“In peace prepare for war, in war prepare for peace. The art of war is of vital importance to the state.”

512 BC Structure

1. What is ? 2. Strategic Analysis 3. Strategy Development 4. Strategy Implementation 1. What is Strategy?

“Tactics is the art of using troops in battle; strategy is the art of using battles to win wars.” Helmuth Karl Bernhard Graf von Moltke

“Strategy is the practical adaptation of the means placed at a general's disposal to the attainment of the object in view.” Michael E Porter

“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

Porter (1996:64) Subhash C Jain

„Strategy in a firm is a pattern of major objectives, purposes, or goals ...... and essential policies and plans for achieving those goals...... , stated in such way as to define ...... what business the company is in or is to be in and the kind of company it is or is to be.“ (Jain 2004 p. 9) Marketing Strategy

Marketing strategy deals essentially with the interplay of three forces: – the customer, the competition, and the corporation (strategic three Cs)

Characteristics of good marketing strategy: – A clear market definition – A good match between corporate strengths and the needs of the market; – Superior performance in the key success factors of the business

Based on the interplay of the three Cs, strategy requires three decisions: − Where to compete (market, segments, …)? − How to compete (means for competing)? − When to compete (timing)?

(Jain 2004) Put differently …

Strategy development is a question‐based process: – Where are we now?

– Where would we like to go?

– How do we get there?

(Peter Edelmann, Senior Executive President Voith Turbo) 2. Strategic Analysis PESTEL Analysis

What are the key issues we face in our business?

Political Environment Economical Environment

Social Environment Technological Environment

Environmental Environment Legal Environment Example issues

Political environment Economical environment

• ecological/environmental issues • home economy situation • current legislation home market • home economy trends • future legislation • overseas economies and trends • European/international legislation • general taxation issues • regulatory bodies and processes • taxation specific to product/services • government policies • seasonality/weather issues • government term and change • market and trade cycles • trading policies • specific industry factors • funding, grants and initiatives • market routes and distribution trends • home market lobbying/pressure groups • customer/end‐user drivers • international pressure groups • interest and exchange rates • wars and conflict • international trade/monetary issues

www.businessballs.com SWOT FIT matters: Internal strength and weaknesses need to match with external opportunities and risks (Kenneth Andrews)

Weaknesses

Strength Opportunities

Risks

Task: Keeping findings descriptive ; Investigating both internal AND external issues Example issues

Strength Weaknesses

• Advantages of proposition? • Disadvantages of proposition? • Capabilities? • Gaps in capabilities? • Competitive advantages? • Lack of competitive strength? • USP's (unique selling points)? • Reputation, presence and reach? • Resources, Assets, People? • Financials? • Experience, knowledge, data? • Own known vulnerabilities? • Financial reserves, likely returns? • Timescales, deadlines and pressures? • Marketing ‐ reach, distribution, awareness? • Cash flow, start‐up cash‐drain? • Innovative aspects? • Continuity, supply chain robustness? • Location and geographical? • Effects on core activities, distraction? • Price, value, quality? • Reliability of data, plan predictability? • Accreditations, qualifications, certifications? • Morale, commitment, leadership? • Processes, systems, IT, communications? • Accreditations, etc? • Cultural, attitudinal, behavioural? • Processes and systems, etc? • Management cover, succession? • Management cover, succession?

www.businessballs.com Example issues

Opportunities Threats

• Market developments? • Political effects? • Competitors' vulnerabilities? • Legislative effects? • Industry or lifestyle trends? • Environmental effects? • Technology development and innovation? • IT developments? • Global influences? • Competitor intentions ‐ various? • New markets, vertical, horizontal? • Market demand? • Niche target markets? • New technologies, services, ideas? • Geographical, export, import? • Vital contracts and partners? • New USP's? • Sustaining internal capabilities? • Tactics ‐ surprise, major contracts, etc? • Obstacles faced? • Business and product development? • Insurmountable weaknesses? • Information and research? • Loss of key staff? • Partnerships, agencies, distribution? • Sustainable financial backing? • Volumes, production, economies? • Economy ‐ home, abroad? • Seasonal, weather, fashion influences? • Seasonality, weather effects?

