STRATEGIC MANAGEMENT –

A PRACTICAL APPROACH

BY
M. EKHLAQUE AHMED

Change is the essence of life. Be willing to

surrender what you are for what you could
become
 STRATEGIC MANAGEMENT – A PRACTICAL APPROACH
WORKSHOP OUTLINE

DAY – 1

 Strategic Management – Concept & Process

 Business Scope & External Analysis
 Structural Changes for Facing Brutal Facts
 Weird Ideas for Managing Creativity
 Case Study: Rebuilding Lego Brick by Brick – Group Presentation

DAY – 2
 Evaluating Co. Resources & Competitive Capabilities
 Vision, Mission & Objective
 Case Study : IBM
 Strategic & Competitive Advantages
 Positioning A Company
 Case Study : PSO
 Strategic Implementation with BBSC.
 CALL FOR URGENCY
 Sudden, fierce, business-destroying competition

 Current strategies aren’t working

 One or more of some strategic initiatives currently underway are not

delivering results or living up to expectations

 Why aren’t we getting a better multiple?

 How can we improve our poor performances?

 Leaders, proactively, want to take new challenges

 Employees too focused on executing day to day operations

 “Growth Culture” in a already Profitable company

 Session: 1

Strategic Management –
Concept & Process
 STRATEGIC BUSINESS PLANNING

 Besides good operational management a business

needs high quality strategic management to ensure
lasting success.
 Strategic management focuses on strategic choices.
 Operational management focuses on actions and
results.
 The business planning process should be an intensive
group (management team) process, based on sharing of
visions and facts, comparison of alternative scenario’s,
agreeing on choices and translating all into consistent
and interlinked action plans.
 A qualified business plan is recognized by its:
 creative content and consistent structure
 implementation and deployment planning
 management ownership
 STRATEGIC management focuses on DECISIONS

VALUES

INFO LOGIC DECISION

While
OPERATIONAL Management focuses on RESULTS

PLAN ACTION RESULTS

 Entrepreneurial management: A Balancing Act

OPERATIONAL MANAGEMENT
QUALITY
of POOR GOOD
STRATEGIC MANAGEMENT

POOR GAME OF
ALMOST HAZARD
CERTAIN
DISASTER
SUSTAINABLE
GOOD
CHANCE
TO WIN
 THEORY OF BUSINESS

 “HOW TO DO” TOOLS

VS
 “WHAT TO DO”
DIRECTION MATRIX:

WTW WTR

RTW RTR

Doing things fruitlessly!

 RESPONSIVENESS TO CHANGE

 “Plans are nothing, planning is everything”.

(Dwight D. Eisenhower)
 Neither dogmatic / rigid against change,
nor drifting with the changes.
 But a well considered standard / yardstick
for reflection and a starting point for
flexible response towards changes.
 STRATEGY
 Strategy is not synonymous with long
term plan.
 It consists of an enterprise's attempts to
reach some preferred future state by
adapting its competitive position as
circumstances change.
 MAKETING STRATEGY INTERFACE

BUDGETING, LONG-RANGE PLANNING, STRATEGIC

PLANNING AND STRATEGIC MARKET
MANAGEMENT
 Budget: (Control deviation and manage complexity)
 Long Range Planning: Past trend will continue, anticipate growth &
manage complexity
 Strategic Planning:
 Strategic adjustment
 Focuses on the market environment facing the firm
 Strategic Market Management:
 Cope with strategic surprises and fast developing threats and
opportunities
 Proactive and future oriented
 MARKETING STRATEGY INTERFACE

 Distinctive and farsighted view rather than a

conventional and reactive view about the future
 Senior Management focuses on regenerating core
strategies rather than re-engineering core processes
 Competitors view the company as a rule maker rather
than a rule follower
 The company’s strength is innovation and growth
 The company is mostly out in front rather than catching
up
 Try to influence the environment as well as respond to it
 MARKETING STRATEGY INTERFACE
PROCESS OF STRATEGIC DECISION MAKING

1. STRATEGIC ANALYSIS:
 Environment (Change / Effects)
 Resources (To deal with the changes)
 Expectations, Objectives and Powers.

