Strategy Course Oussama AMMAR

Working with Strategy There is a problem, making sign or symptom, you have to identified them and then try to solve them. Sign coming from the environment. Course Objectives: Learn to think intuitively, try to compare internal and external Book: Exploring Strategy text and cases Strategy Position: Environment: Capability R&C: set of resources and competences possessed by firms Purpose Culture: the impact of the culture on a firm strategy Section: 1) What is Strategy ? 2) Strategic Vocabulary 3) Level of strategy thinking 4)

1- What is Strategy?
Strategy is a Greek word names STRATEGOS STRATOS means the army or the expedition EGOS: means the leading or the fact of leading your army The art of managing your army, in the presence of the enemy /competitors.

Definition 1: The determination of the long-run goals and objectives of an enterprise and the allocation of resource necessary for carrying out these goals. Alfred Chandler (1963) Resource allocation, long-run, the notion of time, Goals and objectives are different. Definition 2: The purpose of strategy is to: understand the environment and to prepare for putting the firms choices in action Peter Drucker Environment, strategy options, and actions Definition 3: Strategy is a weapon for breaking the conventional rules of the industry and creating a set of new rules to take control of the market and become the leader in the industry Definition 4: Strategy is about reaching a unique competitive position differentiating the firm from its main competitors Michael Porter (1996) The essence of strategy is TO BE UNIQUE. How to be a unique? Definition 4 (suite): Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. Michael Porter Video Mistake 1: My strategy is to internationalize Mistake 2: Outsource more of my production How you can be unique, take advantage at the end of the day.

It is really important to differentiate the different steps you take to implement your strategy. Final Definition of strategy: Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders expectations. Johnson et al. (2011) Stakeholders: Suppliers, employees, competitors, customers Scope of an organization: The activities that the organization decides to cover. Apple: A notion of Convergence in strategy, impacting different industry at the same time. Ex: The computer, music, mobile phone industry impacted by the iphone.

2- Strategic Vocabulary
Mission / Mission Statement Vision Objectives Goals Business model Control Strategic capabilities

Objectives and Goals differences Objective is when you quantify your goal Business Model: How to configure your company in order to make value, How to organize your activity to create value

3- Levels of strategy thinking

We have 3 levels: Corporate-level strategy: Concerned with the overall purpose and scope of an organization and how to add value to business units Business-level strategy: The way a business seeks to compete successfully in its particular market Operational Strategy: How to different parts of the organization deliver the strategy in terms of managing resources, processes and people Example: Corporate-level strategy: News Corporation diversifying from print journalism into social networking through the acquisition of My Space in 2005 Business-level strategy: Website and marketing improvements at My Space to attract more users Operational Strategy: My space engineering increasing

4- The Strategic Management Process

Understand the firms core business (internal analysis) Determine the firm positioning (environment analysis) Ex: Core business = main activity of a company that bring revenues to the company Assess the current strategy and determine the firms orientation How to achieve your purposes? Make strategic choices (Business Strategy, Growth mode ) Slides: The Strategic Management Process

Lesson 2: The environment / External analysis

Section 1: The Macro Environment The macro-environment Industry Competitors and Market The organization The macro-environment Industry Competitors and market PESTEL Five Forces Strategic group, market segments and critical success factors

Political, Economic, Social, Technological, Environment ( green) and Legal factiors: PESTEL The PESTEL Framework 6 facts: Provides a comprehensive list of influences on the firms strategy These influences can be considered Examples: Political factors: government policy Technological factor: new technology Economic factors: cost of production in Europe you have to outsource Environmental factors: Socio-Cultural factors: population changes, income distribution Legal factors: And political factors Applying PESTEL to airlines industry DEFINITION: Key drivers: The factors that have the higher impacts on a company Key drivers for change are environmental factors that are likely to have a high Scenarios are detailed and plausible views of how the business environment of an organization might develop in the future based on key drivers of change.

Carrying out scenario analysis Virtualization: migrating from real life to virtual life Section 2: The Industry analysis The industry is a group of firms producing products and services that are essentially the same. For example: automobile industry and airline industry A sector is a broad industry group especially in the public sector (e.g the health sector) Porters five forces framework helps identify the attractiveness of an industry in terms of 5 competitive forces --------------------------------------------------------------------------------------------------------------Definition: The five forces model of analysis was developed by Michael Porter to analyze the competitive environment in which a product or company works. Description: There are five forces that act on any product/ brand/ company: 1. The threat of entry: competitors can enter from any industry, channel, function, form or marketing activity. How best can the company take care of the threat of new entrants? 2. Supplier power: what is the power of suppliers in this industry? How will their actions affect costs, supplies and developments? If there are a few suppliers, power is in their favour and cost of switching may be prohibitive; vice versa for a situation with lots of suppliers. There may be too many buyers from too few suppliers. 3. Buyer power: there may be few buyers for the product, which could mean that they would drive down prices and dictate business terms. What is their effect on the business? If there are many buyers, sellers could decide not to supply to a few, because other buyers will step in. 4. Threat of substitutes: can another substitute the product? Tea for coffee; email for fax? What is the likely possibility of this and what is its impact? 5. Competitive rivalry: all the four forces may come together to produce this force. All the resources at a company's disposal may be put in to maintain market shares and sales. How intense is competitive action, can it be countered?

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 The threat of entry is low when the barriers to entry are high and vice versa. To compete successfully, Barriers to entry are factors that need to be overcome by new entrants o o o o o o o Economies of scale & experience (car production) The capital requirement (luxury aeronautic) Expected retaliation (reprsaille) Access to distribution channels Differentiation Customer or supplier loyalty / fidelity Government restriction, lesgislations

Substitutes are product Buyers are the organizations immediate customers, not necessarily the ultimate consumers Powerful buyer, can demand cheap prices or product / service improvements to reduce profits. Buyer power is likely to be high when: o Buyers are Suppliers are those who supply what organizations need to produce the product or service. Supplier power is likely to be high when:

Competitive rivals are: Organization Identify the attractiveness of industries Section 3: Competitors and Markets Strategic group Market segments Strategic customers What are strategic groups? Strategic groups are organizations within an industry with similar strategic characteristics, following similar strategies or competing on similar bases.

Scope of activities Extent of product (or service) diversity Extent of geographical coverage Number of market segments served Distribution channels used Resource commitment Extent (number) of branding Marketing effort Critical success factors (CSFs) are those products features or factors that are particularly valued by a group of customers and, therefore, where the organization must excel to outperform competition. The Usefulness of Strategic Grouping

Lesson 3 Strategy Course Leader

Section 1: The notion of culture Section 2: Strategic Capabilities Section 3 The Value Chain Section 1: The notion of culture 1. The importance of the notion of culture 2. Define the strategic capabilities in terms of resources and competences 3. Analyse how strategic capabilities might provide sustainable competitive advantage on the basis of their value, rarity, inimitability, and non-sustainability. PARADIGM: Paradigm in newspaper Centrality of news coverage and reporting Nowadays revenues are reliant on advertising income and the strategy may directed to this

Strategic Capabilities Strategy capability Cross subsidization is the practice of charging higher prices to one group of consumers in order to subsidize lower prices for another group.