Models for Strategic Models for Strategic AnalysisAnalysis

Mintzberg’s Ten Planning SchoolsMintzberg’s Ten Planning SchoolsSCHOOLSCHOOL STRATEGY FORMATION APPROACHSTRATEGY FORMATION APPROACH

DesignDesign Process of Process of ConceptionConception

PlanningPlanning FormalFormal Process Process

PositioningPositioning AnalyticalAnalytical Process Process

EntrepreneurialEntrepreneurial VisionaryVisionary Process Process

CognitiveCognitive MentalMental Process Process

LearningLearning EmergentEmergent Process Process

PowerPower Process of Process of NegotiationNegotiation

CulturalCultural Collective Collective ProcessProcess

EnvironmentalEnvironmental ReactiveReactive Process Process

ConfigurationalConfigurational Process of Process of TransformationTransformation

Mintzberg’s Definitions of StrategyMintzberg’s Definitions of Strategy Strategy is a PLAN Strategy is a PLAN Direction, Direction,

Guide or Course of Action Guide or Course of Action Intended Intended Strategy is a PATTERN Strategy is a PATTERN Reflects Reflects

past decisions past decisions Reactive Reactive Strategy is a POSITION Strategy is a POSITION Locating Locating

products and activities in marketsproducts and activities in markets Strategy is a PERSPECTIVE Strategy is a PERSPECTIVE

“Theory of the business”“Theory of the business” Strategy is a PLOY Strategy is a PLOY A maneuver A maneuver

against opponentsagainst opponents

Strategy for Better or WorseStrategy for Better or WorseSTRATEGIC STRATEGIC ASPECTASPECT

ADVANTAGEADVANTAGE DISADVANTAGEDISADVANTAGE

Strategy Sets Strategy Sets DirectionDirection

Charting a course Charting a course through through uncertaintyuncertainty

Binders that hide Binders that hide potential dangerspotential dangers

Strategy Focuses Strategy Focuses PerspectivePerspective

Coordination of Coordination of ActivityActivity

GroupthinkGroupthink

Strategy Defines Strategy Defines the Organizationthe Organization

Shorthand Shorthand Meaning and Meaning and ComprehensionComprehension

Excessive Excessive Simplicity and Simplicity and StereotypingStereotyping

Strategy Provides Strategy Provides ConsistencyConsistency

Reduces Reduces Ambiguity and Ambiguity and Provides OrderProvides Order

Misrepresentation Misrepresentation and Distortionand Distortion

Elements of StrategyElements of Strategy

Models for Global Models for Global Strategic AnalysisStrategic Analysis

Seven Approaches to PlanningSeven Approaches to PlanningAPPROACHAPPROACH CRITICAL CRITICAL

FACTORFACTORResource based viewResource based view ResourcesResources

Core CompetencyCore Competency Knowledge/Knowledge/

SkillSkill

Competitive Advantage Competitive Advantage of Nationsof Nations

National LocationNational Location

Strategic GroupsStrategic Groups AssetsAssets

Cognitive CommunitiesCognitive Communities Shared IdeasShared Ideas

Network ApproachesNetwork Approaches RelationshipsRelationships

Competing for the Competing for the FutureFuture

OpportunitiesOpportunities

Resource Based ViewResource Based View Object is to acquire or create resources that Object is to acquire or create resources that

others do not haveothers do not have Types of resourcesTypes of resources

• FinancialFinancial• Human Human • PhysicalPhysical• OrganizationalOrganizational• TechnologicalTechnological

Growth happens when managers think of better Growth happens when managers think of better ways to use resources to create valueways to use resources to create value

Bad performance happens with bad assessments Bad performance happens with bad assessments or lack of attention to resourcesor lack of attention to resources

Tangible ResourcesTangible ResourcesFinancialFinancial**

PhysicalPhysical**

Human ResourcesHuman Resources**

OrganizationalOrganizational**

What a firm Has...

What a firm has to work with:

its assets, including its people and the value of its brand name

Resources represent inputs into a firm’s production process...

such as capital equipment, skills of employees, brand names, finances and talented managers

Intangible ResourcesIntangible Resources

TechnologicalTechnological**

InnovationInnovation**

ReputationReputation**

“Some genius invented the Oreo. We’re just living off the inheritance.”

