301– Strategic Management Study Notes

 

301– SM Syllabus 2023 (Semester III)

Chapter 1: Understanding Strategy

• A strategy is a long-term plan of action designed to achieve a particular goal or set of goals. It is a blueprint for how an organization or individual intends to allocate resources, prioritize actions, and make decisions in order to achieve their objectives.

•  Strategy is about making thoughtful and deliberate choices about how to achieve your goals, and aligning your actions, resources, and decision-making with those choices.
  
  

• Corporate level strategy: This is the highest level of strategy and is concerned with the overall direction and scope of the entire organization. It involves decisions about what businesses to be in, what markets to compete in, and how to allocate resources among different business units.
  
  

• Business level strategy: This level of strategy focuses on a specific business unit or subsidiary within the organization. It involves decisions about how to compete in a specific market or industry, what products or services to offer, and how to position the business in the market.

• Functional level strategy: This level of strategy is concerned with the day-to-day operations of the organization and focuses on how individual departments or functions can support the goals of the business unit and the organization as a whole. It involves decisions about how to allocate resources, design processes, and organize work within each function to support the overall strategy of the organization.

• Strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives. It involves the creation and implementation of plans and decisions made by a company's top management, aimed at achieving long-term success and creating value for the organization and its stakeholders.

• Key characteristics of SM: Long-term focus, Integrative approach, Evidence-based decision making, Systemic perspective, Continuous improvement, Collaboration.

• Tactics refer to the specific actions, steps, or techniques used to implement a strategy. Tactics are the specific, concrete actions that are taken to carry out a strategy. They are the means by which a strategy is put into practice.

• Roles of stakeholder in strategic management

1)  Customers: They play a critical role in the strategic management process by providing feedback on the organization's offerings and influencing the demand for its products and services.

2)  Investors: They play a key role in the strategic management process by providing financial support and offering a perspective on the organization's financial performance and growth prospects.

3)  Employees: They contribute to the strategic management process by providing feedback on the organization's operations and suggesting improvements that can be made to increase efficiency and effectiveness.

4)  Suppliers: They play a role in the strategic management process by influencing the cost and quality of the inputs used by the organization.

5)  Regulators: Regulators are responsible for enforcing laws and regulations that govern the operations of organizations.

6) Communities: They play a role in the strategic management process by influencing the organization's reputation and providing feedback on its impact on the community.

• Strategic Management Process

• Strategic intent refers to the purpose for which the organization strives for. It lays down the framework within which firms would operate, adopt a predetermined direction and attempt to achieve their goal.

• Envisioning is the process of creating a mental image or representation of a future scenario or state. It involves using imagination, creativity, and critical thinking to conceive and describe a desired outcome or result.
  
  

• Envisioning Steps 

1. Identifying the goal or desired outcome

2. Gathering information

3. Brainstorming and ideation

4. Refining and prioritizing ideas

5. Visualizing the future state

6. Communicating the vision
   
   

• Vision is a picture of what the firm wants to be and what it wants to ultimately achieve. Vision is a statement which articulates the ideal description of an organization and gives shape to its intended future.
  Amazon vision statement "Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
  
  

• Mission is the purpose or reason for the organization’s existence. Definition by Thompson (1997) defines Mission as the ‘essential purpose of the organization, concerning particularly why it is in existence, the nature of the business it is in and the customers it seeks to serve and satisfy’.
  Amazon's mission statement is: "To serve consumers through online and physical stores and focus on selection, price, and convenience."  
  
  

• Characteristics of good mission statements

1. Clarity: It should be clear, concise, and easy to understand, providing a clear direction for the organization.

2. Specificity: A good mission statement should specify the purpose of the organization, what it does, and what it intends to achieve.

3. Inspiring: It should inspire and motivate employees, customers, and stakeholders to work together towards a common goal.

4. Alignment with Values: A good mission statement should align with the organization's core values, beliefs, and culture.

5. Relevance: It should be relevant to the organization's current and future needs, as well as the needs of its stakeholders.

6. Adaptability: A good mission statement should be flexible enough to adapt to changes in the organization's environment, while still maintaining its core purpose.

7. Uniqueness: A good mission statement should differentiate the organization from others and provide a clear reason for its existence.

8. Action-oriented: It should provide a sense of direction for the organization and its employees, encouraging action and progress towards the organization's goals.
   
   

• Business definition using Abell’s three dimensions: Abell's three dimensions provide a framework for defining the scope of a business and determining its competitive advantage. The three dimensions are:

1. Customer groups: This dimension defines the target customers that the business serves, such as geographic regions, demographic segments, or psychographic profiles.

2. Customer needs: This dimension defines the specific customer needs that the business addresses. This includes the products or services that the business offers, as well as the benefits that these offerings provide to customers.

3. Technologies: This dimension defines the technological areas in which the business operates and the processes it uses to create and deliver its products or services. This includes the specific technologies, processes, and expertise that the business has developed to serve its target customer groups and meet their needs.

• A business model is a conceptual tool that contains a set of elements and their relationships and allows the business logic of a specific firm. A Business Model describes how an organization: Creates, Captures and Delivers values.

• Critical Success Factors (CSF) are the factors or elements that are essential to the success of an organization or project. They are the high-level goals that the organization aims to achieve, and they provide a framework for measuring progress and success. CSFs are typically few in number, focused on the core aspects of the business, and are specific, measurable, and time-bound.

• Key Performance Indicators (KPIs) are metrics or measures that are used to track and evaluate the success of an organization or project in achieving its goals. KPIs provide a quantifiable way to track progress and identify areas for improvement. They can be used to track a variety of metrics, including financial performance, customer satisfaction, and operational efficiency.

