Strategic management
Theme 1: What is strategy and why is it important?
Chapter 1: The concept of strategy
1 What is the essence of strategic thinking & implementation?
1.1 An appealing case: Netflix
• Every company is an answer to a challenge → “why does the company started”
• Problem/Challenge of Netflix: people forgot to bring back their movies and got a fine
→ high fee structure + high fees was the start to create a more easy service
→ with the internet he was the first one to stream movies
➔ What changed since 2001? Netflix started to compete Blockbuster, then started to
stream and competing other entertaining companies like Disney.
• But it was an informed bed = future is uncertain, but strategy is about the future bcs you
make an investment in your organization to go where you want to go with your idea
2 Strategy and competitors
2.1 What is strategy?
Strategy = is about competing differently from rivals—
• Doing what they don’t do or doing it better!
• Doing what they can’t do!
• Doing that which sets the firm apart and attracts customers.
• Deciding what we should or should not do to produce a competitive edge.
• Can be described as adopting a particular position
Strategy = how to create value in a future that is uncertain (USP).
vb. Nike: sports(wo)men Adidas: positioning more on the fashion side
Strategy = the set of actions that its managers take to outperform the company’s competitors and
achieve superior profitability. The objective of a well-crafted strategy is not merely temporary
competitive success and profits in the short run, but rather the sort of lasting success that can
support growth and secure the company’s future over the long term.
2.2 The quest for competitive advantage
Competitive advantage = meeting customer needs more effectively, with products or services that
customers value more highly, or more efficiently, at lower cost.
e.g. Nike: resolving the problem of producing the best sportswear for top athletes
e.g. Adidas: producing pretty products for people who want to spot
Sustainable competitive advantage = giving buyers lasting reasons to prefer a firm’s products or
services over those of its competitors.
1
,e.g. Apple HP: Apple’s strategy is about the identity and not really about the processing system
→ Strategy is about how unique you can be, bcs that’s where you create value and not about being
the best. It’s not a zero sum game.
Case: Starbucks
• Competitive advantage? Creating an upscale experience for coffee drinkers by catering to
individualized tastes, enhancing the atmosphere and comfort of the shops & delivering a
premium product produced under environmentally sound fair trade practices
• Why are they able to charge prices that are well above their rivals? Bcs they are
differentiating from other coffee purveyors
• Its expansion policies have allowed the company to make it easy for customers to find a
Starbucks shop almost anywhere, further enhancing the brand and cementing customer
loyalty.
• A creative distinctive strategy such as that used by Starbucks is a company’s most reliable
ticket for developing a competitive advantage over its rivals. If a strategy is not distinctive,
then there can be no competitive advantage, since no firm would be meeting customer
needs better or operating more efficiently than any other.
• Their key strategy elements?
o Train “baristas” to serve a wide variety of specialty cof ee drinks that allow
customers to satisfy their individual preferences in a customized way.
o Emphasize store ambience and elevation of the customer experience at Starbucks
stores.
o Purchase and roast only top-quality coffee beans.
o Expand the number of Starbucks stores domestically and internationally.
o Broaden and periodically refresh in-store product offerings.
o Fully exploit the growing power of the Starbucks name and brand image with out-of-
store sales. S
2.3 Strategic approach choices
Low-cost provider:
• Cost-based advantage
• E.g. Walmart & Southwest Airlines
Broad differentiation:
• Product or service differentiation that appeal to a broad spectrum of buyers
• E.g. Apple (innovative products,) Johnson & Johnson in baby products (product reliability),
BMW (engineering design and performance)
2
,Focused low-cost:
• Narrow buyer segment & lower cost than competitors
• E.g. Private-label manufactures of food, health and beauty products use low cost advantage
to offer supermarket buyers lower prices than those demanded by producers of branded
products
Focused differentiation:
• Narrow buyer segment & outcompeting rivals by offering buyers customized attributes that
meet their needs
• E.g. Lululemon (high quality yoga clothing that attract a devoted set of buyers), McAfee
Best-cost provider:
• Giving customers more value for the money by satisfying their expectations on key quality
features/performance/service attributes while beating their price expectations
• Hybrid strategy: low-cost provider + differentiation
• E.g. Target (hip product design & appealing shopping ambience for discount store shoppers
3
, 2.4 Why a company’s strategy evolves over time
Evolving strategy = changing circumstances (changing market conditions, advancing technology,
unexpected moves by competitors, shifting buyer needs, emerging market opportunities and new
ideas for improving the strategy) and ongoing management efforts to improve the strategy cause a
company’s strategy to evolve over time—a condition that makes the task of crafting strategy a work
in progress, not a one-time event.
2.5 A company’s strategy is partly proactive and partly reactive
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.
2.5.1 Deliberateness vs emergence
Case: Honda case in the USA in the 50’s
EXAMEN!
Honda decided to export 75cc motorcycles into California to compete with Harley Davidson.
→ Strategy: let’s try to get them in the market with HD.
→ Why didn’t it work?
1. The Americans didn’t think that Honda was the same as HD
2. 2. Calif is different climate than Japan so the engine was leaking
→ Didn’t work out for Honda
→ They kept trying and due to pure luck the moppet did succeed. Someone arrived on that moppet
and started selling it
→ The emergent strategy was pure luck. They gave it a try with great advertising and said that this
was the future for males AND females (women could sit on it with skirts) and it became a success
story. So the emergent strategy was the one that got realized. But it was not their intended strategy
4
Theme 1: What is strategy and why is it important?
