Course cover
,Strategy & Entrepreneurship
Table of contents
Part one: introduction to strategy
Chapter one : definition and importance of strategy ............................................................................................... 7
1.1 What do we mean by strategy? .................................................................................................................... 7
1.2 What is strategy about? ............................................................................................................................... 7
1.3 Strategy and competitors ............................................................................................................................. 8
1.4 Identifying a firm’s strategy – pattern ........................................................................................................... 8
1.5 The quest for competitive advantage ............................................................................................................ 9
1.5.1 Efficiency versus effectiveness ............................................................................................................... 9
1.5.2 Why an organisation’s strategy evolves over time ................................................................................... 9
1.5.3 Strategic management principle ............................................................................................................ 9
1.5.4 Is competitive advantage sustainable in the 21st century? ....................................................................... 9
1.6 The evolving nature of an organisation’s strategy ........................................................................................ 10
1.7 A company’s business model ...................................................................................................................... 10
1.7.1 Business model elements .................................................................................................................... 10
1.7.2 The business model and the value-price-cost framework....................................................................... 11
1.8 A winning strategy ..................................................................................................................................... 11
1.8.1 Crafting and executing strategy are important ...................................................................................... 11
1.8.2 Why organisations need a strategy ...................................................................................................... 12
Chapter two : strategy, vision & mission .............................................................................................................. 13
The strategy-making, strategy-executing process .............................................................................................. 13
2.1 Stage one : purpose and mission ................................................................................................................ 13
2.1.1 Purpose .............................................................................................................................................. 13
2.1.2 Mission .............................................................................................................................................. 14
2.1.3 Vision ................................................................................................................................................. 14
2.1.4 Values ................................................................................................................................................ 16
2.2 Stage two : setting objectives ..................................................................................................................... 16
2.2.1 The need for short-term and long-term objectives ................................................................................ 16
2.2.2 Setting financial objectives .................................................................................................................. 17
2.2.3 Setting strategic objectives .................................................................................................................. 17
2.2.4 The balanced approach to objective setting .......................................................................................... 17
2.2.5 Good strategic performance = key to a better financial performance ..................................................... 18
2.3 Stage three : crafting a strategy .................................................................................................................. 18
2.3.1 Strategy making .................................................................................................................................. 18
2.3.2 Who is involved?................................................................................................................................. 18
, 2.3.3 Strategic management principle .......................................................................................................... 18
2.3.4 Achieving effective corporate governance ............................................................................................ 19
2.3.5 Strategy-making hierarchy ................................................................................................................... 19
2.4 The strategy execution process .................................................................................................................. 20
2.5 Evaluating performance and initiating corrective adjustments ..................................................................... 20
2.6 CSR as strategy .......................................................................................................................................... 20
2.6.1 Narrow view ....................................................................................................................................... 21
2.6.2 Broad view ......................................................................................................................................... 21
2.6.3 Stakeholder approach ......................................................................................................................... 21
2.6.4 Corporate social responsibility ............................................................................................................. 22
Part two: internal and external analysis
Chapter three : external analysis ......................................................................................................................... 23
3.1 The external environment .......................................................................................................................... 23
3.2 Thinking strategically about the industry and environment .......................................................................... 23
Q 1 : does the industry offer attractive opportunities for growth? .................................................................. 23
Q 2 : What kinds of competitive forces are industry members facing, and how strong are they? ...................... 24
Q 3 : what factors are driving industry change, and what impacts will they have? ........................................... 27
Q 4 : how industry rivals are positioned = who is strongly positioned and who is not ....................................... 28
Q 5 : what specific moves are rivals likely to make next? ............................................................................... 29
Q 6 : what are the key factors for future competitive success? ....................................................................... 30
Q 7 : does the industry offer good prospects for attractive profits? ................................................................ 30
Chapter four : internal analysis ............................................................................................................................ 30