2. STRAGEGIC CHOICE:
 Strategic Option (Beyond Obvious)
 Evaluation (Exploit Strengths and Overcome Weaknesses)
 Selection of Strategy

3. STRATEGIC IMPLEMENTATION:
 Resource Planning
 Organization Structure
 People and System
BUSINESS PLAN – BASIC FORMAT

BUSINESS SCOPE OPERATIONAL PLAN

BUSINESS ENVIRONMENT
OPERATIONAL PLAN

INTERNAL ANALYSIS
OPERATIONAL PLAN
BUSINESS OBJECTIVES
OPERATIONAL PLAN
KEY ISSUES
OPERATIONAL PLAN
OVERALL STRATEGIC DIRECTION
SUPPORTING CONDITIONS

FINANCIAL PROJECTION
 Session: 2

Business Scope & External Analysis

 BUSINESS SCOPE
 Describes “THE BUSINESS WE ARE / WANT TO BE IN” through
the eyes of the customers
 Regions = where
 Functions / applications = what needs
 Customers & users = whose needs
 Products, technologies & services = added value
 SO: how do we create customers?

 CONSIDERATIONS:
 Not too narrow: present + intended (future) business.
 Indicates relations with other business.
 Clarifies also the business we are not in.
 In line with organizational and managerial responsibility & authority
areas.
 How do competitors define their business scope? Which do it the
same way and which do it different; why?
 BUSINESS ENVIRONMENT

1. Market Structure
2. Market Size & Growth – Past 4 Years
3. Market Size & Growth – Future 4 Years
(with underlying assumption about growth)
4. Product Life Cycle
5. Distribution Structure in the Industry
6. Company & Competitors Market Share
7. Market Profitability Analysis: Porters’ Five
Forces
8. Driving Force / Key Success Factors
 MARKET STRUCTURE
1. End user/application segments
2. Product application combinations
3. Distribution structure

End user/applications
Products

Channels

Channels

The Company
MARKET SIZE
Volume (MLN RS)
MARKET 1992 1993 1994 1995 1996 1997 GROWTH
SEGMENT P.A.

Value (MLN RS)

MARKET 1992 1993 1995 1996 1997 GROWTH
SEGMENT P.A.
 PRODUCT LIFE CYCLE STAGES

Product Segments INTRODUCTION GROWTH MATURITY DECLINE

 COMPETITION / SEGMENT MATRIX

One page analysis – The competitor / segment matrix for evaluating

market attractiveness and competitive position
Competition Segments Overall
1 2 3 4

1.
2.
3.

Historical Growth

Projected Growth
Company
Profitability
 COMPETITION / SEGMENT MATRIX

FINDINGS:
 Market is bigger than you thought

 Company has more competitors than you thought

 Your share is smaller than you thought

 Company is trying to dominate different segments than you thought

 You can not make money where you thought

 Somebody you were not watching is gaining on you
 It can highlight for you where your base is threatened
 It can reveal unanticipated opportunities for growth within your
existing business (higher market, lower MS, opportunity in current
product line)
 A good teaching tool for managers to understand their existing
business! (about market segmentation and competitive
advantage)
 DISTRIBUTION STRUCTURE: SHIFT FROM 2008 TO 2012

% OF RS MIL Segment 1 Segment 2 Segment 3 Segment 4 Total

2008 2012 2008 2012 2008 2012 2008 2012 2008 2012

WHOLESALES

DISTRIBUTOR

CONTRACTORS

DIRECT

OEM

PROJECT

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 DISTRIBUTION SHARES AND COMPANY’S POSITIONS (2008)

% OF RS MLN ALL PAKISTAN COMPANY’S TURN - #1 COMPETITORS OUTLET

DISTRIBUTION OVER SHARE TURNOVER SHARE COVERAGE

WHOLESALES

DISTRIBUTOR

CONTRACTORS

DIRECT

OEM

PROJECTS

Turnover Share = Co’s Sales per outlet/∑ Co’s Sales by all outlets
Outlet Coverage = ∑ Co’s outlets / ∑ outlets
 MARKET STRUCTURE, DATA & TRENDS

3. DRIVING FORCES AND TRENDS IN THE BUSINESS/INDUSTRY:

- Most dominant forces are called driving force, biggest influence
- Machine cost, new customer group, customer usage, product innovation,
marketing innovation, technological change, cost factors etc.
- Economic climate; growth, currencies, inflation, investment levels, taxes.
- Governmental regulations (national/international) & economic blocks.
- Bargaining power and structure of the suppliers.
- Bargaining power and structure of the buyers (key players in the distribution?)
- Main entry barriers.
- New entrants (their origin and competence base).
- Key technologies and components.
- New technologies and/or substitute products.
- Environmental concern.
- Installed industrial capacities (surplus/shortages) in the business)
- General profitability margins in the business.
- User appreciations, loyalty and fashions.
 TOP – 10 External Trends
Taking Advantage
Trend Potential Impact We C1 C2 C3
Growth of rural markets and focus Increasing competition, Price
of companies on this area Erosion
Price decrease Margins/sales under pressure
Application segmentation Customization
Premium product growth Opportunity (high-end)
World-wide (instant) communication Influence on Sales and Margin
Untapped market in Health Care Opportunity
Change in Environmental Opportunity
Legislation
Foreign loans / lack of Budget Sales down in Govt. Sector

