Introduction

Strategy
- a set of related actions that managers take to increase their company’s
performance
- companies achieving superior performance relative to rivals is the ultimate
challenge
- if a company’s strategies result in superior performance, then the company
has a competitive advantage
Strategic leadership
- how to most effectively manage a company’s strategy making process to
create competitive advantage
Dell’s Example
Strategies followed
- selling directly to customers – through mailings and telephone contracts and
through its websites
 - managing supply chain to minimize the cost of holding inventory
- internet to feed real-time information
Strategy Formulation
- task of selecting strategies
Strategy implementation
- task of putting strategies into action
– includes designing, delivering and supporting products
Strategic Leadership, Competitive Advantage and Superior Performance
Strategic Leadership
- is concerned with managing the strategy-making process to increase the
performance of a company, thereby increasing the value of the enterprise to its
owners, its shareholders
Superior Performance
- maximizing the shareholder value – ultimate goal of profit-making companies
- 2 reasons
- first, shareholders provide a company with the risk capital that enables
managers to buy the resources needed to produce and sell goods and services
- Risk Capital – capital that cannot be recovered if a company fails and goes
bankrupt
- managers have the obligation to invest those profits in ways that maximize
shareholder value
Shareholder Value
- the returns that shareholders earn from purchasing shares in a company
 - these returns come from 2 sources
a. capital appreciation in the value of a company’s shares
b. dividend payments
Profitability and Profit Growth – principal drivers of shareholder value
Profitability
- is measured by the return that it makes on the capital invested (ROIC) in the
enterprise
- ROIC – Return on Invested Capital – defined as its net profit over capital invested in
the firm
= Net profit / capital invested
= net profit = profit after tax
= capital invested = equity + debt
Profit Growth
- measured by the increase in net profit over time
Competitive Advantage and a Company’s Business Model
Competitive Advantage
- a company is said to have a competitive advantage over its rivals
- when its profitability is greater than the average profitability and profit growth
of other companies competing for the same set of customers
- the higher its profitability relative to rivals, the greater its competitive
advantage will be
Sustained competitive advantage
- when the companies strategies enable it to maintain above-average profitability
for a number of years
Key to understanding competitive advantage
- appreciating how the different strategies managers
 pursue over time
- can create activities that fit together to make a company unique
- or different from its rivals and able to consistently outperform them
A business model
- managers’ conception of how the set of strategies their company pursues should
mesh together into a congruent whole
- enabling the company to gain a competitive advantage and achieve superior
profitability and profit growth
A business model encompasses the totality of how a company will:
1. Select its customers
2. Define and differentiate its product offerings
3. Create value for its customers
4. Acquire and keep customers
5. Produce goods and services
6. Lower costs
7. Configure its resources
8. Achieve and sustain a high level of profitability
9. Grow the business over time
Strategic Managers

1.Corporate-Level Managers
– occupy the apex of decision making with the organisation
– role includes
– defining the goals of the organisation,
determining what businesses it should be in, allocating resources among the
different businesses,
formulating and implementing strategies that span individual businesses and
providing leadership for the entire organisation
- viewed as the agents of the shareholders
2. Business-Level Managers
- a business unit is a self-contained division
- with its own functions – like finance, purchasing, production and marketing
departments
- provides a product or service for a particular market
- the strategic role
–translate the general statements of direction and intent that come from the
corporate level into concrete strategies for individual businesses
3. Functional Level Managers
- are responsible for the specific business functions or operations
- functional managers responsibility – confined to one organisational activity
The Strategy Making Process
5 main steps:
1.Select the corporate mission and major corporate goals
2. Analyze the organization's external competitive environment to identify
opportunities and threats
3. Analyze the organization’s internal operating environment to identify the
organisation’s internal environment to identify organisation’s strengths and
weaknesses
4. Select strategies
5. Implement the strategies
A. The Mission
- a company’s mission describes what the company does
Example
1. Ford Motor Company
Moto - Built for the road ahead
Mission - We are a global family with a proud heritage passionately committed to
providing personal mobility for people around the world
2. Microsoft
At Microsoft, we work to help people and businesses throughout the world realize
their full potential. This is our mission. Everything we do reflects this mission and
the values that make it possible
3. NIKE Inc
To Bring Inspiration and innovation to every athlete in the world.
