Business strategy from michael porter to blue oceans to what's the problem


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MBA students and Business Majors this presentation introduces you to the leading strategy gurus over the past few decades. Michael Porter, generic strategy, Blue Ocean Strategy, and more are examined in this easy to follow presentation

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Business strategy from michael porter to blue oceans to what's the problem

  1. 1. Five Perspectives of Business Strategy? By Dr. Michael McDermott mcdermottm1@nku.edu24/01/2013 1
  2. 2. Perspectives on Strategy: Five Schools of thoughtAuthor Published Key Concept CommentsMichael Porter 1980s Competitive Positioning The Dominant viewKim & Maubergne Early 2000s Blue Ocean StrategyRichard Rumelt 2011 Good vs Bad StrategyCynthia 2008 Leadership and StrategyMontgomeryBrian Solis, others 2011 Social Business Evolving24/01/2013 2
  3. 3. Perspectives on Strategy: Five Schools of thought Author Key Concept Objective Michael Porter Competitive Establish a clear Positioning (i.e. competitive position Generic Strategy) Kim & Maubergne Blue Ocean Strategy Create a new market with no competition Richard Rumelt Good vs Bad Strategy Focus on the “big problem” Cynthia Leadership and Strategy and leadership Montgomery Strategy must be interconnected Solis and others Social Business Engagement to create value24/01/2013 © McDermott, 2013 3
  4. 4. Michael Porter and Strategy24/01/2013 4
  5. 5. Michael Porter & Competitive Position24/01/2013 5
  6. 6. Operational Effectiveness Explains Initial Success of Asian Companies (i.e. a low cost generic strategy) 2020s- Chinese 1990s-2010s companies South are winners Korean companies 1960s-80s are winners Japanese companies are winners © McDermott, 2012. 6
  7. 7. Where we place a company depends upon the definition of the industry that it competes in.24/01/2013 7
  8. 8. Porter’s value chain – this has to focus on achieving cost minimization or differentiation.24/01/2013 8
  9. 9. Generic Strategy and Porter’s Five ForcesThe Five Forces of Industry analysis 24/01/2013 9
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  12. 12. Competitive Position – Strategy Clock The “greenish” area is non-viable24/01/2013 12
  13. 13. 2. Blue Ocean Strategy24/01/2013 13
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  21. 21. This looks at the Strategy Canvass for traditional circuses (i.e. red) vs Cirque du Soleil 24/01/2013 21
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  27. 27. Rumelt on Strategy24/01/2013 27
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  31. 31. Apple’s Strategy Journey Flourishing, 2001- Turnaround present Survival mode, mid Company defines its problem at each stage 1990sConsider what the company did at each stage 24/01/2013 31
  32. 32. 1990s: BMW and Mercedes24/01/2013 32
  33. 33. Figure 1: BMW’s Decision to invest in the U.S.A. in the 1990s Push Factors Strength of High Labor Strong Remote from DM vs US$ Costs unions key market BMW’s Decision to Invest in the USA Overcome 10% Weak unions in import tax South Low labor Largest costs international market Response to Opportunity to introduce competitive threat manufacturing processes from Japan Pull Factors
  34. 34. What’s the “Big problem” facing these companies?24/01/2013 34
  35. 35. Moneyball (2011)24/01/2013 35
  36. 36. 4. Strategy and Leadership No matter how accomplished the strategy, can it “work” in the absence of effective leadership?24/01/2013 36
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  39. 39. The Role of the Strategist• To find and examine all the evidence to determine the problem – It’s vital to be able to ask the right questions – If you do not ask the right questions, then you cannot find the right answer• To design a solution24/01/2013 39
  40. 40. The Strategist is both Detective and Designer24/01/2013 40
  41. 41. Strategy at the Corporate Level• A blurring of competitive position is clearly a problem• This causes rampant confusion internally and externally• So establish an unambiguous competitive position24/01/2013 41
  42. 42. Strategy at the Corporate Level• Sources of problems can be found when examining:1. The remote external environment2. The broad competitive environment3. Rivals4. The market5. The company24/01/2013 42
  43. 43. The Strategy Detective’s Tools: The External Environment The External • PEST or PESTEL analysis Remote • Political, Economic, Social, Technological Environment The Broad • Porter’s Industry Analysis Five Forces Model Competitive • Industry Life Cycle • Company analysis (see section on internal analysis) Environment • Market Segmentation The Market • Customer Relationships • Product Life Cycle24/01/2013 43
  44. 44. The Strategy Detective’s Tools: The Internal Environment •Core competencies; The Internal •Porter’s Value Chain; Environment Functional Analysis; BCG Matrix; Ansoff’s Matrix24/01/2013 44
  45. 45. Strategy is all about choice and saying ‘no’24/01/2013 45
  46. 46. What is a Strategist?• A decision-maker? – Look at options and pick ‘the best’• Or a designer?• Yes, he/she designs a novel response24/01/2013 46
  47. 47. The Strategy Designer• You are allowed only one objective and it must be feasible• What one single feasible objective, when accomplished, would make the biggest difference?• Now design a strategy and make it happen.24/01/2013 47
