ST310E Strategic Thinking in a Complex World Session 2 (2024-2025) PDF

9/27/2024 ST310E - Strategic Thinking in a Complex World Session 2 Module Coordinator: Cilem Selin HAZIR (Ph.D) 2024-2025 Academic Year 1 Agenda 2...

9/27/2024 ST310E - Strategic Thinking in a Complex World Session 2 Module Coordinator: Cilem Selin HAZIR (Ph.D) 2024-2025 Academic Year 1 Agenda 2 1  9/27/2024 Business Models A business model describes a value proposition for customers and other participants, an arrangement of activities that produce this value, and associated revenue and cost structures.  Often taken for granted in established industries  Competitors can have same business model, but different strategies. Source: Whittington et al. (2020) Exploring Strategy: Text and Cases, 12th Edition, Pearson. 3 Business Model Components Source: Whittington et al. (2020) Exploring Strategy: Text and Cases, 12th Edition, Pearson. 4 2  9/27/2024 Example: Phenix’s Business Model Source: https://www.wearephenix.com/phenix/qui-sommes-nous/ 5 Example: Phenix’s Business Model Phenix creates value for: Consumers: affordable food and consuming sustainably Food retailers: reducing biowaste and carbon footprint, selling food with close deadlines or reducing tax by food donations, improving stock management, etc. Food retailers and Phenix capture value : Phoenix’s activities/resources: Retailers get revenue Partnerships with food retailers, from selling anti-waste Phoenix as a facilitator. baskets App with 5M+ users Phenix gets a fee for Retailers publish managing retailers’ stock announcements on the App and a small margin from discounted food baskets. Source: Whittington et al. (2020) Exploring Strategy: Text and Cases, 12th Edition, Pearson. 6 3  9/27/2024 Major Patterns in Business Models Separate selling of two interlinked products. Razor and Blade E.g., Gilette sells razors at a very low price, but the replacement blades ta a high price. A basic version is offered for free to build a large Freemium customer base and eventually convince a portion of them to buy premium services. (Free+Premium) E.g., LinkedIn, Spotify. Brings people and/or businesses together with or without an intermediary. Peer to Peer E.g., Airbnb is a peer-to-peer model with a for- profit intermediary. Source: Whittington et al. (2020) Exploring Strategy: Text and Cases, 12th Edition, Pearson. 7 Agenda 8 4  9/27/2024 Debate: How is Strategy Made? Deliberate Planning It emerges: analyzing: Spontaneous innovation Market growth Customer needs OR Daily decisions of employees/managers Competitors Technological trends, etc. 9 Strategy as a Blend of Proactive and Reactive Actions Source: Thompson et al., Crafting and executing strategy 10 5  9/27/2024 Example: Starbucks Frappuccino Developed by Starbucks employees in California, led by Dina Campion: “It was the summer of 1993, and Los Angeles is very hot in the summer. We noticed there were some smaller coffee shops that did some sort of blended coffee beverage. A couple of store managers and I felt there was a huge opportunity for Starbucks.” Source: https://stories.starbucks.com/stories/2015/frappuccino-turns-20/ 11 Strategy Development Process Source: Thompson et al., Crafting and executing strategy 12 6  9/27/2024 Vision Future Strategic vision Provides a panoramic view of “where we are going?” Today Charts a path for it to follow. Organization Source: Thompson et al., Crafting and executing strategy 13 Wording a Vision Statement Distinctive “to organize the world’s information and Specific / focused but flexible make it universally accessible” Founders of Google Memorable Feasible / measurable What about these? “Nike, Inc. fosters a culture of invention. “Become the world’s leading personal We create products, services and beverage systems company” experiences for today’s athlete while Keurlg Green Mountain solving problems for the next generation” Nike, Inc. Source: Thompson et al., Crafting and executing strategy 14 7  9/27/2024 Mission Describes the enterprise’s present business and purpose: – who we are, – what we do, and – why we are here. The ideal mission statement Identifies products and services Specifies markets Specifies customers’ needs Sets the firm apart from its competitors Clarifies the business to stakeholders Source: Thompson et al., Crafting and executing strategy 15 Wording a Mission Statement What about the following mission statements? FedEX: “The FedEx Corporation offers express and fast delivery transportation services, delivering an estimated 3 million packages daily all around the globe. Its services include overnight courier, ground, heavy freight, document copying, and logistics services.” Coca Cola: “to refresh the world; to inspire moments of optimism and happiness; to create value and make a difference.” Source: Thompson et al., Crafting and executing strategy 16 8  9/27/2024 Core Values Core values are a moral compass They are criteria for employees