MGS 526

WINNING STRATEGIES FOR “REAL WORLD” SUCCESS

BUSINESS WEALTH CREATION

AND
STRATEGIC STAKEHOLDER MANAGEMENT
--‘

1.0: STRATEGY DEFINITIONS & THEORIES

2.0: STRATEGY PROCESS MODELS RE:

• MICRO & MACRO ENVIRONMENTAL SCANNING
MODELS
• DEVELOPMENT –FORMULATION -
IMPLEMENTATION

3.0: THE STRATEGIC DILEMMA

1
1.0: STRATEGY DEFINITIONS
1.1: QUOTATIONS
• Strategy is about setting yourself apart from the competition. It’s not a matter
of being better at what you do – it’s a matter of being different at what you do.
~ Michael Porter

“A satisfied customer is the best business strategy of all.”

Michael Leboeuf

Leaders establish the vision for the future and set the strategy for getting there; they cause change.
They motivate and inspire others to go in the right direction and they, along with everyone else,
sacrifice to get there.”
John Kotter

“There will be hunters and hunted, winners and losers. What counts in global competition is the right
strategy and success.”
Heinrich von Pierer

2
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

THE “WHY” THIS COURSE

This course is designed to provide Business Faculty students with the opportunity to
understand how strategic business battles are won or lost by studying “real world”
examples as to "how and why" various corporations succeeded or failed resultant of
their managerial competencies to effectively deploy resource assets to achieve
pluralistic stakeholder objectives.

THERFORE IT IS ESSENTIAL T/B EXPOSED TO

THE DYNAMICS-THE MODELS AND THE PROCESS
RE:STRATEGIC DECISION MAKING

WHY?

TO COMPREHEND COMPARATIVE “REAL WORLD” EXAMPLES RE:

THE IMPACT OF “REAL WORLD” STRATEGIC APPLICATIONS
CONSEQUENTLY:

WHAT WORKED -----WHAT DIDN’T

MORE IMPORTLANTLY—UNDERSTANDING THE “WHY”

3
 BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

1.2: THEORIES
Strategy According to Kenneth Andrews
Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of Corporate
Strategy [4]:
"Corporate strategy is the pattern of decisions in a company that determines and reveals its
objectives, purposes, or goals, produces the principal policies and plans for achieving those goals,
and defines the range of business the company is to pursue, the kind of economic and human
organization it is or intends to be, and the nature of the economic and non-economic contribution it
intends to make to its shareholders, employees, customers, and communities."

Strategy According to George Steiner

. Steiner also points out that there is very little agreement as to the meaning of strategy in the
business world. Some of the definitions in use to which Steiner pointed include the following:
• Strategy is that which top management does that is of great importance to the organization.
• Strategy refers to basic directional decisions, that is, to purposes and missions.
• Strategy consists of the important actions necessary to realize these directions.
• Strategy answers the question: What should the organization be doing?
• Strategy answers the question: What are the ends we seek and how should we achieve them?
•

4
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
1.2: THEORIES
Strategy According to Henry Mintzberg
Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning [3], points out that people
use "strategy" in several different ways, the most common being these four:
1. Strategy is a plan, a "how," a means of getting from here to there.
2. Strategy is a pattern in actions over time; for example, a company that regularly markets very
expensive products is using a "high end" strategy.
3. Strategy is position; that is, it reflects decisions to offer particular products or services in
particular markets.
4. Strategy is perspective, that is, vision and direction.
Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a
changing reality. Thus, one might start with a perspective and conclude that it calls for a certain
position, which is to be achieved by way of a carefully crafted plan, with the eventual outcome and
strategy reflected in a pattern evident in decisions and actions over time. This pattern in decisions
and actions defines what Mintzberg called "realized" or emergent strategy.

• STRATEGY ACCORDING TO HP CEO LEWIS PALTT

STRATEGY is defensive self-destruction and renewal. We have to be willing to cannibalize what
we're doing today in order to ensure our leadership in the future....

5
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
1.2: THEORIES:
• The concept of strategy has been borrowed from the military and adapted for use in
business

A strategy is a long term plan of action designed to achieve a particular goal, most often "winning". Strategy is
differentiated from tactics or immediate actions with resources at hand by its nature of being extensively
premeditated, and often practically rehearsed.
The word derives from the Greek word stratēgos, which derives from two words: stratos (army) and ago
(ancient Greek for leading). Stratēgos referred to a 'military commander' during the age of Athenian
Democracy.

