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Mastering Business Strategy:
Simplifying the Complex
By
Dr. Michael McDermott
mcdermottm1@nku.edu
25/01/2014

© McDermott,...
Perspectives on Strategy
Author(s)

Perspective

(Published)

1.

Emergent Strategy

Executives use
unpredictability is us...
Perspectives on Strategy
Author(s)

Perspective

(Published)

Key Concept

Key Message

5.

Richard Rumelt

Good vs Bad
St...
1. MINTZBERG AND DELIBERATE VS
EMERGENT STRATEGY
25/01/2014

© McDermott, 2014

4
Emergent
Strategy

25/01/2014

© McDermott, 2014

5
Mintzberg (1978)
Deliberate vs Emergent Strategy
Strategy

Deliberate

Emergent

Recommendations

Delay making
strategic c...
Companies develop intended strategy;
Some plans are “dropped” or “unrealized”;

25/01/2014

Some unintended ideas emerge
a...
25/01/2014

© McDermott, 2014

8
2. MICHAEL PORTER: COMPETITIVE
POSITION FOR COMPETITIVE
ADVANTAGE
25/01/2014

© McDermott, 2014

9
Michael Porter and Strategy
• The Porter view stresses the importance of
analysis
• Good analysis = good strategy
• Good s...
Michael Porter and Strategy
• What industry do we compete in?
– So perform industry analysis.
– Determine the nature of th...
Michael Porter and Strategy
Strategic Analysis

Strategic Choice

Competitive
Advantage

Industry Analysis

Choice of Gene...
Industry Analysis and
Five Forces

25/01/2014

© McDermott, 2014

13
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14
Michael Porter and Strategy:
Generic Strategy
• Finding a unique
competitive position.
• But often in highly
competitive i...
3. PRAHALAD AND HAMEL: CORE
COMPETENCE OF THE FIRM AND
STRATEGIC INTENT
25/01/2014

© McDermott, 2014

16
Why are tribute
bands not
superstars

25/01/2014

It’s obvious!
We do not have all
the four traits of
core competences

© ...
Core Competences and the Resource-Based View
(RBV)of the Firm
(Prahald and Hamel, 1990)

Competitive advantage is
determin...
Core competences are of crucial importance
(see above).
But what are the defining traits of core
competencies?
25/01/2014
...
A Core Competence Passes three Tests

25/01/2014

© McDermott, 2014

20
25/01/2014

© McDermott, 2014

21
25/01/2014

© McDermott, 2014

22
Strategic Intent

25/01/2014

© McDermott, 2014

23
Strategic Intent
Once tiny Japanese companies
developed explicit strategic intent
to beat their much larger US and
Europea...
Core competencies are increasingly
based upon a company’s network
25/01/2014

© McDermott, 2014

25
4. KIM AND MAUBORGNE: BLUE OCEAN
STRATEGY
25/01/2014

© McDermott, 2014

26
Strategy
Michael Porter

Kim & Mauborgne

Or how to
survive with a
Red Ocean
Strategy
25/01/2014

Developing a
Blue Ocean
...
25/01/2014

© McDermott, 2014

28
25/01/2014

© McDermott, 2014

29
Mmmm….wonder
Why this slide is
here?

25/01/2014

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30
5. RICHARD RUMELT: WHAT’S THE
PROBLEM?
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© McDermott, 2014

31
Recognize this star, the movie and the dialogue?
Grady:
We're trying to solve the problem.
Billy:
Good. What's the problem...
The Key Message?
Progress requires
candid admission
of the true problem

No problem = no strategy
Strategy = problem solvi...
Pre-requisite of Good Strategy

The Root Cause of Bad Strategy
25/01/2014

© McDermott, 2014

34
The Problem

The Solution

How can an older, slower,
weaker, boxer who has lost
his unique competences
beat the world cham...
Bad Strategy

