Strategy Formulation v2 9-4-12

transcript

Strategy Formulation

The Strategic Management Process

Bateman, 135

Strategic Direction

• Mission

• Vision

• Values SWOT Analysis

Updated Mission

Statement

Strategies

& Objectives

Business Model

BSC Strategy Map

Organization Structure

Culture

Enabling Key Processes

Budget

Business Scorecard

Strategic Thinking: Elements & Outputs

Strengths

Opportunities

Threats

Weaknesses

Primary factors SWOT ANALYSIS

TOWS Matrix

Leave Blank

Strengths – S

List Strengths

Weaknesses –

List Weaknesses

Opportunities –

List Opportunities

SO Strategies

Use strengths to take

advantage of

opportunities

WO Strategies

Overcoming

weaknesses by taking

advantage of

opportunities

Threats – T

List Threats

ST Strategies

Use strengths to avoid

threats

WT Strategies

Minimize weaknesses

and avoid threats

TOWS Matrix

Leave Blank

Strengths – S

List Strengths

Weaknesses – W

List Weaknesses

Opportunities – O

List Opportunities

SO Strategies

Match and determine

strategy

WO Strategies

Match and determine

strategy

Threats – T

List Threats

ST Strategies

Match and determine

strategy

WT Strategies

Match and determine

strategy

Inset key strategies into correct box element of the Matrix

What business are we in?

What is our business?

What do we stand for? How

should we behave?

Can we manage

ourselves as a group?

Strategic Thinking

Business Strategy?

Enterprise Strategy?

Corporate Culture

Strategy?

Strategic Thinking

Four Levels of Strategy

• What is the role and value of the organization to society?

• What do we stand for? Enterprise-level Strategy

• What is our business? What business are we in?

• What business should we be in/not in? Corporate-level Strategy

• How should we compete in a given business or industry?

• How do we support the corporate strategy? Business-level Strategy

• Marketing/Sales/Production/HR/Finance/IT/Supply Chain Srategies?

• How do we maximize resource productivity?

• How do we achieve competitive advantage in our area?

Functional/Operational-level Strategy

Corporate-level Strategic Thinking

•What is our value and relevance to the consumer and to the marketplace?

•What is our value and relevance to society and to the country?

•What do we want to become? What do we stand for? How do we conduct our business? Strategic Direction

•What set of businesses should we be in?

•What do we maintain, divest, acquire, invest in?

•What new businesses can we create and venture in?

Growth & Profitability

•Do we have sufficient internal generation of cash flow?

•Do we have sufficient cash cows in our portfolio?

•Is the cash flow position in each business healthy? Cash Flow

•Do we have countercyclical balance?

•Do we have product market lifecycle balance?

•Can we attain stability thru diversification? Stability

•Do we have core competencies that can be shared portfolio-wide?

•What can we do to add extra strength to the business units? Low cost capital, outstanding managers, correct values and codes of conduct, training and development, R&D

Synergy

Porter’s Five Forces

Potential

Rivals

Current

Rivals

Substitute

Products

Buyers Sellers

Value/supply Chain

Competitive Environment

Upstream Downstream

Diversification Strategies

Related Diversification

Unrelated Diversification

Defensive Strategies

Retrenchment

Divestiture

Liquidation

SBU-level Strategic Thinking

Business-level Strategy

Positional Component

Market Based View

Marketing 3.0

Market Driven

Segment-Target-Position

Market Creating

Blue Ocean Strategy

Performance Component

Resource Based View

Business Model

TQM & Value Chain

Gen, Management, Finance, HRM, Technology, Procurement

Supply Chain Operations Distribution Marketing &

Sales Service

Culture

Service Profit Chain

Values Brand Chain

Business Ethics

Key Relationships

Porter’s Three Generic Strategies

Vertical

Integration Strategies

Forward Integration

Backward Integration

Horizontal Integration

Intensive Strategies

Market Penetration

Market Development

Product Development

Diversification Strategies

Related Diversification

Unrelated Diversification

Strategy: Market Based View

Kotler: What is Marketing?

Superior Customer Value for

Target Markets

Creating

Delivering Communicating

Kotler: What is Marketing?

Target Markets

Product Management

Brand Management

Customer Management

Five Basic Markets

Resource Markets

Manufacturer Markets

Government Markets

Intermediary Markets

Consumer Markets

Market Segmentation

Target Marketing

Segmentation -Targeting - Positioning

Patterns of Target Market Selection: Product x Market Matrices

Product Positioning

Positioning Map

Product Positioning

• Positioning Map

Simple Preparation

Involved Preparation

Healthy Unhealthy

Chicken

Turkey

Fresh Fish

Hot Dogs

To (target segment and need) our (brand) is a (concept) that (point-of-difference).

