Integrated Paper(Richard)

Business Strategy (Mid term Assignment)

Created By:Name : Richard Tino Andrean Silaen NIM : 29111203

Introduction: Strategic Management

Strategic management is a process to help organizations identify what they want to

accomplish, and how should they achieve valuable results. The role played by strategic

management increasingly recognized in this period than ever before. In a global

economy that allow the movement of goods and services freely among the various

countries, companies continue to be challenged to become more competitive.

Many of the companies that have increased the level of competition is offering products

to consumers at a higher value, and this often results in above-average returns (Ireland,

Hoskisson, Hitt, 2009). By using strategic management, companies can finally

understand the competing forces and develop a sustainable competitive advantage in a

systematic and consistent.

Understanding Business Strategy

Most practicing executives would define strategy as “how I could achieve my

company’s objectives”. An organization or a company should decide parameters to

define the company’s strategic position in its industry. A company has to decide on three

main issues: who will be its targeted customers and who it will not target; what products

or services it will offer its chosen customers and what it will not offer them; and how it

will go about achieving all this – what activities it will perform and what activities it

will not perform (Markides, C., 2004)

As mentioned by Amol Titus, strategy is about communication. Business strategy is

how to bring out targeted customer language and turn it into a business model. How to

deliver and fulfill the need of customers is a process of business strategy. Customers

concern about value or benefits. Customer wouldn't care about the strategies behind the

business model. That’s why a business model should build a commercial sense. It's a

tactic to get customers awareness about the product we had. It’s a tool to grab the

targeted customers to choose our product instead others. After all, those strategies must

have results in the matter of time.

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Customer Value

When business leaders and others are talking about customer value, it is important that

everyone at the table understands that customer value does not relate to the value of

customers, but to the value that customers receive from the business. According to Amol

Titus, customer value must meet company value. Customer value is the number of

benefits that a customer will get from products or services relative to its cost. Most

customers want minimum equal to high value for every cost they spend on a product or

service they got from company. In the other hand, most company wants a high return

(profit) for every product of service that they deliver to their customer. In this situation,

a good strategy is how to make a win-win solution for both customer and company.

In a wider context, which is not only limited in the areas of retail, customer value can be

described as the perceived customer preferences for product characteristics,

performance, and the extent of compliance with what the customer wants.

In the implementation, carried Value Chain Analysis to help companies identify

potential resources and competitive capabilities. Like a race then start it is customer

needs, and the finish line is customer delight. Andy do described that to change the

orientation from product-focused to customer-focused company must meet the

following three steps: know your customers; deliver significant value and competitive

advantage, as well as creating a customer-centric culture.

In order to provide a competitive advantage, it is not enough to be functional value but

also emotionally. To generate more thought about customer value, and to reach out to a

customer base, a business might promote a customer value proposition. The customer

value proposition is basically a promise of benefits from a vendor to customers. So,

what makes customers satisfied? To be able to answer, first examine what the customer

expects the company, namely responsibility, quality, value and innovation of products

and services, the overall quality of service / support, and on time presentation. Amol

Titus mentioned, if a company builds their relationship with people and customers, they

can do a very good business.

Strategic Drivers (Influencer)

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Creating strategy is not easy. The characteristics of the current environment can be

considered as an environment that has never happened before, it can not be dismissed

just like that and can not be changed just like that. Basically, the nature of the industry

continues to change rapidly. It will cause that every country had different strategies to

be developed by companies who want to enter. For example, in Akzo Nobel NV case,

the newly appointed CEO, Ton Buchner had found that every country had different

characteristic, either do Indonesia. Indonesia has its own market characteristic, political

situation, business regulations and other factor that will influence the company strategy

to strengthen its presence in Indonesia.

Strategy is a basic pattern of the current goals and that was to be planned, empowerment

resources, and the interaction of a company with a market, competitors and other

environmental factors. Environmental factors here are grouped into two categories,

namely external environment and internal environment.

External environment means outside factors of the organizations which effect

the changes in the organization which the organization does not have the control

of it. External environment are involved by the PESTL (Politic, Economy,

Social, Technology, and Legal). The external environment has three major parts:

the general environment, the industry environment and the competitor

environment.