25/01/2014

Good Strategy

© McDermott, 2014

36
Bad Strategy

25/01/2014

Good Strategy

© McDermott, 2014

37
What’s the “Big problem” facing these companies?

25/01/2014

© McDermott, 2014

38
What’s the “Big issue/problem” facing these
companies?

The issue or problem may not be
conspicuously obvious….but there i...
What’s the Problem?
• Most companies refuse to pose this basic
question.
• Why?
• It makes them feel very uncomfortable…it...
6. CYNTHIA MONTGOMERY: THE
STRATEGIST
25/01/2014

© McDermott, 2014

41
Strategy and Leadership
• The Porter view separates the role of the
leader from strategy.
• It ignores the importance of t...
Meaning-Maker

“strategy has been narrowed to a
competitive game plan, divorcing it
from a firm's larger sense of
purpose;...
The Buck Stops with the Strategist

Develop
Stated
Purpose

25/01/2014

Develop
Strategy

Articulate
Strategy in
Concise
S...
1. Defines firm’s unique value.
2. Explains its relevance – why it matters
3. Easy to understand & memorable

Develop
Stat...
The Buck Stops with the Strategist
Develop
Stated
Purpose

Develop
Strategy

Sets
Direction

Establishes
Priorities

Guide...
Strategies and Strategy Statements
The Honed Strategy &
Strategy Statement
• Sets direction;
• Establish priorities;
• Gui...
Strategy and Strategy Statements
Effective

Ineffective

1.
2.
3.
4.
5.
6.

1.
2.
3.
4.
5.
6.

Distinctive
Provides focus ...
7. A.G. LAFLEY AND ROGER L. MARTIN
PLAYING TO WIN: STRATEGY IS FIVE
INTEGRATED CHOICES
25/01/2014

© McDermott, 2014

49
"The most important thing in the Olympic
Games is not winning but taking part; the
essential thing in life is not conqueri...
You Play only where you can Win?
Really
•
•
•
•
•
•
•

Can US auto companies beat BMW, Mercedes?
Can Walmart win in China?...
Winning Demands Beating the Biggest
and also the Best
US airlines need to compete only where they
can win - beating the ai...
How to Win
With a Low Cost Strategy

With Differentiation

• There can be only one winner!

• There can be several winners...
Strategy is Five Choices
• What is your winning aspiration?
• The purpose of your enterprise, its motivating aspiration.
C...
In an SME the above is sufficient.
In a large multi-business company, apply this cascade at the following levels:
• Corpor...
Notice how this is a dynamic system.
Notice too the importance of feedback.
Thus strategy is an iterative process

Iterati...
In an SME the above is sufficient.
In a large multi-business company, apply this cascade at the following levels:
• Corpor...
Create fierce brand advocates;
Make a difference in the world;
Make money doing it

In its own retail stores;
Athletic wea...
Create fierce brand advocates;
Make a difference in the world;
Make money doing it

In its own retail
stores;
Athletic wea...
2018
Global # 1
US sales of 1m vehicles

All actions at the model, brand,
category, sector, and company
level driven by me...
What is Winning?
What is your
winning
aspiration*?

What is your
stated
purpose?

What is
your
winning
aspiration?
25/01/2...
What is Winning?
What is
your
winning
aspiration?

What is
your
stated
purpose*?

Thus your winning
aspiration should
reve...
What is Winning?
What is
your
winning
aspiration?

What is
your
stated
purpose*?

Thus your winning
aspiration should
reve...
Examples of Winning Aspirations
• to inspire and nurture the human spirit – one
person, one cup and one neighbourhood at a...
Examples of Winning Aspirations: Who am I?
to inspire and nurture the human spirit –
one person, one cup and one
neighbour...
Examples of Winning Aspirations: Who am I?
to inspire and nurture the human spirit –
one person, one cup and one
neighbour...
•

•
•
•

Our Strategy 2018 focuses on positioning the Volkswagen Group as a global
economic and environmental leader amon...
25/01/2014

© McDermott, 2014

68
Two Questions are at the Heart of Strategy

Where to
play?

How to
Win?

Strategy

25/01/2014

© McDermott, 2014

69
Winning
Aspiration
Where &
How to Play
25/01/2014

• Defines the scope of
the firm’s activities

• Defines:
• What the fir...
1. Where to Play?
Which
markets?

