Business Strategy (Mid term Assignment)

Created By:
Name : Richard Tino Andrean Silaen
NIM : 29111203
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Introduction: Strategic Management
Strategic management is a process to help organizations identify what they want to
accomplish, and how should they achieve valuable results. The role played by strategic
management increasingly recognized in this period than ever before. In a global
economy that allow the movement of goods and services freely among the various
countries, companies continue to be challenged to become more competitive.
Many of the companies that have increased the level of competition is offering products
to consumers at a higher value, and this often results in above-average returns (Ireland,
Hoskisson, Hitt, 2009). By using strategic management, companies can finally
understand the competing forces and develop a sustainable competitive advantage in a
systematic and consistent.

Understanding Business Strategy
Most practicing executives would define strategy as how I could achieve my
companys objectives. An organization or a company should decide parameters to
define the companys strategic position in its industry. A company has to decide on three
main issues: who will be its targeted customers and who it will not target; what products
or services it will offer its chosen customers and what it will not offer them; and how it
will go about achieving all this what activities it will perform and what activities it
will not perform (Markides, C., 2004)
As mentioned by Amol Titus, strategy is about communication. Business strategy is
how to bring out targeted customer language and turn it into a business model. How to
deliver and fulfill the need of customers is a process of business strategy. Customers
concern about value or benefits. Customer wouldn't care about the strategies behind the
business model. Thats why a business model should build a commercial sense. It's a
tactic to get customers awareness about the product we had. Its a tool to grab the
targeted customers to choose our product instead others. After all, those strategies must
have results in the matter of time.






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Customer Value
When business leaders and others are talking about customer value, it is important that
everyone at the table understands that customer value does not relate to the value of
customers, but to the value that customers receive from the business. According to Amol
Titus, customer value must meet company value. Customer value is the number of
benefits that a customer will get from products or services relative to its cost. Most
customers want minimum equal to high value for every cost they spend on a product or
service they got from company. In the other hand, most company wants a high return
(profit) for every product of service that they deliver to their customer. In this situation,
a good strategy is how to make a win-win solution for both customer and company.
In a wider context, which is not only limited in the areas of retail, customer value can be
described as the perceived customer preferences for product characteristics,
performance, and the extent of compliance with what the customer wants.
In the implementation, carried Value Chain Analysis to help companies identify
potential resources and competitive capabilities. Like a race then start it is customer
needs, and the finish line is customer delight. Andy do described that to change the
orientation from product-focused to customer-focused company must meet the
following three steps: know your customers; deliver significant value and competitive
advantage, as well as creating a customer-centric culture.
In order to provide a competitive advantage, it is not enough to be functional value but
also emotionally. To generate more thought about customer value, and to reach out to a
customer base, a business might promote a customer value proposition. The customer
value proposition is basically a promise of benefits from a vendor to customers. So,
what makes customers satisfied? To be able to answer, first examine what the customer
expects the company, namely responsibility, quality, value and innovation of products
and services, the overall quality of service / support, and on time presentation. Amol
Titus mentioned, if a company builds their relationship with people and customers, they
can do a very good business.








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Strategic Drivers (Influencer)
Creating strategy is not easy. The characteristics of the current environment can be
considered as an environment that has never happened before, it can not be dismissed
just like that and can not be changed just like that. Basically, the nature of the industry
continues to change rapidly. It will cause that every country had different strategies to
be developed by companies who want to enter. For example, in Akzo Nobel NV case,
the newly appointed CEO, Ton Buchner had found that every country had different
characteristic, either do Indonesia. Indonesia has its own market characteristic, political
situation, business regulations and other factor that will influence the company strategy
to strengthen its presence in Indonesia.
Strategy is a basic pattern of the current goals and that was to be planned, empowerment
resources, and the interaction of a company with a market, competitors and other
environmental factors. Environmental factors here are grouped into two categories,
namely external environment and internal environment.
External environment means outside factors of the organizations which effect
the changes in the organization which the organization does not have the control
of it. External environment are involved by the PESTL (Politic, Economy,
Social, Technology, and Legal). The external environment has three major parts:
the general environment, the industry environment and the competitor
environment.
Internal environment involve within the organization. The internal business
environment has a direct impact on the business such as the company structure,
culture, strategic competitiveness, resources, capabilities and core competencies.
The organization has the control of these matters because it happen within the
organization unless like external environment.

