STRATEGY

What ? Why? How?

We are answering
What is strategy? Case examples
Business models employed by companies, Aspirations Brief on linkages within and outside the firm, Strategic Value Creation

Why Strategy? Value creation, Competitive advantage

How to Strategize? The Process, its execution & evaluation

Five phases in process, levels of strategy, Schools of strategy

Range of business strategies employed by some global heavyweights

Business model What they do Successful examples

Brand builder

Sell flagship products globally by

leveraging brand

Market maker

Create a new category or popularize an

out-of-the-ordinary value proposition that addresses an unmet local consumer need

Leverage company capabilities to

Replicator duplicate a successful business format in many local markets

Scale generator

Build leading position by leveraging

scale and operational know-how

Standard setter

Cultivate relationships with regulators

to ensure favored market position

Thinking Strategically: The 3 Big Strategic Questions

1 Where are we now? 2 Where do we want to be? 3 How might we get there?
Aspirations Scenarios

4 Which way is best? 5 How can we ensure arrival?

2. Where do we want to be?

Business(es) to be in and market positions to stake out Buyer needs and groups to serve Outcomes to achieve

Current capabilities/ skills

1. Where are we now?

External factors

Aspiration based planning

Clear, focused and aggressive aspiration setting gives an
organization the context in which to excel

Without aspiration setting even well-run organizations may underperform or miss out on emerging opportunities

If aspiration setting is combined with a plan to develop the required

capabilities, then aspirations can become a reality

We need to break out of our traditional incremental way of planning our business. I am convinced that with the combination of an unreasonable goal, an inspired and talented management team and 5-10 years we can accomplish anything we set out to do.

(CEO of major healthcare company)

Aspiration setting as a foundation for success

The setting of aspirations in the form of a mission and vision is a common theme in nearly all successful organizations
the reason for a companys existence a shared understanding of where the organization would like to be at some point in the future

Mission Statement

Mission Statement GEC (Till 2004)

To bring good things to life

Mission Statement GEC (Current)

Mission Statement Disney

To make people happy

Mission Statement Star Trek

To boldly go ..where no man has gone before!

A Vision is. . .
. . . an aspiration that is designed to be the target for the organization to achieve in the future

The targets should be aggressive to the point of being unreasonable . . .

to become the most powerful, the most serviceable, the most far reaching world financial institution that has ever been

. . . but consistent with the reality of the organization's current position

- 1915

A VISION can encompass many ideas

Fundamental aim

Core strengths

VISION
Focus

Pro-active view

VISION - What to look for

Fundamental aim
Quantitative Become a $125 billion company by the year 2000 (Wal-Mart, 1990)

Qualitative

Become the company most known for changing the worldwide poor-quality image of Japanese products (Sony, early 1950s)

Enemy driven

Crush Adidas

(Nike, 1960s)
Role model driven Become the Harvard of the West (Stanford Univ., 1940s)

VISION - What to look for

Core strengths
Products To deliver quality second to none in the premium automotive market worldwide (Daimler Benz)

Innovation

To make technical contributions for the advancement and welfare of humanity (Hewlett-Packard)

Other strengths include brand name, location, network, personnel etc.

VISION - What to look for

Focus
Which product segments To preserve, collect and exhibit 20th century American art (Whitney Museum)
To help make a lasting, positive difference in the lives of disadvantaged children (Save the Children) Our aim is to establish the new British Airways as the undisputed leader of world travel (British Airways) Village Roadshows objective is, very simply, to be the best entertainment company in Australia and the Pacific Basin (Village Roadshow, 1990)

Which consumers

Which industries

Which regions

VISION - What to look for

A pro-active view of the future
At FedEx our ultimate strategy is to comprehend - and be a catalyst for - the way the world works (FedEx)

Become the dominant player in commercial aircraft and bring the world into the jet age (Boeing, 1950)

VISION - Bringing it all together

To provide or arrange medical care for every homeless, housing vulnerable and medically underserved child in New York NY Childrens Health Project)

Fundamental aim: every needy child Core strength: medical care Focus: needy children, New York only Proactive view: implicit that there will be needy children in the future

We are answering
What is strategy? Case examples
Business models employed by companies, Mission, Vision Brief on linkages within and outside the firm, Imagining life without strategy

Why Strategy? Value creation, Competitive advantage

How to Strategize? The Process, its execution & evaluation

Five phases in process, levels of strategy, Schools of strategy

The value chain by Porter

Strategic Value Creation

Corp. Comman d Center Function al Units Strategic Value Creation Orgz. External Environ. Business Units

CSR

We are answering
What is strategy? Case examples
Business models employed by companies, Mission, Vision Brief on linkages within and outside the firm, Imagining life without strategy

