Thursday, 4 November 2021
Strategic management and Decision making
What is strategy?
- Strategy comes from the greek word “Strategos” which means ‘the art of the
general’. It is a word that has come from the art of war. Specifically the role of the
general in the war.
Modern day executives have a similar role as these generals.
• They need to develop a set of complex tactics that lead to victories.
Strategy is about how people organise major resources to enhance the
performance of an enterprise.
How do we know what strategy is?
- Good strategy provides clear and concise answers to 4 key questions:
1. Where do we compete? I.e. What competitive arenas or markets will we
compete in?
2. What unique value do we bring to win in those markets? I.e. why do our
customers choose our products and services instead of the competitors. Our
unique value could be cost or differentiation; which includes image,
customisation, styling, quality, etc.
3. What resources and capabilities do we utilise to deliver that value? I.e. Do
we have exceptional human capital, technology, unrivalled network connections,
unique reputation, etc. Resources could be tangible (diamonds), or intangible
(e.g. reputation). Capabilities generally refer to the things that we can do or our
ability to use the things in our toolbox.
4. How do we sustain our ability to provide that unique value? I.e. Are their
barriers to imitation; Are there factors that keep our competitors from being
willing or able to replicate the value we create for our customers? What question
focuses on what factors allow us to continue to win over time.
As you analyse companies and develop strategies you need to answer these 4
questions.
1
, Thursday, 4 November 2021
IKEA example for clearly-defined strategy
• IKEA sells relatively inexpensive furniture to primarily young white-collar
customers all over the world.
• By being the first furniture retailer to put stores in every major country, IKEA has
greater scale than local competitors.
• The choice of markets helped IKEA offer their unique value propositions of
inexpensive fashionable furniture.
• IKEA sells this furniture in a fun and low-pressure showroom where offer
fulfilment is usually immediate.
• IKEA is able to sell because they’ve developed excellent design capabilities for
inexpensive Scandinavian design.
• More important: products are designed to be manufactured by suppliers using
mass production techniques and then shipped in flat boxes. The flat boxed
require that the final assembly is done by the consumer, this drops the shipment
costs massively.
• As shipment costs are low, IKEA suppliers can manufacture furniture in high
volumes and ship it around the globe.
The complex interdependence of IKEA strategy makes it difficult for
competitors to imitate, because they don’t design their own furniture, and their
suppliers don’t manufacture furniture in high volumes and ship it in flat boxes.
• To imitate IKEA, they have to completely change the way they design
manufacture and ship their furniture.
What does IKEA not do?
- Doesn’t compete in high end furniture business.
- Doesn’t try to provide high levels of shrive and customisation
- IKEA designs most of its furnitures but doesn’t manufacture them.
• So in addition to clearly showing why we win with customers, a good strategy
also provides clear boundary lines of what we don’t do.
2
, Thursday, 4 November 2021
4 key questions for IKEA:
1- Global market, over 50 countries, the industry: furniture and home furnishing
products.
2- Unique value is that it sells inexpensive and fashionable furniture. Customers
benefit from the massive, low-pressure showrooms. They can spend hours. Snacks
food, refreshments available.
3- Resources; unpresident designs, assembled by customers themselves, relies on
mass production from external providers, which represents opportunities for
economies of scale, cost reduced due to packaging, which is flat rectangular boxes.
Also reduces shipping costs.
4- Sustaining value; result of Ikea strategy, where design in associated with the
manufacturing process and with the supply of the final products from the production
plants to the customers home via showrooms. This combination makes it difficult
for customers to replicate or imitate, iso IKEA can sustain its value. IKEA has been
keeping up with consumer demand, e.g. Providing online shopping, and a service
where IKEA employees can assemble the products in peoples homes.
Henry Mintzberg - business strategist.
Illustrates differences between an intended strategy, an emergent
strategy and a realised strategy:
• Strategy is more about what you actually do rather than what you intend to do.
I.e. your real strategy emerges as you do it, then you realise that it may or may
not line up with your plans.
Other strategists could focus on :
Staging or Timing
- You may have a great time, but if you execute the plan with poor timing, it may
fail.
- To be successful, you need an orchestrated set of timed steps in order to win
in the marketplace.