4. Apollo Hospitals
Vision – ‘Touch a billion lives’
Mission - "Our mission is to bring healthcare of International standards within the
reach of every individual. We are committed to the achievement and maintenance
of excellence in education, research and healthcare for the benefit of humanity“
5. Breach Candy Hospital
Vision - To be recognized as a trusted leader in providing high quality healthcare with
a reputation for patient care, performance and sustained growth
Mission - To offer comprehensive State of the Art healthcare services in an
environment where compassion, quality, safety and cost effectiveness are integral to
care, where we are proud to serve patients; where meeting the challenges of complex
medical needs is viewed as a defining competence
Process of formulating a mission statement
1. Definition of the business by answering these questions:
“what is our business?”, “what will it be?”, ‘what should it be?”
- the responses guide the formulation of the mission
“What is our business?”
- defined in terms of three dimensions:
- who is being satisfied – customer groups
- what is being satisfied – customer needs
- how are the needs being satisfied – distinctive competencies
Vision
- what the company would like to achieve
Values
- the value of a company states how managers and employees should
1. conduct themselves
2. how they should do business
3. what kind of organisation they should build to help a company achieve its
mission
4. values help and drive behaviour within a company
5. the set of values, norms and standards that control how employees work to
achieve an organisation’s mission and goals
Goals
- a goal is a precise and measurable desired future state that a company attempts
to realize
Well-constructed goals have four characteristics:
1. Precise and measurable
– provide a yardstick or standard against which they can judge their
performance
2. Address crucial issues
– managers should select a limited number of major goals to assess
the performance of the company
3. Challenging but realistic
– gives an incentive to look for ways of improving the operations of
the organization
4. Specify a time period in which the goals should be achieved, when that
is appropriate
B. External Analysis
- analysis of the organization’s external operating environment
- identify strategic opportunities and threats in the organisation’s
operating environment
- 3 interrelated environments examined
1. the industry environment in which the company operated
2. the country or national environment
3. the wider socioeconomic or macro environment
- requires the analysis of the nature, stage, dynamics and history of
industry
C. Internal Analysis
- the third component
- focuses on reviewing the resources, capabilities and competencies of a company
- goal – identify the strengths and weaknesses of the company
SWOT Analysis and the Business Model
- Strength, Weakness, Opportunity and Threats
- central purpose – identify the strategies to exploit external opportunities, counter
threats,
- build on and protect company strengths and eradicate weaknesses
The goal of SWOT analysis
– create, affirm, or fine-tune a company-specific business model that will best align, fit
or match a company’s resources and capabilities to the demands of the environment
in which it operates
 - compare and contrast the various alternative possible strategies
against each other
- and then identify the set of strategies that will create and sustain a
competitive advantage
Four main categories of strategies:
1. Functional-level strategies –
improves the effectiveness of operations within a company
2. Business-Level Strategies
– encompasses the business’s overall competitive theme,
- the way it positions itself in the marketplace to gain a
competitive advantage
– the different positioning strategies that can be used
in different industry
3. Global Strategies
- addresses how to expand operations outside the home country to
grow and prosper in a world where competitive advantage is determined
at a global level
4. Corporate – level strategies
- which answer the primary questions
– what business or businesses should we be in to maximize the long-
run profitability and profit growth of the organization
- how should we enter and increase our presence in these businesses
to gain a competitive advantage?
D. Strategy Implementation
- putting strategies into action
- ie., strategy has to be implemented
- involves taking actions at the functional, business and corporate
levels
Examples of implementation
- putting quality improvement programs into place
- changing the way a product is designed
- positioning the product differently in the marketplace
- entails designing the best organization structure and the best
culture and control systems to put a chosen strategy into action
E. Feedback Loop
- indicates that strategic planning is ongoing
- strategy has been implemented, its execution is monitored to
determine the extent to which strategic goals achieved
- to what degree competitive advantage is being created and
sustained
- this information and knowledge – pass back to the corporate level
through feedback loops
- and become the input for the next round of strategy formulation
and implementation
Corporate Strategy
- can be defined as the art and science of formulating, implementing
- and evaluating cross-functional decisions that enable an
organization to achieve its objectives
- implying that corporate strategy focuses on integrating
management, marketing, finance/accounting, production/operations,
research and development etc
- is used to refer to strategy formulation, implementation and
evaluation
Stages of Corporate Strategy
- process consists of three stages: strategy formulation, strategy
implementation and strategy evaluation
Strategy Formulation
- includes developing a vision and mission,
- identifying an organization’s external opportunities and threats
- determining internal strengths and weaknesses
- establishing long-term objectives
- generating alternative strategies
- and choosing particular strategies to pursue
Strategy Implementation
- requires a firm to establish annual objectives,
devise policies,
motivate employees,
and allocate resources so that formulated strategies can be executed
Strategy Evaluation
- is the final stage in strategic management
- 3 fundamental strategy-evaluation activities are
- 1. reviewing external and internal factors that are bases for current strategies
- 2. measuring performance
- 3. taking corrective actions
Integrating Intuition and Analysis
- based on past experiences, judgment and feelings, most people recognize that intuition
– essential to making good strategic decisions
- intuition – useful for making decisions in situations of great uncertainty or little
precedent
- is also helpful when highly interrelated variables exist or when it is necessary to choose
from several plausible alternatives
- analytical thinking and intuitive thinking complement each other
Adapting Change
- organizations should continuously monitor internal and external events and trends so
that timely changes can be made as needed
- the rate and magnitude of changes that affect organizations are increasing
dramatically
- the need to adapt to change leads organizations to key strategic-management
questions
- “what kind of business should we become?”