  48. 48. Leadership Casualties in 2012• How many CEOs of US Fortune 500 companies were fired in 2012?• How many coaches/managers in the NBA, NFL, English Premier League were sacked?• How many incumbent politicians were defeated in the polls?• Clearly employers believe that strategy and leadership are interconnected24/01/2013 48
  49. 49. Meaning-Maker “strategy has been narrowed to a competitive game plan, divorcing it from a firms larger sense of purpose; the CEOs unique role as arbiter and steward of strategy has been eclipsed; 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 The time” (Montgomery, HBR, 2008) Strategist The Reasoner The Operator24/01/2013 49
  50. 50. • If you ask young men what they want to accomplish by the time they are 40, the answers you get fall into two distinct categories. There are those - the great majority - who will respond in terms of what they want to have. This is especially true of graduate students of business administration. There are some men, however, who will answer in terms of the kind of men they hope to be. These are the only ones who have a clear idea of where they are going. The same is true of companies. For far too many companies, what little thinking goes on about the future is done primarily in money terms. There is nothing wrong with financial planning. Most companies should do more of it. But there is a basic fallacy in confusing a financial plan with thinking about the kind of company you want yours to become. It is like saying, "When Im 40, Im going to be rich." It leaves too many basic questions unanswered. Rich in what way? Rich doing what?24/01/2013 50
  51. 51. • Strategy and the Strategist In most popular portrayals the strategists job would seem to be finished once a carefully articulated strategy has been made ready for implementation. The idea has been formed, the next steps specified, the problem solved. But dont be fooled. The job of the strategist never ends. No matter how compelling a strategy is, or how clearly defined, it is unlikely to be a sufficient guide for a firm that aspires to a long and prosperous life24/01/2013 51
  52. 52. The Prevailing Approach: Strategy as a Set Solution• Goal A long-term sustainable competitive advantage• Leadership The CEO and strategy consultants• Form Unchanging plan that derives from an analytical, left-brain exercise• Time Frame Intense period of formulation followed by prolonged period of implementation• Ongoing Activity Defending an established strategy through time24/01/2013 52
  53. 53. What Is Missing: Strategy as a Dynamic Process• Goal Creation of value• Leadership CEO as chief strategist; the job cannot be outsourced• Form Organic process that is adaptive, holistic, and open-ended• Time Frame Everyday, continuous, unending• Ongoing Activity Fostering competitive advantages and developing the company through time24/01/2013 53
  54. 54. 5. THE SOCIAL BUSINESS24/01/2013 54
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  57. 57. Social CRM• “The underlying principle for Social CRM’s success is very different from its predecessor….traditional CRM is based on an internal operational approach to manage customer relationships effectively. But Social CRM is based on the ability of a company to meet the personal agendas of [its] customers while, at the same time, meeting the objectives of [its] own business plan. It is aimed at customer engagement rather than customer management.”24/01/2013 57
  58. 58. Where is my company along the Social Business Journey?24/01/2013 58
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  62. 62. Genuine Strategy and Operational Effectiveness Deliver Enduring Competitive Advantage Genuine Sustainable Operational Effectiveness Competitive Strategy Advantage24/01/2013 62
  63. 63. Genuine Strategy and OE Both are essential for superior performance Excellence in one is not enough for enduring success or competitive advantage24/01/2013 63
  64. 64. Establishing Organizational Competitive Advantage • Deliver greater value to customers; or 1 • Create comparable value at lower 2 prices; or • Do both 324/01/2013 64
  65. 65. Creating Competitive Advantage: Effectiveness vs Efficient • Leads to greater value More • Higher unit prices Effective • Apple, BMW • Leads to Lower unit costs More • Can offer lowest prices Efficient • Costco, Lenovo24/01/2013 65
  66. 66. OE and Buyers• Continuous improvements in OE proves of enormous benefits to buyers; – Today we can buy a USB stick at Walmart for less than $5 that has more memory than a computer that cost $000s in the 1980s;• But this is a nightmare scenario for companies that are sucked into damaging price wars; – Who makes a profit selling only PCs today?24/01/2013 66
  67. 67. Examples of Strategically SmartThe Smarts The Laggards• Tend to be ‘different’ • Imitate and emulate their• Are innovative national rivals24/01/2013 67
  68. 68. OE and Competition• Companies converge• They all follow the exact same strategic path – From made-in-China to sold-in-Walmart• And this is a race that no producer wins – So let’s reduce the number of ‘runners’ – and acquire our rivals• In a ‘buy or be bought’ world, no one enjoys true competitive advantage24/01/2013 68
  69. 69. It does not have to be this way!24/01/2013 69