The firms understanding about the external environment should be matched with
knowledge about its internal environment (Ireland, Hoskisson, Hitt, 2009).








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Competitive Advantage Strategy
A company will never stop dealing with problems inside and outside the company. They
will not be able to stand up to these problems if they do not have a competitive
advantage. A company has a competitive advantage when it stated that the company has
something that is not owned by competitors, doing something is better than another
company, or be able to do something that can not be done by other companies. If the
company has no differentiation compare to its competitors, then the company will no
longer be sustained in the market. For example, in Kodak case, the company does not
have competitive advantage compare to its competitor such as Sony and Canon which
play in the same product, digital cameras. Kodak stops to make camera because the
company lose its market that are switching into another brands and substitute product.
The company has lost its profitability and if it stays on that condition, it will only drive
to death.
A successful organization must be proficient in adapting to any changes that occur,
especially if the company is in a position of fast-cycle market. Companies should be
able to use strategy and tactical action in response to changes that occur in the market.
The course of action taken should have a competitive advantage that is not owned
competitors. Even in a slow-cycle and standard-cycle market, which competitive
advantage is shielded from imitation for long periods and where imitation is costly, the
strategic action and response should also be remained and prepared.

Building Company Competitive Advantages Strategy
Business Level Strategy
Michael E. Porter, in his book, explained that there are three basic key to competitive
advantage: cost leadership, differentiation and focus.
Cost leadership is a strategy in which the company can produce with a lower
cost than other competitors that have an impact on the ability of the company
over to monitor profit and market share because the company is able to set the
price more attractive to consumers than other competitors.
Differentiation is the key of the company to be able to perform a variety of
efforts, including human and financial resources, to be able to produce different




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goods or services to consumers. Differentiation can be achieved on the basis of
skill or competency of the company a competitive advantage when compared to
competitors, such as the quality of the goods and services that are good.
Focus is a corporate strategy that emphasizes efforts on one or more segments of
the market is small, so the company was able to build a deeper knowledge about
the existing segments, and also creates a barrier for competitors to enter the
market due to a higher reputation.
Basically, strategy is for the company to survive and to follow existing competition in
an industry. Competition can form an interaction with a distinct competitive force in the
industry. Further, Porter explains there are five competitives forces that cause the power
of competition to anticipate and influence the competition, they are: barriers to entry,
bargaining power of suppliers, bargaining power of buyers, threat of subtitutes and
competitive rivalry (see exhibit 1).

Corporate-level Strategy
Strategies at the corporate level is the company's efforts to be better between the
combined range of business, including where the company will compete and how
competition in the industry. Efforts are made to establish and maintain competencies
that differentiate the company from other companies at the company's focus on human
resources, organizational structure, finance, and technology. The reason a company uses
a corporate level strategy is to diversified and to create additional value of the industry.
The corporate level strategy helps the company to create value by sharing activities or
transferring competencies between different businesses in the companys portfolio
(Ireland, Hoskisson, Hitt, 2009).
Market definition is usually the domain of corporate-level strategy, the responsibility for
diversification, or the addition of new products or services to the existing offerings, also
mostly comes within the responsibility of corporate-level strategy. Also, whether to
compete head on with other companies or to selectively establish cooperative partnering
arrangements, mergers, acquisition, joint ventures or strategic alliances is a decision for
corporate-level strategy, while requiring ongoing input from business unit or divisional
level managers.




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Merger and Acquisition
Companies that want a rapid growth, good size, market share, and diversification can do
mergers and acquisitions. Merger is a integration of two or more companies into one
unified entity. The dominant company compared with other companies that will retain
its identity, while the weak will obscure its identity. Meanwhile, Acquisition is the
purchase of a company by another company or by a group of investors.
Companies do merger or acquisition to enhance shareholder value. The target is that
value-added from the new company after merger or acquisition, should be higher than
the total value added of the two separate companies. The company does not have the
risk of a new product. In addition, if expanded by mergers and acquisitions, the
company can reduce a competitor or reduce competition.
The reason is getting stronger when economic conditions are difficult. Strong
companies tend to buy other companies to increase their competitiveness and cut costs.
The two companies hope to gain a greater market share and cost efficiency. For this
reason, companies that are not able to survive alone usually volunteered to become
acquisition targets.

