Dr. Elena Dalpiaz

Introduction to Business Strategy

Welcome

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Agenda

1. Ingredients for prolonged success

2. What business strategy is and other questions

3. Money vs. other purposes in business

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1)

Ingredients for prolonged success

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What Do They Have in Common?

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Closer Look at One Example

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http://www.youtube.com/watch?v=lh0fxaR_qrc

Voice?

Beauty?

Lyrics?

Dancing?

Exceptionally Talented As Singer & Songwriter?

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1. Goal commitment and work ethic

2. Understanding evolution of society and multiple market segments

Not just sex sells Continuous renewal

3. Marketing

4. Alliances and good teams Boyfriends/Husbands/Cool producers Good dancers & vocalists

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How?

Examples of Success in Different Arenas

Entertainment

Manufacturing business

Sport management

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Prolonged Success Depends On

NOT (necessarily) on overwhelmingly superior resources!

Madonna: vitality, intelligence, imagination, but no outstanding talent as vocalist and songwriter

James Dyson: depended on his wife teachers salary for years when developing prototypes

Alex Ferguson: built MU team with comparatively modest expenditure on star players (e.g. since 2000 tiny expenditure relative to Chelsea, Real Madrid, Milan)

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Prolonged Success Depends On (Cont.)

Luck?

Lucky breaks at critical junctures (e.g. meeting with the right persons)

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Ingredients For Prolonged Success: 1

Madonna: Goal driven/Work alcoholic

James Dyson: persisted for more than 5 years developing his cleaner (>5,000 prototypes)

Alex Ferguson: life dominated by football

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GOALS THAT ARE SIMPLE, CONSISTENT, AND LONG TERM1

Madonna: understanding basis of popular appeal; name as brand; live-shows; transformation

James Dyson: manufacturing in Malaysia to remain competitive

Alex Ferguson: worldwide search for talents; teams and tactics variation in different competitions

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PROFOUND UNDERSTANDING OF COMPETITIVE ENVIRONMENT2

Ingredients For Prolonged Success: 2

Madonna: position as performance artist, entertainer

James Dyson: patent protection and patent battle with Hoover

Alex Ferguson: masterful appraisal of talents

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OBJECTIVE APPRAISAL OF RESOURCES3

Ingredients For Prolonged Success: 3

Madonna: large team of qualified designers, musicians, vocalists, choreographers

James Dyson: R&D team

Alex Ferguson: team of psychologists, medical doctors, nutritionists, talent scouts

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EFFECTIVE IMPLEMENTATION TO MARSHAL RESOURCES AND PROTECT AGAINST WEAKNESSES4

Ingredients For Prolonged Success: 4

www.imperial.ac.uk/business-school

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Simple consistent, long-term

goals

Profound understanding of competitive environment

Objective appraisal of resources

Effective implementation

Prolonged Success

1 2 3

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Self-Reflection

To what extent does your career strategy fit with your long term goals, the characteristics of the external

environment, and your own strength and weaknesses?

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Crucial For Business

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ITV & Friends Reunited

In 2005, ITV paid 170 million for acquiring Friends Reunited, a five-year-old internet social network which puts former school friends in touch with each other.

http://www.youtube.com/watch?v=hYYuo6rVa7U

In 2009, ITV sold Friends Reunited for 25 million

LOSS: 145 million!!!

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Why?

ITV did not have the appropriate resources and capabilities and structures to manage this new business: TV business is push-driven customers are more passive; Internet social networks are pull-driven customers are very

demanding and knowledgeable, and create the content.

The buyer http://www.youtube.com/watch?v=UK7-V7abx-c

Experience in internet-based business Clear synergies with existing businesses Easier to integrate in existing organization

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2)

What is Strategy?

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What do you think strategy means?

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www.imperial.ac.uk/business-school27

Strategy is the great work of

organization. In situations of life or death, it is the Tao

of survival or extinction. Its

study cannot be neglected

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Lost Boy: Injuns! Lets go get em!

John Darling: Hold on a minute. First we must

have a strategyLost Boy: Uhh? What is

a strategy?John Darling: Its, er...its

a plan of attack

Is Strategy Different from....?

Operational effectiveness?

Tactics?

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Imperial College Business School30

Strategy is performing different activities from rivals or performing similar activities in different ways.

Tactic: is a scheme for a specific action.

Strategy is a theme that guides all actions of the firm by defining its competitive position

All men can see these tactics

whereby I conquer, but what none can see is the strategy out of which victory is evolved. Sun Tsu

Operational effectiveness: performing similar activities better than competitors.

