Essay Strategic Practice 2019/2020

María Ruiz Marín

Karlshochschule
Structure

1. Abstract

1.1 What is Strategic Management?

2. Task one:

2.1 Emergence of Strategy as a discipline of management and changes over time

2.2 Discussion of changes over time

2.3 Tool of strategizing

3. Task two:

3.1 Case of Study​ (Positive)

3.2 Case of Study​ (Negative)

4. Conclusion

5. Literature
 Abstract
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 1. Introduction

1.1 What is Strategic Management?

- What is?:
- The strategic management activity is concerned with establishing objectives
and goals for the organization, and with maintaining a set of relationships
between the organization the environment with the organization capabilities,
and continue to be responsive to environmental demands.
- In summary:
- To determine and bring about strategic change in the organization.
- To build an organization architecture conductive to strategic change
- To select and develop individuals (both workers and managers) motivated and
capable of creating strategic changes.
https://books.google.de/books?hl=fr&lr=&id=YSt1DwAAQBAJ&oi=fnd&pg
=PR9&dq=strategic+management&ots=qSPu9zx4lv&sig=vIzx4FzVhDjVVUi
Lvt2MLPLGYZc&redir_esc=y#v=onepage&q=strategic%20management&f=
false (page 12)
H. Igor Ansoff, Daniel Kipley, A.O. Lewis, Roxanne Helm-Stevens, Rick
Ansoff (1984) Implanting strategic management, Englewood Cliffs, N.J.
:Prentice/Hall International.

- Companies must be flexible to respond rapidly to competitive and market

changes.
- They must outsource aggressively to gain efficiencies.
- The roof of the problem is the failure to distinguish between operational
effectiveness and strategy.
- The quest for productivity, quality, and speed has spawned a remarkable
number of management tools and techniques: total quality management,
benchmarking, time-based competition, outsourcing partnering, reengineering
change management.
- Operational effectiveness means performing similar activities better perform
them.
- Includes but not limited efficiency. In contrast, strategic positioning means
performing different activities from rivals or performing similar activities in
different ways.
- Fact: Japanese companies rarely have strategies.
- Reference: [Porter, M. (1996): What is Strategy?, In: Harvard Business
Review 74(60), 61-63]
 - https://iqfystage.blob.core.windows.net/files/CUE8taE5QUKZf8ujfYlS_Readi
ng+1.4.pdf
-
- Problem: pursuing incremental improvements while rivals reinvent the
industry is like fiddling while Rome burns.
- Shackled neither by convention nor by respect for precedent, these companies
are intent on overturning the industrial order. They are the malcontents, the
radicals, the industry revolutionaries.
- Never has the world been more hospitable to industry revolutionaries and
more hostile to industry incumbents.
- But it’s not just the forces of change that are overturning old industrial
structures—it’s the actions of companies that harness those forces for the
- Change is not the problem; engagement is.cause of revolution. (See the insert
“Nine Routes to Industry Revolution.”), ​When was the last time a
Generation-X employee in your company exchanged ideas with the executive
committee?
- Reference: [Hamel, G. (1996). Strategy as Revolution. In: Harvard Business
Review, 74(4). 61- 63
https://scholar.google.de/scholar?q=Hamel,+G.+(1996).+Strategy+as+Revolut
ion.+In:+Harvard+Business+Review,+74(4).+69-82.&hl=fr&as_sdt=0&as_vis
=1&oi=scholart]

2. Task one:

2.1 Emergence of Strategy as a discipline of management and changes over time

- Strategy word origin: from Greek στρατηγία stratēgia, "art of troop leader;
- office of general, command, generalship" Reference: [Henry George Liddell,
Robert Scott, A Greek-English Lexicon, on Perseus]

- Reference: [Clegg, S., Carter, C., Kornberger, M. and J. Schweitzer. (2011).

