International Business Strategy
Chapter 1: What is strategy and why is it important?
Historical perspective of strategic thinking:
Accor (ibis, Swissotel,...)
- Keeping the identity of the different brands; integrating the culture of the brands
Three elements of strategy:
- Potash: if a company lacks potash, it may be said that that is the strategic (or limiting) factor
- Interdependence: focus on interdependence of adversaries’ decisions and on their expectations about
each other’s behaviour
- Goals and objectives: strategy is the determination of the basic LT goals and objectives of an
enterprise; taking strategic decisions that will lead to your goals
Summary of strategic thinking
- History through mid 1970s
- Early history of strategy affected by military concepts
- Sociology influenced the early concepts; mostly by business school professors
- Consulting firms: disseminated academic insights; developed sets of tools to monitor SBUs
- Disillusionment of tools set in: fragmented agenda for future strategic R&D
What is the link between your strategy and your business model? SLIDE 35
Business model (4 elements): system of choices and consequences; differs from strategy (way of creating and
capturing value)
- Customer value proposition
- Profit formula
- Key resources: ppl, money, research etc
- Key processes: how to transform input into output
- → influences company’s value creation and value eg price influences scale economies and bargaining
power
How to compete w other companies w your business models by
- Strengthening own virtuous cycles
- Weakening competitors’ cycles eg Microsoft teams copied a lot of things from zoom vs linux which is a
minority but it keeps the competition going
- Turning competitors into complements
,External analysis: five forces of Porter
Industry matters: creating competitive advantage
Managerial agency leads to better
EBITDAs, margins: differentiation vs cost
reduction vs focus strategy → not stuck in
the middle
Chapter 2: The competitive landscape
Environment matters
The industry in which a company operates has a strong influence on its economic performance; when you look
at a sector like eg airline industry, on average companies are making losses; business cycle explains a bit of
profitability ; differences between industries are smaller than differences within industries
Three-dimensional landscape metaphor
- Profitability of direct competitors tends to have a common industry-specific component
- Businesses in some industry group (eg pharmaceuticals) have generally operated on profit plateaus
- Others (eg airlines) have mostly remained stuck in deep troughs
- The deviation of individual players is a result of their chosen strategy (how to compete)
FIVE FORCES PORTER:
Degree of rivalry/industry competitors:
, - If fixed costs are high compared to value created: there is pressure/sunk cost (those who spent it
already have an advantage)
- Number and size of direct competitors
- Capacity utillisation influences pricing: high fixed costs, excess capacity, slow growth, no product
differentiation -> rivalry up
- Behavioural determinants: diverse competitors, high exit barriers, high strategic value to industry
position -> rivalry up
Threat of entry/new entrants:
- Industry profitability influenced by potential competitors and existing competitors
- Entre barriers (eg economies of scale, brand names, differentiation, capital requirements) prevent
influx of firms into an industry and rest on irreversible resource commitments
- Strategic groups; expected retaliation: eg Lacoste might retaliate on the fake lacoste products
- Can change over time
Threat of substitutes:
- Price-to-performance ratios: different products or services customers can use to satisfy the same basic
need
- Switching costs incurred: retraining, retooling, redesign
- Eg for airline: railway, low-cost busses, cars etc
Buyer power:
- Vertical force:
o Influences appropriation of value created by industry
o Size and concentration of customers: small # is powerful
o If buyer purchases high volumes relative to the size of the vendor, good information about
prices, attributes, low switching costs, backward integration
o Perceived risk of failure associated w product’s use (eg high personal cost of substitute’s
failure)
o Brand identity: forward and backward integration
Supplier power:
- The higher the bargaining power of suppliers, the lower the profitability
- Mirror image of buyer power (also vertical force)
- Focuses on relative size & concentration of suppliers relative to industry participants and degree of
differentiation in the inputs supplied
- Ability to charge customers different prices when market
characterised by high supplier power and low buyer power
- Switching costs: depends on the preferences of the ppl
The process of mapping business landscapes
- Gathering information: think broadly about sources of (public)
information -> overload
- Drawing the boundaries: challenge of industry definition +
choice of horizontal/vertical/ geographical scope
- Identifying groups of players: especially think about ‘other’
categories
- Understanding group-level bargaining power: macro instead of micro (firm level) – identify which
groups of players get how much of pie)
- Thinking dynamically: as it will be > as it was
- Shaping the business landscape: strategic action
Chapter 1: What is strategy and why is it important?
