STRATEGIC MANAGEMENT
INTRODUCTION
DOCENT
Bruno Cassiman
• Handelsingenieur ‘90
• PhD Managerial Economics, Kellogg School of Management, Northwestern University.
• University Pompeu Fabra, Barcelona (1996-2000).
• IESE Business School, Barcelona (2000-2020)
• “Herman Daems” Chair of Strategy and Entrepreneurship, KU Leuven (2012 – 2018)
• Visiting Professor Harvard Business School (2021)
• Research: Strategy & Innovation
• Department Editor Management Science 2009 - 2017
• Consulting & Policy work
COURSE SE T-UP – 10 TOPICS
- Toledo: Announcements and Course Sessions
- Course Elements
• (Web)Lectures & Slides
• Classic Readings & Quizzes
• Case Discussions
• Guest Speakers
• “Connect to Today” Readings
- Evaluation & Material (check syllabus!)
• (Web)Lectures & Slides
• Classic Readings: Final “Required Reading” List: March 30. Toledo
• Guest Speakers
• Exam Saturday June 11th (closed book)
- Usual Class Times (check Schedule for exact days)
• Wednesday: 18:00 – 20:00: MTC2 – 00.10 (Grote Aula)
• Thursday: 16:00 – 18:00: MTC2 - 00.10 (Grote Aula): Guest Speakers (English)
• Fridays: 9:00 – 11:00: MSI1 - 03.18 (Parthenonzaal): 2 sessions
• February 16 to March 30
• On-Campus, Streaming, Recorded (except guest speakers and case)
- Case Exercises:
• Ducati: In Pursuit of Magic (Friday March 11)
o Read Case. Prepare discussion questions!
• Mini-cases in other sessions, material will be provided in class.
- Guest Speakers:
• CEOs Le Pain Quotidien & Van de Velde, Pre-Reading Background on Organization and CEO
,STRUCTURE: CLASSES & TOPICS
February
Woensdag 16 Topic 1: What is Strategy?
Woensdag 23 Topic 2: Value Creation and Value Capture
Vrijdag 25 Topic 3: The Competitive Landscape
Topic 4: Building Competitive Advantage
March
Woensdag 2 Topic 4: Building Competitive Advantage (Continued)
Topic 5: Sustaining Competitive Advantage
Woensdag 9 Topic 7: Corporate Strategy
Topic 8: Diversification
Vrijdag 11 Topic 6: Ducati Case. Prepare Questions!
Woensdag 16 Topic 9: Governance and Corporate Social Responsibility
Donderdag 17 Guest Lecture: CEO Le Pain Quotidien, Annick Van Overstraeten
Woensdag 23 Topic 10: Strategy Process
Donderdag 24 Guest Lecture: CEO Van de Velde, Marleen Vaesen
Woensdag 30 Conclusion
CONTACT, APPOINTMENTS & QUESTIONS
- Bruno Cassiman
- Elisa Dries
- Witse Konings
,WHAT IS STRATEGY?
WHAT IS STRATEGY?
- “Everyone has a plan ‘till they get punched in the mouth.” Mike Tyson, heavy weight champion
- Strategy & Gnomes
- Longterm Performance of Companies
- Positioning within your industry
- Choosing your Target Market
- Your Resources and Capabilities
- Competition and Market Entry
- Globalization
- Technology Convergence
- Irreversibility of Decisions
- Sustainability?
- Non-Market Strategies
- Communities
- Corporate Social Responsibility
- Not Only Profitability
- Corporate strategy
- Leadership, Communication, Alignment
THE ROLES OF STRATEGY?
STRATEGY AS DECISION SUPPORT
STRATEGY AS A COORDINATING DEVICE
- What is a Strategic Decision?
• Important decisions for direction of organizations?
Interdependence (Leiblein, Reuer and Zenger, 2018)
• Internal Coordination with other decisions is necessary to achieve coherence (cross-section) and consistency (over
time)
o Fit & Trade-offs (Porter, 1996)
o Hard to reverse decisions with important commitment effect (Ghemawat, 1991)
▪ Size of the investment
▪ Timing of the decision
• External Interdependence: reaction from competitors or other players (complementors, suppliers, customers…)
o Small number of players
o Game Theory: a complete contingent plan of action
- Which decisions are strategic?