Strategy: Theory and Practice, London: Sage (introduction: The Context and
Emergence of Strategic Thinking, & chapter 4
https://opus.lib.uts.edu.au/bitstream/10453/77487/1/Strategy%20Theory%20a
nd%20Practice%20second%20edition%202017.pdf​]

- Reference: [Gary Hamel on Management Challenges today:

https://www.bing.com/videos/search?q=gary+hammel+strategy+as+revolution
&&view=detail&mid=D53EC388ACB79DC8601ED53EC388ACB79DC860
1E&FORM=VRDGAR​]
- The first Industrial Revolution (1700-1800) witnessed competition, the small
industrial and merchant firms that were emerging required little or no formal
planning or strategy in the modern sense.
- The Second Industrial Revolution, which started in the second half of the
nineteenth century, saw the emergence of strategy as a way to control market
forces and to shape the competitive environment. In the United States, the
building of the railroads after 1850 led to the development of mass markets for
the first time. Along with improved access to capital and credit, mass markets
encouraged large-scale investment to exploit economies of scale in production
and economies of scope in distribution.
- The need for a formal approach to corporate strategy was first articulated by
top executives of M-form corporations.
- In the 1930s, Chester Barnard, a top executive with AT&T, argued that
- managers should pay especially close attention to “strategic factors” which
depend on“personal or organizational action.”4
- The organizational challenges involved in World War II were a vital stimulus
to strategic thinking.
- A more direct bridge to the development of strategic concepts for business
- applications was provided by inter-service competition in the U.S. military
after World War II.
- By the 1960s, classroom discussions in the Business Policy course focused on
- matching a company’s “strengths” and “weaknesses”—its distinctive
competence—with the “opportunities” and “threats”
- 1960 - 1970 a rise of strategy consulting practices.
- 1963 SWOT
- Experience Curve 1965 -66
- By the early 1970s, the experience curve had led to another “powerful
- oversimplification” by BCG: the so-called “Growth-Share Matrix”
(reproduced below), which was the first use of what came to be known as
“portfolio analysis.” The idea was that after experience curves were drawn for
each of a diversified company’s business units, their relative potential as areas
for investment could be compared by plotting them on the following grid.
Reference: [Ghemawat, Pankaj (2002). Competition and Business Strategy in
Historical Perspective; HBS Competition & Strategy Working Paper Series
https://poseidon01.ssrn.com/delivery.php?ID=02609708402100307608000606
710312009301006402904405401312603112009101808112603500304402501
102209307609109008008712302302604000602210311200208909412212409
908900104605309312712311109110000806911800510412206911312711609
7090026067100122096082024127&EXT=pdf​]
2.2 Discussion of changes over time