• PER GEORGE PATTON THE FAMOUS AMERICAN WORLD WAR 11 GENERAL

“NO POOR DUMB BASTARD EVER WON A WAR BY DYING FOR HIS COUNTRY-----HE
WON IT BY MAKING THE OTHER POOR DUMB BASTARD DIE FOR HIS COUNTRY”

IN THE BUSINESS SCENARIO----

THE ULTIMATE WIN IS ACHIEVING MONOPOLY

THAT IS
RESULTANT OF WINNING THE CUSTOMERS’ ABSOLUTE FRANCHAISE

COMPETING WITH BASICALLY ZERO COMPETITION

6
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

2.0: STRATEGY PROCESS MODELS

2.1: THE GENERAL STANDARD MODEL

• DEFINING THE MISSION

• IDENTIFYING OBJECTIVES
• SITUATION ANALYSIS
• STRATEGY FORMULATION
• IMPLEMENTATION
• CONTROL

2.11:DEFINING THE MISSION

The Company’s mission must expressed clearly its Raison d’etre i.e. Its reason for being.
The mission is typically communicated in the form of a Mission Statement that is geared to convey
a sense of purpose to the Company employees and also project the desired Company image to the
Company’s Target Market----effectively the Mission Statement crystallizes where the Company is
going.

7
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
2.0: STRATEGY PROCESS MODELS

2.12: IDENTIFYING OBJECTIVES/GOALS

Objectives are specific goals that the Company wants to achieve over a specified time spectrum.
For example: MARKET SHARE, EXPANSION, PROFTS,and MARGINS ETC.
The defined objectives s/b expressed in qualitative and quantitative terms so that over the
prescribed period of achievement, performance can be monitored for feedback and appropriate
reactive correction.

2.13: CONDUCTING A SITUATIONAL ANALYSIS

An environmental scan to identify market place opportunities in conjunction with an examination

of the Company’s capabilities and its limitations in order to select the appropriate opportunities it
can realistically capitalize on with a high probability of success.
The “situational” scan should include macro and micro analyses to examine the Company’s
positioning status as related to the general environment plus its positioning as related to its
competitive environment and within the context of its own assets.

SITUATIONAL ANALYTICAL MODELS

• SWOT –REF. EXHIBIT B
• PORTER-REF. EXHIBIT C
• PEST- REF. EXHIBIT D

8
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
2.0: STRATEGY PROCESS MODELS
2.14: STRATEGY FORMULATION

STRATEGY FORMULATION DEFINED

Strategy formulation is the process of determining appropriate courses of action
for achieving organizational objectives and thereby accomplishing organizational
purpose.
FOR EXAMPLE
Sustainable competitive advantage--- allows the maintenance and improvement of the
enterprise's competitive position in the market. It is an advantage that enables
business to survive against its competition over a long period of time.
PROCESS
The strategy you formulate should reflect your environmental analyses lead to
fulfillment of your organizational mission, and result in reaching organizational
objectives.
Tools you can use to assist you in formulating strategies should/could include
• SWOT analysis,

• PEST analysis

• Porter's model for industry analysis

9
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
2.0: STRATEGY PROCESS MODELS
2.15: STRATEGY IMPLEMENTATION
By Bill Birnbaum,CMC

Organizations effective at strategy implementation successfully manage

six strategy supporting factors:
1. Action Planning
First, organizations successful at strategy implementation develop detailed action
plans... chronological lists of action steps (tactics) which add the necessary detail to
strategies. And assign responsibility to a specific individual for accomplishing each of
those action steps. Also, they set a due date and estimate the resources required to
accomplish each of their action steps. Thus they translate their broad strategy
statement into a number of specific work assignments.

2. Organization Structure
Successful implementers give thought to their organizational structure... and ask if
their intended strategy is appropriate for that current structure. And they ask a
deeper question as well... "Is the organizational structure appropriate to the intended
strategy?"

3. Human Resources
Organizations successful at implementation consider the human resource factor
in making strategies happen
10
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
2.0: STRATEGY PROCESS MODELS
2.15: STRATEGY IMPLEMENTATION
By Bill Birnbaum, CMC

Organizations effective at strategy implementation successfully manage

six strategy supporting factors CONT’D:

4. The Annual Business Plan

Organizations successful at implementation are aware of their need to fund their
intended strategies--- they "dollarize" the necessary financial commitment early in
the planning process. First, they "ballpark" the financial requirements when they first
develop their strategy... and later when developing their action plans, they "firm up"
that commitment; they link their strategic plan to their annual business plan (and
their budget). And they eliminate the "surprises" they would otherwise receive at
budgeting

