Dr. Abdulla Kader Research Fellow (UKZN) · 2017/03/15 7 Factors Shaping the Choice of Strategy • One of the most pivotal strategy-shaping internal considerations is whether a company

2017/03/15

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Dr. Abdulla Kader

Research Fellow (UKZN)

Contemporary Strategy conversations

Managing Strategic Change

Leadership involved with Strategy

Performance Management

Scenario Planning

Corporate Governance

South African Markets and developments

Blue Ocean vs Red Ocean Strategies

Business Strategy

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Right Strategy , Right Model

Size the Prize

Execution Excellence

Optimisation

Cost vs Revenue (Duality)

Leadership Challenges (connecting the dots)

Abundance Thinking

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A mixed bag of good & bad

news

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INSPIRING GREATNESS

Chaos and complexity in a VUCA world

Economics

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Chapter 04: Analysing a Company’s Internal Resources and Competitive CapabilitiesHOUGH | THOMPSON | STRICKLAND | GAMBLE

Factors Shaping the Choice of Strategy

Economic,

societal, political,

and government

regulations

• What an enterprise can and cannot do

strategywise is always constrained by

what is legal, by what complies with

government policies and regulatory

requirements, by what is considered

ethical, and by what is in accord with

societal expectations and the standards

of good social and community

citizenship.

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• An industry's competitive conditions

and overall attractiveness are big

strategy-determining factors.

• A company's strategy has to be tailored

to the nature and mix of competitive

factors in play—price, product quality,

performance features, service, war-

ranties, and so on.

Competitive

conditions and

industry

attractiveness


• A company's strategy needs to be

deliberately aimed at capturing its best

growth opportunities, especially the

ones that hold the most promise for

building sustainable competitive

advantage and enhancing profitability.

• Strategy should also provide a defense

against external threats to the

company's well-being and future

performance.

Company

opportunity and

threat

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• One of the most pivotal strategy-shaping

internal considerations is whether a

company has or can acquire the

resources, competencies, and capabilities

needed to execute a strategy proficiently.

• The best path to competitive advantage is

found where a firm has competitively

valuable resources and competencies,

where rivals can't develop comparable

capabilities except at high cost or over an

extended period of time.

Company

strengths and

weaknesses,

competencies and

capabilities


• Managers do not dispassionately assess

what strategic course to steer.

• Their choices are typically influenced by

their own vision of how to compete and

how to position the enterprise and by what

image and standing they want the

company to have.

Personal

ambitions and

business

philosophies of

key executives

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• An organization's policies, practices,

traditions, philosophical beliefs, and ways

of doing things combine to create a

distinctive culture.

• The stronger a company's culture, the

more that culture is likely to shape the

company's strategic actions, sometimes

even dominating the choice of strategic

moves.

Shared values

and company

culture

Strategic Analysis and Strategic Choices

Analyzing

strategically

about industry

and competitive

conditions

Analyzing

strategically

about a

company’s own

situation

What strategic

options does the

company

realistically

have?

What is the best

strategy?

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Analyzing

strategically

about industry

and competitive

conditions

The Key Questions

• What are the industry’s dominant economic

features?

• What is causing the industry’s competitive

structure and business environment to change?

• Which companies are in the strongest/weakest

positions?

• What strategic moves are rivals likely to make

next?

• What are the key factors for competitive success?

• Is the industry attractive and what are the

prospects for above-average profitability?


Analyzing

strategically

about a

company’s own

situation

The Key Questions

• How well is the company’s present

strategy working?

• What are the company’s strengths,

weaknesses, opportunities, and threats?

• Are the company’s prices and costs

competitive?

• How strong is the company’s competitive

position?

• What strategic issues does the company

face?

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Three Tests of Best Strategy

The

Performance

Test

The

Competitive

Advantage

Test

The

Goodness of

Fit Test

The Best

Strategy

What is Strategy

Q - What is strategy?

A - It’s as easy as “ABC...”

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Strategy: Creating “shareholder value” through effective strategy is as easy as A-B-C...

Where you Are

Where do you

want to Be

How to get there

(Course to follow)

Monitor & Evaluate

(Strategic control)

Resource plans

Financial plans

Infrastructure plans

© Strategy Institute,

after Bryson & Alston

Not the only “model” – but the easiest to understand!

Levels of Strategy

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Corporate Level Strategy

• What businesses are we in? What

businesses should we be in?

• Four areas of focus

– Diversification management (acquisitions and

divestitures)

– Synergy between units

– Investment priorities

– Business level strategy approval (but not

crafting)

Corporate-Level Strategies

Firm

Status

Valuable

strengths

Critical

weaknesses

Environmental StatusAbundant

environmental

opportunities

Critical

environmental

threats

Corporate

growth

strategies

Concentric Diversification

(Economies

of Scope)

Conglomerate

Diversification

(Risk Mgt.)

Corporate

retrenchment

strategiesCan still go for business-level

growth (economies of scale)

Corporate

stability

strategies

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Business Level Strategy

• How do we support the corporate strategy?

• How do we compete in a specific business arena?

• Three types of business level strategies:

– Low cost producer

– Differentiator

– Focus

• Four areas of focus

– Generate sustainable competitive advantages

– Develop and nurture (potentially) valuable capabilities

– Respond to environmental changes

– Approval of functional level strategies

Functional / Operational Level Strategy

• Functional: How do

we support the

business level

strategy?

• Operational: How do

we support the

functional level

strategy?

• An example.

