Global Business

Strategy
Week 2
Logical Framework

What is strategy

Why strategy

How to Develop Effective Strategy

01 02 03
What is a strategy? Why have a strategy? How
• Survival • Core Ideology
• Win: Competitive • SWOT Analysis
Advantage • Strategy Formulation
• Execution tactics &
programs
• Measure & Realign

Contents
References
• Hitt, Ireland and Hoskisson, Strategic Management, Competitiveness and
Globalization, 12e, Cengage Learning
• Peng, Global Strategy 3rd and 4th Ed (MindTap), Cengage Learning
• Porter, M.E. (1980) Competitive Strategy, Free Press, New York.
• Hill, Schilling and Jones, Strategic Management, 12e, Cengage Learning
• Gaspar et al, Introduction to Global Business, 2nd Ed., Cengage Learning
• Wheelen et al, Strategic Management and Business Policy 15e, Pearson
• 2013 Robert M. Grant, Contemporary Strategy Analysis, 8e
Overview
Learning Objectives for the Course
• Understand what a strategy is and the origins of strategic thought.
• Describe the components of a business strategy and what makes a successful business strategy.
• Appreciate the importance of following a strategic approach in business management.
• Acquire and develop a strategic mindset.
• Describe the processes for, and implications of, strategic management within organizations.
• Analyze a business’s internal environment to clearly identify strengths, resources, weaknesses and limitations.
• Describe the competitive dynamics and the external environmental factors (political, economic, legal, social, cultural,
technological, etc.) that affect various businesses posing opportunities and threats to business operations and future.
• Design an effective corporate international business strategy and use analytical skills to determine its effectiveness.
• Analyze effective organizational culture, structures, management process and systems and way of doing business including control
and change management systems for the successful implementation of a strategy.
• Understand the components of Blue Ocean Strategy (BOS) and how it can be used to create uncontested market space and achieve
fast growth.
• Summarize how innovation can help entrepreneurial companies and start-ups enter the international market and achieve quick
growth challenging traditional barriers and disrupting existing market rules.
• Chart current strategic positioning elements and formulate new strategic positioning in order to respond to ever changing
international market demands.
Organization of the Course
• Introduction: the concept of strategy
• Environmental Analysis, Industry and competitive analysis – how competitive forces shape
strategy – understanding competitive dynamics
• Tools for strategic management (5 p’s of strategy, 5 industry forces, Analyzing industry
environments, intra industry analysis)
• Core competencies – analysis of the firm’s resources and capabilities
• Corporate strategy and implementation including organization structure, culture, systems,
processes and control mechanisms
• Globalization and international strategy with emphasis on entrepreneurial companies and start-
ups
• Strategy and innovation – strategic entrepreneurship
• Blue Ocean strategy
• Analytical tools and framework
• Formulating a blue ocean strategy
• Executing a blue ocean strategy
WHAT?
What is Strategy?
What is a Strategy?
 Game
• What is your attack strategy?

• What did we learn from this game about

strategy and:
• Situation Analysis
• Resources
• Actions and Sequence
• etc.
Origins
• Origin – Greek word (strategos) “art of the general”
• Sun Tzu, Chinese military strategist in 500 BC
• Modern-day application to business and competition dates to the 1960s
• Plan versus Action – strategy is “explicit, rigorous formal planning”
versus “a set of flexible, goal-oriented actions”
• Strategy as Theory – how to compete successfully
Integrate both planning and action schools
What Is Strategy?
Strategy is a firm’s theory about how to compete successfully
Strategy should be communicated in a powerful but easy-to-remember way
Strategy should give coherence to decisions and actions
Managers must exercise strategic leadership
Strategy
• Set of related intentions, commitments, plans, programs, actions and
measures that managers take to systematically create unique and superior
value in order to ensure:
• Survival
• Above average returns
• Strategic leadership - Creating competitive advantage through effective
management of the strategy-making process.
• Vision Setting and Core Ideology
• Strategy formulation - Selecting strategies based on analysis of an organization’s
external and internal environment.
• Strategy implementation - Putting strategies into action.
• Measurement and realignment

