Management of Strategy
by
Dr Divakar Kamath
Agenda –Management of Strategy
1 2 3 4
Intro to Strategy Strategy Formulation Strategy
Strategy
Implementation Evaluation and Control
TOTAL MARKET
vs
TAM
–
Staretgic Management: Fundamental Questions?
Who
3 Key Qs What
How ?
Sell To
vs
Sell Through
Vs
Sell With
COCO
vs
CODO
Vs
DODO
Michael Porter
Strategy is about
making choices and
trade offs: its about
deliberately
choosing to be
different
Strategy is about making
choices…
q Who will you target as customers
and who will you not?
q What will you offer these
customers and what will you not
offer them?
q How will you do all this? – What
activities will you perform; which
will you not?
Strategy
Definition of Strategy
Strategy is the direction and scope of an organization over
the long term, which achieves advantage in a changing
environment through its configuration of resources and
competences with the aim of fulfilling stakeholder
expectations.
3 stages of Strategic Management
1. Strategy formulation
2. Strategy Implementation/Execution
3. Strategy evaluation and Control
Strategic Management Process: 5 steps
1. Establishing Strategic Intent- Vision (direction), Mission ( purpose of
existence) and core values (for guiding conduct, behaviour & beliefs)
2. Setting Objectives as yardstick for measuring company's performance
and progress ( both financial objectives and strategic objectives)
3. Crafting strategy to achieve objectives including evaluating
alternatives/options ( macro environment assessment , industry
assessment / Competition assessment and organization assessment)
4. Implementation /execution of strategies
5. Strategic Evaluation and control : Monitoring development, evaluating
performance and initiate corrective adjustments in light of actual
experience, changing conditions, new ideas and new opportunities.
• Intended strategy vs Emergent strategy vs Realized Strategy
Vision Core Value
s
Mis s io n
Obje c tiv e s
Policy
Guiding
Culture Principles
Setting Objectives
• Objectives denote what an organization hopes to accomplish in a future
period of time.
1. Financial Objectives
2. Strategic Objectives
• Characteristics of objectives
1 ) Should be understandable
2) should be quantifiable
3) should be time bound
4) should be measurable
5) should be challenging
Linking the Vision and Mission with
Core Values
• Values refer to beliefs, traits and behaviour norms
• Guides the conduct of the company operations and
behaviour of its personnel.
• Core Values are the integral part of the DNA of the
company
Strategy- 5 Ps
Mintzberg (1987):
1. Plan:
2. Ploy:
3. Pattern:
4. Position:
5. Perspective:
Strategic Analysis
1. Know yourself !
2. What is it that you do best ?
3. What is it that you do better than others ?
4. Are there activities that you perform poorly ? worse than others ?)
5. Know your –environment, Demographics ,The economy,
Laws/regulations , Stakeholders And The competition
Strategic Triangle: 3 Cs
Company/
Management
Customers Competition
Mind share
vs
Wallet Share
vs
Trade Share
vs
Market Share
Creating Sustainable
Competitive
Advantage
AAR
Grant’s 2 approaches for achieving
competitive advantages
I/O Model: Resource based model
Industrial organization Model Grant’s Inside out model
Grant’s outside in model ( tangible & intangible& human resources)
(market/customers/competition)
Macro-environment – PESTEL
External Environment Analysis
• 4 components of Environmental Analysis
– Scanning
– Monitoring
– Forecasting
– Assessing
Industry Analysis
w What is the structure of the industry in which the
business unit operates?
w How should the business unit exploit the
industry structure?
w What will be the basis of the business unit’s
competitive advantage?
w Industries transformation and how industries
change?
Porter’s Five Competitive Forces Framework
Attractive Industry
vs
Unattractive Industry
“Intensity of industry competition
and
industry’s profit potential
is a function of 5 forces
Strategy can be viewed as
“building defenses against competitive forces”
OR
“ Finding a position in the industry where the forces are
weakest”
Strategic Analysis
1. Know yourself !
2. What is it that you do best ?
3. What is it that you do better than others ?
4. Are there activities that you perform poorly ? worse than others ?)
5. Know your –environment, Demographics ,The economy,
Laws/regulations , Stakeholders And The competition
Industry Transformation
Ref text Books
1. Hill, C.W.L., Jones, G. R., & Schilling, M. A., 13th Edition (2020). Strategic
management: Theory & cases: An integrated approach. Cengage Learning.
2. Strategic Management Concepts, 16th edition, David & David. Pearson. (2021)
Assessment of Competitive Landscape
1. Identify direct and indirect competition to a set of given products/
industries
2. Assess short and long term threats from such competition as well as
their impact on the industry
Concept of Strategic Groups
Defined:
A set of business units or firms that pursue similar
strategies with similar resources.
Set of firms emphasizing similar strategic
dimensions , may use similar strategy
Implications
1. Because firms within a group compete (offer similar
products) rivalry can be intense –
2. the greater the rivalry the greater the threat to each
firm’s profitability
3. Strengths of the 5 forces differs across strategic
groups
4. The closer the strategic groups, in terms of strategy,
the greater the likelihood of rivalry
Competitor Analysis
• In a competitor analysis, the firm seeks to understand the
following:
1. What drives the competitor, ? as shown by its future
objectives
2. What the competitor is doing and can do? as revealed by its
current strategy
3. What the competitor believes about the industry? as shown
by its assumptions
4. What the competitor’s capabilities are? as shown by its
strengths and weaknesses
Drivers of Competitive action and
reaction
Likelyhood of attack and response
• Awareness
• Motivation
• Ability
Competitor Analysis
• Market Commonality
• Resource Similarity
Inter firm Rivalry: Likelihood of Attack
1 :Three possible ‘likelihood of attack’ actions
– First Mover
– Second Movers
– Late Movers
2. Organizational Size
3. Quality/ Impact
Competitive Dynamics: 3 Market Cycles
1. Slow-Cycle Markets
2. Fast-Cycle Markets
3. Standard-Cycle Markets
From Competitors to Competitive Dynamics
Assessment of Competitive Landscape
• Do you know who are your competitors?
v existing and potential ( todays as well as tomorrow’s)
v direct vs indirect?