Historical perspective of strategic thinking:
Accor (ibis, Swissotel,...)
- Keeping the identity of the different brands; integrating the culture of the brands
Three elements of strategy:
- Potash: if a company lacks potash, it may be said that that is the strategic (or limiting) factor
- Interdependence: focus on interdependence of adversaries’ decisions and on their expectations about
each other’s behaviour
- Goals and objectives: strategy is the determination of the basic LT goals and objectives of an
enterprise; taking strategic decisions that will lead to your goals
Summary of strategic thinking
- History through mid 1970s
- Early history of strategy affected by military concepts
- Sociology influenced the early concepts; mostly by business school professors
- Consulting firms: disseminated academic insights; developed sets of tools to monitor SBUs
- Disillusionment of tools set in: fragmented agenda for future strategic R&D
What is the link between your strategy and your business model? SLIDE 35
Business model (4 elements): system of choices and consequences; differs from strategy (way of creating and
capturing value)
- Customer value proposition
- Profit formula
- Key resources: ppl, money, research etc
- Key processes: how to transform input into output
- → influences company’s value creation and value eg price influences scale economies and bargaining
power
How to compete w other companies w your business models by
- Strengthening own virtuous cycles
- Weakening competitors’ cycles eg Microsoft teams copied a lot of things from zoom vs linux which is a
minority but it keeps the competition going
- Turning competitors into complements
,External analysis: five forces of Porter
Industry matters: creating competitive advantage
Managerial agency leads to better
EBITDAs, margins: differentiation vs cost
reduction vs focus strategy → not stuck in
the middle
Chapter 2: The competitive landscape
Environment matters
The industry in which a company operates has a strong influence on its economic performance; when you look
at a sector like eg airline industry, on average companies are making losses; business cycle explains a bit of
profitability ; differences between industries are smaller than differences within industries
Three-dimensional landscape metaphor
- Profitability of direct competitors tends to have a common industry-specific component
- Businesses in some industry group (eg pharmaceuticals) have generally operated on profit plateaus
- Others (eg airlines) have mostly remained stuck in deep troughs
- The deviation of individual players is a result of their chosen strategy (how to compete)
FIVE FORCES PORTER:
Degree of rivalry/industry competitors:
, - If fixed costs are high compared to value created: there is pressure/sunk cost (those who spent it
already have an advantage)
- Number and size of direct competitors
- Capacity utillisation influences pricing: high fixed costs, excess capacity, slow growth, no product
differentiation -> rivalry up
- Behavioural determinants: diverse competitors, high exit barriers, high strategic value to industry
position -> rivalry up
Threat of entry/new entrants:
- Industry profitability influenced by potential competitors and existing competitors
- Entre barriers (eg economies of scale, brand names, differentiation, capital requirements) prevent
influx of firms into an industry and rest on irreversible resource commitments
- Strategic groups; expected retaliation: eg Lacoste might retaliate on the fake lacoste products
- Can change over time
Threat of substitutes:
- Price-to-performance ratios: different products or services customers can use to satisfy the same basic
need
- Switching costs incurred: retraining, retooling, redesign
- Eg for airline: railway, low-cost busses, cars etc
Buyer power:
- Vertical force:
o Influences appropriation of value created by industry
o Size and concentration of customers: small # is powerful
o If buyer purchases high volumes relative to the size of the vendor, good information about
prices, attributes, low switching costs, backward integration
o Perceived risk of failure associated w product’s use (eg high personal cost of substitute’s
failure)
o Brand identity: forward and backward integration
Supplier power:
- The higher the bargaining power of suppliers, the lower the profitability
- Mirror image of buyer power (also vertical force)
- Focuses on relative size & concentration of suppliers relative to industry participants and degree of
differentiation in the inputs supplied
- Ability to charge customers different prices when market
characterised by high supplier power and low buyer power
- Switching costs: depends on the preferences of the ppl
The process of mapping business landscapes
- Gathering information: think broadly about sources of (public)
information -> overload
- Drawing the boundaries: challenge of industry definition +
choice of horizontal/vertical/ geographical scope
- Identifying groups of players: especially think about ‘other’
categories
- Understanding group-level bargaining power: macro instead of micro (firm level) – identify which
groups of players get how much of pie)
- Thinking dynamically: as it will be > as it was
- Shaping the business landscape: strategic action
