Formulating Objective and

Strategies

Dosen : Dr. Ir. Hariadi Ismail, M.Sc.

 Fakultas Ekonomi dan Bisnis
School Economics and Business Strategic Management Model
Telkom University

Strategy Formulation
Perform External
Strategy Implementation
Audit
Strategy Evaluation

Implement
Generate, Implement Measure,
Develop Vision & Establish Long-term Strategies Mkt,
Evaluate, Choose Strategies Mgt’ Evaluate
Mission Statement Objective Fin, R&D, Performance
Strategies Issues
Prod/Op, MIS

Perform Internal
Audit

2 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business “notable quotes”
Telkom University

Alice said, “would you please tell me which way to go from here?” The cat said,
“that depends on where you want to get to”
Lewis Carrol

Start from the end

3 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business What is Long-Term Objective ?

Long-term objective, represent the results expected from pursuing certain strategies

Strategies, represent the actions to be taken to accomplish long-term objectives

Time frame for objective & strategies should be consistent 2 – 5 years.

4 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Long-term Objective
Telkom University

 Objective should be quantitative, measurable, realistic, understandable, challenging, hierarchical,

obtainable and congruent among organizational units.
 Term of objective : growth in assets, growth in sales, profitability, market share, degree and
nature of diversification, earning per share and social responsibility.
 Varying performance measure by organizational level :

Org’ Level Basis for Annual Bonus or Merit Pay

Corporate 75% based on Long-term objectives

25% based on Annual Objectives
Division 50% based on Long-term objectives
50% based on Annual Objectives
Function 25% based on Long-term objectives
75% based on Annual Objectives

5 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business Characteristic of Objectives

Quantitative
Measurable
Realistic
Understandable
Challenging
Hierarchical
Obtainable
Congruent across departments

6 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business Benefits of Having Clear Objectives

1. Provide direction by revealing expectation 6. Minimize conflict

2. Allow synergy 7. Stimulate exertion

3. Aid in evaluation by serving as standard 8. Aid in allocation of resources

4. Establish priority 9. Aid in design of jobs

5. Reduce uncertainty 10. Provide basis for consistent decision making

7 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Financial vs Strategic Objectives

• Financial Objectives • Strategic Objective

• Growth in revenue • Larger market share

• Growth in earning • Quicker on time delivery than rivals

• Shorter design-to-market times than rivals
• Higher dividends
• Lower cost than rivals
• Larger profit margin
• Higher product quality than rivals
• Greater ROI • Wider geographic coverage than rivals
• Higher EPS • Achieving technological leadership
• Rising Stock Price • Consistently getting new or improved product to market
ahead than rivals
• Improve Cash flow

8 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business The Balanced Scorecard
Telkom University

“Untuk suskes secara

Financial
finasial, bagaimana kita

s
harus nampak di hadapan

e
tiv
es es

s
et
pemegang saham?”

ec
ur iv

rg
t

bj
s a

Ta
a i ti

O
e
M In

Customer Untuk memuaskan Internal Business

Untuk mencapai visi
kita, bagaimana kita
es Visi & pemegang saham danProcess es

iv
iv

harus nampak di ur es ur es

ct
ct

s
s

iv iv

et
et

es bje
s
es bje

hadapan pelanggan a t Strategi pelanggan, proses bisnis ea t

rg
rg

e a a
iti iti

O
O

Ta
Ta

M M
In apa yang diperbaiki In

Untuk mencapai visi kita, Learning and Growth

bagaimana akan
es

tiv
mempertahankan kemampuan s
ur ve

s
c

et
s i

es bje
ea t

rg
untuk berubah dan tia

Ta
M Ini
berkembang

Ref : BSC (Kaplan)

9 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Con’t
Telkom University

10

Cause and Effect Relationship

Financial Perspective Menggambarkan rantai dari logika yang merubah/
Productivity Long term Revenue mentranformasikan dari aset tak berwujud menjadi
hareholders value Growth
nilai yang terukur

Customer Perspective Customer Value Proposition

Product & Service Attr.ibutes Relationship Image Menjelaskan kondisi yang akan menciptakan
Price Quality Time Function Partnership Brand
Value untuk pelanggan