4.1 Evaluating a form’s internal situation .......................................................................................................... 30
Q 1 : How well is the organisation’s present strategy working? ..................................................................... 30
Q 2 : what are the organisation’s competitively important resources and capabilities ..................................... 32
Q 3 : is the organisation able to capture market opportunities and guard against external threats? ................. 34
Q 4 : are prices and costs competitive? ......................................................................................................... 36
Q 5 : is the organisation competitively stronger or weaker than key rivals?..................................................... 39
Part three: strategy development
Chapter five : generic strategies .......................................................................................................................... 40
5.1 Low-cost provider strategies ...................................................................................................................... 40
5.1.1 Major avenues for achieving cost advantage ........................................................................................ 41
5.1.2 Cost-efficient management of value chain activities .............................................................................. 41
5.1.3 Revamping the value chain system to lower costs ................................................................................. 41
5.1.4 When a low-cost provider strategy works best...................................................................................... 41
5.1.5 Pitfalls of a low-cost provider strategy.................................................................................................. 42
5.1.6 Key debate ......................................................................................................................................... 42
5.2 Differentiation........................................................................................................................................... 42
5.2.1 Broad differentiation strategies ........................................................................................................... 43
, 5.2.2 Uniqueness drivers.............................................................................................................................. 43
5.2.3 Revamping the value chain system to increase differentiation ............................................................... 43
5.2.4 Delivering superior value via a broad differentiation strategy ................................................................ 43
5.2.5 Differentiation: signalling value............................................................................................................ 44
5.2.6 Strategic management principle .......................................................................................................... 44
5.2.7 When a differentiation strategy works best .......................................................................................... 44
5.2.8 Pitfalls of a differentiation strategy ...................................................................................................... 44
5.3 Focused (or market niche) strategies .......................................................................................................... 44
5.3.1 When a focused low-cost or focused differentiation strategy is attractive .............................................. 45
5.3.2 The risks of a focused LW or D strategy ................................................................................................ 45
5.4 Best-cost provider strategies ...................................................................................................................... 45
5.4.1 When a best-cost provider strategy works best..................................................................................... 46
5.4.2 The big risk of a best-cost provider strategy : getting squeezed on both sides ......................................... 46
5.5 The contrasting features of the competitive strategies ................................................................................ 46
5.5.1 Successful competitive strategies are resource-based ........................................................................... 47
Chapter six : measures to support strategy........................................................................................................... 47
6.1 Maximising the power of a strategy ............................................................................................................ 47
6.1.1 Going on the offensive ........................................................................................................................ 47
6.1.2 Defensive strategies : protecting market position and competitive advantage ........................................ 48
6.1.3 Timing a firm’s strategic moves ............................................................................................................ 49
6.1.3 Strengthening a firm’s market position via its scope of operations ......................................................... 49
6.2 Outsourcing strategies ............................................................................................................................... 52
6.2.1 The risks of outsourcing value chain activities ....................................................................................... 52
6.2.2 Key debate: innovation: inside or out ................................................................................................... 52
6.3 Strategic alliances & partnerships ......................................................................................................... 52
6.3.1 Factors that make an alliance “strategic” .............................................................................................. 52
6.3.2 Why and how strategic alliances are advantageous ............................................................................... 53
6.3.3 Reasons for entering into strategic alliances ......................................................................................... 53
6.3.4 Principal advantages of strategic alliances ............................................................................................ 53
6.3.5 Strategic alliances vs outsourcing ......................................................................................................... 53
6.3.6 Capturing the benefits of strategic alliances.......................................................................................... 53
6.3.7 Achieving long-lasting strategic alliance relationships............................................................................ 54
6.3.8 The drawbacks of strategic alliances and partnerships........................................................................... 54
6.4 Mergers and acquisitions ........................................................................................................................... 54
6.4.1 Organic growth vs growing through M&A ............................................................................................. 54
6.4.2 SMEs and M&A ................................................................................................................................... 54
Extra chapter : corporate – start-up collaboration ................................................................................................ 55
Corporate venturing ........................................................................................................................................ 55
Why? Corporate perspective........................................................................................................................ 56
