International Strategy Individual Work
ALVAROBA
SESSION1.pdf
Introduction to strategy and strategic management
Nathalie Crutzen Anthony Santino
Associate Professor Principal
Director, Smart City Institute Roland Berger
HEC Liège
INTERNATIONAL STRATEGY
GENERAL INTRODUCTION
1. Course objectives
2. Structure
3. Evaluation
2
1. Course objectives
• The course will introduce and develop the fundamentals of corporate strategic thinking within a multi-polar and international context
• The course on International Strategy introduces contexts, contents and processes of strategic management in an international dimension
• 6 sessions composed with:
1. Academic lectures
2. Guest-speakers’ conferences
3
2. Structure
Date Session Company Speaker
5/02 Introduction to strategy and strategic management
Strategic position : external and internal analyses
Gaudeto Jacques Galloy
19/02 Business-level strategy Mithra Jean-Manuel Fontaine
26/02 Corporate-level strategy
Mergers, acquisitions and alliances Linklaters Eric Pottier
5/03 Strategy and internationalization Coca-Cola Mr Sabanegh
12/03 Digital strategy Dimension Data Pierre Dumont
19/03 Strategy evaluation EDF Luminus Grégoire Dallemagne
4
3. Evaluation
Written exam on 28th May 2018 on 2pm
Mutiple choice questions
+
Questions based on a Case Study
5
PART I: INTRODUCTION TO
STRATEGY AND STRATEGIC
MANAGEMENT 6
INDEX
I. World context II. What is a Strategy?
1. Definition 2. Three core elements 3. Purpose of strategy: mission, vision, values and objectives 4. Levels of strategy 5. Strategy elaboration
III. Strategic management process Framework
IV. Studying strategy 1. Different contexts 2. Different lenses
7
INDEX
I. World context II. What is a Strategy?
1. Definition 2. Three core elements 3. Purpose of strategy: mission, vision, values and objectives 4. Levels of strategy 5. Strategy elaboration
III. Strategic management process Framework
IV. Studying strategy 1. Different contexts 2. Different lenses
8
I. World context
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New technologies
11 https://www.youtube.com/watch?v=hj6OZj4kB3k : drone ambulance https://www.youtube.com/watch?v=uEsKZGOxNKw : internet of things http://www.reuters.com/video/2017/02/03/boeing-to-use-3d-printed-parts?videoId=371058779: 3D printing
Environmental challenges
12
Environmental challenges
« Our future »
https://www.youtube.com/watch?v=8YQIaOldDU8
« Causes and effects of climate change »
https://www.youtube.com/watch?v=G4H1N_yXBiA
13
Multi-polar world
14
• Before – Bi-polar world: - North-South - Orient- occident
• Today – Multi-polar world: various politic and economic center: - US - China - Russia - India - Brazil - Europe (loosing power)
Multi-polar world
15 https://www.youtube.com/watch?v=yoWMn8H7u1Q https://www.youtube.com/watch?v=PxkddTkSEAw
INDEX
I. World context II. What is a Strategy?
1. Definition 2. Three core elements 3. Purpose of strategy: mission, vision, values and objectives 4. Levels of strategy 5. Strategy elaboration
III. Strategic management process Framework
IV. Studying strategy 1. Different contexts 2. Different lenses
16
II. What is a strategy?
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1. Definition
• ‘The determination of the long-run goals of an enterprise, the adoption of courses of action and the allocation of resources necessary out these goals’ (A. D. Chandler,1963)
• ‘Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value’ (M.Porter,1996)
• ‘a firm’s theory about to gain competitive advantages’ (P. Drucker,1994)
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1. Definition
Strategy is the direction and the scope of an organization over the long-term, which
achieves advantage in a changing environment through its configuration of
resources and competences with the aim of fulfilling stakeholders’ expectations’
(Johnson et al., 2010)
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2. Three core elements
a. The long term
b. Strategic direction
c. Organization
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a. The long run
Source: M.Baghai, et al., 2000. 22
b. Strategic decision
• Private sector:
- usually, maximising profits for shareholders,
- but not always, passing down the management to the
next generation, even quality of life…
• Public sector and non-for-profit organisations :
- citizen well-being,
- environment,
- move up from one league to an higher one (in case of
sport club)…
Goal which is followed in a long-term vision according to objectives to reach
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c. Organization
Stakeholders Environment
Internal External - Macro:
multipolar world
Climate
challenge
4th
industrial/digital
revolution
• Competitive
• Direct
competitors and
clients
People involved
and their different
interest and views
Suppliers,
customers,
alliances partners,
regulators,
investors, etc.