Which customers
and/or
consumers?

Which
Channels?

Which Product
Categories?

Which par...
2. How to Win?
Which
markets?

Which customers
and/or
consumers?

Which
Channels?

Which Product
Categories?

Which parts ...
Strategy

What capabilities must be
in place to win?

What management systems are
required to support the strategic
choice...
Strategy
What capabilities must be
in place to win?

Internal Capabilities

(e.g. Innovation, Brand
building,
merchandisin...
The Core Capabilities of P&G
These five core
capabilities
support & reinforce
each other

It is the
combination of
these a...
Two Questions are at the Heart of Strategy

How to
Win?

Where to
play?
Strategy

What capabilities must be
in place to wi...
8. RITA GUNTHER MCGRATH: THE END
OF COMPETITIVE ADVANTAGE
25/01/2014

© McDermott, 2014

77
25/01/2014

© McDermott, 2014

78
Strategy the “old”
way was a fight to
the death

25/01/2014

© McDermott, 2014

79
Think surfing, think strategy
Ride the waves – knowing when to jump “off” and stay on.
Even “good waves” are short-lived.
...
Conclusions
Strategy demands:
1. Making explicit your sense of purpose ( or statement of
mission);
2. Defining your winnin...
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Mastering business strategy simplifying the complex

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  1. 1. Mastering Business Strategy: Simplifying the Complex By Dr. Michael McDermott mcdermottm1@nku.edu 25/01/2014 © McDermott, 2014 1
  2. 2. Perspectives on Strategy Author(s) Perspective (Published) 1. Emergent Strategy Executives use unpredictability is used as a justification to avoid tough choices – “go-with-theflow”. Michael Porter Competitive Advantage Choose industry & unique competitive position. Prahalad & Hamel Core Competences Capabilities with four traits determine competitive advantage. Kim & Mauborgne Blue Ocean Strategy Create new & larger market space where no rivals, & enjoy benefits of lowest cost & highly differentiated. (1980) 3. (1990) 4. (2005) 25/01/2014 Key Message Henry Mintzberg (1978) 2. Key Concept © McDermott, 2014 2
  3. 3. Perspectives on Strategy Author(s) Perspective (Published) Key Concept Key Message 5. Richard Rumelt Good vs Bad Strategy Focus all resources on the “big problem”. 6. Cynthia Montgomery (2013) The Strategist Articulate distinctive purpose & communicate that. 7. Lafley and Martin Playing to Win Make five integrated choices. 8. Rita McGrath The End of Competitive Advantage Forget sustainable advantage, and live with transient advantage 25/01/2014 (2011) (2013) (2013) © McDermott, 2014 3
  4. 4. 1. MINTZBERG AND DELIBERATE VS EMERGENT STRATEGY 25/01/2014 © McDermott, 2014 4
  5. 5. Emergent Strategy 25/01/2014 © McDermott, 2014 5
  6. 6. Mintzberg (1978) Deliberate vs Emergent Strategy Strategy Deliberate Emergent Recommendations Delay making strategic choices until future is predictable. Monitor remote external environment & make necessary adjustments. 25/01/2014 Adjust also when major change sin external competitive environment © McDermott, 2014 6
  7. 7. Companies develop intended strategy; Some plans are “dropped” or “unrealized”; 25/01/2014 Some unintended ideas emerge and are implemented © McDermott, 2014 7
  8. 8. 25/01/2014 © McDermott, 2014 8
  9. 9. 2. MICHAEL PORTER: COMPETITIVE POSITION FOR COMPETITIVE ADVANTAGE 25/01/2014 © McDermott, 2014 9
  10. 10. Michael Porter and Strategy • The Porter view stresses the importance of analysis • Good analysis = good strategy • Good strategy = sustainable competitive advantage 25/01/2014 © McDermott, 2014 10
  11. 11. Michael Porter and Strategy • What industry do we compete in? – So perform industry analysis. – Determine the nature of the nature. • How do we compete? – Select a generic strategy. 25/01/2014 © McDermott, 2014 11
  12. 12. Michael Porter and Strategy Strategic Analysis Strategic Choice Competitive Advantage Industry Analysis Choice of Generic Strategy Competitive Advantage 25/01/2014 © McDermott, 2014 12
  13. 13. Industry Analysis and Five Forces 25/01/2014 © McDermott, 2014 13
  14. 14. 25/01/2014 © McDermott, 2014 14
