Advanced Strategic Toolkit

Course Introduction
Strategic Purpose

Gerardo Serio - 2022 1

Advanced Strategic Toolkit: 2 modules

Corporate Foresight in a digital area

1 Dr. Valery Michaux

Strategy – recap and advanced concepts

2 Internationalisation Strategy
Gerardo Serio

2 2
 Assessment: 2 parts

▪ Continuous assessment ▪ Final exam (1h00)

50 % 50 %

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 Assessment: breakdown
Continuous assessment
– 40 % : internationalization
(Gerardo Serio)
▪ Case studies
– 50 % : Industry/strategic
foresight in a digital era
(Valery Michaux)
Final exam
– 40 % : internationalization
(Gerardo Serio)
– 50 % : Industry/strategic
foresight in a digital era
(Valery Michaux)
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 What is Strategy about ?
‘..a pattern in a stream of decisions’ Henry Mintzberg

‘..the long-term direction of an organisation’ Johnson et

al.

‘Competitive strategy is about being different. It means

deliberately choosing a different set of activities to
deliver a unique mix of value’ Michael Porter

‘..the determination of the long-run goals and

objectives of an enterprise , the adoption of courses of
action and the allocation of resources necessary for
carrying out these goals’ Alfred Chandler

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 What is strategy about?

– Strategy is about creating value

– Whom does a firm create value for?

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The purpose of business

1) to create value for customers

2) to appropriate some of that customer value in
the form of profit—thereby creating value for the
firm

Not-for-profit enterprises aim just to cover their

costs.

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 Value for Whom?
Shareholders vs Stakeholders

The Shareholder approach The Stakeholder approach

The firm is a coalition

The firm exists to
of interest groups—it
maximize the wealth of
seeks to balance their
its owners
different objectives

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What is Profit?
Different measures give different rankings

Market
capitalization Net income ROS ROE ROA Return to
Company ($ billion) ($ billion) (%) (%) (%) shareholders (%)
Apple 750 14.0 29.7 35.2 24.5 +68.5

ExxonMobil 354 30.5 12.5 27.6 17.6 -6.9

Wal-Mart Stores 278 16.0 5.5 20.4 13.1 +2.6

Industrial & Commercial 270 22.9 56.6 20.5 1.6 +12.3

Bank of China

General Electric 254 15.2 12.1 11.9 2.7 -3.4

JPMorgan Chase 222 21.8 31.6 9.8 1.2 +2.7

Volkswagen 118 11.8 6.3 12.3 3.6 +8.4

Source: Grant

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 Profitability Ratios
Ratio Formula Notes

Return on Capital Operating profit before interest The return on the capital invested in a business.
Employed (ROCE) after tax ROCE is also known as return on invested capital.
The numerator can be is operating profit or earnings
Equity + Debt (EBIT).

Return on Equity Net income Measures the firm's success in using shareholders’
(ROE) capital to generate profits that are available to
remunerate investors.
Shareholders’ equity
Return on Assets The numerator should be the return on all the
(ROA) company’s assets—e.g. operating profit, EBITDA
Operating profit (earnings before interest, tax, depreciation, and
amortization), or EBIT (earnings before interest and
tax).
Total assets
Gross margin Sales – cost of material inputs Gross margin measures how much value a firm adds
value to the goods and services it buys in.

Sales
Operating margin Operating profit / Sales
Net margin Net income / Sales
Operating margin and net margin measure a firm's
ability to extract profit from its sales, but influenced
by differences in capital intensity between different
types of business.

Grant

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 Profitability ratios

▪ They tell us whether we have been doing well enough so far

▪ No ability to predict the firm’s future performance, that will be
determined by its ability to take advantage of opportunities and
counter threats
▪ Managers can do little to have a durable impact on share value
▪ Due to short-termism and psychological distortions typical of
stock markets, they may end up making decisions aiming at
maximizing value in the short term (e.g. asset sales)

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 Shareholder perspective

▪ Exclusive focus on financial indicators may conflict with the need to build
a durable competitive advantage
– Increased competition and faster pace of change create complex
challenges
– A long-term commitment is necessary to strengthen a firm’s strategic
capability and allow it to adapt to a changing environment

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Stakeholders

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 Stakeholder perspective – on the rise

▪ Role of policy makers: support of technological innovation,

intervention to support/launch some economic activities, will
to preserve jobs…
▪ Employees are increasingly in search of sense and meaning at
work
▪ Collaborative strategies increase: increased complexity may
involve the need to cooperate with other companies,
universities, governmental entities, etc.

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 Stakeholders mapping

Strong power Weak power → To identify stakeholder

expectations and
power and map
priorities.

