MAN 301 Strategic and International Management

Lecture 1
What Is Strategy and Why Is It Important?
And: Vision, Mission, Objectives
September 9th, 2013

Semesters Agenda
1.

What Is Strategy and Why Is it Important?

Vision, Mission, Objectives
2. Evaluating a Companys Resources, Capabilities and Competitiveness
3. Evaluating a Companys External Environment
4. The Five Generic Competitive Strategies
5. Strengthening a Companys Competitive Position
6. Going International: Market and culture analysis
7. From comparative advantage to multinational and virtual organization:
Learning models of management
8. Diversification: Strategies for managing a group of businesses
9. Going international: Entry strategies and strategic alliances
10. Strategy implementation overview and wrap-up

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What is Strategic Management?

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What is Management?

the planning, organizing, leading, and controlling of human and other

resources to achieve organizational goals effectively and efficiently.

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What is a Manager? Types of Managers

CEO

Senior Manager
Middle Manager
First-line Manager
Marketing &
Sales

R&D

Manufacturing

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Accouting

Materials
management

Types of Managers and time spent on managerial

functions

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What is an Organization?

transforms resources into products or services, using production factors

such as capital and labor

Input
(resources,
production
factors)

Transformation

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Output
(products)

What are Resources?

Employees

Human resources

Financial resources

Physical resources

Equipment & plants

Technological resources

Patents, know-how

Reputation

Brands, networks, customer relationships

Capital, investment capacity

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What is Strategy?
Grecian root: Art of military leading
stratos = military, agos = leader

consists of the competitive moves and business approaches that

managers are employing to compete successfully, improve
performance and grow the business (Thompson et al., 2012)
is the creation of a unique, valuable position in the market space,
using a bundle of specific activities (Porter, HBR, Nov./Dez., 1996)

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Example Daimler

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What is Strategic Management?

tries to provide answers

regarding abnormal returns and
firm success.

Why do some firms perform better

than others?

Strategic management claims that

firm success is the result of the
content of strategy but also of the
process of strategy

The process of strategy concerns

development and implementation

HP

Dow
Jones

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Strategy & Business Model

What is a business model?

shows how the chosen strategy supports
the generation of revenues and ensures the
firms profitability
How are revenues/profits created given the
companys strategy?
Two elements:
Customer Value Proposition
How the company satisfies consumers
preferences while offering them a reasonable
price
Profit formula
How the company generates more revenues
than costs, i.e. efficiently meet customer needs

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Examples for different Business Models

Software

Package

TV /
Radio

Subscription

Advertisement

Open Source

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Successful Strategies

What determines the success of a strategy?

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Fit Test
Does the strategy match the external and internal conditions?

External Fit
Does the strategy fit the competitive
environment?
Is it compatible with the present market
conditions?
Internal Fit
How efficiently are the companys resources
and competencies exploited?
Does the strategy assess the companys
strengths and weaknesses?
Dynamic Fit
Can the strategy be adapted to changing
circumstances?
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Competitive Advantage Test

Is the strategy generating a sustainable competitive advantage?
Sustainable competitive advantage
Is it difficult for rivals to imitate the strategy?
Is the competitive advantage durable and long-lasting?

Examples
Brands
Exclusive access to resources
Knowledge about processes and technologies (patents)

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Performance Test
Is the strategy producing a good company performance?
Profitability and financial strength
Does the strategy lead to profits?
Is the financial strength of a firm enhanced?

Competitive strength and market share

Does the strategy strengthen the competitive position of the firm
compared to its rivals?
Is the extension of market share supported by the strategy?

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Example: McDonalds Plan-to-Win Strategy

Improved restaurant operations

Employee training

Affordable pricing

Cost & quality control

Wide menu variety & beverage

choice

Wraps, salads, coffee, pastry,

1$ Savers Menu,

Convenience & expansion of dining

opportunities

McCaf, 24h drive-thru

Ongoing restaurant reinvestment &

global expansion

China, Russia,

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Is McDonalds strategy successful?

