SUMMARY - FUNDAMENTALS
OF STRATEGY
Mohamed Diallo
NHL STENDEN Leeuwarden
,Content
Chapter 1 - Intrducing strategy ............................................................................................................... 5
1.1 – introduction .......................................................................................................................... 5
1.2 – What is strategy? .................................................................................................................. 5
1.2.2 – The purpose of strategy: mission, vision, values and objectives ........................................ 6
1.2.3 – Strategy statements ............................................................................................................ 7
1.2.4 – Levels of strategy ................................................................................................................. 7
1.3 – The exploring strategy framework ....................................................................................... 9
1.3.1 – Strategy position........................................................................................................... 9
1.3.2 – Strategic choices ........................................................................................................... 9
1.3.3 – Strategy in action .......................................................................................................... 9
1.4 Strategy development processes .......................................................................................... 10
Chapter 2 – Macro-environment analysis ............................................................................................. 11
2.1 Introduction ................................................................................................................................. 11
2.2 PESTEL analysis ............................................................................................................................ 11
2.2.1 PESTEL Factors ...................................................................................................................... 12
2.2.2 Key Drivers for change.......................................................................................................... 14
2.3 Forecasting .................................................................................................................................. 14
2.3.1 Forecast approaches ................................................................................................................ 14
2.3.2 Directions of Change ............................................................................................................ 15
2.4 Scenario Analysis ......................................................................................................................... 16
Chapter 3 – Industry and sector analysis .............................................................................................. 17
3.1 – Introduction .............................................................................................................................. 17
3.2 – The competitive forces ............................................................................................................. 17
3.2.1 – Competitive rivalry ............................................................................................................ 18
3.2.2 – The threat of entry ............................................................................................................ 18
3.2.3 – The threat of substitutes ................................................................................................... 18
3.2.4 – The power of buyers .......................................................................................................... 18
3.2.5 – The power of suppliers ...................................................................................................... 19
3.2.6 – Complementors and network effects................................................................................ 19
3.2.7 – Defining the industry ......................................................................................................... 20
3.2.8 – Implications of the competitive five forces ....................................................................... 20
3.3 – Industry structure ..................................................................................................................... 20
3.3.1 – Industry structure dynamics .............................................................................................. 21
3.4 – Competitors and markets ......................................................................................................... 21
3.4.1 – Strategic group .................................................................................................................. 22
1
, 3.4.2 – Market segments ............................................................................................................... 22
3.4.3 – Critical success factors and ‘blue oceans’.......................................................................... 22
3.5 – opportunities and threats......................................................................................................... 23
Chapter 4 – Resources and capabilities................................................................................................. 25
4.1- Introduction ............................................................................................................................... 25
4.2 – Foundations of resources and capabilities ............................................................................... 25
4.2.1 – Resources and capabilities ................................................................................................ 25
4.2.2 – Threshold and distinctive resources and capabilities........................................................ 26
4.3 – Distinctive resources and capabilities as a basis of competitive advantage ............................ 26
4.3.1 – V-value of resources and capabilities ................................................................................ 26
4.3.2 – R-rarity ............................................................................................................................... 26
4.3.3. I-inimibality .......................................................................................................................... 27
4.3.4 – O-organisational support................................................................................................... 28
4.4 – Diagnosing resources and capabilities ..................................................................................... 29
4.4.1 – VRIO analysis ..................................................................................................................... 29
4.4.2 – The value chain and value system ..................................................................................... 29
4.4.3 Activity systems .................................................................................................................... 31
4.4.4 – Benchmarking .................................................................................................................... 31
4.4.5 – SWOT ................................................................................................................................. 32
4.5 Dynamic capabilities .................................................................................................................... 33
4.5.1 – Innovation.......................................................................................................................... 33
Chapter 5 – Stakeholders and culture ................................................................................................... 34
5.1 – Introduction .............................................................................................................................. 34
5.2 – Stakeholders ............................................................................................................................. 34
5.2.1 – Stakeholder groups............................................................................................................ 34
5.2.2 – Stakeholder mapping......................................................................................................... 35
