Basic questions in strategy
Creating a strategy requires answering six linked questions. There are some important sub-questions for each of these six questions.
1. What is the External environment?
The key aspects of the external environment to evaluate are
(click on links to go to the more detailed case study examples
for each):
This can be done intuitively but it is normally worth applying some structure, particularly in analysing attractiveness (which consists of three separate dimensions – size, growth and profitability – which sometimes get confused). It is also worth checking that any segmentation you come up with is reasonable – using the tools in the book. The analysis of macro-forces is an issue more amenable to an intuitive approach – partly because there are so many potential forces and so many complex interactions, making it difficult to pick one best analytical approach. But, even this can benefit from some structured thinking.
For the sake of illustration, the three questions about the external environment could be analysed intuitively as follows:
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Spain is a large, growing but competitive airlines market
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It can be segmented by type of customer or by destination. It is quite difficult to say how exactly to segment the business, or how segment attractiveness varies, without more detailed analysis.
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The macro forces shaping it include increasing consumer wealth, regulation and climate concerns all of which affect the industry.
By clicking on the links above you can see examples of how to do more detailed analysis of each of these questions.
2. What is the Internal situation?
The Internal Environment: Iberia case study - The key aspects of the internal environment to evaluate are (click on links to go to the more detailed case study examples for each):
This can be done intuitively – but it is normally worth applying some structure – particularly in analysing the value created for customers and our competitive advantage. These are issues which it is difficult to be objective about.
For the sake of illustration, the four questions about the internal environment could be analysed intuitively as follows:
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The objectives of Iberia are unclear from the case
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It is offering a reasonable and improving service for customers although not as cheaply as the low cost airlines. Neither is it known as one of the best business airlines to fly on
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It’s competitive advantage arises primarily from its very strong position in the Spanish domestic market, a strong but challenged position, in flights from Spain to Europe, and its protected status as Spain’s only inter-continental airline.
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It has performed well since privatisation
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Overall, an interesting position in a growing market – but not a really strong position
By clicking on the links above you can see examples of how to do more detailed analysis of each of these questions.
3. How might the situation Evolve?
The general process for evaluating uncertainties is shown here.
Projecting how the situation may evolve
You can simply do this intuitively. Alternatively, you can
do some analysis to improve your thinking. The types of
analysis cover the main steps shown above (click through
to go to these documents):
4. What is the primary Issue?
The Primary Issue: Iberia case study - having analysed the current position and how this may evolve over time, it is now time to identify the primary issue, or perhaps issues, that the strategy has to face.
This is typically done intuitively – perhaps with some accompanying discussion. For example, we could decide as an individual that the primary issue facing Iberia is “How to deal with the low cost entrants. Then we could discuss this with a colleague, who thinks that the primary issue is”How to preserve Iberia’s strongholds in the domestic and inter-continental markets”. We could continue to collect individual viewpoints and then discuss them in a group. If you need some help thinking through how to do this in a more structured way, then there are two questions to ask:
By clicking on the links above you can see examples of how to do more detailed analysis of each of these questions.
