence of
a strategy that has failed to break away from its long-
established ideas about multi-brand market
segmentation and adapt to the changing market for
automobiles.
• In other cases, many companies have failed to align
Strategic their strategies to their internal resources and
capabilities. A critical issue for Nintendo in the coming
Fit...Cont’d years will be whether it possesses the financial and
technological resources to continue to compete head-to-
head with Sony and Microsoft in the market for video
game consoles.
• As you will discover, the notion of strategic fit extends
beyond the simple notion that strategy must fit with
the external and the internal environment of the firm.

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Strategic Fit of the Brazil
National Team
https://www.youtube.com/watch?v=5BLKspKyrg8&ab_channel=MovieclipsIndie

43
Strategic Fit of
the Brazil
National Team
Video

https://www.imdb.com/video/vi928301337/?playlistId=tt13842562&ref_=tt_pr_ov_vi 44
Goals for successful functional strategies:

1. Attain superior efficiency: the measure of outputs for a given

unit of input.
2. Attain superior quality: products that reliably do the job they
were designed for.
3. Attain superior innovation: new, novel features about the
product or process.
4. Attain superior responsiveness to customers: Know the
customer needs and fill them.
Some good fortune?
• More important than
luck was the ability to
recognize
opportunities when
they appeared and to
have the clarity of
direction and the
flexibility necessary to
exploit these chances.

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Four features of Strategy – Madonna and Giapp

• 1) Goals that are simple, • ● Madonna’s career featured a

consistent, and long-term.
• 2) Commitment to a clearly
recognized goal that was
pursued steadfastly over a • ● North Vietnamese efforts were
substantial part of their
lifetime.
relentless drive for stardom in
which other dimensions of her
life were absorbed within her
career.
unified and focused on the
ultimate goal of reuniting
Vietnam under communist rule
and expelling a foreign army

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Four features of Strategy – Madonna and Giapp, cont’d
• ●
3) Objective appraisal of • By positioning herself as a “star,” Madonna
resources. exploited her abilities to develop and project
• All three strategies were her image, to self-promote while avoiding being
effective in exploiting internal judged simply as a pop singer.
strengths, while protecting
areas of weakness. • Live performances rely heavily on qualified
dancers, musicians, vocalists, choreographers
• 4) Effective implementation. and technicians, thus compensating for any
Without effective weaknesses in her own performing capabilities.
implementation, the best-laid
strategies are of little use. • Giap’s strategy
• To protect against his army’s deficiencies in
arms and equipment Exploiting the
commitment and loyalty of his troops.

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x

49
 Think of a firm as a
submarine –
You are a silent hunter – but there are many others – counter hunters!

50
Think of a firm as a submarine –
You ping and so does everyone else!. If you want a fresh air and better view you are at risk…

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What happens here?
• What is relevant to the
submarime –
• 1) Other boats
• 2) Other submarines?
• 3) Planes coming from afar?

52
Task Environment and Global Environment
• External environment of an organization which
affects its ability to reach business goals.
• Any business or consumer with direct involvement
with an organization may be part of the task
environment.
• Examples of task environment sectors include,
competitors, customers, suppliers and labor supply.
• Geography, cultural and social factors, economic
conditions, and political and legal factors are
the four parts of the international business
environment.

53
The Basic Framework for Strategy Analysis

54
A Brief History of Business
Strategy

55
Origins and Military Antecedents

• Enterprises need business strategies for much the same reasons that
armies need military strategies—
• 1) to give direction and purpose,
• 2) to deploy resources in the most effective manner and to
• 3) coordinate the decisions made by different individuals.
• Many of the concepts and theories of business strategy have their
antecedents in military strategy.
• Greek word strategia, meaning “generalship.”
• However, the concept of strategy did not originate with the Greeks.
• Sun Tzu’s classic The Art of War, written circa 500 BC, is regarded as the first
treatise on strategy.

56
57
From Corporate Planning to Strategic
Management
• The evolution of business strategy has been driven more by the practical needs of business than by the
development of theory.
• During the 1950s and 1960s, senior executives were experiencing increasing difficulty in coordinating
decisions and maintaining control in companies that were growing in size and complexity.
• Financial budgeting - annual financial planning and investment appraisal provided short-term control and
project selection but did little to guide the long-term development of the firm.
• Corporate planning (also known as long-term planning) was developed during the late 1950s to serve this
purpose.
• Macroeconomic forecasts provided the foundation for the new corporate planning.
• The typical format was a five-year corporate planning document that set
• 1) goals and objectives,
• 2) forecasted key economic trends (including market demand,
• 3) the company’s market share, revenue, costs and margins),
• 4) established priorities for different products and business areas of the firm, and
• 5) allocated capital expenditures.

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Fade Out of planning- 1970
• During the 1970s and early 1980s, confidence in corporate planning
and infatuation with scientific approaches to management were
severely shaken.
• Oil shocks
• Increased competition
• Japan and Southeast Asia
• Inflation
• The end of Breton Woods
• simply because they couldn’t forecast that far into the future.
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1990 –s Resource Based View
The resources and capabilities of the firm became regarded as the main source of
competitive advantage and the primary basis for formulating strategy.

Focus of strategy analysis shifted from the sources of profit in the external
environment to the sources of profit within the firm.
This emphasis on what has been called the resource-based view of the firm
represented a substantial shift in thinking about strategy.
• Rather than firms pursuing similar strategies, as in seeking attractive markets and
favorable competitive positions, emphasis on internal resources and capabilities
has encouraged firms to identify how they are different from their competitors
and design strategies that exploit these differences.
• Michael Porter’s answer to the question “What is strategy?” emphasized that:
“Competitive strategy is about being different. It means deliberately choosing
a different set of activities to deliver a unique mix of value.”

60
00-s
1) Technology 2) Temporariness 3)Aliances & 4)CSR
• Technology has been a particularly potent force.
The bursting of the TMT (technology, media, telecommunications) bubble and the
realization that the “new knowledge economy” and internet-based business models did
not require a rewriting of the principles of strategy.
Technology continues to reshape industries: digital technologies are associated with
standards wars,16 the emergence of “winner-take-all” markets, and the potential for
strategic innovation as firms seek the “blue oceans” of uncontested market space.
Continuous change and relentless competition, strategy becomes less about building
positions of sustained competitive advantage and more about developing the
responsiveness and flexibility to create successive temporary advantages.
Typically requires firms to collaborate within networks of strategic alliances.
The continuing traumas of the twenty-first century, including the recession of 2008–9, are
encouraging new thinking about the purpose of business.
From ”cruel capitalism” to “CSR”

61
From Strategic Planning to `Strategy Making
• The result was a shift in emphasis from planning to strategy making, where the
focus was less on the detailed management of companies’ growth paths than on
positioning the company in markets and in relation to competitors in order to
maximize the potential for profit.
This transition from corporate planning to what became termed strategic
management was associated with
1) increasing focus on competition as the central characteristic of the business
environment and
2) competitive advantage as the primary goal of strategy.
• This emphasis on strategy as a pursuit for performance directed attention to the
sources of profitability.
• Michael Porter of Harvard Business School pioneered the application of industrial
organization economics to analyzing industry profitability.

62
What is Strategy?
• In its broadest sense, strategy is the means by which individuals or
organizations achieve their objectives.

• Common to definitions of business strategy is the notion that

strategy is focused on
• 1) achieving certain goals;
• 2) allocation of resources; and that
• 3) strategy implies some consistency, integration, or cohesiveness of
decisions and actions.

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