,Strategy & Entrepreneurship
Table of contents
Part one: introduction to strategy
Chapter one : definition and importance of strategy ............................................................................................... 7
1.1 What do we mean by strategy? .................................................................................................................... 7
1.2 What is strategy about? ............................................................................................................................... 7
1.3 Strategy and competitors ............................................................................................................................. 8
1.4 Identifying a firm’s strategy – pattern ........................................................................................................... 8
1.5 The quest for competitive advantage ............................................................................................................ 9
1.5.1 Efficiency versus effectiveness ............................................................................................................... 9
1.5.2 Why an organisation’s strategy evolves over time ................................................................................... 9
1.5.3 Strategic management principle ............................................................................................................ 9
1.5.4 Is competitive advantage sustainable in the 21st century? ....................................................................... 9
1.6 The evolving nature of an organisation’s strategy ........................................................................................ 10
1.7 A company’s business model ...................................................................................................................... 10
1.7.1 Business model elements .................................................................................................................... 10
1.7.2 The business model and the value-price-cost framework....................................................................... 11
1.8 A winning strategy ..................................................................................................................................... 11
1.8.1 Crafting and executing strategy are important ...................................................................................... 11
1.8.2 Why organisations need a strategy ...................................................................................................... 12
Chapter two : strategy, vision & mission .............................................................................................................. 13
The strategy-making, strategy-executing process .............................................................................................. 13
2.1 Stage one : purpose and mission ................................................................................................................ 13
2.1.1 Purpose .............................................................................................................................................. 13
2.1.2 Mission .............................................................................................................................................. 14
2.1.3 Vision ................................................................................................................................................. 14
2.1.4 Values ................................................................................................................................................ 16
2.2 Stage two : setting objectives ..................................................................................................................... 16
2.2.1 The need for short-term and long-term objectives ................................................................................ 16
2.2.2 Setting financial objectives .................................................................................................................. 17
2.2.3 Setting strategic objectives .................................................................................................................. 17
2.2.4 The balanced approach to objective setting .......................................................................................... 17
2.2.5 Good strategic performance = key to a better financial performance ..................................................... 18
2.3 Stage three : crafting a strategy .................................................................................................................. 18
2.3.1 Strategy making .................................................................................................................................. 18
2.3.2 Who is involved?................................................................................................................................. 18
, 2.3.3 Strategic management principle .......................................................................................................... 18
2.3.4 Achieving effective corporate governance ............................................................................................ 19
2.3.5 Strategy-making hierarchy ................................................................................................................... 19
2.4 The strategy execution process .................................................................................................................. 20
2.5 Evaluating performance and initiating corrective adjustments ..................................................................... 20
2.6 CSR as strategy .......................................................................................................................................... 20
2.6.1 Narrow view ....................................................................................................................................... 21
2.6.2 Broad view ......................................................................................................................................... 21
2.6.3 Stakeholder approach ......................................................................................................................... 21
2.6.4 Corporate social responsibility ............................................................................................................. 22
Part two: internal and external analysis
Chapter three : external analysis ......................................................................................................................... 23
3.1 The external environment .......................................................................................................................... 23
3.2 Thinking strategically about the industry and environment .......................................................................... 23
Q 1 : does the industry offer attractive opportunities for growth? .................................................................. 23
Q 2 : What kinds of competitive forces are industry members facing, and how strong are they? ...................... 24
Q 3 : what factors are driving industry change, and what impacts will they have? ........................................... 27
Q 4 : how industry rivals are positioned = who is strongly positioned and who is not ....................................... 28
Q 5 : what specific moves are rivals likely to make next? ............................................................................... 29
Q 6 : what are the key factors for future competitive success? ....................................................................... 30
Q 7 : does the industry offer good prospects for attractive profits? ................................................................ 30
Chapter four : internal analysis ............................................................................................................................ 30