• How much do you know about your competitors?- Their strengths and
weaknesses and their ability to capture parts of the market
• Are you aware of emerging arenas of competition?
• What objectives are your competitor pursuing ?
• Positioning map?
• How will your competitors react to moves by you and other firms (slow to react,
aggressive in the offense, fight hard to defend its turf) ?
Organization Assessment
for
Gaining Competitive Advantages
Michael Porter’s
Value Chain Framework
The Basic Value Chain
Michael Porter’s Value chain
• Each activity should be examined relative to competitors’ abilities.
• Accordingly, firms rate each activity as superior, equivalent, or
inferior.
• 2 Major avenues for achieving Competitive advantages:
1. Do a better job than rivals of performing value chain activities
more effectively
2. Revamp the firm’s overall value chain to eliminate or bypass
some cost –producing activities.
Strategic Analysis
1. Know yourself !
2. What is it that you do best ?
3. What is it that you do better than others ?
4. Are there activities that you perform poorly ? worse than others ?)
5. Know your –environment, Demographics ,The economy,
Laws/regulations , Stakeholders And The competition
Gaining Sustainable Competitive
Advantage :
VRIO Framework
Gaining SCA : VRIO Framework
Valuable? Do Innovations provide
value? Yes
Do they provide
Rare?
“rarity”? Yes ?
Apple
400 B USD
2 Trillion +USD
250 B USD
Inimitable and Can competitors imitate?
non-substitutable?Can they substitute? No?
Apple has an organizational
Organized to
architecture to exploit the
exploit
market using its unique
Strength? Yes
IFE Matrix
EFE Matrix
CPM
IFE Matrix
(IFE)Key Internal Forces
• A firm’s strengths that cannot be easily matched or imitated by
competitors are called distinctive competencies.
• Building competitive advantages involves taking advantage of
distinctive competencies
• Strategies are designed in part to improve on a firm’s
weaknesses, turning them into strengths – and maybe even
into distinctive competencies.
Weaknesses à Strengths à Distinctive Competencies à Competitive Advantage
IFE Matrix
• Choose an industry and a company
• List key internal factors
Ø Decide the most important ~15 factors
Ø Sort into strengths and weaknesses
• Assign weights denoting relative importance:
• 0.0 (not important) to 1.0 (very important),The sum of all weights to equal 1.0
• Assign a rating denoting the strengths & weaknesses of the firms:
Ø 1 (major weakness) to 4 (major strength)
• Weight x Rating = Weighted Score
• Sum the Weighted Score
• Weight: indicates the relative importance of the factor to being
successful in the company’s industry
• Rating: indicates the relative strength/weakness of the company
EFE Matrix
EFE Matrix
• The purpose of an external Factors Evaluation is to develop
a finite list of opportunities that could benefit a firm and
threats that should be avoided
• Aimed at identifying key variables that offer actionable
responses
• Either offensive or defensive – take advantage of external
opportunities or minimize the impact of potential threats
Key External Forces
5 broad categories
1. Economic forces
2. Social, cultural, demographic and environmental forces
3. Political, governmental and legal forces
4. Technological forces
5. Competitive forces
Opportunities &
Threats
External Factor Evaluation (EFE) Matrix
• Choose an industry and a company
• List key external factors
Ø Decide the most important ~15 factors
Ø Sort into opportunities and threats
• Assign weights denoting relative importance: 0.0 (not important) to 1.0
(very important)
Ø The sum of all weights to equal 1.0
• Assign a rating denoting the effectiveness of company’s strategic
response to the factor 1 (poor) to 4 (superior)
• Weight x Rating = Weighted Score
• Sum the Weighted Score
• Weight: indicates the relative importance of the factor to being
successful in the company’s industry
• Rating: indicates the effectiveness of the company’s current
strategic response to each factor
CPM
Competitive Forces
• Important part of an external audit is identifying rival firms and
determining their strengths, weaknesses, objectives,
strategies, etc.
• Collecting and evaluating information on competition is
essential for successful strategy formulation
Competitive Profile Matrix (CPM)
• Choose an industry and 3 companies
• List Critical success factors
Ø Decide the most important 10-12 CSFs
• Assign weights denoting relative importance: 0.0 (not important) to 1.0 (very important)
Ø The sum of all weights to equal 1.0
• Assign a rating denoting the strengths & weaknesses of the firms: 1 (major weakness) to 4
(major strength)
Ø No two companies can have the same rating
• Weight x Rating = Score
• Weight: indicates the relative importance of the factor to being successful the company’s industry
• Rating: indicates the relative strength/weakness of each company
• Examples of CSF:
Advertising - Product Quality - Price competitiveness - Management capability - Financial position
Customer Loyalty - Market Share - Distribution Network - Product Line - I- Technology
Class Activity 2 :
Develop IFE, EFE ,CPM & VRIO
for your assigned Organization