Joint Ventures and Strategic Alliance
As in the preceding discussion, there are many ways a company can develop, including
the joint venture and strategic alliance. Joint Venture is where companies work together
to establish a legally independent company with an investment of each so that they can
make a profit.
The joint venture is different from the merger. In the joint venture, the two
organizations form an independent company with a balanced number of shares and does
not eliminate the two companies. Effectively a joint venture is a completely new
organization, but owned by the founding participants. The board of directors generally
is constructed with representatives of the founding organizations.
Strategic Alliance is a partnership between the two organizations in which they take
advantage of the core strengths of each such proprietary processes, intellectual capital,
research, market penetration, manufacturing and/or distribution capabilities. The two
organizations will share their core strengths with each other. However, they only want




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to work with other organizations on a contract basis, and not as a legal partnership.
Strategic Management Implementation
Strategy formulation will be the basis for an alternative look at the main strategy to
guide managers and planning staff in the organization's strategy planning process.
Successful organizational strategy is set as a measure to deal with changes in the
environment, and will not succeed without implementation involving all organizational
resources. To effectively direct and control the use of company resources, then
mechanisms such as organizational structure, information systems, leadership styles,
budgeting, reward, and control systems of strategy implementation to be something very
important.
The companys best strategic plans are not likely to be successful if they are not
effectively communicated to the employees who must implement them. The strategy of
the business model which is being undertaken by the company should be able to be
implemented properly by each employee. This requires companies to set annual goals,
policies, motivate employees and allocate resources so that formulated strategies can be
executed.
The failure of the implementation of strategy set may occur. It can inhibit the
implementation of the strategy underlying the failure of such poor environmental
analysis and failure processes such as the lack of participation of member organizations
in the planning process. Many employees are competent but do not get many
opportunities to participate actively in the implementation of business strategy. As
mentioned by Amol Titus, many employees idea is only written on their personal laptop.
When they leave the company they bring their knowledge with them. There is no
knowledge capture in those companies.














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Conclusion
Management strategy is a process that takes a company to be able to enter, grow, and
survive in a dynamic market that never stops changing. Stretegi requires
communication, both to the customer, as well as the team that will execute and
implement these strategies. By communicating with customers, the company can
respond to customer needs in the form of goods or services that the company offer.
Good communication is the beginning of successful implementation of a strategy of the
company.
Market dynamic and changing organization requires a change of action remains to
formulate strategy in response to the change. External and internal factors of the
environment are drivers of the change of the company. Any company that is able to
survive and be able to respond well to any changes that occur, will be able to survive in
the competitive market.
In formulating a strategy that will be pursued, each company has a different approach.
In business-level strategy, Porter mentions three key things that a company can have a
competitive advantage compared to other companies, namely: cost leadership,
differentiation, and focus. In practice, there are five competitive forces affecting the
strength of competition in the market, they are: barriers to entry, bargaining power of
suppliers, bargaining power of buyers, threat of subtitutes and competitive pressures.
In corporate-level strategy, the company has the option to grow the company's
performance. Various attempts to do in the field of human resources, organizational
structure, finance, and technology etc.. Selection option to perform cooperative
partnering arrangements, mergers, acquisition, joint ventures or strategic alliances is a
decision for corporate-level strategy. Ultimately every company should assess their self
to do every strategy and taking into account the possibilities that will happen later.
Implementation and assessment of the business strategy defined is the last part that is no
less important. Any business strategy that has been set by the company should be able
to be implemented and assessed progress each time to measure how far the strategy can
work and what obstacles occur.

Exhibit:




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Exhibit 1. Porters Five Competitive Forces of Industry



Reference:
1. Henry, A. E. (2011). Understanding Strategic Management. 2
nd
Edition.
Oxford University Press.

2. Ireland, R. D. ; R. E. hoskisson & M. A. Hitt (2009). The Management of
Strategy: Concepts and Cases. 9
th
Edition. South-Western Cengage
Learning.
3. Markides, C. (2004). What is Strategy & How Do You Know If You Have
One? Business Strategy Review. 15(2).