STRATEGIC MANAGEMENT: ALL LECTURES
Lecture 1
Introduction to Strategic Management
Strategic management and external analysis
De nitions
- Strategy
- Greek origin (strategos), the general’s view
- Dictionary: detailed plan for achieving success in situations such as war, politics, industry, or
support, or the skill of planning for such situations
- Porter: strategy is the creation of a unique and valuable position involving a di erent set of
activities
- Book: a strategy is an integrated and coordinated set of commitments and actions designed to
develop and exploit core competencies and gain a competitive advantage
- Strategy is creating a t among company’s activities to achieve strategic competitiveness by
formulating and implementing a value creating strategy through a strategic management process
with is the full set of commitments, decisions, and actions required for a company to achieve
strategic competitiveness and above-average returns
- Competitive advantage
- When company implements a strategy that competitors are unable to duplicate or nd too costly
to try and imitate it (book)
- Above average returns
- Returns in excess of what an investor expects to earn from other investments with a similar
amount of risk (book)
- Operational e ectiveness
- Means performing activities better (faster or with fewer inputs and defects) than rivals (Porter)
- By outsourcing; reducing number of defects; business process reengineering or change
management
- Is necessary but not su cient, therefore strategy in addition
- Strategic positioning
- Achieve sustainable competitive advantage by preserving what is distinctive about a company by
performing di erent activities from rivals or similar activities in di erent ways
- Sources: product-focused (variety-based); customer-need focused (needs-based); access-focused
(access-based)
- Not enough in itself in today’s highly competitive and dynamic markets
- Trade-o s naturally emerge
- Combine activities, activity t important, activities as reminders of the strategy
- Strategy without activities is just a statement, e.g. Zara mission statement 2020: “give customers
what they want, and get it to them faster than anyone else”
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, Two underlying models
- Input-output (I/O) model (20%)
- External environment is the primary determinant of successful strategic choice
- About nding attractive industries
- Assumptions: resource are mobile, rational decision-making, rm strategies are similar in nature
- Porter’s ve forces
- Resource-based view (36%)
- Internal characteristics are the primary determinants
- Assumptions: heterogeneous company resources, immobile resources, rational decision-making
- VRIN model (next week)
- Rest is luck
How to identify opportunities and threats
- By analyzing macro environment and industry environment
- General environment analysis: identifying forces in the macro environment that are (mostly) beyond
a company’s control
- Political/legal factors (e.g. stability, taxation)
- Economic factors (e.g. growth rates)
- Socio-cultural factors (e.g. workforce diversity)
- Technological factors (e.g. speed of change)
- Demographic factors (e.g. population, ethnic mix)
- Global factors (e.g. political events)
- Environmental factors (e.g. pollution, recourse deprivation)
- Scenario planning: conduct general environment analysis, identify critical dimensions based on
degree of uncertainty and impact, develop scenarios, discuss how each scenario would impact
company strategy
- Industry analysis
- Industry: group of companies that are active with the same/similar product on the same market,
should be not too brand and not too narrow (industry boundaries)
- Think of core competitors
- E.g. Coca Cola’s industry: beverage industry (no, there’s alcohol), nonalcoholic beverage
industry (no, there’s milk), nonalcoholic soft drink beverage industry (no, mineral water),
nonalcoholic carbonated soft drink beverage industry (or is that too narrow?)
- Industry structure determines pro tability
- When starting industry analysis (with Porter’s ve forces model) rst de ne the industry
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, Porter’s ve forces model
- (1) Degree of rivalry
- Assessing industry characteristics, structure, and attractiveness
- Industry level of analysis
- Rivalry high if: large number of competitors, low switching costs, slow
rate of industry growth, high exit barriers
- Key aspect: risk of price competition
- (2) Supplier power
- Supplier power high: it’s concentrated, input is important, switching costs are high, forward
integration (company owns and controls business activities that are ahead in the value chain of its
industry)
- (3) Buyer power
- Buyer power high if: it’s concentrated, low product di erentiation, low switching costs, backward
integration (company owns another company that supplies the products or services needed for
production)
- (4) Risk of new entrants
- Threat of new entrants is low if: high time and cost of entry, economies of scale (cost advantages
due to decrease of cost per unit with increasing scale), technology protection, high switching costs
- (5) Risk of substitutes
- Substitute: any product that can satisfy the same demand as the products of the focal industry
- Threat of substitutes high if: better price/quality ratio, low switching costs
- All ve forces low: industry is attractive, stay in or enter the industry
- All ve forces high: industry is not attractive, improve position or leave industry (unless there are
important synergies between business units)
Lecture 2
Internal analysis and resource integration
Why do companies that operate in the same industry and the same market di er in performance? When
the external contexts are very similar, why do some companies perform better than others?