2.3 Tool of strategizing

- Quick introduction and reason of choosing it

- AT A GLANCE
- Bruce Henderson devised the concept of the growth share matrix in 1970 as a tool to
help companies allocate resources on the basis of the attractiveness of their market
and their own level of competitiveness. The matrix remains relevant today—but with
some important tweaks.
- The Matrix as a Tool for Managing Experimentation Today, the matrix can be
adapted to help companies drive the strategic experimentation required for success in
unpredictable markets.
- More than 40 years after Bruce Henderson proposed BCG’s growth-share matrix, the
concept is very much alive.
- The utility of the matrix in practice was twofold:
- The matrix provided conglomerates and diversified industrial companies with a logic
to redeploy cash from cash cows to business units with higher growth potential. This
came at a time when units often kept and reinvested their own cash—which in some
cases had the effect of continuously decreasing returns on investment. Conglomerates
that allocated cash smartly gained an advantage.
- It also provided companies with a simple but powerful tool for maximizing the
competitiveness, value, and sustainability of their business by allowing them to strike
the right balance between the exploitation of mature businesses and the exploration of
new businesses to secure future growth.
- First, companies indeed circulated through the matrix quadrants faster in the five-year
period from 2008 through 2012 than in the five-year period from 1988 through 1992.
In those industries, the average time spent in a quadrant halved: from four years in
1992 to less than two years in 2012.
Second, our analysis showed the breakdown of the relationship between
relative market share and sustained competitiveness.
- BCG Matrix 2.0 in Practice: To get the most out of the matrix for successful
experimentation in the modern business environment, companies need to focus on
four practical imperatives: Accelerate. It is critical to evaluate the portfolio frequently.
- Balance exploration and exploitation. This requires having an adequate number of
question marks while simultaneously maximizing the benefits of both cows and pets:
- Increase the number of question marks: This requires a culture that encourages risk
taking, tolerates failure, and allows challenges to the status quo.
- Test question marks quickly and economically: Successful
experimenters achieve this by using rapid (for example, virtual) tests
that limit the cost of failure
 - Milk cows efficiently: Successful companies do not neglect the need to
exploit existing sources of advantage.
- Keep pets on a short leash: With experimentation comes failure: our
analysis found that the number of pets increased by almost 50 percent
in 30 years.
- Measure and manage portfolio economics of experimentation:
- Manage the rate of expectations
- Drive new product and business success.
- Maintain a portfolio balance.
- Increasing change certainly requires companies to adjust how they apply the matrix.
“The need for a portfolio of businesses becomes obvious. Every company needs
products in which to invest cash. Every company needs products that generate cash.
And every product should eventually be a cash generator; otherwise it is worthless.
Only a diversified company with a balanced portfolio can use its strengths to truly
capitalize on its growth opportunities.”
- Reeves, Martin., Moose, Sandy., and Venema, Thijs (2014) The Growth Share Matrix.
BCG Classics Revisited, 1 - 9.

- Growth-Share-Matrix ( Strategy WS 2019, Slide 86)

- http://image-src.bcg.com/Images/BCG_Classics_Revisited_The_Growth_Share_Matr
ix_Jun_2014_tcm56-84453.pdf

-
- BCG’s basic strategy recommendation was to maintain a balance between “cash
cows” (i.e., mature businesses) and “stars,” while allocating some resources to feed
 “question marks,” which were potential stars. “Dogs” were to be sold off. Put in
more sophisticated language, a BCG vice-president explained that “since the
producer with the largest stable market share eventually has the lowest costs and
greatest profits, it becomes vital to have a dominant market share in as many
products as possible. However, market share in slowly growing products can be
gained only by reducing the share of competitors who are likely to fight back.” If a
product market is growing rapidly, “a company can gain share by securing most of
the growth. Thus, while competitors grow, the company can grow even faster and
emerge with a dominant share when growth eventually slows.”34
- Ghemawat, Pankaj (2002). Competition and Business Strategy in Historical
Perspective; HBS Competition & Strategy Working Paper Series (8)

3. Task two:

3.1 Case of Study​ ​(Positive) → Netflix

- Company showing nice design on strategy and implementation of it (Value by
economic success, revenue, EBIT, shared value, Sustainability).
- Definition of:
- Value by economics success
- Shared Value
- CSR
- EBIT
- Sustainability
- Netflix's corporate strategy can be summarised in its mission and vision statements:
We promise our customers stellar service, our suppliers a valuable partner, our
investors the prospects of sustained profitable growth, and our employees the allure of
huge impact.
- Given its current status as an established unicorn, the origins of Netflix now seem
somewhat quaint. Frustrated by Blockbuster's $40 late fee (when returning a VHS
copy of Apollo 13, no less), current CEO and company co-founder Reed Hastings
resolved to overhaul the then-established order of video rental. The result was a
subscription-based business model, with the unique selling point being the
abolishment of due dates and late fees, as well as providing users with unlimited
access to the company's content library. However, while this strategy received modest
success and proved scalable, it wasn't until dramatic shifts in technology – namely
internet download speeds – that Netflix was truly able to come into its own. Realising
the potential of the digital revolution, Hastings ripped up the business plan and
incorporated a new focus for the company - video streaming - and, despite initial
apprehension from investors, the rental model was phased out across 2010 and 2011
- Culture: Under a CEO that requires self-motivated and innovative employees, Netflix
boasts a highly unique company culture. The company's careers page is proof of this,
emphasising the focus on transparency, accountability and independent
 decision-making, while it even routinely encourages employees to interview with
competitors to attain a greater understanding of their market rate. The company has
also attracted criticism for its culture, however, particularly its own stark admission
that it "keep(s) only our highly effective people". Some former employees have
spoken out about this high-pressure, performance-driven environment, although it
should be noted that Netflix themselves admit that this lack of stability is only
motivational for a select few. Either way, the company's growth and success to this
point suggest that such a brutal culture is working, while Bretton Putter makes a good
point in Forbes: the entire point of having a company culture is that it's not meant to
be for everybody. --- As with all successful startups, Netflix's ability to scale is as a
result of its leadership identifying external opportunity – in this case, the potential of
video streaming. The company's corporate strategy has evolved massively over the
past two decades and is seemingly poised to change again over the next one, but its
commitment to producing quality content will always ensure that it has a paying
audience at the heart of what it does.
- Referneces: [Fata, Emily. (2019) ​Netflix’s Business Strategy,​ Starting Business]

