MGT 599 DISCISSION 1: Strategy Foundations

MGT599 DISCISSION 1-3

Week 1: “Strategy Foundations”

The Difference between Strategy and Tactics

Kolbusa (2013) describes strategy as essentially involving planning a company’s next move, and tactics involve physically carrying out the plan. The difference between the two concepts can be remembered with the phrase, “strategic is doing the right things, tactical is doing things right. A strategy is a larger, overall plan that can comprise several smaller tactics, which are focused, less impactful plans that are part of the overall plan. Basically, in the business, it is common to use ‘tactics’ for low-altitude tasks and ‘strategy’ for higher-altitude plans and goals (Allio& Fahey, 2012).

In business, ‘strategy’ is used to describe the organization’s topmost goals in its marketplace. These encompasses start-up companies, multinationals, universities or a government agencies (Allio& Fahey, 2012). Because strategies are large, long-term and a matter of top management, people may claim to know the strategy, but they usually don’t know. If anyone in a companyclaims to know the company strategy, that person isn’t talking about it, so people wander around trying to figure out what’s important and what to focus on in their work (Kolbusa, 2013). People only know the tactics – they know their weekly, monthly and quarterly goals, for instance – but they don’t know the higher-level strategy from which their goals are supposedly derived.

The two terms also differ in purpose. Strategy is used to identify clear broader goals that advance the overall organization and organize resources (Kolbusa, 2013). Tactics, on the other hand, utilize specific resources to achieve sub-goals that support the company’s defined mission. Strategies uses experience, research, analysis, thinking, and then communication. Communication is important to keep everyone in the loop about the company’s long term direction. Tactics uses experiences, best practices, plans, processes, and teams (Allio& Fahey, 2012).

Reference

Allio, R. J., & Fahey, L. (2012). Joan Magretta: what executives can learn from revisiting Michael Porter. Strategy & Leadership, 40(2), 5-10. doi:10.1108/10878571211209297

Kolbusa, M. (2013). The Difference between Goal, Strategy, Tactics and Execution. Management for Professionals, 1-24. doi:10.1007/978-3-642-42036-8_1

Characterization of Strategy

Porter argues that the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are difficult to match. Porter thus traces the economic basis of competitive advantage down to the level of the specific activities a company performs. Using cases such as Ikea and Vanguard, he shows how making trade-offs among activities is critical to the sustainability of a strategy. Whereas managers often focus on individual components of success such as core competencies or critical resources, Porter shows how managing fit across all of a company’s activities enhances both competitive advantage and sustainability.

Sir Liddell-Hart’s article characterizes strategy as a sequence of activities that begins from a clear plan. The eight maxims of strategy describes a strategy as “the art of distributing means or resources to fulfil the ends.” The goal is to ensure thatthere is a clear sight with appropriate calculation of every step and every activity. Both authors agree on the use of resources to obtain a unique and valuable position that is difficult to reach.

On of Sir Liddell-Hart’s maxim involves ‘taking a line of operation which offers alternative objectives.’ To this end, Sir Liddell-Hart recommends choosing a single course of action that could have several objectives without letting your actions to reveal your objectives. Such a strategy puts the opponent on the horns of a dilemma. Apple Inc. is one such company that employs this strategy. When launching iPhone 6, people only knew that the iPhone 6 would be out, but Apple surprised people (its competitors including Samsung) with the iPhone 6 plus. The same strategy was employed when launching the iPhone 7, which came without the hole of the earphone. Instead the company had made a phone with wireless earphones.

References

Kolbusa, M. (2013). The Difference between Goal, Strategy, Tactics and Execution. Management for Professionals, 1-24. doi:10.1007/978-3-642-42036-8_1

Week 2: “Strategic Value Analysis”

Strategic Value Analysis

My argument is that a company should determine its goals and values before performing an industry analysis. In my view, managers can do a better job if they understand how each process they manage adds value to the company. They will know this if they actually perform a strategic value analysis (SVA) of the industry. SVA is a business tool for gaining such an understanding of the industry. Strategic Value Analysis involves careful attention to analytically grounded insights and quantitative relationships. Such attention allowsmore explicit and much richer awareness of the underlying economic context shaping business choices (Shank, Spiegel & Escher, 1998).

In that respect, every company must determine its values and goals before performing an industry analysis. To summarize, a company is usually only a part of the larger set of activities in the value delivery system (industry) in which it participates. There is no absolute two companies, even in the same industry, that compete in exactly the same set of markets with exactly the same set of suppliers. Notably, in every industry, the positioning for each company within the overall value chain is unique. The company will only identify its position in the market if it knows its goals and values that will propel its market survival (Shank, Spiegel & Escher, 1998).

A good example of such a strategy is Apple Inc. When Apple first came to business, no one believed that it could control the market. There was Sonny, IBM, Samsung and Nokia. But Apple knew exactly what their goals and values were. They wanted to offer something unique, something never seen before. That’s how they came up with the touch screen phones. According to Apple’s ‘think different campaign’ their goal is to always think differently while developing their products. But they also know that the most innovative company must also be diverse. Hence they take a holistic view of diversity (Shank, Spiegel & Escher, 1998).

