Post on 16-May-2018
Strategic Thinking
Shayne Gary
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Levels of Strategy
CORPORATE HEAD OFFICE
Division A Division B Division C
R&DHRFinanceOperationsMarketing
R&DHRFinanceOperationsMarketing
R&DHRFinanceOperationsMarketing
Corporate Strategy
Business Strategy
Functional Strategy
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What is Strategy?
• Integrated plan of how to achieve objectives– Guides actions & functional policies to develop or enhance
a firm’s competitive advantage
• Evolves over time as the external environment or internal resources & capabilities change
• Involves commitment of significant resources (not easily changed)
• Must be viewed in the context of inter-firm competition
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• Fundamentalpurpose
• Values
• Specifictargets
• Integrated planof how to achievestated objectives
Strategy as an Integrated Plan
OrganizationalArrangementsStrategyMission Objectives
• Structure• Systems • Process• Culture• People• Rewards
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Connecting Actions with Performance Outcomes
Source: Saloner, Shepard, Podolny: Strategic Management (2001)
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Strategic Thinking
• Ability to develop & maintain a conceptual map (mental model) of the overall business– Understanding of the key relationships among
actions, context, & performance• Ability to conceptualize an integrated plan
that guides actions & functional policies to achieve objectives– Capacity to diagnose problems & to think
through the impact of changes in external & internal contexts
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Linking the Internal &External Contexts
FIRMGoals & valuesResourcesCapabilitiesOrganisation
• Structure• Systems• Style
STRATEGYthat ‘fits’
ENVIRONMENTIndustry• Suppliers• Customers• Competitors• Substitutes
TechnologyGovernmentEconomyNature
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Strategy Formulation Process
Industryanalysis
Step 3
Define objectives &
key issues
Generate
hypotheses
Step 1
Internal analysis
Generate& evaluateoptions
Synthesizefindings
& Recs
Step 4Step 2 Step 5
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Generating Strategic Options
• The strategic analysis should provide a comprehensive overview of the current situation, which is a precursor to generating strategies that can meet objectives and targets
• Generate multiple strategic options for evaluation– At least two alternative options but more if time permits
• Evaluate & test strategic options by cross-checking the analyses & performing further analyses if needed
• Anticipate competitive response & test strategic options against moves available to the competition
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Components of a Strategy
• Long-term goals and objectives• Scope of business activities
– Products, markets, geographies, technologies, and broad areas of activity
• Competitive advantage over rivals– Cost or differentiation advantages
• Logical, coherent case for firm success– Articulation of how the goals, scope, &
competitive advantage come together into an integrated plan
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Strategy Diamond:Five Elements of a Strategy
2. Vehicles• Internal development?• JVs? Alliances?• Licensing/franchising?• Acquisitions?
3. Differentiators• Image/Brand?• Customization?• Price?• Styling?• Product reliability?
1. Arenas• Products or services?• Market segments?• Geographies?• Distribution channels?• Technologies?• Stages of the value chain?
4. Staging• Sequence of moves? • When (how fast)?• Pace of innovation?
5. Logic for success• Low cost leader through
scale, scope, learning curve,capacity utilization, etc?
• Premium prices due to differentiation strategy?
• Lock-up scarce resources,de facto standard, increasingreturns, etc.
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Hambrick and Fredrickson (2001) Are you sure you have a strategy?
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Southwest Airlines’ Strategy
2. Vehicles• Internal development to maintain Southwest culture
3. Differentiators• Very low ticket prices• Convenience• Reliability• “Fun, friendly” experience
1. Arenas• Short-haul, point-to-point service• Midsize cities and secondary airports in
large cities• Frequent departures on these routes• Price- and convenience-sensitive travelers• Boeing 737s exclusively
5. Economic logic• Low cost through high aircraft utilization (15 minute turn-around), limited use of travel agents, lean & highly productive staff, limited passenger service
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4. Staging• Incremental origin-destination pair expansion from original stronghold in Southwest U.S.• Build out presence at existing airports rather than spreading “too thin, too fast”
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Evaluating Southwest’s Strategy
Likely to create & capture valueFit with external environmentFit with company resources, capabilities & objectivesSustainable differentiatorsDesigned to grow the pie, not just take a larger slice (create & capture value)Performs different activities and/or performs activities differently (unique strategic position)
Comprehensive, integrated strategyComprehensive (covers all five elements)Clarity on what to do and what not to do (trade-offs)Activities are internally consistent & reinforcing (strategic fit)Adequate resources to pursue strategy (can be implemented)
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Group Exercise:Strategy of the SSO
For the next 30-45 minutes…
1. Identify a few overall long term strategic goals & objectives of the SSO
2. Identify the elements of the SSO’s current strategy to achieve those goals and start to think about evaluating the strategy
3. Be prepared to present one slide summarizing the SSO’s current strategy to your classmates
Strategy Formulation Process
Define objectives &
key issues
Industryanalysis
Internal analysis
Generate& evaluateoptions
Synthesizefindings
& Recs
Generate
hypotheses
Industry value chain5 ForcesStructure-Conduct-PerformanceValue netOT in SWOTIndustry demand & cost curvesPositioning mapsKey success factors
Firm value chainResources & capabilities auditSW in SWOTActivity systemsCost structureDuPont analysis (profit trees)Analysis of historical performance (financial & operational)
Create &/or capture value (5Cs)• Differentiation drivers• Cost drivers• Positioning options• Superior R&C’s
Components of a strategy• Scope, competitive
advantage, & logic • Strategy diamond• Where, how, when
Evaluation criteriaMobility barriersCompetitive responseCash flow analysis
Develop specific recommendations (actions)Support recs by integrating analyses
Step 3
Step 1 Step 2 Step 4 Step 5
Generate hypotheses about root causes & solutions
• Brainstorming• Fish bone
diagrams• Issue trees
Plan analyses
Categories of objectives• Economic value• Stakeholder surplus• Other
Identify problems or key issues faced in meeting targets
• 5 W’s• Root cause analysis
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Strategy in Term 3
• Objectives are to learn core theory & models– What is the logic of the model? What manager
actions lead to superior performance and why?– Practice applying models to support decision
making• Integrative course that will bring together
material you have learned in all of the core courses