Strategy fundamentals

IS 7010

William A. Sodeman, Ph.D.

http://billso.com/7010/

What is strategy?

• Developing unique core activities that fit with other activities in the SBU or firm

• Create sustainable growth in the firm

• Rivals will imitate these activities as costs decrease, and if they have time

• Competitive advantages for a single company become key success factors (KSFs) for the entire industry

What isn’t strategy?

• Effectiveness is not strategy– Doing the right thing doesn’t guarantee

success, but it does help improve your chances

• Imitating your rivals leads to stagnation– Competitive convergence– Acquisition of rivals when you’re out of ideas

• Failing to choose a strategy is a choice• The desire to grow is a trap

Inference

• An intellectual process in which conclusions are derived from observed facts or from other ideas

“Just the facts, ma’am. (We’ll draw our own inferences.)”

Induction-deduction

“Elementary, my Dear Watson!

1. Observation of data

2. Induction or inference regarding unobservable data

3. Prediction through deduction

The X-Files

• Dana Sculley and Fox Mulder use deduction and induction

• Sculley relies more on scientific evidence– Direct observations like

autopsy and physical evidence

• Mulder is more likely to suspend disbelief– Events that cannot easily be

described or measured

Why study cases?

• Provides a single set of materials for analysis and discussion

• A text-based snapshot of a managerial situation

• Primary, archival and secondary data are provided

• Multiple solutions are possible… but some solutions are better than others

Planning and implementation

STRATEGY

CLEAR UNCLEAR

Imple-ment-ation

Effective SUCCESS MAYBE

Ineffective MAYBE FAILURE

P (company) vs. E (external environment

P’S STRATEGIC ACTIONS

RULE-ABIDING

RULE-BREAKING

E and

e

Rule-abiding

Limited change

P-controlled change

Rule-breaking

P-independent change

Runaway change

Limited change

• Linear

• Stable

• Mutual adaptation

• “Running hard to stay in place”

• Over time, strategic inertia sets in and reinforces the constraints

P-independent change

• Nonlinear

• Disruptive

• Rule breaking by others leads to 10x (major) changes in E and P

• Sometimes these changes emerge from e

• e may become a complementor

P-controlled change

• Nonlinear

• Complex

• Rule breaking by P leads to 10x (major) changes in E

• Planned changes are easier to control, but difficult to arrange

• Unplanned changes might work if E waits to act

Runaway change

• Nonlinear

• Chaotic

• Rule breaking by P and E leads to 10x (major) changes in industry structure

• e may also be involved and changed

• “The perfect storm”

• The only sure prediction is destruction

Porter’s five forces

• Competitive rivalry among the firms in the industry

• Threat of new entrants

• Threat of substitutes

• Power of buyers

• Power of suppliers

Grove’s NINE forces model

• Competitive rivalry among the firms in the industry

• Threat of new entrants• Threat of substitutes• Power of customers• Power of suppliers• POWER OF CHANNELS• POWER OF COMPLEMENTORS• REGULATORY CHANGE• TECHNOLOGICAL CHANGE

Value chain

Porter & Millar (1985, p. 4)

Reading the case

• Read the case at least twice

• Most of the information you need for analysis is already in the case and assigned readings

• Don’t do extra research on the company or industry

• No need to check what the company actually did – it was usually the wrong decision anyway

Reading the cases

• If two or more cases are assigned together, those cases are probably related

• Situation and follow-up

• Competitors

• Complementors

• Other similarities

Writing the case notes

• Always write a separate sheet or document of notes while reading a case

• Highlighting the book is only a start

• Use the notes to start lists of analysis inputs

What are your assumptions?

• Make clear notes to yourself about your assumptions regarding the case

• There is always information that is missing from the case

Case analysis

• Restrict your analysis to the actual time of the case (casetime)

• Don’t propose solutions that are unavailable or illogical– E-commerce in the early 1990s– Expensive plans when the company is facing

bankruptcy– Entering a completely new area of business