Strategic Management:

What Is Strategy
and
Why Is It Important?

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Video: What is VUCA

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 Michael Eugene Porter
Born May 23, 1947, is an American
academic known for his theories on
economics, business strategy, and social
causes. He is the Bishop William Lawrence
University Professor at Harvard Business
School.

Michael Porter is the author of 18 books and numerous articles

including Competitive Strategy (1980), Competitive Advantage (1985),
Competitive Advantage of Nations (1990) and On Competition (1998).

A six-time winner of the McKinsey Award for the best Harvard Business
Review article of the year, Professor Porter is the most cited author in
business and economics.

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Video: What Is Strategy – Michael Porter explain misunderstandings.

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Video: What Strategy Is – Michael Porter
What Is Strategy About?
• Strategy is the set of actions that its managers take to
outperform the company’s competitors and achieve superior
profitability.
• Strategy is goal-directed actions to gain and sustain
competitive advantage

• Strategy is all about How:

 How to position the company in the market place
 How to attract customers
 How to compete against rivals
 How to achieve the company’s performance targets
 How to capitalize on opportunities to grow the business
 How to respond to changing economic and market
conditions.
 What Is Strategy?
Definition: Strategy is the quest to gain and sustain
competitive advantage.
• It is the managers’ theories about how to gain and
sustain competitive advantage.
• It is about being different from your rivals.
• It is about creating value while containing cost.
• It is about deciding what to do, and what not to do.
• It combines a set of activities to stake out a unique
position.
• It requires long-term commitments that are often not
easily reversible.
 Why Do Strategy?

• A firm does strategy:

 To improve its financial performance.
 To strengthen its competitive position.
 To gain a sustainable competitive. advantage over
its market rivals.

• A creative, distinctive strategy:

 Can yield above-average profits.
 Makes competition difficult for rivals.
 Strategy and Competitors

Strategy is about competing differently from

rivals—
● Doing what they don’t do or doing it better!
● Doing what they can’t do!
● Doing that which sets the firm apart and attracts
customers.
● Doing what we should or should not do to produce
a competitive edge.
Identifying a Company’s Strategy—What to Look For
 Identifikasi Strategi Perusahaan
Apa yang dicari
Tndakan utk memperoleh penjualan dan pangsa
Tindakan utk memperkuat
pasar via fitur lkinerja yg lebih, desain yg lebih
posisi tawar perusahaan thd
menarik , kualitas atau layanan pelanggan yg lebih
para pemasok, distributor, dll.
baik, pemilihan produk yg lebih luas , atau tindakan
lain semacam itu.
Tindakan utk meningkatkan, Tindakan utk memperoleh penjualan
membangun, atau dan pangsa pasar dgn harga yg lebih
mendapatkan sumber daya rendah berdasarkan biaya yg lebih
dan kapabilitas penting yg rendah
Pola aksi dan
kompetitif
pendekatan
bisnis yg Tindakan utk memasukkan
Tindakan dan pendekatan produk baru atau pasar
yg digunakan dlm
mendefinisikan
geografis yg baru atau utk
mengelola litbang, strategi keluar dari pasar yg ada
produksi, penjualan dan perusahaan
pemasaran, keuangan,
dan kegiatan utama
lainnya Tindakan utk menangkap peluang yg
muncul dan bertahan thd ancaman
Tindakan utk memperkuat eksternal demi prospek bisnis
daya saing melalui aliansi perusahaan
stratejik dan kemitraan
kolaboratif Tindakan utk memperkuat posisi pasar dan
daya saing dgn akuisisi atau merger dgn
perusahaan lain
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 The Quest for Competitive Advantage

• Competitive Advantage
 Superior performance relative to competitors
 Meeting customer needs more effectively, with products
or services that customers value more highly, or more
efficiently, at lower cost.
 Examples: Google, Microsoft, Unilever.

