Effective strategies in an environment of constant change are a key requirement for success. Corporate strategy: Deciding on the scope and purpose of the business, its objectives, and the initiatives and resources necessary to achieve the objectives.

1. Business Strategy:
Creating and Sustaining
Competitive Advantages
Seta Ariawuri Wicaksana

2. Dr. Seta A. Wicaksana
S.Psi, M.Psi, Psikolog
0811 19 53 43
wicaksana@humanikaconsulting.com
• Pendiri dan Direktur Humanika Consulting dan hipotest.com
• Business Psychologist
• Certified of Assessor Talent Management
• Certified of Human Resources as a Business Partner
• Certified of Risk Professional
• Certified of HR Audit
• Dosen Tetap dan Peneliti di Fakultas Psikologi UP
• Penulis Buku: Sobat Way (2016), Industri dan Organisasi: Pendekatan
Integratif dalam menghadapi Perubahan (2020), Human Faktor
Engineering: Integratif Desain Manusia dan Lingkungan Kerja (2021),
Psikologi Industri dan Organisasi (2021), Psikologi Umum (2021),
Manajemen Pengembangan Talenta (2021), PIODiagnostik: Pengukuran
Psikologi di Lingkungan Kerja (2021), Transformasi Digital: Perspektif
Organisasi, Talenta dan Budaya Organisasi (2021), Psikologi Pelayanan
(2021) dan Psikologi Konsumen (2021).
• Dosen Tidak Tetap di: Program Pasca Sarjana Ekonomi di Univ. Pancasila,
STP TRISAKTI, Fakultas Psikologi Universitas Mercu Buana, STIKOM IMA
• Wakil Ketua Asosiasi Psikologi Forensik Indonesia wilayah DKI
• Pembina Yayasan Humanika Edukasi Indonesia
• Ilmu Ekonomi dan Manajemen (MSDM) S3 Universitas Pancasila
• Fakultas Psikologi S1 dan S2 Universitas Indonesia
• Sekolah ikatan dinas Akademi Sandi Negara

3. Business Strategy
• Effective strategies in an
environment of constant
change are a key
requirement for success
• Corporate strategy:
Deciding on the scope and
purpose of the business, its
objectives, and the
initiatives and resources
necessary to achieve the
objectives.

4. Porter’s“What Is Strategy?”
• Operational effectiveness is not strategy:
• Operational effectiveness means performing similar
activities better than rivals. It is necessary, but not
sufficient, for competitive advantage.
• Strategic positioning means performing different activities
from rivals’or performing similar activities in different ways:
• Variety-based positioning (producing a subset of
products/services)
• Needs-based positioning (serving needs of particular
group of customers)
• Access-based positioning (using different ways to
reach customers)
• Strategy involves trade-offs, choosing what not to do.

5. Organization
Strategy
• “organization strategy is the way a
company creates value through the
configuration and coordination of its
multi-market activities.”

6. Characteristics of
Successful Strategy
• Unique competitive position for the
company.
• Activities tailored to strategy.
• Clear trade-offs and choices vis-à-vis
competitors.
• Competitive advantage arises from fit
across activities.
• Sustainability comes from the activity
system not the parts.
• Operational effectiveness a given.

8. Organization Strategy
Components
• Corporate Vision
• Objectives
• Capabilities
• Business Composition
• Structure, Systems, and Processes
• Corporate Competitive Advantage

9. Organization’s Vision
• Defines what the Organization is and
what it does and provides important
guidelines for managing and improving
the organization.

10. Objectives
May be established in the following areas:
• Marketing
• Innovation
• Resources
• Productivity
• Social responsibility
• Finance

11. Business
Composition
• Place company’s strategic
focus on distinctive
capabilities.
• Key strategy issue: matching
capabilities to market
opportunities
• Challenge: provide direction
for both corporate and
marketing strategy design.
• Corporate strategy <> SBU
strategy

12. Structure, Systems, and
Processes
• How the organization controls and
coordinates the activities of its various
business units and staff functions.

13. Competitive
Advantage
• Value creation through multi-market activity.
• Does the corporation add value to the business?