Remarks:
 INDUSTRY TRENDS
PORTERS’ FIVE FORCES

1. COMPETITORS
 No of competitors
 Their relative size
 Similar product offerings / strategies
 Commitment of competitors
 Size and nature of exit barriers
 Rivalry heats up when competition seeks opportunity to better meet
customers needs or is under pressure to improve
 Actions and reactions
 How much pressure cross-company rivalry is going to put on the
profitability of the industry
 Diversity of the strategic vision of the competing firms
2. POTENTIAL COMPETITORS:
BARRIERS TO ENTRY
 Capital investment
 Economy of Scale
 Inability to gain access to technical/specialized know-how
 Access to distribution channel
 Brand preference/customer loyalty

3. SUBSTITUTE PRODUCTS
 Price Attractiveness
 Switching cost
 Can influence the profitability of the market.
4. CUSTOMER POWER:
 Customers with more power than sellers can force prices down
or demand more services affecting profitability
 Influencing factors – purchase size, availability of alternative
suppliers;

5. SUPPLIER POWER:
 Suppliers sells to a variety of customers in diverse market
 Switching cost of customers – of the suppliers are high
 Raw material crucial to the production process and affect quality
 Cost advantage to such supplier vs. industry who wants to go for
backward integration
 Session: 3

Structural Change For Facing Brutal

Facts
 Advice from Jim Collins

FIRST WHO……THEN WHAT

 WHO EMPLOYEES

WHAT STRATEGY

“First get the right people on the bus and the wrong people
off the bus and then figure out where to drive it.”
 Three Simple Truths
1. First, if you begin with “who” rather than “what” you
can more easily adapt to a changing world.
2. Second, if you have the right people on the bus, the
problem of how to motivate and manage people largely
goes away.
3. Third, if you have the wrong people, it doesn’t matter
whether you discover the right direction; you still won’t
have a great company.

“Great vision without great people is irrelevant.”

“It’s WHO you pay , not HOW you pay.”
 How to be Rigorous
 Practical Discipline 1:
When in doubt, don’t hire – keep looking

 Practical Discipline 2 :
When you know you need to make a change, act

 Practical Discipline 3:
Put your best people on your biggest
opportunities, not you biggest problems
Advice from Jim Collins
Confront the Brutal Facts
(yet Never Lose Faith)
 Facts are better than dreams

 GTG companies displayed two distinctive forms of disciplined

thought:-
 They infused the entire process with brutal facts of reality
 They developed a simple, yet deeply insightful frame of reference for
all decisions
 Refine your path of greatness with brutal facts of reality.

 How do you motivate people with brutal facts?

(Leadership is about vision & equally about creating a climate where truth is
heard)

 Lead with questions, not answers

 So, what’s in your mind?
 Can you tell me about that?
 Can you help me understand?
 What should we be worried about?)
 Engage in dialogue and debate not
coercion
 Refuse to begin with the answer.

 Play the role of Socratic Moderator in a series of

raging debates

 Argue & debate then sell the nuclear business

 A climate of debate, where Co’s strategy evolved

through many agonizing arguments and fights.
 Conduct Autopsies w/o blame
 ”I will take responsibility for the bad decision
but we will all take responsibility for
extracting the maximum learning from the
tuition we have paid”.

 If we have the right people on the bus, we

should never need to assign blame but need
only to search for understanding and
learning.
 WEIRD
IDEAS FOR
MANAGING
CREATIVITY
 DECIDE TO DO SOMETHING
THAT WILL PROBABLY…

Succeed, then Fail, then convince

convince yourself and your-self and
everyone else that everyone else that
success is certain success is certain
TAKE YOUR PAST SUCCESSES…

And replicate them And forget them

 REWARD…

Success; punish failure Success and failure;

and inaction punish inaction
 USE JOB INTERVIEWS…

To screen candidates
To get new ideas, not
and especially to
to screen candidates
recruit new employees
 THINK OF SOME…

Sound or practical Ridiculous or impractical

things to do, and plan things to do, and plan to
to do them do them
 IGNORE PEOPLE…

