SESSION 1-19

• Strategy - The plan of action that prescribes resource allocation and other activities for dealing with the
environment, achieving a competitive advantage, and attaining organizational goals.

• Strategic Management - The set of decisions and actions used to formulate and implement strategies that will
provide a competitively superior fit between the organization and its environment so as to achieve organizational
goals.

• Top-Down Approach - The top-down approach relies on higher authority figures to determine larger goals that
will filter down to the tasks of lower level employees.

• Bottom-Up Approach - a decision-making process that gives the entire staff a voice in company goals.

• Role of a Strategist
o Creating or designing out of nothing
o Define opportunities, take those opportunities, and set boundaries.
o Filter the information you get and get only the relevant information.
o Look at the big picture. Provide a direction and guide the people included in the planning.

Strategy Management Cycle

1. Who are we? – Mission, Vision, Values

2. Where are we? – Environmental Analysis: External (PESTLE, Porter’s Diamond, 5 Forces) & Internal (SWOT)
3. Where do we want to go? – Strategy (Ex. Porter’s Generic Strategy), Business Model
4. How can we get there? BCG, Strategic Actions, Blue Ocean, Disruptive innovation
5. How do we do it? Strategic/Scenario Planning, Strategic Alignment, BMC, 7S, Kotter (if needed), Theory O vs. E
6. How are we doing?

Organization’s Aspirations. WHO ARE WE?

how a company will position itself in the industry to achieve superior returns vs competitors

• Mission – Why we exist

• Vision – What future we want to create
• Values – What is important to us (how we operate)

Campbell and Yeung

• Motivational (Heart) – there is an intrinsic motivation.

Your personal aspirations are connected to the company’s aspirations.

• Strategic (Head) – it is all strategic what an organization needs to

achieve is to be COHERENT. It is the balance between
Motivational and Strategic.
Case Analysis Framework (PACADI: 6 step decision making approach)

1. Problem Definition
2. Alternatives
3. Criteria
4. Analysis
5. Decision
6. Implementation Plan

Environmental Analysis. WHERE ARE WE?

1. Industrial Organization Theory - the external factors that shape the company’s competitive advantage
o Country Analysis – PESTLE, Porter’s Diamond (if the environment is conducive for the company/industry. Nation
vs Nation for international expansion – looking also for complementary/supporting industries)

o Industry Analysis – Porter’s 5 Forces (+government as a 6th force)

2. Resource-Based View Theory - company’s competitive advantage comes from within

o Internal analysis

o Company must be organized to sustain and take advantage of the resources that the company has: valuable,
Rare, difficult to imitate, and not easily substitutable

• Porter’s Diamond Model – determinants that create the national environment which companies are born and learn
how to compete

• Industry Analysis: Porter’s 5 Forces – Opportunities & threats, industry attractiveness, industry position, stability
o Defend or Influence?

• External Environment Analysis:

o PESTLE
o PORTER’S DIAMOND
o PORTER’S 5 FORCES
o These 3 leads to analyzing the company’s competitive
advantage relative to the external factors
(industrial organization theory)
• Internal Environment Analysis:
o Strengths Capabilities + Gaps Barriers (Weaknesses) = Competitive Advantage (Resource-based view)
▪ Is it valuable?
▪ Is it rare?
▪ Is it difficult to imitate?
▪ Is it not easily substitutable?

internal and external analysis together: SWOT - Not yet actionable, just basis for strategies, leads to the business model

WHERE DO WE WANT TO GO?

• Business Model
o Value for internal and external customer:
▪ Customer Value Proposition (Comp. Identity) – customer segmentation, what product & services to offer
▪ Financial Model
o How to deliver the value:
▪ Processes & Resources
o Strategy – integrated choices that position the company in the industry to achieve and sustain competitive
advantage over competitors

• Porter’s Generic Strategy

o Possible Risk Factors
▪ Imitation by competitors
▪ Technology change
▪ Value to buyer erodes
▪ Buyers become homogenous
 HOW CAN WE GET THERE?
BCG Matrix

• Identify company vs. industry position that will dictate investment decisions and strategic actions

STRATEGIC ACTIONS

• Vertical Integration
o Forward Integration – acquiring distributors/retailers
o Backward Integration – acquiring suppliers
• Horizontal Integration – Acquiring competitors
• Diversification (would want to use similar value chain to minimize cost)
LONG TERM OBJECTIVES

Blue Ocean Strategy

• Value innovation
• Create uncontested new market space
• Make competition irrelevant
• Break the value/cost trade off

ERRC GRID: 4-Action Framework

• Cost:
o Eliminate – factors the industry takes for granted
o Reduce – factors that can be reduced well below standard
• Buyer’s Value
o Raise – factors that can be raised well above standards
o Create – factors that the industry has never offered

MARVEL VIDEO NOTES:

• Turn arounds require 3 things: (most will fail if not all are met)
o Cost Reduction
o Revenue Growth
o Strategic Leaps in the business
• Aside from ERRC, it was essential for Marvel to have an emotional connection with the customers.
• Value innovation vs. Value Extraction
o Balancing short-term profit making vs. long-term goals, no decisions made that will benefit short term at the
expense of long term.
▪ No quarterly guidance to wall street, just annual guidance – not to distract their strategies
▪ Starts with board members (company executives) to be adamant about this
▪ Never ran to business to exit or to be sold, focus in continuous growth: value of stock, free cash flow.
• Alignment of Value, Profit, and People
o Changing culture takes time. It needs action so people see the value, and you mean it.
o Wanted, needed, and rewarded in terms of employees
o Biggest factor why leaders fail: They are incapable of making hard decisions
▪ Decisions that will grow the business but make people unhappy
▪ Human beings do not like change (even positive)
▪ To avoid failure, the company needs 90% of good leadership and a positive culture
Disruptive Innovation – PROCESS

• Change in the business model that is enabled by TECHNOLOGY that creates the disruptive impact.

1. Sustaining innovation - Incumbents continue to innovate to appeal to their most profitable customers IGNORING
those down market
2. New Entrants FOCUS on this ignored or new market by offering simpler and cheaper products
3. Incumbents DO NOT respond to the new entrants since markets are different
4. Incumbents are DISPLACED

STRATEGIC PLANNING AND IMPLEMENTATION (HOW DO WE DO IT?)

• Strategic planning and execution are inseparable

TACTICAL PLANNING

• Translating STRATEGIC PILLARS into ACTIONABLE PROJECTS over a defined period (marketing objectives)
• It identifies the DETAILS of the company’s PROCESSES AND OPERATIONS incl. the roles and responsibilities of
employees and REQUIRED RESOURCES.

STRATEGIC ALIGNMENT

• ALL ELEMENTS of the businesses are ARRANGED in such a way as the BEST SUPPORT the fulfilment of its LONG-TERM
PURPOSE.
o Strategy – HOW the business will achieve its long-term goals.
o Organizational Capabilities – readiness to execute the strategy.

BUSINESS MODEL CANVAS

Before execution, the strategy is evaluated first through BMC. (pre-execution stage)
THE 7-S Model – Alignment, Consistency, Fit, Reinforcement

• Assess the wellbeing of 7 INTERNAL factors to determine

If the company has a structural support to be successful.
• Hard Elements – influenced by management
o Strategy – ideally long-term
o Structure – corporate hierarchy
o Systems – daily SOP
• Soft Elements – company culture
o Staffing
o Skills
o Styles – management leadership approach
• Both elements should coincide with the
Company’s shared values and goals

Kotter Model – Change management, Execution Risk Management

• 8 Step model for leading change

1. Create sense of urgency – help others see the NEED for change. Communicate importance of acting immediately
2. Build a guiding coalition – to guide, coordinate, communicate activities
3. Form a strategic vision and initiatives – clarify how to future will be different from the past, how to make it a
reality via initiatives linked to vision
4. Enlist a volunteer army – large change scale is only possible with massive number of people rallying for a common
goal
5. Enable action by removing barriers – remove inefficient processes and hierarchies to provide freedom to work
across silos
6. Generate short-term wins – wins = results. These must be recognized, collected, and communicated to track
progress and energize volunteers to persist
7. Sustain acceleration – press harder after first successes. Increasing credibility improve systems, structures and
policies
8. Institute change – articulate the connections between new behaviors and organizational success – assuring they
continue until they become strong enough to replace old habits

BLUE OCEAN IMPLEMENTATION RISK

• Organizational Risk – 4 key hurdles that block the implementation

o Tipping Point Leadership (TPL) – Change management, Execution Risk Management, Overcome the hurdles
• Management Risk – distrust and resentment can derail execution
o principles of Fair Processes – Change management, Execution Risk Management, Overcome the hurdles

• Strategy Execution

• Cracking the Code of Change

• Theory O – change based on organizational capability
• Theory E – change based on economic value

EX:

Balanced Scorecard

• Measures accountability
• Does not consider changes in the environment
• Strategy translating framework: A way to simplify plan, top to bottom approach
• Can be a part of internal analysis prior to SWOT

CASE BUSINESS PROBLEMS/FRAMEWORKS

Who are we?

1. Mindtree Consulting
• How to ensure that today’s ‘Special Touch’ remains Special even in a hyper-growth environment?
• Focused framework: Mission, Vision, Values

Where are we?

2. Lagom Kitchen + Brewery: A Quest for Survival

• Why did they over forecast their growth?
• Focused framework: PESTLE, Porter’s 5 Forces, RBV

3. Canopy Growth Corporation: Canada Fist and the World Next

• Should they stay in Canada or expand to other countries?
• Focused framework: Porter’s Diamond, CAGE analysis, RBV

Where do we want to go?