  15. 15. Michael Porter and Strategy: Generic Strategy • Finding a unique competitive position. • But often in highly competitive industry. • All seeking to grab a share of a defined market. 25/01/2014 © McDermott, 2014 15
  16. 16. 3. PRAHALAD AND HAMEL: CORE COMPETENCE OF THE FIRM AND STRATEGIC INTENT 25/01/2014 © McDermott, 2014 16
  17. 17. Why are tribute bands not superstars 25/01/2014 It’s obvious! We do not have all the four traits of core competences © McDermott, 2014 17
  18. 18. Core Competences and the Resource-Based View (RBV)of the Firm (Prahald and Hamel, 1990) Competitive advantage is determined by internal considerations – the company’s capabilities Capabilities must possess four key traits 25/01/2014 © McDermott, 2014 18
  19. 19. Core competences are of crucial importance (see above). But what are the defining traits of core competencies? 25/01/2014 © McDermott, 2014 19
  20. 20. A Core Competence Passes three Tests 25/01/2014 © McDermott, 2014 20
  21. 21. 25/01/2014 © McDermott, 2014 21
  22. 22. 25/01/2014 © McDermott, 2014 22
  23. 23. Strategic Intent 25/01/2014 © McDermott, 2014 23
  24. 24. Strategic Intent Once tiny Japanese companies developed explicit strategic intent to beat their much larger US and European rivals 1960s Once tiny South Korean companies developed explicit strategic intent to beat their much larger Japanese rivals 1980s Once tiny Chinese companies developed explicit strategic intent to beat their much larger Asian rivals 1990s/2000s 25/01/2014 © McDermott, 2014 24
  25. 25. Core competencies are increasingly based upon a company’s network 25/01/2014 © McDermott, 2014 25
  26. 26. 4. KIM AND MAUBORGNE: BLUE OCEAN STRATEGY 25/01/2014 © McDermott, 2014 26
  27. 27. Strategy Michael Porter Kim & Mauborgne Or how to survive with a Red Ocean Strategy 25/01/2014 Developing a Blue Ocean Strategy © McDermott, 2014 27
  28. 28. 25/01/2014 © McDermott, 2014 28
  29. 29. 25/01/2014 © McDermott, 2014 29
  30. 30. Mmmm….wonder Why this slide is here? 25/01/2014 © McDermott, 2014 30
  31. 31. 5. RICHARD RUMELT: WHAT’S THE PROBLEM? 25/01/2014 © McDermott, 2014 31
  32. 32. Recognize this star, the movie and the dialogue? Grady: We're trying to solve the problem. Billy: Good. What's the problem? Grady: The problem is that we've lost 3 key players that we now have to replace. BILLY Not like this. You're not even looking at the problem. Okay, stop. The problem we're trying to solve is that this is an unfair game. There are rich teams, poor teams, 50 feet of crap and then there's us. Billy = Good Strategy 25/01/2014 Grady = Bad Strategy © McDermott, 2014 32
  33. 33. The Key Message? Progress requires candid admission of the true problem No problem = no strategy Strategy = problem solving 25/01/2014 © McDermott, 2014 33
  34. 34. Pre-requisite of Good Strategy The Root Cause of Bad Strategy 25/01/2014 © McDermott, 2014 34
  35. 35. The Problem The Solution How can an older, slower, weaker, boxer who has lost his unique competences beat the world champion in energy-sapping heat of Africa? 25/01/2014 © McDermott, 2014 35
  36. 36. Bad Strategy 25/01/2014 Good Strategy © McDermott, 2014 36
  37. 37. Bad Strategy 25/01/2014 Good Strategy © McDermott, 2014 37
  38. 38. What’s the “Big problem” facing these companies? 25/01/2014 © McDermott, 2014 38
  39. 39. What’s the “Big issue/problem” facing these companies? The issue or problem may not be conspicuously obvious….but there is one lurking within. 25/01/2014 © McDermott, 2014 39
  40. 40. What’s the Problem? • Most companies refuse to pose this basic question. • Why? • It makes them feel very uncomfortable…it demands admitting there is a problem 25/01/2014 © McDermott, 2014 40
  41. 41. 6. CYNTHIA MONTGOMERY: THE STRATEGIST 25/01/2014 © McDermott, 2014 41
  42. 42. Strategy and Leadership • The Porter view separates the role of the leader from strategy. • It ignores the importance of the strategist (the CEO) • This is a major error. 25/01/2014 © McDermott, 2014 42