Why Strategy? Value creation, Competitive advantage

How to Strategize? The Process, its execution & evaluation

Five phases in process, levels of strategy, Schools of strategy

Strategy Process The 5 Phases of Strategic Management

Phase1 Phase 2 Phase 3
Formulate Strategy to Achieve Goals & Objectives

Phase 4

Phase 5
Monitor, Evaluate, and Take Corrective Action

Develop Vision and Mission

Set Goals & Objectives

Implement and Execute Strategy

Revise as Needed

Revise as Needed

Improve/ Change

Improve/ Change

Recycle as Needed

Strategy Process Slightly complex

Strategy Process Emerson Case

In Emerson, strategic planning takes place in small groups with a high level of senior involvement
Disciplined annual cycle
Intense preparation Pre-review meetings

One for every BU and sector/group Separate from budgeting/financial planning reviews Full-day, often at business unit site

Run by business head, corporate leaders

(CEO, Vice Chairman, often in attendance)

Limited attendance, small enough for real discussion Very intense atmosphere
Not dog and pony show Material sent in advance Engaged, substantive discussion Push-back expected/prepared for by business leaders Immediate feed-back

Focus on real strategy and numbers

Strategy Process BP Case

In BP, strategic planning takes place in over 150 business units, with strong peer collaboration
BU BU BU

1.

Corporate centre and business area (e.g., downstream) develop medium/long-term view

Profitability Sectors of development and new Regional expansion Unit/operation consolidation Operating framework for BUs
business

BU

BU

Gas and power

BU

Corporate centre

BU

Some knowledge transferred back to centre

Financial allocation and broad operational framework

BU

Chemicals

BU

2.

BU BU

BU

Peer group acts as innovation hub, transfers best practice, allows internal challenge and engages/educates new managers

BUs collaborate within peer group to develop own strategy

Operational plans Acquisitions/divestitures Allocation of capital and setting of

targets

Strategy Process Coca Cola Case

Leading consumer goods players such an Coke, perform detail analysis of their external environment as a basis for strategy development
Competitor/market information
Market potential

ILLUSTRATIVE ANALYSES Consumer information

Consumption funnel Key actions/ threats Brand health scorecard Consumer segmentation
Onpremise Occasions Convenience At-home

Financial performance
Progress against initiatives Progress against initiatives Operational performance (KPIs) ROIC tree

Competitor impact assessment Market share trends

"White" spaces

Activityrelated A B C D

Levels of Strategy
LEVELS Description Company-wide plan for managing a set of businesses Responsibili ty CEO & Senior Executives GMs/Heads of BUs

Corporate Strategy*

Business Strategy*

- Strengthen market position - Build competitive advantage and capabilities - Adding details to bus. strategy - Prepare game plan for activities - Adding details to bus. & functional strategy - Prepare game plan for lower level activities

Functional Strategy

Heads of functional activities Heads of functional activities

Operations Strategy

*In case of single business company, these two levels merge into one

Mintzbergs 10 Schools

Being unsatisfied with the strategy discussion, Henry Mintzberg, professor at McGill University Canada, set out to structure the literature and thinking on strategy. He discovered 10 different schools of thought on strategy, arguing that every one of them describes a specific part of strategy. Just like the blind men describe the elephant.

Mintzbergs 10 Schools
Prescriptive Descriptive

Design Planning Positioning

Configuration Cognitive Cultural Entrepreneurial Environmental Learning Power

Mintzbergs 10 Schools: 3 Prescriptive

Design School

Strategy as a process of conception achieving the essential fit between

internal strengths & weaknesses and external opportunities & threats

'70s

Mintzbergs 10 Schools: 3 Prescriptive

Planning School
Igor Ansoff mid '70s

Strategy as a formal process Process: Formal, Decomposable, Steps Based on past trends, forecasts, stable structures and environment Tries to achieve a fit between Organization and its environment Requires detailed & inflexible planning not suitable in turbulent markets

Ansoff Matrix

Mintzbergs 10 Schools: 3 Prescriptive

Positioning School
Michael Porter '80s

Strategy as an analytical process Generic positions selected through formalized analyses of industry situations Attempt to place Org. in a favorable market / environment Heavily based on performance measurement and decision making tools

BCG Matrix

Mintzbergs 10 Schools : 7 Descriptives

Configuration School

Strategy as a process of transformation process varies according to company configuration

Mintzbergs 10 Schools : 7 Descriptives

Cognitive School

Strategy as a mental process and creative interpretations

Mintzbergs 10 Schools : 7 Descriptives

Cultural School

Strategy as a social process rooted in the companys culture focuses on common interest & integration

Mintzbergs 10 Schools : 7 Descriptives

Entrepreneurial School

Strategy as a visionary process Intuition The leader is central

Mintzbergs 10 Schools : 7 Descriptives

Environmental School

Strategy as a reactive process influenced by the demands of the environment

Mintzbergs 10 Schools : 7 Descriptives

Learning School

Strategy as an emergent process Organisational Learning formulation & implementation interwine

Mintzbergs 10 Schools : 7 Descriptives

Power School

Strategy as a process of negotiation Micro vs Macro, i.e. company vs individual interests political focuses on personal interest