BUSINESS STRATEGY

REVIEW
3871 words

Devika Raina (15200288) BMGT43370: BUSINESS STRATEGY

PLAGIARISM STATEMENT
I the undersigned confirm that the work submitted here is entirely my own work, and that any
work of others which is included has been properly referenced and acknowledged according to
normal academic guidelines.
Student: Devika Raina Student Number: 15200288

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A famous American singer B.B. King once said, The beautiful thing about learning is nobody can
take it away from you. I believe continuous learning is what evolves us. Coming from a technical
background, the subject of Business Strategy was relatively new to me. As the course progressed,
I found it very thought-provoking and this subject will definitely leave an indelible mark in my
mind. I am sure that the learnings here will help me make some of the biggest decisions in the
future. Thus it is important to once reflect deeply and ponder over ideas and issues that need
more understanding. This review is an attempt to justify the lessons learnt in the entire course
and bridge the knowledge gaps encountered in the process.

WHAT IS STRATEGY?
In the first class we were faced with this daunting question of what strategy is and just like many
people who are not business literate I assumed that strategy was having a vision which a company
aims for. After going through the series of lectures, case studies and articles I second the
definition given by Mr. Bernard Faughey, my
teacher Strategy is the direction and scope of
an organisation over the long term, which
achieves advantage in a changing environment
through its configuration of resources and
competences with the aim of fulfilling
stakeholder expectations. Strategy is more
about defining a long term route that can handle
the complexities that may arise in between and
still keep the firm standing tall. Strategy-making
primarily consists of strategic planning and
strategic thinking. Heracleous (2001) compares
Mintzbergs and Porters (1996) view on these
Figure 1: Heracleous (2001)
two concepts and devises a model wherein we
can see that strategic planning and thinking are part of a dialectical model where both are
necessary to be efficient. This course has laid a strong basis for strategic thinking which is about
being novel in the strategies and pre-empting competition. It has also focused on the ability be
able to operationalize the strategies that are developed through strategic thinking. Thus giving
rise to strategic planning.
A successful strategy is a link between the firm and the external environment. Having consistent,
long term goals is an essential part of any firm. Grant (2013) identifies that it is not just the
profitability, but the goals that motivate organisations to accomplish outstanding achievements.
He further claims that a firms strategy is hidden in its vision. Clear vision that is steady
throughout the company can help to realize a strategy. Resources and capabilities are intrinsic to
a firm. The better they are managed and valued, the better a firm will perform. It is also important
to note that a firms capabilities if well-developed can give rise to a strong competitive advantage
which in turn helps build strategy. Structure and systems are the lifelines of any organisation. A

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strategy is useless if it is not effectively implemented. It is important for firms to realize that doing
things effectively and efficiently will keep them going in the race. The second part to be wary of
in a successful strategy is the competition in the industry. It basically relates to the profound
understanding of the competitive environment and market. Kryscynski (2012) aptly supports this
by calling a successful strategy a three legged stool wherein the three legs are market
opportunities, resources and capabilities and a well-coordinated execution and implementation.
If any of these legs fails to exist, the stool will fall.

