Strategy syllabus ENG AOF 2016

AoF - Hanoi IUT de Toulon Licence professionnelle Bancassurance Strategy François Lacroux Strategy - F Lacroux Strategy François LACROUX Presentation This course introduces the strategic approach It aims to bring a vision of what strategy means for companies: the issues, the tools, the concepts, and, more broadly, the specificity of this strategic approach This course includes a presentation of the tools and the concepts used in strategy, and many applications of these concepts and tools in Vietnamese contexts Summary Course 1: Strategy: definitions, issues, constraints Course 2: Fundamental strategic models Course 3: Strategic diagnosis Course 4: Strategic moves Students’ evaluation Individual evaluation Strategy - F Lacroux Course : Strategy : Definitions, Issues, Constraints Strategy - F Lacroux Strtegy- F Lacroux Course #1 Strategy : Definitions, Issues, Constraints Presentation and Summary Issues y Basic strategic models y Strategic diagnosis y Strategic moves Strtegy- F Lacroux y Strategy - F Lacroux What is strategy ? y A basic definition : Strtegy- F Lacroux ◦ To finds some goals, ◦ To select some ways to reach them y Illustration y One… Or many definitions ◦ Individual strategy ◦ Corporate & business strategy ◦ Global strategy What is strategy ? y Tools, methods, concepts mixing : Technical & economic issues Strtegy- F Lacroux Income, growth , positioning… Social issues Motivation, work atmosphere, involvment… Strategy - F Lacroux « Political » issues Power, management… Social issues Fleet Partners Careers Responsabilities Political issues Strtegy- F Lacroux Economiic issues Illustration Board of directors What is strategy ? y Tools, Methods, Concepts ◦ Designed at the hierarchical top of the organization x … « Translated » and used by the employees x … Facing a competitive environment Strtegy- F Lacroux ◦ … Constantly evolving Environment Strategy Strategy Strategy Organization Strategy - F Lacroux What y is strategy ? Some new issues… Technical & economic issues Income, growth , positioning… Unpredictability Strtegy- F Lacroux Globalization Attitude to work Social issues Motivation, work atmosphere, involvment… Attitude to authority « Political » issues Power, management… Strtegy- F Lacroux Unvarying strategy Strategy - F Lacroux y Strategy is always varying… But whatever the firm, whatever the environment, some issues remain unchanged y Unvarying issues ◦ ◦ ◦ ◦ ◦ Competition Constraints Unpredicatibility Efficiency Horizontal design Competition y Strategy cannot be defined out of the competitive environment ◦ « Avoidance behavior » ◦ Cooperation Strtegy- F Lacroux ◦ Competition y Each strategy implies a reverse move Constraints y Internal Constraints Strtegy- F Lacroux ◦ ◦ ◦ ◦ y Human constraints Manufacturing constraints Financial constraints Global constraints External Constraints : entry/exit barriers ◦ Technological barriers ◦ Law barriers ◦ Financial barriers 10 Strategy - F Lacroux Unpredictability  A consequence of globalization  Different kinds of unpredictability Strtegy- F Lacroux ◦ Technological unpredictability ; ex : iPad ◦ « Nature » unpredictability ; ex : volcano ◦ Competitive unpredictability ; ex : chinese planes 11 Strtegy- F Lacroux Efficiency  An efficient strategy is always a good strategy  A well-prepared strategy is not always efficient 12 Strategy - F Lacroux Horizontal design HUAMN RESOURCE MANUFACTURING Strategy always implies all the parts of the organization : Horizontal design FINANCE  MARKETING HUAMN RESOURCE MANUFACTURING An organization is made of different parts, each having its own issues : Vertical design FINANCE Strtegy- F Lacroux MARKETING  13 Application History of Strtegy- F Lacroux  14 Strategy - F Lacroux 10 2.2 Tool Strtegy- F Lacroux y Force : Bargaining power of the suppliers y Force : Bargaining power of the customers ◦ Definition ◦ Definition ◦ It depends on… x The number of competitors x Their relative size (who is bigger than the other ?) x The relative importance of the supplier (what does it sell to us ? Is it important for us ? ◦ It depends on… x The number of competitors x Their relative size (who is bigger than the other ?) x The relative importance of the buyer (what