Chapter 1: The concept of strategy
1 What is the essence of strategic thinking & implementation?
1.1 An appealing case: Netflix
• Every company is an answer to a challenge → “why does the company started”
• Problem/Challenge of Netflix: people forgot to bring back their movies and got a fine
→ high fee structure + high fees was the start to create a more easy service
→ with the internet he was the first one to stream movies
➔ What changed since 2001? Netflix started to compete Blockbuster, then started to
stream and competing other entertaining companies like Disney.
• But it was an informed bed = future is uncertain, but strategy is about the future bcs you
make an investment in your organization to go where you want to go with your idea
2 Strategy and competitors
2.1 What is strategy?
Strategy = is about competing differently from rivals—
• Doing what they don’t do or doing it better!
• Doing what they can’t do!
• Doing that which sets the firm apart and attracts customers.
• Deciding what we should or should not do to produce a competitive edge.
• Can be described as adopting a particular position
Strategy = how to create value in a future that is uncertain (USP).
vb. Nike: sports(wo)men Adidas: positioning more on the fashion side
Strategy = the set of actions that its managers take to outperform the company’s competitors and
achieve superior profitability. The objective of a well-crafted strategy is not merely temporary
competitive success and profits in the short run, but rather the sort of lasting success that can
support growth and secure the company’s future over the long term.
2.2 The quest for competitive advantage
Competitive advantage = meeting customer needs more effectively, with products or services that
customers value more highly, or more efficiently, at lower cost.
e.g. Nike: resolving the problem of producing the best sportswear for top athletes
e.g. Adidas: producing pretty products for people who want to spot
Sustainable competitive advantage = giving buyers lasting reasons to prefer a firm’s products or
services over those of its competitors.
1
,e.g. Apple HP: Apple’s strategy is about the identity and not really about the processing system
→ Strategy is about how unique you can be, bcs that’s where you create value and not about being
the best. It’s not a zero sum game.
Case: Starbucks
• Competitive advantage? Creating an upscale experience for coffee drinkers by catering to
individualized tastes, enhancing the atmosphere and comfort of the shops & delivering a
premium product produced under environmentally sound fair trade practices
• Why are they able to charge prices that are well above their rivals? Bcs they are
differentiating from other coffee purveyors
• Its expansion policies have allowed the company to make it easy for customers to find a
Starbucks shop almost anywhere, further enhancing the brand and cementing customer
loyalty.
• A creative distinctive strategy such as that used by Starbucks is a company’s most reliable
ticket for developing a competitive advantage over its rivals. If a strategy is not distinctive,
then there can be no competitive advantage, since no firm would be meeting customer
needs better or operating more efficiently than any other.
• Their key strategy elements?
o Train “baristas” to serve a wide variety of specialty cof ee drinks that allow
customers to satisfy their individual preferences in a customized way.
o Emphasize store ambience and elevation of the customer experience at Starbucks
stores.
o Purchase and roast only top-quality coffee beans.
o Expand the number of Starbucks stores domestically and internationally.
o Broaden and periodically refresh in-store product offerings.
o Fully exploit the growing power of the Starbucks name and brand image with out-of-
store sales. S
2.3 Strategic approach choices
Low-cost provider:
• Cost-based advantage
• E.g. Walmart & Southwest Airlines
Broad differentiation:
• Product or service differentiation that appeal to a broad spectrum of buyers
• E.g. Apple (innovative products,) Johnson & Johnson in baby products (product reliability),
BMW (engineering design and performance)
2
,Focused low-cost:
• Narrow buyer segment & lower cost than competitors
• E.g. Private-label manufactures of food, health and beauty products use low cost advantage
to offer supermarket buyers lower prices than those demanded by producers of branded
products
Focused differentiation:
• Narrow buyer segment & outcompeting rivals by offering buyers customized attributes that
meet their needs
• E.g. Lululemon (high quality yoga clothing that attract a devoted set of buyers), McAfee
Best-cost provider:
• Giving customers more value for the money by satisfying their expectations on key quality
features/performance/service attributes while beating their price expectations
• Hybrid strategy: low-cost provider + differentiation
• E.g. Target (hip product design & appealing shopping ambience for discount store shoppers
3
, 2.4 Why a company’s strategy evolves over time
Evolving strategy = changing circumstances (changing market conditions, advancing technology,
unexpected moves by competitors, shifting buyer needs, emerging market opportunities and new
ideas for improving the strategy) and ongoing management efforts to improve the strategy cause a
company’s strategy to evolve over time—a condition that makes the task of crafting strategy a work
in progress, not a one-time event.
2.5 A company’s strategy is partly proactive and partly reactive
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.
2.5.1 Deliberateness vs emergence
Case: Honda case in the USA in the 50’s
EXAMEN!
Honda decided to export 75cc motorcycles into California to compete with Harley Davidson.
→ Strategy: let’s try to get them in the market with HD.
→ Why didn’t it work?
1. The Americans didn’t think that Honda was the same as HD
2. 2. Calif is different climate than Japan so the engine was leaking
→ Didn’t work out for Honda
→ They kept trying and due to pure luck the moppet did succeed. Someone arrived on that moppet
and started selling it
→ The emergent strategy was pure luck. They gave it a try with great advertising and said that this
was the future for males AND females (women could sit on it with skirts) and it became a success
story. So the emergent strategy was the one that got realized. But it was not their intended strategy
4
