Strategic Management
Theme 1: What is strategy and why is it important?
Introduction example Netflix
Start working for Netflix: how would you proceed Netflix?
Do you think that Netflix is an easy go, no competition, not much to change,… company?
• Took a look at the stock price of Netflix:
o Doing pretty well before Covid, now there is a dip…
Strategy is about a mission, a vision, a way to prepare for the future but this needs to be
translated in performance
Strategy needs to be reflected in performances
Stock prices did go up until the end of September
What happenend?
• Between first of October 2021 and October 2022: stock prices glided down
o Because in 2021 there were newcomers in the market
o Competitors got up: newcomers in market: Amazon Prime, Amazon+, HBO,… →
competition: so, some customers go away to the competitors
o Profitability of Netflix could go down
Why is it going up again because competition is still there (in 2022)
• 1. The competition didn’t cause to much trouble for Netflix
• 2. Netflix changed the policies:
o US: Everyone that want to see Netflix, need to pay
▪ -> internationally Netflix is still growing (not in the US, but in Asia)
Strategy is about competition: increasing the pie without bothering others?
The stock price going up, indicates that the expected cashflow in the future (today) is going to
be more than between 2021-2022
• So Netflix still grows internationally
• Example: Disney+ is also doing well
The quest for competitive advantage
Competitive advantage (exam question)
• = not the same as comparative advantage
• Meeting customer needs more effectively, with products or services that customers
value more highly, or more efficiently, at lower cost.
• Example: successful stores/restaurants might deal with copycats → leads to more
competition: you will have to share the pie
o Competition = “you will have to share the pie”
o So as an organization you want to grab as much possible for your organization
• What is business?
1
, o If you maximize profitability, it is the same as maximizing your happiness
▪ Proven that you you’re friends, loved ones makes you happy
o If you make money for yourself, and ignoring your clients etc… this works for a
short time
o Creating value for anybody that has an effect in the organization
o It’s about employees: because without, your organization will not remain
competitive
▪ You need suppliers that are willing to supply to you
o If you don’t create value: you are not able to sustain as a business
o SO: business is about creating value on product or services that customers are
willing to pay a price
You are competitive for a few days or months, but if you don’t create value, you will not be
able to sustain: you will need to reinvest in equipment
So strategy is about having an idea how you prepare an organization to create a (sustainable)
competitive advantage!
Sustainable Competitive Advantage
• Giving buyers “lasting” reasons to prefer a firm’s products or services over those of its
competitors
Apple and Samsung are organizations who have grapped of the top end of the Smartphones a big
share of the market → they have lasting reasons why people are willing to pay the price for the
product
In order to build a competitive advantage:
• You can be a low-cost provider (e.g. Lidl and Aldi)
• You can be a differentiation on features (e.g. Apple)
• You can focus on differentiation market niche (e.g. Maserati
and Ferrari)
• You can focus on a cost market niche (e.g. Alibaba in China)
o Example: particular shops where they sell a good quality of products
The evolving nature of an organization strategy
Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that include both continued and new initiatives.
• Reactive (emergent) strategy elements that are required due to unanticipated competitive
developments and fresh market conditions.
An organization’s strategy in total tends to be a combination of proactive and reactive
elements, with certain strategy elements being abandoned because they have become
obsolete (= verouderd) or ineffective
What is the reason of a business: to solve a problem, to face a challenge
Competitive success requires an organization’s managers to make strategic choices about the key
building blocks of its strategy that differ from the choices made by competitors. More specific,
strategy is about competing differently from rivals:
• Doing what they don’t do or doing it better
2
, • Doing what they can’t do
• Doing something which sets the firm apart and attracts customers
• Deciding what we should or shouldn’t do to produce a competitive edge
• Can be described as adopting a particular position
Can you explain the strategy of Netflix? Why is Netflix so successful nowadays? What is the purpose
of Netflix?
Three stages to explain the strategy
1. Hastings started Netflix because he reacted to an upset event: paying fines
a. A business is usually an answer to a challenge. Netflix started as a business because
of Blockbuster as Netflix wouldn’t charge fines like Blockbuster did
2. First one who introduced the concept of streaming movies
a. Then, for many years the two companies were competing but Netflix did a better job
than Blockbuster (situated at the years 90) Netflix allowed customers to stream
movies, which Blockbuster didn’t do. This is where Netflix created a competitive
advantage: it was the first company that allowed customers to download/stream a
movie through the internet: proactively invest in movies that are shown and
basically paid for a 2 million people (stock price increase and profitability
3. Today, Netflix goes a step further: it creates and provides its own content: entertainment
company (not only a logistic company) → competing with Disney for example
Why is Netflix taking this risk? What are the capabilities of Netflix to reach that competitive
advantage?
• Netflix has a lot of data from its users about what they like in terms of movies and series
o Through an algorithm, the values indicate or predict quite accurately what a user
likes: AI can make sure that they proactively act
• They can ‘see’ what movies or series you watch and they can ‘see’ whether you like it.
• This allows them to predict whether a movie will be a success
o But HBO still beats Netflix regarding awards, which is important because of
reputation.