Who have never solved Who have solved the

the exact problem you exact problem you
face face
 FIND SOME HAPPY PEOPLE…

And make sure they And get them to fight

don’t fight
 ENCOURAGE PEOPLE…

To pay attention to and To ignore and defy

obey their bosses and their bosses and
peers peers
 HIRE…

“fast learners” (of the “slow learners” (of the

organizational code) organizational code)

People who make you People who make you

feel comfortable, uncomfortable, even
whom you like those you dislike

People you (probably) People you (probably)

do need don’t need
 Session: 4

Case Study: Rebuilding Lego

Brick by Brick
 End of Day 1
 Session: 5

“Evaluating Company Resources &

Competitive Capabilities

Day 2
The Hedgehog Concept
 THREE circles of the Hedgehog concept

What you are deeply passionate about

What you can be the best in the world at What drives your economic engine
 WHAT YOU CAN BE THE BEST AT?

WHAT YOU CANNOT BE THE BEST AT?

 If you cannot be best in the world at your core business
then your core business Cannot be the basis of your
hedgehog concept

 Core competence at something doesn’t mean that you

can be the best at that thing

 Hedgehog concept is not a goal to be the best, a

strategy to be the best, an intention to be the best, a plan
to be the best.

 “It is the understanding of what you can be best at”

 What drives your economic engine

 What is your Economic denominator?

 Search for the one denominator “x” that has the single
greatest impact
Examples;

 Abbott: shift from profit per product line to profit

per employee

 Walgreen: shift from profit per store to profit per

customer visit

 Gillette: shift from profit per division to profit per

customer
 UNDERSTANDING YOUR PASSION

“Lets get passionate about what we do”

or
“We should only do things that we can get passionate
about”
 Key Questions for Situation Analysis

 How well is the company’s present strategy is

working?
 What are the company’s resource, strengths and
weaknesses and its external opportunities and
threats?
 Are the company’s price and cost competitive?
 How strong is the company’s prices and cost
competitive position relative to its rivals?
 What strategic issue does the company face?
 Key Indicators of How Well the Strategy Is
Working
 Trend in sales and market share
 Acquiring and/or retaining customers
 Trend in profit margins
 Overall financial strength and credit ranking
 Efforts at continuous improvement activities
 Trend in stock price and stockholder value
 Image and reputation with customers
 Leadership role(s) – Technology, quality, innovation, e-commerce,
etc.
 SWOT - ANALYSIS

External Analysis Internal Analysis

Threats Strengths
Opportunities Weaknesses

Promising Opportunities

Only opportunities after improvement

Ability to resist

High Risks
Competitive Advantage(s)?
Constraints to potential business objectives & strategic scenario’s
 CONFRONTATION MATRICES
Opportunities Opportunities
W
s 1 2 3 4 5 e
a 1 2 3 4 5
t
r 1 k
n 1
e 2
e 2
n 3
s 3
g 4 s 4
t 5 e 5
h s

Threats Threats
W
s 1 2 3 4 5 e
a 1 2 3 4 5
t
r 1 k
n 1
e 2
e 2
n 3
s 3
g 4 s 4
t 5 e 5
h s
 Identifying Company Strengths & Resource
Capabilities.
 A strength is something a company is good at doing or a
characteristic that gives it enhanced competitiveness.

 Valuable skills, expertise, or capabilities

 Valuable physical assets
 Valuable human assets
 Valuable organizational assets
 Valuable intangible assets
 Important competitive capabilities
 An attribute placing a company in a position of market advantage
 Alliances or cooperative ventures with partners

Resource strengths and competitive

capabilities are competitive assets!
 Identifying Company weaknesses &
Resource Deficiencies
 A weakness is something a firm lacks, does poorly, or a condition
placing it at a disadvantage
 Resource weaknesses relate to
 Deficiencies in competitively important skills or expertise or
intellectual capital of one kind or another.
 Lack of competitively important physical, organizational or
Intangible assets.
 Missing capabilities in key areas. Internal weaknesses are thus
shortcomings in a company’s complement of resources.

Resource weaknesses and deficiencies

are competitive liabilities!
 Competencies vs. Core Competencies
vs. Distinctive Competencies
 A competence is the product of organizational
learning and experience and represents real
proficiency in performing an internal activity

 A core competence is a well-performed

internal activity central (not peripheral or incidental) to a
company’s competitiveness
and profitability

 A distinctive competence is a competitively valuable

activity a company performs better than its rivals
Questions 3. Are The Company’s Price & Cost
Competitive?

 Assessing whether a company’s costs are competitive

with those of its close rivals is a necessary part of
company situation analysis.