 

• Key Result Areas (KRA) refers to a set of performance indicators that are critical to achieving a specific goal or objective. In an organizational context, KRAs help to define and track the progress of individuals or teams towards meeting the organization's strategic objectives. KRAs are typically aligned with the organization's overall mission and vision, and can be used to measure the effectiveness of specific programs, projects, or initiatives.

• Goals denote what an organization hopes to accomplish in a future period of time. They represent the future outcome of efforts put in now.

• Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific whereas goals are generalized.

• Organizational Appraisal is a process of observing an organizational internal environment to identify the strengths & weaknesses that may influence the organization’s ability to achieve goals.
  
  

• Components of a strategic plan

• Porter’s Five Forces Model of competition -  Porter's Five Forces Model is a framework used to analyze the level of competitiveness within an industry. The model was developed by Michael Porter, a Harvard Business School professor, in 1979. The model is based on the idea that the level of competition in an industry is determined by five key forces.

1. Threat of New Entrants: The ease with which new competitors can enter the market and establish themselves.

2. Threat of Substitute Products or Services: The availability and attractiveness of substitutes for the industry's products or services.

3. Bargaining Power of Suppliers: The bargaining power and influence of suppliers in the industry.

4. Bargaining Power of Buyers: The bargaining power and influence of buyers in the industry.

5. Rivalry Among Existing Competitors: The level of competition among existing players in the industry.

By analyzing these five forces, companies can better understand the level of competitiveness within their industry and make informed decisions about their strategy and positioning. For example, if the threat of new entrants is high, a company may choose to focus on improving its differentiation and building strong brand recognition to make it harder for new competitors to enter the market. If the bargaining power of suppliers is high, a company may consider investing in supplier development programs to strengthen relationships and increase its bargaining power.

In summary, Porter's Five Forces Model is a useful tool for companies to analyze the level of competitiveness within their industry and make informed decisions about their strategy.

• Entry barriers are the obstacles that prevent new firms from entering a market and competing with existing firms. Entry barriers can be high or low, depending on various factors such as economies of scale, product differentiation, cost advantages, government regulations, and brand recognition.

• Exit barriers are the obstacles that prevent existing firms from leaving a market. Exit barriers can be high or low, depending on factors such as the cost of assets, sunk costs, contractual obligations, and the availability of alternative uses for resources.

Chapter 2: Analyzing Company’s Internal environment

• Internal environmental Analysis is the process of evaluating an organization's internal resources, capabilities, and competencies to identify strengths, weaknesses, opportunities, and threats that may impact its ability to achieve its strategic objectives.

• This analysis typically involves assessing factors such as the organization's leadership, culture, structure, human resources, finances, and operational processes to determine its overall strengths and weaknesses. By conducting an internal environmental analysis, a company can gain a better understanding of its current position and identify areas for improvement or development to enhance its performance and competitive advantage.

• The resource-based theory of the firm is a perspective in strategic management that emphasizes the importance of a firm's internal resources and capabilities in achieving sustainable competitive advantage. The theory suggests that a firm's resources, including its tangible and intangible assets, are the primary determinants of its competitive advantage, rather than external factors such as market conditions or industry characteristics.

 

According to this theory, a firm's resources and capabilities can be classified into two categories: tangible resources and intangible resources. Tangible resources include physical assets such as facilities, equipment, and inventory, while intangible resources include things like brand reputation, patents, and organizational culture.

 

The resource-based theory of the firm proposes that for a firm to achieve sustainable competitive advantage, it must possess resources and capabilities that are valuable, rare, inimitable, and non-substitutable (VRIN). This VRIN criteria helps to determine whether a firm's resources and capabilities can provide it with a long-term competitive advantage.

In addition, the theory suggests that a firm can gain competitive advantage through the development of resources and capabilities that are difficult to replicate or imitate by competitors. This can be achieved through investing in research and development, human capital development, or other forms of innovation.

Overall, the resource-based theory of the firm emphasizes the importance of a firm's internal resources and capabilities in achieving sustainable competitive advantage, and encourages firms to focus on developing unique and valuable resources that are difficult for competitors to imitate.

• Competitive parity refers to a situation where a firm has similar resources and capabilities as its competitors, enabling it to compete on an equal footing.

• Competitive disadvantage refers to a situation where a firm's resources and capabilities are inferior to those of its competitors, making it difficult to compete effectively.

• Competitive advantage refers to the unique advantage that a business or organization has over its competitors, which allows it to outperform them in terms of market share, profitability, or other key metrics. A sustainable competitive advantage is one that is difficult for competitors to replicate, and can provide long-term benefits for the organization.

VRIO framework 

• The VRIO framework is a tool used in strategic management to assess whether a company's resources and capabilities are valuable, rare, inimitable, and organized to capture value. The four components of the VRIO framework are: 

1. Value  2. Rarity  3. Inimitability  4. Organization

1. Value: The resource or capability provides value to the company and helps it achieve its goals.
2. Rarity: The resource or capability is unique and not easily obtainable by competitors.
3. Inimitability: The resource or capability cannot be easily replicated by competitors, either due to legal or economic barriers or other factors.
4. Organization: The company has the organizational structure and processes in place to fully exploit the resource or capability and capture its full potential value.

If a company's resources and capabilities meet all four of these criteria, it is said to have a sustained competitive advantage. If one or more of the criteria is not met, the company may need to re-evaluate its strategy or invest in developing new resources or capabilities.

• A core competence is a unique capability or resource of a company that provides it with a competitive advantage in the marketplace. It is an area of expertise or a set of skills that the company possesses and leverages to create value for its customers and achieve sustainable competitive advantage.