References

Shank, J. K., Spiegel, E., & Escher, A. (1998, January). Strategic Value Analysis for Competitive Advantage: An Illustration from the Petroleum Industry. Retrieved from http://www.strategy-business.com/article/9797?gko=83012

Types of Values

Business value is the core principleor standards that guide the ways of the business. They sum up what the business stands for and what makes it special. While business plans and strategies may change the core values always remain the same (Shank, Spiegel & Escher, 1998).Every business is different and will have its own set of values – whether or not these are articulated. There are different types of value that companies my incline to:

For instance, some businesses say that innovation is one of their core values. These are the business that are constantly developing new products or services, which shapes their whole approach to business. Apple Inc. is one such business that believes in innovation with their campaign of ‘think differently.’ Other businesses value service to customer (Shank, Spiegel & Escher, 1998). This ensures that their customers are always satisfied and keep coming back, sometimes with others, hence increasing their market share. For a publicly traded company, shareholder value is the part of its capitalization that is equity as opposed to long-term debt. This shareholder value ensures that the company’s shareholders are always satisfied. Other businesses may say that they are agile – they are constantly responding to change and creating new opportunities for customers.

Every company is in business for profits. As a manager, on whether or not a company should maximize its profits or social good, when these two are in conflict, I will incline to the business maximizing profits. While social good is ethically appropriate for the business reputation, the business my end up closing if there are no profits. If done well, profit maximization does not mean infringing social good (Shank, Spiegel & Escher, 1998).

References

Shank, J. K., Spiegel, E., & Escher, A. (1998, January). Strategic Value Analysis for Competitive Advantage: An Illustration from the Petroleum Industry. Retrieved from http://www.strategy-business.com/article/9797?gko=83012

Week 3: “Game Theory and Segmentation”

The “Game Theory”

As a science of strategy Game Theory attempts to determine logically and mathematically the actions that “players” should take to secure the best outcomes in a wide array of “games (Akdeniz, 2015).” In the games all share the common feature of interdependence, that is, the outcome for each participant depends upon the choices (strategies) of all. In the zero-sum games the interests of the players conflict, so that one person’s gain is always another’s loss. This is the clear example of the business world. In the notorious prisoners’ dilemma (PD), the players are drawn into a bad outcome by each following his best private interests (Peterson, 2015).

The prisoners’ dilemma, in game, theory helps us understand what governs the balance between cooperation and competition in business. We can consider two firms, say Coca-Cola and Pepsi, which sale similar products. Each company must decide on their pricing strategy. They can best exploit their joint market power if both charge a high price. For instance, each could make a profit of $10 million monthly. However, if one sets a competitive low price, it will win a lot of more customers away from the competitor. Thus, its profitswill rise to $12 million, and that of the competitor will fall to $7 million. On the other hand, if both set low prices, each could have a profit of $9 million.

This former strategy is called cooperation, a strategy akin to the prisoner’s confession, while the latter strategy (high-price) is akin to keeping silent (or cheating). Cheating could be each firm’s dominant strategy (Peterson, 2015). However, the result when both “cheat” is worse for each company than when they cooperate. When business are formulating their strategy, their values will determine if they will cooperate with their rivals or if they will cheat to gain more profits (Akdeniz, 2015).

References

Akdeniz, C. (2015). Game Theory and Strategy for Business Explained: Business School Books Volume 12

Peterson, M. (2015). The prisoner’s dilemma. Cambridge: Cambridge University Press.

Segmentation

Ford has four market segmentation approaches. Geographic Segmentation, where ford aims to grab the market of UK as well as India, China, Africa and Malaysia. Demographic Segmentation, using FORD FOCUS Ford aims to capture young people, ladies and the average income consumer. Behavioral Segmentation focuses on the benefit for safety and fuel efficiency of the Ford cars Ford (Motor Company, 2015).

The multi marketing strategy if its different brands helps Ford with strong marketing strategy that enables to gain more competitive advantage. Ford’s competitive advantage for business growth is dependent on the varying emphases on market development, product development, and market penetration. Ford Focus for example, allow Ford to capture the young people. Young people form the bulk of the society and anyone who can capture a larger market share in the segment of the youth is sure enough to control the market. While Ford uses the Ford Focus to control the youth market, it use the Ford Fiesta to capture those concerned with fuel and safety (Motor Company, 2015).

Due to the increased demand for better fuel economic cars with the increasing wealth of developing world; the ford motors developed the world cars. Ford Europe designed the Ford fiesta as the first world car then Ford US and China produced the car to be supplied throughout the world. The future strategy of Ford Company is to develop more world cars with the idea of providing standardized products to its worldwide markets. Thus, the company has developed a competitive edge above its competitors. The technology was already used by its competitors but, they brought a new modification and perspective (Motor Company, 2015).

References

Ford Motor Company (2015). Business Strategy.