14. • #1 – Corporate Level Strategy
• A corporate-level strategy is a long-term, proactive,
coordinated, and all-encompassing plan created by top
management. In other words, it determines business
(product) lines, stability, growth, expansion, acquisitions
and mergers, product diversification, integration, new
investment areas, etc.
• #2 – Business-Level Strategies
• These are those that are relevant to a certain industry or
industry sector. As a result, ideas to improve a business unit
or product-level market position among competitors are
considered. Then the general managers create it by turning
the mission and vision into actionable plans. Eventually, it
resembles a blueprint for the entire company as they are
specific to the industry the organization belongs to.
• #3 – Functional Level Strategy
• First-line managers or supervisors design a functional-level
strategy. The functional-level strategy entails operational-
level decision-making concerning certain functional
domains like marketing, production, human resources,
research and development, finance, and so forth. They aim
to achieve organizational aims by maximizing resource
efficiency and utilization.
• #4 – Operational Level Strategy
• The operational level strategy involves regions, plants,
departments, etc., within the functional areas. Laying out
plans under this strategy is the responsibility of the plant
managers, geography unit managers, low-level supervisors,
etc.
Levels of Business
Strategy

15. Types of Competitive
Advantage and
Sustainability
• Three generic strategies to overcome the five forces and
achieve a competitive advantage
• Overall cost leadership
• Low-cost-position relative to a firm’s peers
• Manage relationships throughout the entire
value chain
• Differentiation
• Create products and/or services that are
unique and valued
• Non-price attributes for which customers will
pay a premium
• Focus strategy
• Narrow product lines, buyer segments, or
targeted geographic markets
• Attain advantages either through
differentiation or cost leadership

16. Three Generic Strategies
Source: Competitive Strategy: Techniques for Analyzing Industries and Competitorsby Michael E.
Porter. Copyright © 1980, 1998 by The Free Press.
Competitive Advantage
Uniqueness Perceived
by the Customer
Low Cost Position
Strategic
Target
Particular
Segment Only
Industrywide

18. Strategic
focus matrix

19. Creating Value Through Human Capital, Social Capital, and
Technology
Performance
Competitive Advantage
Source:Adapted from G. G. Dess and J. C. Picken, Beyond Productivity(New York:
AMACON, 1999), pp. 63-64.
Return on
investment (%) 35.5 32.9 30.2 17.0 23.7 17.8
Sales Growth (%)15.1 13.5 13.5 16.4 17.5 12.2
Gain in Market
Share (%) 5.3 5.3 5.5 6.1 6.3 4.4
Sample Size 123 160 100 141 86 105
Differentiation
and Cost Differentiation Cost
Differentiation
Focus
Cost
Focus
Stuck in
the
Middle

20. Overall Cost
Leadership
• Integrated tactics
• Aggressive construction of efficient-scale facilities
• Vigorous pursuit of cost reductions from
experience
• Tight cost and overhead control
• Avoidance of marginal customer accounts
• Cost minimization in all activities in the firm’s
value chain, such as R&D, service, sales force, and
advertising

21. Value-Chain
Activities
Source: Adapted from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter.
Copyright © 1985 by Michael E. Porter.
Shared purchasing operations
with other business units
Effective policy guidelines
to ensure low cost raw
materials (with acceptable
quality levels)
Expertise in process
engineering to reduce
manufacturing costs
Effective use of automated
technology to reduce
scrappage rates
Effective orientation and
training programs to maxi-
mize employee productivity
Minimize costs associated
with employee turnover
through effective policies
Standardized account-
ing practices to minimize
personnel required
Few management layers
to reduce overhead
costs
Effective
layout of
receiving
dock
operation
Effective
use of
quality
control
inspectors
to
minimize
rework on
the final
product
Effective
utilization
of
delivery
fleets
Purchase of
media in
large blocks
Sales force
utilization is
maximized
by territory
management
Thorough service
repair guidelines to
minimize repeat
maintenance calls
Use of single type
of repair vehicle
to minimize
costs
Firm
infrastructure
Human resource
management
Technology
development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
Service

22. Overall Cost
Leadership (Cont.)
• A firm following an overall cost
leadership position
• Must attain parity on the basis of
differentiation relative to
competitors
• Parity on the basis of differentiation
• Permits a cost leader to
translate cost advantages
directly into higher profits than
competitors
• Allows firm to earn above-
average profits

23. Overall Cost
Leadership:
Improving
Competitive Position
vis-à-vis the Five
Forces
• An overall low-cost position
• Protects a firm against rivalry from
competitors
• Protects a firm against powerful buyers
• Provides more flexibility to cope with
demands from powerful suppliers for
input cost increases
• Provides substantial entry barriers from
economies of scale and cost
advantages
• Puts the firm in a favorable position
with respect to substitute products