F. Ross Johnson,Former President & CEO, RJR Nabisco

ResourcesResources

Competence Based CompetitionCompetence Based Competition

Competence is the bases for all new Competence is the bases for all new movesmoves• Skill/Knowledge/LearningSkill/Knowledge/Learning

Four bases for competenceFour bases for competence• Adds valueAdds value• Applies to a wide variety of businessesApplies to a wide variety of businesses• Difficult to copyDifficult to copy• Cannot substitute other products or Cannot substitute other products or

servicesservices

Mobilizing Company Resources to Mobilizing Company Resources to Produce Competitive AdvantageProduce Competitive Advantage

Competitive Advantage

Strategic Assets and Market Achievements

Core and Distinctive Competencies

Competitive Capabilities

Company Resources

Competitive Advantage of NationsCompetitive Advantage of Nations

Home Base forHome Base for• StrategyStrategy• Core product/process developmentCore product/process development• Essential SkillsEssential Skills

Determinants of National AdvantageDeterminants of National Advantage• Factor ConditionsFactor Conditions• Demand ConditionsDemand Conditions• Related/Supporting IndustriesRelated/Supporting Industries• Firm Strategy/Structure/RivalryFirm Strategy/Structure/Rivalry

Difficulty at home can make strength Difficulty at home can make strength outsideoutside

Strategic Group TheoryStrategic Group Theory

Firms with similar strategies compete Firms with similar strategies compete with each otherwith each other

Industries have more than one groupIndustries have more than one group Barriers to change between groupsBarriers to change between groups Functional/National/International Functional/National/International

differencesdifferences

Strategic Group MappingStrategic Group Mapping Firms in Firms in same strategic group same strategic group have have

two or more competitive two or more competitive characteristics in commoncharacteristics in common• Sell in same price/quality rangeSell in same price/quality range• Cover same geographic areasCover same geographic areas• Be vertically integrated to same degreeBe vertically integrated to same degree• Have comparable product line breadthHave comparable product line breadth• Emphasize same types of distribution Emphasize same types of distribution

channelschannels• Offer buyers similar servicesOffer buyers similar services• Use identical technological approachesUse identical technological approaches

Strategic Group Map of the Video Strategic Group Map of the Video Game IndustryGame Industry

Typ

es o

f V

ideo

Gam

e S

up

pli

ers/

Dis

trib

uti

on

Ch

ann

els

Overall Cost to Players of Video Games

Low(Coin-operated

equipment)

Medium (Video players

cost $100-$300)

High (Use PC)

Video arcades,coin-operated

machines

Home PCs

Video game consoles

Online game sites

Sony, Sega, Nintendo, several

others

Arcade operators Publishers

of games on CD-ROMs

MSN Gaming Zone, Pogo.com,

America Online, HEAT, Engage, Oceanline, TEN

Categorizing ObjectivesCategorizing Objectivesand Strategies of Competitorsand Strategies of Competitors

Competitive Scope

Strategic Intent

Market Share Objective

Competitive Position

Strategic Posture

Competitive Strategy

• Local• Be dominant

leader

• Aggressive expansion via acquisition & internal growth

• Getting stronger; on the move

• Mostly offensive

• Regional• Overtake

industry leader

• Well-entrenched

• Mostly defensive

• National• Be among

industry leaders

• Expansion via internal growth

• Stuck in the middle of the pack

• Combination of offensive & defensive

• Multicountry• Move into

top 10

• Expansion via acquisition

• Going after a different position

• Aggressive risk-taker

• Global• Move up a

notch in rankings

• Hold on to present share

• Struggling; losing ground

• Conservative follower

• Maintain current position

• Give up present share to achieve short-term profits

• Retrenching to a position that can be defended• Just survive

• Striving for low-cost leadership

• Focusing on market niche

• Pursuing differentiation based on

QualityServiceTechnology

superiorityBreadth of

product lineImage &

reputationMore value

for the money

Other attributes

Mental CommunitiesMental Communities

Mental map of competitive landscapeMental map of competitive landscape Firms develop experienceFirms develop experience Firms work together across industries Firms work together across industries

and within industriesand within industries• CompetitorsCompetitors• SuppliersSuppliers• Buyers Buyers

Uses Manager’s views to classify firmsUses Manager’s views to classify firms

Levels of Strategy-Making in Levels of Strategy-Making in a Single-Business Companya Single-Business Company

Business Strategy

Two-Way Influence

Two-Way Influence

Functional Strategies

Operating Strategies

Executive-Level Managers

OperatingManagers

Functional Managers

Corporate Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level Managers

Business-Level Managers

OperatingManagers

Functional Managers

Levels of Strategy-Making in Levels of Strategy-Making in a Diversified Companya Diversified Company

Who Performs the FiveWho Performs the FiveStrategic Management Tasks?Strategic Management Tasks?

