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Chapter One. What is Strategy?. Cornelis A. de Kluyver and John A. Pearce II Third Edition. It is a pattern in a stream of actions. What is Strategy?. Positioning an organization for competitive advantage Deciding what to do and what NOT to do Which industries to participate in

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Chapter one

Chapter One

What is Strategy?

Cornelis A. de Kluyver

and

John A. Pearce II

Third Edition


What is strategy

It is a pattern in a stream of actions.

What is Strategy?


Strategy is about

Positioning an organization for competitive advantage

Deciding what to do and what NOT to do

Which industries to participate in

What products and services to offer

How to allocate resources, add value

Creating value for shareholders and other stakeholders by providing value to customers

Strategy is About…


Strategy

Differs from Tactics:

Forces trade-offs and should focus on differentiation from rivals

Focuses on value creation

Allows for learning and adaptation

Takes a long-term perspective

Responds to the needs of all stakeholders

Strategy…


Strategy is about making choices

Whowill you target as customers and who will you not?

What will you offer these customers and what will you not offer them?

How will you do all this? – What activities will you perform; which will you not?

Strategy is About Making Choices…


Choosing is not enough you must force trade offs and create fit

Dell’s manufacture-to-order system forced competitors to make trade-offs(Key to Differentiation)

Southwest Airlines has created fit(Key to competitive advantage through Operational excellence)

Choosing is Not Enough; You Must Force Trade-offs and Create Fit


Chapter one

Southwest Airlines’ Activity System

No meals

No baggage

transfers

Limited passenger service

No

connections

with other

airlines

No seat

assignments

Limited use of

travel agents

Short-hand

point to point

routes between

midsize cities

and secondary

airports

15 minute

gate

turnaround

Standardized

fleet of 737

aircraft

Frequent reliable departures

Automatic

ticketing

machines

Lean, highly

productive ground

and gate crews

High

compensation

of employees

Very low ticket prices

“Southwest,

the low-fare

airline”

High aircraft utilization

Flexible union

contract

High level

of employee

stock

ownership


Strategy should consider the company s ecosystem

The environment

Governments

Standards bodies

New entrants

Competitors

Supplier’s suppliers

Customer’s customers

Suppliers

Customers

Organisation

Substitutes

Stakeholders

International law

Strategy Should Consider the Company’s Ecosystem


What is an ecosystem

Simply put, it's the idea that today's companies are embedded in multiple, complex relationships that make them interdependent on each other for success.

But it's only recently that corporate leaders are realizing that an ecosystem is more than a concept.

The ecosystem has intense implications for how companies plan for the future, and they ignore those implications at their own risk.

What is an Ecosystem?


Sound strategy development focuses on

Sound Strategy Development Focuses On:

  • Articulating strategic intent

  • Creating and leveraging organizational capabilities

  • Fostering innovation and learning

  • Embedding strategic leadership


A clear strategic intent provides focus

A Clear Strategic Intent Provides Focus…

“Beat Xerox”

“A Computer on Every Desktop”

“Be #1 or #2 in every business…”


Chapter one

Matching Competitive Advantages of Rivals is No Longer Enough…

Write the rules; Don’t copy someone else’s

Toyota

Canon

Microsoft

Google

  • “Companies that have risen to global leadership invariably began with ambitions that were out of all proportion with their resources and capabilities...” (Hamel and Prahalad)


Organizational capabilities are increasingly critical to success

Organizational Capabilities are Increasingly Critical to Success


Competencies must be nurtured continuous innovation and learning are critical

Basic Competitive Requirements

Latent Core Competencies

  • Core Competencies

  • (CC’s)

  • Customer benefit

  • Cost benefit

  • Competitive differentiation

  • Unexploited

  • Insufficient breadth/ depth

  • High potential

  • Essential to all competitors

  • No industry differentiation

  • Important in the future

  • Agenda for competence building

Future Core Competencies

Competencies Must Be Nurtured Continuous innovation and learning are critical


The competitive advantage cycle value unless constantly nourished erodes over time

  • Sources of Advantage

  • Superior Assets

  • Superior capabilities

Key

Success

Factors

  • Rewards:

  • Satisfaction

  • Loyalty

  • Profits

  • Share

  • Positional

  • Advantages Realized

  • Superior Customer Value

Investments

In Renewal

Barriers to

Imitation

Competitive

Dynamics

Erode

Advantages

The Competitive Advantage Cycle: Value, unless constantly nourished, erodes over time


Strong leadership at all levels of the organization is key

Mission

Documents the purpose of the organization’s existence, may guide conduct

Vision

Represents organization’s strategic intent

Sets stretch targets

Strategic Thinking

Creates a vision for the organization

Is primarily top-down (CEO/Senior management driven)

Requires creativity, analysis and synthesis

Strategic Planning

Is both top down and bottom-up

Plays supporting role focused on analysis, communication

Strong Leadership at All Levels of the Organization is Key


A clear process provides structure

  • Environmental

  • Analysis

  • Economic

  • Socio-cultural

  • Technological

  • Political

  • Opportunities &

  • Threats

  • Evaluate

  • Current

  • Performance

  • Mission

  • Goals

  • Objectives

  • Strategies

  • Strategy

  • Options

  • Business Unit

  • Corporate

  • Evaluation

  • Resource

  • Requirements

  • Risk/return

  • Implementation

  • Industry

  • Analysis

  • Structure

  • Evolution

  • Competition

  • Competitive

  • Analysis &

  • Positioning

  • Company

  • Analysis

  • Structure

  • Resources

  • Processes

  • Staffing

  • Culture

  • Strengths &

  • Weaknesses

How do we get there?

Where should we go?

Where are we now?

A Clear Process Provides Structure…


Strategy as a portfolio of options

Strategy is not about creating a detailed, long-term plan

Strategy should focus on a long-term strategic intent and flexible means for realizing that intent

Learningand continuous renewalare essential parts of strategy

Strategy as a Portfolio of Options…


Not all strategy can be planned

Not All Strategy Can Be Planned…

Deliberate

Strategy

Intended

Strategy

Realized

Strategy

Unrealized

Strategy

Emergent

Strategy


Strategic choices must be supported by organizational choices

Culture

Strategy

People

Structure

Processes/

Incentives

Strategic Choices Must Be Supported by Organizational Choices


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