Positioning Example

“To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.”

Blue Ocean vs. Red Ocean Strategy

• Break the value- cost

trade off

• Align the whole system

of a firm’s activities with

its strategic choice of

differentiation and low

• Make the value-cost

trade off

• Align the whole system

of a firm’s activities with

its strategic choice of

differentiation or low

Blue Ocean Strategy Red Ocean Strategy

Reconstruct Market Boundaries

• Focuses on

maximizing the value

of product or service

offerings within the

bounds of its industry

• Focuses on adapting

to external trends as

they occur

Head-to-Head Strategy Blue Ocean Strategy

• Looks across to

complementary product

and service offerings

• Participates in shaping

external trends over

Get The Strategic Sequence Right

The Sequence of Blue Ocean Strategy

Buyer utility

Is there exceptional buyer

utility in your business idea?

Is your price easily

accessible to the mass of

buyers?

Can you attain your cost

target to profit at your

strategic price?

Adoption

What are the adoption

hurdles in actualizing your

business idea?

A commercially viable blue

ocean idea

• W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, HBS Publication

Target Markets

Demands

Opportunities = Supply and Demand Gaps

Business Opportunities

Producer

Superior Offering

Product

Promotion

Costumer

Needs,

Wants & Demands

Customer

Convenience

Communication

What is Value?

Product

Service

Relationships

The Power of the Brand

Awareness

Recognition

Preference

Loyalty Relationship

Equity/Value

Insistence

Marketing 1.0

Marketing 2.0

Marketing 3.0

http://www.edelman.com/speak_up/blog/archives/2011/03/marketing_30_an.html

Kotler et al: The Brand & Marketing 3.0

• It works

• It is true to its promise Mind

• It makes me happy

• It is good; it is bad

Spirit

Marketing 3.0

Kotler et al: Marketing 3.0

For SC Johnson, creating

sustainable economic

value means helping

communities prosper while

achieving profitable growth

for the company.

Sustaining Values:

SC Johnson Public

Report

We believe our

fundamental

strength lies in our

people.

MIND HEART SPIRIT

Promoting

reusable shopping

Base of the Pyramid

Mission Contributing to the community

well –being as well as

sustaining and protecting the

environment

Vision To be a world leader in

delivering innovative solutions

to meet human needs through

sustainability principles

Values Sustainability

We create economic value

We strive for environmental

health

We advance social progress

Philip Kotler on Marketing 3.0 and S. C. JOHNSON VALUE-BASED MATRIX

Building A Strong

Marketing 3.0 Brand Management

Differentiation

Positioning

Brand Identity

Philip Kotler: Think ASEAN

Philip Kotler & Marketing 3.0: Your Brand Needs to Own a Word • Mercedes - engineering

• BMW - driving

• Disney - family fun entertainment

• Saturn - no hassle car buying

• FedEx - overnight

• Wal-Mart - low prices/good values

• Hallmark - caring

• Nike - performance

• 3M - innovation

• Volvo - safety

• Starbuck - best coffee experience

A unique identity that sets you apart and

makes you stand out.

Brand Equity

Name Awareness

Positive Associations

Perceived Quality

Strong Brand

Loyalty

Shimp, 5

Fred R. David, Strategic Management: Concepts and Cases, Prentice Hall

Marketing Mix – Component Factors

Service level

Warranty

Transportation carriers

Product line

Inventory levels/locations

Packaging

Publicity Sales territories Brand name

Payment terms Sales promotion Outlet location Style

Discounts & allowances

Personal selling Distribution coverage Features

Level Advertising Distribution channels Quality

Price Promotion Place Product

Integrated Marketing Communications

Speaking with one

Using all forms and sources of

brand contact

To affect customer behavior

To build a long-term

relationship between the brand

and customer

Shimp, 12-15

Link Vision-Values & Brand

Strong Values & Strong Brand

On Leading for Competitive Advantage

Strong

Processes

Strong

Values

Strong Relationships

Enhancing Corporate Value

Target Market

Segments: Customers

Marketing Research

Marketing

Product Development

Supply Chain Management

Production

Distribution

Service

General Management

Legal Office Accounting &

Finance

HRD/HRM/ Corporate

Culture Administration

Quality Management

Corporate IT

Ethics Office

The Lord of the Rings

Suppliers

Competitors Distributors

Government

Key Stakeholders

Strategy: Resource Based View

Business Model:

