STRATEGIC MANAGEMENT Concept of Strategy

UNIVERSITAS GADJAH MADAFACULTY OF ECONOMICS AND BUSINESS

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Strategy: Business and Military

Business and military share common concepts of strategy

The overall plan for deploying resources to establish a favorable position

However, both have different purposes Military: the objective of war is (usually) to

defeat the enemy Business: seeking coexistence rather

than the destruction of competitors

Strategic Thinking3

What is present situation?

Where do we need to go from here?

How should we get there?

Actions of Thinking Strategically

What’s the company’s

present situation?

To evaluate internal and

external environment of the company –

industry conditions and its

resources strength and capabilities

Where does the

company need to go from here (present)?

To push managers making choices

about the direction in which the

company is headed- market, customers,

and products

How should the

company get there?

To challenge manager to

craft and execute strategy

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A company’s answer to “how

will we get there?” is its strategy

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A Company ‘s Strategy

“How” to achieve the intended direction (vision and goals/objectives)”

The strategy contains as follows

Managerial commitment on resources to realize the strategy

Competitive moves which aims to establish favorable positions in the market (competition )

Business approaches which suit resources strength and capabilities

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“Without a strategy

the organization is

like a ship without a

rudder.”(Joel Ross and Michael Kami)

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“Strategy means makingclear-cut choices about

how to compete.”

(Jack WelchFormer CEO, General Electric)

Choosing Strategies for Companies

With the similar intended directions, companies would have different

strategies to achieve it,

because:individual strategies have to fit with the company’s situation: resource strengths

and capabilities

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Choosing Strategies for Companies

Television (broadcasting) Industry TV One, Metro TV, RCTI, GlobalTV, SCTV, TVRI,

KompasTV

Airlines Services Garuda, AirAsia, Mandala, Sriwijaya, Citilink

Retail Industry Carrefour, Alfa Mart, Mirota Kampus, Circle K,

Indomaret; Telecommunication Industry

Telkomsel, XL, Indosat

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Sustainable strategy is required to create

competitive advantage is based on the following

criteria: Having been hard to be copy

Relying on distinctive resources

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Strategy to Generates Competitive Advantage

Strive to be the industry’s low-cost provider AirAsia

Outcompete rivals on a key differentiating feature Mercedes-Benz – Engineering design and

performance Focus on a narrow market niche

Starbucks – premium coffees and coffee drinks

Relying on resource strengths not easily imitated Sony – innovative electronic products

Since the dynamic nature of competition, strategies could be

changed to respond with it

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Since the dynamic nature of competition, strategies could be

changed to respond with it

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A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive

Adjustments

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Why Do Strategies Evolve?

A company’s strategy is a work in progress and dynamic because of competition

Changes may be necessary to react to

Technological breakthroughs: e-businesses Fresh moves of competitors: local players (electronic

product-competitive prices) Evolving customer preferences- healthy and saving

energy product Emerging market opportunities: the rising

opportunities in Asia markets New ideas to improve strategy: innovative product in

IT

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Business Model

“How do we make money in this business?”

Simply, how does a company obtain profit in pursuing the committed

strategies?

THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS BUSINESS MODEL

RealizedStrategy

Competitive Initiatives

Business Approaches

Business Model

Value Proposition

Profit Formula

$$$?

In connection with both, when a company needs to pursue strategies for gaining

the favorable position in the market, the company still has to produces revenue sufficient to cover costs and profits and

help the company achieving the strategic objectives

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Business Model and Strategy: its Relationship

Strategy and Business Model

Dell Computer Low cost leadership strategy and direct selling

approach to achieve cost savings (supported IT) AirAsia

Low cost carried and no baggage service and other flight services

HP Low price strategy by selling printers at a low

(virtually break-even) prices, but charging higher prices on the repeat purchases of printing supplies, especially ink cartridges

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The Importance of Crafting and Executing Strategy

Crafting and Executing Strategy are inseparable managerial tasks to ensure that the company run on the intended direction;

Crafting strategy means that the company develop the committed action matching the competition

Executing strategy means that the company is capable to run the planned actions

Both actions are required to achieve the intended direction (survival and favorable position in the market)

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Crafting and Executing Strategy

Crafting Strategy

Executing Strategy

The Intended Direction

(Objectives)

To develop the planned actions in connection

with the intended direction

To build a capable organization and to run the planned

actions

The strategy has to result the improving performance

In terms of profitability and financial performance

In terms of market standing and competitive strength

BS-MMFEBUGM2010

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Strategy on Reflection

What is strategy? Do we really need strategy?

What for is strategy pursued?

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