  43. 43. Meaning-Maker “strategy has been narrowed to a competitive game plan, divorcing it from a firm's larger sense of purpose; the CEO's unique role as arbiter and steward of strategy has been eclipsed; The Roles of the Strategist The Reasoner 25/01/2014 and the exaggerated emphasis on sustainable competitive advantage has drawn attention away from the fact that strategy must be a dynamic tool for guiding the development of a company over time” (Montgomery, HBR, 2008) The Operator © McDermott, 2014 43
  44. 44. The Buck Stops with the Strategist Develop Stated Purpose 25/01/2014 Develop Strategy Articulate Strategy in Concise Statement Sets Direction © McDermott, 2014 Establishes Priorities Guides all Activities 44
  45. 45. 1. Defines firm’s unique value. 2. Explains its relevance – why it matters 3. Easy to understand & memorable Develop Stated Purpose Develop Strategy 25/01/2014 Articulate Strategy in Concise Statement Sets Direction © McDermott, 2014 Establishes Priorities Guides all Activities 45
  46. 46. The Buck Stops with the Strategist Develop Stated Purpose Develop Strategy Sets Direction Establishes Priorities Guides all Activities Articulate Strategy in Concise Statement Strategy statement is important 25/01/2014 © McDermott, 2014 46
  47. 47. Strategies and Strategy Statements The Honed Strategy & Strategy Statement • Sets direction; • Establish priorities; • Guides activity The Weak Strategy & Strategy Statement • Fails to provide direction; • Causes panic; • Creates confusion. Source of competitive advantage 25/01/2014 Source of competitive disadvantage © McDermott, 2014 47
  48. 48. Strategy and Strategy Statements Effective Ineffective 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 6. Distinctive Provides focus – the what Specific – the how Explanatory and transparent Targeted – the who Inspirational 25/01/2014 Too Generic – could be anyone Covers all bases Clichés – meaningless Baffling and opaque Scattered Dull © McDermott, 2014 48
  49. 49. 7. A.G. LAFLEY AND ROGER L. MARTIN PLAYING TO WIN: STRATEGY IS FIVE INTEGRATED CHOICES 25/01/2014 © McDermott, 2014 49
  50. 50. "The most important thing in the Olympic Games is not winning but taking part; the essential thing in life is not conquering but fighting well.“ Baron Pierre de Coubertin, founder of the Olympics, You play only where you can win 25/01/2014 © McDermott, 2014 50
  51. 51. You Play only where you can Win? Really • • • • • • • Can US auto companies beat BMW, Mercedes? Can Walmart win in China? Can JC Penney beat Macy’s? Can Google win in China? Can Avon win anywhere? Can RIM (Blackberry) win in enterprise solutions? Can Dell win in B2C as opposed to B2B? 25/01/2014 © McDermott, 2014 51
  52. 52. Winning Demands Beating the Biggest and also the Best US airlines need to compete only where they can win - beating the airlines below The Biggest 25/01/2014 The Best © McDermott, 2014 52
  53. 53. How to Win With a Low Cost Strategy With Differentiation • There can be only one winner! • There can be several winners • Whoever has the lowest costs • But the rewards rise with the level of differentiation achieved. • Focus must be on costreduction and standardization • And a willingness to lose customers that do not settle for standardization • Focus is customerunderstanding & brand building • High commitment to innovation Both strategies require the pursuit of distinctiveness 25/01/2014 © McDermott, 2014 53
  54. 54. Strategy is Five Choices • What is your winning aspiration? • The purpose of your enterprise, its motivating aspiration. Choice 1. • Where will you play? • A playing field where you can achieve that aspiration. Choice 2. • How will you win? • The way you will win on the chosen playing field. Choice 3 • What capabilities must be in place? • The set and configuration of capabilities required to win in the chosen way. Choice 4 • What management systems are required? Choice 5 • The systems and measures that enable the capabilities and support the choices. 25/01/2014 © McDermott, 2014 54
  55. 55. In an SME the above is sufficient. In a large multi-business company, apply this cascade at the following levels: • Corporate-level cascade (e.g. P&G) • Strategic group cascade (e.g. skin care, detergents, diapers) • Individual business cascade (e.g. Oil of Olay, Tide, Pampers) 25/01/2014 © McDermott, 2014 55
