Strategy Formulation & Implementation Semester I 2021-2022

WHAT IS STRATEGY &

WHY IS IT IMPORTANT?
Chapter 01

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 Strategy Formulation & implementation
Group Member
Nguyễn Thị Như Ý BABAIU19119

Trần Hoàn Hạnh Ngân BABAIU19245

Phạm Vũ Thiên Ngân BABAIU19062

Nguyễn Hữu Ngân Hà BABAIU19398

Phạm Quế Anh BABAIU19011

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 01
CHAPTER 1: WHAT IS STRATEGY
OUTLINE
AND WHY IS IT IMPORTANT?
• What Do We Mean By Strategy?
• A Company’s Strategy And Its Business Model
Strategy Formulation & Implementation

• What Makes A Strategy A Winner?

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• Why Crafting & Executing Strategy Are Important Tasks
• The Road Head

CASE STUDY: IKEA

• Foundation
• Objectives
• Strategies
• Challenges
• Lessons learned

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Chapter 1| What Is Strategy And Why Is It Important?
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by Strategy?
We Mean
What Do
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 Chapter 1| What Is Strategy And Why Is It Important?

Strategy Answer these HOWS to choose a strategy:

✓ How to position the company in the

DEFINITION marketplace
A company’s strategy is the ✓ How to attract customers
coordinated set of actions
✓ How to compete against rivals
that its managers take in
✓ How to achieve the company’s
order to outperform the
performance targets
company’s competitors and
achieve superior profitability. ✓ How to capitalize on opportunities to grow
the business
A long-term decision for a
lasting success ✓ How to respond to changing Economic and
market conditions

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 The essence of strategy is about competing differently from
rivals—doing what competitors don’t do or, even better, doing what
they can’t do!

Strategy is Be different in at least some important respects.

about
A strategy stands a better chance of succeeding when it is
predicated on actions, business approaches, and competitive moves

Competing aimed at:

• Appealing to buyers in ways that set a company apart from its

Differently rivals
• Staking out a market position that is not crowded with strong
competitors

A strategy also provides direction and guidance, in terms of what

should do and shouldn’t do.

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 Chapter 1| What Is Strategy And Why Is It Important?
Strategy and Competitive Advantage
the Quest for Meeting customer needs more effectively,
with products or services that customers
Competitive value more highly, or more efficiently, at

Advantage lower cost.

Sustainable Competitive Advantage

Giving buyers lasting reasons to prefer a
firm’s products or services over those of
its competitors.

If a strategy is not distinctive,

then there can be no competitive
advantage.
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 Chapter 1| What Is Strategy And Why Is It Important?
Five Frequently
Strategic Approaches

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 Chapter 1| What Is Strategy And Why Is It Important?
Managers modify the strategy in response to:

Why a o Changing market conditions

Company’s o Advancing technology

o Fresh moves of competitors

Strategy o Shifting buyer needs

Evolves o Emerging market opportunities

over Time? o New ideas for improving the strategy

A company's strategy evolves throughout time as a result

of changing conditions and continual management efforts

to improve the plan.

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 A Company’s Strategy Is
Partly Proactive and Partly Reactive

Reactive
Proactive (emergent) strategy
(deliberate) strategy elements that are required
elements that include due to unanticipated
both continued competitive developments
and new initiatives. and fresh market
conditions.

A company’s strategy is shaped partly by management analysis and choice

and partly by the necessity of adapting and learning by doing. 12
 Chapter 1| What Is Strategy And Why Is It Important?

CORE CONCEPT
A company’s deliberate
strategy consists of
proactive strategy elements
that are both planned and
realized as planned; its
emergent strategy consists
of reactive strategy elements
that emerge as changing
conditions warrant.

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 Chapter 1| What Is Strategy And Why Is It Important?

Strategy
• Ethical and moral standards are not fully
& Ethics governed by what is legal.

- • Rather, they involve issues of “right” versus

“wrong” and duty—what one should do.
Passing the
• A strategy is ethical only if it does not entail
Test of Moral actions that cross the moral line from “can do” to
“should not do.”
Scrutiny

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 Chapter 1| What Is Strategy And Why Is It Important?
A company’s strategic actions cross over into the “should not do” zone and
are likely to be deemed unethical when:
• They reflect badly on the company;
• They adversely impact the legitimate interests and well-being of shareholders,
customers, employees, suppliers, the communities where it operates, and society
at large;
• They provoke public outcries about inappropriate or “irresponsible” actions,
behavior, or outcomes.

