Tut 5 – Strategy Planning Framework: Corporate & Business Strategies

Strategy Formation

Mgt ToolsEnvironment

Scanning

Scenario PlanningGame Theory

Conceptual Mapping

Country Assessment

Strategy Planning

Corporate Strategy Planning

Business Level Planning

Strategy ImplementationPlanning & Execution

Internationalisation Process

Corporate LevelConfiguration &

Coordination

Foreign Market Strategies evaluation &

selection

Leadership, innovation & governance

Organisational Design & Control

Country Strategy Dev

Her

e no

wLast Week

Strategy Development Orientation

Emergent – evolves from continuously

improving from the past strategies

Deliberate – strategically focused

& intended

Corporate StrategyOrganisational Wide Strategy

Business StrategyOrganisational Breakdown Strategies by Business Units

Strategy Development Orientation

HQ

International

Corporate Strategy Formation

1. Choosing which international businesses to be in, depends on:• Capacity to complete internationally• Capacity to manage entry barriers

o Forex / currency riskso Target countries’ PEST risks

2. Choosing corporate parenting approach – how HQ manages IB in order to create shareable value add or increase value to HQ

• Value adding portfolio management:o IB units that creates valueo Divest from IB that has no value

add to HQ

IB value to

HQ value to

Corporate Strategy Formation

3. Choosing strategic integration approaches• Forward integration – increasing

control closer to target customers• Backward integration – increasing

control of suppliers• Horizontal integration – increasing

control over competitions

Influences

4. Choosing market entry and development approaches:• JV, retrenchment, divestment,

liquidation, industry to product/service diversification considerations that would influence the modes of entry or growth expansion in target countries

Influences

5. Choosing product development approaches

War Game Positioning

Corporate Strategy Considerations

1. What business to be in?2. What corporate parenting approach?3. What control criteria/integration approach?4. What market entry & development options?5. What product development options

Global & in Country Market Share capture:WAR GAME thinking in developing IB Strategies of MNCs

Business Strategy

Corporate Strategy

Different BU’sBusiness Strategies

Strategic Business Unit (SBU) Strategy

Is deployed by manyIs deployed by one

Also called competitive strategies

How each BU seeks to:• compete in its chosen markets• sustain international

competitive advantage

How org coordinates BUs or strategic projects to:• compete in its chosen markets• sustain international

competitive advantage

same

Business Strategy

Corporate Strategy

Different BU’sBusiness Strategies

Strategic Business Unit (SBU) Strategy

SAME GAME strategy - understand competition rules to winNEW GAME – changing competition rules to winINSIDE OUT strategy - – using internal strengths in strategies

OrientationCost leadershipDifferentiationFocus cost leadershipFocus differentiation

Efficient drivenQuality drivenInnovation drivenCustomer Responsive

New Game Strategic Positioning

1. Aim for industry foresight & intellectual leadership• Understand the external drivers of new markets & industries• Identify the opportunity scenarios of new markets and

industry developments

2. Have strategies for exploiting the new markets/industries by developing & using CORE COMPETENCIES (which are strategic services, often technology enabled these days) to dominate in new markets/industries

3. Establish your competitive market position and share targets

Hamel and Prahalad say strategy is about “stretch” and “fit” • ie stretching resource position but fit in to organisation’s

current growth and function.

NOW FUTURESustainable Strategic

Positioning

Strategic PositioningChanging the Competition through Innovation

Creating Core competencies (strategic services) that:1. Provides access to a diverse markets2. Gives significant value to customers3. Difficult to imitate by competitors

Resources

Capabilities

Hamel and Prahalad ‘s “stretch” and “fit” strategy by creating innovative core competencies

Business Strategy FormulationBusiness Unit Planning Focus:

How to compete in chosen regions/countries’ markets

Business Strategy Planning Options1. Same vs New Game2. Inside out vs Outside in 3. Generic strategies

• Porter’s model - broad or specific focus at cost/differentiation

• Hill & Jones’ model – efficiency (cost), quality, innovation & customer responsiveness

Functional Strategies

Corporate Strategy

Different BU’sBusiness Strategies

Strategic Business Unit (SBU) Strategy

SBU or BU strategies deployment by functions

Functional Strategies

Correlation Between the 3 levels of Strategy Planning

Corporate Level

Business Unit Level

Functional Level

Org Scope & Corporate parenting structures

Product/Market or Market/Product Strategies in Countries/Regions

Implementation review at program/project levels

Performance Management:

Variance (Actual – Planned KPIs) Corrections at the appropriate 3 levels

Diversification Approaches

Industry diversification strategy

Business lines diversification strategy

Breaks down to ID which businesses with each industry of interest

Diversification strategies define:

1. What businesses should the firm be in?

2. How can the HQ manage the different business lines?

Goal: Create wealth or value-add via:1. Economies of scale – more for less2. Economies of scope – reuse3. Optimisation of capital4. Marketing power increase5. etc

Case Dev Assignment & Tutorial Tasks

Case Development TipsTask 1Task 2

Case Development Tips1. Pick a company planning or already achieved its internationalisation goal/s

MAKE SURE there are NO written case studies about your company & internationalisation intent

2. Which internationalisation phase and unit topics/concepts are you orientating your case story writing and Q&As ?

a) Make sure the case story contain info that associates with your case Qs – see existing case readings for example of how this can be accomplished

b) Follow the unit guide’s guidelines for case development

c) Conclude how the answers to your Q would lead to what next step recommendations

Tutorial Task 1WAR GAME strategic positioning for:

1. Conquering MARKET SHARE of cash flows NOT product sales

2. Using cash flows from one market/country to subsidise market share battles in other markets/countries

3. Attacking competitors when most vulnerable to a cash flow siege

4. Taking aggressive NOT defensive strategies

You are executives of one of the following world leading insurance companies (Allianz, AXA, AIG, China Life, ING, Zurich) with different mixes of commercial and personal insurance around the world (some more domestic orientated).

Get your team to identify potential war game strategies that might assist them in gaining market share in an existing market of a chosen competitor (from the list above) or in entering into a new market others might also want to enter.

Present their strategy and justify it. What are the key lessons and challenges when using this approach?

1. List one example of same game strategy and one potential new game strategy for each of the following organisations going international:

• Tertiary education provider• Insurance company• Bank• Packaged food company• Beverage company (e.g. water, softdrink, coffee, tea etc) • Computer software company• One more organisation of your choice

2. List potential value propositions (what benefits/how delivered/how benefit measured) for your customers if they follow your proposed new game strategy

How might Hamel and Prahalad’s idea of strategy “fit” (match your products/services, systems and processes short term to what you are good at) versus “stretch (strive long term to do something different and better than your competitors) impact on your strategic choice of same game or new game?

Tutorial Task 2: Same Game versus New Game approach

Organisation New Game Benefits How Success Measures