Internal Process Perspective Value Creating Processes

Operation Regulatory and
Menentukan proses-proses yang akan
Customer Innovation
Management Management Social Processes Mentranfoemasikan aset tak berwujud
Processes
Processes Processes Menjadi hasil keuangan dan Customer
Clustering of Assets and
Learning & Growth Perspective Activities
Human Capital Information Capital Organization Capital Menentukan aset tak berwujud yang harus
diselaraskan dan diintegrasikan untuk
menciptakan value

10 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Strategic Objective Example
Telkom University

11

Balanced Scorecard Objective Measurement Target

Financial Perspective Growth - CAGR Revenue (5years) 12 %
- Market share :
- Product 1 40 %
- Product 2 20 %
Profitability - EBITDA Margin 63 %
- Net Income Margin 20 %
Customer Perspective Excellent Product • CSI 80 %
Excellent Service • CLI 90 %
• SLI Compliance > 90 %
Internal Business process One stop service process. • SLA Compliance 90 %
Excellent Operation • Network Performance 99,99 %
• etc

Learning & Growth HR Development • CAGR EBITDA / Empl’ 19 %

IT Support • HR Competency gap 95 % K3
• HR Satisfaction 80 %
• IT Fulfillment 100 %
• IT Availability 99,99 %

11 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business

Alternative Strategies Defined and Example

Telkom University

12

Strategy Definition 2007 Example

Gaining ownership or increased control over distributors or retailers Starbucks reached a deal with Green Mountain Coffee Roater for that
firm to sell packs of Starbucks Tazo-branded coffee and tea in their
Forward Integration brewers

Backward Integration Seeking ownership or increased control of firm’s suppliers Hilton Hotel could acquire a large furniture manufacturer

Seeking ownership or increased control over competitors Pfizer acquires Wyeth; both are huge drug companies
Horizontal Integration

Seeking increased market share for present product or services in present Mc Donald’s spending million on its promotion aimed at convincing
Market Penetration market through greater marketing effort consumers it offers healthy items.

Introducing present product or services into new geographic area Burger King opened its first in Japan
Market Development

Seeking increased sales by improving present product and services or Google introduced “Google Presents” to compete with Microsoft
Product Development developing new ones. Power Point

12 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Con’t
Telkom University

13

Strategy Definition 2007 Example

Adding new but related product or services AT&T acquiresof BellSouth
Related Diversification

Unrelated Adding new unrelated product or services Ford Motor company entered the industrial bank business
Diversification

Regrouping through cost and asset reduction to reserve declining sales Discovery Channel closed its103 mall-based and stand-alone stores
Retrenchment and profit. to focus on the internet and laid 25%of its workforce

Selling a division or part of an organization Whirpool sold its struggling Hoover floor-care business to
Divestiture Techtronic Industries

Liquidation Selling all of a company’s assets, in part, for their tangible worth Follow Me Charter sold all of its assets and ceased doing business

13 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business Alternative Strategies

Integration Strategies Intensive

Forward Int’ Strategies
Backward Int’ Market Penetration
Horizontal Int’ Market Dev’
Product Dev’

Defensive
Diversification Strategies
Strategies
Related Divers’
Retrenchment
Unrelated Diversification Divestiture
Liquidation

14 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Levels of Strategies

• Large Company • Small Comapny

Corporate
level, CEO

Company level,
owner or president

Division level,
EVP

Functional level,
m arketing, finance, R&D,
m anufacturing, M IS, HR

Functional level, marketing,

finance, R&D, HRM
production/operation, MIS

Operational level, plant

manager, sales manager,
production and department
manager

Operational level, plant

manager, sales manager,
production and department
manager.

15 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Corporate Strategy Relationship in Single Business
Telkom University

16

Top Management
Corporate Strategy
Middle &
Supervisory
Management

Production – Financial Personal – Labor

Marketing Operation
Policies and relation Policies
Accounting R & D Policies
Policies & Plan Management Policies & Plans and Plans
Policies & Plans Plans & Plans

16 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Corporate Strategy Relationship in Multi Business
Telkom University

17

Corporate
Corporate Strategy Management

SBU Top Management

SBU-1 SBU-2 SBU-3
Strategy Strategy Strategy

Middle &
Supervisory
Management

Production – Financial Personal – Labor

Marketing Operation
Policies and relation Policies
Accounting R & D Policies
Policies & Plan Management Policies & Plans and Plans
Policies & Plans Plans & Plans