• Sustainable Competitive Advantage (SCA)

 Giving buyers lasting reasons to prefer a firm’s products
or services over those of its competitors.
 Strategic Approach Choices
Building Competitive Advantage
Low-cost Differentiation
provider on features
A cost based competitive • Higher quality
Advantage over rivals • Wider product selection
Eg. Walmart, Southwest • Added performance
Airlines • Value added services
• More attractive styling
• Technological superiority
Eg. Apple, Rolex,
Johnson & Johnson
Focus on Best-cost
market niche provider
Better job than rivals of Match features and
serving special needs performance of higher-
and tastes of buyers in priced rival brands.
the niche. Eg. Target
Eg. eBay (online auction)
McAfee (virus protection)
 Strategic Approaches

Building a competitive advantage by:

1. Striving to become the industry’s low-cost provider
(efficiency).
2. Outcompeting rivals on differentiating features
(effectiveness).
3. Focusing on better serving a niche market’s needs
(efficiency and\or effectiveness).
4. Offering the lowest (best) prices for differentiated
goods (best-cost provider).
 Gaining
Sustainable Competitive Advantage
How to create a sustainable competitive
advantage:
 Develop valuable expertise and competitive
capabilities over the long-term that rivals cannot
readily copy, match or best.
 Put the constant quest for sustainable competitive
advantage at center stage in crafting your strategy.
Why a Firm’s Strategy Evolves over Time

Managers modify strategy in response to:

● Changing market conditions
● Advancing technology
● Fresh moves of competitors
● Shifting buyer needs
● Emerging market opportunities
● New ideas for improving the strategy
A Company Strategy Is Partly Proactive
and Partly Reactive

Realized (current) strategy is a blend of:

 Proactive (deliberate) strategy elements that include
both continued and new initiatives.
 Reactive (emergent) strategy elements that are
required due to unanticipated competitive
developments and fresh market conditions.
1.2 A Company’s Strategy Is a Blend of Proactive Initiatives
and Reactive Adjustments
 A Company Strategy and
Its Business Model

 Business Model, at the core of every sound strategy.

 Business Model, is management’s blueprint for
delivering a valuable product of service to customers
in a manner that will generate revenues sufficient to
cover costs and yield an attractive profit.
 Elements of Business Model
a. Customer Value Proposition
b. Profit Formula
Known as: Value-Price-Cost Framework.

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 The Relationship Between
A Firm’s Strategy and Its Business Model

Realized Business
Strategy $$$? Model
Competitive Value
Initiatives Proposition

Business
Profit Formula
Approaches
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 Business Model
• The translation of strategy into action takes place in the
firm’s business model, which details the firms’s
competitive tactics and initiatives.

• Business model explains how the firms intends to make

money. It stipulates how the firm conducts its business
with its buyers, suppliers, and partners.

• What’s happening now between Microsoft & Google?

 Business models in opposite directions
Competing Business Models: Google vs. Microsoft

Microsoft
Operating Software Online
Systems Apps Search
Google
 Strategy Across the Levels
• Where to Compete? • CORPORATE
 Should GE move more STRATEGY
aggressively into the
health care industry?
• How to Compete?
 Should GE jet engines
• BUSINESS
have better fuel efficiency STRATEGY
than Rolls Royce?
• How to Implement? • FUNCTIONAL
 Should GE human STRATEGY
resources recruit more
science graduates?
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 Strategy Across the Levels:
Corporate, Business, and Functional Strategy
 Is Our Strategy A Winner?

The Strategic
Fit Test

The Competitive Winning The Performance

Advantage Test Test
Strategy
What Makes A Strategy A Winner?
A winning strategy must pass three tests:
 The Fit Test
 Does it exhibit dynamic fit with the external and
internal aspects of the firm’s overall situation?
 The Competitive Advantage Test
 Can it help the firm achieve a significant and
sustainable competitive advantage?
 The Performance Test
 Can it produce good performance as measured by
the firm’s profitability, financial and competitive
strengths, and market standing?
 What is A Good Strategy?
A good strategy is good when it enables a firm to achieve
superior performance that consists of 3 elements:
 A diagnosis of the competitive challenge
It is accomplished through analysis of the firm’s
external and internal environment.
 A guiding policy to address the competitive
challenge.
It is accomplished through strategy formulation,
resulting in the firm’s corporate, business, and
functional strategies.
 A set of coherent actions to implement the firm’s
guiding policy.
It is accomplieshed through strategy implementation.

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 Why Crafting and Executing Strategy
are Important Tasks
Crafting and executing strategy are core
management functions.
 How well a company performs and the degree of
market success it enjoys are directly attributable to
caliber of its strategy.
 The proficiency with which the strategy is
executed.
Proses Manajemen Stratejik

Visi, Menetap-
kan Merumus Monitor,
Misi, Eksekusi Evaluasi
kan
Core Tujuan Strategi Kinerja
Strategi
Values (Objectives)

Perubahan Kondisi, Peluang

Baru, Ide Baru
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