Formulating Objective and

Strategies

Dosen : Drs. HA. ROMADLON, MM, CTP

 Fakultas Ekonomi dan Bisnis
School Economics and Business Strategic Management Model
Telkom University

Strategy Formulation
Perform External
Strategy Implementation
Audit
Strategy Evaluation

Implement
Generate, Implement Measure,
Develop Vision & Establish Long-term Strategies Mkt,
Evaluate, Choose Strategies Mgt Evaluate
Mission Statement Objective Fin, R&D, Performance
Strategies Issues
Prod/Op, MIS

Perform Internal
Audit

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 Fakultas Ekonomi dan Bisnis
School Economics and Business notable quotes
Telkom University

Alice said, would you please tell me which way to go from here? The cat said,
that depends on where you want to get to
Lewis Carrol

Start from the end

3 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business What is Long-Term Objective ?

Long-term objective, represent the results expected from pursuing certain strategies

Strategies, represent the actions to be taken to accomplish long-term objectives

Time frame for objective & strategies should be consistent 2 5 years.

4 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Long-term Objective
Telkom University

Objective should be quantitative, measurable, realistic, understandable, challenging, hierarchical,

obtainable and congruent among organizational units.
Term of objective : growth in assets, growth in sales, profitability, market share, degree and
nature of diversification, earning per share and social responsibility.
Varying performance measure by organizational level :

Org Level Basis for Annual Bonus or Merit Pay

Corporate 75% based on Long-term objectives

25% based on Annual Objectives
Division 50% based on Long-term objectives
50% based on Annual Objectives
Function 25% based on Long-term objectives
75% based on Annual Objectives

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Fakultas Ekonomi dan Bisnis
School Economics and Business Characteristic of Objectives

Quantitative
Measurable
Realistic
Understandable
Challenging
Hierarchical
Obtainable
Congruent across departments

6 Creating the great business leaders

Fakultas Ekonomi dan Bisnis
School Economics and Business Benefits of Having Clear Objectives

1. Provide direction by revealing expectation 6. Minimize conflict

2. Allow synergy 7. Stimulate exertion

3. Aid in evaluation by serving as standard 8. Aid in allocation of resources

4. Establish priority 9. Aid in design of jobs

5. Reduce uncertainty 10. Provide basis for consistent decision making

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Financial vs Strategic Objectives

Financial Objectives Strategic Objective

Growth in revenue Larger market share

Growth in earning Quicker on time delivery than rivals

Shorter design-to-market times than rivals
Higher dividends
Lower cost than rivals
Larger profit margin
Higher product quality than rivals
Greater ROI Wider geographic coverage than rivals
Higher EPS Achieving technological leadership
Rising Stock Price Consistently getting new or improved product to market
ahead than rivals
Improve Cash flow

8 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business The Balanced Scorecard
Telkom University

Untuk suskes secara

Financial
finasial, bagaimana kita
harus nampak di hadapan
pemegang saham?

Customer Untuk memuaskan Internal Business

Untuk mencapai visi
kita, bagaimana kita
harus nampak di Visi & pemegang saham danProcess
hadapan pelanggan Strategi pelanggan, proses bisnis
apa yang diperbaiki

Untuk mencapai visi kita, Learning and Growth

bagaimana akan
mempertahankan kemampuan
untuk berubah dan
berkembang

Ref : BSC (Kaplan)

9 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Cont
Telkom University

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Cause and Effect Relationship

Financial Perspective Menggambarkan rantai dari logika yang merubah/
Productivity Long term Revenue mentranformasikan dari aset tak berwujud menjadi
hareholders value Growth
nilai yang terukur

Customer Perspective Customer Value Proposition

Product & Service Attr.ibutes Relationship Image Menjelaskan kondisi yang akan menciptakan
Price Quality Time Function Partnership Brand
Value untuk pelanggan

Internal Process Perspective Value Creating Processes

Operation
Menentukan proses-proses yang akan
Customer Innovation Regulatory and
Management Management Social Processes Mentranfoemasikan aset tak berwujud
Processes
Processes Processes Menjadi hasil keuangan dan Customer
Clustering of Assets and
Learning & Growth Perspective Activities
Human Capital Information Capital Organization Capital Menentukan aset tak berwujud yang harus
diselaraskan dan diintegrasikan untuk
menciptakan value

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Strategic Objective Example
Telkom University

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Balanced Scorecard Objective Measurement Target

Financial Perspective Growth - CAGR Revenue (5years) 12 %
- Market share :
- Product 1 40 %
- Product 2 20 %
Profitability - EBITDA Margin 63 %
- Net Income Margin 20 %