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Strategy & Tactics
• Being in business is really a question of developing strategy and
executing tactics
• STRATEGY = The development of plans and decisions that will guide
the direction of the firm and determine its long term performance
• TACTICS = The immediate term actions that a firm executes to meet
its short term objectives as set forth in the current planning cycle
• To successfully grow a company, the management team has to be
successful in both planning strategy and executing tactics
• The right product has to reach the right customer, at the right time,
and at the right place for the right price
Interdependency of Strategy & Tactics
16
What is a Global Strategy
What Is Globalization?
• Globalization: The close integration of countries and peoples of the
world
• New force sweeping through the world in recent times?
• Long-run historical evolution since the dawn of history?
• Closer integration of the countries and people of the world?
• Pendulum view: Globalization swings between embracing and restricting due to
success, world events, crises, etc.
• A process similar to the swing of a pendulum: Postwar history, emerging economies,
outsourcing, MNEs, terrorist attacks, BRIC, recession…
• Semiglobalization: Market barriers are high but not high enough to completely insulate
countries
What Is Global Strategy?
• Provide standardized products and/or services on a worldwide basis
(i.e., traditional view)
• Any strategy outside one’s home country
• The firm’s theory of competing in the global market place
One Size Fits All Global Strategy?
• Traditional global strategy of standardized products
and services around the globe is incomplete and
unbalanced
• Sacrifices local responsiveness and global learning
• Ignores how domestic firms compete with each other and
with foreign entrants
• Traditional global strategy is only appropriate for large
MNEs in developed countries
• It is dangerous to ignore less developed economies
• It is important to respond to local needs
Global Strategy
• Know Yourself, Know Your Opponents and Mind your Surroundings
Understand strengths AND limitations
Recognize the social, political, and environmental costs associated with
globalization
Current business school students exhibit values and beliefs different from the
general public
Be aware of bias and strategic blind spots (of students, instructors, and
managers)
Strategic Mindset
Strategic Mindset
• What is a strategic mindset?
• Goal Oriented
• Focused on the vision
• Not distracted by opportunities which are not relevant to the company’s
vision, mission and values
WHY?
Why Have a Strategy?
Why have a strategy?
• Discussion
• What is the first priority of any organism, entity, person or
organization?

• Survival on the short term

• Superior performance to ensure survival on the longer
term
Benefits of Strategic Management

• The attainment of an appropriate match, or “fit,” between an

organization’s environment and its strategy, structure, and processes
has positive effects on the organization’s performance.
• Strategic planning becomes increasingly important as the
environment becomes more unstable.
• Clearer sense of strategic vision for the firm
• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing environment

1-26
Competition
And Competitive Advantage
Twenty-First Century Competition
Rapid
Globalization technological
change

Increasing
The global importance of
economy Today’s knowledge
competitive and people
markets

1–28
The Global Competitive Landscape
• Market volatility and instability due to
the rapid pace of change in markets
• Blurring of market boundaries
• Globalized flow of financial capital
Increasing • Need for flexibility, speed, innovation,
and integration in the use of technology
• Strategic and operational complexity
of global-scale competition
• Rising product quality standards

• Traditional time for adapting to change

Decreasing

• Traditional sources of competitive advantage

• Traditional managerial mindset

1–29
Competitive Advantage
Formulation and
implementation of
a superior value-
creating strategy

Commitments and actions to achieve

above-average performance and returns

What the firm Competitive What the firm

will do advantage will not do

1–30
Competitive Success Factors
Are market/ Make effective
customer-needs use of valuable
oriented competencies

Have an
Offer new
entrepreneurial/
and innovative
opportunistic
mindset
Top corporate products and services
performers