Company performance
Operating Income: $ 7,4 billion (2010)
Sales records in 2010 despite the global economic crisis

Global expansion
Restaurants in 118 countries
3200 McCafs in Europe
Largest ice cream retailer in China

Dynamic customer needs

Increased demand for coffee shops
McCafs

Health-awareness
salads, wraps,

Source: McDonalds Corp. Annual Report 2010

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The Strategy Process

Vision and Mission Statement
Target planning
Environmental
Analysis

Corporate
analysis

Stage of
Mission building
Stage of
Strategic Analysis

Misfit-analysis
Strategy formulation
Corporate Strategy
Business Unit Strategy
Functional Strategy
Project Strategy

Stage of
Strategy
Formulation

Validation/Selection of a Strategy
Strategy implementation / Operative Planning
Functional Planning
Project Planning
Budget Planning

Stage of
Strategy
Implementation

Check on Strategy
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Mission Building

Definition of a companys
present state and purpose

Outline for the future direction

and focus of the firm

Vision, Mission and Values

statement

Objectives planning

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Strategic Analysis

External Analysis
Competitive environment
Customer demand
Market conditions

Internal Analysis
Resources
Competencies
Strengths & weaknesses

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Strategy Formulation

involves all management levels

Generic Competitive Strategies

Corporate Strategy
Business Unit Strategy
Functional Strategy
Project / Operational Strategy

Low-cost leader
Differentiation
Niche market
Best-price leader

Strategic Plan

= Vision, Mission, Values + Objectives + chosen Strategy

Often serves as motivator by setting ambitious objectives (strategic intent)

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Levels of Strategy Formulation

Corporate
Strategy

Multibusiness Strategyhow to gain synergies from managing a portfolio of

businesses together rather than as separate businesses

Two-Way Influence
Business
Strategy

How to strengthen the market position and gain competitive advantage

Actions to build competitive capabilities of single businesses
Monitoring and aligning lower-level strategies
Two-Way Influence

Functional Area
Strategies

Add relevant detail to the hows of the business strategy

Provide a game plan for managing a particular activity in ways that support
the business strategy
Two-Way Influence

Operating
Strategies

Add detail and completeness to business and functional strategies

Provide a game plan for managing specific operating activities with strategic
significance

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Example for Strategy Levels: Lufthansa

Passenger Business
Worldwide Nr. 2 in
international transport

Logistics
Leading in international
air freight logistics

Maintenance
Leading provider of
engineering, maintaining
services related to the
airline industry

Catering
World largest AirlineCaterer

Services
One of the worlds
leading providers of
training courses for
airlines

IT-Services
One of the leading IT
providers for airline and
aviation industry

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Strategy Levels

Lufthansa

LH Strategic Business Unit:

Lufthansa Cargo:
> How do we position Lufthansa Cargo
in comparison to its competitors?

Business-Level:

Business Strategies
Available strategic advantages at this level:
> Competitive advantage
> Market positioning advantage

Superior performance
Above-average returns

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Strategy Levels
Corporate-level:

Lufthansa

LH Holding:
> Which businesses are we in?
> How can we exploit our
existing core competences best?

Corporate
Strategies
Available strategic
advantages at this level:
> Portfolio-selectionadvantages
> Parenting
advantages
> Strategic
spillovers

Business Strategies

Superior performance
Above-average returns

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Strategy Levels

Lufthansa

Corporate
Strategies

Business Strategies

Functional-Level:

Functional
Strategies

LH marketing
strategy:
> Branding
> Policies for
marketing mix

Available strategic advantages at

this level:
> skills/capabilities/
Superior performance
competences
advantages
Above-average returns

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Strategy Levels

Lufthansa
Operating Strategies #1: e.g.
Network Strategies

Network-Level:
Corporate
Strategies

Star Alliance:
> Where can we best realize
synergies with our alliance
partners?

Available strategic
advantages at this
level:
> advantages
from synergies

Business Strategies
Functional
Strategies

Superior performance
Above-average returns

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Strategy Levels

Lufthansa
Network
Strategies

Corporate
Strategies

Business Strategies

Issue-Level:
Operating Strategies #2:
e.g. Issue Strategies

Functional
Strategies

Above-average returns

E-viation initiative:
> How can we improve our
inflight services by new (broad
bandwith) technologies?

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Superior performance

Interaction of Strategy Levels

Corporate Strategies

Network Strategies

Business Strategies

Functional Strategies

Issue Strategies

Level-related advantages
Superior performance
Above-average returns
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Strategy Implementation

Execution of strategy depends

on employees attitude towards
internal changes

Often implies
Training
Resource allocation
Investments

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Strategy Evaluation

Evaluation Criteria
Fit Test
Competitive Advantage Test
Performance Test

Failures in strategy formulation

and/or implementation?

Changing external conditions?

New opportunities?

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Evolution process of strategies

Depending on the volatility of the environment, strategies have to be

adapted to meet changing circumstances in competition or demand

Crafting a strategy is not a one-time event, but a work in progress

evolving strategy!

Deliberate strategies: Planned and realized as planned

Proactive actions: financial performance /competitive positioning

Emergent strategies: unplanned, adaptive to changing conditions

Reactive actions: adaption to unanticipated developments

Abandoned elements: obsolete or ineffective due to unanticipated events

Realized strategies = proactive and reactive elements!