3.2 Case of Study​ (Negative)

- Choose a company that commercially failed due to shortcoming in strategy design,

and/or strategy implementation
- Strategy examples:
- Concentrated Growth
- Market Development
- Product Development
- Innovation Strategies
- Cooperative Strategies
- Joint Ventures
- Strategic Alliances
- Merger & Acquisition
- Horizontal Integration
- Vertical Integration (forward and backward)
- Related Diversification
- Unrelated Diversification
- Outsourcing Strategies
- Offensive Strategies
- Defensive Strategies
- First-Mover, Rapid-Follower, and Late-Mover Strategies
- Strategies for Industry Leaders
- Turnaround
- Digitalisation…
 - Module theories:
- Scharmer, O. Addressing the blind spot of our time. An executive summary of
the new book​ Theory U:​ Leading from the Future as It Emerges
- Treacy, M., Wiersema, S. (1993), ​Customer Intimacy and other Value
Disciplines In​: Harvard Business Review, 71(1) 84–93.
- Faulkner, D.O. and Campbell, A. (2006). Introduction. In: Faulkner, D.O. and
Campbell, A.: The Oxford Handbook of Strategy. ​A Strategy Overview and
Competitive Strategy​. Oxford: Oxford University Press (especially: pages
1-26).
- Paroutis, S., Heracleous, L. and Angwin, D. (2013). Practicing strategy: Text
and cases, London: Sage (especially: Introduction, chapter 1).
- Ghemawat, Pankaj (2002).
- Kaplan, R.S., Norton, D.P. (2000). ​Having Trouble with your strategy – then
map it.​ In: Harvard Business Review; 78(5), 167-176
- De Wit, B and Meyer, R (2010). Strategy: Process, Content, Context, 4th ed,
Andover: Cengage Learning. (especially: chapter 1)
- Portfolio Theory (1970)

