1. 5/3/2019
Corporate Strategy
The Strategy Diamond and the Five Elements of Strategy (p 14 US) TWO PAGES
The first four only make sense for a for-profit firm to the extent that they combine to earn a profit.
Arenas. Where will we be active?
Area (product, service, distribution channels, geographic markets, technology, etc.) in which a firm participates.
Unlike vision statements, which tend to be fairly general, the identification of arenas must be very specific.
Under Armour paragraph p 15 text is on the next slide to follow.
Vehicles. How will we get there?
Example – going international – send own people? Outsource? Acquisition?
the possible vehicles for entering a new arena include acquisitions, alliances, and organic investment and growth.
Differentiators. How will we win in the marketplace?
Feature or attribute of a company’s product or service (e.g., image, customization, technical superiority, price, quality, and reliability) that helps it beat its competitors in the marketplace.
There are two critical factors in selecting differentiators
These decisions must be made early
Identifying and executing successful differentiators means making tough choices— tradeoffs.
Regarding the two choices above, Audi paragraph p 16 is second slide to follow. Audi is the car that Jason Statham drives in the “Transporter” movies? What a great marketing choice for improving image. Mention that you first see the bomb attached to the bottom of the car, then the girl goes to detonate it but waits when her boyfriend says to put some distance between them and the bomb Show the Audi VIDEO
Staging and pacing. What will be our speed and sequence of moves?
Timing and pace of strategic moves.
Reflects available resources: cash, human capital, knowledge
Which lines should be expanded now, later? Must match opportunities with available resources.
Decisions driven by resources, urgency, credibility, and the need for early wins.
Economic logic. How will we obtain our returns?
Means by which a firm will earn a profit by implementing a strategy.
how the firm will generate positive returns over and above its cost of capital.(WACC)
Think of both costs and revenues
Sometimes economic logic resides primarily on the cost side of the equation.Southwest Airlines,for example,can fly passengers for significantly lower costs per passenger mile than any major competitor.
At other times, economic logic may rest on the firm’s ability to increase the customer’s willingness to pay premium prices for products (in other words, prices that significantly exceed the costs of providing enhanced products).
Many short-sighted managers will concentrate on only 1 or 2, leaving gaps in the overall strategy. Or they may have all 5 but not understand how they dovetail together. (Reiterate that the CEO must maintain the holistic view.)
We will detail these elements in future chapters.