3.Straegic Tools

8/2/2019 3.Straegic Tools

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A sneak preview ofstrategy tools

Prof R.Venkatarman1


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Definition of Strategy

The roots of strategy lie firmly in the

world of military combat. The termitself derives from the Greek wordstrategia meaning generalship, itselfformed from stratos, meaning army.

The concept of strategy is howevermuch older than the word. In around500BC Sun Tzu wrote The Art of Warwhich is widely considered the firsttreatise written on what we now callstrategy.

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All men can

see thesetacticswhereby I

conquer butwhat nonecan see is thestrategy out ofwhich victoryevolves.

- Sun Tzu


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Corporate strategy

A strategy is a long termseries of actions designed totake a company from its

current state to its desiredfuture state, and aims toprovide a sustainable

competitive advantage overother companies in thesame market.

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Consists of the combinationof competitive movesandbusiness approachesusedby managers to run thecompany

Managements game plan

To Stake out a market position

Compete successfully

Grow the business

Achieve targeted objectives

Attract customers4


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Strategic thinkingWhere are we now?

Where do we want to go?

Businesses to be in

Market positions to stake out Buyer needs and groups to

serve

Outcomes to achieve

How will we get there?

A companys answer to howwill we get there? is its strategy

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What are choices for company

Trial-and-error organizationallearning about

What has worked and

What has not worked

Managements appetite for taking

risks

Managerial analysis and strategicthinking about how best to proceed,

given prevailing circumstances 6


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Strategic Inflection Points

There are times whencompanies come to a majorfork in the road.

Market conditions are

changing Strategy runs out of stream Actions of competitors block

present strategy

Critical decisions have to bemade about where do we gofrom here - major new strategy

may be needed 7


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The competitive advantage

Strategy is to gainsustainable competitiveadvantage

In developing

competitive capabilitiesrivals can not match-Mercedes benz(technology), Chanel and

rolex (top of the line) Or providing a distinctive

product or servicelow

cost- wall mart 8


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Or focus on a narrowmarket niche, doing a betterjob than rivals of serving

the unique needs of nichebuyers Lotus or porshe

Or develop expertise,resource strengths, andcapabilities not easilyimitated by rivals- South

west 9

The competitive advantage


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THE INTER-RELATIONSHIP BETWEENMARKETING AND CORPORATE STRATEGY

INFORMS DIRECTS GUIDES CONTROLS

ACHIEVES SUPPORTS

OPERATIONALISE

Corporate Strategy Specifying the

organisations mission Allocating resources Defining Organisational

objectives

Marketing Strategy Identifying product market/s to

compete in Selecting market segments to

target Developing the marketing mix


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OPERATIONALvsSTRATEGIC MARKETING

Operational Marketing

Action-oriented

Existing opportunities

Non-product variables Stable environment

Reactive behaviour

Day-to-day management

Marketing department

Strategic Marketing

Analysis-oriented

New opportunities

Product market variables Dynamic environment

Proactive behaviour

Longer range management

Cross-functionalorganisation


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Strategic MarketingManagement

o Crafting and executing strategy are coremanagement functions

o Among all things managers do, nothing affects

a companys ultimate success or failure morefundamentally than how well its managementteam Charts the companys direction,

Develops competitively effective strategic moves andbusiness approaches, and

Pursues what needs to be done internally to producegood day-in/day-out strategy execution


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Levels of Strategic Management

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The six Qs for creating a dynamic strategy.Profitability rests on six solid answers to

these questionprofitability

Why are we

pursuing thisobjective?

The vision

The mission

Where will we be

active? The customer

The market

How will we

achieve ourobjective?

Innovation

Acquisitions

When will we actand at what

speed?

Timing

Execution

What willdifferentiate our

product?

Positioning

With whom will wecompete andcooperate?

Competition

Alliances 14


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Vision vs Mission A strategic vision

concerns a firms

futurebusiness path -

where we are going

The mission

statementof most

companies focuses

on currentbusinessactivities - who we

are and what we do

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Vision Statement

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Defining the Business is veryimportant for marketing strategy

Source: D. F. Abell,Defining the Business: The Starting Point of Strategic

Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7. 17


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Beyondagri

business


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Haulage

Business redefined

t t


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ro ta ty s animportant

consideration Maximizing returns to

shareholders

Importance of balancingshort-term returns withlong-term profitability

Pressures to maximizeshort-term profitabilitymay result in unethical

behavior 20


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Strategy Implementation

After choosing strategies, managers mustput them into action.

The feedback loopstrategy is ongoing.Managers must monitor and reevaluate forthe next round of strategy formulation andimplementation.