- In 1985, the first Blockbuster store opened its doors in Dallas, Texas.3 The company
was the brainchild of David Cook, a computer programmer.4 Cook’s background
proved crucial to Blockbuster’s early success. Cook programmed Blockbuster’s
computers to track inventory and consumer preferences.5 Thus, Blockbuster thrived
off its ability to provide the films that consumers wanted at individual stores.6 In
addition to its ability to customize store selection to local neighborhoods, a large
distribution center in Dallas helped Blockbuster grow quickly.
- Wayne Huizenga, founder of Waste Management, purchased a controlling interest in
Blockbuster with two colleagues in 1987 for $18 million.8 Huizenga believed that
Blockbuster had immense potential because, like McDonalds, it was a one-product
business holding national appeal.9 Huizenga guided the company through a period of
expansive acquisition. In 1987, Blockbuster owned eight stores and franchised
eleven.10 Within a year, it had become the largest video chain in the world and, by
1991, Blockbuster owned 1,654 stores in the United States alone.11 Blockbuster
expanded in part by buying out both video and music chain competitors like Erol,
Sound Warehouse, and Music Plus.12 After seven years under Huizenga, Viacom
purchased Blockbuster for $8.4 billion.13 Without Huizenga’s guidance, however, the
company faltered. By 1996, Blockbuster had lost half of its value.14 A large part of
this downswing was Viacom’s prioritizing more than just renting movies.15 Breaking
from Huizenga’s singular focus, Viacom instead tried to use Blockbuster stores as
outlets for Paramount and MTV merchandise, books, toys, and selected clothing.16 In
1996, Blockbuster rebranded.17 Blockbuster Entertainment Corporation was renamed
Blockbuster, Inc. and retail stores changed from Blockbuster Video to simply
Blockbuster. By the time Blockbuster started a competing by-mail subscription
 service in 2004, Netflix had already cut into its customer base.28 Blockbuster finally
discontinued its late fee program later that year.29 Instead of focusing on video rental
competitors Netflix and Redbox, Blockbuster spent the turn of the century expanding
into the videogame rental market. Blockbuster purchased competitors in this market,
like Gamestation,30 and employed various programs to promote instore rentals. By
2002, Blockbuster had placed video game ministores representing all the major
contemporary gaming platforms in 90 percent of its stores.31 Blockbuster continued
expanding into these fields after separating from Viacom in 2004. One expansion
program, Blockbuster Gamerush, allowed for video game and DVD trading in 3,000
stores to enter into the secondary market.
- A changing market paved the way into bankruptcy for Blockbuster. Jeffery Stegenga,
Chief Restructuring Officer of Blockbuster, attributed Blockbuster’s declining
revenue to five main events: (i) increased competition in the media entertainment
industry; (ii) technological advances that changed the landscape of the industry; (iii)
changing consumer preferences; (iv) the rapid growth of disruptive new competitors;
and (v) the general economic environment.61 Along with these changes and difficult
operating environment, Blockbuster was hindered by the high level of debt that the
business had incurred during earlier periods of significantly lower competition and
higher operating performance.62

Figure 1: Look Back At Why Blockbuster Really Failed And Why It Didn’t Have To
[Internet].; 2014 [updated September 5,; cited 1/29/2018]. Available from:
https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-fa
iled-and-why-it-didnt-have-to/#34dca53d1d64​.

4. Conclusion
 5. Literature

E.g.

Last Name, F. M. (Year). Article Title. ​Journal Title,​ Pages From - To.

Last Name, F. M. (Year). ​Book Title. ​City Name: Publisher Name.

Reeves, Martin., Moose, Sandy., and Venema, Thijs (2014) ​The Growth Share Matrix.​ BCG
Classics Revisited, 1 - 9.

H. Igor Ansoff, Daniel Kipley, A.O. Lewis, Roxanne Helm-Stevens, Rick Ansoff (1984)
Implanting strategic management,​ Englewood Cliffs, N.J. :Prentice/Hall International, 12.

Porter, M. (1996): ​What is Strategy?​, In: Harvard Business Review 74(60), 61-78.

Henry George Liddell, Robert Scott, ​A Greek-English Lexicon​, on Perseus

Clegg, S., Carter, C., Kornberger, M. and J. Schweitzer. (2011). ​Strategy: Theory and
Practice​, London: Sage (introduction: The Context and Emergence of Strategic Thinking, &
chapter 4)

Ghemawat, Pankaj (2002). ​Competition and Business Strategy in Historical Perspective​;

HBS Competition & Strategy Working Paper Series

Fata, Emily. (2019) ​Netflix’s Business Strategy,​ Starting Business

Davis, Todd and Higgins, John. (2013)"​A Blockbuster Failure: How an Outdated Business
Model Destroyed a Giant".​ Chapter 11 Bankruptcy Case Studies.