5.3 – Owners and governance ........................................................................................................... 36
5.3.1 – Ownership models ............................................................................................................. 36
5.3.2 – Corporate governance ....................................................................................................... 36
5.3.3 – How boards of directors influence strategy ...................................................................... 37
5.4 – Ethics and social responsibility ................................................................................................. 38
5.4.1 Corporate social responsibility ............................................................................................. 38
5.4.2 The ethics of individuals and managers ............................................................................... 39
5.5 – Organisational culture .............................................................................................................. 39
5.6 – Strategic drift ............................................................................................................................ 41
Chapter 6 – Business strategy and models ....................................................................................... 43
2
, 6.1 Introduction ................................................................................................................................. 43
6.2 – Generic competitive strategies ................................................................................................ 43
6.2.1 – Cost leadership strategy .................................................................................................... 44
6.2.2 – Differentiation strategy ..................................................................................................... 45
6.2.3 – Focus strategy .................................................................................................................... 46
6.2.4 – Hybrid strategy .................................................................................................................. 46
6.2.5 – The strategy clock .............................................................................................................. 47
6.3 – Interactive strategies ................................................................................................................ 48
6.3.1 – Interactive price and quality strategies ............................................................................. 48
6.3.2 – Game theory ...................................................................................................................... 49
6.4 – Business models ....................................................................................................................... 50
6.4.1 – Value creation, configuration and capture........................................................................ 50
6.4.2 – Business model patterns ................................................................................................... 51
Chapter 7 – Corporate strategy and diversification ...................................................................... 52
7.1 – Introduction .............................................................................................................................. 52
7.2 – Strategy directions.................................................................................................................... 52
7.2.1 – Market penetration ........................................................................................................... 52
7.2.2 – Product development ........................................................................................................ 53
7.2.3 – Market development ......................................................................................................... 53
7.2.4 – Conglomerate diversification ............................................................................................ 53
7.3 – Diversification drivers ............................................................................................................... 53
7.4 – Vertical integration ................................................................................................................... 54
7.4.1 – Forward and backward integration ................................................................................... 54
7.4.2 – To integrate or to outsource? ........................................................................................... 55
7.5 – Value creation and the corporate parent ................................................................................. 55
7.5.1 – Value-adding and value-destroying activities of corporate parents ................................. 56
7.5.2 – The portfolio manager ....................................................................................................... 56
7.5.3 – The synergy manager ........................................................................................................ 57
7.5.4 – The parental developer ..................................................................................................... 57
7.6 – The BCG (or growth share) matrix ............................................................................................ 58
7.7 – International diversification strategy ....................................................................................... 59
7.8 – Mergers, acquisitions and alliances.......................................................................................... 59
7.8.1 – Comparing acquisitions, alliances and organic development ........................................... 60
Chapter 8 – Strategy in action ............................................................................................................... 61
8.1 – Introduction .............................................................................................................................. 61
8.2 – Structural types ........................................................................................................................ 61
3
, 8.2.1 – The functional structure .................................................................................................... 61
8.2.2 – The divisional structure ..................................................................................................... 62
8.2.3 – The matrix structure .......................................................................................................... 62
8.2.4 – Choosing between structures ............................................................................................ 63
8.3 – Systems ..................................................................................................................................... 63
8.3.1 – Planning systems ............................................................................................................... 63
8.3.2 – Cultural systems ................................................................................................................ 63
8.3.3 – Performance targeting systems......................................................................................... 64
8.3.4 – Market systems ................................................................................................................. 65
8.4 – Organisational configuration: The Mckinsey 7-s Framework................................................... 65
8.5 – Leading strategic change .......................................................................................................... 66
8.5.1 – Strategic leadership roles .................................................................................................. 66
8.5.2 – Leadership styles ............................................................................................................... 66
8.5.3 – Types of strategic change .................................................................................................. 67
8.5.4 – Identifying levers for change: forcefield analysis .............................................................. 68
8.5.5 steps for strategic change: Kotter’s Change Model ............................................................. 68
Cases .......................................................................................................... Error! Bookmark not defined.
