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MQM485: Advanced Organizational Strategy

MQM485: Advanced Organizational Strategy. Prof. Elango. MQM485/Sp12/Class1. WHAT STRATEGY IS: GAINING AND SUSTAINING COMPETITIVE ADVANTAGE. What Is Competitive Advantage? Superior performance relative to competitors Examples: Google, Duke Basketball, Pfizer’s Lipitor What Is Strategy?

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MQM485: Advanced Organizational Strategy

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  1. MQM485: Advanced Organizational Strategy Prof. Elango MQM485/Sp12/Class1

  2. WHAT STRATEGY IS: GAINING AND SUSTAININGCOMPETITIVE ADVANTAGE • What Is Competitive Advantage? • Superior performance relative to competitors • Examples: Google, Duke Basketball, Pfizer’s Lipitor • What Is Strategy? • Goal-directed actions to gain and sustain competitive advantage • NOT a zero-sum game • Win – win scenarios – co-opetition • Requires trade-offs for strategic positioning • JCPenney vs. Neiman Marcus • Southwest Airlines vs. Delta Song

  3. EXHIBIT 1.2 What Is Strategy? • Definition: Strategy is the quest to gain and sustain competitive advantage. • It is the managers’ theories about how to gain and sustain competitive advantage. • It is about being differentfrom your rivals. • It is about creating value while containing cost. • It is about deciding what to do, and what not to do. • It combines a set of activities to stake out a unique position. • It requires long-term commitments that are often not easily reversible.

  4. What Strategy Is NOT…. • Raking in every penny the firm can get • Profit is a consequence of good strategy, it is NOT the main goal! • Operational effectiveness • Enterprise Resource Planning (ERP) • Benchmarking • Six Sigma • “Necessary but not sufficient” such as Lean Manufacture

  5. Industry, Firm, and Other Effects Explaining Superior Firm Performance EXHIBIT 1.1 • Industry vs. Firm Effects in Performance • Astute managers create superior performance • Making important trade-offs • - Toyota’s lean manufacturing

  6. Strategy Across the Levels • Where to Compete? • Should GE move more aggressively into the health care industry? • How to Compete? • Should GE jet engines have better fuel efficiency than Rolls Royce? • How to Implement? • Should GE human resources recruit more science graduates? • CORPORATE STRATEGY • BUSINESS STRATEGY • FUNCTIONAL STRATEGY

  7. Strategy Formulation and Implementation Across Levels: Corporate, Business, and Functional Strategy EXHIBIT 1.3

  8. BUSINESS MODELS: • PUTTING STRATEGY INTO ACTION • Razor-blade model • Subscription model • How is the firm going to make money to continue operations? • What’s happening now between Microsoft & Google? • Business models in opposite directions

  9. Competing Business Models: Google vs. Microsoft EXHIBIT 1.4 Microsoft Operating Systems Software Apps Online Search Google

  10. STRATEGY IN THE 21ST CENTURY • Accelerating Technological Change • 84 years for half of U.S. families to own a car • 28 years for half to own a TV • 6 years for an MP3 player

  11. Accelerating Speed of Technological Change EXHIBIT 1.5

  12. STRATEGY IN THE 21ST CENTURY • Accelerating Technological Change • Why are we seeing this increased rate of change? • What are the strategic implications here?

  13. STRATEGY IN THE 21ST CENTURY • A Truly Global World • BRIC countries have 40% of earth’s population • IBM has less than 30% of employees in the U.S. • “Bottom of the pyramid” business opportunities Thomas Friedman-Flat World

  14. Geographic Sources of IBM Revenues, 2010 EXHIBIT 1.6 • Is IBM still a “U.S. company” ?

  15. STRATEGY IN THE 21ST CENTURY • Future Industries • HEALTH CARE • In the U.S., over 16% of GDP and still growing • GREEN ECONOMY • Potentially large growth in energy efficiency and technologies • WEB 2.0 • Interactivity and using collective intelligence on the Internet

  16. Conceptual Depiction of Oil Prices and Predicted Trend EXHIBIT 1.7

  17. STAKEHOLDERS • Successful business generates societal value • Stakeholders – are affected by firm’s actions • Internal • External • Vary by industry • Autos • Investment banking

  18. Internal and External Stakeholders EXHIBIT 1.8

  19. THE AFI STRATEGY FRAMEWORK • Analyze (A) • Getting Started; External & Internal Analysis • Chapters 1 thru 5 • Formulate (F) • Business and Corporate Strategy • Chapters 6 thru 10 • Implement (I) • Organizational Design & Corporate Governance • Chapters 11 thru 12

  20. Part 1 Strategy Analysis

  21. What is Strategy -Porter? • Operational Effectiveness is Not Strategy • Necessary but not Sufficient • Strategy Rests in Unique Activities • Perform activities differently than rivals • Positioning • Variety Based • Needs Based • Access Based • Broad or Narrow • Strategy is Unique and Valuable position, involving a different set of activities • If there was one ideal position, then there would be no need for strategy

  22. What is Strategy? • Sustainable Strategic Position Requires Tradeoffs • Need to Choose and Limit Your Offerings • Fit Drives Both Competitive Advantage and Sustainability • Simple Consistency • Activities are Reinforcing • Optimization of Effort • Rediscovering Strategy • Strategic Managers Job • DEFINING POSTION • MAKING TRADEOFF • FORGING FIT

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