Week 1: Compettte e st eteg
Thinkint tbou e st eteg – S oelhose (2008)
Main message
Overview of strategic management since 1960s
Theory
3 aspects of strategic management
Process of strategy = where do they come from? How developed?
Content of strategy = which types? Which give compettve advantage?
Context of strategy = how efected by specifc organiiatonala environmental contexts?
Standard model of strategy
1. Strategic analyses
External analyses
Internal analyses
SWOT analyses
2. Strategic choice
Choose among strategic optons taaing into account: suitability, acceptability and
feasibility
3. Strategic implementaton
Detailed plan, assignment of responsibilites and budgets, performance measures
Combinaton design & planning school = standard model of strategy
Combinaton positoning & resourcebbased school = how internal & external analyses should be
executed
\
Design school
o Strategy as conceptual process
Planning school
o Strategy as formal process (Hedley)
Positoning school
o Strategy as ft (Porter)
Resourcebbased school
o Strategy as stretch (Prahalad & Hamel, Barney)
Process school
o Strategy as collectve learning (Mintiberg)
Agreement across schools
Strategy concerns both organiiaton and environment
Substance of strategy is complex
Strategies exist on diferent levels
Strategy involves issues of both content and process
,How compettte foscee ehtpe e st eteg – oos es (1979)
Main message
Compettve advantage is created through frmss ft into environment
External focus on opportunites and threats
Theory
5 compettve forces
Threat of new entrants
Threat of substtute products
Bargaining power of suppliers
Bargaining power pf buyers
Rivalry among existng frms
The collectve strength of these forces determines the ultmate proft potental of an industry: the
weaaer the forces collectvely, the greater opportunity for superior performance
3 Generic strategies
Cost leadership
Diferentaton
Focused strategy
SCP Paradigm
Structure = proft potental varies per industry
Conduct = actons taaen to realiie industrybspecifc proft potental
Performance = variance S and C = variance in frmss performance
Strategistss goal to fnd positon in industry to defend against forces, or infuence them
strategic agenda
1. Positoning the frm
2. Infuencing the balance
3. Exploitng industry change
Disadvantages
Firmss play a more important role in determining proftability than industry
Firmss do not have identcal relevant resources
Focuses solely on industry as whole and not on diferences between frms
, The fsm mttese, no he indue seg – Btdentfulles & S opfosd (1992)
Main message
Opportunites are not based solely on industry proftability but also internal factors of frm
Theory
Proftable industries are proftable because it includes imaginatve and creatve
businesses
Large maraet share is ofen the reward, not the cause of success
Large maraet share is reached through efciency and efectveness
Fallacy of generic strategies = asserton that opposites cannot be reconciled “cannot be both low
cost and high quality – stuca in middle is worst thing”, is not true. Most frms strive for reconciling
of opposites – frms need diverse approaches to the maraet
Disadvantages
Careful not to underestmate impact of industry forces
Fism seeouscee tnd eue tined compettte tdttn tte – Btsneeg (1991)
Main message
Compettve advantage is created though frmss resources
Internal focus on strengths and weaanesses
Theory
Value comes from resources that are
Heterogeneous
Imperfectly mobile
To lead to a sustained compettve advantage resources must be
Valuable
Rare
Imperfectly inimitable
Nonbsubsttutable
Resources can be classifed into 3 categories
Physical capital resources
Human capital resources
Organiiatonal capital resources
Schumpeterian shocas = structural revolutons in industry that redefne which of frmss atributes
are resources and which are not
Disadvantages
Tautological (selfbverifying): resources are valuable thus create value
Possession difers from implementaton
Causal ambiguity: no proven relatonship resources – performance
Unclear about what relevant resources are
In reality managers quite limited in shaping compettve environment in their favor
Thinkint tbou e st eteg – S oelhose (2008)
Main message
Overview of strategic management since 1960s
Theory
3 aspects of strategic management
Process of strategy = where do they come from? How developed?
Content of strategy = which types? Which give compettve advantage?
Context of strategy = how efected by specifc organiiatonala environmental contexts?
Standard model of strategy
1. Strategic analyses
External analyses
Internal analyses
SWOT analyses
2. Strategic choice
Choose among strategic optons taaing into account: suitability, acceptability and
feasibility
3. Strategic implementaton
Detailed plan, assignment of responsibilites and budgets, performance measures
Combinaton design & planning school = standard model of strategy
Combinaton positoning & resourcebbased school = how internal & external analyses should be
executed
\
Design school
o Strategy as conceptual process
Planning school
o Strategy as formal process (Hedley)
Positoning school
o Strategy as ft (Porter)
Resourcebbased school
o Strategy as stretch (Prahalad & Hamel, Barney)
Process school
o Strategy as collectve learning (Mintiberg)
Agreement across schools
Strategy concerns both organiiaton and environment
Substance of strategy is complex
Strategies exist on diferent levels
Strategy involves issues of both content and process
,How compettte foscee ehtpe e st eteg – oos es (1979)
Main message
Compettve advantage is created through frmss ft into environment
External focus on opportunites and threats
Theory
5 compettve forces
Threat of new entrants
Threat of substtute products
Bargaining power of suppliers
Bargaining power pf buyers
Rivalry among existng frms
The collectve strength of these forces determines the ultmate proft potental of an industry: the
weaaer the forces collectvely, the greater opportunity for superior performance
3 Generic strategies
Cost leadership
Diferentaton
Focused strategy
SCP Paradigm
Structure = proft potental varies per industry
Conduct = actons taaen to realiie industrybspecifc proft potental
Performance = variance S and C = variance in frmss performance
Strategistss goal to fnd positon in industry to defend against forces, or infuence them
strategic agenda
1. Positoning the frm
2. Infuencing the balance
3. Exploitng industry change
Disadvantages
Firmss play a more important role in determining proftability than industry
Firmss do not have identcal relevant resources
Focuses solely on industry as whole and not on diferences between frms
, The fsm mttese, no he indue seg – Btdentfulles & S opfosd (1992)
Main message
Opportunites are not based solely on industry proftability but also internal factors of frm
Theory
Proftable industries are proftable because it includes imaginatve and creatve
businesses
Large maraet share is ofen the reward, not the cause of success
Large maraet share is reached through efciency and efectveness
Fallacy of generic strategies = asserton that opposites cannot be reconciled “cannot be both low
cost and high quality – stuca in middle is worst thing”, is not true. Most frms strive for reconciling
of opposites – frms need diverse approaches to the maraet
Disadvantages
Careful not to underestmate impact of industry forces
Fism seeouscee tnd eue tined compettte tdttn tte – Btsneeg (1991)
Main message
Compettve advantage is created though frmss resources
Internal focus on strengths and weaanesses
Theory
Value comes from resources that are
Heterogeneous
Imperfectly mobile
To lead to a sustained compettve advantage resources must be
Valuable
Rare
Imperfectly inimitable
Nonbsubsttutable
Resources can be classifed into 3 categories
Physical capital resources
Human capital resources
Organiiatonal capital resources
Schumpeterian shocas = structural revolutons in industry that redefne which of frmss atributes
are resources and which are not
Disadvantages
Tautological (selfbverifying): resources are valuable thus create value
Possession difers from implementaton
Causal ambiguity: no proven relatonship resources – performance
Unclear about what relevant resources are
In reality managers quite limited in shaping compettve environment in their favor