Case 1 – The rise of a unicorn: Airbnb ................................................... Error! Bookmark not defined.
Case 2 – Video en artikel ....................................................................... Error! Bookmark not defined.
Case 3 – Praxis ....................................................................................... Error! Bookmark not defined.
Case 4 – Build a beer ............................................................................. Error! Bookmark not defined.
Case 5 – Walmart .................................................................................. Error! Bookmark not defined.
4
, Fundamentals of strategy
Chapter 1 - Intrducing strategy
1.1 – introduction
- Globalization
- Strategievragen
- Everyone needs to know the company’s strategy (Iedereen moet de strategie van het bedrijf
weten)
1.2 – What is strategy?
Strategy is the long-term direction of an organisation (lange termijn richting van een organisatie).
Several leading strategy theorists: (Verschillende leidende Strategy theoretici):
Figuur 1 Definitions of strategy
The Long term:
Strategies are measured over years. (De strategieën worden gemeten over jaren.)
- The importance of a long-term perspective for a strategy is emphasised by the Three
Horizons framework (Het belang van een lange termijn perspectief voor een strategie wordt
benadrukt door het ‘three horizon’ framework):
• Horizon 1: Extend en defend core busness (bedrijven moeten verdedigen en uitbreiden)
• Horizon 2: Build emerging businesses (bedrijven zijn toekomstige activiteiten die nieuwe
bronnen van winst zijn) → Tesla: Mega battery business
• Horizon 3: Create viable options (zijn bedrijven waarvoor niks zeker is dus met veel
risico)
The basic point about the ‘three horizons’ framework is that managers need to avoid focussing on
the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as
possible, at the same time looking to Horizons 2 and 3. (Het basis punt over de ´three horizons
framework´ is dat managers moeten vermijden dat ze zich gaan focussen op de korte tijd
onderwerpen of op hun bestaande activiteiten. Strategie gaat over het wegduwen van horizon 1 en
het kijken naar horizon 2 en 3.)
Strategic direction:
- Strategies follow some kind of long-term direction or trajectory (strategie volgt een langer
termijn richting of traject.)
5
OF STRATEGY
Mohamed Diallo
NHL STENDEN Leeuwarden
,Content
Chapter 1 - Intrducing strategy ............................................................................................................... 5
1.1 – introduction .......................................................................................................................... 5
1.2 – What is strategy? .................................................................................................................. 5
1.2.2 – The purpose of strategy: mission, vision, values and objectives ........................................ 6
1.2.3 – Strategy statements ............................................................................................................ 7
1.2.4 – Levels of strategy ................................................................................................................. 7
1.3 – The exploring strategy framework ....................................................................................... 9
1.3.1 – Strategy position........................................................................................................... 9
1.3.2 – Strategic choices ........................................................................................................... 9
1.3.3 – Strategy in action .......................................................................................................... 9
1.4 Strategy development processes .......................................................................................... 10
Chapter 2 – Macro-environment analysis ............................................................................................. 11
2.1 Introduction ................................................................................................................................. 11
2.2 PESTEL analysis ............................................................................................................................ 11
2.2.1 PESTEL Factors ...................................................................................................................... 12
2.2.2 Key Drivers for change.......................................................................................................... 14
2.3 Forecasting .................................................................................................................................. 14
2.3.1 Forecast approaches ................................................................................................................ 14
2.3.2 Directions of Change ............................................................................................................ 15
2.4 Scenario Analysis ......................................................................................................................... 16
Chapter 3 – Industry and sector analysis .............................................................................................. 17
3.1 – Introduction .............................................................................................................................. 17
3.2 – The competitive forces ............................................................................................................. 17
3.2.1 – Competitive rivalry ............................................................................................................ 18
3.2.2 – The threat of entry ............................................................................................................ 18
3.2.3 – The threat of substitutes ................................................................................................... 18
3.2.4 – The power of buyers .......................................................................................................... 18
3.2.5 – The power of suppliers ...................................................................................................... 19
3.2.6 – Complementors and network effects................................................................................ 19
3.2.7 – Defining the industry ......................................................................................................... 20
3.2.8 – Implications of the competitive five forces ....................................................................... 20
3.3 – Industry structure ..................................................................................................................... 20
3.3.1 – Industry structure dynamics .............................................................................................. 21
3.4 – Competitors and markets ......................................................................................................... 21
3.4.1 – Strategic group .................................................................................................................. 22
1