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c. Organization
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3. Purpose of strategy: mission, vision, values and objectives
Definition Personal Example
Values Underlying and enduring core principles that guide the organisation
Ethics, Respects, Healthiness
Vision Is concerned with the future the organisation seeks to create
Being part of the Olympics' team
Mission Aims to provide employees and stakeholders with clarity about what the organisation is fundamentally there to do
‘Being healthy and physically trained’
Strategy The long-term direction of an organisation Daily training, taking part in local competitions, following a strict diet
Objectives Specific outcomes that are to be achieved (quantitative)
Losing 5 kilos before June
Control Strategy efficiency assessment and revision if needed
Weight control and competitions performance
26
27
As a global Luxury group, Kering develops an ensemble of luxury houses in fashion, leather goods, jewellery and watches Care –Collaborate –Create
Reducing EP&L by 40% Sharp increase in revenue as in 2016(+8,1%) Grow and sustain market shares gain
Brand
OBJECTIVE
S
Group
OBJECTIVE
S
VALUES Gender equality - Diversity Environment & sustainability Ethics
MISSION
VISION KERING 2025
Video 28
5. Strategy elaboration
PLAN
DO
CHECK
ACT
29
4. Levels of strategy
Corporate level
Business level
Functional / Operational level
Overall scope of an organisation and how
value is added to the constituent businesses
How the individual business should compete in
their particular market
How the components of an organisation
deliver effectively the corporate and
business level in terms of resources,
processes and people
30
INDEX
I. World context II. What is a Strategy?
1. Definition 2. Three core elements 3. Purpose of strategy: mission, vision, values and objectives 4. Levels of strategy 5. Strategy elaboration
III. Strategic management process Framework
IV. Studying strategy 1. Different contexts 2. Different lenses
31
III. Strategic management process
32
Framework Strategic position
Strategic choices
Strategic in action
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i. Strategic position
Concerned with the impact on strategy of:
The macro-environment Chapter 2
The industry environment Chapter 3
The organisation’s strategic capabilities
(resources & competences)
Chapter 4
The stakeholders’ interests Chapter 5
The organisation's culture (Chapter 6)
Framework
34
Options for the directions in which strategy might move and methods by
which a strategy must be pursued. There are different strategic choices
such as
Directions Business strategy and models Chapter 7
Corporate strategy and diversification Chapter 8
International strategy Chapter 9
Entrepreneurship and innovation Chapter
10
Methods Merger and acquisition, alliances, use of own
resources, …
Chapter
11
Framework
35
ii. Strategic choices
How strategies are formed and how they are
implemented?
Strategy performance and evaluation Chapter 12
Strategy development process Chapter 13
Implementation model Chapter 14
Change management and leadership Chapter 15
Strategy practice Chapter 16
Framework
36
iii. Strategic in action
INDEX
I. World context II. What is a Strategy?
1. Definition 2. Three core elements 3. Purpose of strategy: mission, vision, values and objectives 4. Levels of strategy 5. Strategy elaboration
III. Strategic management process Framework
IV. Studying strategy 1. Different contexts 2. Different lenses
37
IV. Studying strategy
38
1. Different contexts
Strategy is something that every level of management should engage
and not just top-decision makers. It can be different depending on
context.