High Key players Keep informed ✓ Power → control of

level of Main shareholders, Employees, suppliers, resources /
interest customers… partners, … involvement /
possession of
knowledge / informal
influence
Low Keep satisfied Not to forget,
Small shareholders, investors, ✓ Interest → level of
level of prescribers,…
optimized effort perceived interest or
interest hostility, company
impact on stakeholder
life

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 Different governance models
Shareholder model
Advantages • Higher rates of return
• Reduced risk
• Increased innovation and
entrepreneurship
• Better decision-making
Disadvantages • Diluted monitoring
• Vulnerable minority
shareholders
• Short termism
Source: Johnson, Whittington & Scholes
Stakeholder model
• Long term horizons
• Less reckless risk-taking
• Better management
• Weaker decision-making
• Uneconomic investments
• Reduced innovation and
entrepreneurship
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 Corporate social responsibility

Corporate social responsibility (CSR)

is the commitment by organisations to ‘behave ethically
and contribute to economic development while improving
the quality of life of the workforce and their families as
well as the local community and society at large’.

(World Business Council for Sustainable Development)

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 CSR – Internal Aspects

Source: Johnson, Whittington & Scholes et al.

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 CSR – External Aspects

Source: Johnson, Whittington & Scholes et al.

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 A new perspective:
Creating Shared Value
(M. Porter / M Kramer)

▪ Do we really need to oppose society and firms?

▪ Beyond CSR: look for intersections between interests of
the firm and those of society.

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Creating Shared Value
(M. Porter / M Kramer)

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Creating Shared Value - Examples

▪ Waste Concern (Bangladesh) – converts trash into fertilizers

▪ Revolution Foods (US) – delivers students fresh, healthy
meals, with margins higher than the industry average

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 Creating Shared Value

▪ Societal needs, not economic needs, define markets

▪ Societal harms or weaknesses create costs for firms →
negative impact on value chains
▪ There is more value creation when we try to solve
societal issues that also represent constraints for firms

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 Creating Shared Value
▪ Cut costs: less fuel/energy, less transport
▪ Reengineer value chains and supply chains (less
dispersed activities)
▪ Create new markets, launch new products and
services
▪ Enhance clusters

→ Improved productivity and competitiveness

→ More motivated employees

___________________________________________________

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The elements of the Strategic Process

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Strategic Purpose

How does an organization make a difference?

Every business has a unique purpose—typically this
reflects the motives of the entrepreneurs who created
these businesses
E.g. Henry Ford (Ford Motor Company), Steve Jobs (Apple), Jack Ma
(Alibaba) were each motivated by a distinct vision.

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 Corporate purpose
▪ Mission / raison d’être / vocation
– We are existing for…
▪ Vision / ambition / intent
– Our will is to be…
▪ Values / code of conduct / guidelines
– We are acting with…
– To confront with internal CULTURE
▪ Core business / core competences / know-
how
– We are excellent in…

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 Danone’s mission statement

▪ Mission / raison d’être / vocation

– Bring health through food to as many people as
possible

▪ Vision / ambition / intent

– One Planet, One Health

▪ Core business / core competences / know-how

– High-protein dairy products, science-based infant
food, …

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 ‘Old-fashioned’ purposes

Encircle Caterpillar Beat Xerox

To put a coke within arm’s reach of every consumer in the

world

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 Google
Mission statement and official values

Google's mission is to organize the world's information

and make it universally accessible and useful.

Focus on the user and all else will follow.

It’s best to do one thing really, really well.
Fast is better than slow.
Democracy on the web works.
You don’t need to be at your desk to need an answer.
You can make money without doing evil.
There’s always more information out there.
The need for information crosses all borders.
You can be serious without a suit.
Great just isn’t good enough.

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LVMH

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 Corporate purpose

Core values and core purpose unite to form an

organization’s “core ideology” which “defines an
organization’s timeless character”, “the glue that
holds the organization together”
(Collins & Porras)

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Corporate purpose - benefits

▪ Strategic capability
– Setting ambitious targets allows the firm stretch
its existing resources and capabilities, or
create/acquire new ones
▪ Thinking beyond the industry
boundaries
– Seize opportunities by expanding the firm’s
perimeter (rather than fighting for market share in
the existing activities)

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 Corporate purpose - benefits

▪ Consistency and flexibility

▪ It keeps the long-term strategy coherent – may
participate to customer loyalty
▪ Room for reinterpretation and for different
operational approaches
▪ Makes the firm more resilient
▪ Allows it face the evolution of market life cycle as
much as disruptive change

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 Corporate purpose
Employees’ motivation and sense of belonging

▪ Better ability to attract talents as employees are

increasingly in search of meaning at work
▪ Brings an emotional connection which is more powerful
than ‘maximizing shareholder value’
▪ More inclusive decision-making processes: open to
individual contributions

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 Corporate purpose

Should be:
▪ Answering a need in the society that the firm
can satisfy
▪ Ambitious
▪ Discomforting – must involve change
▪ Authentic
▪ Rooted in the organization’s history and
culture (it is not made up, it is discovered)

Listen to your employees!

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Need of alignment with identity and
stakeholder values

▪ The French president announced in 2017 that the

company should become a “global mobility
player”, including coach services, car sharing, etc.
▪ It just did not happen…

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 Intent/Purpose - Determinants

Environmental
Core pressures/shocks Societal needs
competencies

Intent/
Purpose

Stakeholders’
History and Culture
values and
expectations

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