17 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Porter’s Five Generic Strategies

Generic Strategies

Cost Leadership Differentiation Focus

Type-1 Cost Leadership-Low cost

Type-1 Type-2 Cost Leadership – Best Cost
Large Type-3 -----
Size of Market

Type-2 Type-3 Differentiation

Type-4 Focus-Low Cost
Type-5 Focus Best Value

Small Type-4
----- Type-3
Type-5

18 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Cost Leadership Strategies (Type-1 and Type-2)
Telkom University

19 1. A primary reason for pursuing forward, backward and horizontal integration strategies is to gain
low-cost or best-value cost leadership benefits.
2. Can be especially effective when the market is composed of many price-sensitive buyers.
3. It must achieve their competitive advantage in ways that are difficult for competitors to copy or
match.
4. Cost of overall Value Chain must lower than competitor’s total cost
a) Perform value chain activities more efficiently than rivals
b) Revamp the firm’s overall value chain to eliminate or bypass some cost producing activities

19 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Differentiation Strategies (Type-3)

1. Different strategies offer different degree of differentiation, differentiation doesn’t guarantee

competitive advantage, especially if standard products sufficiently meet customer needs.

2. A differentiation strategy should be pursued only after a carefully study of buyer’s needs and
preference.

3. Strong coordination among R&D and marketing function

4. Effective if hard or expensive for rivals to duplicate

20 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Focus Strategies (Type-4 & Type-5)

A low-cost (type-4) or Best-Value (type-5) focus strategy can be especially attractive under the following
conditions :
1. Target market niche is large, profitable, and growing
2. Industry leaders do not consider the niche to be crucial to their own success.
3. etc

21 Creating the great business leaders

Means for Achieving Strategies
Cooperation Among Competitors.
For collaboration between competitors to succeed, both firms must contribute distinctive, such as technology,
distribution, basic research or manufacturing capacity  Example : Airline Industry

Joint Venture / Partnering

JV is a popular strategy that occurs when two or more companies form a temporary partnership or
consortium for the purpose of capitalizing on some opportunity  share equity in new entity
Other cooperative arrangements : R&D partnership, cross-distribution agreement, cross-licensing agreement,
cross-manufacturing agreement  Nokia and Facebook Inc.

22
 Merger/ Acquisition
Merger occurs when to organization of about equal size unite to form one enterprise.
Acquisition occurs when a large organization purchase (acquires) a smaller firm, or viceversa.
When merger and acquisition is not desired by both parties  take over or hostile takeover
When merger and acquisition is desired by both parties  friendly merger

Outsourcing
Business-process outsourcing (BPO) involves companies taking over the functional operation such as human
resources, information system, payroll, accounting, customer service. The reasons are :
1) It less expensive
2) Allow the firm to focus on its core business
3) It enable the firms provide better service

First Mover Advantage

It refers to the benefits a firm may achieve by entering a new market or developing a new product or service
23 prior to rival’s firm.
 Fakultas Ekonomi dan Bisnis
School Economics and Business Requirement for Generic Competitive Strategy
Telkom University

24

Generic Commonly Required Skill Common Organizational

Strategic And Resources Requirement

1. Sustained capital investment and access to 1. Tight cost control

capital. 2. Frequent, detailed control report
2. Process Engineering Skill 3. Structured organization and responsibilities
Overall Cost 3. Intent supervision of labor 4. Incentives based on meeting strict quantitative targets.
Leadership 4. Product design for ease in manufacture
5. Low-cost distribution system

1. Strong marketing ability 1. Strong coordination among function in R&D, product

2. Product engineering development and marketing.
n
tio

3. Creative flare 2. Subjective measurement and of incentives instead of

tia

4. Strong capabilities in basic research quantitative measure.

ren

5. Corporate reputation for quality or technological 3. Amenities to attract highly skilled labor, scientist or
ffe
Di

leadership creative people

6. Strong cooperation from channel

Combination of the above policies directed at the Combination of the above policies directed at the regular
Focus particular strategic target. strategic target.