www.businessballs.com Competitor Intelligence

• Who are your key competitors? • How do they perform? • What are there strengths and weaknesses? • What could be there strategy? • How could all of this impact your business? Stakeholder Analysis

• Think of all of your stakeholder groups: – What do they expect from your company? 3. Strategy Development Point of view

• Developing good :

– Having managers understanding ‘the benefit of having a well‐ articulated, stable purpose, and the importance of discovering, understanding, documenting, and exploiting insights about how to create more value than other competitors do’

– Universal objectives (profitability, costs, turnover, sales, quality, etc. ) define what a company must do to survive – but do not automatically suggest unique strategies nor provide direction

– The essence of why an organization exists does provide guidance to achieve these universal objectives

(Campbell 1997 p 42) What business are we in and why?

• Vision – long‐term, encouraging, aspiration for the future

• Mission – purpose of the business

• Values – attitudes, behaviours, character of organization to guide actions like an internal compass Planning Processes

• Processes of developing good strategies are ‘much more messy, experimental, iterative; and driven from the bottom up’ than many planning processes suggest • Besides, if there were one best way –everyone could use it • However processes and frameworks do provide structure, help to systematize the basis and context for decision taking and document results along the way (Campbell 1997 p 46)

“A good plan is not a neat document put in a folder after print – a good plan – that is a piece of paper, which has been crumpled up a hundred times, thrown into the corner, but taken again to get changed, modified, extended …” (Robert Grant, Lecturer UOW) Generic Strategies

Competitive Advantage

Differentiation Lower Cost

Differentiation Cost Leadership Broad Target Scope

Focus Niche Market Efficiency Narrow Target Competitive (Porter 1985) Core Marketing Strategies

Operational Product Customer Excellence Leadership Intimacy

Strategic Sharpen distribution Nurture ideas, translate Provide solutions and systems and provide them into products, and help customers run their Direction no‐hassle service market them skillfully business

Organizational Has strong, central Acts in an ad hoc, Pushes empowerment authority and a finite organic, loosely knit, and close to customer Arrangement level of empowerment ever‐changing way contact

Systems Maintain standard Reward individuals´ Measure the cost of operating procedures innovative capacity and providing service and of Support new product success maintaining custome loyalty Corporate Acts predictably and Experiments and thinks Is flexible and thinks believes „one size fits „out‐of‐the‐box“ „have it your way“ Culture all“

(Pearcy, Wiersema 1995) Market Strategies

Current Markets New Markets

Market Penetration Market Development Current Products

Product Development Diversification New Products

(Ansoff) How can we best compete?

• Which customers and markets will we target? • What is the value proposition that distinguishes us? • What key processes give us ? • What are the human capital capabilities required to excel at these key processes? • What are the technology enablers required for the strategy?

(Kaplan 2008) Key Success Drivers

• What factors are especially important to perform superior in our industry? Defining Strategic Business Units

“An SBU is composed of a product or product lines having identifiable independence from other products or product lines in terms of competition, prices, substitutability of product, style/quality and impact of product withdrawal.” (Jain 2004 p. 18)

- unique business mission, independent of other SBU’s - clearly definable set of competitors - able to carry out integrative planning relatively independently of other SBU’s -large enough to justify senior management attention but small enough to serve a useful focus for resource allocation

(Jain 2004) Defining SBUs –Targeting Market Segments

Customer Groups 4. Dimension: Level of Distribution

Technologies

Customer Functions Targeting: Which segments to go for?

• Identifiability − Ability to identify and measure the relevant characteristics • Size − Sufficient number of buyers • Stability − Needs or factors do not change too rapidly • Accessibility − Ability to reach target segment in economical way • Responsiveness − Segment responds homogeneously to a specific marketing mix

‐> Meaningful ‐> Actionable ‐> Financially attractive (Schiffman et al. 2005)

Customer Benefits Configuration Company Boundaries

Cutomer Interface Core Strategy Strategic Resources Value Network Fulfillment & Support Business Mission Core Competencies Suppliers Information & Insight Product/Market Scope Strategic Assets Partners Relashionship Dynamics Basis for Differentiation Core Processes Coalitions Pricing Structure