• Definition: a decision is ‘strategic’ if it is investigated or announced as part of the optimal strategy
• Different Players make decisions, have only “local” information, and, maximize the return from their individual
decision
o Standalone Value of a decision (A or B):
o Interaction Value of a decision: if decisions are complements, they need to be coordinated and select the
same value as the other decision (A or B):
o Probability that random selection of a decision gets it right is zero. Investigation by strategist is costly.
• Example: 3 Decisions C1 (Product Development), C2 (Marketing), C3 (Operations).
, - Analysis
• Strategy = Set of decisions announced or investigated by strategist
• Absent any investigation or announcement, each participant will choose locally optimal decision. This results in
payoff R = Σ αk= 1.2.
• If Strategist investigates and announces, say, C2
o P2 can’t align with other decisions and thus chooses its locally optimal decision
o P1 also chooses locally optimal decision as her payoff α 1 is larger than from any alignment
o P3 can now
▪ choose locally optimal decision with payoff 0.1
▪ align with C2 with payoff 0.8 which is higher
o So the payoff now becomes 0.3 + 0.8 + 0.8 and the value of this announcement is 0.7.
• The optimal strategy is to investigate and announce C1
o with payoff of 0.8 + 0.8 + 0.8 = 2.4
• Strategy is Valuable if alignment - coordination is needed.
• What if the Strategist is only correct with certain probability?
o Reliability of Strategy: focus on more stable factors
o Irreversibility (by itself) does not make a decision more strategic but makes strategy more valuable
o Option to commit makes decision more strategic
• What if decisions interact with other players in the market?
- Which decisions are strategic?
STRATEGY AS A TARGET
- Strategy and Historical Numbers
Adjusted R2 of regression of Corporate market value on reported earnings and book value, 1950-2013
- Our Mission: Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world
closer together. People use Facebook to stay connected with friends and family, to discover what’s going on in this
world, and to share and express what matters tot hem.
- Coca-Cola:
• Mission (Statement explaining why a company exists, “Purpose”)
To Refresh the World
To Inspire Moments of Optimism
To Create Value and Make a Difference
• Vision for Sustainable Growth (What leaders want the organization to become)
People: Being a great place to work where people are inspired to be the best they can be.
Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples’desires and
needs.
Partners: Nurturing a winning network of partners and building mutual loyalty.
INTRODUCTION
DOCENT
Bruno Cassiman
• Handelsingenieur ‘90
• PhD Managerial Economics, Kellogg School of Management, Northwestern University.
• University Pompeu Fabra, Barcelona (1996-2000).
• IESE Business School, Barcelona (2000-2020)
• “Herman Daems” Chair of Strategy and Entrepreneurship, KU Leuven (2012 – 2018)
• Visiting Professor Harvard Business School (2021)
• Research: Strategy & Innovation
• Department Editor Management Science 2009 - 2017
• Consulting & Policy work
COURSE SE T-UP – 10 TOPICS
- Toledo: Announcements and Course Sessions
- Course Elements
• (Web)Lectures & Slides
• Classic Readings & Quizzes
• Case Discussions
• Guest Speakers
• “Connect to Today” Readings
- Evaluation & Material (check syllabus!)
• (Web)Lectures & Slides
• Classic Readings: Final “Required Reading” List: March 30. Toledo
• Guest Speakers
• Exam Saturday June 11th (closed book)
- Usual Class Times (check Schedule for exact days)
• Wednesday: 18:00 – 20:00: MTC2 – 00.10 (Grote Aula)
• Thursday: 16:00 – 18:00: MTC2 - 00.10 (Grote Aula): Guest Speakers (English)
• Fridays: 9:00 – 11:00: MSI1 - 03.18 (Parthenonzaal): 2 sessions
• February 16 to March 30
• On-Campus, Streaming, Recorded (except guest speakers and case)
- Case Exercises:
• Ducati: In Pursuit of Magic (Friday March 11)
o Read Case. Prepare discussion questions!
• Mini-cases in other sessions, material will be provided in class.
- Guest Speakers:
• CEOs Le Pain Quotidien & Van de Velde, Pre-Reading Background on Organization and CEO
,STRUCTURE: CLASSES & TOPICS
February
Woensdag 16 Topic 1: What is Strategy?
Woensdag 23 Topic 2: Value Creation and Value Capture
Vrijdag 25 Topic 3: The Competitive Landscape
Topic 4: Building Competitive Advantage
March
Woensdag 2 Topic 4: Building Competitive Advantage (Continued)
Topic 5: Sustaining Competitive Advantage
Woensdag 9 Topic 7: Corporate Strategy
Topic 8: Diversification
Vrijdag 11 Topic 6: Ducati Case. Prepare Questions!