Why is it that HBO has a competitive advantage in terms of awards?
• It’s because of Game of Thrones, which is owned by HBO.
Deliberateness vs. Emergence
Case: Honda in USA in the 50s
Can you explain the strategy of Honda in California in the 50s?
The intended strategy of Honda in the 50s was to bring in the big bikes
to compete with Harley Davidson in the US.
• That was the strategy that they saw as a potential market.
Unfortunately, the Honda bikes were suffering from engineering issues because of the weather in
California.
3
, So, Honda’s plan didn’t succeed as was expected: the intended strategy that became a deliberate
strategy didn’t work out as Honda exported the bikes from Japan directly to California.
What happened afterwards was an emergent strategy: the sales people of Honda were driving the
big bikes from one shop to another shop. A sales manager saw the bike and wanted to sell it in its
shop. The rest is history.
Honda had a great advertising campaign as nobody in the US was driving a Honda bike in the first
place.
• They did not only advertise to males but also and especially to females.
• This became the realized strategy of Honda as they didn’t stick to their plan.
You need to understand that there is a distinction to be made between the intended strategy
(the plan), the deliberate strategy that you’re trying to execute, and the emergent strategy
because you’re flexible enough to adapt where necessary so it becomes the realized strategy
o An organization’s realized strategy can be observed in the pattern of its actions over
time.
You may have a plan, but the plan doesn’t guarantee that it will be executed/ succeed
That is how Honda became a powerful corporation in the late 50s – early 60s(t
So:
Deliberateness (=intented, proactive strategy) versus emergence (= unintended, reactive strategy
• Deliberative strategy → emergent strategy → realized strategy
o Instead of focusing on the big bikes (= intended strategy) they adapted themselves
and decided to focus on other kind of bikes
o That’s how Honda grabbed the market (with this little muppets), this was a non-
existing kind of bike in the USA
Business model elements
Business is value creation
Think Value, not Profit:
Increasing the Willingness to Pay (Customers’ perspective) & Decreasing the Willingness to Sell
(Employees’ and Suppliers’ perspective)
Key principles of Value-based Strategy
• Companies that excel at creating value focus squarely on Value or WTP (enhance
the customer experience) and WTS (make it more attractive for vendors and
employees to work with the company).
• Companies that outperform their peers increase WTP or decrease WTS in ways
that are difficult to imitate
• Simplicity opens up room for creativity and broad engagement
• Many of the most successful companies focus on their competitive position inside
an industry, as opposed to the average performance of their segment of the
economy
Two principles to create value:
4
Theme 1: What is strategy and why is it important?
Introduction example Netflix
Start working for Netflix: how would you proceed Netflix?
Do you think that Netflix is an easy go, no competition, not much to change,… company?
• Took a look at the stock price of Netflix:
o Doing pretty well before Covid, now there is a dip…
Strategy is about a mission, a vision, a way to prepare for the future but this needs to be
translated in performance
Strategy needs to be reflected in performances
Stock prices did go up until the end of September
What happenend?
• Between first of October 2021 and October 2022: stock prices glided down
o Because in 2021 there were newcomers in the market
o Competitors got up: newcomers in market: Amazon Prime, Amazon+, HBO,… →
competition: so, some customers go away to the competitors
o Profitability of Netflix could go down
Why is it going up again because competition is still there (in 2022)
• 1. The competition didn’t cause to much trouble for Netflix
• 2. Netflix changed the policies:
o US: Everyone that want to see Netflix, need to pay
▪ -> internationally Netflix is still growing (not in the US, but in Asia)
Strategy is about competition: increasing the pie without bothering others?
The stock price going up, indicates that the expected cashflow in the future (today) is going to
be more than between 2021-2022
• So Netflix still grows internationally
• Example: Disney+ is also doing well
The quest for competitive advantage
Competitive advantage (exam question)
• = not the same as comparative advantage
• Meeting customer needs more effectively, with products or services that customers
value more highly, or more efficiently, at lower cost.
• Example: successful stores/restaurants might deal with copycats → leads to more
competition: you will have to share the pie
o Competition = “you will have to share the pie”
o So as an organization you want to grab as much possible for your organization
• What is business?
1
, o If you maximize profitability, it is the same as maximizing your happiness
▪ Proven that you you’re friends, loved ones makes you happy
o If you make money for yourself, and ignoring your clients etc… this works for a
short time
o Creating value for anybody that has an effect in the organization
o It’s about employees: because without, your organization will not remain
competitive
▪ You need suppliers that are willing to supply to you
o If you don’t create value: you are not able to sustain as a business
o SO: business is about creating value on product or services that customers are
willing to pay a price
You are competitive for a few days or months, but if you don’t create value, you will not be
able to sustain: you will need to reinvest in equipment
So strategy is about having an idea how you prepare an organization to create a (sustainable)
competitive advantage!