24. Pitfalls of Overall Cost
Leadership Strategies
Too much focus on one or a few value-chain activities
All rivals share a common input or raw material
The strategy is initiated too easily
A lack of parity on differentiation
Erosion of cost advantages when the pricing information available to
customers increases

25. Differentiation
• Differentiation can take
many forms
• Prestige or brand
image
• Technology
• Innovation
• Features
• Customer service
• Dealer network

26. Value-Chain
Activities: Examples
of Differentiation
Source: Adapted from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter.
Copyright © 1985 by Michael E. Porter.
Facilities that
promote firm
image
Superior MIS—To integrate
value-creating activities to
improve quality
Widely respected
CEO enhances
firm reputation
Provide training and
incentives to ensure a strong
customer service orientation
Programs to attract talented
engineers and scientists
Excellent applications
engineering support
Superior material handling
and sorting technology
Use of most prestigious outlets
Purchase of high-quality
components to enhance
product image
Superior
material
handling
operations
to minimize
damage
Quick
transfer of
inputs to
manufactur-
ing process
Flexibility
and speed in
responding
to changes
in manu-
facturing
specs
Low defect
rates to
improve
quality
Accurate and
responsive
order
processing
Effective
product
replenish-
ment to
reduce
customer’s
inventory
Creative
and
innovative
advertising
programs
Fostering
of personal
relation-
ship with
key
customers
Rapid response
to customer
service
requests
Complete
inventory of
replacement
parts and
supplies
Firm
infrastructure
Human resource
management
Technology
development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
Service

27. Differentiation
• Firms may differentiate along
several dimensions at once
• Firms achieve and sustain
differentiation and above-average
profits when price premiums
exceed extra costs of being unique
• Successful differentiation requires
integration with all parts of a firm’s
value chain
• An important aspect of
differentiation is speed or quick
response

28. Differentiation: Improving
Competitive Position vis-à-vis
the Five Forces
• Differentiation
• Creates higher entry barriers due to
customer loyalty
• Provides higher margins that enable
the firm to deal with supplier power
• Reduces buyer power because
buyers lack suitable alternative
• Reduces supplier power due to
prestige associated with supplying to
highly differentiated products
• Establishes customer loyalty and
hence less threat from substitutes

29. Potential Pitfalls of
Differentiation Strategies
• Uniqueness that is not valuable
• Too much differentiation
• Too high a price premium
• Differentiation that is easily imitated
• Dilution of brand identification through
product-line extensions
• Perceptions of differentiation may vary
between buyers and sellers

30. Focus
• Focus is based on the choice of a
narrow competitive scope within an
industry
• Firm selects a segment or
group of segments (niche) and
tailors its strategy to serve them
• Firm achieves competitive
advantages by dedicating itself
to these segments exclusively
• Two variants
• Cost focus
• Differentiation focus

31. Focus: Improving
Competitive Position vis-
à-vis the Five Forces
• Focus
• Creates barriers of either cost
leadership or differentiation, or
both
• Also focus is used to select
niches that are least
vulnerable to substitutes or
where competitors are
weakest

32. Pitfalls of Focus Strategies
• Erosion of cost advantages within the
narrow segment
• Focused products and services are still
subject to competition from new entrants
and imitation
• Focusers can become too focused on
satisfying buyer needs

33. Combination Strategies:
Integrating Overall Low
Cost and Differentiation
• Primary benefit of successful
integration of low-cost and
differentiation strategies is
difficulty it poses for competitors
to duplicate or imitate strategy
• Goal of combination strategy is to
provide unique value in an
efficient manner

34. Combination
Approaches
• Automated and flexible
manufacturing systems (e.g.,
“mass customization”)
• Exploiting the profit pool concept
for competitive advantage
• Coordinating the “extended”
value chain by way of information
technology
• Best-cost provider strategies –
incorporating attractive attributes
at a lower cost than rivals

35. The U.S. Auto Industry’s Profit Pool
Source: Adapted from “A Fresh Look at Strategy”by O. Gadiesh and J. L. Gilbert, Harvard Business Review 76, no.
3 (1998), pp. 139-48. Copyright © 1998 by the Harvard Business School Publishing Corporation, all rights
reserved.