5. Monitoring and Control

Monitoring and controlling the plan includes a periodic look to see if you're on course...
and it also includes a list of options to get back on course if you should veer off. Those
options include changing the schedule, changing the action steps, changing the
strategy or (as a last resort) changing the objective

11
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

3.0: THE STRATEGIC DILEMMA

MOST COMPANIES HAVE STRATEGIES, BUT FAR FEWER ACHIEVE THEM. VARIOUS
STUDIES SUPPORT THIS VIEW, FOR EXAMPLE:

A Fortune Magazine study suggested that 70% of 10 CEOs who fail do so

not because of bad strategy, but because of bad execution. (Source: Why
CEOs Fail - R Charan & G Colvin, Fortune Magazine, 21 Jun 1999.)

In another study of 200 companies in the Times 1000, 80% of directors

said they had the right strategies but only 14% thought they were
implementing them well, no doubt linked to the finding that despite 97%
of directors having a 'strategic vision', only 33% reported achieving
'significant strategic success'. (Source: Why do only one third of UK
companies achieve strategic success? - I Cobbold & G Lawrie, 2GC Ltd.,
May 2001.)

12
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

3.0: THE STRATEGIC DILEMMA---STRATEGY IMPLEMENTATION FAILURE

Why Strategy Implementation Fails.

The most common reasons for failure include:
• People don't want to make the strategy work.
• Ineffective communication.
• Failure to analyze the implications of the strategy on the Organization.
• Changing too much at once. Lack of 80/20 focus.
• Mixed messages.
• Lack of role clarity – who? must do what--by when.
• Lack of action! Focus on knowing rather than doing.
• Being 'put off' by resistance to change.
• Failing to remove or step around barriers to implementation.
• Lack of perseverance. Things get worse before they get better.
• Implementation is seen as negative and stressful rather than creative and exciting.

13
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT

THE “WHY” THIS COURSE

This course is designed to provide Business Faculty students with the opportunity to
understand how strategic business battles are won or lost by studying “real world”
examples as to "how and why" various corporations succeeded or failed resultant of
their managerial competencies to effectively deploy resource assets to achieve
pluralistic stakeholder objectives.

HAVING BEEN EXPOSED TO

THE DYNAMICS-THE MODELS AND THE PROCESS
RE:STRATEGIC DECISION MAKING

NOW YOU ARE IN A BETTER POSTION

TO STUDY COMPARATIVE “REAL WORLD” EXAMPLES RE:

THE IMPACT OF “REAL WORLD” STRATEGIC APPLICATIONS
SPECIFCALLY:

WHAT WORKED -----WHAT DIDN’T

MORE IMPORTLANTLY—UNDERSTANDING THE “WHY”

14
BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDER
MANAGEMENT
STRATEGY PROCESS MODEL EXHIBITS

ANALYTICAL MODELS

• SWOT –REF. EXHIBIT B

PAGE:13-17

• PORTER-REF. EXHIBIT C
PAGE:18-22

• PEST- REF. EXHIBIT D

PAGE:2-25

15
EXHIBIT B

SWOT REPRESENTS

� Strengths
� Weaknesses
� Opportunities
� Threats

� For a organization’s strategy to be well conceived,

it must be matched to both
� Taking advantage of its internal strengths
while defending against its weakness Identifying the
best market opportunities WHILE SIMULTANEOUSLY
MINIMIZING OR ELIMINATING
external threats to its well-being.

16
SWOT Analysis: What to Look For
Potential Resource Strengths

• Powerful strategy
• Strong financial condition
• Strong brand name image/reputation
• Widely recognized as market leader
• Proprietary technology
• Cost advantages
• Strong communications
• Product innovation
• Good customer service
• Better product quality
• No clear strategic direction

17
SWOT Analysis: What to Look For
Potential Resource Weaknesses

• Obsolete facilities
• Weak balance sheet; excess debt
• Higher overall costs than rivals
• Missing some key skills/competencies
• Internal operating problems
• Falling behind in R&D
• Too narrow product line
• Weak marketing

18
SWOT Analysis: What to Look For

Potential Opportunities
• Serving additional “customer”groups
• Expanding to new geographic areas
• Expanding product line
• Transferring skills to new products or services
• Vertical integration
• Take market share from rivals
• Alliances or acquisitions
• Openings to exploit new technologies
• Openings to extend brand name/image

