1. 1 DEVELOPING STRATEGIES FOR COMPETITIVE ADVANATGE Session 1 The Concept of Strategy Session 1 The Concept of Strategy

2. 2 The role of strategy in success A framework for strategy analysis The evolution of strategic management What is strategy? Strategy making: Design or process? The role of strategy OUTLINE

3. 3 GIAP & NORTH VIETNAMESE GOALSReunification of Vietnam under Communist rule. UNDER-STANDING THE ENVIRONMENT Intimate knowledge of terrain Understanding U.S. political system. RESOURCE APPRAISAL Recognized economic and military weaknesses and core political strengths IMPLEMENT- ATION Tight control. Long-term commitment. Effective propaganda. Inspirational leadership. Components of Success

4. 4 What Makes a Successful Strategy? Long-term, simple and agreed objectives Objective appraisal of resources EFFECTIVE IMPLEMENTATION Successful strategy Profound understanding of the competitive environment

5. 5 The Basic Framework Strategy: the Link between the Firm and its Environment THE FIRM Goals & Values Resources & Capabilities Structure & Systems THE FIRM Goals & Values Resources & Capabilities Structure & Systems THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers THE INDUSTRY ENVIRONMENT Competitors Customers Suppliers STRATEGY

6. 6 1950s Financial budgeting: Operational budgeting Capital budgeting (the wonders of DCF) 1950s Financial budgeting: Operational budgeting Capital budgeting (the wonders of DCF) 1960s & early 1970s Corporate planning: Corporate plans based on 5-10 yr economic forecasts Diversification 1960s & early 1970s Corporate planning: Corporate plans based on 5-10 yr economic forecasts Diversification Late 1970s & 1980s Emergence of Strategic Management: Industry analysis Competitive positioning Strategic priorities: locating in attractive industries & establishing market leadership Late 1970s & 1980s Emergence of Strategic Management: Industry analysis Competitive positioning Strategic priorities: locating in attractive industries & establishing market leadership 1990s & early 2000s Quest for Shareholder Value: Refocusing, outsourcing, delayering, cost cutting Quest for Competitive Advantage: Emphasis on resources & capabilities Flexibility & innovation Collaboration—alliances, networks Succeeding in dynamic (Schumpeterian) markets 1990s & early 2000s Quest for Shareholder Value: Refocusing, outsourcing, delayering, cost cutting Quest for Competitive Advantage: Emphasis on resources & capabilities Flexibility & innovation Collaboration—alliances, networks Succeeding in dynamic (Schumpeterian) markets ? ? 3 key changes: 1.Changing concept of strategy 2.Changing processes of strategy formulation 3.New tools of strategy analysis 3 key changes: 1.Changing concept of strategy 2.Changing processes of strategy formulation 3.New tools of strategy analysis The Evolution of Strategic Management

7. 7 Distinguishing strategy from tactics : –Strategy is the overall plan for deploying resources to establish a favorable position. –Tactic is a scheme for a specific maneuver. What is Strategy? Characteristics of strategic decisions: –Important. –Involve a significant commitment of resources. –Not easily reversible.

8. 8 RATE OF PROFIT ABOVE THE COST OF CAPITAL How do we make money? INDUSTRY ATTRACTIVENESS Which businesses should we be in? CORPORATE STRATEGY BUSINESS STRATEGY Sources of Superior Profitability COMPETITIVE ADVANTAGE How should we compete?

9. 9 Describing Strategy: Competing for the Present; Preparing for the Future. STATIC Where are we competing? - Product market scope - Geographical scope - Vertical scope How are we competing? - What is the basis of our competitive advantage?) DYNAMIC What do we want to become? - Vision statement What do we want to achieve? - Mission statement - Performance goals How will we get there? - Guidelines for development - Priorities for capital expenditure, R&D - Growth modes: organic growth, M&A, alliances COMPETING FOR THE PRESENT PREPARING FOR THE FUTURE

10. 10 Strategy as Design Planning and rational choice INTENDED STRATEGY Many decision makers responding to multitude of external and internal forces REALIZED STRATEGY EMERGENT STRATEGY Strategy as Process Mintzberg’s Critique of Formal Strategic Planning: The fallacy of prediction – the future is unknown The fallacy of detachment -- impossible to divorce formulation from implementation The fallacy of formalization --inhibits flexibility, spontaneity, intuition and learning. Mintzberg’s Critique of Formal Strategic Planning: The fallacy of prediction – the future is unknown The fallacy of detachment -- impossible to divorce formulation from implementation The fallacy of formalization --inhibits flexibility, spontaneity, intuition and learning. Strategic Making: Design or Process?

11. 11 Strategy as Decision Support Strategy as Coordination and Communication Strategy as Target Improves the quality of decision making Creates consistency and unity Improves perform- ance by setting high aspirations Strategic Making Processes within the Company: Multiple Roles of Strategy

12. 12 Strategy analysis improves decision processes, but doesn’t give answers. Strategy analysis assists us to identify and understand the main issues. Strategy analysis helps us to manage complexity. Strategy analysis can enhance flexibility and innovation by supporting learning. The Role of Analysis