Overview
,Lecture 1: Introduction to Strategic Management and External
Analysis
2 Definitions of strategy
Þ Origin: Strategos (Greek) = “the general’s view”
Þ Strategy (dictionary definition): a detailed plan for achieving success in situations such
as war, politics, industry or support or the skill of planning for such situations
Þ Porter, 1996: “Strategy is the creation of unique and valuable position, involving a
different set of activities” (not only think but also action)
Þ Book (Volberda et al., 2011): “A strategy is an integrated and coordinated set of
commitments and actions designed to exploit and develop core competencies and gain
a competitive advantage”
® Business thinking moved from a point where you can use existing resources/
competencies to a point where you can also develop these competencies
Key definitions
Competitive advantage: A firm has a competitive advantage when it implements a strategy that
competitors are unable to duplicate or find too costly to try to imitate it
Þ Profit making firms always try to find things that bring competitive advantage in the long
term (= sustained competitive advantage)
Þ Firms without competitive advantage earn average returns (= returns equal to those an
investor expects to earn from other investments with a similar amount of risk). In the
long run, a failure to earn at least average returns results in failure.
Above-average returns: Returns in excess of what an investor expects to earn from other
investments with similar amount of risk (more than what you expect)
Þ Risk: An investor’s uncertainty about the economic gains or losses that will result from a
particular investment
Operational effectiveness: About performing activities better your rivals/ competitors (being
faster, using fewer inputs and defects, etc.)
Þ How? Outsourcing, reducing # of defects, business process reengineering or change
management
Strategic positioning: Attempts to achieve sustainable competitive advantage by preserving
what is distinctive about a company by performing different activities from rivals or performing
similar activities in different ways
Þ Sources: product-focused (variety based), customer-need focused (needs-based),
access-focused (access based)
,Strategic competitiveness: Achieved when a firm successfully formulates and implements a
value creating strategy
Operational effectiveness (about performing activities better than rivals)
Þ Often confused with strategy BUT operational effectiveness is necessary for strategy but
not the strategy itself
Þ Why? Operational effectiveness can be imitated (everyone does it so it does unique)
Þ Need more> strategic positioning
Strategic positioning (about performing different activities or similar activities in different
ways)
In today’s highly competitive and dynamic markets, strategic positioning is not enough in itself
(can be imitated as well!)
Þ Activities:
• Trade-offs naturally emerge
• Strategy is about combining activities
• Activity fit is important
• Activities are reminders of the strategy
• Strategy without activities is just a statement
3 sources of strategic positioning
1. Product-focused (variety based): Different set of products that competitors
2. Customer-need focused (needs-based): Focus on a specific customer segment group (ex:
Lululemon who provides everything for yoga)
3. Access focused (access-based): Focus on a specific geographical area (ex: bol.com who
focuses on the Netherlands and Belgium)
Þ Companies aim with strategic positioning is to either do different activities or the same
activities in different ways
Þ Activities need to be aligned with your mission as a company (ex: being the fastest in the
market)
Strategy is creating fit among company’s activities to achieve strategic competitiveness by
formulating and implementing a value creating strategy,
Through a strategic management process, which is the full set of commitments, decisions and
actions required for a firm to achieve strategic competitiveness and above-average returns
, Two underlying models: How can a firm use it resources to gain strategic advantage?
Þ Both based on the view that humans act rationally
1. I/O Model
2. Resource-based view (RBV model)
Þ The success of a firm is explained:
• 20% by the I/O model
• 36% by the Resource based model
• 44% by luck (serendipity = discovery by luck combined with a prepared mind)
I/O Model (Industrial organization model)
Þ A successful competitive advantage (organization success) is highly linked to the
external environment (ex: which market you are in, whether you should enter a market
or not, which market is more profitable)
Þ Related to Porter’s five forces model (to find the attractive industry)
,Lecture 1: Introduction to Strategic Management and External
Analysis
2 Definitions of strategy
Þ Origin: Strategos (Greek) = “the general’s view”
Þ Strategy (dictionary definition): a detailed plan for achieving success in situations such
as war, politics, industry or support or the skill of planning for such situations
Þ Porter, 1996: “Strategy is the creation of unique and valuable position, involving a
different set of activities” (not only think but also action)
Þ Book (Volberda et al., 2011): “A strategy is an integrated and coordinated set of
commitments and actions designed to exploit and develop core competencies and gain
a competitive advantage”
® Business thinking moved from a point where you can use existing resources/
competencies to a point where you can also develop these competencies
Key definitions
Competitive advantage: A firm has a competitive advantage when it implements a strategy that
competitors are unable to duplicate or find too costly to try to imitate it
Þ Profit making firms always try to find things that bring competitive advantage in the long
term (= sustained competitive advantage)
Þ Firms without competitive advantage earn average returns (= returns equal to those an
investor expects to earn from other investments with a similar amount of risk). In the
long run, a failure to earn at least average returns results in failure.
Above-average returns: Returns in excess of what an investor expects to earn from other
investments with similar amount of risk (more than what you expect)
Þ Risk: An investor’s uncertainty about the economic gains or losses that will result from a
particular investment
Operational effectiveness: About performing activities better your rivals/ competitors (being
faster, using fewer inputs and defects, etc.)
Þ How? Outsourcing, reducing # of defects, business process reengineering or change
management
Strategic positioning: Attempts to achieve sustainable competitive advantage by preserving
what is distinctive about a company by performing different activities from rivals or performing
similar activities in different ways
Þ Sources: product-focused (variety based), customer-need focused (needs-based),
access-focused (access based)
,Strategic competitiveness: Achieved when a firm successfully formulates and implements a
value creating strategy
Operational effectiveness (about performing activities better than rivals)
Þ Often confused with strategy BUT operational effectiveness is necessary for strategy but
not the strategy itself
Þ Why? Operational effectiveness can be imitated (everyone does it so it does unique)
Þ Need more> strategic positioning
Strategic positioning (about performing different activities or similar activities in different
ways)
In today’s highly competitive and dynamic markets, strategic positioning is not enough in itself
(can be imitated as well!)
Þ Activities:
• Trade-offs naturally emerge
• Strategy is about combining activities
• Activity fit is important
• Activities are reminders of the strategy
• Strategy without activities is just a statement
3 sources of strategic positioning
1. Product-focused (variety based): Different set of products that competitors
2. Customer-need focused (needs-based): Focus on a specific customer segment group (ex:
Lululemon who provides everything for yoga)
3. Access focused (access-based): Focus on a specific geographical area (ex: bol.com who
focuses on the Netherlands and Belgium)
Þ Companies aim with strategic positioning is to either do different activities or the same
activities in different ways
Þ Activities need to be aligned with your mission as a company (ex: being the fastest in the
market)
Strategy is creating fit among company’s activities to achieve strategic competitiveness by
formulating and implementing a value creating strategy,
Through a strategic management process, which is the full set of commitments, decisions and
actions required for a firm to achieve strategic competitiveness and above-average returns
, Two underlying models: How can a firm use it resources to gain strategic advantage?
Þ Both based on the view that humans act rationally
1. I/O Model
2. Resource-based view (RBV model)
Þ The success of a firm is explained:
• 20% by the I/O model
• 36% by the Resource based model
• 44% by luck (serendipity = discovery by luck combined with a prepared mind)
I/O Model (Industrial organization model)
Þ A successful competitive advantage (organization success) is highly linked to the
external environment (ex: which market you are in, whether you should enter a market
or not, which market is more profitable)
Þ Related to Porter’s five forces model (to find the attractive industry)
