Lecture 2 - Developing Strategy Developing Strategy Developing Strategy

Lecture 2 - Developing Strategy Developing Strategy Developing Strategy

1. BSc Logistics with Supply Chain Management Strategic Management – BM4SMT Faculty of Transport & Logistics Developing Strategy

2. Session Learning Outcomes By the end of this session students should be able to: Differentiate between strategy and management Discuss supply chain & procurement as a reflection of business strategy Discuss the strategic planning process Evaluate corporate objectives Analyse Porter’s generic strategies

3. Strategy N oun ‘A plan of action designed to achieve a long-term or overall aim’ synonyms: Master plan, grand design, plan of action, scheme, blueprint, procedure, approach, Is Strategy the SAME as Management ?

4. How is Strategy different from management? Longer Timescale

5. How is Strategy different from management? Not Detailed

6. How is Strategy different from management? Visionary

7. Definitions “.. .a pattern in a stream of decisions” Henry Mintzberg “. ..the long-term direction of an organization” Johnson, Whittington, Scholes, Angwin & Regnér “. ..is about shaping the future” Max McKeown “. .. the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” Alfred Chandler “ Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value” Michael Porter

8. What’s NOT Strategy Don't mistake non-choices for Strategy Probably most of us have read strategies like; "Our strategy is to be customer-centric” …… But is that really a choice?“ Strategy is saying explicitly, proactively: 'We're going to do these things ….. and not those things…. for these reasons.'

9. SC & Procurement as a Reflection of Business Strategy

10. The Strategic Planning Process

11. Unpacking Corporate Objectives Images from http://bluesummitstrategy.com/strategy/mission-vs-vision/2007 / , https://peakon.com/resources/mini-guides/how-to-effectively-communicate-strategy-to-employees / , https://painless.software/vision-mission-values-strategy-action s , https://2012books.lardbucket.org/books/management-principles-v1.1/s08-02-the-roles-of-mission-vision-an.htm l accessed 17/7/2019

12. From the Ford’s ‘about us’ web page Our purpose [assumed to be their vision statement]: To help build a better world, where every person is free to move and pursue their dreams. Explanation of our purpose [assumed to be their mission statement] We believe in the power of creating a world with fewer obstacles and limits, where people have the freedom to build a better life and pursue their dreams. To shorten the distance between where you are and where you want to go. To connect people down the road and over the horizon – to discover possibilities, and enjoy the thrill, adventure and pride of moving freely. From day one, we’ve provided people with the tools to help them move forward and upward. We’ve innovated to expand their opportunities and we’ve worked to earn their trust, every single day. We honour our legacy as we build the future – a better world for generations to come. Because when everyone is free to move and free to dream, we do what we do best: we change the world. Source: https://corporate.ford.com/about/purpose.htm l , https://corporate.ford.com/about/culture.htm l Further information see Ford’s Integrated Sustainability and Financial Report 2021 at https://corporate.ford.com/microsites/integrated-sustainability-and-financial-report-2021/files/ir21.pd f , accessed 11/10/2021

13. From the Tony’s ‘our mission’ web page https://tonyschocolonely.com/uk/en/our-mission Tony’s Chocolonely (2021) “Crazy about chocolate, serious about people” Tony’s Chocolonely (2021) “Together we make 100% slave free the norm in chocolate. Not just our chocolate, but for all chocolate worldwide.”

14. VMOST

15. Strategy Development (Terry Hill)

16. The Role of Strategy ….. To deliver Competitive Advantage Strategy should specify “how a firm can actually create and sustain a Competitive Advantage in an industry” Michael Porter “A Competitive Advantage is an ability to make your company’s product or service preferable to your competitors.” Deborah Hunt

17. A more recent external view of strategy – with whom do I have to share the VALUE.

18. Porter’s generic strategies Source : Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved.

19. Cost Leadership Options Calculated under-pricing Be low price rather than lowest price Works best when…….. Price competition between rivals is especially vigorous Standardised product Buyers use the product in much the same way Low switching costs Potential pitfalls Price cut is too large Not Sustainable Where price cutting is the only tool used

20. Differentiation Options Lower the buyers’ costs of using the product Raise the performance of the product Increase intangible benefits from a product Works best when…….. Many ways to differentiate a product or service Few competitors following a similar approach Dynamic environment Potential pitfalls Differentiation does not benefit the buyer Over-differentiation Trying to charge too high a price for differences

21. Focus On the basis of Cost Differentiation Works best when…….. Few rival An industry has many segments Potential pitfalls Low entry barriers Niche market may not be long-lived Segment is very attractive ex a m pl e s: h ot e lF 1 , Viva / A l d i / L i d l example : ARM Holdings mobile phone chips

22. Can you differentiate Airlines by their Strategies?

23. ‘Stuck in the middle’? Porter argues: Choose which generic strategy to adopt and then stick to it. Failure to do this leads to a danger of being ‘ stuck in the middle’ – doing no strategy well. The argument for pure generic strategies is controversial. Porter acknowledges that the strategies can be combined into ‘ hybrid ’ strategies.

24. Here’s some leading organizations, presumably they have a Strategy and have elected to differentiate themselves from their competition. Are they ‘Better’ than their competitors or are they ‘Different’?

25. ‘Better’ than their competitors or ‘Different’?

26. Four seasons hotel group

27. “We are a ‘luxury’ hotel, I suppose. But ‘luxury is about more than the chandeliers. It’s about all, and I mean all, our people understanding how they can learn to understand customers’ needs. Then focusing totally on meeting these needs.”

28. IKEA

29. To design a desk which may cost $1,000 is easy but to design a functional and good desk which shall cost only $50 can only be done by the very best Ingvar Kamprad

30. Zara

31. “Selling fashion is like selling fish. It’s worth more when it’s fresh. Because our supply network moves product ideas from ‘catwalk to rack’ in around two weeks, we get a huge revenue advantage” E Ortega, Founder Indetex

32. Toyota

33. “The real secret of Toyota is the way it solves problems at the operational level” H Spearman, Lean Guru.

34. Amazon.com

35. “At our heart, we are a process and technology company. So far we have leveraged this capability mainly in a B2C sense. But we also leverage it in the B2B arena. What’s important is how powerful your capabilities are.” Jeff Bezos

36. Davigel

37. “We started life as a trading company – constantly searching for opportunities to bring new foods to our customers. Now we are also a food manufacturer, but we still have to maintain the fast response and flexibility that made us successful in the first place” M. David, Davigel

38. Seminar 2

39. Porter’s generic strategies Source : Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved.

40. Are they a B2C or a B2B company?…

41. Have they got there by being… better, or different from their competitors?

42. Better or different ? “Better” and “Different” operations teach us different things........