Category: Strategy ಯುಕ್ತಿ

In the last blog, we began discussing about performance. We continue the decision in today’s blog too – we here attempt to have a better understanding of one of the approached that could be taken to define and measure performance.

An organization could be looked at as an association of productive assets who voluntarily come together to create something of economic advantage. The owners of these productive assets would only be willing to make their resource available if they steadily see that total income (adjusted for risk – a rate of return higher than the bank could be thought of the minimum risk one could take) that is larger than the reasonable alternative one could have.

This gives us one base to define performance – The comparative value an organization is willing to create using its productive assets with the value that owners of these assets expect to obtain. If this value is larger than the value that the owner of the asset expects, he would be willing to make available these assets to the particular organization; else he would be dissatisfied and look at alternatives where the use of these assets would obtain its full value.

We would get this clearer with a hypothetical example we would give in the next blog.

Read in Kannada:

In the earlier blogs we discussed the concepts of competitive advantage, parity and disadvantage. We also had a discussion on why a strategy that creates a competitive advantage would “out-performs” the other that is either creates a competitive parity or competitive disadvantage. One question that obviously generates from here is that of Performance.

Performance could be defined in many angles and would vary according to the domain, the people involved etc. It is hard to have any agreement on the best way to define performance, forget measuring. There is no single measure of performance without flaws and the multiple approaches one adopts would be useful in actual strategic analysis.

Read in Kannada:

In the earlier blog we began our discussion about SWOT analysis, in todays blog we continue understanding the framework better.

Every organization has some weakness, but they possess some strengths as well. Any theory that is to be successful in assisting organizations gaining competitive advantage should look address all the four aspects of SWOT analysis. Any such theory would build on the firm’s strength and use it to exloit the opportunitities and nutralize the threats, it also suggests how these firms could either avoid the weakness of fix them.

While the SWOT framework clearly highlights the importance of lookin at a theory from the 4 dimensions, it doesnt povide any guidance in identifying the four – this limits its utilitiy to management decision makers. The SWOT framwork does tell the firms what questions they should ask about the strategic theory they are pursuing. Asking the right questions is the key to a lot of knowledge and improvement in any field – mastering it takes a lot of effort.

SWOT is only an evaluatory framework for your theory, it doesnt give any ready made solution. It is the company which develops its strategy and SWOT helps analyze to make it more comprehensive.

Read in Kannada:

In the earlier blogs we were in a discussion on emergent and intended strategy. However it is pretty much believed by most strategists that what makes a strategy successful is not the way it evolves, but whether the strategy addresses four aspects of the setting in which the firm operates

• Strength of the firm
• Weakness of the firm
• Opportunities in the environment
• Threats it faces from the environment.

These four aspects are represented as the famous acronym – SWOT is used to analyze the theory of the firm

We define the various terms as

• Strength – Firm’s Resources and Capabilities that it possesses that enable it to engage in activities that generate economic value and may sometimes lead to competitive advantage.
• Weakness – Firm’s Resources and Capabilities that either makes it difficult to realize economic value of the firm’s strengths or actually reduce the firm’s economic value if implemented
• Opportunities – the chances for a firm to improve its competitive position and performance. These could be expected or unexpected.
• Threats – are any external individual, group, or organizations that seek to reduce the firm’s performance.

We could represent this in the format as shown below:

We would deal with the way we could use this framework in the next blog.

Read in Kannada:

One could look at the earlier blog from another perspective – i.e. assume a firm begins operations with a well-developed theory and the market is the test of that theory; management at regular intervals would make adjustments to the theory to be able to generate competitive advantage.

One could always look at emergent strategies as a failure of a management’s ability to understand the economic processes; however this opens up the question of exploiting opportunities. While it is good to analyze the industry’s underlying economics process and create a strategy to handle that, but as the company begins to operate more avenues of business might open up which might not have been hitherto spotted and create a larger returns to the firm!

Another way of looking at the use of emergent strategy is when you think of the company who adopts a “second mover” strategy. These companies don’t explicitly lead the market creation or exploitation process, they merely follow the leaders. In the process they rely heavily on their ability to adapt quickly to the strategy that other firms demonstrate to be valuable ones.

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If we have a closer look at strategy, we realize that strategies keep getting altered. Is this a weak-link in the strategy or is it normal?

The answer to this question still is unclear. We feel it is ok to have strategy being changed. We would tackle this question over this blog and the next.

To understand this as a process we would need some definitions:

Intended Strategy: – A Strategy a firm thought it was going to pursue when it began is the intended strategy

Deliberate Strategy: – An intended strategy a firm actually implements

Realized Strategy: – A strategy a firm is actually pursuing

Unrealized Strategy: – An intended strategy a firm doesn’t actually implement

Emergent Strategy: – A strategy that emerges over time or that has been radically reshaped once implemented.