 The higher a company’s costs are above those of its

rivals, the more competitively vulnerable it becomes.
A Representative Company Value Chain
REASONS FOR COST DISPARITIES
 Difference in price paid for raw material
component, energy etc.
 Difference in basis technology / age of plants
and equipment
 Difference in product cost (plant efficiency,
learning and experience curve effects, different
wage rate, productivity levels)
 Difference in marketing and distribution cost
 COST COMPETITIVENESS
INTERNAL:

 Eliminate some cost producing activities by revamping the value chain

 Relocate high cost activities to geographic area where they can be

performed more eco.

 Out sourcing

 Cost-saving technological improvements

 Innovate around the troublesome cost components when new investment is

made

 Simplify product design to reduce cost

 Make-up with alternatives in some other areas

 STRATEGIC OPTINS TO COST ADVANTAGES

SUPPLIERS:

 Negotiate favorable prices

 Work with supplier to reduce their cost

 Integrate backward

 Use lower priced substitute inputs

 Manage linkage between suppliers value chain and company’s own

value chain e.g., JIT to reduce inventory costs
 Benchmarking
 Benchmarking the costs of company activities against rivals
provides hard evidence of a company’s cost competitiveness.

 Benchmarking is a tool that allows a company to determine the

manner in which it performs particular functions& activities represent
industry’s “Best Practices” when both cost & effectiveness are taken
into account.

 To benchmark the firm’s cost position against rivals, costs for the
same activities for each rival must be estimated.

 The most important application of value chain analysis is to expose

how particular firm’s cost position compares with the cost position of
its rivals.

 All is needed is competitor vs. competitor cost estimate for supplying

a product or service to a well defined customer group or market
segment.
 Competitive Strength Assessments
 Most effective way to determine how strongly a company holds is
competitive position is to “Qualitatively assess” whether the
company is stronger or weaker then close rivals.

 Much of the information for competitive position comes from

previous analysis.

 Important factors in competitive strength assessments are:

 Cost.
 Product Quality.
 Customer Service.
 Financial Strengths.
 Image & reputation.
 Technological Skills.
 Speed to market.
 Distribution Capability etc.
 THE CUSTOMER: basis of our business

WHAT DO CUSTOMERS
WANT?

Do you really Assignments for

Most important further
know that?
aspects knowledge improvement

How do we Score? And our competitors?

Key strengths and

weaknesses
 Figure 1 – Relative Importance of Factors

Factor Number Absolutely Very Quite Nice to Not Don’t

Critical Important Important Have significant Want it
5 4 3 2 1 0

Suggested Definitions:

Absolutely Crucial: Overrides most other considerations, wouldn’t consider supplier who doesn’t
perform on this factor.
Very Important: One of the first things we ask for, but we may be prepared to negotiate on it.
Quite Important: A negotiable item, but one when we attach considerable weight to.
Nice to Have: It could make the difference in a division, but is normally taken into account last.
Not Significant: Not normally taken into account at all.
Don’t Want it: Would prefer a product without this feature
 RATING AGAINST CUSTOMERS BUYING CRITERIA
This Comp Comp Comp Comp Comp Comp Comp
Quality & Price Bus A B C D E F G

Non-Price attributes %
Affecting Customer Weight
Choice

Product - Related %
1.
2.

Service - Related
1.
2.

Total 100%
Has quality gone up/down (+/-)
In past 4 years
Relative Price today 100
Relative Price 4 years ago 100
Market choice of suppler specified by
Price ………… % and Quality ………………. % (Total 100%)
CUSTOMERS BUYING CRITERIA: PRICE ..%, QUALITY
ATTRIBUTES ..%

Question
its Cost Keep it UP

Better

Relative
Performance Same
Rating

Worse

Do Not Improve
Least 10% 20% Most fast
Sweat

Attributes Important to customers

 Question 5: What Strategic Issue Does the
Company Face?

 Identifying the strategic issues a company faces is a

prerequisite to effective strategy making. It involves
developing a “worry list” of strategic challenges
concerning:

 How to meet the challenges posed by global competition.

 How to combat the product innovation of rivals.
 How to reduce the company’s high costs.
 How to sustain the company’s present rate of growth or
grow the business at a faster rate.
 How to gain better market visibility for the company’s
product.
 How to capture the e-commerce opportunities.
 A company need to put more emphasis on the
 New product R & D.
 Add more production capacity.
 Cut prices in response to the action of competitors.
 Add new features that will boost the performance of
company’s product.
 Or go forward with investments in foreign markets.
 Managers need to draw on all the prior analysis.
 And lock in what challenges have to be overcome and
what issues have to be resolve in order for the
company to be financially and competitively
successful in the years ahead.
 KEY ISSUES

 Are related to the SWOT-analysis and the Business objectives:

 They determine to a large extend the feasibility of the
objectives.
 Are the main hurdles to overcome in order to reach these
objectives.