• Benchmarking is a method of comparative analysis that involves measuring and comparing a company's performance or processes to those of its competitors or industry leaders. The purpose of benchmarking is to identify best practices, gain insights into areas for improvement, and set performance targets that can help a company achieve a competitive advantage. Benchmarking typically involves four steps:

1.  Identify the process or area to be benchmarked

2.  Identify and select benchmarking partners (companies or organizations to be compared to)

3.  Collect and analyze data on performance metrics or best practices

4.  Implement improvements or changes based on the insights gained from the benchmarking process.

• Distinctive competitiveness refers to a company's ability to differentiate itself from its competitors through unique products, services, or business models, and maintain a sustainable competitive advantage. This distinctiveness can be achieved through a variety of means, including superior quality, innovation, branding, customer experience, pricing, or operational efficiency.
  
  

• Value Chain Analysis Using Porter’s Model:

• In his book Competitive Advantage (1985), Michael Porter explains that a value chain is a collection of activities that are performed by a company to create value for its customers. Value chain analysis using Porter's model is a tool that helps organizations identify the key activities that create value for customers and determine how to optimize those activities to gain a competitive advantage. The value chain is divided into primary activities and secondary activities:

Primary activities:

1. Inbound Logistics: Receiving, storing, and distributing inputs to the production process.

2. Operations: Transforming inputs into finished products or services.

3. Outbound Logistics: Collecting, storing, and distributing finished products or services to customers.

4. Marketing and Sales: Promoting and selling products or services to customers.

5. Service: Providing customer support, warranties, and other after-sales services.

Secondary activities:

1. Procurement: Sourcing and purchasing inputs needed for the production process.

2. Technology Development: Investing in research and development, and improving technology for operations and product development.

3. Human Resource Management: Recruiting, training, and retaining employees to support the value chain.

4. Infrastructure: Developing and maintaining systems to support the value chain, such as accounting, legal, and information technology.

Practical Example

By analyzing these primary and secondary activities, a company can identify opportunities to increase efficiency and reduce costs, improve product quality, or develop new products and services. This analysis can also help a company identify areas where it can differentiate itself from competitors and create a unique value proposition for customers. 

• Strategic advantage profile

A strategic profile is a snapshot of an organization's history, its current products and services, and its plans for the future. Using a SWOT (strengths, weaknesses, opportunities, and threats) analysis to develop the strategic profile is a useful tool for understanding the direction that a company wishes to take with its planning, goal-setting, and strategy development.

Understanding a company's weaknesses can help it to understand the things it needs to change to make itself more competitive. These weaknesses could easily be internal matters such as staff shortages or budget pitfalls, but they can also be external to the company: the economy, buyer interest and market fluctuations. As such, auditing the resources available to the company to deal with or overcome its limitations is part and parcel of the strategic profile.

1. Stretch" refers to a company's ability to continuously improve and expand its capabilities, often through innovation and learning.

2. "Leverage" refers to a company's ability to use its existing resources and capabilities to gain a competitive advantage.

3. "Fit" refers to how well a company's capabilities align with its strategic goals and objectives.

4. Companies that have a good fit between their capabilities and strategic goals are more likely to achieve a sustainable competitive advantage.

• Five ways of resource leveraging:
  
  

1. Concentrating: Focusing resources on a narrow range of products or services to achieve economies of scale, reduce costs and improve quality.

2. Accumulating: Acquiring and stockpiling resources, such as knowledge, data, or financial capital, to be used strategically in the future.

3. Complementing: Combining existing resources with new or different resources to create a more valuable and effective capability.

4. Conserving: Reducing waste and inefficiency in the use of resources to increase their effectiveness and prolong their useful life.

5. Recovering: Reclaiming and repurposing resources that have been discarded or are no longer being used to create new value and reduce waste.

• Business Portfolio Analysis is an organizational strategy formulation technique that is based on the philosophy that Organizations should develop strategy much as they handle investment portfolios. Portfolio analysis is a systematic way to analyze the products and services that make up an association's business portfolio. In the way, in which the sound financial investments should be supported and unsound ones discarded, sound organizational activities should be emphasized and unsound ones deemphasized.

• BCG Matrix: The basis for many of these matrix analyses grew out of work carried out in the 1960s by the Boston Consulting Group (BCG). BCG observed in many of their studies that producers tend to become increasingly efficient as they gain experience in making their product and costs usually declined with cumulative production. The growth-share matrix (product portfolio, BCG-matrix, Boston matrix, Boston Consulting Group analysis, and portfolio diagram) is a chart that had been created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their business units or product lines.

The BCG Matrix, also known as the Boston Consulting Group Matrix, is a strategic management tool used to analyze a company's product portfolio. It categorizes a company's products or services into four categories based on two dimensions: relative market share and market growth rate.

• The four categories are:

1. Stars: Products with high market share and high market growth rate. These products have high potential and require high investment to maintain their position.

2. Cash cows: Products with high market share and low market growth rate. These products generate cash and profits but require low investment.

3. Question marks or problem children: Products with low market share and high market growth rate. These products require significant investment to increase their market share and turn them into stars, or they may be divested.

4. Dogs: Products with low market share and low market growth rate. These products have low potential and may be divested if they do not generate enough cash to support the company's other products. The BCG Matrix helps companies to allocate resources effectively by identifying the potential of their products and making strategic decisions about how to invest in them.

   
   

• The GE 9 Cell Model also known as the GE-McKinsey Matrix, is a strategic tool used to evaluate a company's business portfolio. It plots a company's business units on a 3x3 grid based on two dimensions: industry attractiveness and business unit strength. The nine cells represent different strategic options for each business unit:

1. High industry attractiveness and strong business unit: These business units are considered the most attractive and should be invested in heavily.

