The Concept of Strategy

Session 1
What is Strategy?
Consists of competitive moves and business
approaches used by managers to run the company
Managements action plan to
Grow the business
Attract and please customers
Compete successfully
Conduct operations
Achieve target levels of
organizational performance

2
 What is Strategy? Contd.
A firms strategy is found in its investments in resources
and capabilities that 1) determine its market position
and 2) defend this position from competitors
Benefits of an effective strategy
Relates the firms resources and capabilities to its markets
Provides a framework for integrating activities within the firm
Acts as a guide for decisions regarding management and
organization
Businesses achieve competitive advantage by emphasizing
cost, value to the customer, or both.

3
The Three Strategic Questions
Whats the companys present situation?
Where does the company need to go from here?
Businesses to be in and market positions to stake out

Buyer needs and groups to serve

Direction to head

How should it get there?

A companys answer to how
will we get there? is its strategy

4
Origins of Strategy
Basic origins of strategy include:
Industrial and evolutionary economics
Case studies of exemplary companies
Business and industry history
Economic and organizational sociology
Strategic planning tools
Institutional economics

5
10 Schools of Strategy

Strategy Safari (Mintzberg, Ahlstrand, Lampel)

6
5 Ps of Strategy
Plan. A direction, guide, course of action.

Pattern. Consistency in behavior over time.

Position. Locating specific products in specific

markets.

Perspective. Way of doing things.

Ploy. Specific maneuver to outwit.

Strategy Safari (Mintzberg, Ahlstrand, Lampel)

7
Strategy Formulation and Implementation
Strategy formulation
Information gathering and identification of resources and
capabilities
Deciding which strategy the firm should follow
Strategy implementation
Taking action necessary for the strategy to be successful

8
Strategy and the Quest for Competitive
Advantage
The heart and soul of any strategy are the actions
and moves in the marketplace that a company
makes to strengthen its competitive position and
gain a competitive advantage over rivals
A creative distinctive strategy that sets a company
apart from rivals and yields a competitive advantage
is a companys most reliable ticket to above average
profitability
Competing with a competitive advantage is more
profitable than competing with no advantage
Competing with a competitive disadvantage nearly always
results in below-average profitability

9
A Powerful Strategy Leads to
Sustainable Competitive Advantage
A company achieves sustainable competitive
advantage when an attractive number or buyers prefer
its products/services over those of rivals and when the
basis for this preference can be maintained over time
Its nice when a strategy produces a temporary
competitive edge but a durable edge over rivals greatly
enhances a companys prospects for winning in the
marketplace and realizing above-average profits

What separates a powerful strategy from an ordinary

strategy is managements ability to forge a series of
moves, both in the marketplace and internally, that
produces sustainable competitive advantage!

10
Four Best Strategic Approaches to
Building Sustainable Competitive Advantage
Being the industrys low-cost provider (a cost-based
competitive advantage)
Incorporate differentiating features (a superior
product type of competitive advantage keyed to
higher quality, better performance, wider selection,
value-added services, or some other attribute)
Focusing on a narrow market niche (winning a
competitive edge by doing a better job than rivals
of serving the needs and preferences of
buyers comprising the niche)
Developing expertise and resource
strengths not easily imitated or matched by rivals
(a capabilities-based competitive advantage)

11
Strategy Execution
Entails continuous development, maintenance and
improvement of resources and capabilities
Elements of execution:
Incentives and compensation
Control and coordination systems
Degree of consistency among a firms activities
Firms culture and human resource systems
Effective execution requires each element to reinforce
the others
Not the same as strategic planning

12
Strategic Planning
Details the process for developing business
strategies and links them to operational programs
and investments
Details the logic behind cash flow forecasts
Provides process for:
Development of the firms mission
Goal setting
Identification of strategic initiatives
Program development, scheduling and accountability
Problem solving and innovation

13
Tests of a Winning Strategy

Goodness of fit test

How well does strategy fit
the firms situation?

Competitive advantage test

Does strategy lead to sustainable
competitive advantage?

Performance test
Does strategy boost firm performance?

14
Thank You
15