 Issues are:
 Not the solution, but are the problem.
 Have to be dealt with in the strategic direction.
 Have to be solved by the subsequent operational actions.

 Therefore issues have to be:

 Clearly described; I.e. specific and as problems.
 Prioritized to their urgency / impact.
 Impact of Issues on Strategic Profile
Issue Number Issue 1 Issue 2 Issue 3 Issue 4 Issue 5
Issue Name High-end High-end Growing of Coherent Address
Type1 Type 2 Appl. A.P. Policy Key Gap

Customers ++ ++
Regions
Market segments ++
Needs/wants/applications
Products (prices)/services ++ ++ ++ ++
Strategic Management ++
Product Creation Process + +
Sales Acquisition Process ++
Operations (Production/Logistics
Customer base Management ++
Technology + +
Plant & Equipment
Distribution Channels +
 Impact of Issues on Strategic Profile
Issue Number Issue 1 Issue 2 Issue 3 Issue 4 Issue 5
Issue Name High-end High-end Growing Coherent Address
Type1 Type 2 of Appl. A.P. Policy Key Gap

Money
People
Informaiton
Raw Materials, Energy
Organization Structure
Procedures
Culture

Remarks

+ = high impact
++ = very high impact
 Session: 6

Vision, Mission & Objectives

TWO UNDERLYING THEMES EMERGED IN RESEARCH

 Strategic Intent:
 Creating an obsession with winning that encompasses
an entire company and sustaining that thirst for winning
over the 20 year quest for global leadership.
 Competitive Innovation:
 An ability to change existing industry rules to provide
competitive openings against larger, richer competitors.
 STRATEGIC INTENT IS NOT
STRATEGIC PLANNING

 Strategic intent is fundamentally different from strategic planning.

 Strategic planning begins with the notion of “FIT”. A company looks

at its resources, its strengths and weaknesses and then chooses a
strategy of best fit.

 As a starting point, this logic can lead to a company short changing

itself.

 Strategic intent, on the other hand, starts with a “MISMATCH”. You

begin by deciding where you want to be, or in some cases where
you need to be to survive. The next step is to identify the “GAP” not
the “FIT” and then set about removing the gap.
BUILDING GLOBALY CAPABLE COMPANIES

Competitive In Support Strategic

Innovation of Intent

Changing the rules, Focusing energies,

Accumulating strengths Sustaining thrust

Winning “impossible” bets

Fighting 20 year battles
 Competence is Different From Technology

 Technology Competence
 Stand Alone System Embodied
 Explicit Knowledge Tacit Knowledge
 Narrowly held Deeply Embedded
 Easily copied / Acquired Difficult to Un bundle
 Discontinuous Process Aggregative Process
 Inventive Capability Integrative Capability

 Competence = (Technologies + Social Organization +

Collective Learning)
 VISION / MISSION STATEMENT

 INCLUDES THE PRIMARY BUSINESS FOCUS

 IDEAL/INTENDED BUSINESS POSITION
 QUALITATIVE & GENERAL
 OFFERS AN INSPIRING PERSPECTIVE
 LONG TERM / FUTURE PROOF
 SETS THE ORGANISATION APART FROM ITS
COMPETITORS
 CREDENTIALS TO THE OUTSIDE WORLD
 SHORT, CLEAR & SIMPLE FORMULATED
 SHARED VALUES & REASON FOR EXISTENCE
 DEPLOYED / WELL KNOWN BY ALL
 BUSINESS OBJECTIVES
 RELATED TOS THE EXISTANCE & CONTINUITY OF THE COMPANY:

 MARKET SHARE
 VOLUME / TURNOVER
 PROFITABILITY

 WHAT HAS TO BE ACHIEVED BY WHEN

 SPECIFIC & MEASURABLE

 FEASIBLE & ACCEPTED

 DIFFERENTIATED

 MID TERM

 DEPLOYABLE & WELL KNOWN

 Session: 7

Case Study: IBM

 Session: 8
STRATEGY AND
COMPETITIVE
ADVANTAGE

Any competitive advantage currently held will

eventually be reversed by the actions of
competent & resourceful competitor
“The essence of strategy lies in creating
tomorrow’s competitive advantages faster
than competitors mimic the ones you
possess today “Quote”

“Strategies for taking the hill won’t necessarily hold it.”