2. Medium industry attractiveness and strong business unit: These business units should be invested in selectively.

3. Low industry attractiveness and strong business unit: These business units should be harvested for cash.

4. High industry attractiveness and medium business unit strength: These business units have potential for growth and require investment.

5. Medium industry attractiveness and medium business unit strength: These business units should be managed for earnings and selectively invested in.

6. Low industry attractiveness and medium business unit strength: These business units should be repositioned to improve their performance or divested.

7. High industry attractiveness and weak business unit: These business units require significant investment to improve their performance or should be divested.

8. Medium industry attractiveness and weak business unit: These business units should be divested or prepositioned

   The GE 9 Cell Model helps companies to evaluate their business units and make strategic decisions about how to invest in and manage their portfolio

9. Low industry attractiveness and weak business unit: These business units should be divested.

Practical Example

• Criteria to evaluate Core Competences

1. Relevance: Core competencies should be relevant to the company's mission, vision, and objectives. They should align with the company's overall strategy and contribute to its competitive advantage.

2. Uniqueness: Core competencies should be unique to the company and not easily imitated by competitors. They should provide a competitive edge and differentiate the company from its competitors.

3. Durability: Core competencies should be durable and not easily affected by changes in the market or technology. They should provide a sustainable competitive advantage.

4. Transferability: Core competencies should be transferable to other products, services, or markets. They should have the potential to be leveraged in other areas of the company or industry.

5. Measurability: Core competencies should be measurable and quantifiable. Companies should be able to track the effectiveness of their core competencies and identify areas for improvement.

6. Valuable: Core competencies should provide value to the customer, either through cost savings or increased product or service quality. They should also be valuable to the company, either through increased revenue or decreased costs.

7. Scalability: Core competencies should be scalable and able to support the company's growth. They should not be limited by size or scope, and should be able to adapt to changing circumstances.

Chapter 3: Generic competitive Strategy 

• Generic competitive strategies are high-level, broad-based strategies that businesses can use to gain a competitive advantage in their industry. They were first identified by Michael Porter, a leading authority on business strategy, and include three main strategies: cost leadership, differentiation, and focus.
  

• The four generic strategies, also known as business-level strategies, were first identified by Michael Porter and are commonly used in strategic planning to gain a competitive advantage in an industry. The four generic strategies are :

1. Cost Leadership Strategy: This strategy focuses on achieving the lowest cost of production and delivery of a product or service in the industry. Companies can achieve cost leadership through economies of scale, efficient processes, and tight cost controls. By offering products or services at a lower price point than competitors, companies can attract price-sensitive customers and gain market share. 

• Example: Walmart is a good example of a company that uses a cost leadership strategy. Walmart is known for its "Everyday Low Prices" and has become the largest retailer in the world by offering a wide range of products at the lowest possible prices. 

2. Differentiation Strategy: This strategy focuses on creating a unique product or service that is distinct from the competition. Companies can differentiate their products or services through features, quality, branding, or customer service. By offering something unique and valuable, companies can charge a premium price and build customer loyalty.

• Example: Apple is a good example of a company that uses a differentiation strategy. Apple's products are known for their distinctive design, innovative features, and high quality, which sets them apart from other products in the market.

3. Cost-Focus Strategy: This strategy focuses on achieving the lowest cost within a specific market segment or niche. By targeting a narrow market segment and achieving the lowest cost, companies can achieve a competitive advantage over rivals and gain market share within that segment.

4. Differentiation-Focus Strategy: This strategy focuses on creating a unique product or service that is tailored to a specific market segment or niche. By offering a unique product or service that meets the specific needs of a particular market segment, companies can charge a premium price and build customer loyalty within that segment.

Each of these strategies has its advantages and disadvantages, and the best strategy for a company depends on the company's strengths, weaknesses, opportunities, and threats, as well as the competitive environment in which it operates. Companies must carefully consider which strategy to pursue to gain a sustainable competitive advantage in their industry.

• Corporate-level (Grand) strategy classification

Corporate-level strategy is the overall plan that guides a company's actions and decisions at the highest level. It is concerned with the long-term direction and scope of the organization, and it defines the businesses in which the company will compete and the ways in which it will allocate its resources to achieve its goals.

1. Growth Strategies: These strategies focus on expanding the company's reach and market share through various means, such as market penetration, market development, product development, and diversification.

Ø  Diversification Strategies: Diversification is a corporate-level strategy that involves entering into new markets or industries that are different from a company's current businesses. This strategy can help spread risks, increase revenue, and leverage core competencies across multiple industries.

 

• Example: The Walt Disney Company is a good example of a diversified company. It started as an animation studio, but over the years, it has expanded into theme parks, television networks, movies, and various other businesses.

 

Ø  Vertical Integration Strategies: Vertical integration is a corporate-level strategy that involves acquiring or merging with companies that are part of a company's supply chain or distribution channels. This strategy can help improve efficiency, reduce costs, and enhance control over quality and distribution.

• Example: Tesla is an example of a company that uses vertical integration. It owns several subsidiaries that produce components for its electric cars, such as batteries, powertrains, and solar panels. By integrating vertically, Tesla can control the quality and availability of these critical components.

 

Ø  Mergers, Acquisition & Takeover Strategies: Mergers, acquisitions, and takeovers are corporate-level strategies that involve buying or merging with other companies to expand market share, gain access to new technologies or products, or achieve other strategic goals.

§  Example: In 2019, Disney acquired 21st Century Fox for $71 billion, which allowed Disney to gain control over Fox's movie and TV studios, as well as its content library, including popular franchises like The Simpsons and X-Men.

