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Strategy: The Whole Journey

This is all the slides on SIE module, MSc in Management. Enjoy it!
by

Ehsan Sabet

on 5 October 2016

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Transcript of Strategy: The Whole Journey

Strategy in the International Environment
Strategy Reflection:
Go international
Strategy and
Competencies / Capabilities

Strategy and Business Environment
Positioning
Shape your Strategy
What is Strategy !?
In your groups:
Produce a diagram or picture of what you think strategy is and how it works…
The Economist
“Nobody really knows what strategy is” !!!
Can we fix a corporate strategy, which works for 10 years?
Shape
Leads us
“Strategy is the direction and
scope
of an organization over the
long term
, which achieves advantage in a
changing environment
through its configuration of
resources
and competences with the aim of fulfilling
stakeholder expectations
.” (Johnson, 2008)
Arenas
Vehicles
Differentiation
Staging
Economic
Logic
Arena: Where will be active
and with how much emphasis?
which Product categories?
which Channels?
which market segment?
which geographic are?
which core technology?
which value creation stages?
How we get there?

Internal development?
Joint ventures
Licensing / Franchising?
Alliance?
Acquisitions?
Staging: what will be our speed
and sequence of moves?

Speed of expansion?
Sequence of initiatives?
How will we win?
Image?
Customization?
Price?
Styling?
Product reliability?
Speed to market?
...
How will return be obtained
Lowest costs through scale advantage?
Lowest costs through scope and replication advantages?
Premium prices due to unmatchable service?
Premium prices due to product features?
Michael Eugene Porter (born May 23, 1947) is the most cited author in Business Economics.

He is now a Professor of competitive strategy at Harvard Business School.
He is recognised as father of modern strategy field
He has written 18 books in strategy field.
His ideas and theories are thought in all business schools of the world.
Can it be a strategic Decision?
Why Ramping up the R&D budget can't be a strategy?
Source: Hambrick, D.C., Fredrickson, J., W., 2001, Are you sure you have a strategy? Academy of management executives, Vo1. 19, No. 4.
How do you say it is a good strategy?
Count & Measurement
Thinking through and designing metrics for organisations

This session complements the finance module and will be based on students’ contributions….

But the development here is to think through other metrics that matter – based on Beyond the Hype Eccles and Nohria
Models require metrics: things to count and measure
In your assessment teams:
10 minutes discussion to design a set of measures for a restaurant …..
Please describe each measure and explain why you have chosen it
What needs to be measured?
Eccles and Nohria ask the question “Is profitability the measure for business success?”

Is there an objective measure or criterion for success?

Why do we seek such a thing anyway……….
Business Model
What is a business model?
It is a model, an image, a representation, of how the business works
what is a “model”?
Theme 1: Business Models
A simple way to start: how one thing leads to another….
Leading-Following Business Model of a restaurant
Now when the model is done, it seems complicated.
So, unless you write the mechanisms on the arrows you cannot use the model for further discussions
Make sure you understand the leading-following flows from the kitchen and chef down the supply chain and how this connects the internal business to the external environment
Nine building blocks of a business model
Strategy in the international Environment
Ehsan Sabet
ehnsa.sabet@ntu.ac.uk

John Fredericks
john.Fredericks@ntu.ac.uk

Nottingham Business School
Nottingham Trent University

http://www.polleverywhere.com/multiple_choice_polls/MTk2NzI5MDMyOA
Strategic Groups
The Macro-Environment
Industry (or Sector)
Industry (or Sector)
Strategic Groups
Competitors
Competitors
Strategic Groups
Strategic Groups
The Macro-Environment
If there was no change in business environment ...
Setting up and maintaining exchange relationships in order to secure critical exchange with the environment
Whys Change is a scary thing?
change
Optimistic
Opportunities
or Realistic?!
Pessimistic
or Realistic?!
Threats
Data & Information on the changes
To establish trends, correlations and links
A pattern to be seen emerging over time as actions are taken to enable the organisation to continue into the future
A race for future advantage
Positioning….
Doing something different or doing it differently
A pattern in a stream of actions and decisions
A process of analysis, choice and implementation
Exercising Choices
-Focus
Strategy
The formulation of strategy is concerned with matching the capabilities of an organisation with its environment”
Johnson & Scholes, Exploring Corporate Strategy, first edition (1989) page 53
A business model describes the way these connections between an organisation and environment are maintained: it indicates the capabilities and the way they are matched…
Your Business
Technological Factors
Environmental Factors
Legal Factors
Political Factors
Economic Factors
Social Factors
To predict future
Intervine:

An SME which sells Wine to multinational airlines and cruise
http://www.intervineinc.com/Our_Team.html
In your groups:

Task 1:
- What would be economic impacts of the environment on this company
Task 2:
- How Exchange rate changes may affect the company? and how they can hedge against it
Task 3:
- Now watch this video clip as a money exchange service provider company and identify the values for your client (Intervine)
Lifestyle
change
Intervine Co.
Technological Factors
Environmental Factors
Legal Factors
Political Factors
Economic Factors
Social Factors
Groups Task
http://www.intervineinc.com/index.html
Group Task: Draw a leading-following business model for the company, Using the information on their website and some assumptions of your own
From their website, you know who are the customers - work it out what would be value for each customer.

from the website, you know who is on the team, where are the suppliers and what is their capabilities. and what are the services they offer.
Task2:
Now understanding the company's business model, please study the impact of the macro-business environment on the company. Use your iPads to search all available the databases (Mintel, Keynote, etc.)
Which Industries you will look into? Vine? or...?
Micro-Environment
Is it really important what the industry is, in which we are operating?
Strategic Groups
The Macro-Environment
Industry (or Sector)
Industry (or Sector)
Strategic Groups
Competitors
Competitors
Strategic Groups
Strategic Groups
Low Cost Leaders
The UK Macro-Environment
Supermarket Sector
Differentiated
Outfit Industry
Niche Market (Focused)
The Macro-Environment
Industry (or Sector)
Industry (or Sector)
Generic Strategy (Porter, 1980)
Strategic Group A
Time
Emergent
Dynamic Strategy
Strategic Group 1
The Macro-Environment
Sector A
Sector B
Strategic Group 3
Strategic Group 2
- Understanding the
Market
and
Values
- Your
resources
and
capabilities
How to choose a sector and a strategic group?
Market-Based Approach
(Discussed Previously)
Resource-Based Approach
Group Discussion
First You need data and information about the industry - Remember: How the industry has been changing? not a snapshot!
http://www.eef.org.uk/NR/rdonlyres/61572F71-4C20-4D72-BD9B-D8AA9914A27E/20866/SteelMarketReport_May12.pdf
http://eippcb.jrc.ec.europa.eu/reference/BREF/IS_Adopted_03_2012.pdf
http://www.ey.com/Publication/vwLUAssets/Global-Steel-Report-2013/$FILE/Global-Steel-Report-2013_ER0046.pdf
Porter, 1996….
In HBR, Fall 1996, Porter claimed his ideas about industry structure and value chain had become so popular that they no longer led to strategic advantage….

There are a number of ways of describing what he says “i
s strategy”
:
Choosing

whic
h customers/clients you want to work with
Focusing

on
their needs and ways of doing things, to the exclusion of all others
Do different things
from
other providers for these clients
Or
Do things differently
– configure yo
ur processes for delivery of goods and services in a different way from competitors.
Value Chain vs. Value Network
Team work: Create a value network (Value activity map) for the business you did the value chain for, in the last task
Part 1:
Resource-Based View
Part 2:
Core Competency
Thank you!!
1- Gather data and information about the industry (Steel Making industry)
2- Do an in-depth 5-forces analysis on the industry and generate a spider chart.
3- Create a presentation (max 8 slides - 12 minute presentation)
Need more examples and explanation?
http://www.slideshare.net/Alex.Osterwalder/business-models-beyond-profit-social-entrepreneurship-lecture-wise-etienne-eichenberger-iqbal-quadir-grameen-bank-grameen-phone
Porter 1996:
Positioning
Variety:

what
we do well: product/service content, many client types
Needs:

Who
we work with well: capability to identify and meet their needs
Access:

how
we do things enables access: we can get at opportunities that others don’t see/can’t do
“Positioning
can be based upon producing a subset of an industry's products or services. I call this variety-based positioning because
it is based on the choice of product or service varieties rather than customer segments.
Variety-based positioning makes economic sense when a company can best produce particular products or services using distinctive sets of activities.”
Focus on the productive ability to make stuff (a sub-set of industry’s goods/services) :
"for positioning is that of serving most or all the needs of a particular group of customers. I call this needs-based positioning, which comes closer to traditional thinking about targeting a segment of customers. It arises when there are groups of customers with differing needs, and when a tailored set of activities can serve those needs best. Some groups of customers are more price sensitive than others, demand different product features, and need varying amounts of information, support, and services."
“Intimate” or detailed understanding of a customer segment…..
"positioning
i
s that of segmenting customers who are accessible in different ways
. Although their needs are similar to those of other customers, the best configuration of activities to reach them is different. I call this
access based positioning
. Access can be a function of customer geography or customer scale-or of anything that requires a different set of activities to reach customers in the best way."
What are:
Operations?
Capabilities?
Strategic capabilities
/ Core competencies?
www.youtube.com/watch?v=ZRcDVm6G50Y&feature=player_embedded
Nigel Slack is the Professor of Operations Management and Strategy at Warwick Business School, Warwick University in the UK.
The idea of core competence was introduced into management literature in
1990
by C.K.
Prahalad
and Gary
Hamel
http://www.economist.com/node/12231124
Core competencies are the collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies.

Core competence is communication, involvement and a deep commitment to working across organisational boundaries.

Core competence does not diminish with use. Unlike physical assets, which do deteriorate over time,

Core competencies are enhanced as they are applied and shared.
Is a capability your core competency?
http://www.economist.com/node/12231124
First, a core competence provides potential access to a wide variety of markets.

Second, a core competence makes a significant contribution to the perceived customer benefits of the end product.

Third, a core competence is difficult for competitors to imitate because it is a complex harmonisation of individual technologies and production skills
Strategy as Stretch and Leverage

(Hamel and Prahalad 1993)
Hamel, G., Prahalad, C.K., 1993, Strategy as stretch and leverage, Harvard Business Review, 7(2), 75-84
Global competition is not just product versus product or company versus company. It is
mind-set versus mind-set
.

Understand the dynamics of competition.
Find the root of competitiveness
.

For many managers, "being strategic" means pursuing opportunities that fit the company's resources. This approach is not wrong, but it obscures an approach in which "stretch" supplements fit and
being strategic means creating a chasm between ambition and resources
.
Managers at competitive companies can get a bigger bang for their buck in five basic ways:
by concentrating resources around strategic goals;
by accumulating resources more efficiently;
by complementing one kind of resource with another;
by conserving resources whenever they can;
by recovering resources from the market-place as quickly as possible.
In Resource Based Views of strategy:
Attention and concern shifts FROM the food that was made by the (capable) chef
To the competences of the chef working in the kitchen
(the kitchen itself is an expression of competence in its design and layout),
all of which are expressed in the food
Competing for the
Future
A point of view about the future of the industry…
“Competing for the Future” HBR July-August 1994 p127
How do we want this industry to be shaped in 5 – 10 years?

What must we do to ensure that the industry evolves in a way that is maximally advantageous for us?

What skills and capabilities must we begin to build now, if we are to occupy the industry high ground in the future?

How should we organise for opportunities that may not fit neatly within the boundaries of current business units?
Getting at the thinking: the dynamics and the agenda of core competences
Thinking in time: now
Thinking in time:
the now in future
Thinking in between time: thinking across technologies and their uses, finding ‘better’ and ‘best’
Thinking through time:
what
shapes our capabilities
through time.

What we need and when
To create the future [..] requires industry foresight.
Industry foresight is based on deep insights into trends in technology, demographics, regulations and lifestyles…
…which can be harnessed to re-write industry rules and create new competitive space
Industry foresight is a synthesis of many people’s visions
Senior executives’ primary role is to capture and exploit the foresight that exists throughout the organisation
and Prahalad (2000) “Competing for the Future” HBR July-August 1994 p128
The Quest for Foresight
Understanding your client (strategically)
We asked you to explore the knowledge, skills and capabilities that you see/witness in your client

We asked you to up-date or revise your client business model

Now……

Create an image/description of your client’s environment and business in 7 years time – what competences and capabilities are going to be critical?

Does this change the business model – how must they develop their competences?
S t r e t c h i n g the business model….
This idea is based on thinking about what we do… and what we do not do….
S t r e t c h i n g the business model….
Strategy as Stretch and Leverage
There are things we do not do but they are “near” or close to what we do….
And there are things that we can think of that are related, but far away from what we do…
So let’s take Porter’s (1996) 3 bases of positioning:
Variety:
what we do
well: product/service content, many client types
Needs:
Who we work with
well: capability to identify and meet their needs
Access:
how we do things
enables access: we can get at opportunities that others don’t see/can’t do
Conclusion:
The ideas of capability: VRINE, SWOT, Development
SWOT Presentation:
Strengths
Weaknesses
Opportunities
Threats
The business idea:Note the implicit and underlying relationships between the business and society:
“The Theory of the Business” (Drucker, 1994)
A “business model” for the business
Building competences….
Refining the business model through experience
Competences used to satisfy (chosen) customers
And achieve “competitive advantage”
And takes advantage of environmental “forces”
Yielding profits
Providing investment
Providing new opportunities
Which satisfy stakeholders
SWOT
How we go International?
Can we & Do we need to go International?
Economies of Scale.
Concentrating manufacturing in a few select locations to achieve economies of mass production.