A company has bad reputation for misdeeds, unethical behavior, fraudulent

accounting, or criminal behavior, its revenues and stock price are usually
hammered hard, frequently meet with
• Many customers and suppliers shy away from doing business with it
• Integrity employees do not want to work for this company

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 Chapter 1| What Is Strategy And Why Is It Important?
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02

business model
strategy and its
A company’s
Chapter 1| What Is Strategy And Why Is It Important?
02
Core of strategy
➢ At the core of every sound strategy is the
company’s business model.

➢ The business model shows a clearly vision

about how strategies create customer value
proposition as well as gain profit through
price.

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Value – Price – Cost 02
Framework

Chapter 1| What Is Strategy And Why Is It Important?

CUSTOMER VALUE PROPOSITION (V – P)
Customer Value (V)
The customers’ perception of how much value they are getting for the
money. Customer’s share
[Customer value
proposition]
PROFIT (P – C)
The more expand the customer’s share (V) and the lower the price (P), Price (P)

the more attractive is the company’s value proposition.

Firm’s share
[Profit Formular]
RELATIONSHIP
The lower costs ( C) and the higher customer value proposition (V – P),
Per-Unit Cost (C)
the greater the ability of the business model to be a moneymaker.
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 02 Customer value
- Willing to pay for new collections
- Sharing with their relationships
proposition
- Using products regularly

Value – Price – Cost - Original materials costs such as

color, fabric…
Framework of NIKE - Technique devices, equipment costs
Chapter 1| What Is Strategy And Why Is It Important?

- Marketing costs
- Research and development
- Creative copyright
Profit Formula
- Human resources like employees….

Profit: Profitability depends on

generating sufficient revenues to cover
costs and provide attractive profits.

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 03
What makes
strategy winner?
Chapter 1| What Is Strategy And Why Is It Important?

The Competitive The Performance

The Fit Test
first
Advantage Test Test

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 The Fit Test 03
📌 Internal Factor: Human resources, competitive capabilities which
are supported by a complementary set of functional activities.
Chapter 1| What Is Strategy And Why Is It Important?

📌 External Factors: Market conditions, market changes.

📌 Winning Strategy:
- The strategy exhibits good fit with both the external and internal
aspects of a company’s overall situation.

- The strategy evolves over time in a manner that maintains not

only close and effective but also flexible alignment with the
changes of market as well as company.
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 The Competitive
03
Advantage Test
How strategy achieves the targets with sustainable values
Chapter 1| What Is Strategy And Why Is It Important?

and superior performances.

- If the strategy can not maintain the substainable

advantages -> the superior performance will not last
long-time => lose their competitors.

- Strategy is unable to gain competitive advantage => can

not create superior effect.

The bigger and more durable the competitive advantage,

the more powerful it is.

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03 The Performance
Test
Performance indicators
about the caliber of a strategy

Chapter 1| What Is Strategy And Why Is It Important?

Competitive Strength and Market Standing

Profitability and Financial Strength

A winning strategy: All data is above – average point.

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 03
Comparing o New ideas that look like uncomfortable with

between
internal and external factors, are scrapped
before coming fruition.

existing
o ExistingPlace
initiatives are here
your screenshot scrutinized on a regular
Chapter 1| What Is Strategy And Why Is It Important?

basis to maintain excellent fit as well as above-

average performance.

and new
o If any strategies are failed 1 in 3 tests, they will
be changed immediately.

strategies
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 04 Why crafting
and executing
Chapter 1| What Is Strategy And Why Is It Important?

strategy are
important
tasks?
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 Crafting 04
strategy

Chapter 1| What Is Strategy And Why Is It Important?

• Management’s prescription for doing business

• Road map to competitive advantage

• Game plan for pleasing customers

• Formula for improving performance

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Executing strategy 04
This matters a lot as the best-conceived strategies will result in

Chapter 1| What Is Strategy And Why Is It Important?

performance shortfalls if they are not executed proficiently.

“Without strategy, execution is aimless. Without execution,

strategy is useless.”
(Morris Chang – CEO of TSMC)

“Great strategy, not executed, can’t possibly have any effect on

ecu
performance because it doesn’t actually affect anything….”
(Jeffrey Pfeffer)
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Good Strategy + Good Execution

= Good management

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Chapter 1| What Is Strategy And Why Is It Important?
04
Core concept
➢ Crafting and executing strategy are thus core
management tasks.

➢ How well a company performs is directly

attributable to the caliber of its strategy and
the proficiency with which the strategy is
executed.

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The Coffee 04
House

Chapter 1| What Is Strategy And Why Is It Important?

➢ STRATEGY : the broad differentiation strategy.