24 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Risk of Generic Strategy
Telkom University
25
Risk of Cost Leadership Risk of Differentiation
Cost of leadership is not sustained :
• Competitor imitate
• Technology change
• Other bases of cost of leadership erode.
Proximity in differentiation is lost.
Cost focusers achieve even lower cost in
segment
Risk of Focus
Differentiation is not sustained : The focus strategy is imitated
• Competitor imitate The target segment becomes structurally
• Bases for differentiation become less unattractive :
important to buyers. • Structure erode
• Demand disappears
Cost Proximity is lost.
Broadly targeted competitors overwhelm
the segment :
• The segment’s differences from other
segment narrow
• The advantage of abroad line increase.
Cost focusers achieve even lower cost in
segment New focusers sub-segment the industry
25 Creating the great business leaders
 Fakultas Ekonomi dan Bisnis
School Economics and Business Vertical Integration
Telkom University

26

Vertical Integration
It is based on growth through the acquisition of firms that supply it with inputs (such as raw materials) or are
customers for its outputs (such as warehouse for finish product).

Textile
Textile Producer
Producer Textile
Textile Producer
Producer

Shirt
Shirt Manufacturer
Manufacturer Shirt
Shirt Manufacturer
Manufacturer

Clothing
Clothing Store
Store Clothing
Clothing Store
Store

26 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Corporate Combination
Telkom University

27

Joint Ventures
Occasionally two or more capable firms lack a necessary component for success in a particular competitive environment. The
solution is a set of joint ventures, which are commercial companies (children) created and operated for the benefit of the co-
owners (parents)

Strategic Alliances
They are distinguished from joint ventures because the companies involved do not take an equity position in one another. For
example one partner provides manufacturing capabilities, while second partner provides marketing capabilities.

Consortia / Konsorsium
Consortia are defined a large interlocking relationship between businesses of an industry, consortia project are increasing in
number and in success rates.
Outsourcing
Involve farming out certain value chain activities to outside vendors

27 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Merger and Acquisition
Telkom University
Merger and acquisition are especially suited for situation in which alliance and partnership not
28
enough to provide a company with access to needed resources and capabilities.
Merger, is pooling of equals with the newly created new name of Co’
Acquisition, is combination in which one company, the acquirer, purchases and absorbs the
operation of another, acquirer.

The Strategic Objective :

1. To gain more market share, create more efficient operation.
2. To expand geographic coverage
3. To expand product categories or international
4. To gain access new technologies
5. To try to invent new industry

28 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Five Generic Competitive Strategies
Telkom University

29

Type of Competitive Advantage

Overall Low Cost

Provider Strategy
Low Cost Differentiation Broad
Differentiation
Strategy

Broad Cross
section of
Buyers
Market Target

Best Cost provider

strategy
A narrow buyer
segment
(market niche)

Differentiation
Strategy

Focused
Cost Strategy
Focused Low

29 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Five Distinct Competitive Strategy
Telkom University
1. Low-cost provider strategy, striving to achieve lower overall cost than rivals and appealing to a broad spectrum
of customer, usually under pricing rivals.
30
2. A broad differentiation strategy, seeking to differentiate the company’s product offering from rivals in ways
that will appeal to a broad spectrum of buyers.
3. A best-cost provider strategy, giving customers more value for the money by incorporating good-to-excellent
product attribute at lower cost than rivals.
4. A focused (or market niche) strategy based on low cost, concentrating on a narrow buyer segment and
outcompeting rivals by having lower cost than rivals and thus being able to serve niche member at lower price.
5. A focused (or market niche) strategy based on differentiation, concentrating on a narrow buyer segment and
outcompeting rivals by offering niche member customize attribute that meet their taste and requirement better
than rival’s product.

30 Creating the great business leaders

Tugas-5
A. Case
1. Anda kembali ke kelompok sesuai dengan naskah kasus anda
2. Lakukan analisis Sasaran Jangka Panjang perusahaan tersebut, kelompokkan ke dalam model Balance
Scorecard
3. Dari sejumlah strategi alternatif, strategi apa yang dijalankan oleh perusahaan tersebut berikan
penjelasan
4. Dari Generic Strategic Porter, strategi apa yang diterapkan pada perusahaan tersebut, berikan
penjelasan
5. Tugas ditulis tangan dan dikumpulkan di akhir sesi kuliah hari ini

B. Tugas Textbook.

31