Efficient / Fit / Profit Boosters (1)

(1) Increasing Returns, Competitor Lock‐Out, Strategic Economies, Strategic Flexibility

(Gary Hamel 2002) Strategy as Simple Rules

• Approach to allow quick moves in dynamic markets by increasing managers‘ flexibility in decision taking • Puts focus on growth and pursue of opportunities • Provides just enough guidance and structure by a limited set (<10) of simple and unique rules regarding key processes • Rules mainly based on experience (first‐hand or second‐hand) • Important to not set rules too broad (no specific focus) or vague (not easy to follow) • Challenge to balance strategy consistency (long‐term perspective) and need to adapt rules to changing conditions

(Eisenhardt 2001 pp. 108-115) Types of Rules

• How‐to rules – guiding execution of key processes • Boundary rules – limiting range of opportunities (company scope) • Priority rules – setting priorities for resource allocation (ranking opportunities) • Timing rules – adapting internal schedules (e.g. NPD) to the pace of markets • Exit rules – defining criteria to exit opportunities in the light of unpredictable developments (Eisenhardt 2001 p. 111) Innovation & Change

• Understanding mental models – Managers’ mindsets (industry dogmas) that influence the interpretation of situations (sense‐making) and as such decision making – Task to make the implicit explicit and to constantly question and challenge those long‐held believes • Thinking beyond best‐practice – process‐reengineering, TQM, etc. necessary but not sufficient and lead towards performance barrier – ‚Dream, create, explore, invent, pioneer, imagine …‘ (Hamel G 2002 p. 28) • Changing the rules of the game! – From market driven to market driving by innovating regarding value proposition AND business system

(Bickhoff N 2008, Hamel G 2002, Kumar N 2000, Porter 1996) Strategy Evaluation

• Suitability: Is there a sustainable competitive advantage? • Validity: Are assumptions realistic? • Feasibility: Does firm have the skills, resources, and commitments? • Internal consistency: Does strategy hang together? • Vulnerability: What are the risks and contingencies? • Workability: Can we retain our flexibility? • Timing: What is the appropriate time horizon?

(Jain 2004) 4. Strategy Implementation Strategy Maps

• To visualize strategy and cause‐effect relationships among strategic objectives • Each perspective helps to execute the one above • Best applied at various levels (corporate, SBU, …) • Strategy Maps support strategy alignment • Visual representation of the linked components facilitates strategy communication • Maps link to Balanced Score Card (performance metrics) • Generic maps provide guidance to develop unique maps tailored to company (Kaplan, Norton 1996, 2004, 2008) Generic Strategy Map (reduced)

Increase return on capital

Increase revenues in Grow revenues in new Financial Improve productivity existing segments products and services Perspective and markets

Improve Operating Grow High‐Value Accelerate Product Quality and Efficiency Customer Relationships Innovation Provide valued service, Introduce innovative, Be a leader in quality Customer applications expertise, high‐performance and reliability Perspective and support products and solutions

Excel at technology, Improve supply chain Optimize customer Process product development efficiency and effectiveness profitability Perspective and life cycle Expand channels management Improve quality, cost, offerings, and markets Identify next‐generation and flexibility of Build and maintain strong market opportunities operating processes customer relationships

Learning Create a high‐Performance Culture and Growth Expand and build Develop leadership and Enable and require Perspective strategic skills, capabilities, execution‐driven culture continuous learning and and expertise sharing of knowledge

(Kaplan, Norton 2008) Generic Strategy Map (detailled) (Kaplan, Norton 2004)

Productivity Strategy Long‐Term Growth Strategy Shareholder Value Financial Improve Cost Increase Asset Expand Revenue Enhance Perspective Structure Utilization Opportunities Customer Value

Customer Value Proposition

Price Quality Availability Selection Functionality Service Partnership Brand Customer Perspective Product / Service Attributes Relationship Image

Operations Management Customer Management Innovation Processes Regulatory and Social Processes Processes Processes • Supply • Selection • Opportunity • Environment • Production • Acquisition • R & D Portfolio • Safety and Health • Distribution • Retention • Design/Develop • Employment Internal • Risk Management • Growth • Launch • Community Perspective

