“The supreme art of war is to subdue the

enemy without fighting”

Sun Tzu
400-340 (B.C.)

The Concept of Strategy and the

STRATEGY
Pursuit of Sustainable Above-
Normal Profits
 STRATEGIC THINKING
EVOLUTION

• PETER DRUCKER
• KENNETH
ANDREWS
• ALFRED
Strategic Management CHANDLER
Set of managerial decisions and • IGOR ANSOFF
• MICHAEL
actions that determines the long-run PORTER
performance of a firm.
FOURTH STAGE
Strategy formulation begins with: The analysis of the company's
environment (SWOT),
•evaluating the company preparation to compete in the market
•and from that, it is defined as a strategy what to do with the business and
what company you want to have in the future based on:
 The mission,
 The strategic objectives,
 The correct definition of a competitive advantage and
 The action plans that ultimately support the strategy formulation
process.
THE
THESTRATEGY
STRATEGYFORMULATION
FORMULATIONANALYTICAL
ANALYTICAL
FRAMEWORK
FRAMEWORK
 The strategy answers two questions:
What is our business?
PETER DRUCKER
What should be?

1949
 “The formulation of a competitive strategy is to relate a
MICHAEL PORTER
company with its environment and includes an
offensive or defensive action to create a defensible
1980 - 1990
position against the five competitive forces in the
industrial sector in which it is present and thus obtain
superior performance over The investment of the
company. Strategy that adjectives thus given its external
perspective, typical of the Industrial Economy ”
It adds the influence of knowledge and previous capabilities as
influential elements for the creation of the strategy.

MICHAEL
PORTER
1980 - 1990
• “The strategy is
unique and has a valid
position, considering a
different system of
activities.

• "The strategy is to
choose what to do and
what not to do, which
markets to enter and
https://www.youtube.com/watch?v=Knwk15Q2OJ4 which not."
STRATEGY PHASES
(FRED DAVID)
THOMPSON – 3 BASIC QUESTIONS
¿WH
AT I
S OU
R CU
RRE
NT S
ITUA
TION
?

HOW
W ILL
WE
GET
THE
RE??

WHE
RE D
O WE
W ANT
TO GET
?
LEVELS OF STRATEGY Defines the scope of the business in terms of the
industries and markets in which it competes.
CORPORATE CORPORATE includes decisions about diversification,
STRATEGY HEAD OFFICE vertical integration, acquisitions, new
ventures, divestments, allocation of scarce
resources between business units

is concerned with how the firm

BUSINESS
competes within a particular
STRATEGY Division A Division B industry or market... to win a
business unit must adopt a
strategy that establishes a
competitive advantage over its
R&D R&D rivals
FUNCTIONAL Personnel Personnel
STRATEGIES
Finance Finance
Production Production the detailed
Marketing/Sales Marketing/Sales deployment of
resources at the
operational level
COMMON ELEMENTS IN
SUCCESSFUL STRATEGY

Successful
Strategy

EFFECTIVE IMPLEMENTATION

Profound Objective
Long-term, simple
understanding of appraisal of
and agreed upon
the competitive resources
objectives
environment

$
INTUITION UNCERTAINTY
 SOURCES OF SUPERIOR
PERFORMANCE
Above Normal
Profits
(in Excess of the Competitive Level)

Avoid Be Better Than

Competitors Competition
Attractive Attractive Attractive
Industry Strategic Niche Cost Differentiation
Group Advantage Advantage
Entry Mobility Isolating
Barriers Barriers Mechanisms
SOURCES OF COMPETITIVE
ADVANTAGE

COST
COST
u ct ADVANTAGE
pro d ADVANTAGE
ila r
c ost
Sim r
l o we
COMPETITIVE at
COMPETITIVE
ADVANTAGE
ADVANTAGE Pri
fro ce
m pre
un mi
iqu um
ep
rod DIFFERENTIATION
DIFFERENTIATION
uc
t ADVANTAGE
ADVANTAGE
 THE EXPERIENCE
CURVE
The “Law of Experience”
1970 The unit cost value added to a standard product
declines by a constant % (typically 20-30%) each
time cumulative output doubles.
1990
Cost per
unit of
output (in 2002
real $)
2010
2015
2017 2019

