Discusion QS
claire one
chapter_1_powerpoint.pptxCompetitiveness and Globalization
Chapter 1
Strategic Management
Module 1
In this module, you will develop
definitions for strategy, strategic competitiveness, competitive advantage, and above average returns
an appreciation for the importance of strategy
an ability to recognize strategy
an awareness of the strategic intent of familiar firms
appreciate the importance of strategy to the success of the firm
recognize a strategy
Understanding Strategy
Define Strategy
Understanding Strategy
From the Greek word “strategia” meaning “generalship”
Merriam-Webster
The science and art of employing the political, economic, psychological, and military forces of a nation or group of nations to afford the maximum support to adopted policies in peace or war.
Terms used in regard to strategy
Objectives; Mission; Strengths; Weaknesses
Military strategy assumes conflict
Sun Tsu (544 – 496 BC)
Link between military & strategy
The Art of War
“So it is said that
if you know your enemies and know yourself,
you will not be imperiled in a hundred battles;
if you do not know your enemies but do know yourself,
you will win one and lose one;
if you do not know your enemies nor yourself,
you will be imperiled in every single battle.”
Business Strategy
If military strategy assumes conflict, what does business strategy assume?
Business Strategy
If military strategy assumes conflict, what does business strategy assume?
Competition
Winning
Market Dominance
Number 1
Define business strategy
Strategy Defined
Glueck (1980) defined strategy as: a unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.
Quinn (1980) defined strategy as: the pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole.
Barney (1997) defined strategy as: a pattern of resource allocation that enables firms to maintain or improve their performance.
Strategy Defined
What do these definitions have in common?
Dr. Henry Mintzberg
McGill University
Leading world authority on strategy
Framework for understanding strategy
What is the framework?
Dr. Henry Mintzberg (1987)
strategy is a plan, that is, a consciously intended course of action
strategy is a ploy, that is, a specific maneuver intended to outwit an opponent or competitor
strategy is a pattern, that is, a consistent set of behaviours
strategy is a position, that is, the mediating force between the internal and external environment
strategy is a perspective, that is, an ingrained way of perceiving the world
Apply the framework
Applying Mintzberg's strategy framework to Starbucks:
Plan: open 1800 new stores in 2006
Pattern: predominantly company operated stores
Position: high-traffic, high-visibility locations around the world (37 countries)
Perspective: commitment to coffee producers and the environment
Ploy: third meeting place between home and work
Goal of strategy is to
Create a sustainable competitive advantage that leads to above average returns
Sustainable competitive advantage means:
satisfying your customers in ways that cannot be readily duplicated by your competitors
How does RIM satisfy its customers in ways that cannot be readily duplicated by competitors?
Above average returns means:
Outperforming your competitors by generating returns that exceed the returns that investors expect to earn from other investments with similar levels of risk.
When interest rates are high, why is it more difficult to persuade investors to invest in the stock market than when interest rates are low?
Above average returns
Is it reasonable to assume that a company can generate above average returns in the long run?
Can a thriving business sustain the intensity to deliver like this?
“Shareholder is king”
Why did Eaton's fail as a business?
What important change in retailing did the Company miss?
Strategy Important?
Is strategy important?
What does strategy do for a firm?
Strategy Important?
What does strategy do for a firm?
Strategy sets the direction for the firm.
Strategy focuses the effort's of employees and promotes coordination.
Strategy defines the organization and provides a convenient way to explain what the firm does.
Strategy provides consistency and reduces ambiguity.
Disadvantages?
Is it always a good thing?
Disadvantages?
Locked in
Example of BCG – “we decided this would be our strategy when we started…25 years ago” (Unable to move forward because the company is tied to the past)
Strategy must be flexible
Strategy that’s like a Jelly-fish is undefined and too flimsy
Strategy that’s like a brick wall is too structured and not movable without breaking down the organizational structure
Ideal strategy is more like a Backbone – flexible yet entirely stable and can support the organizational framework
Hambrick and Frederickson (2005)
In spite of 30 years of "hard thinking about strategy" little is known about what actually constitutes a strategy.
Their framework is:
Arenas (where to operate)
Vehicles (how to get there)
Differentiators (about winning)
Staging Activities (speed and sequence)
Economic Logic (anticipated returns)
Red Bull
Apply the Hambrick & Frederickson (2005) model to Red Bull
Arenas (where does Red Bull operate? Where did they start? Where do they operate now?)
Vehicles (how did they get there?)
Differentiators (What is it about Red Bull that helps them win in their market? What sets them apart?)
Staging Activities (Speed and sequence of how they rolled out their product in the marketplace.)