Human Capital Learning and Growth Information Capital Perspective

Culture Leadership Organization Capital Alignment Leadership Balanced Score Card

• Performance measuring system to quantify also intangible assets • Customer perspective, internal processes and learning as building blocks • Financial performance as ultimate indicator • Companies vision and mission stand above providing overall direction • „You cannot manage, what you cannot measure.“ Balanced Score Card

Vision and Mission

Objectives Measures Targets Initiatives

Financial Perspective

Customer Perspective

Process Perspective

Learning and Growth Perspective Balanced Score Card

1) Set global goals − What do you generally aim at? 2) Define measures − How will you measure your results? 3) Set targets − Specific goals related to your measures you like to achieve in a certain time frame 4) Plan initiatives − What actions will take place to meet your goals? Finally, ask yourself …

“There are three kind of companies, those that make things happen, those that watch things happen – and those that wonder what happened.”

(anonymous) And consider…

“Predicting rain does not count – building arks does.”

(anonymous) Literature

• Andrews K R (1987) ‘The Concepts of Corporate Strategy’ Richard D Unwin, Homewood • Bickhoff N (2008) ‚Quintessenz des strategischen Managements –Was Sie wirklich wissen müssen, um im Wettbewerb zu überleben‘ Springer‐Verlag, Berlin • Campbell A, Alexander M (1997) ‚What’s Wrong with Strategy?’ HBR Nov‐Dec, pp. 42‐51 • Eisenhardt K M, Sull D N (2001) ‚Strategy as Simple Rules‘ HBR Jan‐Mar, pp. 107‐116 • Hamel G (2002) ‘Leading the Revolution’ Harvard Business School Press, Boston USA • Jain S C (2004 7th ed.) ‘Marketing: Planning and Strategy’ Thomson, Ohio USA • Kaplan R S, Norton D P (2008) ‘Mastering the Management System’ HBR, Jan, pp. 63‐77 • Kaplan R S, Norton D P (2004) ‘Strategy Maps’ Boston • Kaplan R S, Norton D P (1996) ‘The ’ Boston • Kumar N, Scheer L, Kotler P (2000) ‚From Market Drive to Market Driving‘ European Management Journal Vol. 18 No. 2, pp. 129‐142 • Porter M E (1996) ‘What is Strategy?’ , No. 6, Nov‐Dec, pp. 61‐78 Literature

• Porter M E (1985) ‘Competitive Advantage’ Free Press, New York • Schiffman L et al. (2005) ‘Consumer Behaviour’ Pearson Education Australia, Frenchs Forest NSW • Treacy M, Weirsema F (1995) ‘The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market’ Perseus Books, Cambridge Further Concepts

• Blue Ocean Strategies (Kim, Mauborgne ) • Core Competencies (Hamel, Prahalad); • Resource‐based view (Barney, Clark) • Five Forces (Porter) • Marktet‐Orientation (Kohli, Jaworski, Narver, Slater, Day) • Operational Excellence • Portfolio Analysis • Product Lifecycle, Industry Lifecycle • Six Sigma (Pande, Neuman, Cavanagh) • Strategic Intent (Hamel, Prahalad) • Sustainable Competive Advantage • Total Quality Management • (Porter) Further Readings

• Barney J B, Clark D N (2007) ‘Resource‐Based Theory: Creating and Sustaining Competitive Advantage’ Oxford University Press • Day G S (1994) ‘The capabilities of market‐driven organizations’ Journal of Marketing, Vol. 58, No. 4, pp. 37‐52 • Kim W C, Mauborgne R (2005) ‘Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant’ Harvard Business School Press • Kohli A K, Jaworski B J (1990) ‘Market Orientation: The Construct, Research Propositions, and Managerial Implications’ Journal of Marketing, Vol. 54, No. 2, pp. 1‐18 • Narver J C, Slater S. F. (1990) ‘The effect of a market orientation on business profitability’ Journal of Marketing, Vol. 54, No. 4, pp. 20‐36 • Senge P M (1990) ‘The Fifth Discipline: The Art and Practice of the learning Organization‘ Currency Doubleday