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Evolution process of strategies

Abandoned elements

Deliberate strategy
Planned strategy

(proactive elements)

Realized strategy

Emergent strategy
(reactive elements)

Time
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Example Bosch

The long-term strategy of the Bosch Group takes its lead from fundamental global trends. The core
elements of our strategy thus remain in place even after the crisis. These include a strong
international presence, focused diversification, and a high level of innovative strength. The crisis
has not proved us wrong in sticking to these objectives. On the contrary, it has shown us how right
we are:
Internationalization we shall continue to press ahead with expanding our business worldwide,
thereby further strengthening our international presence.
Diversification we shall continue to balance out our sectoral sales structure. This means taking full
advantage of our opportunities for growth in automotive technology, but at the same time growing
by above-average rates in consumer goods, building technology, and industrial technology. In
doing so, we shall concentrate on areas of business that fit our technological competence this is
what we call focused diversification.
Innovation We shall focus our innovative strength on technology that is Invented for life. We see
significant economic opportunities arising with the attention given to ecological needs, since these
needs require more, not less, technology.

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Semesters Agenda
1.

What Is Strategy and Why Is it Important?

Vision, Mission, Objectives
2. Evaluating a Companys External Environment
3. Evaluating a Companys Resources, Capabilities and Competitiveness
4. The Five Generic Competitive Strategies
5. Strengthening a Companys Competitive Position
6. Strategies for managing a group of businesses
7. Going International: Market and culture analysis
8. Going International: Entry strategies
9. The strategy of the multinational corporation
10. Strategy implementation overview
11. Guest Lecture Horvth & Partners: The Challenge of Strategic Alignment
in International Corporations

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The Strategy Process

Vision and Mission Statement
Target planning

Environmental
Analysis

Corporate
analysis

Stage of
Mission building
Stage of
Strategic Analysis

Misfit-analysis
Strategy formulation
Corporate Strategy
Business Unit Strategy
Functional Strategy
Project Strategy

Stage of
Strategy
Formulation

Validation/Selection of a Strategy
Strategy implementation / Operative Planning
Functional Planning
Project Planning
Budget Planning

Stage of
Strategy
Implementation

Check on Strategy
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Vision and Mission Statements

Vision
Mission

Vision &
Mission
Statement

Values

Objectives

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Target
Planning

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Vision
A vision describes a better future state.
It is a dream with expiration date. After that you need a new vision.
1.

It helps to make sense

.for the collective and the individuals
.reduces complexity and structural requirements

2.

It needs to be motivating
.can help to realize a specific desired image of the future state of
the firm (the difference between the actual and the desired state sets
free endogenous potentials)

3.

It is guiding actions and activities

allows the pursuit of behavior of each individual
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Selected visions
Nike (1964):
Smash Adidas
Canon
Beat IBM

Enemy focused

Wal-Mart (1990):
We want to be a 125
Billion USD company
by the year 2000

Rockwell (1995):
We want to evolve
from a producer of
defense products to
one of the worlds
leading diversified
high tech companies

Watkins-Johnson
(1996):
In 20 years from
now we want to be as
respected in the
industry as Hewlett
Packard is today

Goal focused

Change Focused

Role model focused

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Mission Statement
A mission describes the companys present state and purpose.

Defining the Business

Who are our customers?
What customer needs are being satisfied?
How are we satisfying customer needs

Establishing Major Goals

Provides the organization with a sense of direction
Stretches the organization to higher levels of performance
Goals must be challenging but realistic with a definite period in which they
are to be achieved

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Mission Statement:

Creating a better everyday life for people

Ikea's mission is to offer a wide range of
home furnishing items of good design and
function, excellent quality and durability, at
prices so low that the majority of people
can afford to buy them (IKEA 1994). The
company targets the customer who is
looking for value and is willing to do a little
bit of work serving themselves,
transporting the items home and
assembling the furniture for a better price.
The typical Ikea customer is the young
low to middle income family.

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Other examples of Mission Statement

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The relationship between Mission, Vision and Strategies

Contextual factors
(i.e. Mission, Business model)
Strategic goals

Alternative
strategies
(incl. assumptions)

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The Strategy Process: Next week

Vision and Mission Statement
Target planning
Environmental
Analysis

Corporate
analysis

Stage of
Mission building
Stage of
Strategic Analysis

Misfit-analysis
Strategy formulation
Corporate Strategy
Business Unit Strategy
Functional Strategy
Project Strategy

Stage of
Strategy
Formulation

Validation/Selection of a Strategy
Strategy implementation / Operative Planning
Functional Planning
Project Planning
Budget Planning

Stage of
Strategy
Implementation

Check on Strategy
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Thank you for your attention.

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