LESSON 1: INTRO TO STRATEGIC MANAGEMENT
(competitor moves)
Three Strategic Questions All Firms Must Answer
1.What is the firm’s present situation?
 Industry conditions
 Competitive pressures
 Market standing vis-à-vis rivals
 Competitive strengths and weaknesses
2.What direction to head and what performance
targets to set?
 New buyer needs to satisfy
 Growth opportunities to pursue
 Markets to deemphasize or abandon
 How to measure success
3.How to run the firm in ways that produce good
results?
 Strategy for competing successfully
 How to attract customers
 Deciding what market position to stake out
 Actions to achieve performance targets
NATURE OF STRATEGY
 Involves crafting of some premeditated
actions
 Envisioning the future
 Thus, it is something that seems to happen
ahead of the actual implementation
 Implies a semblance to planning
STRATEGY IN LAYMAN’S TERMS
Strategy is a way to get from A-B Point B. Choosing
the way to get there is what strategy is all about.
STRATEGY: MILITARY BACKGROUND
Originally, the term STRATEGY is used by the
military. In military parlance, strategy means the
deployment of and use of military forces and material
to achieve specific objectives.
FACTORS TO ACHIEVE VICTORY
These factors help to determine the effectiveness of
military actions and performance.
 Resources such as troops and materials that
will be needed (Resource Requirement)
 Strength of the enemy forces (Strength of the
Competition)
 Actions that the enemies are likely to take
 The best way to achieve the objectives
(strategy)
 When to attach (timetable for action)
 What to do if plans do not go as expected
(contingency plans)
IMPLICATIONS
1. FOCUSED ON “BIG TICKET” ITEMS (BIG
DECISIONS)
2. COMMITMENT OF RESOURCES
3. DECISIVE AND IRREVERSIBLE
ELEMENTS OF STRATEGY
1. MOVEMENT (DEPLOYMENT)
2. RESOURCES
3. ASSURANCE (OBJECTIVES ARE MET)
DEFINITION OF STRATEGY
 A plan on the DEPLOYMENT of RESOURCES
to ENSURE ATTAINMENT of long – term goals
 A plan on the DEPLOYMENT of RESOURCES
of a business to ENSURE ATTAINMENT of its
long-term objectives
 A firm’s strategy is defined by the specific
market positioning, competitive moves, and
business approaches that form management’s
answer to “What’s our plan for running the
firm and producing good results?”
STRATEGY
A company’s strategy consists of the competitive
moves and business approaches that managers
employ to
 Attract and please customers
 Compete successfully
 Capitalize on opportunities to grow the
business
 Respond to changing market conditions
 Conduct operations
 Achieve the targeted financial and market
performance.
THINKING STRATEGICALLY
There is no one roadmap or prescription for running
a firm in a successful manner. Many different avenues
exist for competing successfully, staking out a market
position, and operating the different pieces of a
business.
A creative, distinctive strategy that sets a firm apart
from rivals and delivers superior value to customers
is its most reliable ticket for winning a competitive
advantage over rivals.
CONSIDERATIONS IN STRATEGIC PLANNING:
Lessons from The Apprentice Asia
1. Know / define your goal!
 Direction
 Reason for being
 Why are you in business? Why are we here
“The fundamental rule of thumb of business is
making a profit and not selling out” – Tony
Fernandez
2. Situational analysis
 Internal
 Product knowledge (understanding your
product offering, cost)
 External
 Competitor analysis (what others are
selling, pricing strategy)
 Demand
 Supply (no of sellers/competitors,
products sold)
3. Strategies
 Marketing Strategy (winning is everything,
margin should be looked at seriously)
 Operations Strategy
 Financial Strategy
 HR Strategy
4. Implementation
 Leadership
 Team (organizational structure – clarity of
roles, you need to learn how to distinguish
between the strong and the weak)
 Communication
STRATEGIC MANAGEMENT – DEFINITION
 The set of decisions and actions that result in
the formulation and implementation of plans
designed to achieve company objectives
(Pearce)
 Consists of analysis, decisions and actions an
organization undertakes in order to create
and sustain competitive advantages (Dess)
COMPETITIVE ADVANTAGE
Two fundamental questions to ask to determine how
a firm is to compete so that it can obtain advantages
that are sustainable over a lengthy period of time
1. How should we compete in order to create
competitive advantages in the marketplace?
