Diamond Strategy

Diamond Strategy was developed by strategy researchers Don Hambrick and Jim Fredrickson as a framework for checking and communicating a strategy.

“We now have five forces analysis, core competencies, hyper competition, the resource-based view of the firm, value chains, and a host of other helpful, often powerful, analytic tools. Missing, however, has been any guidance as to what the product of these tools should be— or what actually constitutes a strategy…?” Hambrick and Frederickson (2001:48).

According to Hambrick and Frederickson (2001), a strategy has 5 elements, which provide answers to 5 questions. The five elements will form a unity.

1. Arena: Where will we be active? (and with how much emphasis?)

2. Vehicle: How will we get there?

3. Differentiators: How will we win?

4. Staging: What will be our speed and sequences of moves?

5. Economic Logic: How will returns be obtained?

According to Hambrick and Frederickson (2001), a strategy has 5 elements, which provide answers to 5 questions. The five elements will form a unity.

1. Arena

Arena is the most fundamental choices strategist make are those of where or in what arenas the business will be active. “Where will we be active?” (and with how much emphasis?). However, the answer shouldn’t be general. It’s important to be as specific as possible. in this section, company needs to specify the product categories, market segments, geographic areas, and core technologies as well as the value adding stages the business intends to take on.

2. Vehicle

Besides deciding the arena, the strategist also needs to decide how to get there. If the

company have decided to expand the product range, they should choose how to accomplish that by relying on organic, internal development or other vehicles such as joint venture, alliances, licensing/franchising that offer a better means for achieving their broadened scope.

3. Differentiators

Not only where the company will be active (arena) and how it will get there (vehicle), but also how the company will win in the market (How will we win?). The company must have a strategy that differentiates it from other competitors. In a competitive world, winning is the result of differentiators, and such edges don’t just happen. Achieving a compelling marketplace advantage doesn’t mean that the company has to be at the extreme on one differentiating dimension. Sometimes just by having the best combination of differentiators gave the best marketplace advantage.

4. Staging

Every company has a goals or target that they want to achieve. For example, IKEA wants rapid international expansion, by region. Decisions about staging can be driven by a number of factors. first, of course resources. Urgency is a second factor that affecting staging, some of strategy elements may face brief windows of opportunity. A third factor is the achievement of credibility. forth factor is the pursuit of early wins. it may be far wiser to successfully tackle a part of the strategy that is relatively doable before attempting unfamiliar or more challenging initiatives

5. Economic Logic

The core of any business strategy must be clear. How profits will be generated, not just some profits, but profits above the company’s cost of capital.