Lecture 1, Introduction to Business Strategies
Strategy is about making choices; it’s about deliberately choosing to be different. Elements of
successful strategies:
• Consistent and long-term goals
• Formulated based on analyses
• Effectively exploit resources
Strategy is not only used in business but also in politics etc. however the business environment has
changed:
- Less predictable environment
- Analytical reasoning
- Strategic positioning
Business strategy: a thoughtful plan by a company to produce desired outcomes in the marketplace
vis-a-vis customers, channel members, & competitors. The search for a favourable competitive
positioning.
Marketing strategy: A functional strategy aimed at customer value creation, market orientation,
segmentation, targeting, and positioning. Decisions that involve selling products on the market
➔ Strategies are about making choices to create some competitive advantage to enhance
your performance
Most managers see strategy as a plan or concept, however it can be seen in different ways:
Example Zara: Example Kodak/Fujifilm:
- New designs can reach the stores - Kodak had difficulties adapting to the changing
in 3 weeks (whereas other business circumstances
companies take 6 months to do - Kodak invented the roll film and was a lead in the
this), so they can quickly jump on to market
trends - Kodak didn‘t capture the full potential of digital
- If there is no demand for an item, photography on time.
ZARA simply discontinues production ➔ Kodak failed in seeing how successful digital would be
- Shorter lead times (production and they invested too less in this
also in Europe, with low stock) What did Fujifilm do different? They reacted to the changing
- Higher production costs, but less business environment and diversified and differentiated.
advertising costs They even have a healthcare line and started to listen to the
➔ Good strategic choices wishes of the youth e.g. including smartphone options
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,When developing a new product, you should focus on two expects:
- Uniqueness: is it special to the market (it doesn’t exist yet)
- Relevant
Example: glocal strategy of McDonald’s
- Variety of services and product catering to the needs of
consumers
- Standardization strategy: Anywhere the company operates, it
offers identical food products such as McNuggets, Happy
Meal or Filet-O-Fish.
- Adaption strategy: McDonald's adapts to the needs of the
consumers as required by the cultures of specific countries.
There are different events which might stimulate a company to rethink its strategy. These can come
from within out outside the company:
- International expansion
- Performance gap (e.g. unmet growth aspiration)
o E.g. Facebook wasn’t growing anymore, whereas Instagram was. So Facebook
bought Instagram
- Changes in ownership
- Anticipated trends (e.g. disruptive technologies)
- New CEO or executive leadership team
- Interventions from external stakeholders
- More unstable environment
- Mergers & Acquisitions
Principles of Business Strategies
Six principles describe the essentials of strategy for company practice:
1. Quest for competitive advantage
2. Fit of markets and resources
3. Being different and making choices
4. Path to a destination
5. Consistency in behavior
6. Multiple level and theme alignment
Quest for competitive advantage
Strategy is about Gaining, Sustaining and Renewing Competitive Advantage to ensure superior
performance. Strategy makes a difference in winning or losing in a competitive environment.
- Examples of competitive advantages: have a cheaper product, have a better quality product,
have a unique product
However, it is difficult to measure a comp adv. Because it relates to a specific market, but what is
this specific market?
Fit of markets and resources
Strategy is about creating a dynamic “Fit” Between the company and its environment
Market based view: look for needs and fulfill these needs
- E.g. Offering smoothies in the German markets
(because they weren’t there before)
Resource-based view: the firm concentrates on its own
resources, capabilities and competences
- E.g. only using local products
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,Being different and making choices
Strategy is about being different and choosing what to do
and what not do
Operational excellence: you might do similar things to
their competitors, but you do it better than them
- E.g. Having the best flight attendants
Strategy: doing the right things. This can imply doing different things
- E.g. Offering free pick-up service as an airline
Path to a destination
Strategy pursues the achievement of a desired long-term aspiration. It is a means to and end.
Vision: a vision combines the needs of several stakeholder groups. It
represents what the company wants to achieve in the long run
- Shareholders have visions regarding profit and growth, employees
may want to make a positive effect on society, CEO may want to be
famous etc.
Mission: what is our purpose?
Values: what are our behavioral principles?
Strategy: how do we make our vision come true? Based on a vision, we
formulate a strategy. The strategy may change over time even though it is long-term oriented, you
have to be able to adapt
Consistency in behavior
Strategy is consistency in behavior, whether intended (deliberate) or not intended (emergent)
Only a small portion of the intended strategies are
realized. Why? There may be unexpected events that have
significant implications for the firm. Many times the
strategic behavior needs to be adjusted. Unplanned
strategies are called emergent strategies, often based on
intuitions of employees.
Example football finale:
- Netherlands get 3 red cards, one player is injured
and the opponents play different → unrealized
strategy
- Netherlands get only 1 red card → team players make their own individual decisions until
half break = emergent strategy
Multiple level and theme alignment
Strategy is the ‘symphony’ that results from multiple areas and strategic themes in an organization
On different corporate levels there may be different strategies and goals:
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, There are different ways to measure a company’s performance
• Economic Value
• Accounting Performance (Profitability)
• Economic Performance and Shareholder Value
• Corporate Sustainability Performance
Strategic Decision Making
There are two systems or ‘modes of thinking’ in the brain. These are the cognitive foundations for
any kind of decision making.
Reflective thinking: decisions are made based on logical norms and calculations, analytical approach
However, managers often think their intuition is good enough and this can lead to pitfalls
Why not use managerial intuition?
• People (and managers are people too) are poor at learning from experience
• People have poor intuitive sense for the value of information relative to the risk
• People have limited ability to process information and make decisions
o Availability bias: you only rely on the knowledge that is already in your mind
o Overconfidence
o Confirmation bias: you only seek information that confirms pre-existing views
By asking the rights questions you can ‘debias’ strategic decisions:
7 is
important!
8* Halo effect: drawing an overall impression on something based on one single characteristic e.g. the product is
expensive so it will be of good quality
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