What is Strategy.docx

**What is Strategy?** - **What is strategic management:** It's about making choices, especially regarding how a company will compete in the marketplace. This involves identifying key challenges and determining the best course of action to address them. It requires understanding a...

**What is Strategy?** - **What is strategic management:** It's about making choices, especially regarding how a company will compete in the marketplace. This involves identifying key challenges and determining the best course of action to address them. It requires understanding a company\'s internal resources and capabilities, as well as the external environment, including customers and competitors. It is not simply a process or a checklist, but rather a way of thinking that requires making tough decisions and placing bets on the future. - Coherent guiding policy set by CEO drives actions. It starts with a challenge. Its formulation does not usually start what many will have you believe start with a long-term goal. - The single company ambition or mission almost always emerges from corporate communications or PRs to post-rationalise the direction of the firm taken. Companies come up with the strategies to the problem, then the marketing team make up the "mission" bullshit. - **Strategy is the exercise of power to effect change.** It involves making decisions that allocate resources and direct efforts towards specific goals, even if those goals challenge the status quo. It is a set of interrelated and powerful choices that positions the organisation to win. - **CEOs are ultimately responsible for strategy**, as they are accountable to shareholders for delivering value. **Effective CEOs and strategists don\'t operate in isolation**. They involve others in the process and don\'t shy away from collaboration. 2. **Recognising Poor Strategy** - **Bad strategy often lacks clarity**, relying on buzzwords instead of well-defined objectives. - **An unwillingness to reinvent or invest in necessary change** is another red flag. Companies that cling to outdated business models in the face of market shifts are likely to struggle. - **Prioritising internal stakeholders over customers** is a sign of misplaced focus. - **Assuming competitors are static or incapable of response** can be a fatal mistake. - **Confusing financial goals with strategy** is a common pitfall. While financial performance is important, it should be a result of a sound strategy, not the strategy itself. 3. **The 3Cs of Strategy** - Kenichi Ohmae\'s 3Cs model provides a framework for evaluating strategy: - **Company**: Assessing internal resources, capabilities, culture, and systems. - **Customers**: Understanding their needs, preferences, and behaviours. - **Competitors**: Analysing their strengths, weaknesses, and likely responses to your actions. - **Strategy should aim to create value** by identifying: - **Where to play**: Determining the target markets, categories, and segments. Barriers to entry that requires advantages in resources and techniques. - **How to win**: Choosing a path to competitive advantage, such as differentiation or cost leadership. \ 💡 **Case studies of Carrefour** - What problem(s) was the new Carrefour CEO seeking to solve? - Highlight what you think were Good and Bad elements **Good** **Bad** ---------------------------------- --------------------------------------------------------------------------------------------------------------------------------------- Digitalisation is good Prioritise companies' brand recognition across the globe Saving money is not a bad choice Store experience is an essential element for organic food purchasing They're a lager in the digitalisation world--- why would they put all their eggs on the basket of digital market Accessibility of online shopping They're trying to reduce their cost but are they sure online business model going to achieve that? Or is that japoridising this goal? - Explain why you judged the elements as you did - Suggest what Carrefour could have done instead (with the benefit of hindsight) \ 4. **Strategic Choices in eCommerce:** - **The grocery retail sector exemplifies the dynamic nature of strategic choices**: - It\'s historically been highly competitive. - COVID-19 accelerated innovation and challenged traditional store models. - Significant capital has flowed into new business models. - The industry is likely to see the pre-, during, and post-COVID periods as transformative. - **Performance of Carrefour and Hindsight:** - Loss relative % share to two key rivals - eCommerce= 6% of sales (2021) vs 10% est. France avg - They paid the shareholders with the money saved from the cost cut rather than investing more on the online platform, that's why they fall behind. - Focus on food quality and limited eCommerce offer perceived to lag competitors; lacks price cut - **Case example of Ocado** - Multi-decade fixed cost investment--- made significant fixed-cost investments in its e-commerce grocery business model - 3% earning margin in the supermarket--- it's all about expanding the market - Ocado\'s model, which relies on dedicated, highly automated fulfilment centres, requires substantial upfront investment. - Only recently achieved profitability during the peak of the COVID-19 pandemic, suggesting that this model may take time to yield financial returns. - Instacart: "Uber of grocery shopping"--- it is a successful example of Ocado's business model. **Retailers face strategic decisions regarding their eCommerce business model. Both models can be implemented in-house or through partnerships:** - **Variable/ Pick-from-store models: (Instacart)** - Utilise existing stores as fulfilment centres. - Rely on a human workforce for picking and packing. - Offer a product range limited to store inventory. - **Fixed/ Dedicated site models: (Ocado)** - Operate large-scale, dedicated fulfilment centres. - Employ automation and robotics extensively. - Provide a vast product assortment. Fixed site models sell the technology for the eCommerce, so they rely on fixed cost. Variable on the other hand does not, they use the online delivery model as an extension strategy. - **Retailers must weigh the pros and cons of each model** in the context of their overall strategy, considering factors like: - Target market - Desired delivery speed and reach - Cost structure - Competitive landscape. - **Omnichannel grocery profitability has been a challenge for retailers.** 5. **Case Study: Aldi** - **Aldi\'s strategy initially focused on physical store expansion and a cost leadership position.** They're focusing on the **company** for better profit margin: they choose to make their **customers** have less choice (e-shopping), and let their **competitors** to take the market (by not joining the online market). - **They resisted eCommerce for a significant period, hypothesising that it would:** - Divert crucial capital from store openings. - Prove difficult to scale effectively, especially with their click-and-collect model. - Subsidise shoppers who would already frequent their stores. - Result in small basket sizes, limiting profitability. - Cannibalise impulse purchases from their in-store offerings. - **COVID-19 forced Aldi to embrace eCommerce in 2020**, partnering with Deliveroo for home delivery and offering click-and-collect from stores. - **Aldi\'s core strategy remains focused on physical expansion**, and they are experiencing significant revenue growth. 6. **The 7 Tests of Strategy** - These tests help evaluate the robustness and coherence of a strategy: 1. **Challenge Identification:** Does the strategy effectively address the key challenges? 2. **Market Targeting:** Are the chosen markets and categories appropriate for future growth? 3. **Competitive Advantage:** Does the strategy establish a clear path to winning, either through differentiation or cost leadership? 4. **Business Model Alignment:** Do the chosen business models support the strategy, and are the necessary resources (assets, capabilities, systems) in place? 5. **External Resource Utilisation:** Are external resources (suppliers, partners) being leveraged effectively? 6. **Flexibility:** Is the strategy adaptable to changing circumstances? 7. **Realism:** Is there a realistic understanding of the costs and time frames involved in implementing the strategy? 7. **The Importance of Choice** - **Developing a successful strategy requires making difficult choices and trade-offs.** - **It\'s about deciding not only what to do, but also what not to do**, focusing resources on the most impactful actions. - **Strategic choices should align with the company\'s overall goals and its chosen path to competitive advantage**.