Chapter One

1. Chapter One What is Strategy? Cornelis A. de Kluyver and John A. Pearce II Third Edition

2. It is a pattern in a stream of actions. What is Strategy?

3. Positioning an organization for competitive advantage Deciding what to do and what NOT to do Which industries to participate in What products and services to offer How to allocate resources, add value Creating value for shareholders and other stakeholders by providing value to customers Strategy is About…

4. Differs from Tactics: Forces trade-offs and should focus on differentiation from rivals Focuses on value creation Allows for learning and adaptation Takes a long-term perspective Responds to the needs of all stakeholders Strategy…

5. Whowill you target as customers and who will you not? What will you offer these customers and what will you not offer them? How will you do all this? – What activities will you perform; which will you not? Strategy is About Making Choices…

6. Dell’s manufacture-to-order system forced competitors to make trade-offs(Key to Differentiation) Southwest Airlines has created fit(Key to competitive advantage through Operational excellence) Choosing is Not Enough; You Must Force Trade-offs and Create Fit

7. Southwest Airlines’ Activity System No meals No baggage transfers Limited passenger service No connections with other airlines No seat assignments Limited use of travel agents Short-hand point to point routes between midsize cities and secondary airports 15 minute gate turnaround Standardized fleet of 737 aircraft Frequent reliable departures Automatic ticketing machines Lean, highly productive ground and gate crews High compensation of employees Very low ticket prices “Southwest, the low-fare airline” High aircraft utilization Flexible union contract High level of employee stock ownership

8. The environment Governments Standards bodies New entrants Competitors Supplier’s suppliers Customer’s customers Suppliers Customers Organisation Substitutes Stakeholders International law Strategy Should Consider the Company’s Ecosystem

9. Simply put, it's the idea that today's companies are embedded in multiple, complex relationships that make them interdependent on each other for success. But it's only recently that corporate leaders are realizing that an ecosystem is more than a concept. The ecosystem has intense implications for how companies plan for the future, and they ignore those implications at their own risk. What is an Ecosystem?

10. Sound Strategy Development Focuses On: • Articulating strategic intent • Creating and leveraging organizational capabilities • Fostering innovation and learning • Embedding strategic leadership

11. A Clear Strategic Intent Provides Focus… “Beat Xerox” “A Computer on Every Desktop” “Be #1 or #2 in every business…”

12. Matching Competitive Advantages of Rivals is No Longer Enough… Write the rules; Don’t copy someone else’s Toyota Canon Microsoft Google • “Companies that have risen to global leadership invariably began with ambitions that were out of all proportion with their resources and capabilities...” (Hamel and Prahalad)

13. Organizational Capabilities are Increasingly Critical to Success

14. Basic Competitive Requirements Latent Core Competencies • Core Competencies • (CC’s) • Customer benefit • Cost benefit • Competitive differentiation • Unexploited • Insufficient breadth/ depth • High potential • Essential to all competitors • No industry differentiation • Important in the future • Agenda for competence building Future Core Competencies Competencies Must Be Nurtured Continuous innovation and learning are critical

15. Sources of Advantage • Superior Assets • Superior capabilities Key Success Factors • Rewards: • Satisfaction • Loyalty • Profits • Share • Positional • Advantages Realized • Superior Customer Value Investments In Renewal Barriers to Imitation Competitive Dynamics Erode Advantages The Competitive Advantage Cycle: Value, unless constantly nourished, erodes over time

16. Mission Documents the purpose of the organization’s existence, may guide conduct Vision Represents organization’s strategic intent Sets stretch targets Strategic Thinking Creates a vision for the organization Is primarily top-down (CEO/Senior management driven) Requires creativity, analysis and synthesis Strategic Planning Is both top down and bottom-up Plays supporting role focused on analysis, communication Strong Leadership at All Levels of the Organization is Key

17. Environmental • Analysis • Economic • Socio-cultural • Technological • Political • Opportunities & • Threats • Evaluate • Current • Performance • Mission • Goals • Objectives • Strategies • Strategy • Options • Business Unit • Corporate • Evaluation • Resource • Requirements • Risk/return • Implementation • Industry • Analysis • Structure • Evolution • Competition • Competitive • Analysis & • Positioning • Company • Analysis • Structure • Resources • Processes • Staffing • Culture • Strengths & • Weaknesses How do we get there? Where should we go? Where are we now? A Clear Process Provides Structure…

18. Strategy is not about creating a detailed, long-term plan Strategy should focus on a long-term strategic intent and flexible means for realizing that intent Learningand continuous renewalare essential parts of strategy Strategy as a Portfolio of Options…

19. Not All Strategy Can Be Planned… Deliberate Strategy Intended Strategy Realized Strategy Unrealized Strategy Emergent Strategy

20. Culture Strategy People Structure Processes/ Incentives Strategic Choices Must Be Supported by Organizational Choices