1–31
Competitive advantage
• Occurs when a company can deliver value which is superior to the
competition
• Happens when a company uses its resources and capabilities in
creating and mastering core competences which will allow it to
deliver that superior value
• Results in profitability which is greater than the average profitability
of firms in its industry.
• Sustained competitive advantage – A company’s strategies that
enable it to maintain above-average profitability for a number of
years.
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33
BUSINESS MODEL
• Conception of how strategies should work together as a whole to
enable the company to achieve competitive advantage.
• Deals with how a company:
• selects, acquires, and keeps its customers.
• defines and differentiates its product offerings.
• creates value for its customers.
• produces goods or services and delivers to the market.
• lowers costs and organizes its resources and activities.
• achieves and sustains high profitability and growth.

34
Strategic Flexibility
• Often, organizations face difficulty in responding to change
• Change create uncertainty
• Organizations have “inertia” which resists change and seeks to maintain “status
quo”
• Strategic Flexibility means that organizations can “respond” to changes faster
than the competition.
• Organisms which changed their DNA through evolution in response to
environmental changes survived and prospered. Those who didn’t, became
extinct!
• Strategic Flexibility:
• Involves coping with the uncertainty and risks of hypercompetitive environments.
• Must first overcome built-up organizational inertia.
• Requires developing the capacity for continuous learning and applying the new and updated
skills sets and competencies to the firm’s competitive advantage.

1–35
Strategic Choices
• A business can choose between a number of generic strategies such
as:
• Cost leadership
• Differentiation
• Unique positioning of cost and differentiation
Cost Leadership
• can happen as a result of:
• Economies of scale
• R&D
• Process engineering
• Investment in production technology
• Vertical integration
• Bargaining power
• Superior logistics
• etc.
Differentiation
• Differentiation can happen as a result of:
• R&D
• Continuous innovation
• High level of customization and personalization
• Flexible manufacturing technology
• Niche market strategies
• Investment in marketing research and product design
• High service component
• Additional benefits, features and performance which adds value to the
customers which they are willing to pay for
• etc.
Case Studies
• McDonalds
• Elizabeth II
• Madonna
• Wall Mart
Wal-Mart
• What was Sam Walton’s original strategic vision for Wal-Mart? How did this
enable the company to gain a competitive advantage?
• How did Wal-Mart continue to strengthen its competitive advantage over time?
What does this teach you about the source of a long-term competitive
advantage?
• By the early 1990s, Wal-Mart was encountering limits to growth in the US. How
did it overcome these limits to growth? Explain how the expansion moves that
Wal-Mart made in the 1990s made economic sense and helped to create value
for the company’s shareholders.
• Wal-Mart is once again encountering limits to growth. Why do you think this is
the case? What might Wal-Mart do to push back these limits?
• How much of Wal-Mart’s strategy do you think was planned at the outset, and
how much evolved over time in response to circumstances? What does this
suggest to you about the nature of strategy development?
How did Wal-Mart

• continue to strengthen its competitive advantage over time? What

does this teach you about the source of a long-term competitive
advantage?
• ICT
• HR
• Logistics – SCM
HOW?
Strategic Management Process
Strategic Management
• Strategic management is more than a static plan which everyone
implements!
• It is a dynamic process which aims at survival and superior
performance. The process includes:
• Developing core ideology (Vision, Mission, Values & Brand Promise)
• Scanning of the Internal and External Environment
• Developing a strategy which achieves a dynamic fit between the firm, its core
ideology, goals, resources, capabilities, competences and the environment.
• Implementation of the strategy through effective and efficient programs and
action plans
• Measurement and realignment
 Core Ideology

Measure &
SWOT Analysis
Realign
Strategic
Management
Process
Implementation Objectives

Strategy
Core Ideology
• Mission
• purpose or reason for the organization’s existence
• Vision
• describes what the organization would like to become
• Brand Promise
• Encapsulate the value proposition of the company, for instance:
• Cheaper Prices Everyday (Wal Mart)
• Safety (Volvo)
• Values
• Define the culture and the personality of the company

