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DEVELOPING STRATEGIES FOR COMPETITIVE ADVANATGE

Session 1The Concept of Strategy

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The Concept of Strategy

• The role of strategy in success• A framework for strategy analysis• The evolution of strategic management• What is strategy?• Strategy making: Design or process?• The role of strategy

OUTLINE

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GIAP & NORTH VIETNAMESE

GOALS Reunification of Vietnam under Communist rule.

UNDER-STANDING THE ENVIRONMENT

Intimate knowledge of terrain Understanding U.S. political system.

RESOURCE APPRAISAL

Recognized economic and military weaknesses and core political strengths

IMPLEMENT- ATION

Tight control. Long-term commitment. Effective propaganda. Inspirational leadership.

Components of Success

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What Makes a Successful Strategy?

Long-term, simple and

agreed objectives

Objective appraisal of resources

EFFECTIVE IMPLEMENTATION

Successful strategy

Profound understanding of the competitive

environment

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The Basic Framework Strategy: the Link between the Firm and its

Environment

THE FIRM • Goals & Values• Resources & Capabilities• Structure & Systems

THE INDUSTRYENVIRONMENT• Competitors• Customers• Suppliers

STRATEGYSTRATEGY

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1950sFinancial budgeting:•Operational budgeting•Capital budgeting (the wonders of DCF)

1960s & early 1970sCorporate planning:•Corporate plansbased on 5-10 yr economicforecasts•Diversification

Late 1970s & 1980sEmergence of Strategic Management:• Industry analysis• Competitive positioning• Strategic priorities: locating in attractive industries & establishing market leadership

1990s & early 2000sQuest for Shareholder Value:• Refocusing, outsourcing, delayering, cost cuttingQuest for Competitive Advantage:• Emphasis on resources & capabilities• Flexibility & innovation• Collaboration—alliances, networks• Succeeding in dynamic (Schumpeterian) markets

?3 key changes:1. Changing concept of strategy2. Changing processes of strategy formulation3. New tools of strategy analysis

The Evolution of Strategic Management

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• Distinguishing strategy from tactics:– Strategy is the overall plan for deploying resources

to establish a favorable position.– Tactic is a scheme for a specific maneuver.

What is Strategy?

• Characteristics of strategic decisions:– Important.– Involve a significant commitment of resources.– Not easily reversible.

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RATE OF PROFIT ABOVE THE

COST OF CAPITAL

How do we make

money?

INDUSTRY

ATTRACTIVENESS

Which businesses

should we be in?

CORPORATE STRATEGY

BUSINESS STRATEGY

Sources of Superior Profitability

COMPETITIVE ADVANTAGE

How should we compete?

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Describing Strategy:Competing for the Present;

Preparing for the Future.STATIC

• Where are we competing? - Product market scope- Geographical scope- Vertical scope

• How are we competing? - What is the basis of our

competitive advantage?)

DYNAMIC• What do we want to become?

- Vision statement • What do we want to achieve? - Mission statement

- Performance goals• How will we get there?

- Guidelines for development - Priorities for capital expenditure, R&D - Growth modes: organic growth, M&A, alliances

COMPETING FOR THEPRESENT

PREPARING FOR THEFUTURE

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Strategy as Design

Planning andrational choice

INTENDEDSTRATEGY

Many decision makersresponding to multitude ofexternal and internal forces

REALIZED STRATEGY

EMERGENT STRATEGY

Strategy as Process

Mintzberg’s Critique of Formal Strategic Planning:•The fallacy of prediction – the future is unknown•The fallacy of detachment -- impossible to divorce formulation from implementation•The fallacy of formalization --inhibits flexibility, spontaneity, intuition and learning.

Strategic Making: Design or Process?

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Strategy as DecisionSupport

Strategy as Coordinationand Communication

Strategy as Target

Improves the qualityof decision making

Creates consistencyand unity

Improves perform- ance by setting high aspirations

Strategic Making Processes within the Company: Multiple Roles of Strategy

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• Strategy analysis improves decision processes, but doesn’t give answers.

• Strategy analysis assists us to identify and understand the main issues.

• Strategy analysis helps us to manage complexity.

• Strategy analysis can enhance flexibility and innovation by supporting learning.

The Role of Analysis