- Small businesses: narrower strategic possibilities, more vulnerable to change
- Multinational corporations: different strategy regarding the market, geographical localisation, …
- Public sector and non-profits: important to position the organisation as having competitive advantage even if profit is not the primer goal
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2. Different lenses
Strategy lenses are ways of looking at strategy issues differently in
order to generate additional insights. These are different perspectives
to criticize prevailing approaches and raise new issues or solutions
Strategy as design – systematical and analytical valuation
Strategy as experience – influence of culture, standard, taken for
granted assumptions and way of doing thing
Strategy as variety – new ideas bubbling from within and around the
organisation
Strategy as discourse – tool to shape ‘objective’ strategy, to gain
influence, power and legitimacy
40 https://vimeo.com/58112672
PART II: STRATEGIC
POSITION 41
Strategic analysis
INDEX
I. Macro-environment analysis 1. External analysis: different layers 2. Example: pharmaceutical industry 3. PESTEL
II. Industry and sector analysis 1. Porter’s competitive forces 2. Industry dynamics 3. Competitors and markets: strategic groups
III. Resources and capabilities 1. Diagnosing resources and capabilities
a. VRIO model b. Value Chain Model (Porter)
IV. Stakeholders and governance
External analysis
Internal analysis
43
INDEX
I. Macro-environment analysis 1. External analysis: different layers 2. Example: pharmaceutical industry 3. PESTEL
II. Industry and sector analysis 1. Porter’s competitive forces 2. Industry dynamics 3. Competitors and markets: strategic groups
III. Resources and capabilities 1. Diagnosing resources and capabilities
a. VRIO model b. Value Chain Model (Porter)
IV. Stakeholders and governance
External analysis
Internal analysis
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I. Macro- environment analysis
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1. External analysis: different layers
An external analysis is important to
• Identify potential risks which may affect the organisation
• Seize opportunities
• Discover white spots where to innovate
• Compare performances
• Anticipate on changing technology and consumption habits
• …
For, at the end, making more informed strategic choices.
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1. External analysis: different layers
Macro- environment
Industry
/sector
Competitors
/markets
Organisation
PESTEL
Investors, lobbies, regulator, indirect partners or competitors, federations
Customers, competitors, partners & suppliers
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2. Example: pharmaceutical industry
48
3. PESTEL framework Political Economic
• Healthcare cost policies – impact use of
generics
• International harmonisation (FDA, EMEA) –
impact revenues
• Importance of emerging countries – impact
demand/strategy
• Industry consolidation – impact strategy
• Individuals net income – impact revenues
Social Technological
• Ageing population – impact offer and demand
• Internet and better informed consumers –
impact processes and communication
• Shift in underlying science (biotech) – impact
strategy
• Internet and mobile tech – impact marketing and
distribution
Environmental Legal
• Soil/water pollution – impact processes (social
responsibility policy)
• Testing phase on animals – impact processes
• Intellectual property and patents – impact offer
and revenues
• Parallel trade – impact revenues
• Anti-counterfeit legislation – impact revenues
49
INDEX
I. Macro-environment analysis 1. External analysis: different layers 2. Example: pharmaceutical industry 3. PESTEL
II. Industry and sector analysis 1. Porter’s competitive forces 2. Industry dynamics 3. Competitors and markets: strategic groups
III. Resources and capabilities 1. Diagnosing resources and capabilities
a. VRIO model b. Value Chain Model (Porter)
IV. Stakeholders and governance
External analysis
Internal analysis
50
II. Industry and sector analysis
51
1. Porter’s 5(+1) competitive forces
Direct rivals
Potential entrants
Suppliers
Substitutes
Buyers
Public policy
Threat of entry
Threat of substitutes B
a rg
a in
in g
p o
w e
r B a
rg a
in in
g p
o w
e r
52
1. Porter’s 5(+1) competitive forces
• Industries can differ from their attractiveness. To assess this attractiveness, we can use Porter’s 5 forces framework. It helps to analyze an industry and identify the attractiveness of it in terms of five competitive forces, which constitute an industry structure
• High and strong forces induce a non-attractive industry where profits are squeezed
• Forces can help to identify actions to follow in order to control critical issues. Then, the organization will find a place where it can best defend itself against forces or influence them in their favor.
