Introduction

Strategic Management
 What is this course about?
• What do you think?

• Course:
– Strategic
– Management
 Strategy
• Will you survive 5 more years?
• Will you be getting the food for the coming
days?
• Why will you be better than other people?
• Do you have some idea what you will be doing
in next few years?
 What is Strategy?
• Where did it come from?
 Three Important questions of strategy

1. Where we are now?

2. What do we want to go?

3. How will we get there?

 What Is Strategic Management?
• Strategic management is the management of an
organization’s resources to achieve its goals
and objectives.
Example of Strategic Management
• Mobile phone launch.
• New phone model launch using public
relations.
 Strategic partner
• Structure of the corporation
 a te : n
o r ce io
r p an sit Ownership
Co vern l Po
o a Corporate
G tur
u c Governance
t r BoDs
S
BoTs

Management
C-suite or Executive-Level, CEO, CFO, CHRO

MIDDLE LEVEL MANAGER

LOWER LEVEL MANAGER

NON- MANAGERIAL EMPLOYEES

 Strategic Partner
• At the table vs. on the table?

• CEO??

• CFO or Finance Director?

• CMO or Marketing Director?
• CHRO or Director HR?
 Strategy vs operations
• Long tern vs short term.
What is (not) strategy?
 Operational effectiveness
• Operational effectiveness is performing similar
activities better than the rivals.

• It includes all activities that allow a company

to better utilize its input by, for example,
reducing defects in products or developing
products faster.
 Strategic positioning
• Unlike operational effectiveness, strategic
positioning means performing different
activities from the rivals or performing similar
activities in different ways.

• Better vs Different?
 How companies achieve Operational
Effectiveness?
• By:
– By eliminating wasted efforts.
– Employing more advanced technology.
– Motivate employees better.
– Better insight into managing a particular activity.

• In a result they can offer better products with low

costs.
• The recent thinking about strategy was the same as
operational effectiveness.
• Japanese challenge to western companies in 1980s
 The productivity frontier
• Imagine for a moment a productivity frontier
that’s constitute the sum of all existing best
practices at any given time.

• Think of it as a maximum values a company

delivering a particular product or service can
create at a given cost using the best available
technology, skills, management techniques,
and purchased input.
The productivity frontier
The productivity frontier (Your
company)
The productivity frontier (Your
company)
The productivity frontier (Your
company)
The productivity frontier (Your
company) Max Achievement ☺
 The productivity frontier
• When a company improves operational
effectiveness, it is moving towards the frontier.
• Doing so may require:
– Capital investment
– different employees
– Or new ways of managing
The productivity frontier is shifting outwards
(constant improvement in the best practices).
TQM, benchmarking etc.
The productivity frontier (Your
company) Max Achievement ☺
The productivity frontier is expanding ☹
 OE is not enough.
• Many organizations have taken advantages of
OE and made profits.
• BUT
• Any company can imitate the best practices
and reach the productivity frontier easily.

• Therefore, only improving OE is not enough.

 OE is not enough.
• Competitive convergence is when all
companies start benchmarking or outsourcing
the activities to the same parties (all rivals can
and will do the same).

• This will make no company much different

from the other in the long run.

• Therefore, OE has been considered as the

supplement strategy and not a strategy.
 Performing activities differently or
different activities than the rival.
• Strategy is not only the marketing slogan for
customers… but to perform activities differently.
– A full-service airline is configured to get passengers
from one place to another (any place to any place).
– They use connecting flights to reach all destinations.
– They use hub-and-spoke system on major airports.
• In order to do it, full-service airline have to change planes,
baggage transfer, provide meals, provide airport services and
many more activities to keep the customers happy and
comfortable.
– Southwest in contrast, only fly on specific routs,
provide online ticketing (no agent), low cost, no meal,
no assigned seat, no seat classes.
 Competitive strategy
• Competitive strategy is about being different!
• It means choosing a different set of activities to
deliver a unique mix of value.

– Southwest Airline: offers short-haul, low-cost, point to

point service between midsize cities and secondary
airports in large cities.
– It avoids large airports and does not fly long distance.
Its customers include business travelers, families, and
students.
– Frequent departs, and low fares attract price sensitive
customers, who otherwise would travel by bus or car.
 Place of Strategy in the hierarchy of
Objectives

Mission points to the reason the enterprise exist.

Vision identifies what organizations wants to achieve.

Strategy offers the roadmap of action of action that lead an

organization to achieve its vision.

Tactics are the specific action steps the organization takes in

pursuit of its strategy.
 Define Strategy (again)
• Strategy is an integrated set of choices that
position an organization within its environment
to achieve its vision over the long term.

1. Integrated set of choices

2. position an organization within its environment
3. achieve its vision over the long term.
 Three important dimensions of strategy

1. External consistency: Does the strategy tap the

opportunities and mitigate the threats posed by the
environment.