AIMING FOR SUPERIOR PROFITABILITY

The primary objective of any firm is to have a strategy that helps to achieve profitability. When
discussing the sources of superior profitability, it is important to note that there are two aspects
that need to be looked into deeply. First being industry Attractiveness and second being
Competitive advantage. This broadly deals with a different kind of strategy for each of them.
Industry attractiveness helps in deciding which kind of businesses a firm should be in. These
decisions are usually taken at the top management level and is defined as corporate strategy. It
talks about the scope of the firm in which it competes. The other part is the competitive
advantage which answers the question on how to compete. This defines the business strategy
i.e. how a given business would compete in the industry and be profitable.
To dig deeper into industry attractiveness, we can use Porters (2008) five forces model. This
model can help in understanding the industry competition and profitability. A good strategy will
help the businesses align to competition by not merely using defense mechanisms but also
changing the situation in their favor. Porter (2008) has highlighted here how the five forces if not
carefully managed can bring down the profitability of an industry. The first force that shapes
competition is the threat of entry. A pressure on cost and product range can arise if new entrants
are continuously targeting an industry. The power of suppliers is the second force. The lesser the
supplier, more is the bargaining power. Switching costs for a business can also be high when
seeking new suppliers. The third force that dominates is the threat of substitutes. Porter (2008)
examines that this kind of threat not only limits profitability but also limits the bonanza an
industry can reap in good times.
The fourth power is the power of buyers. The point of having a business is to serve customers.
Profitability is limited if the bargaining power is higher with customers. A good quality customer
base can increases sources of profitability. The fifth force that Porter outlines is the rivalry among
existing competitors. Competition based on price directly affects profitability. The competition
that is based on activities usually helps in attracting customer base and aids profits. Porter (2008)
evaluates the concept of zero sum and positive sum competition. If all the competitors are
competing in the same realm of an industry- zero sum competition occurs. But if all compete in
different dimension, a positive sum occurs. A good strategy always aims at creating a positive
sum competition which profits every firm in competition. Another sixth force was appended to
this model it mainly includes the services and products (complements) that are important to the

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industry and help driving profitability. This force brings up the profits unlike others. Strategic
planning can be effectively accomplished once industry structure and its profitability are known.
This also draws in industrial boundaries for the various decisions made based on industries.
Although the five forces model brings out the industry structure which can predict the
profitability of the industry. The businesses and investment decisions are made keeping in mind
the profit that can be attained. Grant (2013) reinforces the idea that this helps firms to position
the businesses where the competition is minimum. Effective positioning requires that firms look
ahead and even anticipate the competition. Porter (1996) has strongly brought out the concept
of Strategic Positioning. He reiterates the fact that a good strategy is all about making hard
choices. He has discussed positioning that can be needs-based, customer-access based or based
on the range of products and services delivered by the firm. He further elaborates that strategy
helps in carving out a niche in the market. It is principally aiming at a valuable and unique position.
It is important to question the conventional wisdom on whether an industry really matters when
it comes to profitability. Grant (2013) examines that many scholars believe that industry structure
has minor effects on the returns. The figures show facts, but industry analysis can help
understand the position of the firm and the competition in the market. Grant (2013) also cites
Schumpeters skepticism about the usefulness of the five forces in the rapid competition-
creative destruction. He suggests that the speed of competition cannot be gauged by this
model i.e. it is useless when discussing hypercompetition. The industry structures are
destabilizing with the uncertain markets. This is something that needs to be factored in when
making a strategy.
When moving from industry analysis to competitive advantage, it is helpful to understand the
factors that help to outperform the rivals in the industry. It is imperative to note what the
customer wants and how does the firm survive competition. This leads to factoring the sources
of success. Though this has been a traditional way of strategy making, Grant (2013) argues that
many scholars are skeptic about the usefulness of this. He cites Ghemawat- The whole idea of
identifying success factor and then chasing it seems to have something in common with the ill-
considered medieval hunt of the philosophers stone. A substance that would transmute
everything it touched into gold. Thus firms should avoid following similar paths to find their
strategy.

AIMING FOR COMPETITIVE ADVANTAGE

The second aspect i.e. competitive advantage helps to compete in the industry. Business strategy
deals with making decisions that enhance the profitability within a specified industry. Before
coming to a successful business strategy, it is important to discuss Porters (1996) view on what
a strategy is not. Operational effectiveness is many a times mistaken to be the strategy of the
company. Many firms consider six sigma to be their key source of a successful strategy.
Operational effectiveness will help in developing best practices like total quality management,
benchmarking, time-based competition, outsourcing practices, reengineering and change