53
2. Industry dynamics
• Competitive forces may change over time so industry structure analysis should be dynamic (cfr. industry life cycle)
• Another way to compare competitive forces over time: ”radar plot” = comparative industry structure analysis
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3. Competitors and markets: strategic groups
Strategic groups are organizations within the same industry or sector
with similar strategic characteristics, following similar strategies or
competing on similar bases (e.g. in the grocery retailing industry,
supermarkets, convenience stores and corner shops each form
different strategic groups)
Many characteristics distinguish between strategic groups but they can
be grouped in two major categories
scope of an organization’s activities
resource commitment
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3. Competitors and markets: strategic groups
It is useful to consider the extent to which organisations differ in terms of
characteristics such as:
• Extent of product (or service) diversity
• Extent of geopgraphical coverage
• Number of market segments served
• Distribution channels used
• Extent (number of branding)
• Marketing efforts (e.g. advertising spread, size of salesforce)
• Extent of vertical integration
• Product or service quality 56
Scope of activities
Resource commitment
3. Competitors and markets: strategic groups
57
Geographic scope
R a n g e o
f p ro
d u c ts
s c o p e
High
High
Specialized
local
producers
Diversified
local
producers
Regional
specialized
producers
Specialized
international
groups
Diversified
global
companies
Unilever
Nestlé
Danone
Ferrero
Bonduelle
Barilla
…
INDEX
I. Macro-environment analysis 1. External analysis: different layers 2. Example: pharmaceutical industry 3. PESTEL
II. Industry and sector analysis 1. Porter’s competitive forces 2. Industry dynamics 3. Competitors and markets: strategic groups
III. Resources and capabilities 1. Diagnosing resources and capabilities
a. VRIO model b. Value Chain Model (Porter)
IV. Stakeholders and governance
External analysis
Internal analysis
58
III. Resources and capabilities
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1. Diagnosing resources and capabilities
The resources and capabilities of an organization contributes to
its long-term survival and potentially to competitive advantage:
• What are the firm’s strengths or weaknesses?
• How do these strengths and weaknesses compare to rivals?
4 main ways to diagnose resources and capabilities:
a. VRIO model
b. Value Chain Model (Porter)
c. Benchmarking
d. SWOT
60
a. VRIO model
A VRIO analysis helps to evaluate if, how and what extent an organization/company has resources and capabilities that are
• Valuable – do resources and capabilities exist that are valued by customers and enable the organisation to respond to environmental opportunities or threats?
• Rare – do resources and capabilities exist that no (or few) competitors process?
• Inimitable – are resources and capabilities difficult and costly for competitors?
• Supported by the organisation – is the organisation appropriately organised to exploit the resources and capabilities?
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b. Value Chain Model (Porter)
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c. Benchmarking
Benchmarking is used as a means of understanding how an organization compares with another. There are two approaches to benchmarking:
• Industry/sector benchmarking
• Best-in-class benchmarking: comparison of performances of capabilities with “best-in-class” from whichever industry.
63
d. SWOT
A SWOT provides a general summary of key issues arising from an
analysis of resources and capabilities.
It explores the Strenghts and Weaknesses in an analysis of resources
and capabilities and the Opportunities and Threats that are most likely
to impact on strategy development.
+ -
Internal Strengths Weaknesses
External Opportunities Threats
64
INDEX
I. Macro-environment analysis 1. External analysis: different layers 2. Example: pharmaceutical industry 3. PESTEL
II. Industry and sector analysis 1. Porter’s competitive forces 2. Industry dynamics 3. Competitors and markets: strategic groups
III. Resources and capabilities 1. Diagnosing resources and capabilities
a. VRIO model b. Value Chain Model (Porter)
IV. Stakeholders and governance
External analysis
Internal analysis
65
IV. Stakeholders and governance
66
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Reference book
Johnson, P., Whittington, R., Scholes, K., Angwin, D., Regnér,
P.(2017). Exploring Strategy (11th edition).Harlow, United
Kingdom: Pearson.
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