This was depicted by Henry Mintzberg in this book – “Strategy Formulation is an Adhocracy”. We have modified the same and come up with the following diagram depicting this.

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ಈ ಹಿಂದಿನ ಎರಡು ಅಂಕಣಗಳು ವ್ಯಾವಹಾರಿಕ ಯುಕ್ತಿಯ ಸ್ಪರ್ಧಾತ್ಮಕ ಲಾಭ ಮತ್ತು ಸ್ಪರ್ಧಾತ್ಮಕ ಸಮಾನತೆ ಬಗ್ಗೆಯಾಗಿತ್ತು. ಇಂದಿನ ಅಂಕಣದಲ್ಲಿ ನಾವು ಇನ್ನೊಂದು ಪದದ ಬಗ್ಗೆ ಅರಿಯೋಣ ಅದೇ ಸ್ಪರ್ಧಾತ್ಮಕ ಹಿನ್ನಡೆ.

ಯಾವುದೇ ಕಂಪನಿಯು ಸ್ಪರ್ಧಾತ್ಮಕ ಹಿನ್ನಡೆಯನ್ನು ಹೊಂದಲು ಬಯಸದು, ಆದರೆ ಅದರ ವ್ಯಾವಹಾರಿಕ ಯುಕ್ತಿಗಳು ಕೆಲವೊಮ್ಮೆ ಹಿನ್ನದೆಯತ್ತಲೇ ಅದನ್ನು ಕೊಂಡೊಯ್ಯಬಹುದು. ಒಂದು ಕಂಪನಿಯು ಅಳವಡಿಸುವ ಯುಕ್ತಿಯು ಯಾವುದೇ ರೀತಿಯ ಆರ್ಥಿಕ ಮೌಲ್ಯವನ್ನು ಹೆಚ್ಚಿಸದಿದ್ದಲ್ಲಿ ಅಥವಾ ಸೃಷ್ಟಿ ಮಾಡದಿದ್ದಲ್ಲಿ ಆಗ ಕಂಪನಿಯ ಯುಕ್ತಿಯು ಸ್ಪರ್ಧಾತ್ಮಕ ಹಿನ್ನಡೆಯನ್ನು ಹೊಂದಿದಂತೆ ಎಂದು ಪರಿಗಣಿಸುವರು. ಆರ್ಥಿಕ ಮೌಲ್ಯವು ಸೃಷ್ಟಿಯಾಗದಿದ್ದರೂ ಅದನ್ನು ಆರ್ಥಿಕ ಮೌಲ್ಯದ ನಾಶವೆಂದೇ ಪರಿಗಣಿಸುವರು. ಕಂಪನಿಯು ಸಮಾನಾಂತರ ಉದ್ಯಮದ ಆರ್ಥಿಕತೆಯೊಡನೆ ಸಮದೂಗಿಸಿ ಮುನ್ನಡೆಯದಿದ್ದಲ್ಲಿ ಈ ರೀತಿಯ ಸ್ಪರ್ಧಾತ್ಮಕ ಹಿನ್ನಡೆಯನ್ನು ಹೊಂದಬೇಕಾಗುತ್ತದೆ.

ನಾವು ಹಿಂದೆ ಚರ್ಚಿಸಿದ ಯುಗೋ ಕಂಪನಿಯ ಉದಾಹರಣೆಯನ್ನು ಇಲ್ಲಿಗೆ ಅಳವಡಿಸಬಹುದು. ಅದರ ಕಡಿಮೆ ಬೆಲೆಗೆ ಯಾವುದೇ ಸುರಕ್ಷತೆ ಇಲ್ಲದ ವಾಹನಗಳ ಉತ್ಪನ್ನವು ಸ್ಪರ್ಧಾತ್ಮಕ ಹಿನ್ನಡೆಯನ್ನು ಹೊಂದಲು ಕಾರಣವಾಯಿತು.

The last two blogs on strategy were about competitive advantage and competitive parity. In today’s blog we would look at another term similar to these – competitive disadvantage.

No company really likes to be at a disadvantage, but the strategy of some of the firms only lead them to a competitive disadvantage. A firm is at a competitive disadvantage when its theory’s implementation and the action it takes in these lines fail to create any economic value; if fact if a firm fails to create any such economic value it could be also seen as destroying the economic value. Such a competitive disadvantage results when the firm doesn’t align itself with the underlying economic process of the industry or the market.

We could relate here to the story of Yugo in USA as an example for having a competitive disadvantage – its attempt to come in as the lowest price with a negligence of on safety resulted in its failure.

Read in Kannada: http://somanagement.blogspot.com/2011/06/blog-post_02.html