19
SWOT Analysis: What to Look For

Potential External Threats

• Entry of potent new competitors
•Substitute products or services
• Slowing market growth
• Adverse shifts in political or economic conditions
• Costly new regulations
• Growing leverage of customers or suppliers

20
 EXHIBIT C

Porter 5 forces analysis

•
Porter's 5 forces analysis is a framework for industry analysis and business strategy development developed by
Michael E. Porter in 1979 of Harvard Business School. It uses concepts developed in Industrial
Organization (IO) economics to derive 5 forces that determine the competitive intensity and therefore
attractiveness of a market. Porter referred to these forces as the micro environment, to contrast it with the more
general term macro environment. They consist of those forces close to a company that affect its ability to serve
its customers and make a profit. A change in any of the forces normally requires a company to re-assess the
marketplace.

] Porter's Five Forces

Five forces include three forces from 'horizontal' competition: threat of substitute products, the
threat of established rivals, and the threat of new entrants; and two forces from 'vertical'
competition: the bargaining power of suppliers, bargaining power of customers.
1:The threat of substitute products
The existence of close substitute products increases the propensity of customers to switch to
alternatives in response to price increases (high elasticity of demand).
• buyer propensity to substitute
• relative price performance of substitutes
• buyer switching costs
• perceived level of product differentiation
21
Porter's Five Forces -CONT’D

2:The threat of new entrants

Profitable markets that yield high returns will draw firms. The result is that many new entrants,
which will effectively decrease profitability. Unless the entry of new firms can be blocked by
incumbents, the profit rate will fall towards a competitive level (perfect competition).
• the existence of barriers to entry (patents, rights, etc.)
• economies of product differences
• brand equity
• switching costs or sunk costs
• capital requirements
• access to distribution
• absolute cost advantages
• learning curve advantages
• expected retaliation by incumbents
• government policies

22
Porter's Five Forces -CONT’D

3:The intensity of competitive rivalry

For most industries, this is the major determinant of the competitiveness of the industry.
Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such
as innovation, marketing, etc.
• number of competitors
• rate of industry growth
• intermittent industry overcapacity
• exit barriers
• diversity of competitors
• informational complexity and asymmetry
• fixed cost allocation per value added
• level of advertising expense

23
Porter's Five Forces -CONT’D

4:The bargaining power of customers

Also described as the market of outputs. The ability of customers to put the firm under pressure
and it also the customer's affects the sensitivity to price changes.
• buyer concentration to firm concentration ratio
• bargaining leverage
• buyer volume
• buyer switching costs relative to firm switching costs
• buyer information availability
• ability to backward integrate
• availability of existing substitute products
• buyer price sensitivity
• price of total purchase

24
Porter's Five Forces -CONT’D

5:The bargaining power of suppliers

Also described as market of inputs. Suppliers of raw materials, components, and services (such as
expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with
the firm, or e.g. charge excessively high prices for unique resources.
• supplier switching costs relative to firm switching costs
• degree of differentiation of inputs
• presence of substitute inputs
• supplier concentration to firm concentration ratio
• threat of forward integration by suppliers relative to the threat of backward
integration by firms
• cost of inputs relative to selling price of the product

25
 • EXHIBIT D

• PEST ANALYSIS FRAMEWORK –

This is a tool to assist in analysing the overall business context an Organization is

operating in and covers five (5) primary dimensions encompassing the business arena.

• Political
• Environmental
• Economic
• Social
• Technology

Examples of what could/should be considered in each area are:

1: Political Factors
• Political stability
• Legal framework for contractual enforcement
• Intellectual property enforcement
• Trade regulations & tariffs
• Price regulations
• Wage legislation
• Environmental legislation
• Product labeling

26
 • PEST ANALYSIS FRAMEWORK – CONT’D

2: Environmental Factors
• Kyoto protocol
• Biodiversity
• Climate Change\
• Desertification
• Nuclear test Ban\
• Ozone layer protection
• Safety and health
• Environmentally responsible corporate citizens

3: Economic Factors
• Economic system operable (socialism –capitalism-communism-dictatorship)
• Government intervention in the marketplace
• Comparative advantage of host country
• Exchange rates
• Labour costs
• Business cycle stage
• Discretionary income
• Unemployment rates
27
 • PEST ANALYSIS FRAMEWORK –

4: Social Factors
• Demographics
• Class Structure
• Education
• Culture

5: Technology Factors
• Information management development
• Privacy of data
• Reliability
• Updates on technology
• Hurdles of acceptance
• Lack of history in new technology
• Protection of intellectual property
• Ease of transferring funds with technology
• Resourcing

28
29