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management. The job of a leader depends ninety percent on creating operational effectiveness
but the remaining ten percent that distinguishes the business is what strategy really is.
Porter (1996) claims that operational effectiveness is a necessity but is not sufficient to achieve
a superior positioning. It helps in performing similar activities better. This leads to many
competitors trying to do the same thing. The situation that arises here is termed as Competitive
Convergence. Porter has very well related this to the Japanese companies who followed the best
practices and brought out high profitability, but lacked strategy. An important concept
highlighted by Porter is regarding the creation of the productivity frontier. Operational
effectiveness raises the bar for all the competitors by shifting the productivity frontier outwards.
Although such efforts produce absolute improvement, they fail to produce the relative
improvements. Such companies are driven by performance and lack strategy which could have
helped them in the long run. The missing element is the competitive advantage.
Competitive advantage can be emerged by analyzing the internal environment and external
environment of the firm. Grant (2013) suggests that cost leadership and differentiation are the
two major kinds of competitive advantage for any firm. Either the product or service should be
sold at the lowest price so that customers are willing to purchase or a unique premium product
or service can be sold to a higher quality of customers. Both these factors are distinguish the
firms from their competitors in the industry. Walmart has used cost advantage as its competitive
advantage. To achieve this advantage, it has configured its value chain to optimize costs. The cost
drivers in the firm like economies of scale, production techniques, distribution, input costs and
capacity utilization have helped the firm achieve it. Differentiation can be seen targeting to a very
specific set of customers. All the profitability is derived from this set. Harley-Davidson has been
reputed to serve to the elite group of motor bikers. This gives it a competitive advantage.
Porter (1996) has supported this concept by saying that it is the set of activities which make a
position of the company unique. He has called this the activity system. A carefully designed
activity system can bring about the competitive advantage into reality. Air Asia has very cost
efficient activity system. This has helped it to be the lowest cost airline in Asia. Hence focus has
to be laid on getting this competitive advantage translated into activities. Also aiming for a
strategic fit is fundamental. Porter (1996) also focusses on the importance of trade-offs that
are critical. He proposes that not doing certain things is a good strategy.
Grant (2013) states that setting performance goals and monitoring these results against the
targets can encourage strategic planning. These performance targets need to be consistent with
the long term goals. It is thus important that right from the CEO level to the line worker, everyone
is in accordance to the strategy. Balanced scorecards developed by Norton & Kaplan (1992) is a
tool to measure the long term performance of a company. It has four perspectives. The first being
the financial perspective. It basically deals with satisfying the needs of the shareholders. It relates
to achieving targets for the benefit of shareholders. The second perspective is that of a customer.
It measures targets based on the needs of the customers and whether they like the products and
services. The third is the internal perspective. This mainly deals with the internal systems in the
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company that can help achieve the targets. The last perspective is the learning and growth. It
focusses on continuous improvement and value creation. Goals and metrics are listed for each
perspective. Learning and innovation can lead to better competencies and processes. This in turn
can boost customer satisfaction and ultimately generate better shareholder returns. The order
of this balanced scorecards matters. If used correctly, the real drivers of long term success can
be identified. It can help managers focus on critical measures and is one of the most widely used
tools to measure performance.
Performance and profitability act like blinkers for managers. Grant (2013) considers that many of
the managers manage through these set performance targets. Rethinking performance targets is
essential. Buddhas teaching warns us Mistaking the finger pointing at the moon for the moon
itself. A game like structure is created as more firms try to fit into this structure. This kind of
propensity not necessarily improves the performance that is underlying the system to achieve
targets.

