01/08/03 John Roberts 1

Stanford GSBSloan Program

Stramgt 258: Strategic ManagementStrategy and Organization in the Global

Economy

Introduction

AT&T in China

01/08/03 John Roberts 2

What is Strategy?

• How we will control our destiny

• How we will win

01/08/03 John Roberts 3

What is Strategy?

• Choice involving tradeoffs– Not operational excellence

• A framework for decisions and actions– Not tactics

• A mechanism for coordinating and motivating

01/08/03 John Roberts 4

Strategic Thinking versus Strategic Planning

• The responsibility of general managers versus staff

• On-going versus episodic• Long-term but adaptive versus annual and

fixed• Embodied in decisions and actions rather

than binders on shelves• Business-relevant versus …

01/08/03 John Roberts 5

Strategizing

• Understand basis for current performance• Evaluate environment, current position,

organizational capabilities and resources • Develop alternatives• Evaluate

– Consider fit, reactions

• Choose, communicate and implement• Re-evaluate and adapt

01/08/03 John Roberts 6

Determinants of Performance

Environment

Strategy

Organization

Performance

01/08/03 John Roberts 7

Environment

• Suppliers

• Customers

• Technology

• Competitors, potential entrants and substitutes

• Complementors

• Legal, regulatory, social forces

01/08/03 John Roberts 8

Organization

• The means by which the organization actually gets things done

• Elements– People– Architecture– Routines and processes– Culture

01/08/03 John Roberts 9

Elements of Strategy

• Goal

• Scope

• Competitive advantage

• Logic

01/08/03 John Roberts 10

Strategic Goal

• What we are trying to accomplish

• What it means to win

• Implies measures to tell how we are doing

01/08/03 John Roberts 11

Strategic Scope

• What

• Where

• When

• How

• For whom

• Places limits on what we will do– Indicating what not to do is crucial!

01/08/03 John Roberts 12

Competitive Advantage

• Why others will deal with us at terms that let us meet our goal– Often, why customers will choose our products at

prices that are profitable

• Typically, better cost or differentiation– Not price!

• Differentiation– Better perceived quality or better adapted to particular

segment’s tastes

01/08/03 John Roberts 13

Cost/Perceived Quality

Lower Cost

HigherPerceivedQuality Frontier of

achievable choices

01/08/03 John Roberts 14

Cost/Perceived Quality

Lower Cost

HigherPerceivedQuality

Operational Improvements

Strategic Choice

01/08/03 John Roberts 15

Sources of Competitive Advantage

• Position– Monopoly, reputation, brand, economies of

scale, network effects and installed base, channel position, …

• Capabilities– Things you can do especially well– Nokia design, Toyota manufacturing

• Not (usually) resources

01/08/03 John Roberts 16

Logic

• Why it will work

• Why competitive advantage is real and how it will be realized

• How internal organization will support

• How fits with external environment

01/08/03 John Roberts 17

Three Foci of S258

Performance

Environment

StrategyOrganization

S258 adopts the perspective of the general manager

01/08/03 John Roberts 18

Three Foci of S258

Performance

Environment

StrategyOrganization

Cost-Quality Trade-off Plane

P.I.E. and 5(+)Forces

Globalization of Economies, Industries, Markets, and Non-Market Environment

Strategy as Goals Competitive Adv Scope Logic

BU vs. Corporate

Capability vs. Position

Global vs. Local

(P)ARC: People/Architecture/ Routines/Culture

Cooperation-Initiative trade- off plane

VSR Model of Organizational Learning

Explorer vs. Exploiter

Multinational Design: Global/International/Multi- Local

Role of Corporate