What is Strategy?

Sumit Mitra IIMK

Learning Outcomes (1)
 Understand the characteristics of strategic decisions and what is meant by strategy and strategic management, distinguishing them from operational management
 Understand how strategic priorities vary by level: corporate, business, and operational  Understand the basic vocabulary of strategy


VP. I enthusiastically joined Yahoo!.Yahoo! Memo: In Nov 2006 he wroteThree and a half years ago.Brad Garlinghouse..to everyone… We are scared to be left out. MBA Sr. We want to do everything and be everything.. But all is not well… We lack a focussed. cohesive vision for our company. We are separated into silos that far too frequently don’t talk to each other 1-3 .

exit non-core business Execute radical reorganization-restructure. STOP EATING PEANUT BUTTER!!! 1-4 ..Brand of Yahoo! cond… Our strategy is described as spreading peanut butter across the myriad opportunities…thus we focus on nothing in particular… I hate peanut butter!! There is massive redundancy. For far too many employees there is another person with similar and overlapping responsibility Lack macro-perspective Solution: Focus on Vision-what we are. downsize. decentralize.

Macroeconomic.Organization structure Talk to each other.HR/behaviour Opportunities.HR/Roles and Responsibilities 1-5 .What are issues being raised? Lack Focus. Making Money Redundancies.Overall –Vision Silos. Marketing.More people.

Three Big Questions Where are we now? -What Brad says is current position of Yahoo Where do we want to go?  Business(es) to be in and market positions to stake out  Buyer needs and groups to serve  Outcomes to achieve How will we get there? 1-6 .

A company‟s answer to “how will we get there?” IS ITS STRATEGY It is a commitment to pursue a particular set of actions/a set of choices some of which could go wrong (show graph) But there are other questions to answer before making choices 1-7 .

which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.What is Strategy? Strategy is the direction and scope of an organisation over the long term. 1-8 .

Characteristics of Strategic Decisions  Long-term direction-Yahoo needs marathon not sprint…  Scope of an organisation‟s activities  Competitive advantage-loss to Google  Strategic fit with business environment-Lack macro perspective  Organization resources and competences  Values and expectations of power players 1-9 .

Implications of Strategic Decisions  Complexity  Uncertainty  Integration  Relationships and networks  Change Different from Operational Decisions 1-10 .

does not give „sustainable advantage‟ Need to do „different’ activities or similar activities ‘differently’ from competitors (e.g South-West Airlines) Strategy Has a Long Term perspective 1-11 .faster with less inputs. ISO Best practices can be copied. best practices.Operational Vs Strategic Decisions Perform activities better.

low fares  Regular business travelers.spares. secondary airport  Frequent departure.South West Airlines  Short haul. students  Standard 737 aircraft. no frills  Mid-sized cities. aircraft  No baggage transfer Continental Airlines Started “Continental Lite‟ to compete-tradeoff 1-12 . point to point  Low cost.

Trade -Offs Sustainable Strategic position needs trade-offs Can Continental lite compete SW? Can „Medimix/Neutrogena‟ a medicinal soap prescribed by doctors compete with „Camay‟ or „Lux‟ ? Why not? Can Ford make and sell Jaguar? http://www.com/gb/en/ 1-13 .jaguar.

Jaguar History  The Swallow Sidecar Company was founded in 1922 by two motorcycle enthusiasts. Between Ford purchasing Jaguar in 1989 and selling it in 2008 it did not earn any profit for the Dearborn-based auto manufacturer.  The company Lotus Engineering Ltd. Aston Martin was subsequently sold off in 2007. Land Rover. In 1935 the SS Jaguar name first appeared on a 2. Ford announced that it had agreed to sell its Jaguar and Land Rover operations to Tata Motors of India. Volvo Cars and. 1-14 .  On 26 March 2008. by engineer Colin Chapman in UK was supplier of engines to F1 cars. William Lyons and William Walmsley.  Few engines have demonstrated such ubiquity and longevity: Jaguar used the Twin OHC XK Engine. from 2000. in such diverse vehicles as the British Army's Scorpion Light Armoured Combat Reconnaissance Vehicle  In 1999 it became part of Ford's new Premier Automotive Group along with Aston Martin.5 litre saloon.[7] sports models of which were the SS 90 and SS 100.

Designed to compete head-on with the Ferrari F40 and Porsche 959 supercars 1-15 .Recent Models The Jaguar XJ is a full-size luxury saloon The Jaguar XF is a mid-size executive car introduced in 2008 Of the more recent saloons. the most significant is the XJ (1968–1992). XJ220.

rearengined.Ford‟s mass production vs Jaguar‟s R&D •Internal coordination/control. creame •Activities.South West versus Continental 1-16 .g Medimix/ Neutrogena versus Lux/Camay – perfumed. four-passenger city car built by the Indian company Tata Motors and is aimed primarily at the Indian domestic market. lather. systems.automation. skills. What Tradeoffs is TATA making or needs to make? Trade offs arise out of: • Inconsistency in image or reputation e.Trade Offs The Tata Nano is an inexpensive.

and competitiveness. strengthening its market position.It is like saying… “Among all the many different business approaches and ways of competing we could have chosen. and boosting performance. we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction.” 1-18 .

Mercedes Benz.Strive to be the industry‟s low-cost provider Wal Mart & South West Airlines  Out-compete rivals on a key differentiating features like higher quality. Toyota 1-19 . resource strengths. Rolex  Focus on a narrow market niche. Starbucks. doing a better job than rivals of serving the unique needs of niche buyers e.g e-Bay.g FedEx. and capabilities not easily imitated by rivals e. more choice.g Harley-Davidson. better technology e. Walt Disney.Sustainable Competitive Advantage  This may be achieved through the following options .McAfee  Develop expertise.

Levels of Strategy Corporatelevel strategy Business-level strategy Operational strategy 1-20 .

Levels of Strategy Strategies are formulated at different levels: Corporate Strategy: What businesses to be in to boost overall performance-BOD approves Business Strategy: How to compete in a business-link corporate to function Functional area strategy to support business strategy at function level say marketingAmway Operational: Align operations to business strategy/functions. .

Vocabulary of Strategy  Mission  Vision  Goal  Objective  Strategic capability  Strategies  Business model  Control 1-23 .

whenever. sharing. and in the awesome potential in connecting the 2 billion who do with the 4 billion who don‟t. Wherever. Nokia believes in communicating.Helps decide what business firm is in  Connecting is about helping people feel close to what matters.Vocabulary of Strategy: Nokia  Vision/Mission. 1-24 .

 Sophisticated distribution systems – Wal-Mart  Product innovation capabilities – 3M Corporation  Complex technological process – Michelin  Defect-free manufacturing – Toyota and Honda  Specialized marketing and merchandising knowhow – Coca-Cola  Global sales and distribution capability – Black & Decker  Superior e-commerce capabilities – Dell Computer  Personalized customer service – Ritz Carlton hotels 1-26 .Examples of Competitive Advantage and their sources..

Strategy can arise from Internal Resource of firmResource Based View of Firm (RBV) 1-27 .

THANK YOU 1-28 .