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Intended and EmergentStrategies

Intended strategies

Strategies an organizationplans to put into action

Emergent strategies Unplanned strategies

Realized strategy

The product of whateverintended strategies are actuallyput into action and of any

emergent strategies 22


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Strategic Intent

Strategic Intent: A long-term goal thatis ambitious, builds upon and stretchesfirms core competencies, and draws

from all levels of the organization.

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e-business 24

Strategy ultimatley leads to theappropriate business model

Financialaspects

HOW MUCH?

What is the revenue

model? the profit

model? designed to

last?

WHO?

How to managerelationships with

customers, satisfy

them and generate

revenues to be on the

winning side?

CustomerRelationship

WHAT?

What is the scope of

products and services,

its value (its benefits)

for the customer, the

capabilties to deliver

them in an innovating

way?

Productinnovation

HOW?How to organize the

infrastructure, its

resources, the

knowledge and the

structure of resulting

costs, manage thevalue chain and

processes, build

alliances to achieve

performance?

Infrastructure


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Th b i l


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SCM, opsresources

The business plan

Creativity -> Ideas -> Innovations -> Success -> Profits


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Creativity -> Ideas -> Innovations -> Success -> Profits


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Strategy Canvas: Cell Devices

0

0.5

1

1.5

2

2.5

C

ost

Imag

e

User

Interface

Applicat

ions

Inte

grated

Cap

abilitie

s

CellCa

rrier

Innov

atio

n

Custom

erSer

vice

Feature

Of

feringLevel

iPhone

Blackberry

Other Cell


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Supplychain

Operation Distribution Sales andMarketing

Service

Taiwan

Facilities ofcamera,circuitry,

connectors,

stainlesscasings

Singapore

Facilities ofCPU,

processingchips

USFacilities of

touchscreen,specific

parts

ChinaShenzhenAssembly

Facility

Source:http://www.shmula.com

The value chain


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Product success

0%

1000%

2000%

3000%

4000%

5000%

6000%

7000%

8000%

2008 2007 2006 2005 2004 2003

PROFIT MARGINApple has recently doubled its net income

Profit margin Net income Net sales

Data:Standard & Poors


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Users experience

Source:http://blog.wired.com

Core Competence


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Cognitive biases

Prior hypothesis bias

Escalating commitment

Representativeness

Illusion of Control

Hubris hypothesis

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Tools used for crafting strategy

to gain competitive advantage


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The various models on strategy

The following are the most commonly used models:

Competitive Advantage

PESTL analysis

SWOT Value Chain

Porters Five Forces

Product Lifecycle

Value Innovation & Blue Ocean Theory

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Supplementary models forenhancement

Supplementary models for enhancement

Gap analysis

Ansoffs Matrix B C G Matrix

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Approaches to Assess How Wellthe Present Strategy Is Working

Qualitativeassessment

What is thestrategy?

Completeness

Internal consistency Rationale

Relevance

Quantitativeassessment What

are the results? Is company achieving

its financial andstrategic objectives?

Is company anabove-averageindustry performer?

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K I di t f H W ll


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Key Indicators of How Wellthe Strategy Is Working

Trend in sales and market share Acquiring and/or retaining customers

Trend in profit margins

Trend in net profits, ROI

Overall financial strength and credit ranking

Efforts at continuous improvementactivities

Trend in stock price and stockholder value

Image and reputation with customers

Leadership role(s) Technology, quality,innovation, e-commerce, etc.

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The Generic Building Blocks ofCompetitive Advantage

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Cost advantage This exists when a company can

deliver the same product or serviceas competitors but at a lower cost,enabling it to offer this product orservice at a lower price and/or with

a higher profit margin.

Travel industry is an example whenlow cost airlines first cut out the

agents (and their associatedcommissions) by selling directly totheir customers on line, combinedwith low operating costs..

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Differentiation advantage

This exists when a company can

deliver a product or service that isperceived to be superior to their

competitors.

In this instance the consumer maybe less sensitive to price, allowingthe company to charge more and

hopefully generate a bettermargin. This can be particularlystrong where the product is non-standard.

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Any Strategy is a direction-driven organizational


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Any Strategy is a direction driven organizationalchange

Realized

direction

Desired

direction

Articulated

direction

Unintended

consequences

Unanticipated

events

Emergent

strategy

Deliberate

strategy

Realizedstrategy

Organizational

change

Mission /

vision

Objectives

Performance

measures

(Targets)

Behavioral

responses

1OBrien, Frances & Dyson, Robert (2007) Supporting Strategy, John Wiley & Sons, West Sussex

The strategic planning process in


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The strategic planning process inan organization

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3.Straegic Tools