Internal environment involve within the organization. The internal business

environment has a direct impact on the business such as the company structure,

culture, strategic competitiveness, resources, capabilities and core competencies.

The organization has the control of these matters because it happen within the

organization unless like external environment.

The firm’s understanding about the external environment should be matched with

knowledge about its internal environment (Ireland, Hoskisson, Hitt, 2009).

Competitive Advantage Strategy

A company will never stop dealing with problems inside and outside the company. They

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will not be able to stand up to these problems if they do not have a competitive

advantage. A company has a competitive advantage when it stated that the company has

something that is not owned by competitors, doing something is better than another

company, or be able to do something that can not be done by other companies. If the

company has no differentiation compare to its competitors, then the company will no

longer be sustained in the market. For example, in Kodak case, the company does not

have competitive advantage compare to its competitor such as Sony and Canon which

play in the same product, digital cameras. Kodak stops to make camera because the

company lose its market that are switching into another brands and substitute product.

The company has lost its profitability and if it stays on that condition, it will only drive

to death.

A successful organization must be proficient in adapting to any changes that occur,

especially if the company is in a position of fast-cycle market. Companies should be

able to use strategy and tactical action in response to changes that occur in the market.

The course of action taken should have a competitive advantage that is not owned

competitors. Even in a slow-cycle and standard-cycle market, which competitive

advantage is shielded from imitation for long periods and where imitation is costly, the

strategic action and response should also be remained and prepared.

Building Company Competitive Advantages Strategy

Business Level Strategy

Michael E. Porter, in his book, explained that there are three basic key to competitive

advantage: cost leadership, differentiation and focus.

Cost leadership is a strategy in which the company can produce with a lower

cost than other competitors that have an impact on the ability of the company

over to monitor profit and market share because the company is able to set the

price more attractive to consumers than other competitors.

Differentiation is the key of the company to be able to perform a variety of

efforts, including human and financial resources, to be able to produce different

goods or services to consumers. Differentiation can be achieved on the basis of

skill or competency of the company a competitive advantage when compared to

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competitors, such as the quality of the goods and services that are good.

Focus is a corporate strategy that emphasizes efforts on one or more segments of

the market is small, so the company was able to build a deeper knowledge about

the existing segments, and also creates a barrier for competitors to enter the

market due to a higher reputation.

Basically, strategy is for the company to survive and to follow existing competition in

an industry. Competition can form an interaction with a distinct competitive force in the

industry. Further, Porter explains there are five competitives forces that cause the power

of competition to anticipate and influence the competition, they are: barriers to entry,

bargaining power of suppliers, bargaining power of buyers, threat of subtitutes and

competitive rivalry (see exhibit 1).

Corporate-level Strategy

Strategies at the corporate level is the company's efforts to be better between the

combined range of business, including where the company will compete and how

competition in the industry. Efforts are made to establish and maintain competencies

that differentiate the company from other companies at the company's focus on human

resources, organizational structure, finance, and technology. The reason a company uses

a corporate level strategy is to diversified and to create additional value of the industry.

The corporate level strategy helps the company to create value by sharing activities or

transferring competencies between different businesses in the company’s portfolio

(Ireland, Hoskisson, Hitt, 2009).

Market definition is usually the domain of corporate-level strategy, the responsibility for

diversification, or the addition of new products or services to the existing offerings, also

mostly comes within the responsibility of corporate-level strategy. Also, whether to

compete head on with other companies or to selectively establish cooperative partnering

arrangements, mergers, acquisition, joint ventures or strategic alliances is a decision for

corporate-level strategy, while requiring ongoing input from business unit or divisional

level managers.

Merger and Acquisition

Companies that want a rapid growth, good size, market share, and diversification can do

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mergers and acquisitions. Merger is a integration of two or more companies into one

unified entity. The dominant company compared with other companies that will retain

its identity, while the weak will obscure its identity. Meanwhile, Acquisition is the

purchase of a company by another company or by a group of investors.

Companies do merger or acquisition to enhance shareholder value. The target is that

value-added from the new company after merger or acquisition, should be higher than

the total value added of the two separate companies. The company does not have the

risk of a new product. In addition, if expanded by mergers and acquisitions, the

company can reduce a competitor or reduce competition.

The reason is getting stronger when economic conditions are difficult. Strong

companies tend to buy other companies to increase their competitiveness and cut costs.

