The book “The quintessence of strategic management. What you really need to know to survive in business” by Philip Kotler, Roland Berger, and Nils Bickhoff provides a basic understanding of strategy, what kinds of strategies are the most basic, and how they interact.
Strategic management book consists of three main chapters.
The first chapter is an introduction
It describes the basics of strategy and strategic management. The authors give a definition of the strategy, while asking to perceive the definition of “as basic, not final”, and describe the process of strategic planning, which is divided into four components.
- General planning
- Strategic planning
- Operational planning
- Operational planning management
The second chapter deals with the key tools of strategy development, the principles of their interaction and combination
The chapter begins with a description of the SWOT analysis as the basis of all strategy development tools. SWOT analysis consists of 4 categories: Strengths; Weaknesses; Opportunities; Threats. The task of the SWOT analysis is to give a structured description of the situation on which you need to make a decision.
The following chapter presents the main tools for strategy development
Ansoff’s Product/Market Matrix. The Ansoff’s Product/Market Matrix helps to choose one of the typical strategies that is most suitable under these market conditions. The matrix consists of 2 axes (product and market), which divide the field into 4 squares, each of which corresponds to one of the 4 possible marketing strategies:
- Market penetration (coordinates existing products / existing markets);
- Market development (coordinates existing products / new markets);
- Product development (coordinates new products / existing markets);
- Diversification (coordinates new products / new markets).
Portfolio Management: Portfolio Analysis (Matrix). Portfolio analysis – a set of measures aimed at evaluating the work of the enterprise for the subsequent analysis of the current strategy and making adjustments to it. Several methods based on the construction of 2-dimensional matrices will be used in the portfolio analysis.
Matrix BCG (Boston Consulting Group). Each of the quadrants in the BCG model is given a figurative name:
“Stars”. These include, as a rule, new business areas, which occupy a relatively large share of the booming market, in which operations generate high profits.
“Cash cows”. These are business areas that in the past have gained a relatively large market share.
“Question marks”. These business areas compete in growing industries, but occupy a relatively small market share.
“Dogs”. These are business areas with a relatively small market share in slow-growing industries.
Analyzing Business Strategies. The task of business strategies is to determine competitive advantages in each strategic segment. They are designed to answer the question: “Which competitive advantages do we need or do we have?”
The Market-Based View: The structure-conduct-performance paradigm and Porter’s five forces
The Structure-Conduct-Performance Paradigm is based on the fact that the industry and its structure are the decisive factors that determine the behavior of players in the market and the potential of the market.
Based on the Structure-Conduct-Performance Paradigm, Michael Porter developed his concept of the five forces, designed to show companies exactly what positioning and strategy options are at their disposal in the context of opportunities and threats in a particular market.
Porter’s five forces are:
- Rivalry among existing competitors;
- Bargaining power of suppliers;
- Bargaining power of buyers;
- Threat of new entrants;
- Threat of substitute products.
The Resource -Based View: The core competency approach
The core competency – a competency that provides a competitive advantage. These core competencies may be resources, skills, general assets and etc.
Dynamic markets: the simple rules approach. These simple rules according to Kathleen Eisenhardt can be broken down into five categories:
1. How-to rules – determine how a company should carry out its key processes and how to make them unique;
2. Boundary rules help you to determine which business opportunity managers need to grasp, and what – not;
3. Priority rules help managers rank emerging business opportunities;
4. Timing rules help to synchronize the dynamics of markets and business opportunities with internal processes — such as the development of new products;
5. Exit rules teach managers to give up outdated business opportunities at the right time.
Network Approaches: the business model – an integrative frame of reference for describing a strategy
The method of building business models emerged in the mid-1990s. as a response to the phenomena occurring in and around network savings (the technological process brought by the Internet, and the globalization of companies and economic processes).
Three components:
- The choice of product / market combinations;
- The determination of the revenue mechanism;
- The configuration and execution of value adding activities.
The third chapter is devoted to the four most important concepts in the field of strategic management
1. Growth strategy
Seven successful growth strategies:
- Innovation and branding;
- Imposing new rules on other players;
- Globalization;
- A focused portfolio is a growth strategy;
- Reducing vertical integration through outsourcing;
- Market presence and consolidation through mergers and acquisitions through mergers and acquisitions ensures dominance in the industry by buying up the main competitors;
- Network / partnership / virtualization
2. Business Process Reengineering (BPO)
4 basic requirements for reengineering:
- fundamentality,
- radicalism,
- scale,
- processes
3. Strategic brand management
The purpose of branding is to maintain customer loyalty to the company in the long term and strengthen the brand.
5 elements of brand value:
- brand loyalty,
- recognition,
- perceived quality,
- associations,
- other advantages of the brand.
4. Strategic games
Game theory is a mathematical theory of strategic behavior that analyzes situations in which a decision is required. Conceptually, strategic games are dynamic modeling of real situations in business.
The book allows in a concise manner to get acquainted with the most important theoretical knowledge in the field of strategic management. The authors clearly and consistently help the reader to understand what a strategy is, what are the main tools for developing a strategy and how they are interconnected.
Most of the tools being analyzed are accompanied by explanatory examples, which makes reading and understanding of the material easier.
Also in the book there are many recommendations and references to the literature, revealing the topic of strategic management in more detail. In the final part of the book discusses the practical aspects of strategy development.
The authors also pay attention to the fact that even the best strategies will not always be correct and optimal in various situations. You can, using a book and your knowledge, reduce risks when making a strategic decision.
The book is recommended for beginners in matters of strategy, as well as for all who develop successful strategies for their company and its employees.
PS: I also recommend to read another great book by Philip Kotler – Lateral Marketing: New Techniques for Finding Breakthrough Ideas