4. Parle Products Private Limited: GST and Retaining Competitiveness

• Increasing tax: What should the company do to retain Parle’s profit margins in the competitive space?
• Focused framework: BCG, Strategic Actions
 5. The Marvel Way: Restoring a Blue Ocean
• How did Marvel become who it is today?
• Focused framework: Blue Ocean, ERRC

How can we get there?

6. Netflix in 2011
• How did Netflix displace Blockbuster?
• Focused framework: Sustainable innovation, disruptive innovation

7. Strategic Planning at UPS

• How should UPS create a roadmap for its centennial strategic plan?
• Focused framework: Scenario Planning

How do we do it?

8. Business Model Challenges: The Electric Vehicle Company

• Why did EVC fail despite having superior products and strong demand?
• Focused framework: balancing production & consumption in BMC, Lean BM, 7S

9. Effective Leadership at Zensar Technologies: Riding the Wave of Change

• Should Zensar pursue being tier 1 company or not?
• Focused framework: 7S, Kotter 8 Step Model

10. Centuria Health System

• What needed to change in Centuria with the threat of growing competitors?
• Focused framework: 7S

11. Wolkswagen do Brasil: Driving Strategy with Balanced Scorecard

• Should Wolkswagen increase its production amid the economic downturn?
• Focused framework: Balanced Scorecard

SFI QUIZ 2-4 Q&A

1. Focus Differentiation is one of the strategies in Porter’s generic strategies. – TRUE
2. In Porter’s 5 forces, the bargaining power of buyers is high if product is standard or undifferentiated. – TRUE
3. A Vision statement describes what the organization stands for and its priorities. – FALSE
4. Firms may pursue a forward integration strategy to gain control or ownership of its suppliers. – FALSE
5. A resource is considered valuable if it is rare, hard to imitate and not easily substitutable. These characteristics are
often called critical factors. – FALSE
6. Motivational and Strategic are the two dimensions in Campbell and Young’s Framework of the value of
organizational aspirations. – FALSE
7. Sustaining innovation is making good products better in the eyes of an incumbent’s existing customers. – TRUE
8. The essence of strategic planning is to predict the future and determine the best position of the company. – FALSE
9. The presence of experience curve insures a barrier to entry. – FALSE
10. Resource-Based View (RBV) Theory emphasizes the role of external factors in an organization’s competitive
advantage. – FALSE
11. Ford has totally revamped its Everest SUV with new features, options, and style. Which strategic action best
describes this activity? – INTENSIVE
12. In 2015, Philippine Airlines began flying to New York, USA, and Quanzhou, China. Which strategic action best
describes this activity? – INTENSIVE
13. Which of the following tools or frameworks does not apply to change management scenarios? – 7S Model
14. In Porter’s analysis of competitive forces, which of the following is not part of the forces: - NONE OF THE ABOVE
(Bargaining Power of Supplier, Government, Industry Rival, and Threat of New Entrants)
15. Amazon started producing and selling its own line of diapers. Which strategic action best describes this activity? –
DIVERSIFICAITON
16. Which of the following objectives is not considered a long-term strategic objective? – RETURN ON INVESTMENT
17. In March 2018, Uber sold its operations in Southeast Asia to Grab. In turn, Uber will receive a 27.5% stake in the
business. Which strategic action best describes this activity? – DEFENSIVE
18. Sears is closing about 235 stores annually. Which strategic action best describes this activity? – DEFENSIVE
19. In the Resource-Based View (RBV) theory, which of the following characteristics does not constitute an empirical
indicator of a company’s resource: - ORGANIZATIONAL ALIGNMENT
20. Which of the following frameworks does not apply to the analysis of environments? – NONE OF THE ABOVE (RBV,
PORTER’S COMPETITIVE FORCES, PESTLE, PORTER’S DIAMOND MODEL)
21. A market-creating strategy is the same as a differentiation strategy. – FALSE
22. Scenario planning and contingency planning are similar as both concepts examine one uncertainty. – FALSE
23. Disruptive Innovation is a market-creating strategy. – TRUE
24. Iphone’s initial growth is explained by sustaining innovation, but its subsequent growth is explained by disruptive
innovation. – TRUE
25. Strategic intent envisions a desired leadership position and establishes the criterion the organization will use to
chart its progress. – TRUE
26. In the 7-S Model, the soft S’s are skills, style, strategy, and shared values. – FALSE
27. The two implementation risks of a Blue Ocean strategy are organizational and cultural. – FALSE
28. Uncovering a niche in an existing space is not the same thing as identifying a new market space. – TRUE
29. According to the Kotter model, the use of consultants is vital to help top management set the new direction and
engage the people below. – FALSE
30. The intensity of rivalry is greatest if industry growth is slow. – TRUE