 

Ø  Strategic Alliances & Collaborative Partnerships: Strategic alliances and collaborative partnerships are corporate-level strategies that involve forming partnerships or joint ventures with other companies to achieve mutual goals, such as sharing resources, expertise, and risks.

• Example: Starbucks and PepsiCo have a strategic alliance to distribute Starbucks coffee products in grocery stores and convenience stores. This partnership allows Starbucks to reach a broader market, while PepsiCo can expand its beverage portfolio.
  
  

2. Stability Strategies: These strategies aim to maintain the company's current position and performance by focusing on efficiency, cost-cutting, and incremental improvements rather than major changes. 

For Example, P&G's stability strategy is its focus on cost management. The company continuously seeks to reduce costs by improving efficiencies in its supply chain, manufacturing processes, and logistics. This allows P&G to maintain a competitive edge by keeping its prices low while still maintaining high-quality products.

3. Retrenchment Strategies: These strategies involve scaling back the company's operations and focusing on core competencies in order to improve profitability and competitiveness.

Ø  Turnaround Strategy: A turnaround strategy is a corporate-level strategy that aims to revive a company that is in decline or facing significant challenges. This strategy involves restructuring operations, improving efficiency, cutting costs, and/or developing new products or services to get the company back on track.

•  Example: When Steve Jobs returned to Apple in 1997, the company was struggling and losing market share to competitors. Jobs implemented a turnaround strategy that involved cutting costs, streamlining operations, and refocusing on core products, such as the iMac and iPod. This strategy helped Apple become one of the most successful and innovative companies in the world.

Ø  Divestment Strategy: A divestment strategy is a corporate-level strategy that involves selling off or spinning off non-core businesses or assets to improve profitability or focus on core competencies.

• Example: In 2020, Wells Fargo announced a divestment strategy to sell off its asset management business to focus on core banking operations. This divestment allowed Wells Fargo to streamline its operations and reduce costs.

 

Ø  Liquidation Strategy: A liquidation strategy is a corporate-level strategy that involves selling off all the assets of a company and closing it down. This strategy is typically used when a company is no longer profitable or sustainable, and there is no other viable alternative.

• Example: In 2018, the retail chain Toys "R" Us filed for bankruptcy and eventually decided to liquidate its stores and assets. The liquidation allowed the company to pay off its debts and creditors, but it also resulted in the loss of jobs and the closure of all its stores.

 

Ø  Outsourcing Strategy: An outsourcing strategy is a corporate-level strategy that involves hiring third-party vendors or contractors to perform certain functions or services that are not part of the company's core competencies or value proposition.

4. Combination Strategies: These strategies combine two or more of the above strategies to achieve multiple goals and address various challenges.

Chapter 4: Strategy implementation

• Barriers to implementation of strategy “Successful strategy formulation does not guarantee successful strategy implementation. Strategies most often fail because they aren’t executed well. Strategy implementation is a critical stage in the strategic management process that involves translating a formulated strategy into action to achieve organizational goals and objectives. However, despite the best intentions and efforts of an organization, several barriers can hinder successful strategy implementation. Some of these barriers include:

1. Vision barrier: A vision barrier is a situation where the organization's strategy lacks a clear and compelling vision for the future. Without a clear vision, employees may not understand the purpose of the strategy or how their role contributes to achieving it. This can lead to a lack of buy-in, commitment, and motivation, making it difficult to implement the strategy effectively
2. People barrier: The people barrier is a situation where the employees or stakeholders in an organization lack the necessary skills, knowledge, or experience to execute the strategy. It can also arise when employees resist change or lack the motivation to support the strategy. To overcome this barrier, organizations need to invest in training and development programs, communication, and change management initiatives to ensure that employees understand and embrace the new strategy.
3. Management barrier: The management barrier refers to a situation where the management team does not have the necessary leadership skills, experience, or knowledge to execute the strategy effectively. Poor leadership and management practices can result in confusion, lack of direction, and demotivation among employees. To overcome this barrier, organizations need to ensure that their management team has the required skills and knowledge and is aligned with the organization's strategic objectives.
4. Resource barrier: The resource barrier is a situation where the organization lacks the necessary financial, human, or technological resources to implement the strategy effectively. Limited resources can lead to delays, cost overruns, or a failure to execute the strategy as planned. To overcome this barrier, organizations need to allocate resources based on their strategic priorities and explore alternative funding sources, such as partnerships or alliances.

• Mintzberg's 5 Ps is a strategic framework that outlines the key elements of strategy. The 5 Ps are Plan, Ploy, Pattern, Position, and Perspective. Among these elements, Plan and Ploy are associated with Deliberate Strategies, while Pattern, Position, and Perspective are associated with Emergent Strategies. Deliberate Strategies are planned and intentionally designed to achieve a specific goal or objective. They involve a systematic and analytical approach to strategy formulation, implementation, and control. The two elements of the 5 Ps associated with Deliberate Strategies are:

1. Plan: Plan refers to a predetermined course of action that an organization follows to achieve its objectives. It involves a formal and structured process of analyzing the internal and external environment, identifying opportunities and threats, setting objectives, and developing an action plan to achieve those objectives.

2. Ploy: Ploy refers to a specific action or tactic that an organization uses to gain a competitive advantage. It involves a deliberate effort to beat competitors through various means such as price, quality, innovation, or marketing.

Emergent Strategies, on the other hand, are developed through a process of trial and error, learning, and adaptation. They are not predetermined but emerge over time in response to changing circumstances and opportunities. The three elements of the 5 Ps associated with Emergent Strategies are:

3. Pattern: Pattern refers to the consistent and persistent behavior of an organization over time. It is the result of the decisions and actions taken by the organization, which become ingrained in its culture and routines.

