According to Michael Porter, a firm must formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries.
According to W. Chan Kim and Renée Mauborgne, an organization can achieve high growth and profits by creating a Blue Ocean Strategy that breaks the previous value-cost trade off by simultaneously pursuing both differentiation and low cost.
Firms must learn to compete differently if they are to achieve strategic competitiveness in the 21 st -century competitive landscape. To provide an idea of what this means, new ways of competing may include:
bringing new good and services to market more quickly
The use of new technologies (e.g., Amazon.com)
Diversifying the product line (e.g., Barnes and Nobles into music as a catalyst for growth)
The New Reality - #1
Shifting product emphasis (e.g., U-Haul’s new focus on accessory sales) (i.e., Dual Branding)
Consolidation (e.g., the merger of Exxon and Mobil)
Combining online selling with physical stores (e.g., CompUSA’s new strategy)
The New Reality - #2
Dell Model for Growth
Have New Business Model (maybe changes every 5 years?)
Identify Core Competencies and then improve the four capabilities
Outsource non-core competencies
Create a “Brand Management Company”
The New Reality - #3
Brief Overview of Corporate Strategy
Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses
1. What businesses should the corporation/enterprise be in? 2. How should the corporate/G.O. office manage the array of business units (GBU’s/SBU’s/ Wholly owed subsidiaries) Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts Key Questions of Corporate/Firm-level Strategies
21 st Century Organization Strategies for Growth and Profitability Multi-International: One Consumer Products Company (Corporate Level) Driving Growth (8) Funding Growth (5) Creating the Best Place To Work (10) Global Scope Consumer Promotion 360 0 Marketing Superior Knowledge of Customers/Consumers Strong Alliances/ Partnerships with Customers Coverage of Trade Acquisitions/JV’s Focus on Product Quality Innovative New Products/Services Vision Direction : Guiding Core Values, Philosophies, Principles, Mission, & Others Regionalization With Local Control Lean & Flat Structures Shared Leadership, Coaching & Feedback Horizontal, Structures, Systems, & Processes: Integration/communication/coordination Empower People Stimulating Careers Streamline and obtain A Seamless Supply Chain/ Demand Side (Value Chain) Integration Use of Technologies to create Cost Savings IS/SAP/ Consolidated Partnership Move to “Global” And “Local” Regional Business HPWS Community Involvement Recognition & Financial Rewards Demand Side Strategies: Supply Chain Strategies: Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
Corporate (and International) Strategies
Three directions for corporate strategy
M&A , JV, and SA (external growth)
International (internal growth)
Stability (internal growth)
Renewal (internal growth)
Increase the four capabilities via core competencies
Organizational Growth: External and/or Internal
External and Internal Growth Strategy
One that involves the attainment of specific growth objectives by increasing the level of an organization’s capabilities
Typical growth strategies include goals for:
Increase in sales revenues
Other balanced scorecard performance measures
Types of Growth Strategies Organizational Growth Horizontal Integration: Along Value Chain International Concentration
Concentration Customers Product(s) Product-Market Exploitation Product Development Market Focused Development Product/Market Diversification
Another Possible Way for Growth
The “Right” People or the “Right” Organization?
What are our basic Principles, Philosophies
and Core Values?
What do we believe in?
What policies and practices are consistent
with these Values and Philosophies?
What can we do for the customer better
than our competitors?
Given our core capabilities, how can we deliver
value (EVA) to customers in a way our
competitors cannot easily imitate?
Senior management “manages” the values
and culture of the firm.
A Values-Based View of Strategy Fundamental Values or Beliefs Design Management Practices That Reflect and Embody These Values Use These to Build Core Capabilities Invent a Strategy That is Consistent with the Values and Uses the Talents & your four Capabilities to Compete in New and Unusual Ways Senior Management’s Role
Another Way: Diversification Related Diversification Product Similarities Distribution Channels Value Chain Capabilities/ Core Competencies Customer Use Similar Technology
Levels and Types of Diversification Low Levels of Diversification Moderate to High Levels of Diversification Very High Levels of Diversification Related linked (mixed) < 70% of revenues from dominant business, and only limited links exist A B C Single business > 95% of revenues from a single business unit A Dominant business Between 70% and 95% of revenues from a single business unit B A Unrelated-Diversified Business units not closely related A B C < 70% of revenues from dominant business; all businesses share product, technological and distribution linkages Related constrained A B C