we sell to him ? Is it important for him ?) x BtoB x BtoC 2.2 Tool y Force :Threaten of new competitors / potentiel entrants ◦ Definition Strtegy- F Lacroux ◦ They depend on the barriers to entry x Technological barriers x Law barriers x Financial barriers x Etc y y Application : barriers to entry for foreign companies in Vietnam Force :Threat of substitutes ◦ Definition ◦ The most unpredictible threaten ◦ It depends on : x Innovation within the market x Strength of the competition Strategy - F Lacroux 10 41 2.3 Approach y Stages ◦ Assess the competition from x Tools of strategy x Porter’model Strtegy- F Lacroux ◦ Define the threatens ◦ Define the opportunities y Conclusion ◦ A difficult process ◦ A subjective process ◦ Difficult to assess both long and short term at the same time 11 Internal diagnosis Build a representation of the company Aim y Tools y Approach Strtegy- F Lacroux y 12 Strategy - F Lacroux 42 3.1 Goal y Representing the company itself in order to discover Strtegy- F Lacroux ◦ The strengths Skills, know-how, etc of the company that can help it to sustain its competitive position ◦ The weaknesses « Lacks » in the firm skills, know-hows, etc that limit or prevent the sustainability of its competitive advantage 13 3.2 Tool y Resources ◦ Resource based view : The company uses all kind of « resource » x Human resource x Financial resource x Marketing resource x Innovation resource ◦ To gain competitive advantage, the company must x Own some particular resource x Use them in a appropriate way Strtegy- F Lacroux y The « core competences » ◦ « Special » competences, owned by a company, and that allow it to sustain or improve its competitive advantage ◦ Core competences : x May be of different types (i e., technological, financial, etc…) x Must be difficult to reproduce x Must not be externalized 14 Strategy - F Lacroux 43 3.2 Tool y Value added chain ◦ Definition ◦ Representation Strtegy- F Lacroux x Generic functions x Support functions 15 3.2 Tool Infrastructure Infrastructure Support functions GRH Human Resource Management Développement technologique Technology Strtegy- F Lacroux Approvisionnements Procurement Generic functions Inbound interne Logistics Production Operations Outbound Logistique externe logistics Marketing Marketing & ventes & sales Services 16 Strategy - F Lacroux 44 3.3 Approach y Stages ◦ Assess the competitive position of the company using x Core competences x Resource x Value added chain ◦ Define the strengths Strtegy- F Lacroux ◦ Define the weaknesses y Conclusion ◦ A difficult process ◦ A subjective process ◦ Difficult to assess both long and short term at the same time 17 Strategic gaps y Linking external and internal diagnosis Limit to the threaten Strtegy- F Lacroux Strengths Threatens Opportunities to gain competitive advantage Weaknesses Short term threatens Opportunities Mid term threaten 18 Strategy - F Lacroux 45 Strtegy- F Lacroux Strategic gaps y Strategic diagnosis must be linked to the predefined strategic goals y Gaps between goals and diagnosis will determine the strategic moves 19 Application Internal and external diagnosis Strtegy- F Lacroux y 20 Strategy - F Lacroux 46 Course : Strategic moves Strategy - F Lacroux 47 Strategic moves Strtegy- F Lacroux How to gain a competitive advantage ? 1 How to select a strategy ? y Strategic diagnosis y Situation of the company Strtegy- F Lacroux ◦ Size ◦ Core competences ◦ Ownership y Situation of the environment ◦ Forces ◦ « Strategy catalog » of the industry ◦ Attractiveness of the industry Strategy - F Lacroux 48 Basic choices Competitive advantage Lower cost Strtegy- F Lacroux Targets Broad Differentiation Cost Leadership Differentiation Focus Narrow By costs By differentiation Basic choices The company must match the strategic move to the situation of the company Strtegy- F Lacroux Return on investment y Cost leadership Differentiation Undefined Strategies Market share Strategy - F Lacroux 49 Basic choices y Cost leadership ◦ How does it work ? x The goal is to decrease all the types of costs x It ’s a strategy for the whole company ◦ What does it require to succeed ? Strtegy- F Lacroux x High Demand-price elasticity x Situation of the other competitors ◦ Synthesis x