, 3.4.2 – Market segments ............................................................................................................... 22
3.4.3 – Critical success factors and ‘blue oceans’.......................................................................... 22
3.5 – opportunities and threats......................................................................................................... 23
Chapter 4 – Resources and capabilities................................................................................................. 25
4.1- Introduction ............................................................................................................................... 25
4.2 – Foundations of resources and capabilities ............................................................................... 25
4.2.1 – Resources and capabilities ................................................................................................ 25
4.2.2 – Threshold and distinctive resources and capabilities........................................................ 26
4.3 – Distinctive resources and capabilities as a basis of competitive advantage ............................ 26
4.3.1 – V-value of resources and capabilities ................................................................................ 26
4.3.2 – R-rarity ............................................................................................................................... 26
4.3.3. I-inimibality .......................................................................................................................... 27
4.3.4 – O-organisational support................................................................................................... 28
4.4 – Diagnosing resources and capabilities ..................................................................................... 29
4.4.1 – VRIO analysis ..................................................................................................................... 29
4.4.2 – The value chain and value system ..................................................................................... 29
4.4.3 Activity systems .................................................................................................................... 31
4.4.4 – Benchmarking .................................................................................................................... 31
4.4.5 – SWOT ................................................................................................................................. 32
4.5 Dynamic capabilities .................................................................................................................... 33
4.5.1 – Innovation.......................................................................................................................... 33
Chapter 5 – Stakeholders and culture ................................................................................................... 34
5.1 – Introduction .............................................................................................................................. 34
5.2 – Stakeholders ............................................................................................................................. 34
5.2.1 – Stakeholder groups............................................................................................................ 34
5.2.2 – Stakeholder mapping......................................................................................................... 35
5.3 – Owners and governance ........................................................................................................... 36
5.3.1 – Ownership models ............................................................................................................. 36
5.3.2 – Corporate governance ....................................................................................................... 36
5.3.3 – How boards of directors influence strategy ...................................................................... 37
5.4 – Ethics and social responsibility ................................................................................................. 38
5.4.1 Corporate social responsibility ............................................................................................. 38
5.4.2 The ethics of individuals and managers ............................................................................... 39
5.5 – Organisational culture .............................................................................................................. 39
5.6 – Strategic drift ............................................................................................................................ 41
Chapter 6 – Business strategy and models ....................................................................................... 43
2
, 6.1 Introduction ................................................................................................................................. 43
6.2 – Generic competitive strategies ................................................................................................ 43
6.2.1 – Cost leadership strategy .................................................................................................... 44
6.2.2 – Differentiation strategy ..................................................................................................... 45
6.2.3 – Focus strategy .................................................................................................................... 46
6.2.4 – Hybrid strategy .................................................................................................................. 46
6.2.5 – The strategy clock .............................................................................................................. 47
6.3 – Interactive strategies ................................................................................................................ 48
6.3.1 – Interactive price and quality strategies ............................................................................. 48
6.3.2 – Game theory ...................................................................................................................... 49
6.4 – Business models ....................................................................................................................... 50
6.4.1 – Value creation, configuration and capture........................................................................ 50
6.4.2 – Business model patterns ................................................................................................... 51
Chapter 7 – Corporate strategy and diversification ...................................................................... 52
7.1 – Introduction .............................................................................................................................. 52
7.2 – Strategy directions.................................................................................................................... 52
7.2.1 – Market penetration ........................................................................................................... 52