Cumulative Output
 STRATEGIC GROUP

The choice of a company in terms of its COMPETITIVE POSITIONING is always made

in relation to that of its competitors
COMPETITOR
COMPETITOR ANALYSIS

• TECHNIQUE TO
UNDERSTAND THE
COMPETITION
ENVIRONMENT
• IT IS NOT AN ANALYSIS
OF RIVALITY
• OBSERVE
COMPETITORS
POSITIVISTICALLY AND
OBJECTIVELY
 The Process of Gaining
Competitive Advantage in a Firm
Weaknesses ⇒ Strengths ⇒ Distinctive Competencies ⇒ Competitive Advantage
GENERIC COMPETITIVE STRATEGIES TO REACH
THE VALUE CREATION BORDER

“Maximum amount of value that the products

VALUE CREATION BORDER
of different companies can give customers at
any time when using different business
models”
 DEFINITION OF THE STRATEGIC
POSITION

S = SP + W + In
S: Strategy
SP: Strategic Position
WHAT IS THE POSITION W: Waiver (say no to opportunities that divert from the EP)
THE COMPANY MUST
OCCUPY? In: Lace (Way to produce a good or service)
Determining Industry
Attractiveness and Identifying INDUSTRY
Strategic Opportunities ANALYSIS AND
POSITIONING
 COMPETITIVE RIVALITY VS
COMPETITIVE BEHAVIOR
SET OF ACTIONS AND COMPETITIVE ANSWERS THAT
 FROM ENVIRONMENTAL
ANALYSIS
TO INDUSTRY ANALYSIS
The national/ The natural
international environment
economy THE INDUSTRY
ENVIRONMENT
Demographic
Technology • Suppliers structure
• Competitors
• Customers

Government Social structure

& Politics

•The Industry Environment lies at the core of the Macro Environment.

•The Macro Environment impacts the firm through its effect on the Industry
Environment.
AN ALTERNATE MODEL OF INDUSTRY
LIFE CYCLE

Emergence Convergence Coexistence Dominance

Sales volume

Established
Industry

Emerging Industry

Time
 THE INDUSTRY
LIFE CYCLE AS
AN S CURVE
Performance
Maturity

Discontinuity
Takeoff

Ferment

Time
“Sustainable Competitive Advantage doesn’t lie in
doggedly following a centrally managed 5 year strategic
plan but in stringing together a series of strategic short
term thrusts” Richard D’Aventi – Hypercompetition

Maturity

Performance

Discontinuity
Takeoff

Ferment

Time

The S-curve Maps Major Transitions

 THE SPECTRUM OF INDUSTRY STRUCTURES

Perfect
Oligopoly Duopoly Monopoly
Competition

Concentration Many firms A few firms Two firms One firm

Entry and Exit No/Low barriers Significant barriers High barriers

Barriers

HOW TO SURVIVE?
HOW TO BE SUSTAINABLE?
HOW TO BE LASTING?
 BASIC ELEMENTS OF THE STRATEGIC
MANAGEMENT PROCESS

Environmental Scanning
Monitoring, evaluation, and disseminating
information from external and internal
environments –to key people in the firm
THE COMPETITOR ANALYSIS
COMPONENTS

• What will our competitors do in the

future?
• At what points do we have an
advantage over competitors?
• How will this situation change our
relationship with them?
INTERNAL ASSESSMENT

"The idea is to concentrate our strength against our competitor’s relative weakness." —Bruce Henderson
 “This strategy-formulation tool summarizes and
evaluates the major strengths and weaknesses in
the functional areas of a business, and it also
provides a basis for identifying and evaluating
relationships among those areas”.
IFE
“In God we trust.
Everyone else
bring data.”
 THE INTERNAL FACTORS EVALUATION
MATRIX (IFE)
Construction - five steps:
INDUSTRY BASE
• 1. List key internal factors as
identified in the internal-audit
process. (from 10 to 20 factors)
• A thorough understanding of the
factors included is more important
than the actual numbers.
• 2. Assign a weight that ranges from
0.0 (not important) to 1.0 (all-
important) to each factor. The sum
of all weights must equal 1.0.
COMPANY BASE:
• 3. Assign a 1-to-4
• major weakness (rating = 1),
• a minor weakness (rating = 2),
• a minor strength (rating = 3), or
• a major strength (rating = 4).
• 4. Multiply each factor’s weight
by its rating to determine a
weighted score for each
variable.
• 5. Sum the weighted scores for
each variable to determine the
total weighted score for the
organization.
 IFE - ANALYSIS

1. RESULT: Regardless of how many factors are included in an IFE

Matrix, the total weighted score can range from a low of 1.0 to a high
of 4.0, with the average score being 2.5.
• Total weighted scores well below (<)2.5: characterize organizations that are
weak internally,
• whereas scores significantly above 2.5 indicate a strong internal position.
2. JUSTIFY SCORE/FACTOR

3. RECOMENDATIONS