  56. 56. Notice how this is a dynamic system. Notice too the importance of feedback. Thus strategy is an iterative process Iterative process 25/01/2014 © McDermott, 2014 56
  57. 57. In an SME the above is sufficient. In a large multi-business company, apply this cascade at the following levels: • Corporate-level cascade (e.g. P&G) • Strategic group cascade (e.g. skin care, detergents, diapers) • Individual business cascade (e.g. Oil of Olay, Tide, Pampers) 25/01/2014 © McDermott, 2014 57
  58. 58. Create fierce brand advocates; Make a difference in the world; Make money doing it In its own retail stores; Athletic wear for women Creating technically superior yoga wear that is also very cool Changes stock regularly to reinforce exclusivity & scarcity; Customers attracted to stores by knowledgeable staff Product & store design; Customer service; Supply-chain expertise. 25/01/2014 © McDermott, 2014 58
  59. 59. Create fierce brand advocates; Make a difference in the world; Make money doing it In its own retail stores; Athletic wear for women Product & store design; Customer service; Supply-chain expertise. 25/01/2014 Creating technically superior yoga wear that is also very cool; Changes stock regularly to reinforce exclusivity & scarcity; Customers attracted to stores by knowledgeable staff © McDermott, 2014 Expand to: • Accessories? • Menswear? • Online presence? • Different retail formats? • How does store employee serve 59 the customers
  60. 60. 2018 Global # 1 US sales of 1m vehicles All actions at the model, brand, category, sector, and company level driven by meeting the ideal. 25/01/2014 © McDermott, 2014 60
  61. 61. What is Winning? What is your winning aspiration*? What is your stated purpose? What is your winning aspiration? 25/01/2014 Your Strategy © McDermott, 2014 61 * Note the similar starting point between Montgomery and The Strategist
  62. 62. What is Winning? What is your winning aspiration? What is your stated purpose*? Thus your winning aspiration should reveal your identity This should focus upon framing ambitions around the customer 25/01/2014 © McDermott, 2014 62 * Note the similar starting point between Montgomery and The Strategist
  63. 63. What is Winning? What is your winning aspiration? What is your stated purpose*? Thus your winning aspiration should reveal your identity This should focus upon framing ambitions around the customer 25/01/2014 © McDermott, 2014 63 * Note the similar starting point between Montgomery and The Strategist
  64. 64. Examples of Winning Aspirations • to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time. our customers' favorite place and way to eat and drink. 25/01/2014 © McDermott, 2014 64
  65. 65. Examples of Winning Aspirations: Who am I? to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time. We will be the easiest pharmacy retailer for customers to use. Undisputed Marketplace Leadership For Our Customers A compelling place to shop. . . by providing convenience and low prices For Our Associates A compelling place to work. . . by providing exceptional opportunities and rewards for achievement For Our Investors A compelling place to invest. . . by providing outstanding returns 25/01/2014 to be our customers' favorite place and way to eat and drink. “To bring inspiration and innovation to every athlete* in the world.” “* If you have a body, you are an athlete.” We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments. People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world. © McDermott, 2014 65
  66. 66. Examples of Winning Aspirations: Who am I? to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time. to be our customers' favorite place and way to eat and drink. We will be the easiest pharmacy retailer for customers to use. “To bring inspiration and innovation to every athlete* in the world.” “* If you have a body, you are an athlete.” Undisputed Marketplace Leadership We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments. For Our Customers A compelling place to shop. . . by providing convenience and low prices For Our Associates A compelling place to work. . . by providing exceptional opportunities and rewards for achievement For Our Investors A compelling place to invest. . . by providing outstanding returns People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world. 25/01/2014 © McDermott, 2014 66