 The Five Generic Competitive Strategies
Type of Advantage Sought
Lower Cost Differentiation

Overall Low-Cost Broad

Market Target

Broad
Range of Provider Differentiation
Buyers Strategy Strategy
Best-Cost
Provider
Strategy
Narrow Focused Focused
Buyer
Segment
Low-Cost Differentiation
or Niche Strategy Strategy
 Low-Cost Leadership

Keys to Success
Make achievement of low-cost relative to rivals the theme of firm’s
business strategy
Find ways to drive costs out of business year-after-year

Low-cost leadership means low

overall costs, not just low
manufacturing or production costs!
 Approach 1: Controlling the Cost Drivers
 Capture scale economies; avoid scale diseconomies

 Capture learning and experience curve effects

 Manage costs of key resource inputs

 Find sharing opportunities with other business units

 Compare vertical integration vs. outsourcing

 Control percentage of capacity utilization

 Make prudent strategic choices related to operations

 Approach 2: Revamping the Value Chain
 Abandon traditional business methods and shift to e-business
technologies and use of Internet

 Use direct-to-end-user sales/marketing methods

 Simplify product design

 Shift to a simpler, less capital-intensive, or more flexible

technological process

 Find ways to bypass use of high-cost raw materials

 Relocate facilities closer to suppliers or customers

 Drop “something for everyone” approach and focus on a limited

product/service
 Differentiation Strategies

Objective
 Incorporate differentiating features that cause buyers
to prefer firm’s product or service over brands of rivals

Keys to Success
 Find ways to differentiate that create value for
buyers and that are not easily matched or
cheaply copied by rivals
 Where to Find Differentiation
Opportunities in the Value Chain
 Purchasing and procurement activities
 Product R&D and product design activities
 Production process / technology-related activities
 Manufacturing / production activities
 Distribution-related activities
 Marketing, sales, and customer service activities

Internally
Activities, Activities, Costs,
Performed Buyer/User
Costs, & & Margins of
Activities, Value
Margins of Forward Channel
Costs, & Chains
Suppliers Allies &
Margins
Strategic Partners
 Risk of a Best-Cost Provider Strategy

 Risk – A best-cost provider may get

squeezed between strategies of firms using
low-cost and differentiation strategies

 Low-costleaders may be able to siphon

customers away with a lower price

 High-enddifferentiators may be able to steal

customers away with better product attributes
 Focus / Niche Strategies

 Involve concentrated attention on a narrow

piece of the total market

Objective
Serve niche buyers better than rivals

Keys to Success
 Choose a market niche where buyers have distinctive
preferences, special requirements, or unique needs
 Develop unique capabilities to serve needs of target
buyer segment
 Positioning a Company
The law of perception - marketing is not a
battle of products, it's a battle of
perceptions.

- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing

 Positioning a Company

The law of focus - the most powerful concept in

marketing is owning a word in the prospect's mind
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing
Owning in this context means that if people hear or see
this word they usually connect it with a company that
"owns" this word.

owns owns owns

“mobile phones” “fast food” “computers”
 Positioning a Company

STANDING FOR SOMETHING

Your company name ought to stand for
something within your industry.
Ford can’t build corporate position on a
specific kind of car, because it builds them
in all types and sizes.
So in 1993 Ford “Quality is Job 1” Ad
positioned it’s automobiles around “Quality”
as key attribute in a vehicle from Ford.
Who owns the quality position in
automobiles today ?
Our guess would be Mercedes-Benz.

It never pays to take somebody else’s

position away from them .
 Positioning a Company

The law of exclusivity - two companies cannot own the

same word in the prospect's mind.
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing
It's fruitless to try to take over a word that is already owned
by a competitor. FedEx tried to take over "worldwide" from
DHL and did not succeed.

Owns Owns Owns Owns

“overnight” “worldwide” “safety” “performance”
 Positioning a Company

 The law of the ladder - the strategy to use depends on

which rung you occupy on the ladder - each category has
its own ladder or hierarchy, and where your product or
service is in this hierarchy will determine your strategic
options.
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing
- Marketing strategy depends on your position in the market. If you're
No. 2 you use different strategy than when you're No. 1 or 3. Avis
was No. 2 in car rental and when they advertised as "finest in rent-
a-cars" they had losses because their marketing wasn't credible
(you can't be "finest" being No. 2). That had profit when they
switched to "Avis is only No. 2 in rent-a-cars. So why go with us?
We try harder". Then they had another disastrous campaign when
they started claiming "Avis is going to be No. 1".
 Positioning a Company