- “are we in the right field(s)?”
- “should we reshape our business?”
- “what new competitors are entering our industry?”
- “what strategies should we pursue?”
- “how are our customers changing?”
- “are new technologies being developed that could put us out of business?”
Key Terms in Corporate Strategy
1. Competitive advantage
– “anything that a firm does especially well compared to rival firms”
– a firm must strive to achieve sustained comparative
advantage by (1) continually adapting changes in external
trends and events and internal capabilities, competencies and
resources
(2) Effectively formulating, implementing and evaluating strategies
that capitalize upon those factors
2. Strategists
- most responsible for the success or failure of an organization
3. Vision and Mission Statements
- Vision – first step in strategic planning – answers the question – “what do
we want to become?”
Our vision is to be the world’s best quick service restaurant;(McDonald’s)
- Mission statements – “enduring statements of purpose that distinguish
one business from other similar firms”
- defines the scope of a firm’s operations in product and market terms
4. External opportunities and threats
- refer to economic, social, cultural, demographic, environmental, political,
legal, governmental, technological, and competitive trends and events
- that could significantly benefit or harm an organization in the future
5. Internal Strengths and Weaknesses
- are an organization’s controllable activities that are performed especially well or poorly
6. Long term objectives
- objectives – defined as specific results that an organization seeks to achieve in
pursuing its basic mission
7. Strategies
- are the means by which long-term objectives will be achieved
8. Annual Objectives
- short term milestones that organizations must achieve to reach long term objectives
9. Policies
- are the means by which annual objectives will be achieved
- include guidelines, rules and procedures established to support efforts to achieve
stated objectives
- policies are guides to decision making and address repetitive or recurring situations
Benefits of Corporate Strategy:
Corporate Strategy allows an organization to be more proactive than reactive in
shaping its own future;
- it allows an organization to initiate and influence (rather than just respond to)
activities—and thus to exert control over its own destiny
- small business owners, chief executive officers, presidents, and managers of many
for-profit and non-profit organizations have recognized and realized the benefits
of strategic management
- enhances the problem-prevention capabilities of organizations because it
promotes interaction among manager’s at all divisional and functional levels
- Interaction can enable firms to turn on their managers and employees by
nurturing them,
sharing organizational objectives with them,
empowering them to help improve the product or service, and recognizing their
contributions.
A survey of nearly 50 corporations in a variety of countries and industries
found the three most highly rated benefits of corporate strategy to be:
1. Clearer sense of strategic vision for the firm.
2. Sharper focus on what is strategically important.
3. Improved understanding of a rapidly changing environment
- the principal benefit of strategic management has been to help
organizations formulate better strategies
- through the use of a more systematic, logical, and rational approach
to strategic choice.
- This certainly continues to be a major benefit of strategic
management,
- but research studies now indicate that the process, rather than the
decision or document, is the more important contribution of strategic
management.
Greenley stated that corporate strategy offers the following benefits:
1. It allows for identification, prioritization, and exploitation of
opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of
activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified
opportunities.
7. It allows fewer resources and less time to be devoted to correcting
erroneous or ad hoc decisions.
8. It creates a framework for internal communication among personnel.
9. It helps integrate the behavior of individuals into a total effort.
10. It provides a basis for clarifying individual responsibilities.
11. It encourages forward thinking.
12. It provides a cooperative, integrated, and enthusiastic approach to
tackling problems and opportunities.
13. It encourages a favourable attitude toward change.
14. It gives a degree of discipline and formality to the management of a
business
The end