Introduction

What is a simple approach to strategy?

Andy Weeger

Neu-Ulm University of Applied Sciences

October 8, 2024

Learning outcomes

After this session and after working through the review questions, you should have a solid understanding of

• the concept of value-based strategy illustrated by the value stick,
• the difference between value and profit,
• main value drivers and how they can be implemented,
• as well as potential challenges and limitations of implementing a value-based strategy.

You are able to apply the knowledge gained to real-life scenarios to describe and provide explanations for strategic decisions made by firms.

An approach to strategy

In a nutshell

Strategy?
A plan to create value.

It may not be quite that simple, but it’s almost.

Exercise

What is strategy?

In small groups of three or four, discuss what business strategy is and how to recognise a successful business. Identify a company that you can use to illustrate your findings.

Prepare to present what you found (e.g. using slides).

What is stratgegy?

Exercise

Get back to your groups, and apply the value stick concept to the company you have used as an illustration in the last exercise and work on the following questions:

• To what extent do customers demonstrate a willingness to pay for the company’s offerings?
• What pricing strategy does the company employ?
• How does the pricing strategy compare to that of competitors?
• What are the primary costs associated with the production and delivery of offerings?
• What are the primary costs and how does the company manage these?
• What factors motivate suppliers or employees to work with the company?
• How does the company create value for its customers, employees, and suppliers?
• How does the company capture value (i.e., generate profit) from its operations?

Prepare to present what you found (e.g., by visualizing the value stick).

Review and consolidation

The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.

Read Felix Oberholzer-Gee’s article about eliminating strategic overload to enhance your understanding of his strategy concept and work on the following questions.

1. What is a value-based strategy?
2. According to Oberholzer-Gee, what are the key components of a value-based strategy?
3. How does creating value for customers, employees, and suppliers contribute to a company’s long-term success?
4. What is the difference between value and profit?
5. Describe the main ways a company can create value under a value-based strategy. Through what can these be implemented?
6. Provide an example of a company that has successfully implemented a value-based strategy. What specific actions did they take?
7. What advises does Obehrolzer-Gee give with regard to the selection and implementation of strategic initiatives?
8. What is the difference between value creation and value capturing (e.g., with regards to focus, process, and outcome)?
9. What are the potential challenges and limitations of implementing a value-based strategy in an organization?
10. Compare the value-based strategy approach with another strategic management theory you have studied / you will study. What are the key similarities and differences?

Homework

Read Mintzberg (1987) and make notes on following questions:

• What are the characteristics of the five different definitions of strategy discussed in the paper (Plan, Ploy, Pattern, Position, and Perspective)?
• What do the perspectives imply for strategic management?
• Do you agree with Mintzberg’s assertion that strategy is not solely a product of rational planning?
• Use the organization chosen in the last exercise and analyze its strategy using Mintzberg’s Five Ps framework.

Q&A

Literature

Mintzberg, Henry. 1987. “The Strategy Concept i: Five Ps for Strategy.” California Management Review 30 (1): 11–24.