• Objectives
• desired results of planned activity

1-45
Core Ideology
What is Ideology
• Discussion
Vision Statement
• A Successful Vision:
• is an enduring word picture of what the firm wants to be and expects to
achieve in the future.
• stretches and challenges its people.
• reflects the firm’s values and aspirations.
• is most effective when its development includes all stakeholders.
• recognizes the firm’s internal and external competitive environments.
• is supported by upper management decisions and actions.

1–48
Mission Statement
• An Effective Mission:
• specifies the present business or businesses in which the firm intends to
compete and customers it intends to serve.
• has a more concrete, near-term focus on current product markets and
customers than the firm’s vision.
• should be inspiring and relevant to all stakeholders.
• Should illustrate why the company exists (raison d'être) and how it adds value
to its stakeholders

1–49
Components of a Mission statement
Mission

• Purpose of the company, or a statement of what the company strives to

do.

Vision

• Articulation of a company’s desired achievements or future state.

Values

• Statement of how employees should conduct themselves and their

business to help achieve the company mission.

Establishing major goals

• Goal - Precise and measurable desired future state that a company

attempts to realize.
50
Values
• Discussion
• What are the organization values?
• Why are they important?
• How do they manifest themselves?
• What is the organization culture?
• Can it be a source of competitiveness?
• Can the lack of values hurt the organization?
Activity
• Identify core ideology of a business you admire
Environmental Scanning
Know yourself, Know your Opponent and Mind your Surroundings!
Environmental Scanning

• the monitoring, evaluating and disseminating of information from the

external and internal environments to key people within the organization
• SWOT analysis: simple way to conduct environmental scanning

1-54
Environmental Variables

1-55
Strategy Formulation
Strategy

• Strategy Formulation
• process of investigation, analysis, and decision-making that provides the
company with the criteria for attaining a competitive advantage
• includes defining the core competencies and competitive advantages of the
business, crafting the corporate mission, specifying achievable objectives, and
setting policy guidelines
• The strategy
• forms a comprehensive master approach that states how the corporation will
achieve its mission and objectives
• maximizes competitive advantage and minimizes competitive disadvantage
• is defined at several levels, including corporate, business, functional

1-57
Hierarchy of Strategy

1-58
Implementation
• Execution of the strategy through programs and action plans
Measurement and Realignment
• Measuring actual performance and KPIs as compared to objectives
• Realigning strategy and or implementation
• Even revisiting objectives and goals
Activity
• What are the lessons we can learn from Starbucks growth
• http://www.mckinsey.com/global-themes/employment-and-
growth/starbucks-quest-for-healthy-growth-an-interview-with-
howard-schultz
• Perform SWOT analysis for Starbucks
• What would be the best strategy for Starbucks?
Lessons Learned
• Growth in itself is not a strategy: Disciplined growth
• Over emphasis on P/E ratio led to reporting monthly sales, which
made managers make decisions to increase sales rather than serve
customers (which would eventually increase sales), Schultz stopped
that
• Seed products inside the store, then utilize emotional connection
with clients in selling these products in other retail stores (30,000)
RyanAir
• From an industry-based view, assess the strength of the five forces and
determine the extent to which Ryanair is positioned against those forces.
• From a resource-based view, what explains Ryanair's success?
• From an institution-based view, assess the opportunities and threats
presented by the current and future institutional environment (both formal
and informal). How should Ryanair respond?
• What is your evaluation of the proposal that Ryanair offer free flights in
perpetuity? Draw on the three views in your answer.
• ON ETHICS: Evaluate Ryanair's ethical (or unethical) behavior, especially in
light of the questionable practices discussed in the case. What changes, if
any, would you recommend to CEO Michael O'Leary?
Thank you!
Good Luck