36. Industry Map
and Profit pool
analysis – Indian
Auto Ancilliary
industry –
Tankrich

37. Combination Strategies: Improving Competitive
Position vis-à-vis the Five Forces
• Firms that successfully integrate differentiation
and cost strategies obtain advantages of
competition from both approaches
• High entry barriers
• Bargaining power over suppliers
• Reduces power of buyers (fewer competitors)
• Value position reduces threat from substitute products
• Reduces the possibility of head-to-head rivalry

38. Types Of
Corporate
Combination
Strategies
• #1 – Simultaneous combination strategies
• Simultaneous Combinations can be used in the following way:
• During the divestment of a product line or strategic
business unit (SBU) while simultaneously incorporating it
into another SBU or product line.
• When a company or business uses a turnaround strategy
for some commodities and pursues a growth strategy for
others.
• The corporation may be harvesting for some products, and
for others, it is pursuing growth.
• #2 – Sequential combination strategies
• The business may utilize sequential strategies in the following
ways:
• Starting with a growth strategy and moving on to a stability
approach later.
• Deploying the growth plan after implementing the
turnaround strategy as soon as the situation on the ground
improves.
• #3 – Combination of simultaneous and sequential strategies
• As the name suggests, it combines both simultaneous and
sequential strategies.

39. Example #1
• Cotton Club is a clothing company specializing in
manufacturing comfort clothes for small babies (0–1
years). At first, it produced only normal clothes, but
slowly it started manufacturing socks and hats for
babies (stability). Later, it expanded to produce
clothing for children and adults (shifting focus to
capturing market segments of other age groups—
expansion). Finally, to concentrate more on business
development, it decided to discontinue
manufacturing baby shoes as it was not profitable
(retrenchment).
• Here, multiple stability, expansion, and retrenchment
strategies were employed to grow the business, thus
adopting a combination strategy.

40. Example #2
• Incorporated in June 1980 by airline investor Frank Lorenzo, Texas Air
Corporation, usually known as Texas Air, is headquartered in Houston, Texas. The
corporation’s subsidiary, “Eastern Air Lines,” reported a loss of $885.6 million in
1989. On the other hand, another company carrier, Continental Airlines, showed
improvement. Following the loss of Eastern, Texas Air changed its name to
“Continental Airlines Holdings” in June 1990 to reflect that the company’s core
business is Continental. In 1991, Eastern Air Lines filed for bankruptcy and was
liquidated.
• Here, the company made two major decisions or strategies quickly. The first was
to keep what was profitable, renaming it Continental Airlines Holdings, and the
second was to cut off what was not profitable by liquidating Eastern Air Lines.

41. Retrenchment And Combination
Strategy

42. Pitfalls of Combination Strategies
Firms that fail to attain both strategies may end
up with neither and become “stuck in the
middle”
Underestimating the challenges and expenses
associated with coordinating value-creating
activities in the extended value chain
Miscalculating sources of revenue and profit
pools in the firm’s industry

43. Industry Life-Cycle States: Strategic Implications
Emphasis on strategies, functional areas, value-creating activities,
and overall objectives varies over the course of an industry life
cycle
Life cycle of an industry
Introduction Growth Maturity Decline

44. Stages of the Industry Life Cycle

45. Stages of the
Industry Life
Cycle

46. Strategies in the Introduction Stage
Products are unfamiliar to consumers
Market segments not well defined
Product features not clearly specified
Competition tends to be limited
Strategies
• Develop product and get users to try it
• Generate exposure so product becomes
“standard

47. Strategies in the Growth Stage
Characterized by strong increases in sales
Attractive to potential competitors
Primary key to success is to build consumer preferences for specific brands
Strategies
• Brand recognition
• Differentiated products
• Financial resources to support value-chain
activities

48. Strategies in the Maturity Stage
Aggregate industry demand slows
Market becomes saturated, few new adopters
Direct competition becomes predominant
Marginal competitors begin to exit
Strategies
• Efficient manufacturing operations and process
engineering
• Low costs (customers become price sensitive)

49. Strategies in the Decline Stage
Industry sales and profits begin to fall
Strategic options become dependent on the actions of rivals

50. Turnaround
Strategies in the Life
Cycle
• Asset and cost surgery
• Selective product and market
pruning
• Piecemeal productivity
improvements

51. Grand Strategies
• Concentrated Growth
• Market Development
• Product Development
• Innovation
• Cooperative Strategies
• Joint Ventures
• Strategic Alliances
• Merger and Acquisition Strategies
• Horizontal Integration
• Vertical Integration (forward
and backward)
• Related Diversification
• Unrelated Diversification

52. Grand Strategies
(cont.)

53. Learning and Giving for Better
Indonesia