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Summary for exam of Strategic Consultancy
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Summary of all the relevant materials for the exam, consisting of the web clips and slide decks.
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Strategy Consulting – Webclips & Slide decksWeek 0 – The foundations of strategy:
Strategy is:
1. Making and implementing vital decisions that are difficult to reverse
2. Aimed at increasing performance
3. In an environment that is characterized by high complexity and uncertainty
4. Through the rational use of scarce resources
How do you design strategy? The classical process:
- Formulate goals
- External and internal analysis
- Confrontation
- Formulate strategy
- Implement strategy
There is a feedback loop in the design of strategy.
Formulate goals:
- Mission – why we exist
- Values – what we believe in and how we behave
- Vision – what we want to be
Confrontation:
- TOWS matrix
• SO – use strengths to exploit opportunities
• ST – use strengths to avoid threats
• WO – exploit opportunities to overcome weaknesses
• WT – minimize weaknesses and avoid threats
Formulate strategy:
- Corporate-level strategy
- International strategy
- Business-level strategy
- Functional strategy
Implementation strategy:
- Choice of entry and exit modes
- Change management
- Structure and controls
How do you design a strategy? A realistic view:
- Deliberate / planned strategy : intended strategy is the actual realized strategy
- Unrealized strategy: your intended strategy is not realized
- Emergent / spontaneous strategy: not formulated beforehand, but pattern that can be discerned
afterwards in a series of decisions
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,You should balance planned and spontaneous strategy. It is important to plan beforehand but at the
same time you have to be prepared to abandon strategies and keep your eyes open for new
opportunities and strategies that emerge.
External analysis – example of Besi:
- Customers are semiconductor manufacturers, assembly subcontractors, and electronics and
industrial companies
- It is a supplier of semiconductor assembly and packaging equipment
- Besi was doing very well, but then there was a sharp drop of their share price
- There was an international trade conflict which caused a lot of uncertainty and therefore
investors held back
- Smartphone sales were over the top, expected to drop off and Besi is associated with supply
for this industry
- Furthermore, a customer retracted its order
- Thus, the drop of share price was due to several external challenges
The external environment is like a matryoshka doll, it exists of multiple different layers.
Levels of the external analysis – from high to low:
- General environment – broad factors external to the firm that can have an impact on the
firm’s strategic decisions
• Demography
• Economy
• Society and culture
• Ecology
• Politics and law
• Technology
- Industry – collection of firms that are offering similar products or services using a similar
technology; thus, functionality for its clients and productions process is comparable
- Strategic group – subset of firms within industry that emphasize similar strategic dimensions
- Competitor – market commonality + resource similarity → predict competitive interaction
Tools for external analysis:
- Porter Five Forces
• Threat of new entrants
• Bargaining power of suppliers
• Threat of substitute products or services
• Rivalry among existing firms
• Bargaining power of buyers
- Challenges to employ Porter Five Forces in practice:
• Defining the industry is key but is becoming increasingly difficult
• Every source has different indicators thus many indicators to consider. However there
is much hard evidence required and much processing has to be done.
• Analysis takes time and then your outcome may already be obsolete and the model is
very static (not dynamic).
• Oversimplification of reality
2
, External analysis of buyers – example of HEMA:
- They want to reach the final customer
- They do have their own stores, at the same time the use franchised stores and a third channel
is online
- More players with more complicated linkages may be relevant
External actors can have a major impact on the firm. The external analysis to drive strategic decisions
is vital. External analysis has different levels. And tools are available for external analysis but their
application is challenging in practice.
If the external environment is challenging, you can still gain a competitive advantage with the right
resources and capabilities. The construction industry is a booming industry, therefore it is an attractive
industry. However, still some companies perform badly. For example, Moonen went bankrupt
because they charged prices that were below their real costs.
The opposite is also viable, when the industry’s environment is challenging some companies can still
perform very well. For example, the smartphone industry is challenging due to fierce internal rivalry
and many companies are struggling to survive or become profitable. On the other hand, there are
companies that perform very well in this industry, like Apple.
The environment sets the stage, but the internal factors create competitive (dis)advantage.
How do you perform an internal analysis?
- Resource based view (RBV) – firm as a bundle of heterogeneous and immobile resources and
capabilities; the resources thus differ per firm and these differences persist for a long time
Resources : tangible and intangible assets that a firm controls and that it can use to conceive and
implement its strategies
Capabilities : tangible and intangible assets that enable a firm to take full advantage of the resources it
controls – a subset of a firm’s resources – what the firm can do with the resources
Resources and capabilities:
- Financial
• Cash
• Equity
• Debt
- Physical
• Plant and equipment
• Computer hardware and software
• Geographic location
- Human
• Training, experience, judgement, intelligence, and relationships
• Managers and workers
- Organizational
• Structure
• Systems for planning, control, and coordination
• Informal relations
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