Pasca Sarjana

Universitas Sriwijaya
 STRATEGIC MANAGEMENT

 WEEK 3 - 4 MSS

Muchsin Saggaff Shihab, MBA, Ph.D.

 The Strategic Management Process
External
Analysis

Strategic Strategy Competitive

Mission Objectives
Choice Implementation Advantage

Internal
Analysis

Business Level Corporate Level

Strategy Strategy

How to Position a Which Businesses

Business to Enter?
in the Market?
TYPES / LEVEL OF STRATEGT
 Levels of Strategy

CORPORATE CORPORATE
STRATEGY HEAD OFFICE

BUSINESS
STRATEGY Division A Division B

R&D R&D
FUNCTIONAL Personnel Personnel
STRATEGIES
Finance Finance
Production Production
Marketing/Sales Marketing/Sales
Types/Level of Strategy
A. Corporate strategy... defines the scope of the business in terms of
the industries and markets in which it competes. OJECTIVES,
PERFORMANCE
 Moving the organization ahead -- Organizational Growth
 Keeping the organization where it is -- Organizational Stability
 Reversing the organization’s weaknesses or decline -- Organizational Renewal
 diversification, vertical integration, acquisitions, new ventures, divestments,
allocation of scarce resources between business units
B. Business strategy is concerned with how the firm competes within
a particular industry or market... to win a business unit must adopt
a strategy that establishes a competitive advantage over its rivals.
 positioning relative to competitors to create sustainable competitive advantage
 Competitive strategies
 Cooperative strategies
C. Functional strategy is the detailed arrangement of resources at the
operational level
 how functions of the business contribute towards achieving the business
strategy
 Technological leadership
 Technological followership
 Types of Growth Strategies
Concentrates on its primary ANSOFF
line of business Horizontal
Concentration Integration

expands its operation Organizational

by moving into a
different industry Growth
Diversification Vertical Integration
•Related •Backward
•Unrelated • Mergers & Acquisitions
•Forward
• Strategic Partnering (JV, SA, Contract
(2) ORGANIZATIONAL STABILITY
 A strategy where the organization maintains its
current size and current level of business
operations
 When is stability an appropriate strategy?
 Industry is facing slow or no growth opportunities
 Many small business owners follow stability strategy indefinitely
 large firm in large industry at maturity stage of industry life cycle
 Implementation of Stability Strategy
 Not expanding organization’s level of operation
 Should be a short-run strategy
B. Business Level Strategies
Sources of Competitive Advantage

COST
du ct ADVANTAGE
pro
ila r
c ost
Sim r
l o we
COMPETITIVE at
ADVANTAGE
Pri
fro ce
m pre
un mi
iqu um
ep
rod DIFFERENTIATION
uc
t ADVANTAGE
 Drivers of Cost Advantage

ECONOMIES OF SCALE • Indivisibli\ties

• Specialization and division of labor

ECONOMIES OF LEARNING • Increased skill

• Improved organizational routines

• Process innovation
PRODUCTION TECHNIQUES • Reengineering business processes

PRODUCT DESIGN • Standardizing designs & components

• Design for manufacture

• Location advantages
INPUT COSTS • Ownership of low-cost inputs
• Non-union labor
• Bargaining power

CAPACITY UTILIZATION • Ratio of fixed to variable costs

• Speed of capacity adjustment

RESIDUAL EFFICIENCY • Organizational slack; Motivation &

culture; Managerial efficiency
Cost Leadership Strategy
 Objective:
– Gain sustainable competitive advantage over
competitors, using low-cost (not price)
– Produce for broad customer base
 Basic Theme (Keys to Success):
– Low-cost relative to competitors
 Low cost implies OVERALL LOW COST
 Not just low manufacturing or production cost
 Product quality cannot be ignored
Differentiation Strategy

 Objective
 Offering products/services perceived as unique over
the brands of rivals in an industry
 Keys to Success
 Offer products/services that create value to
customers
 Offer products/services not easily matched or easily
copied by rivals
 Not spending more to differentiate the firm’s
products or service than the price premium that can
be charged
Bases of Differentiation
Three Categories When Differentiation Works Better

Porter and Day

1) Product Attributes ???
• exploiting the actual product

2) Firm—Customer Relationships ?????

• exploiting relationships with customers

3) Firm Linkages ?????