Seldom unique x Always used Basic choices y Differentiation Strtegy- F Lacroux ◦ How does it work ? x To « avoid » the competition x Some different ways x Weak differenciation x Strong differenciation ◦ What does it require to succeed ? x The differentation must be : x Easily perceived by the customer x Difficult to copy x Sustainable ◦ Synthesis x Seldom unique x Always used Strategy - F Lacroux 50 Basic choices y Focused-strategy ◦ How does it work ? x « Escape » from the competition x A « bounded » strategy ◦ What does it require to succeed ? Strtegy- F Lacroux x Core competences x A market that « accepts » niches ◦ Synthesis x A strategy for small companies x A High-vulnerability strategy To Make or to « unmake » : diversification Definition y Possible choices : Strtegy- F Lacroux y Same market New Market Same product Market Penetration Market Development New product Product  Development Diversification Strategy - F Lacroux 51 To Make or to « unmake » : diversification y Diversification ◦ The strategy of the growing company Strtegy- F Lacroux ◦ The success depends on the capacity for the firm to « export » its identity (brands, know-how, etc…) ◦ Risk and opportunity x Risk : increasing of the fixed costs x Opportunity: a better way to face crisis ◦ The risk of this strategy depends on the closeness between the current industry and the new industry To make or to delegate : integration and externalization The main problem : to rule… Or to externalize y How to be integrated ? y Strtegy- F Lacroux Supplier Competitor COMPANY Horizontal Integration Competitor Client Vertical integration 10 Strategy - F Lacroux 52 To make or to delegate : integration and externalization y The Reasons for selecting vertical integration Strtegy- F Lacroux ◦ To secure the procurement ◦ To lower costs ◦ To internalize margins y Some risks ◦ Evolving of the structure of the costs : variable costs become fixed costs ◦ Loss of flexibility ◦ Loss of expertise 11 To make or to delegate : integration and externalization y The reasons for selecting externalization Strtegy- F Lacroux ◦ To lower costs ◦ To modify the costs structure : fixed costs Î variable costs ◦ To inscrease flexibiliy ◦ To focus on the core business y Some risks ◦ Difficult to draw the frontiers (what is our business ?) ◦ Difficulty to master the manufacturing process 12 Strategy - F Lacroux 53 To stay single… or to get married ? Partnership and Merging y The main concern : trying to remain independant… Or accepting to share the profit and the risks ? y Possible ways ◦ Specific partnerships x Additional skills x « Opening of the road » for specific markets Strtegy- F Lacroux ◦ Generic partnerships x Critical size x Synergy ◦ Partnerships in : x Product x Process 13 To stay single… or to get married ? Partnership and Merging y Merging/Buying ◦ Possible ways x To buy the shares x Take-over bid (with cash or shares) Strtegy- F Lacroux ◦ What is the goal ? x To increase the size of the company (economy of scale) x Broadly, to develop the company ◦ Some risks x « Integration » problems : how to mix different cultures ? x « Political » problems (where is the power in the new company ?) 14 Strategy - F Lacroux 54 Strtegy- F Lacroux Conclusion y No intrinsic superiority of a strategic move compared to the others y Most of the strategies can (and must) be combined Î it’s better to use multiples strategies rather then a unique strategy y Most of the time, a strategy is « bounded » rather than « selected » (you have to… even if you’d like not to…) 15 Application Strategic moves of… Strtegy- F Lacroux y 16 Strategy - F Lacroux 55 ... environment Strtegy- F Lacroux ◦ … Constantly evolving Environment Strategy Strategy Strategy Organization Strategy - F Lacroux What y is strategy ? Some new issues… Technical & economic issues Income,... Efficiency  An efficient strategy is always a good strategy  A well-prepared strategy is not always efficient 12 Strategy - F Lacroux Horizontal design HUAMN RESOURCE MANUFACTURING Strategy always implies... evaluation Individual evaluation Strategy - F Lacroux Course : Strategy : Definitions, Issues, Constraints Strategy - F Lacroux Strtegy- F Lacroux Course #1 Strategy : Definitions, Issues, Constraints