Revenue & Profit Streams

Marketing Research

Marketing

Product Development

Production

Distribution

Service

General Management

Finance

HRD/HRM/ Corporate

Quality Management

Corporate IT

Ethics Office

The Internal Environment

Delivering Customer Value

Benefits Received

Cost Paid

External Customers => the Lifeblood of the Business

Delivering Customer Value & Total Quality Management

Offer Customer Value

Continually improve systems &

processes

Manage processes, not just people

Look for root causes to solve and prevent problems

Make decisions based on data and scientific analysis

Empower employees and provide training and education

Create teams to execute processes

effectively and efficiently

The Deming PDCA Cycle: For Continuous Improvement

Do Check

SBU-level Strategic Thinking

Business-level Strategy

Positional Component

Market Based View

Marketing 3.0

Market Driven

Segment-Target-Position

Market Creating

Blue Ocean Strategy

Performance Component

Resource Based View

Business Model

TQM & Value Chain

Gen, Management, Finance, HRM, Technology, Procurement

Supply Chain Operations Distribution Marketing &

Sales Service

Culture

Values Brand Chain

Business Ethics

Key Relationships

Resources: Inputs and Sources of Capability

Tangible Physical Resources

Human Resources

Financial Resources

Intangible Brand(s)

Reputation

Culture

Knowledge

Technological

Patents/Copyrights

What is a Strategic Resource?

Strategic Resource

Valuable

Inimitable

Non-substitutable Enables

customer value creation

Developed internally

Relevant to the

marketplace

Barney, 1991

Kay (1993) on Distinctive Capability

Key Relationships

Employees

Suppliers

Customers

Shareholders

Networks

Reputation

Market Reputation

Social Reputation

Employer Reputation

Innovation

Product

Design

Distribution

Processes

Technology

Kay, Jay. Foundations of Corporate Success. 1993. Oxford University Press

Strategy: Resource Based View

• Comparative Strengths

• Comparative Weaknesses

Resources

• Key Relationships

• Reputation

• Value Creation

• Innovation

Distinctive Capabilities

• Resources and Capabilities

• Market Needs and Opportunities

Strategy

David J. Collis and Cynthia A. Montgomery

http://hbr.org/2008/07/competing-on-resources/ar/pr

Differentiation and Cost Structure: Roots of Competitive Advantage

Porter’s Value Chain

Where Distinctive Capabilities and Competitive Advantages Can Come From

Barney (1991): Sustained Competitive Advantage

Value creating strategy

Difficult to copy

Sustained Competitive Advantage

Not being done by

competitors

Sustainable Competitive Advantage

• Walmart Low Cost Provider

• Rolex

• Amazon.com Differentiated

Product Offering

• Starbucks – premium coffee and coffee drinks

Focused Market Niche

• Walt Disney – theme park management and entertainment

Superior Capabilities

Thompson, Strickland, Gamble, 7-9

Harrison & John: Resources Leading to

Sustainable Competitive Advantage

Organizational

Resources and

Capabilities

Financial

Physical

Organizational

VALUABLE?

UNIQUE?

Competitive

Advantage

DIFFICULT

OR COSTLY

TO IMITATE?

Sustainable

Competitive

Advantage

APPLIED

TO MULTIPLE

BUSINESSES?

Competency

or Capability

Foundations in Strategic Management, 3rd Edition

by Jeffrey S. Harrison and Caron H. St. John

Resource Based Strategy

Core Competency

Sustained Competitive Advantage

Competitive Advantage

Resources

Business Model & Business Canvass Sheet Tool

Business Model:

Revenue & Profit Streams

Marketing Research

Marketing

Product Development

Production

Distribution

Service

General Management

Finance

HRD/HRM/ Corporate

Quality Management

Corporate IT

Ethics Office

The Internal Environment

Film: Business Canvass Sheet

Osterwalder’s Business Model Canvas

Balanced Score Card

What is a Balanced Score Card?