The law of line extension - there's an

irresistible pressure to extend the equity of
the brand:
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing
One day a company is tightly focused on a
single product that is highly profitable. The
next day the same company is spread thin
over many products and is losing money.
 Positioning a Company

The law of the category - if you can't be

first in a category, set up a new
category you can be first in.
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing
 Positioning Monsanto

“Best Product”
Product Leadership

Product
Differentiation –
DuPont’s Nylon

Profits are Chemical Facts

for People – Allied of Life -
Chemicals Monsanto

Business Leadership Industry Leadership

“Faith in Free-enterprise system” “Lead Industry Perception”

 Positioning a Company

The law of the mind - it's better to be first in the

mind than to be first in the marketplace:
- Al Ries & Jack Trout in The 22 Immutable Laws of Marketing

Being first in the mind is everything in marketing.

Being first into the marketplace is important only
to the extent that it allows you to get into the
mind first.
 Session: 09

Case Study: Pakistan State Oil

Session 10
Strategic Implementation

with

Business Balanced Scorecard

The Balanced Score Card – Measures
that Drive Performance
 What you measure is what you get done

 Organization’s measurement system strongly

affects the behavior of managers and
employees
Balanced Scorecard:
 A set of measures that gives top managers a fast but
comprehensive view of the business.
 It includes financial measures (that tell the results of
actions already taken)
 It complements the financial measures with operational
measures on
 Customer Satisfaction
 Internal Processes
 Organization’s innovation & improvement
activities

(Operational measures that are the drivers of

future financial performance)
The Balanced Scorecard Links Performance
Measures
Customer Perspective:
 BSC demands that managers translate their general
mission statement into specific measures / factors that
matter to customers
 Customer Concerns: Time, Quality, Performance,
Service, Cost
 To put BSC work, companies should articulate goals for
time, quality, performance, cost into specific measures.
 Benchmarking: Internal, Best in Industry, Best in class.
Measures of Customers’ Concern:
(Creating value to customer)
 Lead Time
 Time to Market
 Quality: Defect Levels
 Accuracy of Delivery Forecasts
 Becoming Customer’s Preferred Supplier
 Percent of sales from New Products
 Cost Effectiveness:
 Supplier driven costs
 Re-work
 Efficiency of Machine
 Back-Process Efficiency
 Workers’ Skill Level
 Defect Rate
What Must We Excel At ?
 Excellent customer performance derives from processes, decision
& actions

 Focus on critical internal operations

 Factors that affect: cycle time, quality, employee skills, productivity

 Identify core competencies, the critical technologies to ensure

continued market leadership

 Decompose overall cycle time, quality, product & cost measures to

local levels

 The linkage to local levels ensures that employees at all levels have
clear targets for actions, decisions & improvement activities that will
contribute to the overall mission.
Can we continue to Improve and Create Value?
 Targets for success keep changing

 Intense global competition requires that companies

make continual improvements to their existing products
& processes

 Expansion of capabilities, ability to launch new products,

create more value for customers, improve operating
efficiencies

 Specific and time bound improvement goals for existing

processes on continuous basis e.g. improvement for on-
time delivery, cycle time, defect rate, yield etc.
How Do We Look to Shareholders?

 Indicates whether the Company’s strategy & its implementation are contributing to
bottom-line improvement

 Survive: Cash Flow

 Success: Sales & Income Growth

 Prosper: Increased MS by segment, return on equity

 Disappointed financial results (separate & integrated both) should send managers to
revisit their strategy or its execution

 Periodical financial statements remind that improved quality, response time,

productivity or new products benefit the company where translated into improved
sales, MS, reduced operating expense or higher assets turn.

 Linkage of operations & finance (Excess Capacity due to improved quality &
response time)
Measures that Move Companies Forward
 BBSC puts strategy & vision, brutal facts, changes needed (and not
control) at the center.

 It establishes goals but assumes that people will adopt right

behavior & actions necessary to arrive at those goals.

 It pulls people towards the change

 Senior managers may know what the end results should be, but they
cannot tell employees exactly how to achieve that result as
conditions in which employees operate are constantly changing

 BBSC helps implement HPWS, Change Management, Cross

functional integration, customer-supplier partnership team
management, continuous improvement and such other
organizational initiatives to excel.
 Balanced Scorecard Development
Board Level Scorecard
Overall Vision

Objectives
Measure & Initiatives
Targets

H Subordinate Scorecard
Local Vision

Objectives
Measure & Initiatives
Targets Team/Individual Scorecard
Team/Ind Vision

Objectives
Measure & Initiatives
Targets