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THE LOGIC OF CORPORATE STRATEGY

THE LOGIC OF CORPORATE STRATEGY. ACHMAD SOBIRIN MAGISTER MANAJEMEN FE UII. The Hierarchy of management. GENERAL MANAGEMENT. STRATEGIC MANAGEMENT. FUNCTIONAL MANAGEMENT. The Hierarchy of Strategic Management. CORPORATE STRATEGY. COMPETITIVE STRATEGY. FUNCTIONAL STRATEGY.

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THE LOGIC OF CORPORATE STRATEGY

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  1. THE LOGIC OFCORPORATE STRATEGY ACHMAD SOBIRIN MAGISTER MANAJEMEN FE UII

  2. The Hierarchy of management GENERAL MANAGEMENT STRATEGIC MANAGEMENT FUNCTIONAL MANAGEMENT

  3. The Hierarchy of Strategic Management CORPORATE STRATEGY COMPETITIVE STRATEGY FUNCTIONAL STRATEGY

  4. School of Strategy Strategy formation as a process of conception Strategy formation as a formal process Strategy formation as an analytical process Strategy formation as a visionary process Strategy formation as a mental process Strategy formation as an emergent process The Design School: The Planning School: The Positioning School: The Entrepreneurial School: The Cognitive School: The Learning School:

  5. The Power School: The Cultural School: The Environmental School: The Configuration School: Strategy formation as a process of negotiation Strategy formation as a collective process Strategy formation as a reactive process Strategy formation as a process of transformation

  6. THE NEW STRATEGY PARADIGM The Competitive Challenge Not Only Reengineering processes Organizational transformation Competing for market share But Also Regenerating strategies Industry transformation Competing for opportunity share

  7. THE NEW STRATEGY PARADIGM Finding the Future Not Only But Also Strategy as learning Strategy as positioning Strategic plans Strategy as forgetting Strategy as foresight Strategy architecture

  8. THE NEW STRATEGY PARADIGM Mobilizing for the Future Not Only But Also Strategy as fit Strategy as resume allocation Strategy as stretch Strategy as resource accumulation and leverage

  9. THE NEW STRATEGY PARADIGM Getting to the Future First Not Only But Also Competing within an existing industry structure Competing for product leadership Competing as a single entity Maximizing the ratio of new product “hits” Minimizing time-to-market Competing to shape future industry structure Competing for core competence leadership Competing as a coalition Maximizing the rate of new market learning Minimizing time to global pre-emotion

  10. History of Strategic management:Military influences in strategy • “Strategos” referred to a general in command of an army • The art of the general • By 450 B.C. it came to mean managerial skill • By 330 B.C. it referred to the skill of employing forces to overcome positions to create a system of global governance • Carl von Clausewitz “tactics…(involve) the use of armed forces in the engagement, strategy (is) the use of engagements for the object of war” 1838 On War

  11. Academic influences in strategy • HBS requires a class in Business Policy in 1912 • Adam Smith’s “invisible hand” (the market) gives way to Alfred Sloan (GM CEO from 1923-1946) concept of the “visible hand”—middle manager • Chester Bernard influential book “the executive” argues that managers should pay attention to “strategic factors” • Ronald Coase’s 1937 article “why firms exist” (Nobel Prize in economics) and Joseph Schumpter’s concept of “disruptive technologies” written in 1942 bring in organizational economics

  12. Recent influences in strategy • 1960s (Strategy and structure; Corporate Strategy) • 1963 Harvard business conference leads to SWOT analysis • BCG founded in 1963 “strategy boutique” • Created the portfolio analysis • Stars, dogs, cash cows, question marks • 1980s (Porter’s 5 forces) • 1990s (Resource Based view of the firm)

  13. Why is strategic management important? • Gives everyone a role • Makes a difference in performance levels • Provides systematic approach to uncertainties • Coordinates and focuses employees

  14. Basics of Strategic Management • Four aspects that set strategic management apart • Interdisciplinary • Capstone of the Business degree • External focus • Competition • Internal focus • Future direction

  15. Why do strategy? • Gain competitive advantage • Sets an organization apart • Having something other competitors don't • Doing something better than other organizations • Doing something that others can't • Necessary for long-term success and survival

  16. Who does strategy? • The Role of the Board of Directors • Elected representatives of the company’s stockholders • Legally obligated to represent and protect stockholder’s • The Role of Top Management • Responsible for decisions and action of every employee • Providing effective leadership • Other Organizational Employees • Implement— put the strategies into action and monitor performance • Evaluate—do the actual evaluations and take necessary actions

  17. The Role of the Board of Directors • Approve an organizational philosophy • Review and approve strategic goals and plans • Review and approve organization's financial standards and policies • Monitor organizational performance and regularly review performance results • Select, evaluate, and compensate top-level managers • Develop management succession plans • Monitor relations with shareholders and other key stakeholders

  18. Who is on the board of directors? • Chairman of the board • Chief Executive officer (CEO) • President • Chief Operating officer (COO) • Other C’s • Chief Financial officer • Chief information officer • Inside board members • Outside board members

  19. The Role of Top Management Determining Organizational Purpose or Vision Exploiting and Maintaining Core Competencies Establishing Appropriately Balanced Controls Effective Strategic Leadership Developing Human Capital Emphasizing Ethical Decisions and Practices Creating and Sustaining Strong Organizational Culture

  20. Corporate (and international) Strategy • Three directions for corporate strategy • Growth • M&A, JV/SA • International • Stability • Renewal • Retrenchment • Turnaround

  21. Brief Overview of Corporate Strategy • Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses • How should the parent company influence and relate to the business under its control?

  22. Why Parent Company Should Exist? To create synergy – the business under its stewardship should perform not only better than they would as stand-alone entities but also better than they would under the stewardship any other parent

  23. The Framework of Parenting Advantage SHAREHOLDER/INVESTORS CORPORATE PARENT BUSINESSES

  24. What Constitutes the Parent? Major decisions and services centralized at this level Profit centers BUSINESS UNIT

  25. Product Groups Functions Profit centers Business Units? Units

  26. Dominant Business Parent embedded in Dominant Business Overlapping Units

  27. Corporate Strategy Framework Characteristics Characteristics of the Parent of the businesses Fit ? Parenting Advantage Rival Parents Trend and Scenario Decision about Decision about the Parent the Portfolio Fit

  28. Characteristics of the Parent Mental Maps Structure, Systems, and Process Functions, Central Services, and Resources Decentralization Contracts People and Skill

  29. Characteristics of the Businesses Mental Maps; Structure, systems and Processes; Functions, central services, and resources; People and Skill; Decentralization contracts Business definitions; Parenting opportunities; Critical success factors Characteristics Characteristics of the Parent of the businesses Fit ? Parenting Advantage Rival Parents Trend and Scenario Decision about Decision about the Parent the Portfolio Fit

  30. Successful Corporate Strategies Identifying existing distinctive parenting characteristics Clarifying current Heartland criteria Characteristics Characteristics of the Parent of the businesses Fit ? Parenting Advantage – Based on value creation insight Rival Parents Trend and Scenario Decision about Decision about the Parent the Portfolio Fit To develop or enhance distinctive parenting characteristics Based on prospective Heartland criteria

  31. The Evolution

  32. Four types of parental value creation Stand-alone influence Linkage influence

  33. Four types of parental value creation Central functions and services Corporate development

  34. PARENTING FIT MATRIX Low Heartland Ballast Edge of Heartland MISFIT of business’s critical success factor with prospective parenting characteristic Alien Territory Alien Territory Value Trap High Low High FIT of business parenting opportunities with parent’s prospective value creation insights

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