1) A strategic management system

2) A measurement system

3) A communication tool of priority strategies and objectives

A Gap Exists Between Mission-Vision-Strategy and Employees’ Everyday Actions

MISSION Why we exist

VALUES What’s important to us

VISION What we want to be

STRATEGY Our game plan

EMPOWERMENT / PERSONAL OBJECTIVES What I need to do

TOTAL QUALITY MANAGEMENT What we must improve

The Balanced Scorecard Links Vision and Strategy to Employees’ Everyday Actions

BALANCED SCORECARD Translate, Focus and Align

STRATEGIC INITIATIVES What are the priorities

MISSION Why we exist

VALUES What’s important to us

VISION What we want to be

STRATEGY Our game plan

STRATEGIC OUTCOMES

Satisfied SHAREHOLDERS

Delighted CUSTOMERS

Efficient and Effective PROCESSES

Motivated & Prepared WORKFORCE

EMPOWERMENT / PERSONAL OBJECTIVES What I need to do

TOTAL QUALITY MANAGEMENT What we must improve

The Complete Balanced Scorecard Strategy Map

Improve Shareholder Value

Productivity Strategy Revenue Growth Strategy

Improve Cost Structure

Increase Asset Utilization

Enhance Customer Value

Create Value from New Products &

Services

Human, Information, and Organizational Capital

Shareholder Value ROCE

Cost per Unit Asset Turnover Customer Profitability

New Revenue Sources

Financial

Perspective:

the drivers of

shareholder

Product/Service Attributes

Strategic Competencies

Strategic Technologies

Climate for Action

(Processes that Produce and Deliver Products

& Services)

(Processes that Enhance Customer

Value)

Operations Theme Customer

Management Theme

Innovation Theme Regulatory and Society Theme

Customer Value Proposition

Quality

Low Total Cost

Customer Solutions

Product Leader

Customer Satisfaction Customer Acquisition Customer Retention

Time Function Service Relations Brand

Relationship Image

• Market and Account Share

Customer

Perspective:

differentiating

proposition

Internal

Perspective:

how value is

created and

sustained

Learning & Growth

Perspective: role for

intangible assets –

people, systems,

climate and culture

(Processes that Create New

Products and Services)

(Processes that Improve the Environment

and Communities)

Kaplan & Norton: Translating Vision and Strategy - Four Perspectives

Vision and Strategy

Objectives Measures Targets Initiatives

FINANCIAL

“To succeed financially, how should we appear to our shareholders?”

LEARNING AND GROWTH

“To achieve our vision, how will we sustain our ability to change and improve?”

CUSTOMER

“To achieve our vision, how should we appear to our customers?”

INTERNAL BUSINESS PROCESS

“To satisfy our shareholders and customers, what business processes must we excel at?”

Film: Balanced Score Card

Key Performance

Indicators

Source: Robert Kaplan and David Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard Business School Press, 2004), Figure 3-2, p. 67

Increase ROCE to 12%

Revenue Growth Strategy Productivity Strategy

New Sources of Non-Gasoline Revenue

Increase Customer Profitability Through

Premium Brands

Become Industry Cost Leader

Maximize Use of Existing Assets

ROCE Net Margin (vs. industry)

Non-Gasoline Revenue & Margin

Volume vs. Industry Premium Ratio

Cash Expense (cpg) vs. Industry

Cash Flow

Speedy Purchase

Clean Safe Quality Product Trusted Brand

Friendly Helpful Employees

Financial

Perspective

Customer

Perspective

Help Develop Business

Skills

More Consumer Products

Recognize Loyalty

Share of Targeted Segment

Mystery Shopper Score

Dealer Profit Growth

Dealer Satisfaction

Differentiators

“Delight the Consumer” “Win-Win Dealer Relations”

Create Non-Gasoline

Products & Services

“Build the Franchise” “Increase Customer Value” “Achieve Operational Excellence” “Be a Good Neighbor”

Improve Environmental,

Health and Safety

Understand Consumer Segments

Best-In-Class Franchise

Improve Hardware

Performance

Improve Inventory

Management

On-Spec On-Time

Industry Cost Leader

New Product Acceptance Rate Environment

Incidents Safety Incidents Dealer Quality

Rating

Yield Gap Unplanned

Downtime

Inventory Levels

Run-Out Rate

Activity Cost vs. Competition

Internal

Perspective

A Motivated and Prepared Workforce

• Aligned • Personal Growth

Climate for Action

• Functional Excellence • Leadership Skills • Integrated View

Competencies

• Process Improvement

Technology

Personal BSC Employee Feedback

Strategic Skill Coverage Ratio

Systems Milestones

Learning &

Growth

Perspective

Mobil NAM&R Strategy Map

Make sure the components of your scorecard fit together. We want to create a tight model for driving execution of your strategy.