4. Position: Position refers to an organization's place in the market or industry relative to its competitors. It is the result of the organization's decisions and actions, which determine its competitive advantage and differentiation.

5. Perspective: Perspective refers to an organization's values, beliefs, and culture, which influence its strategic decisions and actions. It is the result of the organization's history, leadership, and stakeholders, which shape its identity and purpose.

• The McKinsey 7S Framework is a management model developed by McKinsey & Company, a global management consulting firm. It is used to analyze and assess organizations and their effectiveness by examining seven interconnected elements of an organization. The framework can be used to diagnose issues within an organization, identify areas for improvement, and design a comprehensive approach to organizational change.

1. Strategy: The first S is Strategy. It refers to the organization's plan for achieving its goals and objectives. This includes the organization's mission, vision, and the long-term plans for growth and development.

2. Structure: The second S is Structure. It refers to the way the organization is designed and how it operates. This includes the organization's hierarchy, reporting lines, and the roles and responsibilities of its employees.

3. Systems: The third S is Systems. It refers to the processes, procedures, and routines that are used to run the organization. This includes the organization's technology, communication systems, and performance measurement and management systems.

4. Shared values: The fourth S is Shared values. It refers to the core values and beliefs that are shared by the organization's employees. These values shape the culture of the organization and guide its decision-making.

5. Skills: The fifth S is Skills. It refers to the capabilities and competencies of the organization's employees. This includes the skills, knowledge, and experience required to perform their roles and responsibilities effectively.

6. Staff: The sixth S is Staff. It refers to the people who work for the organization. This includes their qualifications, experience, and the size and composition of the workforce.

7. Style: The seventh S is Style. It refers to the leadership style and culture of the organization. This includes the leadership style of the senior management team, the communication style of the organization, and the general working culture.
   
   

The McKinsey 7S Framework suggests that all of these seven elements are interconnected and must be aligned for an organization to be successful. For example, if an organization has a strong culture of innovation (shared values) but an outdated structure (structure), it may struggle to implement new ideas effectively. Similarly, if an organization has a well-designed structure (structure) but lacks the necessary skills and capabilities (skills), it may struggle to achieve its goals and objectives.

• Organization Structures for Strategy Implementation

1. Entrepreneurial Structure: This type of structure is common in start-up companies and small businesses. In this structure, decision-making is centralized and there is little formalization or hierarchy. Employees are often highly motivated and have a lot of autonomy to make decisions.
2. Functional Structure: In this type of structure, employees are grouped based on their functional expertise, such as marketing, finance, or operations. Each department has a clear hierarchy and there is a strong focus on specialization and efficiency.

3. Divisional Structure: This type of structure is often used in larger organizations that have multiple products, services, or geographic locations. In this structure, each division operates like a separate business unit, with its own functional areas, such as marketing and finance.

4. Strategic Business Unit (SBU) Structure: This type of structure is similar to a divisional structure, but with a greater emphasis on strategic planning and decision-making. SBUs are often responsible for their own strategic planning, marketing, and financial management.

5. Matrix Structure: This type of structure is a hybrid of functional and divisional structures. In a matrix structure, employees are assigned to both a functional area and a product, service, or geographic area. This allows for greater flexibility and cross-functional collaboration 

6. Network Structure: This type of structure is common in organizations that rely heavily on outsourcing, partnerships, or alliances. In a network structure, the organization is made up of a core group of employees who manage and coordinate the work of external partners 

• Example of a network organization structure is the global consulting firm, Deloitte. Deloitte has a matrix structure where employees are organized by both function and industry. The company is divided into various service lines such as audit, tax, consulting, and advisory. Additionally, employees are also organized by industry sectors such as healthcare, financial services, technology, and others.

7. Cellular/Modular Organization: This type of structure is common in manufacturing or production environments. In a cellular organization, employees are grouped together in self-managing teams, with each team responsible for a specific aspect of the production process.

 

Each of these organizational structures has its own advantages and disadvantages, and the best structure for a particular organization will depend on a variety of factors, such as its size, industry, and strategic goals. The choice of structure will also have implications for how work is organized, how decisions are made, and how employees are managed and motivated.

Organizational design is the process of creating structures, systems, and processes that support the organization's goals and objectives. The optimal design will depend on the organization's environment and the degree of stability or turbulence within it. Here are some factors to consider when designing organizations for stable versus turbulent environments:

 

Organizational Design for Stable Environments:

1. Hierarchical Structure: In a stable environment, a hierarchical structure is often effective as it provides clear lines of authority and well-defined roles and responsibilities.

2. Centralized Decision-Making: With less uncertainty and change in a stable environment, centralization of decision-making can help ensure consistency and control.

3. Formalization: Standardization of procedures and processes through formalization can help reduce errors and improve efficiency.

4. Specialization: Specialization of roles and tasks can be beneficial in a stable environment, as employees can develop deep expertise in their respective areas.

5. Narrow Span of Control: In a stable environment, a narrow span of control can help ensure effective supervision of employees.

 

Organizational Design for Turbulent Environments:

1. Flatter Structure: In a turbulent environment, a flatter structure with fewer layers of management can help facilitate more rapid decision-making.

2. Decentralized Decision-Making: Decentralizing decision-making to lower levels of the organization can improve agility and responsiveness.

3. Flexibility: Organizational flexibility is important in turbulent environments as it allows for adaptation to changing circumstances.

4. Cross-Functional Teams: In a turbulent environment, cross-functional teams can facilitate collaboration and the sharing of knowledge and resources.

5. Broad Span of Control: In a turbulent environment, a broad span of control can help reduce delays in decision-making and increase responsiveness.

