Objectives and Plan for the Day What is strategy? Foundation Concepts Honda Understanding Market Strategy Industry forces Partner’s HealthCare System (A) Vertical Integration When Outsourcing Goes Awry

What is strategy? "The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals." ”A strategy is the pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole. “ Sources: Alfred Chandler, Strategy and Structure: Chapters in the History of American Industrial Enterprise.. James Brian Quinn, Strategies for Change.

Does strategy matter? Apple Computer Madonna

The Context of Strategy Industry Opportunities and Threats Strengths and Weaknesses Strategy Personal Values of Key People Broader Societal Expectations

Key Characteristics of Strategic Decisions Important Significant Commitment of Resources Not Easily Reversible Involves Choice

Common Elements in Successful Strategy EFFECTIVE IMPLEMENTATION Profound understanding of the competitive environment Long-term, simple and agreed objectives Objective Appraisal of Resources Commitment in the face of Uncertainty Source: Adapted from Robert S. Grant, Contemporary Strategy Analysis, Basil Blackwell, 1991.

Effective Strategies Answer: Where will we compete? Industry/market analysis How will we compete? Cost vs. Differentiation What do we need to do to achieve advantage? Value chain alternatives Strategic commitments Who needs to be committed to the strategy? Managing the process of strategy

More Than One Way to Formulate Strategy Deliberate Choice Deliberate Strategy PLANNING Chaotic Processes Emergent Strategy CRAFTING Tensions in Strategy Formulation: Problem of prediction -- future is unknown Problem of detachment -- impossible to divorce formulation from implementation Problem of formalization -- formalization inhibits flexibility, spontaneity, intuition, and learning

Uncertainty and Strategy Useful prediction Discrete scenarios Continuous uncertainty Formulation Formal planning and Forecasting Scenario analysis -- robust strategies, options Emergent learning, flexibility

Levels of Strategy CORPORATE STRATEGY CORPORATE HEAD OFFICE BUSINESS Division A Division B R & D R & D FUNCTIONAL STRATEGIES Personnel Personnel Finance Finance Production Production Marketing/Sales Marketing/Sales Source: Robert M. Grant, Contemporary Strategy Analysis, Basil Blackwell, 1991.

What makes for a successful strategy? An Ancient Perspective Know the other and know yourself: Triumph without peril Know Nature and know the Situation: Triumph completely. Sun Tzu