• Business L.S.: Become

the low cost producer of

widgets

• Functional L.S. (Mfg.):

Reduce manufacturing

costs by 10%

• Operational (Plant #1):

Increase worker

productivity by 15%

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Analyzing Industry Environment

and Designing Competitive Strategy

Porter’s Five Forces

Rivalry

Buyer

Power

Supplier

Power

Threats of

Substitutes

Barriers to

Entry

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Striving forCompetitive Advantage

• To achieve sustainable competitive advantage, a company’s strategy usually must be aimed at either

– Providing a distinctive product or service or

– Developing competitive capabilities rivals can not match

• Achieving a sustainable competitive advantage greatly enhances a company’s prospects for

– Winning in the marketplace and

– Realising above-average profits

What separates a powerful strategy from an ordinary strategy is management’s ability to forge a series of moves,

both in the marketplace and internally, that produces sustainable competitive advantage!

Strategic Approaches to Building Competitive Advantage

• Strive to be the industry’s low-cost provider

• Outcompete rivals on a key differentiating feature

• Focus on a narrow market niche, doing a better job than rivals of serving the unique needs of niche buyers

• Develop expertise, resource strengths, and capabilities not easily imitated by rivals

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Five Generic Competitive Strategies

Overall Low Cost

Leadership Strategy

Differentiation

Strategy

Focused Low Cost

Strategy

Focused

Differentiation

Strategy

Low Cost Differentiation

Broad Market

Segment

Narrow Market

Segment

Best Cost

Strategy


Overall Low Cost

Leadership

Strategy

Broad

Differentiation

Strategy

Appealing to a broad spectrum of customers

based on being the overall low-cost provider

of product and service

A differentiation strategy calls for the

development of a product or service that

offers unique attributes that are valued by

customers and that customers perceive to be

better than or different from the products of

the competition

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Overall Low Cost

Leadership

Strategy

Broad

Differentiation

Strategy

Appealing to a broad spectrum of customers

based on being the overall low-cost provider

of product and service

A differentiation strategy calls for the

development of a product or service that

offers unique attributes that are valued by

customers and that customers perceive to be

better than or different from the products of

the competition


Best Cost Strategy • Giving customers more value for the

money by incorporating good-to-

excellent product attributes at a lower

cost than rivals

• The target is to have the lowest (best)

costs and prices compared to rivals

offering products with comparable

upscale attributes

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Tailoring Strategy to Fit Specific

Industry and Company Situation

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“Competing in the marketplace is like

war. You have injuries and casualties,

and the best strategy wins.”

-- John Collins

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Lecture 7 Strategic Management41

Tailoring Strategy to Fit Specific Industry and Company Situations

1. Companies competing in Emerging Industries of the future

2. Companies competing in Turbulent, High-velocity markets

3. Companies competing in Mature, Slow-growth industries

Lecture 7 Strategic Management42

Lecture

Tailoring Strategy to Fit Specific Industry and Company Situations

4. Companies competing in Stagnant or Declining industries

5. Companies competing in Fragmented Industries

6. Companies pursuing Rapid Growth

7. Companies in Industry Leadership Positions

8. Companies in Runner-up Positions

9. Companies in Competitively Weak Positions or plagued by crisis conditions.

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The strange story of OK Bazaars

Strategic Management

1. Forming a strategic vision of where the

organization is headed.

2. Setting Objectives

3. Crafting a strategy to achieve the desired

outcomes.

4. Implementing and executing the chosen

strategy efficiently and effectively.

5. Evaluating performance and initiating

corrective adjustments in vision, long-term

direction, objectives, strategy or execution

in light of actual experience, changing

conditions , new ideas and new

opportunities.13

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Strategic Management

Task 3

Crafting a

Strategy to

Achieve

the Objectives

Task 4

Implementing

and Executing

the Strategy

Revise

as Needed

Revise

as Needed

Improve/

Change

as Needed

Improve/

Change

as Needed

Recycle to

Tasks 1,2,3

or

4 as Needed

Developing a

Strategic Vision

And Business

Mission

Task 1

Setting

Objectives

Task 2 Task 5

Evaluating

Performance,

Monitoring New

Developments,

and Initiating

Corrective

Adjustments

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Setting

Objectives

Task 2

Basic Concept:

Objectives are an

organization’s performance

targets – the results and

outcomes it wants to achieve.

They function as yardsticks for

tracking an organization’s

performance and progress.

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STRATEGIC OBJECTIVES:

Relate to outcomes that strengthen

an organization’s overall business

position and competitive vitality.

FINANCIAL OBJECTIVES:

Relate to the financial performance

targets management has established

for the organization to achieve.

Setting

Objectives

Task 2

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Task 3

Crafting a

Strategy to

Achieve

the Objectives

Basic Concept:

A company’s Strategy consists of the competitive

efforts and business

approaches that managers

employ to please customer,

compete successfully and

achieve organizational

objectives.

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Task 3

Crafting a

Strategy to

Achieve

the Objectives

Actual

Company

Strategy

PLANNED STRATEGY

Company

Experience

Know-how,Resource

Strengths and

Weaknesses, and

Competitive

Capabilities

Adaptive reactions to

changing circumstances

REACTIVE STRATEGY

Strategy is both proactive (intended and deliberate)

and reactive (adaptive):

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Six Imperatives of Strategic Execution

Executing Strategy

Making Strategy

Vision Nature

Engagement

Synthesis

Transition

Ideation

Strategy

Portfolio

Documents

Dr. Abdulla Kader Research Fellow (UKZN) · 2017/03/15 7 Factors Shaping the Choice of Strategy • One of the most pivotal strategy-shaping internal considerations is whether a company