4.1 Evaluating a form’s internal situation .......................................................................................................... 30
Q 1 : How well is the organisation’s present strategy working? ..................................................................... 30
Q 2 : what are the organisation’s competitively important resources and capabilities ..................................... 32
Q 3 : is the organisation able to capture market opportunities and guard against external threats? ................. 34
Q 4 : are prices and costs competitive? ......................................................................................................... 36
Q 5 : is the organisation competitively stronger or weaker than key rivals?..................................................... 39
Part three: strategy development
Chapter five : generic strategies .......................................................................................................................... 40
5.1 Low-cost provider strategies ...................................................................................................................... 40
5.1.1 Major avenues for achieving cost advantage ........................................................................................ 41
5.1.2 Cost-efficient management of value chain activities .............................................................................. 41
5.1.3 Revamping the value chain system to lower costs ................................................................................. 41
5.1.4 When a low-cost provider strategy works best...................................................................................... 41
5.1.5 Pitfalls of a low-cost provider strategy.................................................................................................. 42
5.1.6 Key debate ......................................................................................................................................... 42
5.2 Differentiation........................................................................................................................................... 42
5.2.1 Broad differentiation strategies ........................................................................................................... 43
, 5.2.2 Uniqueness drivers.............................................................................................................................. 43
5.2.3 Revamping the value chain system to increase differentiation ............................................................... 43
5.2.4 Delivering superior value via a broad differentiation strategy ................................................................ 43
5.2.5 Differentiation: signalling value............................................................................................................ 44
5.2.6 Strategic management principle .......................................................................................................... 44
5.2.7 When a differentiation strategy works best .......................................................................................... 44
5.2.8 Pitfalls of a differentiation strategy ...................................................................................................... 44
5.3 Focused (or market niche) strategies .......................................................................................................... 44
5.3.1 When a focused low-cost or focused differentiation strategy is attractive .............................................. 45
5.3.2 The risks of a focused LW or D strategy ................................................................................................ 45
5.4 Best-cost provider strategies ...................................................................................................................... 45
5.4.1 When a best-cost provider strategy works best..................................................................................... 46
5.4.2 The big risk of a best-cost provider strategy : getting squeezed on both sides ......................................... 46
5.5 The contrasting features of the competitive strategies ................................................................................ 46
5.5.1 Successful competitive strategies are resource-based ........................................................................... 47
Chapter six : measures to support strategy........................................................................................................... 47
6.1 Maximising the power of a strategy ............................................................................................................ 47
6.1.1 Going on the offensive ........................................................................................................................ 47
6.1.2 Defensive strategies : protecting market position and competitive advantage ........................................ 48
6.1.3 Timing a firm’s strategic moves ............................................................................................................ 49
6.1.3 Strengthening a firm’s market position via its scope of operations ......................................................... 49
6.2 Outsourcing strategies ............................................................................................................................... 52
6.2.1 The risks of outsourcing value chain activities ....................................................................................... 52
6.2.2 Key debate: innovation: inside or out ................................................................................................... 52
6.3 Strategic alliances & partnerships ......................................................................................................... 52
6.3.1 Factors that make an alliance “strategic” .............................................................................................. 52
6.3.2 Why and how strategic alliances are advantageous ............................................................................... 53
6.3.3 Reasons for entering into strategic alliances ......................................................................................... 53
6.3.4 Principal advantages of strategic alliances ............................................................................................ 53
6.3.5 Strategic alliances vs outsourcing ......................................................................................................... 53
6.3.6 Capturing the benefits of strategic alliances.......................................................................................... 53
6.3.7 Achieving long-lasting strategic alliance relationships............................................................................ 54
6.3.8 The drawbacks of strategic alliances and partnerships........................................................................... 54
6.4 Mergers and acquisitions ........................................................................................................................... 54
6.4.1 Organic growth vs growing through M&A ............................................................................................. 54
6.4.2 SMEs and M&A ................................................................................................................................... 54
Extra chapter : corporate – start-up collaboration ................................................................................................ 55
Corporate venturing ........................................................................................................................................ 55
Why? Corporate perspective........................................................................................................................ 56