Economic Logic (What are their past returns and future anticipated returns?)
Red Bull
Arena – Europe 1987
Vehicle – licensed a local firm (TC Pharmaceuticals) to produce the product
Differentiators – “Red Bull gives you wings”
Staging Activities – Austria, Germany, rolled out across Europe, into North America, South America, and Australia – Asia is next
Economic Logic – 1 yr sales growth of 22% (2003 to 2004)
What is NOT strategy
Productivity or quality improvements to a business
Cost reductions within the business
The introduction of new technology
E-commerce sales
Supply Chain Management
These are tactics, the ways you implement a strategy, but they are not strategy in themselves.
Each of these items could be a feature of strategy. For example, productivity improvements increase output without increasing costs and can be an important consideration for firms pursuing a cost leadership strategy. The introduction of new technology could be the mechanism by which a firm differentiates itself from its competitors but in and of itself, the technology is not the strategy.
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Porter (1996)
Article entitled, “What is Strategy”
Differentiates between operational effectiveness and strategy
Firms thrive when they have something that sets them apart
A difference they can preserve
Take a look at one of those firms
Porter's (1996) article entitled "What is Strategy" differentiates between operational effectiveness and strategy. While both are essential if the firm intends to superior performance, a firm can outperform its rivals only if it can establish a difference that it can preserve.
What is operational effectiveness?
What are the three strategic positions?
Why does a sustainable strategic position require trade-offs?
Why can growth be a trap?
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What is operational effectiveness?
What are the three strategic positions?
Why does a sustainable strategic position require trade-offs?
Why can growth be a trap?
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Ikea
Inexpensive, contemporary furniture that is sold worldwide
Organic expansion (wholly owned stores)
Reliable quality, low price, positive shopping experience
One store in each targeted country followed by additional stores at a later date
Economies of scale and efficiencies from replication
What is their competitive advantage?
Competitive advantage lies in its activity systems:
Low cost carrier (no meals, no seat assignments, no interline baggage transfers, fleet of 737 jets, selected airports and routes, automatic ticketing machines, flexible union rules, employee stock options)
Rapid gate turnaround = more frequent departures and better utilization of aircraft
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What’s luck got to do with it?
How much does luck have to do with strategy?
Why is strategy often described as being an art and a science?
We used the example of “Snuggies” – a blanket type backwards robe. Could that have been lucky?
All market forces combined to make that product a hit:
Unusual
Served a specific need and solved a problem (Who hasn’t needed to hold a book while they are snuggled into a blanket? Your arms get cold.)
Market research from direct market sales showed optimal price point and product potential
Launched for the Christmas Season; Launched on Home shopping network; rolled out through discount retailers like Walmart
Once this was a hit product, the Oprah effect kicked in – she did a feature on this product
The rest is history.
The Question remains: Luck or strategy?
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Gildan Activewear and FOTL
Issues:
growth and market share
quality control and manufacturing
knock-off brand
strategy
How did Gildan get into the market?
What role did Gildan play in the fate of Fruit of the Loom?
What happened to FOTL?
Warren Buffett - Berkshire Hathaway bought FOTL brand and will bring it back
Example of what he did with the Sara Lee brand.
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Vision & Mission
Define Vision & Mission
What do they have to do with Strategy?
What role does a corporate vision play in a company’s success?
What role does a corporate mission play in a company’s success
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Stakeholders
Who are a firm’s stakeholders?
What roles do stakeholders play?
Stakeholders
Stakeholders are those who can affect, and are affected by, a firm’s strategic outcomes.
How are stakeholders impacted by a firm earning below average returns?
Strategic Leaders
Do you have to be a CEO to have the role of strategic leader?
What work does a strategic leader engage in?
Community & Ethics
Ethics & Leadership
What is the measurement of worthwhile leadership?
Ethics & financial returns (in the wake of Enron)
Corporate Social Responsibility & Strategy
Heather Reisman – Corporate social responsibility comes from her personal dedication to solving environmental and social issues
Chapters has changed the industry:
First major book retailer to announce they would not sell books without a certain percentage of recycled paper used in manufacturing
Entire industry had to restructure to accommodate her demand
Self-Study Review Questions
Why is it so difficult to define strategy?
Is strategy all about winning?
Is Sun Tzu’s The Art of War still relevant?
Could a firm survive without a strategy?
Why is it not enough to simply obtain a competitive advantage?
If benchmarking is unlikely to provide a sustainable competitive advantage why do firms continue to do it?
How much does luck have to do with strategy?
Does every firm need a business strategy?