2. Internal consistency: are the activities that constitute the

strategy integrated in such a manners that the whole is greater
than the sum of its parts.

3. Dynamic consistency: Does the strategy offers a pathway to

success over the long term.
 Characteristics of an effective strategy
1. Choice: Strategy is about Choice. What to do and more
importantly, what not to do? The resources should be spent
on important and not secondary issues. 80/20

2. Clarity: Clarity of the sense “What organization want to

do?” Is it clear to everyone?

3. Commitment: Sense of direction, and long term is important

than temporary disturbance. (Goal is more important than
role).
4. Congruence: Various activities supporting each other to
gain strategic fit. The whole becomes more than the sum of
each activity (synergy).
Strategic Leadership is needed to ensure all these
things.
 Strategic positions
• Positioning or competitive advantage?
• Two main perspectives (positioning and
generic strategies).
 The origins of strategic positions
(One Perspective )

• The strategic positioning emerge from three

distinct sources which are not mutually
exclusive and often overlap.

1. Variety based positioning

2. Needs based positioning
3. Access based positioning
 Variety based positioning
• By producing a subset of industry’s products or
services.
• Company makes/offers best products using a
unique set of activities.
• Specialists in one thing/ Offers only one services.
– AL Balagh: offers only Hajj and Umrah related items.
– Red bull? Any other examples?
• It can serve a wide array of customers but will
only meet one type of need.
– (many customers of one need).
 Needs based positioning
• Serving most or all the needs of a particular
group of customers.
• When you are serving a group of customers
with different needs.
– Ikea meets all furniture related needs.
– Al-Fatah meets all household items needs.
– JaferJees?

• Some/all customers, all needs

 Access based positioning
• Access based positioning can be called the
geographic based positioning— how well you
can reach the customers.
• Different set of activates to reach the
customers.
• Carmike cinema only operates in towns under 200000
population,
• They can reach the customers, large scale cinemas
cannot.
• Gourmet Bakery in Lahore reaches area no famous
bakery reaches.
 Competitive generic strategies
(The Other Perspective )

• The word generic is there because these

strategies are applicable on all businesses (any
size or type) and can generate sustainable
competitive advantage.
 Competitive generic strategies
• According to Porter there are only two ways a
company can be successful i.e.,

– Low-cost production then any other competitor at

the same quality standards

– Or if the cost structure is higher, by creating

differentiation (making something no one is
making.)
 rd
Focus (3 way)
• Companies that use Focus strategies concentrate on
particular niche markets and, by understanding the
dynamics of that market and the unique needs of
customers within it, develop uniquely low-cost or
well-specified products for the market.

• Because they serve customers in their market uniquely

well, they tend to build strong brand loyalty amongst
their customers.

• This makes their particular market segment less

attractive to competitors.
• For example, when an insurance company
specializes in 'crop insurance'
 Some other factors
• Broad market scope: target multiple
segments in the entire industry.

• Narrow market scope: targeting a limited

segments.
 Combination of competitive advantage
and market scope
1. Cost leadership
2. Differentiation
3. Focus

4. The Focus strategy can be achieved by low

cost or differentiation
5. Therefore, focus- low cost and focus
differentiation
 All generic strategies
1. Cost leadership
2. Differentiation
3. Focus- low cost
4. Focus- differentiation
5. Best cost producer
 Case Article
.

Blue ocean strategy Case study in the next class.

 How to gain Cost leadership
• Economies of scale, experience and scope
• Better processing
• Outsourcing non-essential activities
• Removing bad costs
• Limiting Extras
• Employee involvement in cost cutting advantages
• Backward integration
• Relocation of labour to cheap labour places
• Engineering expertise
• Distribution efficiencies
 Reasons for pursuing overall cost
leadership
• If a company has a cost leadership advantage,
it can go with different pricing strategies
 How to build differentiated strategy
1. Decide what you want to be known for
You must have an idea of your expertise in your business.
2. Research your target audience
Research will help you align your business’ offerings with the wants
and needs of current and potential customers.
3. Develop differentiators
Image or reputation, Relationship, Service, Product, Distribution
4. Tell your story
When you tell your business’s unique story, it may automatically
assist with your differentiation strategy since your competitors likely
won’t have a story like yours.
5. Create a brand image
Implement your strategy and create a brand image by ensuring better
quality. Try to be creative and rebrand, if necessary, to capture new
clients and customers within your target audience.
Red Oceans?
Blue Oceans
A sustainable Strategic Position requires
Trade-offs
• Choosing a unique position is good and
profitable, however, not enough to guarantee
sustainable advantage (long term).
• A valuable position (by one company) will
attract imitation (by another company).
• Another type of imitation is