Customer Perspective Excellent Product CSI 80 %

CLI 90 %
Excellent Service SLI Compliance > 90 %

Internal Business process One stop service process. SLA Compliance 90 %

Network Performance 99,99 %
Excellent Operation etc

Learning & Growth HR Development CAGR EBITDA / Empl 19 %

HR Competency gap 95 % K3
IT Support HR Satisfaction 80 %
IT Fulfillment 100 %
IT Availability 99,99 %

11 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business

Alternative Strategies Defined and Example

Telkom University

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Strategy Definition 2007 Example

Gaining ownership or increased control over distributors or retailers Starbucks reached a deal with Green Mountain Coffee Roater for that
firm to sell packs of Starbucks Tazo-branded coffee and tea in their
Forward Integration brewers

Backward Integration Seeking ownership or increased control of firms suppliers Hilton Hotel could acquire a large furniture manufacturer

Horizontal Integration Seeking ownership or increased control over competitors Pfizer acquires Wyeth; both are huge drug companies

Seeking increased market share for present product or services in present Mc Donalds spending million on its promotion aimed at
Market Penetration market through greater marketing effort convincing consumers it offers healthy items.

Market Development Introducing present product or services into new geographic area Burger King opened its first in Japan

Seeking increased sales by improving present product and services or Google introduced Google Presents to compete with Microsoft
Product Development developing new ones. Power Point

12 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Cont
Telkom University

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Strategy Definition 2007 Example

Related Diversification Adding new but related product or services AT&T acquiresof BellSouth

Unrelated Adding new unrelated product or services Ford Motor company entered the industrial bank business
Diversification

Regrouping through cost and asset reduction to reserve declining sales Discovery Channel closed its103 mall-based and stand-alone stores
Retrenchment and profit. to focus on the internet and laid 25%of its workforce

Selling a division or part of an organization Whirpool sold its struggling Hoover floor-care business to
Divestiture Techtronic Industries

Liquidation Selling all of a companys assets, in part, for their tangible worth Follow Me Charter sold all of its assets and ceased doing business

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Fakultas Ekonomi dan Bisnis
School Economics and Business Alternative Strategies

Integration Strategies Intensive

Forward Int Strategies
Backward Int Market Penetration
Horizontal Int Market Dev
Product Dev

Defensive
Diversification Strategies
Strategies
Retrenchment
Related Divers
Unrelated Diversification Divestiture
Liquidation

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Fakultas Ekonomi dan Bisnis
School Economics and Business Levels of Strategies

Large Company Small Comapny

Corporate level, CEO

Company level, owner
or president

Division level,
EVP Functional level, marketing,
finance, R&D, manufacturing,
Functional level, marketing, MIS, HR
finance, R&D, HRM
production/operation, MIS
Operational level, plant
Operational level, plant manager, sales manager, sales manager,
manager, production and department production and department
manager. manager

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Porters Five Generic Strategies

Generic Strategies

Cost Leadership Differentiation Focus

Type-1 Cost Leadership-Low cost

Type-1 Type-2 Cost Leadership Best Cost
Large Type-3 -----
Size of Market

Type-2 Type-3 Differentiation

Type-4 Focus-Low Cost
Type-5 Focus Best Value

Small Type-4
----- Type-3
Type-5

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Cost Leadership Strategies (Type-1 and Type-2)
Telkom University

17 1. A primary reason for pursuing forward, backward and horizontal integration strategies is to gain
low-cost or best-value cost leadership benefits.
2. Can be especially effective when the market is composed of many price-sensitive buyers.
3. It must achieve their competitive advantage in ways that are difficult for competitors to copy or
match.
4. Cost of overall Value Chain must lower than competitors total cost
a) Perform value chain activities more efficiently than rivals
b) Revamp the firms overall value chain to eliminate or bypass some cost producing activities

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Differentiation Strategies (Type-3)

1. Different strategies offer different degree of differentiation, differentiation doesnt guarantee

competitive advantage, especially if standard products sufficiently meet customer needs.

2. A differentiation strategy should be pursued only after a carefully study of buyers needs and
preference.

3. Strong coordination among R&D and marketing function

4. Effective if hard or expensive for rivals to duplicate

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Focus Strategies (Type-4 & Type-5)

A low-cost (type-4) or Best-Value (type-5) focus strategy can be especially attractive under the following
conditions :
1. Target market niche is large, profitable, and growing
2. Industry leaders do not consider the niche to be crucial to their own success.
3. etc

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Means for Achieving Strategies
Cooperation Among Competitors.
For collaboration between competitors to succeed, both firms must contribute distinctive, such as
technology, distribution, basic research or manufacturing capacity Example : Airline Industry

Joint Venture / Partnering

JV is a popular strategy that occurs when two or more companies form a temporary partnership or
consortium for the purpose of capitalizing on some opportunity share equity in new entity
Other cooperative arrangements : R&D partnership, cross-distribution agreement, cross-licensing agreement,
cross-manufacturing agreement Nokia and Facebook Inc.

