Introduction to Strategy :

Clarifying the Idea of a strategy

CBMC-SM 301 Strategic Management

Joseph Anthony M. Romero

What is Strategy?
• The use of strategy has existed for many centuries, although its
use in management has a more recent history, dating back about
forty years.
• Strategy was born out of military conflicts, and the use of a
superior strategy enabled one party to win the war.
• Winning wars is not just about the magnitude of soldiers,
horses or ammunition an army has, wars are won through
strategy. Alexander the Great
Carl von Clausewitz, writing in the nineteenth century, states that
the decision to wage war ought to be:
➢ Rational - based on estimates of what can be gained and the
costs incurred by the war.
➢ Instrumental - waged to achieve some specific goal, never for
its own sake, and
➢ that strategy should be directed to achieve one end: victory.
What is Strategy?
Unlike war, in the modern business arena organizations are increasingly aware of the
benefits of cooperation as well as competition.

➢ Without a strategy, a firm is like a boat without an anchor floating in an open sea. Strong winds can
toss the boat to and fro, and has the ability to destroy it if neglected.
➢ A good strategy can explain “How the company plans to compete in a market” and “How it intends
to grow at a profit?”
What is Strategy?
A strategy is a set of goal-directed actions a firm takes to gain competitive advantage and
sustain superior performance relative to competitors. It is a crucial element in the firm’s
growth and development.

➢ In any competitive situation, a good strategy could enable a firm to maintain a

competitive advantage and achieve superior performance.
➢ A strategy provides Direction, Efficiency, Proactivity, Durability, and Leadership.
What is Strategy?
“Strategy is about being different. It requires a company to
choose a different set of activities to undertake than its
competitors. All companies incur costs as a result of the many
activities they undertake in order to be able to design,
manufacture, market, and distribute their products or services.
It is these activities which form the basis of competitive
advantage. Therefore, a company must choose activities in which
it can deliver a unique mix of value to the consumer.“
Michael Porter A company can only outperform its rivals when the value it provides to the
Professor in Harvard consumer is difficult for them to imitate. This occurs when:
1. the company provides a differentiated product or service which is more
highly valued by customers, enabling it to charge a premium price; or
2. the company provides products with the same quality as a competitor
offering, but charges a lower price.
Clarifying what is a Strategy
➢ Without a strategy, a firm is like a boat without an anchor floating in
an open sea. Strong winds can toss the boat to and fro, and has the
ability to destroy it if neglected.
➢ A strategy is a set of goal-directed actions a firm takes to gain
competitive advantage and sustain superior performance relative to
competitors
Constantinos Markides argues that the essence of strategy is for an organization to select one
strategic position that it can claim as its own.
A strategic position represents a company’s answers to the following questions:
• Who should the company target as customers?
• What products or services should the company offer the targeted customers?
• How can the company do this efficiently?
➢ In this way, a company can achieve success by choosing a strategic position which differs from
the competitors in its industry.
 Clarifying what is a Strategy
“a company’s strategy describes the match between what it is
particularly good at doing and its relationship with its
customers, suppliers, and competitors. This is because
organizations arepart of a network of relationships.
To succeed, they must deal with customers and suppliers, with
their competitors and potential competitors.
These relationships may be contractual—based on precise, legal
documentation—or, they may be relational—that is, based on
Oxford Economist John the need the parties have to continue doing business together."
Kay, views the strategy of ➢ This unique structure of these relationships is what Kay
an organization as ‘the referred to as architecture, which can be a source of a
match between its firm’s competitive advantage.
internal capabilities and
its external relationships’
What a Good Strategy looks like!
The success of BMW and Honda is based on their ability to
recognize their distinctive capabilities, what each can do
better than other organizations, and compete in the
markets which exploit these capabilities.
They do not build on the best practice of their competitors.
In fact, when they tried to copy their competitors they
failed.

Therefore, successful strategy is based on doing well

what your competitors cannot do or cannot easily do.
It is seldom based on what your competitors can do or
are already doing. An effective strategy will be adaptive
and opportunistic; this is not to imply anything vague
and unfocused. Strategy is about the firm using analytical
techniques to help it understand, and therefore
influence, its position in the market.
The Kernel of Strategy
➢ A strategy should honestly acknowledge the challenges being faced by an organization. It should
also provide an approach to overcome those challenges. As such, strategy is about discovering
the critical factors in a situation and providing a way to coordinate and focus action to deal
with these factors.
➢ A good strategy has an essential logical structure, which Rumel calls the
“kernel”. The kernel of a strategy contains three elements: Diagnosis,
Guiding Policy & a Set of Coherent Actions.
1. A Diagnosis
➢ A diagnosis defines or explains the nature of the challenge the
organization faces. The purpose of a diagnosis is to simplify the
complexity of the situation facing the organization. This is done by
identifying which aspects of the situation are critical.
➢ An insightful diagnosis can transform a manager’s view of the situation. It
might classify the situation according to a certain pattern; this then guides
managers to think how a similar pattern was handled by the organization
in the past.
Features of a Strategy
1. Strategy involves making integrative choices that position you on a playing Think of strategy as a
field of your choice in a way that you win. map! The map has to show
2. A great strategy must have a coherent theory (theory of business/business you where you are and where
model), be doable, and be translatable into actions. you want to go.
3. Strategy requires putting yourself out and specifying an outcome that It should also show you the
terrain and the obstacles you
involves customers wanting your product or service enough that they will may encounter along the way.
buy enough of it to make the profitability that you'd like to make. Without a map, you'll be lost,
4. You do not control the customers, which makes strategy a trickier task. and without a strategy, you'll
be directionless.
How?
1. Start by identifying the playing field you want to be on. Determine
where you can win.
2. Develop a theory as to why this playing field is the right one for you
to be on.
3. Determine how you will win on this playing field. What can you do to
serve the customers on this playing field better than anyone else?
4. Translate your theory and choices into concrete actions.
 Characteristic of a Good Strategy
1. Flexibility. A good strategy is flexible and adaptable to changes in the environment or circumstances.
2. Clarity. A clear understanding of the end goal and how to achieve it is crucial for a successful
strategy.
3. Focus. A strategy must prioritize and focus on the most important objectives to avoid spreading
resources too thin.
4. Agility. The ability to act quickly and make decisions under pressure is necessary for a successful
strategy.
5. Resourcefulness. A good strategy utilizes available resources effectively and efficiently.
6. Innovation. Innovative thinking is necessary to create a unique and effective strategy.
7. Risk management. Risk assessment and mitigation strategies should be incorporated into the
overall strategy.
Thank you for
Listening