What is Strategy?

Sumit Mitra IIMK

Learning Outcomes (1)

Understand the characteristics of strategic decisions and what is meant by strategy and strategic management, distinguishing them from operational management
Understand how strategic priorities vary by level: corporate, business, and operational Understand the basic vocabulary of strategy

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Brad Garlinghouse, MBA Sr. VP- Yahoo! Memo:

In Nov 2006 he wroteThree and a half years ago, I enthusiastically joined Yahoo!... But all is not well We lack a focussed, cohesive vision for our company. We want to do everything and be everything- to everyone We are scared to be left out. We are separated into silos that far too frequently dont talk to each other

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Brand of Yahoo! cond

Our strategy is described as spreading peanut butter across the myriad opportunitiesthus we focus on nothing in particular I hate peanut butter!! There is massive redundancy.. For far too many employees there is another person with similar and overlapping responsibility Lack macro-perspective Solution: Focus on Vision-what we are, exit non-core business Execute radical reorganization-restructure, decentralize, downsize. STOP EATING PEANUT BUTTER!!!

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What are issues being raised?

Lack Focus- Overall Vision
Silos- Organization structure

Talk to each other- HR/behaviour

Opportunities- Macroeconomic, Marketing, Making Money Redundancies- More people- HR/Roles and Responsibilities
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Three Big Questions

Where are we now?

-What Brad says is current position of Yahoo

Where do we want to go?
Business(es) to be in and market positions to stake out
Buyer needs and groups to serve

Outcomes to achieve

How will we get there?

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A companys answer to how will we get there?

IS ITS STRATEGY
It is a commitment to pursue a particular set of actions/a set of choices some of which could go wrong (show graph)

But there are other questions to answer before making choices

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What is Strategy?
Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.

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Characteristics of Strategic Decisions

Long-term direction-Yahoo needs marathon not sprint Scope of an organisations activities Competitive advantage-loss to Google Strategic fit with business environment-Lack
macro perspective

Organization resources and competences Values and expectations of power players

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Implications of Strategic Decisions

Complexity
Uncertainty

Integration
Relationships and networks

Change
Different from Operational Decisions

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Operational Vs Strategic Decisions

Perform activities better- faster with less inputs, best practices, ISO Best practices can be copied- does not give sustainable advantage Need to do different activities or similar activities differently from competitors (e.g South-West Airlines) Strategy Has a Long Term perspective
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South West Airlines

Short haul, point to point Low cost, no frills

Mid-sized cities, secondary airport

Frequent departure, low fares Regular business travelers, students Standard 737 aircraft- spares, aircraft No baggage transfer

Continental Airlines
Started Continental Lite to compete-tradeoff
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Trade -Offs
Sustainable Strategic position needs trade-offs
Can Continental lite compete SW? Can Medimix/Neutrogena a medicinal soap prescribed by doctors compete with Camay or Lux ? Why not?

Can Ford make and sell Jaguar? http://www.jaguar.com/gb/en/

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Jaguar History
The Swallow Sidecar Company was founded in 1922 by two motorcycle enthusiasts, William Lyons and William Walmsley. In 1935 the SS Jaguar name first appeared on a 2.5 litre saloon,[7] sports models of which were the SS 90 and SS 100. Few engines have demonstrated such ubiquity and longevity: Jaguar used the Twin OHC XK Engine, in such diverse vehicles as the British Army's Scorpion Light Armoured Combat Reconnaissance Vehicle In 1999 it became part of Ford's new Premier Automotive Group along with Aston Martin, Volvo Cars and, from 2000, Land Rover. Aston Martin was subsequently sold off in 2007. Between Ford purchasing Jaguar in 1989 and selling it in 2008 it did not earn any profit for the Dearborn-based auto manufacturer. On 26 March 2008, Ford announced that it had agreed to sell its Jaguar and Land Rover operations to Tata Motors of India. The company Lotus Engineering Ltd. by engineer Colin Chapman in UK was supplier of engines to F1 cars.
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Recent Models
The Jaguar XJ is a full-size luxury saloon

The Jaguar XF is a mid-size executive car introduced in 2008

Of the more recent saloons, the most significant is the XJ (19681992),

XJ220. Designed to compete head-on with the Ferrari F40 and Porsche 959 supercars
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Trade Offs
The Tata Nano is an inexpensive, rearengined, four-passenger city car built by the Indian company Tata Motors and is aimed primarily at the Indian domestic market.

What Tradeoffs is TATA making or needs to make? Trade offs arise out of: Inconsistency in image or reputation e.g Medimix/ Neutrogena versus Lux/Camay perfumed, lather, creame Activities- automation, skills, systems- Fords mass production vs Jaguars R&D Internal coordination/control- South West versus Continental
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It is like saying
Among all the many different business approaches and ways of competing we could have chosen, we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction, strengthening its market position, and competitiveness, and boosting performance.
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Sustainable Competitive Advantage

This may be achieved through the following options - Strive to be the industrys low-cost provider Wal Mart & South West Airlines Out-compete rivals on a key differentiating features like higher quality, more choice, better technology e.g Harley-Davidson, Mercedes Benz, Rolex Focus on a narrow market niche, doing a better job than rivals of serving the unique needs of niche buyers e.g e-Bay, Starbucks,McAfee

Develop expertise, resource strengths, and capabilities not easily imitated by rivals e.g FedEx, Walt Disney, Toyota

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Levels of Strategy
Corporatelevel strategy
Business-level strategy Operational strategy

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Levels of Strategy Strategies are formulated at different levels:

Corporate Strategy: What businesses to be in to boost overall performance-BOD approves
Business Strategy: How to compete in a business-link corporate to function Functional area strategy to support business strategy at function level say marketingAmway Operational: Align operations to business strategy/functions.

Vocabulary of Strategy
Mission
Vision Goal Objective

Strategic capability
Strategies Business model Control

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Vocabulary of Strategy: Nokia

Vision/Mission- Helps decide what business firm is in
Connecting is about helping people feel close to what matters. Wherever, whenever, Nokia believes in communicating, sharing, and in the awesome potential in connecting the 2 billion who do with the 4 billion who dont.

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Examples of Competitive Advantage and their sources..

Sophisticated distribution systems Wal-Mart

Product innovation capabilities 3M Corporation

Complex technological process Michelin Defect-free manufacturing Toyota and Honda

Specialized marketing and merchandising knowhow Coca-Cola

Global sales and distribution capability Black & Decker

Superior e-commerce capabilities Dell Computer

Personalized customer service Ritz Carlton hotels
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Strategy can arise from Internal Resource of firmResource Based View of Firm (RBV)

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THANK YOU

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