239
Chapter 12
Strategic Management
12.1 Introduction
From the start, your immediate task is to identify and establish your com-
pany’s sustainable strategic competitive advantage.
1,2
Your strategy is your
business approach to a set of competitive moves designed to generate a suc-
cessful outcome for your enterprise. It is your game plan for:
◾ Strengthening your organization’s competitive position
◾ Satisfying customers
◾ Achieving your performance targets
You have three generic strategies available to you: (1) focus, (2) differen-
tiation, and (3) cost leadership, as shown in Figure12.1.
A focused (or market niche) outcompetes rivals by offering innovative
(customized attributes) products that meet requirements/tastes not previ-
ously available. A differentiated strategy presents the market with enabling
(revolutionary) new products that appeal to a broad spectrum of buyers.
Last, a cost leadership strategy seeks to give customers more “value for
their money” by offering good-to-excellent attributes at a lower cost than
competitors offer, in price-sensitive markets.
240 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
12.2 Strategic Corporate Planning
“The essence of strategy lies in creating tomorrow’s competitive advan-
tage faster than competitors mimic yours.” —Hamel and Prahalad
As a founder, one of your most important strategies is to set the tone for
your company (also known as culture). You need to develop a strategic
plan to grow your company and align your organization as cross-functional
teams. Your company will be a reection of you.
Strategic corporate planning is the organization’s process of dening
its strategy, or direction, and making decisions on allocating its resources to
pursue this strategy, in order to determine the future direction of the orga-
nization.
3
You will need to clearly communicate your strategy to your team.
This will allow executives to make the hard decisions that come with a rap-
idly growing business, and provide you with immediate and timely feedback
when crises occur.
Strategic planning consists of the following steps, summarized in
Figure12.2.
Focus Differentiation
Cost leadership
Stuck in the middle
Porter’s Generic Strategies
(Enabling technologies)(Innovations)
(Evolutionary technologies)
Market share (%)
Profitability
Xerox copiers; Sony
walkman; iPhone; Boeing 747
Lotus 1–2–3; Windows; CT scanner;
Polaroid cameras; AMEX cards
Honda Accord; TIMEX watches;
McDonald’s restaurants; VW Beetle;
Wal-Mart
Figure 12.1 Porter’s generic strategies—The three generic strategies to establish your
sustainable advantage.
Strategic Management ◾ 241
Your decisions will determine which strategies are formulated and imple-
mented to put your business model into action:
Goals (understood by all members)
Founder Core values Core principles
Core
competencies
Corporate Mission, vision Strategy Tactics
Innovation R&D Value creation
Differentiation
Align with strategy Product
Launch
Finance Fundraising
Debt
Metrics of success Cash ow
Capitalization
Marketing
Sales
Pricing
Positioning
Market share
targets
Product
extensions
Customer
feedback
Personnel Hire top talent Hiring
Firing
Empowerment
Morale
Manufacturing Outsourcing
Geographical
location
Production costs
Inventory control
Value added
Flexible
production
Strategic Planning Process
Culture
Politics
Structure
Core values
Purpose
Mission
Vision
Strategic
planning
Growth
Tactics
Competitive
environment
Figure 12.2 Strategic planning process—Strategic planning consists of three inputs.
242 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
12.3 Core Values and Core Purpose
“To be successful, you have to have your heart in your business,
and your business in your heart.” —Thomas Watson, Sr., IBM
Core values are the set of unchanging principles that dene your organiza-
tion. For example, “I believe that our reputation for integrity and honorable
dealings is our most important asset. Your GE team believes that strong
integrity is the foundation of great performance. I hold myself to a high stan-
dard, and I know you will do the same.” Jeffrey Immelt, Chairman & CEO,
General Electric.
The core purpose is your reason for existing, reecting your idealistic
motivation, and capturing the soul of your creation. Your core competencies
are those things your company can do better than anyone else. For example:
◾ Nike’s core purpose is to experience the emotion of competition, win-
ning, and crushing competitors.
◾ 3M’s core purpose is to solve unsolved problems innovatively.
◾ Walt Disney’s core purpose is to make people happy.
◾ Apple’s core competency is disruptive innovations.
◾ Charles Schwab’s core competency is lightning fast, cost-effective trades.
◾ Aspen Dental’s core competency is your mouth is our business.
Table12.1 summarizes the two core principles you should inculcate in
your organization, while is it still in the formative stages.
12.4 Mission, Vision
“You must sell yourself before you sell your company.”
A mission is a compelling, daring, and achievable goal. Like any goal, a
mission must be nite, measurable, and practical. Once achieved, a new
mission must be set and articulated.
A vision statement is very broad and forward-looking and should be
inspiring to employees as well as all other stakeholders. The vision statement
clearly states what the company is all about and explains direction and pur-
pose. As opposed to mission statements, vision statements unite the entire
staff toward the pursuit of one common goal and are permanent.
Strategic Management ◾ 243
Collins and Lazier
4
argue that if you examine the historical evolution of
great companies like L.L. Bean, Hewlett-Packard, Merck, Johnson & Johnson,
Medtronic, Wal-Mart, Boeing, PepsiCo, Sony, McDonald’s, etc. you will nd
that while the company was still relatively small, key leaders instilled a com-
pelling vision into the organization.
For example, Johnson & Johnson’s famous mission statement reads as
follows:
5
We will delight our consumers, treating each person who con-
tacts us as if they are our only consumer, providing them with a
response which is evidence of our interest and that leaves them
with the clear understanding that they are important to us.
Our Johnson & Johnson Consumer Service Centre staffare commit-
ted to providing exceptional service to our consumers.
◾ We will be contactable 24 hours a day, 7 days a week either
personally or by voicemail.
◾ We will be empowered to resolve any dissatisfaction that con-
sumers have about our products and services.
◾ We will send a response, where appropriate, to email and tele-
phone contact within two working days and written contact
within three working days of its receipt.
◾ We will compose our response letters so they are easily
understood.
◾ We will provide consumers with replacement or alternative prod-
uct or monetary refund in instances of product dissatisfaction.
◾ In some cases, you will be asked to return the product (at our
expense) so that we can conduct an appropriate review and
take any necessary corrective action to the monitoring proce-
dures in an endeavor to eliminate a repetition of the problem
Table12.1 Core principles (Values purposes)
Core Values Core Purposes
HOW? WHEN?
Do we behave? Do we measure our progress?
Do we achieve collective commitment? Do we establish targets and timelines?
Do we guide behavior? Do we establish priorities?
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