Learning objectives

Understand what

strategy

Highlight the role of critical thinking in defining

business

problems

Understand the

external analysis

tools

–

uses,

assumptions, strengths and weaknesses

Develop

techniques

for identifying real

competitors

What is a strategy?

Strategy is about influencing the future outcomes

A good strategy provides:

· a clear roadmap, consisting of a set of guiding principles or rules,

· defines the actions people in the business should take (and not take) and the things they should prioritize (and not prioritize) to achieve desired goals.

Source: Michael Watkins (2007). Demystifying Strategy. The what, who, How and Why. Harvard Business Review

Strategy

–

Definitions

•

Multiple definitions in academic literature:

•

More than just actions

–

includes aspirations and

visions

(

Porter,

1996)

•

Plan, ploy, pattern, position, perspective

(

Mintzberg et. al.,

1998)

•

High level plan

to achieve the goals of the firm

•

Choices that affect the

fundamental performance

and

survival

of the business

What is the strategy of these firms?

Note:

All these companies started as small companies

and must have implemented a strategy successfully!

Example of IKEA

· Sell relatively inexpensive contemporary Scandinavian style furniture to young, mostly western customers all over the world.

· Products are explicitly designed such as they can easily be mass produced and assembly can be done by the end customer without needing much knowledge

Uniqueness: Complex set of interdependent activities that are difficult to imitate

Their strategy is as much ‘about what they do as about what they do not do.’

Source:

A strategy process

will be worthless

without an

identified problem

Strategy as a problem solving process

· To develop a strategy, we first need to know which problem we are trying to solve (or address).

· E.g., What is the goal of Holistic Hair?

· To successfully enter the US market

· What is the problem?

· No simple answer – will have to find based on research

· The answer would come from the analysis of (a) internal and (b) external environments

Problems are not always visible

Problematisation

(

or problematizing):

means

making something problematic, not

taking it for granted

, questioning assumptions,

framings, inclusions, emphases, exclusions

•

Helps in identifying value

–

creating opportunity

Identifying a problem(s)

–

need analysis

•

Problems can be internal or external to the firm

(

or both

–

linked)

•

Choosing relevant strategic analysis tools and

techniques

–

not straight forward

•

What is a particular tool / technique useful for?

•

Underlying assumptions?

•

Strengths & weaknesses?

•

Different tools & techniques are used for different

purposes.

Suggestion for the project…

· Don’t decide yet – what the company needs (or what the problem is) without analysis!

· Write down ideas each week – but then put question marks (?) at the end

· Ask yourself what assumptions are you making as you come to conclusions about the “best” approach

· Where do these assumptions come from?

· What biases do you bring?

“rationale and justification”

Tools are not solutions

But no single tool is a solution or a best strategy.

•

Each too has its own strengths and weaknesses along

with its assumptions

•

So, select your tools carefully

Some popular tools are:

•

VRIO Framework

•

Value chain analysis

•

PESTLE

•

Porter’s Five Forces

•

Competitor analysis

•

Business model canvas

Selecting a tool without a reason is …

Analysing the context

External Environment

•

Context is complex

•

What is important may be

unclear

A firm’s business context

· Context effects:

“… set of factors that exert some influence on the firm; explanatory factors associated with a higher level of analysis than those under investigation.” (Whetten, 2009, p. 31).

· Examples:

· Economy (interest rates, unemployment …)

· Institutions (culture, norms, laws….)

· Industries (competitors and competition)

· Markets (customers, channels)

The context – business environments

external environment

composed of all the

outside factors or

influences that impact the

operation of business.

Why is context important?

•

Context can: (

)

constrains

to a firm’s path or lead to

opportunities

(

i.e. strategic options

•

Explain history & traditions

•

Influence future outcomes

•

Analysing the context provides meaning to what

would otherwise be isolated facts

•

Strategy represents a firm’s attempt to adapt to its

context

THREE common techniques

Porter’s Five Forces Analysis

Rivalry

Threat to new

entrants

Bargaining power

of buyers

Threat of

substitutes

Bargaining power

of suppliers

Porter’s Five Forces Analysis

Typical SWOT: not ‘good

–

enough’

STRENGTHS

Experienced senior

management

Hit sales target previous year

Many new products

WEAKNESSES

Not many

Quality

OPPORTUNITIES

China

Grow markets

Increase market share

THREATS

Global warming

Nestle (or any large Fortune

500

)

company

A general list will

not be valuable

in your reports!

Confrontation matrix

Graphic source: https://www.slideshare.net/mdhompes/marketingplanning

–

college

–

delft

–

michael

–

hompes

–

def

Competition as a continuum

Conflict

Competition

–

existence

–

operation

Collusion

Source: Easton, Burrell, Rothschild & Shearman (1993).

Managers and competition

. Oxford: Blackwell.

Typical competitive strategies

•

Large firms:

•

Cost leadership

•

Differentiation

•

Focus (cost / differentiation)

•

SMEs:

•

Niche targeting (dynamic)

•

Differentiation

•

Bridging structural holes in networks

Who are your close rivals / real competitors?

All

few

Easton, G. (1988). Competition and marketing strategy.

European Journal of Marketing, 22

(2)

, Page

33.

Strategic group analysis – close rivals!

· A strategic group comprises of a group of companies who are very close rivals because they follow the same strategy and are targeting the same customer group.

· Firms in a strategic group possesses similar characteristics:

· Product quality, distribution channels and market segments served.

· Technological leadership and customer service • Pricing

Strategic group analysis

–

Aircrafts

Strategic group analysis

–

Automobiles

Comparing close rivals

Note: You may consider more attributes and rivals

AMC model

Motivation

Does the

competitor have a

reason to respond

to your actions?

Capabilities

Does the

competitor have the

means to respond

to your actions?

Awareness

Does the

competitor

know

you are there

Competitors

–

Identifying and analysing

Industry

Size

Market commonality: overlap in customers,

products, geographies, channels

(

Chen,

1996)

Resource similarity

•

Are the assets & capabilities similar?

AMC Framework

•

Awareness

•

Motivation to respond

•

Capability to respond

(

Chen,

1996)

Summary

•

Outside

–

in analysis of context

and its influence on the firm

•

Context changes “meaning”

•

Tools such as PESTLE , 5 Forces

and SWOT are very limited in

developing strategy

•

But can provide a list of

(

priority) issues

•

Competitor threats may not be

clear

–

need more analysis