  67. 67. • • • • Our Strategy 2018 focuses on positioning the Volkswagen Group as a global economic and environmental leader among automobile manufacturers. We have defined four goals that are intended to make Volkswagen the best automaker in the world by 2018: • Volkswagen intends to deploy intelligent innovations and technologies to become a world leader in customer satisfaction and quality. • The goal is to increase unit sales to more than 10 million vehicles a year; in particular, Volkswagen intends to capture an above-average share of growth in the major growth markets. • Volkswagen’s aim is a sustainable return on sales before tax of at least 8% so as to ensure that the Group’s solid financial position and ability to act are guaranteed even in difficult market periods. • Volkswagen aims to become the top employer across all brands, in all companies and regions; this is necessary in order to build a first-class team. 25/01/2014 © McDermott, 2014 67
  68. 68. 25/01/2014 © McDermott, 2014 68
  69. 69. Two Questions are at the Heart of Strategy Where to play? How to Win? Strategy 25/01/2014 © McDermott, 2014 69
  70. 70. Winning Aspiration Where & How to Play 25/01/2014 • Defines the scope of the firm’s activities • Defines: • What the firm will do; • Where; and • How © McDermott, 2014 70
  71. 71. 1. Where to Play? Which markets? Which customers and/or consumers? Which Channels? Which Product Categories? Which parts of the industry value chain The answers capture the strategic playing field for the firm 25/01/2014 © McDermott, 2014 71
  72. 72. 2. How to Win? Which markets? Which customers and/or consumers? Which Channels? Which Product Categories? Which parts of the industry value chain The recipe for success in each chosen area 25/01/2014 Competitive advantage © McDermott, 2014 72
  73. 73. Strategy What capabilities must be in place to win? What management systems are required to support the strategic choices? The range & qualities of activities necessary to win 25/01/2014 © McDermott, 2014 73
  74. 74. Strategy What capabilities must be in place to win? Internal Capabilities (e.g. Innovation, Brand building, merchandising What management systems are required to support the strategic choices? External Capabilities (form partnerships with key parties such as designers, advertising & PR agencies, key influencers Deepening existing capabilities Building new capabilities 25/01/2014 © McDermott, 2014 74
  75. 75. The Core Capabilities of P&G These five core capabilities support & reinforce each other It is the combination of these advantages that confers competitive advantage But this could also be Adidas or Nike? 25/01/2014 © McDermott, 2014 75
  76. 76. Two Questions are at the Heart of Strategy How to Win? Where to play? Strategy What capabilities must be in place to win? 25/01/2014 What management systems are required to support the strategic choices? © McDermott, 2014 76
  77. 77. 8. RITA GUNTHER MCGRATH: THE END OF COMPETITIVE ADVANTAGE 25/01/2014 © McDermott, 2014 77
  78. 78. 25/01/2014 © McDermott, 2014 78
  79. 79. Strategy the “old” way was a fight to the death 25/01/2014 © McDermott, 2014 79
  80. 80. Think surfing, think strategy Ride the waves – knowing when to jump “off” and stay on. Even “good waves” are short-lived. 25/01/2014 © McDermott, 2014 80
  81. 81. Conclusions Strategy demands: 1. Making explicit your sense of purpose ( or statement of mission); 2. Defining your winning aspiration; 3. Acknowledging your big problem; 4. Recognizing that new games are always emerging; 5. Choosing where to play; 6. Determining your competitive position and how you will play. 7. Deepening and developing core competences or capabilities; 8. Creating the systems that enable you to play successfully 25/01/2014 © McDermott, 2014 81
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