Introduction and overview

KSOM

Fundamental dimensions of strategy

Origin of strategy
What is strategy Tens schools, five Ps
Why organizations need strategy
Role of strategy in success
Business Model

@Ashok K. Sar

Subject:

Hierarchy of Strategic Intent

KSOM
Most

Fewest in
number

Integrative

Vision
Mission
Values
Goals

Objectives
Most
specific

Plans
Miller - 1998

@ Ashok K. Sar

SM-2011

Greatest
in number
2

KSOM

Hierarchy of Strategic Intent

Statement of Firms Strategic Intent
Arenas

Staging

Economic
Logic

Vehicles

Differentiators

Hambrick and Fredrickson (2001)

@ Ashok K. Sar

SM-2011

Analysis of External Environment

KSOM

Value
Competitive forces
Value net
Strategy groups
Industry life cycle
Role of macro environment
Key success factors

@ Ashok K. Sar

SFM-2010

4. Develop strategy implications:

(a) In relation to strengths--How can these
be exploited more effectively and fully?
(b) In relation to weaknesses
KSOM
--Identify opportunities to outsourcing
activities that can be better
performed by other organizations.
--How can weaknesses be corrected
through acquiring and developing
resources and capabilities?
3. Appraise the firms resources and capabilities in
terms of:
(a) strategic importance (b) relative strength
2. Explore the linkages between resources and
capabilities
1. Identify the firms resources and capabilities
11/30/2011

Ashok Sar@BP - XIMB

STRATEGY

POTENTIAL FOR
SUSTAINABLE
COMPETITIVE
ADVANTAGE
CAPABILITIES
RESOURCES
5

Types of Competitive Advantage

Total Cost

KSOM
20
18
16
14
12
10
8
6
4
2
0

WTP
SOC

IAC

SDC

SLC

CDA

Competitors

SFM

@Prof. Ashok Sar

Elements of Competitor Analysis

KSOM
How do I frame the competitive decision problem?
Game
How do I use this framing to predict
Theory
competitive outcomes?
What behavioural biases might affect my
Behavioural
rivals decisions?
Theory
What cognitive shortcuts might my rival be using?
Analysis Framework
What information do I need to fill in the blanks?
Strategy What information will reveal payoffs and biases?
Goals
Capabilities
Assumptions
Data Source
Public
@Ashok Sar

Private

Signals

Where do I find the details?

What source contain the data I need?

MBA-II, SFM-2010

The Roots of Competitive Advantage

KSOM
Distinctive competencies shape
the functional-level strategies that
a company can pursue.

Dual
Advantage

Function-level strategies can

build resources and capabilities
to enhance a companys
distinctive competencies.
SFM-2011

The Strategic Logic of Cost Leadership

KSOM
P, C,
Price, unit cost

indifference
curve
E

PE

PF

Consumer Surplus Parity

PE PF < CE - CF

CE

PF CF > PE - CE

DC

Dq

CF
qF
@Ashok K. Sar

qE

SFM2011: Low Cost Leadership

q, quality
9

The Strategic Logic of

Differentiation Leadership

KSOM
P, C,
Price, unit cost

indifference
curve
F

PF

Consumer Surplus Parity

DP

PF PE > CF - CE

PE

CF
CE

PF CF > PE - CE

Dq

DC

qE
@Ashok K. Sar

qF
SFM: Differentiation

q, quality
10

The Strategic Logic of

Dual Advantage
KSOM
P, AC
(Price, unit cost)

P1
P0
AC0(Q0)
AC1(Q1)

AC1(Q)
D0
Q0

D1
Q1

AC0(Q)
Volume of output

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KSOM

The Delta Model

Three Distinct Strategic Options
Systems Lock-In
Systems economics
Market dominance
Achieving complementor share

Enabled through
Effective use
Of technology

Best Products

Total Customer Solutions

Product economies
Rivalry
Achieving product share

Customer economics
Cooperation
Achieving customer share
MBA-II, General

12

The Industry Environment

KSOM

Different industry environments present different

opportunities and threats.
A companys business model and strategies have
to change to meet the environment.
Companies must face the challenges of
developing and maintaining a competitive
strategy in:

Fragmented Industries
Embryonic & growth Industries
Mature Industries
Declining Industries
MBA-II, General

13

Strategy & Technology

KSOM

Technology and High-Tech Business

Technical Standards and Format Wars
Strategies for Winning a Format War
Costs in High-Technology Industries
Managing Intellectual Property Rights
Capturing First-Mover Advantages
Technological Paradigm Shifts
Strategy in Hi-Tech. Industries