Woensdag 16 Topic 9: Governance and Corporate Social Responsibility
Donderdag 17 Guest Lecture: CEO Le Pain Quotidien, Annick Van Overstraeten
Woensdag 23 Topic 10: Strategy Process
Donderdag 24 Guest Lecture: CEO Van de Velde, Marleen Vaesen
Woensdag 30 Conclusion
CONTACT, APPOINTMENTS & QUESTIONS
- Bruno Cassiman
- Elisa Dries
- Witse Konings
,WHAT IS STRATEGY?
WHAT IS STRATEGY?
- “Everyone has a plan ‘till they get punched in the mouth.” Mike Tyson, heavy weight champion
- Strategy & Gnomes
- Longterm Performance of Companies
- Positioning within your industry
- Choosing your Target Market
- Your Resources and Capabilities
- Competition and Market Entry
- Globalization
- Technology Convergence
- Irreversibility of Decisions
- Sustainability?
- Non-Market Strategies
- Communities
- Corporate Social Responsibility
- Not Only Profitability
- Corporate strategy
- Leadership, Communication, Alignment
THE ROLES OF STRATEGY?
STRATEGY AS DECISION SUPPORT
STRATEGY AS A COORDINATING DEVICE
- What is a Strategic Decision?
• Important decisions for direction of organizations?
Interdependence (Leiblein, Reuer and Zenger, 2018)
• Internal Coordination with other decisions is necessary to achieve coherence (cross-section) and consistency (over
time)
o Fit & Trade-offs (Porter, 1996)
o Hard to reverse decisions with important commitment effect (Ghemawat, 1991)
▪ Size of the investment
▪ Timing of the decision
• External Interdependence: reaction from competitors or other players (complementors, suppliers, customers…)
o Small number of players
o Game Theory: a complete contingent plan of action
- Which decisions are strategic?
• Definition: a decision is ‘strategic’ if it is investigated or announced as part of the optimal strategy
• Different Players make decisions, have only “local” information, and, maximize the return from their individual
decision
o Standalone Value of a decision (A or B):
o Interaction Value of a decision: if decisions are complements, they need to be coordinated and select the
same value as the other decision (A or B):
o Probability that random selection of a decision gets it right is zero. Investigation by strategist is costly.
• Example: 3 Decisions C1 (Product Development), C2 (Marketing), C3 (Operations).
, - Analysis
• Strategy = Set of decisions announced or investigated by strategist
• Absent any investigation or announcement, each participant will choose locally optimal decision. This results in
payoff R = Σ αk= 1.2.
• If Strategist investigates and announces, say, C2
o P2 can’t align with other decisions and thus chooses its locally optimal decision
o P1 also chooses locally optimal decision as her payoff α 1 is larger than from any alignment
o P3 can now
▪ choose locally optimal decision with payoff 0.1
▪ align with C2 with payoff 0.8 which is higher
o So the payoff now becomes 0.3 + 0.8 + 0.8 and the value of this announcement is 0.7.
• The optimal strategy is to investigate and announce C1
o with payoff of 0.8 + 0.8 + 0.8 = 2.4
• Strategy is Valuable if alignment - coordination is needed.
• What if the Strategist is only correct with certain probability?
o Reliability of Strategy: focus on more stable factors
o Irreversibility (by itself) does not make a decision more strategic but makes strategy more valuable
o Option to commit makes decision more strategic
• What if decisions interact with other players in the market?
- Which decisions are strategic?
STRATEGY AS A TARGET
- Strategy and Historical Numbers
Adjusted R2 of regression of Corporate market value on reported earnings and book value, 1950-2013
- Our Mission: Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world
closer together. People use Facebook to stay connected with friends and family, to discover what’s going on in this
world, and to share and express what matters tot hem.
- Coca-Cola:
• Mission (Statement explaining why a company exists, “Purpose”)
To Refresh the World
To Inspire Moments of Optimism
To Create Value and Make a Difference
• Vision for Sustainable Growth (What leaders want the organization to become)
People: Being a great place to work where people are inspired to be the best they can be.
Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples’desires and
needs.
Partners: Nurturing a winning network of partners and building mutual loyalty.