2. How can we create competitive advantages
in the marketplace that are unique, valuable,
and difficult for rivals to copy or substitute?
Competitive Advantage is a firm’s resources and
capabilities that enable it to overcome the
competitive forces in its industry(ies).
 A company achieves a competitive advantage
whenever it has some type of edge over rivals
in attracting buyers and coping with
competitive forces.
 A company achieves competitive advantage
when an attractive number of buyers are
drawn to purchase its products or services
rather than those of competitors.
 A company achieves sustainable competitive
advantage when the basis for buyer
preferences for its product offering relative to
the offerings of its rivals is durable, despite
competitors’ efforts to nullify or overcome
the appeal of its product offering.
Strategic Approaches to Building Sustainable
Competitive Advantage
 Becoming the low-cost provider by achieving
cost-based competitive advantages over
rivals
 Offering differentiating features that set the
firm’s products apart from rivals
 Offering customers more value for the
money
 Focusing on better serving the unique needs
and tastes of buyers in a niche market
  Developing expertise, resources, and
capabilities that are competitively valuable
and that rivals cannot easily overcome
Strategy Is About Competing Differently
Crafting a good strategy entails deliberately choosing
to compete differently from rivals by:
 Appealing to buyers in ways that set a firm
apart from rivals and that deliver superior
value to buyers—this requires doing what
rivals don’t do or, even better, doing what
rivals can’t do
 Staking out a market position that is not
crowded with other strong competitors
(blue-ocean strategy)
Blue Ocean Strategy is a business theory and
methodology that emphasizes on the importance of
creating new market space and making the
competition irrelevant. The idea is to move away
from the “red ocean” of bloody competition in
existing markets and create “blue ocean” of untapped
new market spaces where there is less in
competition.
ELEMENTS OR KEY ATTRIBUTES OF STRATEGIC
MNGT
1. Directed towards overall organizational goals
and objectives
Organizational vs Individual Rationality
 Effort must be directed at what is best for the
total organization, not just a single functional
area. Some authors have referred to this
perspective as “organizational versus
individual rationality” – organizational goals
supersede individual goals.
 That is, what might look “rational” (best
decision) or ideal for one functional area,
such as operations, may not be in the best
interest of the overall firm.
2. Includes multiple stakeholders in decision
making
Stakeholders - individuals, groups, and
organizations who have a “stake” (interest or
concern) in the success of the organization,
including owners (shareholders in a publicly
held corporation), employees, customers,
suppliers, and the community at large.
3. Requires incorporating both short-term and
long-term perspectives
Creative Tension - the contrast between
vision and a clear picture of current reality
generates what we call “creative tension”,
which is a force to bring them together,
caused by the natural tendency of tension to
seek resolution (Senge)
4. Involves the recognition of trade-offs
between effectiveness and efficiency
EFFECTIVENESS refers to tailoring actions to
the needs of the organization in order to
achieve its objectives, while EFFICIENCY
refers to performing actions in order to
achieve company objectives with the use of
the least resources.
STRATEGIC MANAGEMENT MODEL
Strategy Analysis - is the starting point of the
strategic management process. It consist of the
“advance work” that must be done in order to
effectively formulate and implement strategies. This
involves an analysis of the relevance of the Vision,
Mission, Core Values, goals and Objectives and it
includes environmental scanning or analysis of both
internal and external environments of the business.
Strategy Formulation – is developed at several levels.
1. Business level strategy addresses the issues
of how to compete in a given business to
attain competitive advantage.
