The Concept of Strategy
Session 1 and 2
What is ‘Strategy’?
A company’s strategy is the set of actions that
its managers take to outperform the company’s
competitors and achieve superior profitability.
2
What is ‘Strategy’?
Consists of competitive moves and business
approaches used by managers to run the company
Management’s “action plan” to
Grow the business
Attract and please customers
Compete successfully
Conduct operations
Achieve target levels of
organizational performance
3
What is ‘Strategy’? … Contd.
A firm’s strategy is found in its investments in resources
and capabilities that 1) determine its market position
and 2) defend this position from competitors
Benefits of an effective strategy
Relates the firm’s resources and capabilities to its markets
Provides a framework for integrating activities within the firm
Acts as a guide for decisions regarding management and
organization
Businesses achieve competitive advantage by emphasizing
cost, value to the customer, or both.
4
The Three Strategic Questions
What’s the company’s present situation?
Where does the company need to go from here?
Businesses to be in and market positions to stake out
Buyer needs and groups to serve
Direction to head
How should it get there?
A company’s answer to “how
will we get there?” is its strategy
5
Origins of Strategy
Basic origins of strategy include:
Industrial and evolutionary economics
Case studies of exemplary companies
Business and industry history
Economic and organizational sociology
Strategic planning tools
Institutional economics
6
10 Schools of Strategy
Strategy Safari (Mintzberg, Ahlstrand, Lampel)
7
5 Ps of Strategy
Plan. A direction, guide, course of action.
Pattern. Consistency in behavior over time.
Position. Locating specific products in specific
markets.
Perspective. Way of doing things.
Ploy. Specific maneuver to outwit.
Strategy Safari (Mintzberg, Ahlstrand, Lampel)
8
Auto makers in India – Issues?
Dull Markets: https://www.livemint.com/auto-
news/dull-december-caps-a-year-to-forget-for-
automakers-11577903523946.html
Self Driving Cars:
https://www.forbes.com/sites/doronlevin/2019/04/24/
google-and-tesla-say-self-driving-tech-will-
accelerate-exponentially-within-twenty-four-
months/#457c21d55e51
Assetless Models: UBER, Ola etc.
9
Strategy Formulation and Implementation
Strategy formulation
Information gathering and identification of resources and
capabilities
Deciding which strategy the firm should follow
Strategy implementation
Taking action necessary for the strategy to be successful
10
?
Google’s browser-based Chrome operating system
and its online applications suite are now challenging
Microsoft’s long-term dominance of those
marketplace sectors.
What should be Microsoft’s near-term response to
this competitive challenge?
How will Microsoft’s long-term response to this
competitor’s actions affect its business model?
Which competitor’s strategy will likely be the
eventual winner in the marketplace? Why?
11
What is Strategy About?
Strategy is all about How:
● How to position the firm in the marketplace
● How to attract customers
● How to compete against rivals
● How to achieve the firm’s performance targets
● How to capitalize on opportunities to grow the business
● How to respond to changing economic and market
conditions
12
Strategy and the Quest for Competitive
Advantage
Competitive advantage
Requires meeting customer needs either more effectively
(with products or services that customers value more
highly) or more efficiently (by providing products or
services at a lower cost to customers)
Sustainable competitive advantage
Requires giving buyers lasting reasons to prefer a firm’s
products or services over those of its competitors
13
Starbucks-Strategy Elements
Key elements of Starbucks’ strategy:
Train baristas to serve a wide variety of specialty coffee drinks that
satisfy individual customer preferences in a customized way
Emphasize store ambience and elevation of the customer
experience at Starbucks stores
Purchase and roast only top-quality coffee beans
Foster commitment to corporate responsibility
Expand the number of Starbucks stores domestically and
internationally
Broaden and periodically refresh in-store product offerings
Fully exploit the growing power of the Starbucks name and brand
image with out-of-store sales
14
Basic Strategic Approaches
Strategies for Building
Competitive Advantage
Low-cost Broad
provider differentiation
Focused Focused
low-cost Best-cost differentiation
provider
15
Identifying a company’s Strategy
16
Strategy Execution
Entails continuous development, maintenance and
improvement of resources and capabilities
Elements of execution:
Incentives and compensation
Control and coordination systems
Degree of consistency among a firm’s activities
Firm’s culture and human resource systems
Effective execution requires each element to reinforce
the others
Not the same as strategic planning
17
Strategic Planning
Details the process for developing business
strategies and links them to operational programs
and investments
Details the logic behind cash flow forecasts
Provides process for:
Development of the firm’s mission
Goal setting
Identification of strategic initiatives
Program development, scheduling and accountability
Problem solving and innovation
18
Proactive and Reactive Strategies
A firm’s deliberate
strategy consists of
proactive strategy
elements that are both
planned and realized
as planned.
Its emergent strategy
consists of reactive
strategy elements that
emerge as changing
conditions warrant.
19
Strategy and Business Model
Realized Business
Strategy Rs.??? Model
Competitive Value
Initiatives Proposition
Business Profit
Approaches Formula
20
Tests of a Winning Strategy
Goodness of fit test
How well does strategy The Fit Test
fit
the firm’s situation?
Competitive advantage
test
Three
The Competitive Tests of a The Performance
Does strategy lead to Advantage Test Winning Test
sustainable Strategy
competitive advantage?
Performance test
Does strategy boost
firm performance?
21
The VPC Framework
22
Thank You
23
