Dr.

Harris Turino
harristk@indo.net.id harristk.blogspot.com

AGENDA
1. What is Business Strategy
2. Market-Based and Resource-Based View of Strategy 3. Formulating Competitive Strategy 4. Company Growth

Definition of Strategy
Strategic Analysis: External analysis (O & P) Internal analysis (S & W)

Vision Mission

Goal Objectives

STRATEGY

Functional Strategies

Strategy is the central integrated and externally oriented concept of how we will achieve our objectives (Hambrick & Fredrickson, 2001)

Implementation and Review

Elements of Strategy
(Hambrick & Fredrickson, 2001)

ARENA Where will we be in?

(which product categories, market segments, geographic area, core technologies?)

DIFFERENTIATOR How will we win?

(uniqueness, reputation, advance technology, low cost?)

ECONOMIC LOGIC

How will we obtain our return?

(lowest cost, premium price to uncomparable services, economies of scale?)

How will we get there?

(organic growth, M&A, joint venture, franchise, licensing?)

How the sequence of our moves?

(penetration, market expansion, brand awareness, go international?)

VEHICLE

STAGING

Example: IKEA
ARENA
Inexpensive contemporary furniture Young, white-collar customers Worldwide

DIFFERENTIATOR
Very reliable quality Fun, non threatening shopping experience Instant fulfilment Low price

ECONOMIC LOGIC
Economies of scale (global regional, and individual-store scale) Efficiencies from replication

Organic expansion Wholly owned store

Rapid international expansion, by region Early footholds in each country; fill in later

VEHICLE

STAGING

Intended and Emergent Strategy

Intended Strategy

Deliberate Strategy

Realized Strategy

Unrealized Strategy Emergent Strategy

General Framework
External Environment Insight/Idea Internal Environment

Business Model

PEST analysis Industrial analysis Market analysis Competitive analysis (Five Forces, Strategic group), etc

Vision Mission Objectives

Resources Process Performance

O and T

Strategy

S and W

Where do We Start From?

Business Model Critical Success Factors (CSF)

Value Configuration

 Identify industry critical success factors (CSFs).

Analyze the strength of those CFSs in our company (compare to rivals, especially within strategic group or closest strategic group). The weak CFSs should become the consideration to build strategic initiatives.

 Summarize (list) all Opportunities and Threats (external analysis) and Strengths and Weaknesses (internal analysis). Respond some or all list by selecting one or more activities. Depict them on the value configuration

Evaluate the connection between activities so that they create logical thinking that create unique and valuable value

Emphasize

Improve

STRENGTHS

WEAKNESSES

From Internal Analysis

OPPORTUNITIES

THREATS

From External Analysis

Graps

Anticipate

Strategy Formulation
Strategy Formulation is the process of choosing a set of different activities to:
o create or preserve unique and valuable position by: o exploit opportunities (O) and strengths (S) and in the same time: o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a set of different activities.

Those set of different activities can be depicted on the value configuration model.

Generic Competitive Strategy

There are three approaches to achieve valuable and unique position (Porter, 1980):

Strategic Advantage
Uniqueness Low Cost Position

Strategic Market

Industry wide

Differentiation
Apple, Microsoft, Nike, BMW

Overall Cost Leadership

Walmart, Toyota, Dell

Particular segment only

Focus Differentiation Ferrari, Louis Vuitton, Rolex, Vertu

Focus Cost IKEA, Southwest

Strategy Formulation
Strategy Formulation is the process of choosing a set of different activities to:
o create or preserve unique and valuable position by: o exploit opportunities (O) and strengths (S) and in the same time: o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a set of different activities.

Those set of different activities can be depicted on the value configuration model.

Value Configuration
Firm can be viewed as collection of activities that are performed to design, produce, market, and support its products (Porter, 1985). All these activities can be represented using value configuration model (value activities system). There are three models of value configurations:
o Value Chain: transform input into product o Value Network: serve exchange between customers o Value Shop: solve customer problem

Basic Value Chain

Porter (1980) C U S T O M E R
Costs Selling Price

Value

Example
Competitive Strategy

Source of CA
Different Set of Activities

Competitive Advantage (CA)

Valuable Unique Superior Performance

Direct selling JIT inventory Integrated process with global suppliers Efficient working capital management, etc

Dell Computer:
Customized product Lower price

Value Chain: Dell Computer

Support Activities
Infrastructure Exclusive agreement with Intel and Microsoft Exclusive agreement with Samsung, Kodak, Fuji (for printer) Manage network of suppliers around the world

HR Mgt
Tech Dev.