14

Global Strategy
KSOM
Global competition and global competitors
Cost & benefit of globalization
CAGE Framework
Pressures for cost reductions and local responsiveness
Four different strategies for competing in the global
marketplace: international strategy, global strategy,
multi-domestic / localization strategy, and transnational strategy
Adaptation, Aggregation, Arbitrage
Market entry modes and scale
MBA-II, General

15

Horizontal boundaries
KSOM

Size (how much of the total product market

will the firm serve) and
Scope (what variety of products and services
does the firm produce).
The horizontal boundaries of the firm depend
critically on economies of scale and scope

Strategic Management, 2011

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Use the
Market

NO
NO

Vertical
Integration

NO

NO
Would intermediate
arrangement (alliances,
close-knit supply
arrangements) suffice

Is common
ownership
needed to
mitigate
contracting
problems?

YES

Is detailed
contracting
infeasible or
too costly

NO

YES

YES

KSOM

Are there
significant
relation-specific
assets?
Are there
significant
coordination
problems?
Are there
significant
problems involved
in leakage of
private
information

YES

Are there existing

suppliers that can
attain economies
of scale that an
in-house unit
couldnt attain?
Do they possess
execution
capabilities that
an in-house unit
would not?

YES

NO
SFM-II

Alliances joint
ventures or
other close-knit
non-ownership
arrangements
Vertical
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Integration

Strategies for Related Diversification

Timing
KSOM

Industry

Synergies

Implementation

Ownership

SM

What is the motive

to expand now?

Offensive: Leveraging existing strengths;

pre-empting rivals
Defensive: Escaping weak core

How attractive is the

industry now

What are key sources of competition?

How vulnerable is intended positioning strategy to
these competitive forces?

Where are the scope

Economies with our
existing businesses?

Common
resources

What organisational
changes are
necessary to exploit
scope economies
Where should
boundaries of the
firm be drawn?

Soc

wtp

Sharing
activities
Front end or back end integration?
Organise by SBUs or functions
Informal coordinating mechanisms

Growth in the
pie (market
failure)
Capture more
of the pie
(market power)
@Prof. Ashok Sar

Markets are absent

Specific investments & hold-up
Increase efficiency thru coordination
Fore-closure/ entry barriers
Use integration as leverage
18

KSOM
Context

Strategy

SM

Unrelated Diversification
Can Conglomerates Add Value?
How well do markets
function?

What types of market intermediaries exit?

How well they function?

Does the firm have an

effective strategy to
add value to the
individual businesses?

@Prof. Ashok Sar

Organisational processes

Alignment with choice of businesses

and ownership structures

19

Multi-market contact
Between focal firm and
rivals

Thicker shadow
of the future

KSOM
Ability to hurt
Larger revenue exposure
to rivals actions

Larger number of
interactions with rivals

Better understanding of
interdependence and
overlapping market
fortunes with rivals

Greater attention to rivals

in market scanning and
competitor information
acquisition

Increased familiarity

Opportunity to hurt
Rivals opportunity to
retaliate in multiple markets

Lower expected payoff

from rivalry

Increased deterrence

MUTUAL FORBEARANCE

SM

Lower intensity of
competition
@Prof. Ashok Sar

20

Determine strategy and communicate

Measurable objectives for company as a
whole
Evaluate results, access gaps,
Determine key managerial tasks
KSOM
and provide feedback
Assign tasks to various parts of
organisation, or restructure if
necessary

Regularly ascertain adequacy

of control mechanisms
Develop managerial talent and
educate managers in values
and styles of the organisation

Make provision for a reward

system reinforcing desired
behaviour
Build MIS to provide adequate
and timely data useful for
business evaluation

Strategy
Implementation
Process

Design authority
relationships and establish
methods for coordination
Allocate resources to SBUs
and departments
State policies as guides for action

Clarify goals of various

individual managers

Operationalise ways to
performance
12 |measure
21

Corporate Strategy Implmentation

KSOM

Competitive Advantage

Key Challenges
For implementation of CS
Control
Coherence
Synergies

Coherence

Control

22

KSOM

1.
2.
3.
4.
5.

Managing Networked Businesses:

Platform-mediated Networks
Overview, Definitions, and Core Concepts
Pricing the platform
Business model design
Winner-Take-All Dynamics
Platform Envelopment

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