the importance of strategy
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Strategic ManagementTRANSCRIPT
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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
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Strategic Thinking3
What is present situation?
Where do we need to go from here?
How should we get there?
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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)
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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
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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?
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THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS BUSINESS MODEL
RealizedStrategy
Competitive Initiatives
Business Approaches
Business Model
Value Proposition
Profit Formula
$$$?
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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
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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
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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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