Capitalize on converging consumer trends and universal needs.
Companies such as Nike, Dell, ING, and Coca-Cola offer products that appeal to customers everywhere.

Uniform service to global customers.
Services are easier to standardize when their creation and delivery are centralized

Global sourcing of raw materials, components, energy, and labor.
So
urcing from large-scale, centralized suppliers provides economies of scale and consistent performance.

Global competitors.
Global
coordination is necessary to monitor and respond to global competitive threats.

Availability of media that reaches customers in multiple markets.
Firms
now take advantage of the Internet and cross-national television to promote offerings in many countries simultaneously.
Pressures for Global Integration
Yip’s Industry globalisation drivers
Friedman’s flatteners of the entire economy
The new, “flat” world is one where technology and collaborative economies have created an entirely new playing field. The ten flattening forces are:
Innovative mindset
Collapse of Berlin Wall
Netscape
Workflow
Open sourcing
Outsourcing
Offshoring

Supply chaining

Insourcing

In-forming

"The Steroids"
(Friedman T. The world is flat 2005)
Pressures for Local Responsiveness
Unique resources and capabilities available to the firm.
Each country has national endowments that the foreign firm should access.

Diversity of local customer needs.
Businesses, such as clothing and food, require significant adaptation to local customer needs.

Differences in distribution channels
. Small retailers in Japan understand local customs and needs, so locally responsive MNEs use them.

Local competition.
When competing against numerous local rivals, centrally-controlled MNEs will have difficulty gaining market share with global products that are not adapted to local needs.

Cultural differences.
For those products where cultural differences are important, such as clothing and furniture, local managers require considerable freedom from HQ to adapt the product and marketing.

Host government requirements and regulations.
When governments impose trade barriers or complex business regulations, it can halt or reverse the competitive threat of foreign firms.
Four Strategies Emerging from the Integration-Responsiveness Framework
The International Strategy
Core functions and competencies remain centralised.

Home-country offices retain tight control over brand and product/service strategy.

The strategy is to build or exploit global brand power and competitive advantage and to secure experience curve benefits. BUT strategy also aims to achieve a degree of localisation.

Consequently, international firms tend to be able to evidence standardised product/service cores (based largely on domestic variants) and a record of adapting products/services and/or their marketing.

International firms evidence what some have called a “glocal” strategy (Svensson, 2001), standardizing certain core elements and localizing others.

Localisation may be delivered through local centres or subsidiaries
The Multi-domestic Strategy
Strategy is said to be ‘locally responsive’.

The focus is on building competitive advantage through sensitivity and responsiveness to national differences.

The firm generally modifies and adapts its products and/or services from country to country, with many products and brands unique to local settings.

Subsidiaries or other operations around the world, enjoy a high degree of autonomy.

Value-creating activities (production, marketing etc.) are dispersed and often duplicated.

Some country clustering may be evident.
Effective when large differences exist between countries or country clusters and when industry globalisation levels are low.
The Global Strategy
Strategy is focused on producing standardized products for sale around the world (global scale economies).

There is virtually no adaptation of products or services to meet local needs.

Production and R&D activities are concentrated in a small number of scale facilities in optimal locations.

Key operating decisions remain centralized at the home country-base.

There is tight operational control from the centre with world-wide operations highly integrated.

The main role of subsidiaries is to implement parent company strategies – that is, to act as pipelines of products and strategy (‘hub-and-spoke model’).

Marketing strategy is based on ‘one sight, one sound, one sell’ with little practical adaptation or (local) tailoring.
Effective when differences between countries are small and when industry globalisation levels are high.
The Transnational Strategy
Strategy is focused on building cost advantages through scale and location economies (like the global firm).

Strategy is also focused on maximizing local responsiveness (like the multi-domestic firm).

Strategy also targets ‘global learning’ through transfer of best practice and innovation across business centres with assumption of multi-directional communication flows.