6. Innovation and Experimentation: In turbulent environments, experimentation and innovation can help   organizations stay ahead of the curve and respond to changing market conditions.
   
   

Ultimately, organizations must be able to adapt to changing environments in order to remain successful. Organizations that are designed for stability may need to be reconfigured or reorganized to adapt to turbulent environments, and vice versa. The key is to be flexible and responsive to changing circumstances.

• Business Process Re-engineering or BPR is the process of evaluating and re-organizing the processes and activities between and within the organisations. In the field of management and computer science, improving the performance and efficiency of the business processes in order to improve the organisational stability is called business process re-engineering.

• Business Process Reengineering (BPR) is a management approach that aims to radically redesign business processes to achieve significant improvements in performance, quality, and cost-effectiveness.
  
  

The BPR framework typically includes the following steps:

1. Identify the Processes to Be Redesigned: The first step is to identify the key business processes that need to be redesigned. This involves analyzing the current processes, identifying areas of inefficiency, and determining which processes are critical to the organization's success.

2. Map the Existing Processes: The next step is to map the existing processes to gain a clear understanding of how they work. This involves documenting the steps in each process, the roles and responsibilities of each stakeholder, and the inputs and outputs of each step.

3. Analyze the Processes: Once the existing processes have been mapped, the next step is to analyze them to identify areas of inefficiency, waste, and redundancy. This involves looking for opportunities to streamline processes, eliminate unnecessary steps, and automate tasks.

4. Design the New Processes: Based on the analysis, the next step is to design the new processes. This involves developing new process flows, defining new roles and responsibilities, and identifying the technology and resources needed to support the new processes.

5. Implement the New Processes: Once the new processes have been designed, the next step is to implement them. This involves communicating the changes to stakeholders, providing training and support, and monitoring the implementation to ensure that it is successful.

6. Continuous Improvement: BPR is an ongoing process that requires continuous improvement. Once the new processes have been implemented, it is important to monitor their performance and identify areas for further optimization.

Overall, the BPR framework is designed to help organizations achieve significant improvements in performance, quality, and cost-effectiveness by rethinking and redesigning their business processes. It is a complex and time-consuming process that requires strong leadership, effective communication, and a willingness to challenge the status quo.

 

• The Balanced Scorecard is a strategic management tool used to measure and evaluate an organization's performance against its strategic objectives. It provides a framework for translating the organization's vision and strategy into measurable goals and targets across four perspectives: financial, customer, internal processes, and learning and growth. The Balanced Scorecard concept recognizes that financial measures are not sufficient to evaluate an organization's overall performance. It considers the perspectives of other stakeholders, including customers, employees, and shareholders, and focuses on a balance between short-term and long-term performance measures.

Chapter 5: Blue Ocean Strategy 

• Red ocean strategy refers to a competitive market where companies compete head-to-head on factors such as price, quality, features, and customer service. In a red ocean, companies are focused on gaining market share from their competitors, and they often engage in price wars and aggressive marketing campaigns. Red oceans are characterized by high levels of competition, shrinking profit margins, and limited growth opportunities.

• Blue ocean strategy refers to a market that is untapped or uncontested, where there are no competitors or where competitors have not yet exploited the full potential of the market. In a blue ocean, companies focus on creating new demand and value, rather than competing with existing players. This involves developing new products or services, exploring new customer segments, and creating a new value proposition. Blue oceans are characterized by high growth potential, higher profit margins, and lower levels of competition.

 

Overall, the main difference between blue and red ocean strategies is that red ocean strategies focus on competing in existing markets, while blue ocean strategies focus on creating new markets. Red oceans are often overcrowded and intensely competitive, while blue oceans offer greater growth potential and less competition.

 

• Six principles of blue ocean strategy:

1. Reconstruct Market Boundaries: Instead of competing in existing markets, companies should look to create new market spaces where they can offer unique and differentiated value propositions. This involves redefining the market boundaries and identifying new customer groups and untapped customer needs.

2. Focus on the Big Picture, not the Numbers: Blue ocean strategy is about creating and capturing new demand, not about dividing existing demand. Therefore, companies should focus on creating a big picture strategy that delivers unique value to customers and captures the imagination of the market.

3. Reach Beyond Existing Demand: Blue Ocean strategy is about creating new markets, not just stealing market share from competitors. Therefore, companies should focus on expanding the market and creating new demand by offering new and unique value propositions that appeal to non-customers.

4. Get the Strategic Sequence Right: Blue ocean strategy involves a specific sequence of strategic moves, starting with value innovation, followed by market creation, and ending with the capture of new markets. Companies must get this sequence right to create a blue ocean.

5. Overcome Organizational Hurdles: Blue Ocean strategy requires a shift in organizational mindset and culture. Companies must overcome the cognitive, resource, and motivational hurdles that prevent them from creating new markets and delivering unique value propositions.

6. Build Execution into Strategy: Blue Ocean strategy requires both creativity and execution. Companies must build execution into their strategy by creating a culture of action, establishing clear metrics for success, and empowering employees to take ownership of their roles in creating a blue ocean.

• A strategy canvas is a tool used in blue ocean strategy to visually illustrate the key factors that define a company's competitive landscape and differentiate it from its competitors. It is a graphical representation that compares a company's current offering with that of its competitors, along several key dimensions that customers value.

The horizontal axis of the strategy canvas represents the different factors that customers value, while the vertical axis represents the level of offering provided by the company and its competitors. The company's current offering is represented by a line that shows how the company performs on each factor compared to its competitors. The strategy canvas allows companies to see the strengths and weaknesses of their current offering and identify opportunities to differentiate themselves and create a blue ocean.