Components of internal analysis
- Resources: inputs to company’s product and services; assets
- Tangible resources: physical attributes, visible, quanti ed; e.g. capital, land, buildings, plant,
equipment, supplies, technologies artifacts
- Intangible resources: no physical attributes, invisible, harder to quantify; e.g. knowledge, culture,
routines, brand name, reputation
- Intangible resources more likely to be harder to imitate
- Capabilities: skills of using resources
- When resources have been purposefully integrated into the company to achieve a speci c task or
set of tasks they are capabilities
- E.g. resources: marketing employees, money, etc.; capabilities: ability to do market research
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Lecture 1
Introduction to Strategic Management
Strategic management and external analysis
De nitions
- Strategy
- Greek origin (strategos), the general’s view
- Dictionary: detailed plan for achieving success in situations such as war, politics, industry, or
support, or the skill of planning for such situations
- Porter: strategy is the creation of a unique and valuable position involving a di erent set of
activities
- Book: a strategy is an integrated and coordinated set of commitments and actions designed to
develop and exploit core competencies and gain a competitive advantage
- Strategy is creating a t among company’s activities to achieve strategic competitiveness by
formulating and implementing a value creating strategy through a strategic management process
with is the full set of commitments, decisions, and actions required for a company to achieve
strategic competitiveness and above-average returns
- Competitive advantage
- When company implements a strategy that competitors are unable to duplicate or nd too costly
to try and imitate it (book)
- Above average returns
- Returns in excess of what an investor expects to earn from other investments with a similar
amount of risk (book)
- Operational e ectiveness
- Means performing activities better (faster or with fewer inputs and defects) than rivals (Porter)
- By outsourcing; reducing number of defects; business process reengineering or change
management
- Is necessary but not su cient, therefore strategy in addition
- Strategic positioning
- Achieve sustainable competitive advantage by preserving what is distinctive about a company by
performing di erent activities from rivals or similar activities in di erent ways
- Sources: product-focused (variety-based); customer-need focused (needs-based); access-focused
(access-based)
- Not enough in itself in today’s highly competitive and dynamic markets
- Trade-o s naturally emerge
- Combine activities, activity t important, activities as reminders of the strategy
- Strategy without activities is just a statement, e.g. Zara mission statement 2020: “give customers
what they want, and get it to them faster than anyone else”
fi ff ff fi ffi fi ff ff fi
, Two underlying models
- Input-output (I/O) model (20%)
- External environment is the primary determinant of successful strategic choice
- About nding attractive industries
- Assumptions: resource are mobile, rational decision-making, rm strategies are similar in nature
- Porter’s ve forces
- Resource-based view (36%)
- Internal characteristics are the primary determinants
- Assumptions: heterogeneous company resources, immobile resources, rational decision-making
- VRIN model (next week)
- Rest is luck
How to identify opportunities and threats
- By analyzing macro environment and industry environment
- General environment analysis: identifying forces in the macro environment that are (mostly) beyond
a company’s control
- Political/legal factors (e.g. stability, taxation)
- Economic factors (e.g. growth rates)
- Socio-cultural factors (e.g. workforce diversity)
- Technological factors (e.g. speed of change)
- Demographic factors (e.g. population, ethnic mix)
- Global factors (e.g. political events)
- Environmental factors (e.g. pollution, recourse deprivation)
- Scenario planning: conduct general environment analysis, identify critical dimensions based on
degree of uncertainty and impact, develop scenarios, discuss how each scenario would impact
company strategy
- Industry analysis
- Industry: group of companies that are active with the same/similar product on the same market,
should be not too brand and not too narrow (industry boundaries)
- Think of core competitors
- E.g. Coca Cola’s industry: beverage industry (no, there’s alcohol), nonalcoholic beverage
industry (no, there’s milk), nonalcoholic soft drink beverage industry (no, mineral water),
nonalcoholic carbonated soft drink beverage industry (or is that too narrow?)
- Industry structure determines pro tability
- When starting industry analysis (with Porter’s ve forces model) rst de ne the industry
fi fi fi fi fi fi fi
, Porter’s ve forces model
- (1) Degree of rivalry
- Assessing industry characteristics, structure, and attractiveness
- Industry level of analysis
- Rivalry high if: large number of competitors, low switching costs, slow
rate of industry growth, high exit barriers
- Key aspect: risk of price competition
- (2) Supplier power
- Supplier power high: it’s concentrated, input is important, switching costs are high, forward
integration (company owns and controls business activities that are ahead in the value chain of its
industry)
- (3) Buyer power
- Buyer power high if: it’s concentrated, low product di erentiation, low switching costs, backward
integration (company owns another company that supplies the products or services needed for
production)
- (4) Risk of new entrants
- Threat of new entrants is low if: high time and cost of entry, economies of scale (cost advantages
due to decrease of cost per unit with increasing scale), technology protection, high switching costs
- (5) Risk of substitutes
- Substitute: any product that can satisfy the same demand as the products of the focal industry
- Threat of substitutes high if: better price/quality ratio, low switching costs
- All ve forces low: industry is attractive, stay in or enter the industry
- All ve forces high: industry is not attractive, improve position or leave industry (unless there are
important synergies between business units)
Lecture 2
Internal analysis and resource integration
Why do companies that operate in the same industry and the same market di er in performance? When
the external contexts are very similar, why do some companies perform better than others?
Components of internal analysis
- Resources: inputs to company’s product and services; assets
- Tangible resources: physical attributes, visible, quanti ed; e.g. capital, land, buildings, plant,
equipment, supplies, technologies artifacts
- Intangible resources: no physical attributes, invisible, harder to quantify; e.g. knowledge, culture,
routines, brand name, reputation
- Intangible resources more likely to be harder to imitate
- Capabilities: skills of using resources
- When resources have been purposefully integrated into the company to achieve a speci c task or
set of tasks they are capabilities
- E.g. resources: marketing employees, money, etc.; capabilities: ability to do market research
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