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7/23/2019 Ch01rnp Establish Strategy
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Establish Strategy
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Strategy
• Defines a desired objective and
communicates what will be done, by
whom, how, for whom, and why the output
is valuable
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What are the characteristics of
effective strategy?
1 !ommunicate a compelling purpose orvision to others
" !onnect organi#ational strengths with
environmental opportunities
$ E%ploit current success while e%ploringnew opportunities
& 'enerate more resources than it uses( !oordinate and guide activities
) *espond to new conditions over time
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+igure 11 - .isual Definition of
Strategy
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Strategy is about saying /no0
• Strategy defines and communicates whatthe organi#ation is not
• What does the firm 234 ma5e?
• Who does 234 do the wor5?
• Where does the firm 234 have activities?
• When 234?
• Who is 234 offered the results?
• What will they 234 pay?
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Strategy is about saying /no0
• When there are too many priorities, thereare 23 priorities
• /6y success is that 7 have focused on afew things0 8 9ill 'ates
• /4he art of leadership is saying :no;, notsaying :yes;, it is very easy to say :yes;0 84ony 9lair
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Southwest -irlines and Saying :2o;
• 9usiness Wee5 /Will Southwest -irlines e%pandinternationally? 7f so, when?0
• <erb =elleher, !o>founder, !hairman /7t;s a uestion of
priorities @ou only have so many airplanes 4hey;ree%pensive and you try to send them where they will dothe most good for our people;s job security within theshortest period of time 8 and do the most good for theprofit sharing we;ve got 1AB of the domestic mar5et at
the present time and 7 thin5 that wor5s out to CAB whichisn;t ours0
Source Business Week , December "&, "AA$
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.ision 6ission
• .ision statements provide a compellingimage of what the company should be ordo
8 /the ability to thin5 about the future withimagination or wisdom0
• 6ission statements are more detailed and
e%plicit than vision statements about whatwill be done, why whom, how, for whom,and why
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Sample .ision 6ission !oca !ola
4o achieve sustainable growth, we have established a Vision with cleargoals
• People: 9eing a great place to wor5 where people are inspired to be thebest they can be
• Planet: 9eing a responsible global citi#en that ma5es a difference
• Portfolio: 9ringing to the world a portfolio of beverage brands thatanticipate and satisfy peoples desires and needs• Partners: 2urturing a winning networ5 of partners and building mutual
loyalty• Profit: 6a%imi#ing return to shareowners while being mindful of our
overall responsibilities
Everything we do is inspired by our enduring Mission• To Refresh the Worldin body, mind, and spirit• To Inspire Moments of Optimismthrough our brands and our actions• To Create Value and Make a Differenceeverywhere we engage
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Strategy !onnects 3rgani#ational Strengths
with Environmental 3pportunities
• Strategy has many definitions that we will
discuss in this courseF one of the most basic is
that it is an attempt to organi#e thoughts about
action alternatives• - simple but useful $>part organi#ing framewor5
for understanding the situation within which
action occurs includes
8 E%ternal macro>environment
8 7ndustry environment
8 7nternal company environment
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4he Strategic Environment
Figure 1.2: An Overview of the Context of Business Strategy
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Defining Strategy =ey Gropositions
• -ll of these distinctions are /fu##y0 8 7t is increasingly difficult to define organi#ational boundaries
Hproduction, for e%ample, can be within the firm or by partnersoutside the firmI
8 7t is increasingly difficult to define industry boundaries Ha shoe,
for e%ample, can be part of sports or fashionI 8 7t is increasingly difficult to predict macro factors Heg <ow
strong will the JS economy be? What scientific inventions willbecome available?I 9ut these un5nowns are what ma5estrategy so interesting and important
• =ey uestion of strategy HWill we be able to ma5eenough money to pay our creditors and survive?Ireuires understanding connections between companyactions, industry actions and events in the macro>environment
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What strategy is 234
• -n idea that /springs to mind full>blown0 8 Eg Keus and the birth of -thenaL6inerva who
sprang full>grown in armor from his forehead
• 3ften :5ernel; of strategy is sudden insight,but there is a long way to go beforeorgani#ational strategy can be e%pressed
8 Eg 2apster 8 Eg +ederal E%press Hgrade ! at @ale Schoolof 6anagementI
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What Strategy 7s