The two companies hope to gain a greater market share and cost efficiency. For this

reason, companies that are not able to survive alone usually volunteered to become

acquisition targets.

Joint Ventures and Strategic Alliance

As in the preceding discussion, there are many ways a company can develop, including

the joint venture and strategic alliance. Joint Venture is where companies work together

to establish a legally independent company with an investment of each so that they can

make a profit.

The joint venture is different from the merger. In the joint venture, the two

organizations form an independent company with a balanced number of shares and does

not eliminate the two companies. Effectively a joint venture is a completely new

organization, but owned by the founding participants. The board of directors generally

is constructed with representatives of the founding organizations.

Strategic Alliance is a partnership between the two organizations in which they take

advantage of the core strengths of each such proprietary processes, intellectual capital,

research, market penetration, manufacturing and/or distribution capabilities. The two

organizations will share their core strengths with each other. However, they only want

to work with other organizations on a contract basis, and not as a legal partnership.

Strategic Management Implementation

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Strategy formulation will be the basis for an alternative look at the main strategy to

guide managers and planning staff in the organization's strategy planning process.

Successful organizational strategy is set as a measure to deal with changes in the

environment, and will not succeed without implementation involving all organizational

resources. To effectively direct and control the use of company resources, then

mechanisms such as organizational structure, information systems, leadership styles,

budgeting, reward, and control systems of strategy implementation to be something very

important.

The company’s best strategic plans are not likely to be successful if they are not

effectively communicated to the employees who must implement them. The strategy of

the business model which is being undertaken by the company should be able to be

implemented properly by each employee. This requires companies to set annual goals,

policies, motivate employees and allocate resources so that formulated strategies can be

executed.

The failure of the implementation of strategy set may occur. It can inhibit the

implementation of the strategy underlying the failure of such poor environmental

analysis and failure processes such as the lack of participation of member organizations

in the planning process. Many employees are competent but do not get many

opportunities to participate actively in the implementation of business strategy. As

mentioned by Amol Titus, many employees idea is only written on their personal laptop.

When they leave the company they bring their knowledge with them. There is no

knowledge capture in those companies.

Conclusion

Management strategy is a process that takes a company to be able to enter, grow, and

survive in a dynamic market that never stops changing. Stretegi requires

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communication, both to the customer, as well as the team that will execute and

implement these strategies. By communicating with customers, the company can

respond to customer needs in the form of goods or services that the company offer.

Good communication is the beginning of successful implementation of a strategy of the

company.

Market dynamic and changing organization requires a change of action remains to

formulate strategy in response to the change. External and internal factors of the

environment are drivers of the change of the company. Any company that is able to

survive and be able to respond well to any changes that occur, will be able to survive in

the competitive market.

In formulating a strategy that will be pursued, each company has a different approach.

In business-level strategy, Porter mentions three key things that a company can have a

competitive advantage compared to other companies, namely: cost leadership,

differentiation, and focus. In practice, there are five competitive forces affecting the

strength of competition in the market, they are: barriers to entry, bargaining power of

suppliers, bargaining power of buyers, threat of subtitutes and competitive pressures.

In corporate-level strategy, the company has the option to grow the company's

performance. Various attempts to do in the field of human resources, organizational

structure, finance, and technology etc.. Selection option to perform cooperative

partnering arrangements, mergers, acquisition, joint ventures or strategic alliances is a

decision for corporate-level strategy. Ultimately every company should assess their self

to do every strategy and taking into account the possibilities that will happen later.

Implementation and assessment of the business strategy defined is the last part that is no

less important. Any business strategy that has been set by the company should be able

to be implemented and assessed progress each time to measure how far the strategy can

work and what obstacles occur. ■

Exhibit:

Exhibit 1. Porter’s Five Competitive Forces of Industry

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Reference:

1. Henry, A. E. (2011). Understanding Strategic Management. 2nd Edition.

Oxford University Press.

2. Ireland, R. D. ; R. E. hoskisson & M. A. Hitt (2009). The Management of

Strategy: Concepts and Cases. 9th Edition. South-Western Cengage Learning.

3. Markides, C. (2004). “What is Strategy & How Do You Know If You Have

One?” Business Strategy Review. 15(2).

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