Definition of Strategy

PLAN: series of actions designed to achieve a specific goal

PATTERN of objectives and goals, i.e. what business the firm wants to be in

PERSPECTIVE: overarching theme driving every action

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Position

Means by which individuals or firms achieve their goals

Imperial College Business School32

Position

POSITION: UNIQUE VALUABLE

1) Competitive arena

Clients Geographical

markets Products

2) Activities

Unique configuration of activities

Different activities

Similar activities in different ways

Profitability >

Industry

Achieving and sustaining acompetitive advantage (differentiation vs. cost)

Where?

http://investing.businessweek.com/research/stocks/financials/secfilings.asp?ticker=AAPL

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Where we compete

Vertical range of activitiesCustomer segmentsGeographical areas

How we compete

Basis of competitive advantage (differentiation vs. cost)

designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software

The Company sells to consumers, small and mid-sized businesses (SMB), and education, enterprise and government customers

sells its products worldwide

Strategy Describes...

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Where we compete

Vertical range of activitiesCustomer segmentsGeographical areas

How we compete

Basis of competitive advantage (differentiation vs. cost)

committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, and services

leverages its unique ability to design and develop its own operating systems

to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design

believes continual investment in research and development and marketing and advertising is critical to the development and sale of innovative products and technologies

Strategy Describes...

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How is Strategy Made?

Rational deliberation from top management team?

Mintzberg:

Intended Realized Emergent

Environment: stability vs. turbulence affect the balance Banks in African countries?

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Planned emergence

PresenterPresentation NotesIntended: conceived by TMT, but outcome of negotiation and compromiseRealized: actual strategy that is implemented (only 30% of intended strategy is actually realized)Emergent: interpretation of intended strategy by individual managers, who adapt to changing circumstances. Intel decision to abandon microchip and focus on micron processor was bottom-up (business unit and plant managers) African countries and Central Banks?: strategic planning will be inevitably restricted to a few principles and guidelines, and the rest will have to emerge as circumstances unfolds

The Roles of Strategy1. Decision support

Constrains alternatives Pools and integrates knowledge of different individuals Facilitates the use of analytic frameworks and techniques

2. Coordinating device Communicates the identity and goals of organisations Strategy-making process enhances consensus

3. Target Motivates and inspires Big, Hairy, Ambitious Goals 37

PresenterPresentation NotesDecision support: guidelines and decision criteria

3)

Money vs. other purposes in business

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In Whose Interest? Shareholders vs. Stakeholders

Different groups have interest in firms performance:

Employees (wages and salaries) Landlords (rent) Government (taxes) Citizens (clean environment) Customers (safe products) Lenders (interests)

Owners (profits)

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STAKEHOLDERS

SHAREHOLDERS

What Interests Should Be Prioritized

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The Kraft Takeover of Cadbury

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VS.

VIDEO: http://www.youtube.com/watch?v=w9eP5-qkAVc

There Is More To Business Than Making Money

Purpose is what inspires the great businesses and endeavors:

Exclusive focus on profitability has negative consequences: May blinker managers perception of the real sources of

competitive advantage Unlikely to inspire employees42

I will build a motor car for the great multitudeit will be so low in price that no man making good wage will be unable to own one and to enjoy with his family the blessing of hours of

pleasure Henry Ford

To Sum Up

Ingredients of prolonged success (three examples) Importance for business (ITV and Friends Reunited) Definition of business strategy What documents you can look at (Apple) What a firms strategy describes (Apple) The process of strategy-making Three main roles for strategy within firms The trade-off of focusing on shareholders or stakeholders (Kraft vs.

Cadbury) Successful businesses are motivated by factors other than profit (Cadbury)

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www.imperial.ac.uk/business-school

BEST OF LUCK&

THANK YOU!

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My Contacts

Dr. Elena Dalpiaz

Tanaka Building, Imperial College Business School

E-mail: e.dalpiaz@imperial.ac.uk

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Introduction to Business StrategyWelcomeAgendaSlide Number 41) Ingredients for prolonged successSlide Number 6Slide Number 7Slide Number 8What Do They Have in Common?Closer Look at One ExampleExceptionally Talented As Singer & Songwriter? How? Examples of Success in Different ArenasProlonged Success Depends OnProlonged Success Depends On (Cont.)Ingredients For Prolonged Success: 1Ingredients For Prolonged Success: 2Ingredients For Prolonged Success: 3Ingredients For Prolonged Success: 4Slide Number 20Self-ReflectionCrucial For BusinessITV & Friends ReunitedWhy? 2) What is Strategy?What do you think strategy means?Slide Number 27Slide Number 28Is Strategy Different from....?Slide Number 30Definition of StrategyPositionWhere? Strategy Describes...Strategy Describes...How is Strategy Made?The Roles of Strategy3) Money vs. other purposes in businessIn Whose Interest? Shareholders vs. StakeholdersWhat Interests Should Be PrioritizedThe Kraft Takeover of CadburyThere Is More To Business Than Making MoneyTo Sum UpSlide Number 44My Contacts