• !onnected objectives
• .iable position in an environment
• Mogic for coordinating activities• E%ploitation of current capability and
possibly e%ploration of new opportunities
• Source of more resources generated thanconsumed
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SW34 -nalysis
• Summari#es the firm;s strengths and
wea5nesses, along with environmental
opportunities and threats
• When used thoughtfully, can summari#e
the evolution of strategy over time
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Strategy E%ploits !urrent Success
while E%ploring 2ew 3pportunities
• Exploitation: Successfule%ploitation strategies developadditional value from currentresources and activities
• -bility to E%ploit 8 7ncremental innovation
8 !ontinuous innovation
8 /Do better0 innovations
8 Evolutional change
8 Efficiency 8 Groductivity
• Eg better contracts with e%isting
buyersLsuppliers, better
euipment, new training programs
• Exploration: successfule%ploration strategies create newvalue from unfamiliar resourcesand activities
• -bility to E%plore 8 *adical innovation
8 Discontinuous innovation
8 /Do different0 innovations
8 Step change
8 +le%ibility• E%ample Eg Napan *ailways
East bottled water
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Strategy generates more resources
than it uses
• Strategy generates substantial resources
8 income, as well as reputation, employee
commitment, brand identity and other
intangibles
• 9alance between using and creating
resources is critical imbalance Hheavy
useI from beginning
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Strategy responds to new conditions
over time
• Strategi#ing ongoing process of
discovering purpose, creating and using
resources and guiding supporting activities
• 7ntended strategy set of ideas, usually
made e%plicit, that the strategist uses to
inspire and direct activities
• *eali#ed strategy illustrated by pattern ofactual behavior over time
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+igure 1$ Si% +unctions of Strategy
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<ow are strategists influenced by
other strategists?
• Strategy is rarely developed by just one
individual Heg !E3, GresidentI
• 3ne person can rarely come up with all
the ideas
• Different individuals, interest groups, and
organi#ations care about and e%pect to
have a role in specifying a firm;s strategic
objectives and activities
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+igure 1& Mevels of Strategi#ing
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• 2etwor5 strategy coordinates actions among alliesF definespurposes no one participant could achieve alone when strategistsally with others they do not formally control
• !orporate strategy ma5es broad domain and funding decisions fora porfolio of business units 8 Eg identifies industryHiesI in which subunits of the organi#ation will
engage• 9usiness Hor organi#ationalI strategy reuires more specific
decisions at the business level around what, whom, how, for whomand why 8 Eg focus on one, or a related cluster, of competitive domains
• +unctional Hor operatingI strategy supports business strategy in
areas such as information technology, human relations, *D,mar5etingF more detailed level and necessary to achieve desiredoutcomes from business activity
• 7ndividual strategy direct efforts by individuals, inside or outsideorgani#ations, to protect and enhance their own welfare
+ive Mevels of Strategi#ing
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Sta5eholders influence strategists
across organi#ational boundaries
• Sta5eholders individuals and groups who are
potentially affected by an organi#ation;s activities
and may attempt to influence its strategy
8 .ary in power and attentiveness 8 -ffect how purpose is defined, resources are
gathered and used and who benefits from this activity
8 Each sta5eholder has uniue perspective and may
conflict, even within the firm• Synergies enable one resource to increase the
impact of others
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+igure 1( 9usiness>Mevel
Sta5eholders
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Sensegiving 4as5 of Strategists
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Sensema5ing and Sensegiving
• Sensema5ing
8 9y individuals or groups
8 !aptures something important about
e%perience in words and sentences
• Sensegiving
8 -ttempts to persuade others of the reality and
appropriateness of a strategic unit;ssensema5ing efforts
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Why are the successes and failures
of other organi#ations important?
• *ivals offer similar products, services or
e%periences to similar clients or customers
• 3rgani#ations are compared by
sta5eholders
• 7nteracting with strong competitors can
strengthen a firm;s capabilities
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Gerformance differences shape
sta5eholder e%pectations
• Economic profits level of return after all
costs of the unit;s activities have been
subtracted from revenue
• !ompetitive advantage revealed when a
firm is more profitable than its rivals or
e%ceeds them on other valued
performance measures