THE CONCEPT OF SUSTAINABILITY

The strategy of a company is to achieve higher profitability by achieving a competitive advantage.
A strategy is not effective if it is not designed to be sustainable. When discussing the sustainability
of competitive advantage, it is important to analyze the internal resources and capabilities of a
firm. Grant (2013) has described three kinds of resources viz. tangible resources, intangible
resources human resources. Barney (1991) has elucidated how a firm can achieve this sustainable
competitive advantage (SCA) and what are the merits of having such a strategy. He has laid out
four empirical indicators that will together help in bringing out the sustainability of the
competitive advantage. The resource that is being considered should be valuable i.e. it should be
capable of generating rents. The next attribute that the resource should have is that it should be
rare. It is highly unlikely that a competitor will have an edge if the resource is rare. The third
important attribute is that it should be difficult to imitate the resource. There are ways like causal
ambiguity which can help establish this. This is one of the toughest challenge of firms. The last
attribute is non substitutability. These four together can help firms realize a sound strategy.

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Appraising resources and capabilities is a part of developing sustainability. Understanding the
strategic importance and relative strength is essential. Grant (2013) has laid focus on developing
capabilities in the organisation. Patenting, benchmarking are some ways to appraise the routines
and resources. Sometimes hierarchy of capabilities can also help analyze the competitive
advantage. In todays world, knowledge is an important resource. Knowledge management is
something most firms are looking for. It consists of both knowledge exploitation and exploration.

Figure 2: Spiral evolution of knowledge creation (Nonaka and Konno, 1998)

Nonaka and Konno (1998) suggest that knowledge creation is a spiral process of interactions of
two kinds of knowledge i.e. explicit and tacit knowledge. The process of socialization,
externalization, combination and internalization is what can help create and retain knowledge. A
firm can attain sustainable advantage if the knowledge is exchanged and transformed. To deal
with the dynamic environment, firms require effective leadership that can help nurture and
enhance this knowledge. Hence, sustainability of knowledge is also key for the strategy.

STRATEGIC INNOVATION
Strategy qualifies for sustainability if it can handle well the different phases of an industry life
cycle. Grant (2013) emphasizes that growth in demand and the diffusion of knowledge within the
industry are the important drivers of industry evolution. The introduction phase sees much of
the growing competition wherein there are plenty of new entrants. The growth phase aims for
creating a dominant designing. Scaling up is the key motive here. Industry maturity is a critical
phase for any firm, a good strategy here can either make or break a firm. There is limited potential

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for differentiation and the
technology is well diffused.
Strategic innovation is a
necessity here. Grant
(2013) outlines some
sources of competitive
advantage like embracing
new customer groups,
augmenting business or
theming businesses. Firms
sometimes are victim to
the industry recipe here
and are more reluctant to
change. Product and
process innovation here Figure 3: Strategic innovation (Faughey, 2015)
has to be concurrent to a
strategic innovation. In case a company is heading towards decline, four strategy options
suggested by Grant (2014) can be used. A strong leadership can help in reducing competition.
Harvesting the options that are doing well and divesting the unsuitable ones is a good strategic
alternative. Also carving a niche in the market can mitigate decline. New York Times, being a
mature industry has carefully used these options which helped it to survive. Blue ocean strategy
surfaces when discussing strategic innovation. Firms can target to find the blue ocean instead of
targeting red oceans where huge competition exists already. Business models can serve as
strategic innovations. Repeatable differentiation is difficult for competitors to imitate. Zook and
Allen (2011) suggest that such few vivid and hardy forms of differentiation act as a system and
reinforce one another.

NEED FOR CHANGE

In this ever-evolving world, coping with change is the biggest hurdle. Grant (2014) discusses two
primary forces of change viz. Technology and Internationalization. The industry clock cycles are
reducing and innovation is taking a toll. In such cases it is critical for firms to be flexible to handle
this. Some changes are competence enhancing and some are competence destroying (Grant,
2013). Eastman Kodak was one of the many companies which could not cope with the technology
it had itself developed. Technologybased industries face this problem wherein their core
capabilities are challenged time and again. Leonard-Barton (1993) calls these core rigidities.
These companies enable innovation and also hinder it. Going a step further, Christensen and
Bower (1996) have addressed two kinds of changes in technology- Sustaining and disruptive
changes. It is important for firms to realize that the adaption to technology would be helpful or
destructive to the organisation. A strategy hence will prevent firms to run successful and
disruptive businesses under the same roof.

