WEEK 1 COMPETITIVE STRATEGY (CONTENT – PRESCRIPTIVE)
Article 1: Thinking About Strategy (Stoelhorst, 2008) BASE FOR THIS WHOLE COURSE
● Content includes what good strategies are.
● Process includes where strategies come from
● Context includes how specific organisational/environmental
contexts affect the strategy process.
Article 1: How Competitive Forces Shape Strategy (Porter, 1979)
Porter states that the choice of industry is key to success. The degree of competition within an industry is based on
five forces (structure) instead of only on price, being (1) threat of entry, (2) power of buyer, (3) power of supplier, (4)
threat of substitutes and (5) competition. There are three ways to position in the market as a company (three generic
strategies = conduct), being (i) cost-leadership (low costs in a broad market), (ii) differentiation (offering a unique
product for a higher price in a broad market) or (iii) focused strategy (narrow). The collective strength of these five
forces determines the ultimate profitability of an industry. Variance in firm performance depends on structure and
conduct (SCP paradigms).
Article 2: Firm Resources and Sustained Competitive Advantage (Barney, 1991)
Resources may not be perfectly mobile across firms and thus heterogeneity can be long lasting. Firm resources
(physical-, human- and organizational capital resources) include all assets, capabilities, organizational processes, firm
attributes, information, knowledge etc. controlled by a firm that enable the firm to implement strategies that improve
the firm’s efficiency and effectiveness. Sustained competitive advantage occurs when a firm is implementing a value-
creating strategy that cannot be implemented by current or potential competitors at the same time and these
competitors are unable to duplicate the benefits of this strategy. Four characteristics make resources a source of
sustained competitive advantage: (i) valuable, (ii) rare, (iii) non-imitable and (iv) non-substitutable. The main interest
lies in understanding the relationship between differences among firms in terms of
resources/competencies/capabilities and performance differentials among these firms. Core competencies are
described as the collective learning of the organization, especially how to coordinate diverse production skills and
integrate multiple streams of technology. Porter is more environmentally focused, Barney’s focus is more focused on
the company's internal resources itself. In Porter’s case in the form of choice of industry, Barney in the form of the
firm’s resources. The big similarity between the articles (Barney/Porter) is that they try to explain differences in the
profitability of firms. However, their belief in how an organization can be profitable or what determines performance
is different.
Disadvantage: subjective and causal ambiguity because you can’t link causes to result.
Possession differs from implementation, e.g. not using a valuable resource the right way, doesn’t lead to
competitive advantage.
Article 3: A knowledge accessing theory of strategic alliances (grant)
Using strategic alliances in organisations happens a lot nowadays. Amongst others, to have a competitive advantage
in an early stage but also to concentrate on the core-business. Strategic alliances can be two things: knowledge-
accessing and knowledge-acquisition. Accessing alliances happen more often and mean that an organisation uses the
knowledge of another company. These alliances can stay for a long time and are stable. Acquisition means absorbing
the knowledge so this moves in house, this alliance is often short-term and does not lead to stable alliances. Accessing
alliances work when: 1) knowledge cannot be utilised in own product domain, 2) the knowledge is not fully utilised, 3)
future uncertainty, 4) early mover advantage
, Article 4: Transparency strategy: Competing with information in a digital world (granados)
In today’s digital world, information and transparency is very important for a good competitive advantage. Customers
want and rely on public information. This online availability of information shows prices and perhaps advantages for
competitors. There are 4 ways to deal with information transparency. 1. disclose (all available) , 2. distort (inaccurate),
3. bias (partially available, strategically) and 4. conceal (not available). Organisations need a strategy for their
transparency as for example; legal and PR also have to follow the strategy.
Two paradoxes emerge from the literature:
- Inside-out vs. outside-in perspective on strategy: some authors maintain that strategy analysis should focus on the
characteristics of the industry, while the other maintains that strategy analyses should focus on the characteristics of
the firm itself. (Having this paradox together, these theories should build on each other to create a better theory, both
theories need to be merged together)
- Second, the deterministic vs. voluntaristic view on strategy: some authors argue that the environment determines the
optimal strategy for a firm (a deterministic view on strategy), while others argue that firms can actively influence the
environment through their strategy ( a more voluntaristic view).
