Stanford GSB Sloan Program

Stramgt 258: Strategic Management

Strategy and Organization in the Global Economy

Introduction AT&T in China John Roberts 01/08/03 1

What is Strategy?

• How we will control our destiny • How we will win 01/08/03 John Roberts 2

What is Strategy?

• Choice involving tradeoffs – Not operational excellence • A framework for decisions and actions – Not tactics • A mechanism for coordinating and motivating 01/08/03 John Roberts 3

Strategic Thinking versus Strategic Planning

• The responsibility of general managers versus staff • On-going versus episodic • Long-term but adaptive versus annual and fixed • Embodied in decisions and actions rather than binders on shelves • Business-relevant versus … 01/08/03 John Roberts 4

Strategizing

• Understand basis for current performance • Evaluate environment, current position, organizational capabilities and resources • Develop alternatives • Evaluate – Consider fit, reactions • Choose, communicate and implement • Re-evaluate and adapt 01/08/03 John Roberts 5

01/08/03

Determinants of Performance

Environment Strategy Organization Performance John Roberts 6

Environment

• Suppliers • Customers • Technology • Competitors, potential entrants and substitutes • Complementors • Legal, regulatory, social forces 01/08/03 John Roberts 7

Organization

• The means by which the organization actually gets things done • Elements – People – Architecture – Routines and processes – Culture 01/08/03 John Roberts 8

Elements of Strategy

• Goal • Scope • Competitive advantage • Logic 01/08/03 John Roberts 9

Strategic Goal

• What we are trying to accomplish • What it means to win • Implies measures to tell how we are doing 01/08/03 John Roberts 10

Strategic Scope

• What • Where • When • How • For whom • Places limits on what we will do – Indicating what not to do is crucial!

01/08/03 John Roberts 11

Competitive Advantage

• Why others will deal with us at terms that let us meet our goal – Often, why customers will choose our products at prices that are profitable • Typically, better cost or differentiation – Not price!

• Differentiation – Better perceived quality or better adapted to particular segment’s tastes 01/08/03 John Roberts 12

Cost/Perceived Quality

Higher Perceived Quality

Frontier of achievable choices

John Roberts Lower Cost 13 01/08/03

Cost/Perceived Quality

Higher Perceived Quality Strategic Choice Operational Improvements Lower Cost John Roberts 14 01/08/03

Sources of Competitive Advantage

• Position – Monopoly, reputation, brand, economies of scale, network effects and installed base, channel position, … • Capabilities – Things you can do especially well – Nokia design, Toyota manufacturing • Not (usually) resources 01/08/03 John Roberts 15

Logic

• Why it will work • Why competitive advantage is real and how it will be realized • How internal organization will support • How fits with external environment 01/08/03 John Roberts 16

Three Foci of S258

S258 adopts the perspective of the general manager

Environment Organization 01/08/03

Performance

John Roberts Strategy 17

(P)ARC: People/Architecture/ Routines/Culture Cooperation-Initiative trade off plane VSR Model of Organizational Learning Explorer vs. Exploiter Multinational Design: Global/International/Multi Local

Three Foci of S258

Cost-Quality Trade-off Plane P.I.E. and 5(+)Forces Globalization of Economies, Industries, Markets, and Non-Market Environment

Environment

Strategy as Goals Competitive Adv Scope Logic BU vs. Corporate Capability vs. Position Role of Corporate

Performance

Global vs. Local

Organization 01/08/03 Strategy John Roberts 18