Goal Objective Measurement Target Initiative

Achieve

Agency

operational

efficiencies

with best

practices in

the private

sector

Reduce

Operational

Service Costs by

50% over the

next 5 years

Cost per Outlet

Office, Cost per

Region, Cost

per FTE

5% - Year 1

10% - Year 2

15% - Year 3

Activity

Costing /

Management

Reduce identified

re-activities

within primary

processes by

80% over the

next 3 years

Waste Volume

Charts, Rework

Tracking, Cycle

Time End to End

in S-LX (5 of 7

Regions)

Waste stream

reductions of

5% each year,

Reworks cut in

half for next 3

years, cycle

time cut by 75%

Lean / Six

Matt H. Evans: Alignment of Scorecard Components

Film: Strategic Objectives

The Balanced Scorecard Matrix

Financial

Customer

Internal

Business

Process

Learning

& Growth

Objectives

Measures

Targets

Initiatives

Film: KPIs

Balanced Score Card: A Modified Perspective

Perspective

• Employee Productivity

• Employee Satisfaction & Retention

• Mission-Vision-Values–Brand focused Employees

• Ethical Performance: Ethical Employees

Business Model & Value Chain

Perspective

• Core Competency/ Comparative Advantage Improvement

• Cost Structure Improvement: FC/VC/CM/OPM

• Quality Improvement/Process Efficiency

• Key Relationships: Suppliers, Distributors, Networks

• Ethical Performance: Ethical Operations , Supply & Distribution Chain

Marketing 3.0 Perspective

• Product /Market /Brand Initiatives

• Market Share Size/ Market Share Growth

• Contribution Margin

• Customer Service

• Ethical Performance: Creating a Better World

Financial Perspective

• Cash Flow

• ROTA

• ROIC & ROE

• Ethical Performance: Corporate Governance

The Service-Profit Chain

What is Service-Profit Chain?

The service-profit chain is a powerful

phenomenon that stresses the importance of

people – both employees and customers –

and how linking them can leverage

corporate performance.

Competitive Advantage of Companies with Adaptive Strong Cultures

1990s: Harvard 11-year Study

Revenue Growth: 682% vs. 166%

Stock Appreciation:

901% vs. 74%

2001 UCLA study: Prof. Eric Flamholtz

Within a 20-division industrial firm

Divisions consistent w/ company’s culture:

Had much better financial performance

2009-2010:

Towers Watson global study of 700 companies

Business results of

Companies with high employee

engagement

2X to 3X higher than Companies with low

engagement

Adrian Gostick and Chester Elton, All In, pp. 11-13

"It's People, Service, Profit, not Profit,

Service, People."

– Fred Smith

Founder, Federal Express

“In able to make leaders follow, you must not hold your money tightly, know how to delight your people and get their heart.”

-Li Ka Shing

Born in China, richest person in East Asia, eleventh richest person in the world

The Balanced Scorecard Matrix: Priority Strategic Initiatives

Financial

Perspective

Marketing 3.0

Perspective

Business

Model &

Value Chain

Perspective

Service

Profit Chain

Perspective

Objectives

Measures

Targets

Initiatives

Action Plan

Project Title

Objective:

Action Steps Accountability Schedule Resources Feedback Mechanism

Primary Others Start Complete Dollars Time

- Values-driven Marketing 3.0

- Product/ Service Brand

- Societal Brand

- Employer Brand

- Shared M-V-V

- Leadership Behavior

- Reinforcing HRM Systems

- Core Values- driven Brand Delivery

- Culture of Believers

- Key Relationships oriented

Culture

- TQM: PDCA & Continuous Improvement

- Value Creation: Benefit & Cost

- Balanced Scorecards - Control Systems

- Enabling Technologies

Systems & Processes

- Talent Attraction - Talent Retention - Human Capital Development

- Knowledge Management - Ethical Behavior

- Service- Profit Chain People Philosophy

People

- Structural Design

- Empowered Teams

- Organization Networks

Structure

- Enterprise Strategy

- Corporate /SBU/ Functional Strategies

- Corporate Culture Strategy

- Business Model - BSC Strategic Map

Strategy

- Mission

- Vision

- Values

- Stakeholder Philosophy

- Corporate Citizenship

Mission

External Adaptation & Internal Integration:

By Aligning Environment-Strategy -Structure-

People-Processes –Culture-Brand

Define Formulate

Align & Organize

Recruit, Lead &

Motivate

Manage & Improve

Shape & Strengthen

Communicate & Deliver

Strategy Formulation v2 9-4-12

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