to understand company culture They guide actions and behaviors in pursuing vision and mission 17 How Vision, Mission and Values Affect Strategic Decisions: The Case of Ikea “To create a better everyday life for the many people.” This vision goes beyond home furnishing. We want to have a positive impact on the world – from the communities where we source our raw materials to the way our Vision products help our customers live a more sustainable life at home. By sharing what we do, and speaking up for what we believe in, we can be part of positive change in society. “to offer a wide range of well-designed, functional home furnishing products Mission at prices so low that as many people as possible will be able to afford them.” Togetherness Caring for people and planet Cost-consciousness Core Simplicity Values Renew and improve Different with a meaning Give and take responsibility Lead by example Source: https://www.ikea.com/gb/en/this-is-ikea/about-us/the-ikea-vision-and-values-pub9aa779d0 18 9  9/27/2024 How Vision, Mission and Values Affect Strategic Decisions: The Case of Ikea Vision “To create a better everyday life for the many people.” Caring for people and planet Core Different with a meaning Values Lead by example A plant-based alternative to the iconic IKEA meatball “IKEA wants to inspire a more sustainable eating and lifestyle habits with a positive impact on people and the planet. Adding the plant ball to the IKEA food offer contributes to this ambition.” Sources: https://www.ikea.com/gb/en/this-is-ikea/about-us/the-ikea-vision-and-values-pub9aa779d0 https://www.ikea.com/global/en/newsroom/sustainability/ikea-introduces-a-plant-ball-for-meat-lovers--a-more-sustainable-alternative-to-the-iconic- ikea-meatball-200716/ 19 How Vision, Mission and Values Affect Strategic Decisions: The Case of Ikea Core Caring for people and planet Values Cost-consciousness Sources: https://www.ikea.com/gb/en/this-is-ikea/about-us/the-ikea-vision-and-values-pub9aa779d0 https://www.ikea.com/us/en/customer-service/product-support/recalls/following-an-additional-child-fatality-ikea-recalls-29-million-malm-and-other- models-of-chests-pub4128a7af 20 10  9/27/2024 Purpose of Setting Objectives Objectives convert the vision and mission into performance targets. Well-stated objectives must be: – specific, – quantifiable / measurable. Stretch objectives: – Targets that are high enough – Reachable with enough effort – Not beyond the organization’s current capabilities regardless of the effort. Source: Thompson et al., Crafting and executing strategy 21 The two-mode network Sets of Objectives Source: Thompson et al., Crafting and executing strategy 22 11  9/27/2024 The two-mode Researchnetwork setting Sets of Objectives Mission, vision and values Objectives Examples? Financial Strategic Lagging Leading Short-term Long-term Tension? Source: Thompson et al., Crafting and executing strategy 23 Breakdown of Objectives into Targets Source: Thompson et al., Crafting and executing strategy 24 12  9/27/2024 Strategy Making Hierarchy Corporate Where to compete? Portfolio of business and its adjustment Strategy Overarching goals and synergies Headquarter Resource allocation, monitoring Business How to compete? How to gain a competitive advantage? Strategy Build resources and capabilities SBU Monitor lower level functions Functional Add detail to business strategy E.g., Marketing, R&D, regional sales, supplies Strategy Bottom-up initiatives Functions Monitors operations within functions Source: Thompson et al., Crafting and executing strategy 25 The two-mode Researchnetwork setting Who is Involved in Strategy Making? Chief Executive Officer (CEO) – Lawrence Culp Ultimate responsible for leading the process Accountable for results Senior executives, e.g. CFO, CTO, CMO, COO (Senior) Vice presidents Various areas of expertise Managers of divisions, subsidiaries, geographic regions, plants, operating units Familiar with their business Orchestrate their pieces of strategy Source: Thompson et al., Crafting and executing strategy 26 13  9/27/2024 The two-mode Researchnetwork setting Stakeholders Individuals or groups who can affect or are affected by the actions of a firm. External Internal Customers Employees Suppliers Stockholders Alliance partners Board members Creditors Unions Communities Governments Stakeholders exert different power. Examples Source: Rothaermel, Strategic Management 27 The two-mode Researchnetwork setting Board of directors: exercise strong oversight Elected by shareholders to represent their interests Meet several times per year Board of directors Inside and outside directors Board’s independence is important The board of directors Oversees the strategic direction Tasks and Evaluates senior executives responsibilities Oversees financial accounting and reporting Handle executive payment Source: Thompson et al., Crafting and executing strategy 28 14  9/27/2024 THANK YOU! 29 15