➢ STRATEGY EXECUTION
• Physical evidence (open spaces, golden-tone
lights, high-rise architecture, friendly staff)
• Promotion (take the customer’s story at the
center)
• Price (a reasonable cost)
• Product (variety in menu, updated
packaging)
• Place (easy-to-find locations, eye-catching
street views)
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05 The Road Ahead
Chapter 1| What Is Strategy And Why Is It Important?

What must managers do, and do well, to make a company

successful in the marketplace?

The answer is that doing a good business management

starts with good strategic thinking and good management
of the strategy-making, strategy-executing process.

“Commerce is a game of skill which many people play, but

which few play well. “(Ralph Waldo Emerson)

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 06

IKEA
Case Study

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 06
VISION
To create a better everyday life for many
people.

MISSION
To offer a wide range of well-designed,
functional home furnishing products at
Case Study IKEA| Introduction

prices so low, that as many people as

possible will be able to afford them.

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 1943
06 IKEA was founded in Sweden
I: Ingvar
K: Kamprad

1948 E: Elmtaryd
A: Agunnaryd
Began selling furniture

IKEA’s 1951

Case Study IKEA| Introduction

History First annual catalogue

1953
First showroom

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 1956
06 Flat – packing furniture was
introduced

1958
First retail store in Älmhult

IKEA’s

Case Study IKEA| Introduction

1963
First store in Norway

History 1973
First store in Switzerland

2008
Largest furniture retailer 35
Case Study IKEA| Business Strategy

07

Strategy
Business

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 07

Case Study IKEA| Business Strategy

Offering the lowest prices

The global furniture retailer is able to offer low

prices thanks to a combination of economies of
scale and technological integration into various
business processes.

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 07

Increasing variety of products

Case Study IKEA| Business Strategy

✓ 9,500 products in IKEA portfolio
✓ 2,500 new products/year
✓ Food & catering industries

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Case Study IKEA| Business Strategy

07

International market expansion strategy

459 45
stores shopping
22 centers 38
pickup & order distribution
points centers

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 Case Study IKEA| Business Strategy
07
Benefiting from Strategic Alliances
✓ APPLE: possibilities of augmented reality
✓ LEGO: new product development
✓ ADIDAS: customer behaviour

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08

Challenges

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Banned local 08
suppliers

Case Study IKEA | Challenges

DIFFICULTY
Local suppliers were banned from providing raw material
and furniture.

OVERCOME
Design its own furniture, and created its own exhibitions.

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 Imitation from
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Competitors
DIFFICULTY
Case Study IKEA| Challenges

Local competitors copied IKEA's designs and

then offered similar products at lower prices.

OVERCOME
Use Chinese social media and micro-blogging
website Weibo to target the urban youth

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08
COVID-19
The COVID-19 pandemic has slowed
down Swedish furniture retailer IKEA's
Case Study IKEA| Challenges

expansion plans in India.

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 COVID-19
08 APPROACHES

1 2 3
Case Study IKEA| Challenges

omni-channel ''Click and Online

approach, by Collect'' consultations
integrating its contactless /planning
brick and and safe services
mortar format shopping in
stores with Hyderabad
online stores
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08 OUTCOMES
1 2 3
Develop logistical More people are Clear
capabilities to shopping online for communication in
serve customers all the things they all channels to
more efficiently need customers
and to expand its
Case Study IKEA | Challenges

customer reach

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 Case Study IKEA| Key Learning

09
KEY
LEARNING

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 09
KEY 1

Case Study IKEA | Key learning

“The more thoroughly we prepare, the
better it goes. It’s not enough to
respect and accept a country; you have
to love it and embrace its values!”

Ulf Smedberg, former Country Marketing

Manager South Korea and India

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 09

KEY 2

Case Study IKEA | Key learning

There is no formula for success that
fits all marketing strategies when a
global brand decides to try a new
market.

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09 KEY 3
Ready to listen, respect and learn from
the local environment.
Case Study IKEA | Key learning

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 REFERENCES
❑ IKEA Business Strategy and Competitive Advantage: Capitalising on IKEA
Strategy Formulation & Implementation

Concept, John Dudovskiy, 2019 https://www.ikea.com/

❑ Covid 19 Impact IKEA. Business Standard.com, from https://www.business-

standard.com/article/companies/covid-19-impact-ikea

❑ LBS Case Study. BusinessToday.In. Published Septamber 2021 from

https://www.businesstoday.in/magazine/lbs-case-study/

❑ Learning As We Go the Challenges. IKEA.com, from

https://about.ikea.com/en/about-us/ikea-retail/learning-as-we-go-the-challenges

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Thank you!
LET US KNOW IF YOU HAVE
QUESTIONS OR CLARIFICATIONS.

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