7.2.2 – Product development ........................................................................................................ 53
7.2.3 – Market development ......................................................................................................... 53
7.2.4 – Conglomerate diversification ............................................................................................ 53
7.3 – Diversification drivers ............................................................................................................... 53
7.4 – Vertical integration ................................................................................................................... 54
7.4.1 – Forward and backward integration ................................................................................... 54
7.4.2 – To integrate or to outsource? ........................................................................................... 55
7.5 – Value creation and the corporate parent ................................................................................. 55
7.5.1 – Value-adding and value-destroying activities of corporate parents ................................. 56
7.5.2 – The portfolio manager ....................................................................................................... 56
7.5.3 – The synergy manager ........................................................................................................ 57
7.5.4 – The parental developer ..................................................................................................... 57
7.6 – The BCG (or growth share) matrix ............................................................................................ 58
7.7 – International diversification strategy ....................................................................................... 59
7.8 – Mergers, acquisitions and alliances.......................................................................................... 59
7.8.1 – Comparing acquisitions, alliances and organic development ........................................... 60
Chapter 8 – Strategy in action ............................................................................................................... 61
8.1 – Introduction .............................................................................................................................. 61
8.2 – Structural types ........................................................................................................................ 61
3
, 8.2.1 – The functional structure .................................................................................................... 61
8.2.2 – The divisional structure ..................................................................................................... 62
8.2.3 – The matrix structure .......................................................................................................... 62
8.2.4 – Choosing between structures ............................................................................................ 63
8.3 – Systems ..................................................................................................................................... 63
8.3.1 – Planning systems ............................................................................................................... 63
8.3.2 – Cultural systems ................................................................................................................ 63
8.3.3 – Performance targeting systems......................................................................................... 64
8.3.4 – Market systems ................................................................................................................. 65
8.4 – Organisational configuration: The Mckinsey 7-s Framework................................................... 65
8.5 – Leading strategic change .......................................................................................................... 66
8.5.1 – Strategic leadership roles .................................................................................................. 66
8.5.2 – Leadership styles ............................................................................................................... 66
8.5.3 – Types of strategic change .................................................................................................. 67
8.5.4 – Identifying levers for change: forcefield analysis .............................................................. 68
8.5.5 steps for strategic change: Kotter’s Change Model ............................................................. 68
Cases .......................................................................................................... Error! Bookmark not defined.
Case 1 – The rise of a unicorn: Airbnb ................................................... Error! Bookmark not defined.
Case 2 – Video en artikel ....................................................................... Error! Bookmark not defined.
Case 3 – Praxis ....................................................................................... Error! Bookmark not defined.
Case 4 – Build a beer ............................................................................. Error! Bookmark not defined.
Case 5 – Walmart .................................................................................. Error! Bookmark not defined.
4
, Fundamentals of strategy
Chapter 1 - Intrducing strategy
1.1 – introduction
- Globalization
- Strategievragen
- Everyone needs to know the company’s strategy (Iedereen moet de strategie van het bedrijf
weten)
1.2 – What is strategy?
Strategy is the long-term direction of an organisation (lange termijn richting van een organisatie).
Several leading strategy theorists: (Verschillende leidende Strategy theoretici):
Figuur 1 Definitions of strategy
The Long term:
Strategies are measured over years. (De strategieën worden gemeten over jaren.)
- The importance of a long-term perspective for a strategy is emphasised by the Three
Horizons framework (Het belang van een lange termijn perspectief voor een strategie wordt
benadrukt door het ‘three horizon’ framework):
• Horizon 1: Extend en defend core busness (bedrijven moeten verdedigen en uitbreiden)
• Horizon 2: Build emerging businesses (bedrijven zijn toekomstige activiteiten die nieuwe
bronnen van winst zijn) → Tesla: Mega battery business
• Horizon 3: Create viable options (zijn bedrijven waarvoor niks zeker is dus met veel
risico)
The basic point about the ‘three horizons’ framework is that managers need to avoid focussing on
the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as
possible, at the same time looking to Horizons 2 and 3. (Het basis punt over de ´three horizons
framework´ is dat managers moeten vermijden dat ze zich gaan focussen op de korte tijd
onderwerpen of op hun bestaande activiteiten. Strategie gaat over het wegduwen van horizon 1 en
het kijken naar horizon 2 en 3.)
Strategic direction:
- Strategies follow some kind of long-term direction or trajectory (strategie volgt een langer
termijn richting of traject.)
5