Senior Corporate Senior Corporate ExecutivesExecutives

Managers of Managers of Subsidiary Subsidiary Business UnitsBusiness Units

Functional Area Functional Area ManagersManagers

Operating Operating ManagersManagers

Approaches to PerformingApproaches to Performingthe Strategy-Making Taskthe Strategy-Making Task

Chief ArchitectChief Architect

Manager personally functions as chief strategistManager personally functions as chief strategist

Delegate-It-to-Down-the-Line ManagersDelegate-It-to-Down-the-Line Managers

Manager delegates some strategy-making Manager delegates some strategy-making responsibility to subordinates in charge of key responsibility to subordinates in charge of key

organizational unitsorganizational units

Collaborative/Team Collaborative/Team

Manager enlists assistance and advice of key Manager enlists assistance and advice of key subordinates in hammering out a consensus strategysubordinates in hammering out a consensus strategy

Corporate IntrapreneurCorporate Intrapreneur

Manager encourages subordinates to develop and Manager encourages subordinates to develop and champion proposals for new ventureschampion proposals for new ventures

Strategic Role of a Board of Strategic Role of a Board of DirectorsDirectors

Critically appraise and ultimately approve Critically appraise and ultimately approve strategic action plansstrategic action plans

Evaluate strategic leadership skills of the Evaluate strategic leadership skills of the CEO and candidates to succeed the CEOCEO and candidates to succeed the CEO

Strategic Management PrincipleStrategic Management Principle

A board of director’s role in the A board of director’s role in the

strategic management process is strategic management process is

to critically appraise and ultimately to critically appraise and ultimately

approve strategic action plans and approve strategic action plans and

to evaluate the strategic to evaluate the strategic

leadership skills of the CEO and leadership skills of the CEO and

others in line to succeed the others in line to succeed the

incumbent CEO.incumbent CEO.

Network TheoryNetwork Theory

Firms succeed by alliances and joint Firms succeed by alliances and joint venturesventures

Patterns of relationships are as Patterns of relationships are as important as firm abilities and important as firm abilities and resourcesresources

Network relations assist and restrainNetwork relations assist and restrain

Supply NetworkSupply Network

CHAIN TYPE SYSTEMCHAIN TYPE SYSTEM

CLIENTCLIENT

NETWORK TYPE SYSTEMNETWORK TYPE SYSTEM

CLIENCLIENTT

CLIENCLIENTT

CLIENCLIENTT

CLIENCLIENTT

CLIENCLIENTT

CLIENCLIENTT

SHOP TYPE SYSTEMSHOP TYPE SYSTEM

CLIENCLIENTT

ResourcResourceses

INTERACTIONSINTERACTIONS

Strategic VisionStrategic Vision

Firm compete for the ability to define the Firm compete for the ability to define the futurefuture

Firms define the future for their own Firms define the future for their own benefitbenefit

Important in emerging marketsImportant in emerging markets Competitive leadership in new markets Competitive leadership in new markets

happens through defining and anticipating happens through defining and anticipating marketsmarkets• Design/market development/resource Design/market development/resource

development/human developmentdevelopment/human development

Business Mission: The McGraw Business Mission: The McGraw Hill CompaniesHill Companies

The McGraw-Hill Companies is a global publishing, The McGraw-Hill Companies is a global publishing, financial, information and media services company financial, information and media services company with such renowned brands as Standard & Poor’s, with such renowned brands as Standard & Poor’s, Business Week, and McGraw-Hill educational Business Week, and McGraw-Hill educational and professional materials. and professional materials.

The Company provides information via various media The Company provides information via various media platforms: books, magazines and newsletters; on-platforms: books, magazines and newsletters; on-line; via television, satellite and FM sideband line; via television, satellite and FM sideband broadcast; and software, videotape, facsimile and broadcast; and software, videotape, facsimile and CD-ROM products.CD-ROM products.

The Company now creates more than 90 % of its The Company now creates more than 90 % of its information on digital platforms and its business information on digital platforms and its business units are represented on more than 75 Web sites.units are represented on more than 75 Web sites.

““Management’s job is not to see the company as it Management’s job is not to see the company as it is….but as it can become.” is….but as it can become.”

John W. Teets

Broad vs. Narrow ScopeBroad vs. Narrow Scope

Broad Broad DefinitionDefinition

• FurnitureFurniture

• TelecommunicationsTelecommunications

• BeveragesBeverages

• Global mail deliveryGlobal mail delivery

• Travel & tourismTravel & tourism

Narrow Narrow DefinitionDefinition• Wrought-iron lawn Wrought-iron lawn

furniturefurniture

• Long-distance Long-distance telephone servicetelephone service

• Soft drinksSoft drinks

• Overnight package Overnight package deliverydelivery

• Caribbean cruisesCaribbean cruises