• exploiting relationships within the firm
and/or relationships with other firms
 Unique Comparative
Resources Advantage

Positional Advantage
Superior
Our Company Customer Competitive
Value Advantage

Inferior
Customer Strategic Cooperative
Competitors Value Relationship Advantage

Sucherly, 2004

2- 13
 Core Competencies
• Traditionally companies owned and controlled resources,
• But situation changing, today outsourcing less critical resources: criteria (low cost,
better quality)

The key is: to own and nurture the resources and competencies, e.g. Nike does not
manufacture its own shoes. Nike nurtures its superiority in shoe design and shoe
merchandising

• Characteristics of CC
• A source of competitive advantage(make significant contribution to perceived customer
benefits)
• Applications in a wide variety of markets
• Difficult to imitate

2- 14
 Functional Strategies
 Role of functional strategies
 Using resources & capabilities to create & exploit CA takes place
through the actual strategies that are being used in the functional
areas
 Have a dual role in determining
 What competitive strategy is most appropriate?
 How is the strategy implemented?
 What is the Competitive Strategy is most Appropriate?
 Depends on
 Current firm resources & capabilities in place
 Fir resources & capabilities acquired & developed
 Each of Porter’s competitive strategies requires certain skills,
resources, & organizational requirements
Competitive Strategy

 What is competitive strategy?

• Consists of business approaches to
– Attract customers by fulfilling their expectations
– Withstand competitive pressures
– Strengthen market position
 Exploits competitive advantage by
 finding ways to use resources & capabilities to set firm
apart from competitors
 Understanding the Competitive Environment
 Who are our competitors? -- 3 Perspectives
(1) Industry perspective
 Identifies competitors as firms that are making the same products or

providing the same service

 Describes industries according to number of sellers & the

similarities or differences in the products or services

 The number of sellers & level of product-service differences will
affect how intensely competitive the industry is
(2) Marketing perspective
 Competitors are firms that satisfy the same customer needs

 Intensity of competition depends on

 How well the customer need is understood or defined

 How well different firms are able to meet that need

(3) Strategic Group Perspective

 Strategic group is a set of firms competing within an industry that have

similar strategies & resources

 OTHER PERSPECTIVES ON COMPETITIVE
STRATEGY
 Technological advancements that make this hybrid
competitive strategy possible are
 Flexible manufacturing systems
 Just-in-time inventory systems
 Computer-integrated manufacturing systems
 Advantages of hybrid strategy
• Competitive advantage from
 Premium pricing and
 Cost efficiency
• Success depends on having the capabilities to
 Provide attractive performance and features, &
 Lower cost than rivals
• Can often out-compete both a low-cost provider and a
differentiator
 What the industry offers
Premium Quality Budget
Polarised
Strategic Groups

Massive Choice
Blue Ocean Strategy: Basic Concept

Value Innovation
•Value Innovation is the simultaneous pursuit of
differentiation and low cost, creating a leap in value for
both buyers and the company
•companies can create greater value to customers at a
higher cost or create reasonable value at a lower cost
•Value creation….. Incremental
•Know Value Drivers (WHAT IMPORTANT TO
CUSTOMERS… MISSION

Utility Price Cost

Create new Set a price that Set the structure
buyer attracts a mass based on a target
utilities of buyers

customization.
 IMPLEMENTING VALUE INNOVATION
Reduce
The key to discovering What factors should
a new value curve lies be reduced well
in answering four below the industry
basic questions standard?

Eliminate Create/Add
Creating
What factors that the new markets: What factors that the
industry has taken for industry has never
A new value
granted should be offered should be
eliminated? curve
created or added?

Raise
What factors should
be raised well above
the industry standard?
Value Chain

3-22
 Resources, Capabilities and Core Competencies

Toyota things that an organization

Low-cost, high-quality does particularly well
manufacturing capability and Distinctive relative to competitors
short design-to-market cycles
Capabilities

Discovering Core
Competencies
The processes, systems or
organisational routines which the
organisation uses to coordinate
capabilities that are
its resources for productive use. Core fundamental to a firm’s strategy
and performance
Competencies
– Marketing firm’s capacity for
–
–
Finance
Capabilities undertaking a
Research and Development (R&D)
– Operations and Logistics particular activity
– Human Resources Management
(HRM)
– Information Systems (IS)
Resources The tangible and
•Tangible intangible assets of the
•Intangible organisation