What is Strategy?

Strategy Formulation and Implementation: the Traditional view

FORMULATION

FOLLOWED BY

IMPLEMENTATION

The SWOT Model

External Analysis Internal Analysis

Threats and Opportunities

Strengths and Weaknesses

Strategic Options

Functional Policies

Business Strategy and Corporate Strategy

The objective of BUSINESS STRATEGY is to create a competitive advantage for the firm in ONE particular business The objective of CORPORATE STRATEGY is to determine :
what business or businesses a firm should be in and how these various businesses should be managed in order to strengthen the overall position of the company

Business Strategy and Corporate Strategy

Business Strategy Competition Corporate Strategy Resource Allocation

Analyze each Business

Industry Analysis Competitor Analysis

Competitive Advantage Strategy Analysis

INDUSTRY ANALYSIS

COMPETITOR ANALYSIS
COMPETITIVE ADVANTAGE

Industry Analysis
Potential entrants

STRATEGY ANALYSIS

Suppliers

Internal rivalry

Buyers

Substitutes

Potential entrants

Industry Analysis

Suppliers

Internal rivalry

Buyers

Determinants of Internal Rivalry

Industry growth Distribution of market shares Fixed costs and storage costs Differentiation Switching costs Competitor diversity Barriers to exit

Substitutes

Potential entrants

Industry Analysis
Suppliers

Internal rivalry

Buyers

Threat of Entry
Capital requirements Economies of scale Product differentiation Switching costs Access to distribution First mover advantages Industry growth Strength of established competitors
Substitutes

Threat of Substitutes

Potential entrants

Industry Analysis
Suppliers

Internal rivalry

Buyers

Power of buyers / suppliers

Substitutes

Relative concentration Impact on supplier volume Impact on buyer cost Impact on buyer quality Product differentiation Switching costs Threat of forward / backward integration Industry profitability

Competitor Analysis

INDUSTRY ANALYSIS

COMPETITIVE ADVANTAGE

COMPETITOR ANALYSIS

STRATEGY ANALYSIS

Beware of competitive blind spots: Escalation of commitment Overconfidence in judgment Self-centered view of strategic implications Look out for competitors' Past behavior Commited positions Strategic or related businesses

INDUSTRY ANALYSIS

COMPETITOR ANALYSIS
COMPETITIVE ADVANTAGE

Strategy Analysis

STRATEGY ANALYSIS

Evaluate past performance Make deductions from observed actions Identify what unites the various observed elements into a coherent strategy Analyse what prevents imitation Diagnose problems that are likely to arise

Competitive Advantage
Same product at lower cost Price premium from unique product

Cost leadership

Differentiation

The two corresponding strategies are often referred to as GENERIC STRATEGIES

Cost leadership
The firms advantage rests on its ability to produce a standard product at a lower cost than any other competitor. The firm is thus well positioned to compete on price. Economies of scale Learning and experience
Unit cost $10 $7 $4.9 Competitor A Competitor B Competitor C

100

200

400

Cumulated production

Differentiation
The firms competitive advantage rests on its ability to confer a unique character on its product or service. Differentiation thus makes it possible to avoid direct price competition. Must be perceived as very significant by the customer (perception is more important than reality) Must be hard to imitate Must be economically viable (difficult to find cost-price-volume combination)

Cost Leadership vs. Differentiation

Return on investment

Differentiation

Cost leadership

Stuck in the middle

Market share

Strategy and Competitive Advantage

The companys competitive advantage rests in the activity system, not in the parts Strategy is making tradeoffs, and choosing what not to do

Innovation is an integral part of strategy

products services business processes business models management and culture policy and society