Article 1: Thinking About Strategy (Stoelhorst, 2008) BASE FOR THIS WHOLE COURSE
● Content includes what good strategies are.
● Process includes where strategies come from
● Context includes how specific organisational/environmental
contexts affect the strategy process.
Article 1: How Competitive Forces Shape Strategy (Porter, 1979)
Porter states that the choice of industry is key to success. The degree of competition within an industry is based on
five forces (structure) instead of only on price, being (1) threat of entry, (2) power of buyer, (3) power of supplier, (4)
threat of substitutes and (5) competition. There are three ways to position in the market as a company (three generic
strategies = conduct), being (i) cost-leadership (low costs in a broad market), (ii) differentiation (offering a unique
product for a higher price in a broad market) or (iii) focused strategy (narrow). The collective strength of these five
forces determines the ultimate profitability of an industry. Variance in firm performance depends on structure and
conduct (SCP paradigms).
Article 2: Firm Resources and Sustained Competitive Advantage (Barney, 1991)
Resources may not be perfectly mobile across firms and thus heterogeneity can be long lasting. Firm resources
(physical-, human- and organizational capital resources) include all assets, capabilities, organizational processes, firm
attributes, information, knowledge etc. controlled by a firm that enable the firm to implement strategies that improve
the firm’s efficiency and effectiveness. Sustained competitive advantage occurs when a firm is implementing a value-
creating strategy that cannot be implemented by current or potential competitors at the same time and these
competitors are unable to duplicate the benefits of this strategy. Four characteristics make resources a source of
sustained competitive advantage: (i) valuable, (ii) rare, (iii) non-imitable and (iv) non-substitutable. The main interest
lies in understanding the relationship between differences among firms in terms of
resources/competencies/capabilities and performance differentials among these firms. Core competencies are
described as the collective learning of the organization, especially how to coordinate diverse production skills and
integrate multiple streams of technology. Porter is more environmentally focused, Barney’s focus is more focused on
the company's internal resources itself. In Porter’s case in the form of choice of industry, Barney in the form of the
firm’s resources. The big similarity between the articles (Barney/Porter) is that they try to explain differences in the
profitability of firms. However, their belief in how an organization can be profitable or what determines performance
is different.
Disadvantage: subjective and causal ambiguity because you can’t link causes to result.
Possession differs from implementation, e.g. not using a valuable resource the right way, doesn’t lead to
competitive advantage.
Article 3: A knowledge accessing theory of strategic alliances (grant)
Using strategic alliances in organisations happens a lot nowadays. Amongst others, to have a competitive advantage
in an early stage but also to concentrate on the core-business. Strategic alliances can be two things: knowledge-
accessing and knowledge-acquisition. Accessing alliances happen more often and mean that an organisation uses the
knowledge of another company. These alliances can stay for a long time and are stable. Acquisition means absorbing
the knowledge so this moves in house, this alliance is often short-term and does not lead to stable alliances. Accessing
alliances work when: 1) knowledge cannot be utilised in own product domain, 2) the knowledge is not fully utilised, 3)
future uncertainty, 4) early mover advantage
, Article 4: Transparency strategy: Competing with information in a digital world (granados)
In today’s digital world, information and transparency is very important for a good competitive advantage. Customers
want and rely on public information. This online availability of information shows prices and perhaps advantages for
competitors. There are 4 ways to deal with information transparency. 1. disclose (all available) , 2. distort (inaccurate),
3. bias (partially available, strategically) and 4. conceal (not available). Organisations need a strategy for their
transparency as for example; legal and PR also have to follow the strategy.
Two paradoxes emerge from the literature:
- Inside-out vs. outside-in perspective on strategy: some authors maintain that strategy analysis should focus on the
characteristics of the industry, while the other maintains that strategy analyses should focus on the characteristics of
the firm itself. (Having this paradox together, these theories should build on each other to create a better theory, both
theories need to be merged together)
- Second, the deterministic vs. voluntaristic view on strategy: some authors argue that the environment determines the
optimal strategy for a firm (a deterministic view on strategy), while others argue that firms can actively influence the
environment through their strategy ( a more voluntaristic view).