Sustainable Competitive Advantage
• Giving buyers “lasting” reasons to prefer a firm’s products or services over those of its
competitors
Apple and Samsung are organizations who have grapped of the top end of the Smartphones a big
share of the market → they have lasting reasons why people are willing to pay the price for the
product
In order to build a competitive advantage:
• You can be a low-cost provider (e.g. Lidl and Aldi)
• You can be a differentiation on features (e.g. Apple)
• You can focus on differentiation market niche (e.g. Maserati
and Ferrari)
• You can focus on a cost market niche (e.g. Alibaba in China)
o Example: particular shops where they sell a good quality of products
The evolving nature of an organization strategy
Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that include both continued and new initiatives.
• Reactive (emergent) strategy elements that are required due to unanticipated competitive
developments and fresh market conditions.
An organization’s strategy in total tends to be a combination of proactive and reactive
elements, with certain strategy elements being abandoned because they have become
obsolete (= verouderd) or ineffective
What is the reason of a business: to solve a problem, to face a challenge
Competitive success requires an organization’s managers to make strategic choices about the key
building blocks of its strategy that differ from the choices made by competitors. More specific,
strategy is about competing differently from rivals:
• Doing what they don’t do or doing it better
2
, • Doing what they can’t do
• Doing something which sets the firm apart and attracts customers
• Deciding what we should or shouldn’t do to produce a competitive edge
• Can be described as adopting a particular position
Can you explain the strategy of Netflix? Why is Netflix so successful nowadays? What is the purpose
of Netflix?
Three stages to explain the strategy
1. Hastings started Netflix because he reacted to an upset event: paying fines
a. A business is usually an answer to a challenge. Netflix started as a business because
of Blockbuster as Netflix wouldn’t charge fines like Blockbuster did
2. First one who introduced the concept of streaming movies
a. Then, for many years the two companies were competing but Netflix did a better job
than Blockbuster (situated at the years 90) Netflix allowed customers to stream
movies, which Blockbuster didn’t do. This is where Netflix created a competitive
advantage: it was the first company that allowed customers to download/stream a
movie through the internet: proactively invest in movies that are shown and
basically paid for a 2 million people (stock price increase and profitability
3. Today, Netflix goes a step further: it creates and provides its own content: entertainment
company (not only a logistic company) → competing with Disney for example
Why is Netflix taking this risk? What are the capabilities of Netflix to reach that competitive
advantage?
• Netflix has a lot of data from its users about what they like in terms of movies and series
o Through an algorithm, the values indicate or predict quite accurately what a user
likes: AI can make sure that they proactively act
• They can ‘see’ what movies or series you watch and they can ‘see’ whether you like it.
• This allows them to predict whether a movie will be a success
o But HBO still beats Netflix regarding awards, which is important because of
reputation.
Why is it that HBO has a competitive advantage in terms of awards?
• It’s because of Game of Thrones, which is owned by HBO.
Deliberateness vs. Emergence
Case: Honda in USA in the 50s
Can you explain the strategy of Honda in California in the 50s?
The intended strategy of Honda in the 50s was to bring in the big bikes
to compete with Harley Davidson in the US.
• That was the strategy that they saw as a potential market.
Unfortunately, the Honda bikes were suffering from engineering issues because of the weather in
California.
3
, So, Honda’s plan didn’t succeed as was expected: the intended strategy that became a deliberate
strategy didn’t work out as Honda exported the bikes from Japan directly to California.
What happened afterwards was an emergent strategy: the sales people of Honda were driving the
big bikes from one shop to another shop. A sales manager saw the bike and wanted to sell it in its
shop. The rest is history.
Honda had a great advertising campaign as nobody in the US was driving a Honda bike in the first
place.
• They did not only advertise to males but also and especially to females.
• This became the realized strategy of Honda as they didn’t stick to their plan.
You need to understand that there is a distinction to be made between the intended strategy
(the plan), the deliberate strategy that you’re trying to execute, and the emergent strategy
because you’re flexible enough to adapt where necessary so it becomes the realized strategy
o An organization’s realized strategy can be observed in the pattern of its actions over
time.
You may have a plan, but the plan doesn’t guarantee that it will be executed/ succeed
That is how Honda became a powerful corporation in the late 50s – early 60s(t
So:
Deliberateness (=intented, proactive strategy) versus emergence (= unintended, reactive strategy
• Deliberative strategy → emergent strategy → realized strategy
o Instead of focusing on the big bikes (= intended strategy) they adapted themselves
and decided to focus on other kind of bikes
o That’s how Honda grabbed the market (with this little muppets), this was a non-
existing kind of bike in the USA
Business model elements
Business is value creation
Think Value, not Profit:
Increasing the Willingness to Pay (Customers’ perspective) & Decreasing the Willingness to Sell
(Employees’ and Suppliers’ perspective)
Key principles of Value-based Strategy
• Companies that excel at creating value focus squarely on Value or WTP (enhance
the customer experience) and WTS (make it more attractive for vendors and
employees to work with the company).
• Companies that outperform their peers increase WTP or decrease WTS in ways
that are difficult to imitate
• Simplicity opens up room for creativity and broad engagement
• Many of the most successful companies focus on their competitive position inside
an industry, as opposed to the average performance of their segment of the
economy
Two principles to create value:
4
