1. Formulation

2. Formulation Overview
Want to create a sustainable competitive advantage
Grounded in mission, objectives, and strategies
Identify rich range of strategic alternatives
Balanced evaluation of + and - of alternatives
Decide on alternatives to be implemented/recommended

3. Three Levels of Strategy
Corporate level strategy
Competitive (business level) strategy
Functional strategies
…all need to be consistent and in alignment

4. Corporate Level Strategy
Directional strategy (retrenchment through growth)
Portfolio strategy (what LOB’s for future)
Parenting strategy (allocation of resources + connections)

5. Directional Growth Strategies
Concentration
Vertical integration
Horizontal growth
Diversification
Related (concentric)
Unrelated (conglomerate)
Mergers, acquisitions, strategic alliances

6. Other Directional Strategies
Stability
Retrenchment
…often more appropriate than growth
strategies, which tend to be overused

7. Competitive Strategy (Sometimes called business level strategy)
How we will compete within each line of business (LOB) or strategic business unit (SBU)
We are trying to create a (sustainable) competitive advantage

8. Porter’s four generic competitive strategies Variations plus tactics
Consider our strengths relative to “key success factors” in the industry
Uniqueness
Imitability
Practicality
Porter’s four generic competitive strategies
Variations plus tactics

9. Generic Competitive Strategies

10. Requirements for Price Strategy
Industry is largely commodity
Buyer switching costs are low
Buyers are powerful
We have low costs

11. Requirements for Differentiation
Buyers have different needs or uses
Buyers are willing to pay for special features
Product/technological innovations are important
We have some (sustainable) competitive advantages

12. Functional Level Strategy
More localized and shorter-horizon strategies
Deal with how each functional area will carry out its activities to be effective and maximize resource productivity

13. Need to ensure that the set of recommended strategies address all the critical issues well

14. Exercise in Groups
Identify the main competitive strategy of Reebok, with reasons for your conclusion
Do the same for Steinway & Sons
Do the same for Kroger

15. Strategic Thinking

16. Strategic Thinking Identify & focus on important issues
Select key, relevant information
Recognize systemic properties
Understand through:
Distinguishing causes from effects
Clarifying (tacit) underlying assumptions
Considering issue in a larger context
Maintaining a long-term view

17. Strategic Thinking (cont.)
Appreciate implications & consequences
Generate alternatives & evaluate objectively
Integrate logical/rational & creative/generative thinking
Remain flexible
Act in the face of emotional discomfort

18. Strategic Thinking (1 page)
Identify & focus on important issues
Select key, relevant information
Recognize systemic properties
Understand through:
Distinguishing causes from effects or symptoms
Clarifying (often tacit) underlying assumptions
Considering the issue or situation in a larger context
Maintaining a long-term view
Appreciate implications & consequences
Generate alternatives & evaluate objectively
Integrate logical/rational & creative/generative thinking
Remain flexible
Act in the face of emotional discomfort

19. Another View of Strategic Thinking
Thinking more deeply to distinguish underlying causes and issues from more obvious symptoms
Thinking more broadly to recognize systemic linkages, interactions, and patterns
Thinking long-term as well as short-term about implications and consequences

20. Strategic Thinking Case
Apply strategic thinking to the case, making notes for yourself
Discuss in groups
Report out with total class discussion