3
Strategic management and Decision making
What is strategy?
- Strategy comes from the greek word “Strategos” which means ‘the art of the
general’. It is a word that has come from the art of war. Specifically the role of the
general in the war.
Modern day executives have a similar role as these generals.
• They need to develop a set of complex tactics that lead to victories.
Strategy is about how people organise major resources to enhance the
performance of an enterprise.
How do we know what strategy is?
- Good strategy provides clear and concise answers to 4 key questions:
1. Where do we compete? I.e. What competitive arenas or markets will we
compete in?
2. What unique value do we bring to win in those markets? I.e. why do our
customers choose our products and services instead of the competitors. Our
unique value could be cost or differentiation; which includes image,
customisation, styling, quality, etc.
3. What resources and capabilities do we utilise to deliver that value? I.e. Do
we have exceptional human capital, technology, unrivalled network connections,
unique reputation, etc. Resources could be tangible (diamonds), or intangible
(e.g. reputation). Capabilities generally refer to the things that we can do or our
ability to use the things in our toolbox.
4. How do we sustain our ability to provide that unique value? I.e. Are their
barriers to imitation; Are there factors that keep our competitors from being
willing or able to replicate the value we create for our customers? What question
focuses on what factors allow us to continue to win over time.
As you analyse companies and develop strategies you need to answer these 4
questions.
1
, Thursday, 4 November 2021
IKEA example for clearly-defined strategy
• IKEA sells relatively inexpensive furniture to primarily young white-collar
customers all over the world.
• By being the first furniture retailer to put stores in every major country, IKEA has
greater scale than local competitors.
• The choice of markets helped IKEA offer their unique value propositions of
inexpensive fashionable furniture.
• IKEA sells this furniture in a fun and low-pressure showroom where offer
fulfilment is usually immediate.
• IKEA is able to sell because they’ve developed excellent design capabilities for
inexpensive Scandinavian design.
• More important: products are designed to be manufactured by suppliers using
mass production techniques and then shipped in flat boxes. The flat boxed
require that the final assembly is done by the consumer, this drops the shipment
costs massively.
• As shipment costs are low, IKEA suppliers can manufacture furniture in high
volumes and ship it around the globe.
The complex interdependence of IKEA strategy makes it difficult for
competitors to imitate, because they don’t design their own furniture, and their
suppliers don’t manufacture furniture in high volumes and ship it in flat boxes.
• To imitate IKEA, they have to completely change the way they design
manufacture and ship their furniture.
What does IKEA not do?
- Doesn’t compete in high end furniture business.
- Doesn’t try to provide high levels of shrive and customisation
- IKEA designs most of its furnitures but doesn’t manufacture them.
• So in addition to clearly showing why we win with customers, a good strategy
also provides clear boundary lines of what we don’t do.
2
, Thursday, 4 November 2021
4 key questions for IKEA:
1- Global market, over 50 countries, the industry: furniture and home furnishing
products.
2- Unique value is that it sells inexpensive and fashionable furniture. Customers
benefit from the massive, low-pressure showrooms. They can spend hours. Snacks
food, refreshments available.
3- Resources; unpresident designs, assembled by customers themselves, relies on
mass production from external providers, which represents opportunities for
economies of scale, cost reduced due to packaging, which is flat rectangular boxes.
Also reduces shipping costs.
4- Sustaining value; result of Ikea strategy, where design in associated with the
manufacturing process and with the supply of the final products from the production
plants to the customers home via showrooms. This combination makes it difficult
for customers to replicate or imitate, iso IKEA can sustain its value. IKEA has been
keeping up with consumer demand, e.g. Providing online shopping, and a service
where IKEA employees can assemble the products in peoples homes.
Henry Mintzberg - business strategist.
Illustrates differences between an intended strategy, an emergent
strategy and a realised strategy:
• Strategy is more about what you actually do rather than what you intend to do.
I.e. your real strategy emerges as you do it, then you realise that it may or may
not line up with your plans.
Other strategists could focus on :
Staging or Timing
- You may have a great time, but if you execute the plan with poor timing, it may
fail.
- To be successful, you need an orchestrated set of timed steps in order to win
in the marketplace.
3