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Grant (2013) regards internationalization as a source of huge opportunity. The world has become
a global village and firms are now targeting to be the most cost efficient and spread markets to
sustain their competitive advantages. The competitive forces change with countries and also the
comparative advantage sets in. Dynamic collectivism or a consistency between strategy and the
national conditions is essential. This is a big source of change for firms. Although it gives the scale
of economies, arbitrage and cost benefits along with learning benefits, it also brings in immense
complexity. Large businesses employing this as their corporate strategy, find it tough to manage
linkages across their businesses. Hence concepts like portfolio management, transferring of skills
and activity sharing come in. The increase in turbulence and chaos is continuously serving as a
threat to firms. The firms need to be more adaptable to deal with the world to come.

MANAGING STRATEGIC CHANGE

Organisational inertia is considered as one of the major barriers to change (Grant, 2013).
Organisational routines that are developed over a period of time make firms reluctant to change.
Firms fail to realize that changes need to be systematically adopted to the organisations.
Localized changes tend to be dysfunctional. Institutional Isomorphism wherein organisations
are conformed to strategies and structures to reduce imitation can also hinder change. Thus
powerful tools of strategic management are required. Grant (2013) recommends firms to create
a perception of crisis and act accordingly. Also establishing stretch targets can weaken inertia. An
ambitious vision statement can help firms continuously develop towards change. Organisational
level initiatives that drive change can also be effective. Many noted scholars have considered
new leadership styles to be one of the key drivers of change in a firm. Many a times, external
CEOs are commissioned to bring this change.
The key concept that comes in here is Dynamic capabilities. With rapidly changing environment,
firms requires creative destruction of existing competencies and reconfiguration of new ones
(Teece, 1999). The world is becoming more complex. Small changes are triggering major events
and creating unpredictability. Increasing self organisation and chaos is creating sources of
concern for strategists and firms. Darwins theory of survival of the fittest is true like never
before. This has led to firms to have an angle of exploration and exploitation in their strategy.
OReilly and Tushman (2004) emphasizes on the facts that firms must be ambidextrous. They
must focus on incremental changes of the present and also be able to pre-empt the future and
act accordingly. Structural and contextual ambidexterity have been highlighted as key strategies
of the future.

CONCLUSION
Warren Buffet said, In the business world the rearview mirror is always clearer than the
windshield. The module of business strategy brings out the core concepts of strategic
management. It helps us understand what was done right or wrong in the past and how firms
can do better now. The lag that Grant (2013) refers to between the management practices and

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theory will always exist. By the time a strategy becomes general knowledge it is no longer a
strategy. The essence of this module I believe is to take a step ahead and understand how
strategies would survive the dynamic world. Ambidexterity as mentioned before would be
replaced by multidexterity. Firms will not only sustain competition but also continuously
develop (innovate). With a plethora of capabilities and unique business models, firms will have
to learn to manage the complexities. A powerful leadership which can radically drive change in
the industry is the need of the hour. The concept of strategic fit and growth has also been revised
and is targeted towards dynamic positioning which is sustainable.
Business Strategy is one of the most important tools of project managers. Most programs
emanate out of business strategies. It is not only the role of the higher management in firms but
also Project managers to ensure that all the activities in their projects are in accordance to the
business strategy. The success rate of a project is higher if it is in congruence to the business
strategy. This module has enlightened me with a whole new business world which I was unaware
of. With the help of articles and case studies I have learnt that it is not the analytical skills but the
diagnostic skills that can help develop a good strategy. Einstein said, If you cant explain it, you
dont know it well enough. This reflection has helped me summarize the fundamental learnings
from this module which can be a toolset for the future.

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