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 Merger/ Acquisition
Merger occurs when to organization of about equal size unite to form one enterprise.
Acquisition occurs when a large organization purchase (acquires) a smaller firm, or viceversa.
When merger and acquisition is not desired by both parties take over or hostile takeover
When merger and acquisition is desired by both parties friendly merger

Outsourcing
Business-process outsourcing (BPO) involves companies taking over the functional operation such as human
resources, information system, payroll, accounting, customer service. The reasons are :
1) It less expensive
2) Allow the firm to focus on its core business
3) It enable the firms provide better service

First Mover Advantage

It refers to the benefits a firm may achieve by entering a new market or developing a new product or service
21 prior to rivals firm.
 Fakultas Ekonomi dan Bisnis
School Economics and Business Requirement for Generic Competitive Strategy
Telkom University

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Generic Commonly Required Skill Common Organizational

Strategic And Resources Requirement

1. Sustained capital investment and access to 1. Tight cost control

capital. 2. Frequent, detailed control report
2. Process Engineering Skill 3. Structured organization and responsibilities
Overall Cost 3. Intent supervision of labor 4. Incentives based on meeting strict quantitative targets.
Leadership 4. Product design for ease in manufacture
5. Low-cost distribution system

1. Strong marketing ability 1. Strong coordination among function in R&D, product

2. Product engineering development and marketing.
3. Creative flare 2. Subjective measurement and of incentives instead of
4. Strong capabilities in basic research quantitative measure.
5. Corporate reputation for quality or technological 3. Amenities to attract highly skilled labor, scientist or
leadership creative people
6. Strong cooperation from channel

Combination of the above policies directed at the Combination of the above policies directed at the regular
Focus particular strategic target. strategic target.

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Risk of Generic Strategy
Telkom University

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Risk of Cost Leadership Risk of Differentiation Risk of Focus

Cost of leadership is not sustained : Differentiation is not sustained : The focus strategy is imitated
Competitor imitate Competitor imitate The target segment becomes structurally
Technology change Bases for differentiation become less unattractive :
Other bases of cost of leadership erode. important to buyers. Structure erode
Demand disappears
Proximity in differentiation is lost. Cost Proximity is lost.

Broadly targeted competitors overwhelm

the segment :
The segments differences from other
segment narrow
The advantage of abroad line increase.
Cost focusers achieve even lower cost in
segment Cost focusers achieve even lower cost in
segment New focusers sub-segment the industry

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 Fakultas Ekonomi dan Bisnis
School Economics and Business Vertical Integration
Telkom University

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Vertical Integration
It is based on growth through the acquisition of firms that supply it with inputs (such as raw materials) or are
customers for its outputs (such as warehouse for finish product).

Textile Producer Textile Producer

Shirt Manufacturer Shirt Manufacturer

Clothing Store Clothing Store

24 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Corporate Combination
Telkom University

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Joint Ventures
Occasionally two or more capable firms lack a necessary component for success in a particular competitive environment. The
solution is a set of joint ventures, which are commercial companies (children) created and operated for the benefit of the co-
owners (parents)

Strategic Alliances
They are distinguished from joint ventures because the companies involved do not take an equity position in one another. For
example one partner provides manufacturing capabilities, while second partner provides marketing capabilities.

Consortia / Konsorsium
Consortia are defined a large interlocking relationship between businesses of an industry, consortia project are increasing in
number and in success rates.
Outsourcing
Involve farming out certain value chain activities to outside vendors

25 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Merger and Acquisition
Telkom University
Merger and acquisition are especially suited for situation in which alliance and partnership not
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enough to provide a company with access to needed resources and capabilities.
Merger, is pooling of equals with the newly created new name of Co
Acquisition, is combination in which one company, the acquirer, purchases and absorbs the
operation of another, acquirer.

The Strategic Objective :

1. To gain more market share, create more efficient operation.
2. To expand geographic coverage
3. To expand product categories or international
4. To gain access new technologies
5. To try to invent new industry

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Tugas-5
A. Case
1. Anda kembali ke kelompok sesuai dengan perusahaan masing masing
2. Lakukan analisis Sasaran Jangka Panjang perusahaan tersebut, kelompokkan ke dalam model Balance
Scorecard
3. Dari sejumlah strategi alternatif, strategi apa yang dijalankan oleh perusahaan tersebut berikan
penjelasan
4. Menurut anda bagaaimana level strategi di perusahaan tersebut
5. Dari Generic Strategic Porter, strategi apa yang diterapkan pada perusahaan tersebut, berikan
penjelasan
6. Tugas dikerjakan mulai sekarang dan dikumpulkan hari ini paling lambat pkl 17.00

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