Recruitment, training, performance management, etc.

Little spending on R&D Total quality management to improve supply chain mgt and assembly line Global sourcing for generic component Local sourcing for microprocessor & OS Online communication (e.g. internet, phone)

Procurement

Inbound Logistic:
No warehouse Integrated process JIT inventory 36 days payment

Production (Operation):
Assembly components from supplier

Outbound Logistic:
Immediate delivery No warehouse Zero finished product inventory

Marketing and Sales:

Direct selling Direct payment 7-10 days delivery

After Sales Service:

Online Complain handling

Basic Value Network

Stabell & Fjedstad (1998)
o Infrastructure o HR Management o Technology Development o Procurement

Support Activities Primary Activities

Network promotion & contract mgt Service provisioning Infrastructure operation

Basic Value Shop

Stabell & Fjedstad (1998)
o Infrastructure o HR Management o Technology Development o Procurement
Problem Finding and Acquisition
Control (Evaluation)

Support Activities

Primary Activities

Problem Solving Choice

Execution

Comparing Chain and Shop #2

Inbound logistic Medicine Patient Operation Outbound logistic Marketing & Sales After Sales Progress Report

Examination Surgery Consultation

Prescription Healthy patient

Web Brochure WOM

Problem Finding
Patient data Examination Diagnose

Problem Solving
Consultation Generate treatment plans Select treatment plan

Consultation Next treatment Progress report Control

Prescription Inpatient Surgery Execution

Choice

Inpatient and Surgery

Problem Finding Registration Next diagnosis Problem Solving Consultation Other treatment

Problem Finding Examination Diagnose Consultation Progress report Control

Problem Solving Consultation Alternative treatment Open room Prescription Execution

Choice
Inpatient

Choice Surgery

Consultation Progress report Control

Check up Surgery Execution

Example
Stroke Rehabilitation Clinic
Two successful medium-up clinics: Mandiri Clinic (Rp. 140.000 / therapy / hour) Wijaya Clinic (Rp. 257.000 / therapy / hour) What are their value drivers that make them have unique position? We have to decompose those companies into activities that contribute to create a value (uniqueness).

General Flow of Activities

Start
Diagnose severity

Problem Finding

Control

Monitor & record the progress

Record clinical data

Execution
Refer to rehabilitation?

Treatment Execution

Determine: Set for rehab Type of teraphy Discuss with Family

N
Recommend to go to hospital

Choice
Y

Problem Solving

Approved?

Rehabilitation Plan

Stop

Make Adjustment

Mandiri Clinics Value Drivers

Support Activities
INFRA HR TECH PROC Problem Finding
Record data Consultation Exclusive agreement with Mt. Elizabeth hospital Member of Yastroki (Yayasan Stroke Indonesia) Two branches in Jakarta Experienced therapists Standard equipment

Problem Solving
Outpatient Physio, speech, occupacy Social therapy Home care Brain stroke rehabilitation

Choice
Design combination of therapies

Execution
Therapies execution Improve social interaction (stroke club)

Evaluation
Progress report Regular sharing session

Wijaya Clinics Value Drivers

Support Activities
INFRA HR TECH PROC Problem Finding
Record data Consultation Owned by senior and reputational physicians More strategic location, wider treatment room and parking area Senior medic rehabilitation specialist in charged Self training for therapists Robotic Assistance

Problem Solving
Outpatient Physio, speech, occupacy

Choice
Design combination of therapies More accurate prediction

Execution
Therapies execution More accurate data

Evaluation
Progress report

Comparison
Mandiri Clinic:
More various therapy choices Experienced therapists Emphasize social therapy and interaction between stroke survivors More branches

Wijaya Clinic:
Linkage with hospital network in Jakarta Senior and reputable rehab medic physician better diagnostic, treatment plan design, more accurate prediction RAT (robotic assistance therapy) more accurate progress data Self-trained therapists More comfortable service environment

Generic Growth Strategy

Ansoff (1965)

New Product

Product Development
Develop new product with different characteristics to existing market segments

Diversification
Develop new product to new market segment

Existing Product

Igor Ansoff

Market Penetration
Increase sales per customer Find new customer in existing segment

Market Development
Offer product to new market segment (geographic or customer type)

Existing Market

New Market