2. Corporate level strategy focuses on two
issues:
a) What businesses to compete in
b) How businesses can be managed to achieve
synergy, that is, they create more value by
working together than by operating as a
stand alone businesses.
3. Firm must develop international strategies as
it ventures beyond its national boundaries.
Strategy Implementation – involves ensuring proper
strategic controls and organizational designs, which
includes establishing effective means to coordinate
and integrate activities within the firm and its
suppliers, customers and alliance partners.
THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY
AND ITS BUSINESS MODEL
A Firm’s Strategy - deals with the firm’s competitive
initiatives and its business approaches.
A Firm’s Business Model - Concerns whether the
revenues and costs flowing from the strategy show
that the firm can be profitable and viable
STRATEGY & BUSINESS MODEL
 A firm’s business model sets forth how its
strategy and operating approaches will
create value for customers while also
generating ample revenues to cover costs
and realize a profit.
 When the ability to earn good profits is not
present, a firm’s strategy and operating
blueprint are flawed, its business model is
not viable, and its ability to survive is in
jeopardy.
TWO CRUCIAL ELEMENTS OF A FIRMS BUSINESS
MODEL
1. Its Customer Value Proposition
 How the firm will satisfy customer needs and
requirements at a price customer will
consider to be a good value.
 From a customer perspective, the greater the
value delivered and the lower the price, the
more attractive the firm’s value proposition is
to customers.
 From a firm’s perspective, however, the
greater the value delivered and the higher the
price that can be charged, the bigger the
margin for covering the costs associated with
its business approach and realizing an
attractive profit and return on investment.
2. Its Profit Proposition (or “Profit Formula”)
 How the firm intends to generate a revenue
stream that covers the costs of delivering
attractive value to customers.
 How it will control the costs of the value
being delivered.
 How the proposition will yield attractive
profits for shareholders.
PROVEN VS UNPROVEN BUSINESS MODELS
 Firms in business for a while and making at
least reasonable profits have a “proven”
business model— there is hard revenue-cost
evidence that their strategies and approaches
to operating can yield good profits.
 Start-up firms and unprofitable firms have
“questionable” or “unproven” business
models because their strategies and
operating approaches have yet to produce
good bottom-line results, raising doubts
about their blueprint for profitability and
their viability as business enterprises.
 Firms operating in uncertain, volatile
markets often have business models that can
quickly lose their effectiveness; to survive,
these firms must be alert to early signs of
impending crisis and then swiftly reinvent
their business model and strategy.
EXAMPLE: BM OF TV NETWORKS
The Customer Value Proposition - provide audiences
with free and appealing broadcast programming
content.
The Profit Proposition - charge program sponsors
advertising fees (based on demographics and size of
viewing audiences) that exceed the full costs of
providing program content.
WHAT MAKES A STRATEGY A WINNER?
To qualify as a winning strategy, a strategy must pass
all three tests:
1. The Goodness of Fit Test - Is the strategy
well-matched to the company’s internal and
external situation?
2. The Competitive Advantage Test - Is the
strategy helping the company achieve a
sustainable competitive advantage?
3. The Performance Test - Is the strategy
producing good company performance?
A WINNING STRATEGY must fit the enterprise’s
external and internal situation, help build sustainable
competitive advantage, and improve company
performance.
STRATEGY AND ETHICS
 A strategy is ethical only if it passes the test of
moral scrutiny.
 To pass the test of moral scrutiny and qualify
as ethical, a firm’s actions and behaviors
 cannot cross the line from “should do” to
“should not do”
 A firm’s strategy definitely crosses into the
should not do zone and cannot pass moral
scrutiny if it entails actions and behaviors
that are deceitful, unfair or harmful to others,
disreputable, or unreasonably damaging to
the environment.
 strategy cannot be considered ethical just
because it involves actions that are legal.
 To meet the standard of being ethical, a
strategy must entail actions and behavior that
can pass moral scrutiny in the sense of not
being deceitful, unfair or harmful to others,
disreputable, or unreasonably damaging to
the environment.