Reading 33 - Your Strategy needs a strategy

Question 1

A company’s business environment can be categorized using two key factors, what are they?

Answer 1

1. Predictability - defines how accurately and far into the future a company can forecasts factors such as:
   
   • Industry demand
   • corporate performance
   • market expectations
2. Malleability (mutability) - defined as the extent to which a company and its competitors can influence the above factors

Question 2

Describe the box that describes the 4 coprorate strategies based on Malleability and Predictability

Answer 2

Question 3

Describe the Clasical Style of corporate strategy…

Answer 3

The Classical style is appropriate when the environment is highly predictable and that cannot be easily changed. Analysis of an industry based on Porter’s five forces is an example of the classical style

More Predictable

Less Malleable

Question 4

Describe the Adaptive style of corporate strategy….

Answer 4

When a company faces an environment that is highly unpredictable and not easily changed, the Adaptive style is most appropriate

This can be achieved by:

1. Willingess to constantly refine long term goals in response to a changing environment
2. The ability to quickly redistribute or acquire resources to meet changing conditions
3. A goal of maximizing flexibilty rather than efficiency
4. Short term or continuous planning process based on a hypothesis rather than a rigid plan

Less Predictable

Less Malleable

Question 5

Describe the Shaping corporate strategy…

Answer 5

When the underlying business environment is less predictable but more malleable, a Shaping strategy formulation style is appropriate. Companies seek to influence the unpredictable business environment to further their business interests.

Businesses can influence their competitive environment by:

1. Building a network of committed customers, suppliers and partners
2. Defining new markets, technologies, and business practices
3. Promoting its interests through marketing, lobbying, and strategic partnerships

Less Predictable

More Malleable

Question 6

Describe the Visionary style of corporate strategy…

Answer 6

When the business environment is both more predictable and more malleable, a visionary strategy formulation is most appropriate. This is often called ‘build it and they will come’ approach

Businesses that follow this style must:

1. Have adequate resources to commit
2. Stay focused on a long term goal rather than constantly changing strategy

More Predictable

More Malleable

Question 7

What are the 6 common mistakes in strategy formulation?

Answer 7

1. Focusing only on a predictable environment (most companies assume their industry is predictable when often it is not)
2. Inaccuracy in gauging the dimensions (executives often overestimate the predictibility of their industry)
3. Relying on predefined timetables (annual review of strategy when it should be much more dynamic)
4. Having a cultural mismatch
5. Relying on a single style for diverse divisions of a company
6. A style that does not evolve with changes in industry life cycle.

Question 8

What is the Survival Style?

Answer 8

When the surival of the company is threatened there is a 5th style.

** The company should focus on shoring up capital, cutting expenses, restructuring, etc.. in order to be ready when the business improves and a longer term strategy can be implimented

Question 9

What are 3 traps executives fall into when determining corporate strategy?

Answer 9

1. Misplaced Confidence: Executives often overestimate how well they can predict the predictability and malleability of their industry.
2. Unexaminted Habits: Most executives were educated or strained in the Classical “school”, when they should really use an Adaptive strategy given how fast their industry changes
3. Culture Mismatches: Incorporating adaptive capabilities can be highley countercultural to implement.