• The value curve – the basic component of a strategy canvas – is a graphical representation of the strategic profile of a company or industry segment reflecting its relative performance across the industry’s factors of competition.

• The Four Actions Framework is a tool used in blue ocean strategy to identify opportunities for creating a new value proposition that delivers unique value to customers and creates a blue ocean. It helps companies to break away from the competition by challenging industry assumptions and creating a new market spaceThe Four Actions Framework consists of four key questions that companies should ask themselves:

1. Which factors should be eliminated that the industry has long competed on?

2. Which factors should be reduced well below the industry's standard?

3. Which factors should be raised well above the industry's standard?

4. Which factors should be created that the industry has never offered?

By answering these questions, companies can identify opportunities for differentiation and create a new value proposition that offers unique value to customers. The framework challenges companies to think differently about the industry and to create a new market space by breaking away from industry assumptions.

• A business model is a framework that describes how a company creates, delivers, and captures value for its stakeholders. It outlines the fundamental structure of a company's operations, including its revenue streams, cost structure, customer segments, and value proposition. A business model is essential for creating and sustaining a profitable enterprise. several components of a business model:

1. Value Proposition 2. Customer Segments 3. Channels 4. Revenue Streams 5. Cost Structure 6. Key Activities 7. Key Resources 8. Key Partnerships

• E-commerce business models and strategies refer to the different ways in which e-commerce companies operate and generate revenue. Here are some of the most common e-commerce business models and strategies:
  
  

1. Business-to-consumer (B2C): In this model, an e-commerce company sells products or services directly to consumers. B2C e-commerce companies typically operate online marketplaces or retail stores.

2. Business-to-business (B2B): In this model, an e-commerce company sells products or services to other businesses. B2B e-commerce companies often operate as suppliers or distributors of goods and services.

3. Consumer-to-consumer (C2C): In this model, individuals can buy and sell products or services to other individuals through an e-commerce platform. C2C e-commerce companies typically operate online marketplaces where users can post listings and transactions are facilitated through the platform.

4. Subscription-based model: In this model, customers pay a recurring fee to access a product or service. This is a popular model for companies offering digital content, such as streaming services, software, and online courses.

5. Drop shipping: In this model, an e-commerce company acts as a middleman between the customer and the supplier. The e-commerce company takes orders from customers and then purchases products from a supplier who ships the products directly to the customer.

6. Marketplace model: In this model, an e-commerce company provides a platform for third-party sellers to sell their products. The e-commerce company earns a commission on each transaction.

Some common e-commerce strategies include:

1. Personalization: E-commerce companies can use data analytics and artificial intelligence to personalize the shopping experience for each customer. This can help to improve customer loyalty and increase sales.

2. Mobile optimization: E-commerce companies can optimize their websites and apps for mobile devices to make it easier for customers to shop on-the-go.

3. Social media marketing: E-commerce companies can use social media platforms to promote their products and engage with customers.

4. Customer service: E-commerce companies can differentiate themselves by providing exceptional customer service, such as fast shipping and easy returns.

5. Omni-channel marketing: E-commerce companies can use a combination of online and offline channels to reach customers and provide a seamless shopping experience across all channels.

Overall, e-commerce business models and strategies are constantly evolving as technology and customer preferences change. Companies that can adapt quickly and provide innovative solutions are more likely to succeed in the competitive e-commerce landscape.

• The Virtual Value Chain (VVC) works like a business model and describes the dissemination of value generating services within an “Extended Enterprise”; an organization that cooperates closely with other organizations to provide services or products.

• Threats to sustainability

1. Climate change: Climate change is one of the most pressing threats to sustainability. It is caused by human activities, such as burning fossil fuels, deforestation, and agriculture. Climate change has the potential to cause severe environmental and economic damage, including rising sea levels, more frequent and severe natural disasters, and impacts on food production.

2. Pollution: Pollution of air, water, and land is a major threat to sustainability. Pollution can harm human health and the environment, and can also have economic impacts through lost productivity and increased healthcare costs.

3. Overexploitation of resources: Overexploitation of natural resources, such as forests, fisheries, and fossil fuels, can lead to depletion and degradation of these resources. This can have economic and environmental impacts, including loss of biodiversity and reduced ecosystem services.

4. Loss of biodiversity: Loss of biodiversity is a significant threat to sustainability. It can be caused by habitat destruction, climate change, pollution, and overexploitation of resources. Loss of biodiversity can have economic and environmental impacts, including impacts on ecosystem services such as pollination, soil fertility, and water quality.

5. Unsustainable consumption patterns: Unsustainable consumption patterns, such as overconsumption and waste, are a major threat to sustainability. These patterns can lead to depletion of resources, pollution, and greenhouse gas emissions.

6. Socioeconomic inequality: Socioeconomic inequality can undermine sustainability by creating conditions that lead to social unrest and conflict, as well as reducing the ability of individuals and communities to adapt to environmental change.

• The triple bottom line (TBL) is a framework for evaluating a company's performance and impact based on three factors: social, environmental, and financial. The TBL is also known as the 3P framework, which stands for people, planet, and profit. The three dimensions are often referred to as the three Ps.

The social dimension of the TBL considers the company's impact on people, including employees, customers, communities, and other stakeholders. This includes factors such as social responsibility, ethical business practices, and community involvement. The environmental dimension of the TBL considers the company's impact on the planet, including factors such as carbon emissions, pollution, waste management, and natural resource depletion. This dimension considers the company's responsibility to protect and preserve the environment.

• People-planet-profits (PPP) is another term for the triple bottom line (TBL) framework. PPP is a way to describe the three dimensions of sustainability that the TBL framework aims to balance: social, environmental, and financial