The transnational organisation will tend to be ‘heterarchical’ (with multiple strategic centres) with either complex matrix management structures or loose network characteristics.
Regional strategy
One criticism of the Bartlett & Ghoshal model, is its failure to identify a fifth MNE orientation consistent with the Regio-Centric Strategy identified by Chakravarthy and Perlmutter (1985) and empirically proven in a variety of studies.

Companies operating with a coordinated international regional strategy essentially standardize their product or service for an international region, allowing minor modifications for national markets where necessary.

Within individual regions (Europe, Asia, N.America etc.), key resource areas are centralised and configured to meet the needs of the region, rather than any one national market.

Considerable strategic autonomy will be invested in regional headquarters and/or regional product managers, with reduction in the range of business functions undertaken and controlled by country-based subsidiaries.

Regional-scale efficiencies are generated.
Porter's Diamond Model
Macro-Environment Analysis
International strategy and the environment
PEST (LEPEST) analysis:
It allows to understand how changes in the environmental framework would indirectly affect an organisation
Po
rter’s diamond
I
t identifies the country specific advantage, that is the competitive advantage a given country can offer a to a specific industry
Macro-Environment analysis:
Micro-Environment analysis:
Five forces industry analysis:
It facilitates the understanding of competitive dynamics within an industry and its potential
International strategy and the company’s potential
SWOT analysis
(strengths, weaknesses, opportunities, threats)
It combines the internal aspects of the company with the external changes, on which the company does not have control

VALUE analysis
(C
hain, Network)
It allows the identification of ‘where’ the company creates value and ‘where’ a distinctive competitive advantage can be developed

Resource and Competences analysis.

It facilitates the definition of the competitive advantage of the company. Moreover, it favours the identif
ication of the ‘purpose’ of the company and of its mission and values.
Ohmae, 1990 5-Stage Globalisation Model (evolutionary)
Export orientated company (develop strong product base in home market)

Establish overseas branches

Relocating production base to key markets

'Insiderisation': transferring corporate functions from parent firm HQ to new local environment

Complete global company: establishing global branding
Born-Globals
Traditional internationalisation theories have been challenged by the emergence of new global companies disrupting the stagiest approach.

Particularly in internet, new media, and services.

Opens new horizons for SME

(Knight & Cavusgil, 2004)
What is IKEA’s strategy for global expansion?
What makes IKEA one of the most successful global company?
If your business is global, what strategy it follows to expand in international markets?
Strategic decisions are those decisions which are:

Larger impact
on the organization

Define the
position
of the organization relative to its business environment and competitors

Move the organization closer to its
long-term goals
.
What are the Strategic Decisions?

Integration Level
Supply Chain network
R&D Strategy
HR Strategy
Logistics / Inventory strategy
Capacity Technology
Capacity Location
Investment Level
Strategic Operations
decisions
Read the papers John and I put on NOW !!
Now, create an Osterwalder’s 9-step model for your company
Now, Create a leading-following business model for your client!
Leading-Following Business Model of a restaurant
www.youtube.com/watch?v=LcfOh8NKdho
?
Understanding order winning and qualifier criteria
Strategy
Top-Down
Market Based
Tangible Resources
Intangible Resources
Bottom-Up
Resource Based
Market Based View
Market-Based Approach
Strategy
Top-Down
Market Based
Bottom-Up
Resource Based
What customers want or need?
Don't assume, but ask!
Value is in customers' minds = Perceptions
Customers values change. Keep your eyes on it!
Customers want "IT", free, perfect and now!
www.youtube.com/watch?v=uhOhlxlCRys&list=PL751FD6730BC881EC
C.K. Prahalad
Focus on Different Needs
Focus on Variety
Diversification / Licensing
Porter 1996:
Positioning
Variety
Needs
Access
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. Pearson Education.
Chapter 6
Competitive Advantage
Competition and Collaboration
So far the emphasis on competition. However, advantages may also be achieved by collaboration
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. Pearson Education.
Chapter 6
Recommendations
Domestic or
International
What Do you want / how do you do it?
What Do you want / how do you do it?
What Do you want / how do you do it?
What Do you want / how do you do it?
Related Vs. Unrelated
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. Pearson Education.
Chapter 7
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. Pearson Education.
Chapter 7
Watch it yourself!
Competitive
Strategy

Part1
Part2
https://www.youtube.com/v/H9Fa6XMSTko
Full transcript