Session 3 - Concept Review & Final Project

FACULTY OF BUSINESS
ADMINISTRATION
B7000: STRATEGIC MANAGEMENT

WHAT IS STRATEGY?
How an organization…
• competes and wins in its marketplace
• achieves superior performance, creates value for
shareholders and sustains it over the long run
Management Goals
Preferences
Organization Strategy Environment Industry Analysis (5 Forces)

PEST Trends Analysis
Value Chain Strategy
VRIO Framework Triangle
Resources
Consider how strategy aligns the internal
organization (management preferences,
organization and capabilities and resources)
with the external environment
1. What is the main issue of the case?
2. What is the performance of the organization?
• Use Performance ratios
3. What is the current strategy of the organization?
• Use Strategy Triangle – components of strategy
4. Are there changes in the environment?
• Use 5-Forces Analysis and PEST Framework
5. What are the core resources & capabilities of the organization?
• Use Value Chain analysis
6. Do the resources and capabilities provide a competitive advantage?
• Use VRIO Framework
7. Does the organization need to re-align its strategy?
• Use Diamond-E Framework – look at all parts after answering questions 1-6
Gross Profit Margin = (Sales - Cost of Goods Sold)/Sales
•
ROA = Net Income/Total Assets

•
ROE = Net Income/Shareholder’s Equity

•
•
GOALS
VALUE
PROPOSITION
PRODUCT MARKET CORE
FOCUS ACTIVITIES
What are the components of the strategy?

Are they aligned?
1. POTENTIAL
ENTRANTS
Analyze what is happening with each force
5. COMPETITOR
4. SUPPLIERS RIVALRY 2. BUYERS
3. SUBSTITUTES
1. Low threat of entry of competition
2. Low threat of product/service substitutes
3. Low bargaining power of suppliers Profit
4. Low bargaining power of buyers
5. Low rivalry of competition
When all are low, the 5 forces are not strong

enough to influence prices, cost, investment.
There is maximum potential for profit.
Analyze changes in each
POLITICAL aspect of the environment
INDUSTRY
TECHNOLOGICAL ECONOMIC
(5 forces)
SOCIAL
FIRM INFRASTRUCTURE • VC shows core activities that
(e.g., Finance, Planning) drive business.
• Costs of core activities drive
SUPPORT HUMAN RESOURCE MANAGEMENT profit.
ACTIVITIES TECHNOLOGY DEVELOPMENT M
A
PROCUREMENT R
G
I
N
INBOUND OPERATIONS OUTBOUND MARKETING AFTER-SALE
LOGISTICS (Manufacturing) LOGISTICS AND SALES SERVICE The activities that add most
value are what makes
money. This helps us to
decide strategy.
Source: Porter, 1985
CORE ACTIVITIES
Valuable? Rare? Difficult to Organized to Implications Performance
Imitate? Exploit?
No - - - Competitive Below normal

disadv.
Yes No - - Competitive Normal
parity
Yes Yes No - Temporary Above normal
competitive
advantage
Yes Yes Yes Yes Sustained Above normal

competitive
advantage
To assess whether a business strategy makes sense, it needs
to be evaluated relative to the other elements of the Diamond E.
• Do the goals reflect what we “want” to do?
• Do the product/market scope and value proposition reflect what we “need” to do?
• Do core activities reflect what we “can” do? Do we have the organization,

resources and capabilities to support the required core activities?
“Want”: Goals
Management “Need”: Product/Mkt Concept
Preferences “Need”: Value Proposition
“Can”: Core Activities
WANT TO DO
Organization Strategy Environment
CAN DO NEED TO DO
Capabilities
& Resources
• Executive Summary
• Issue identification
• Analysis
• Options
• Recommendations
• Communication
Executive Summary:
• Reader should know all key points on paper
• There should not be anything that is not in the main paper
• Start with main issue
• Briefly summarize key points of analysis that lead to a recommendation
• End with your recommendation
Issue Identification:
• Identify the overall/major issue – growth and long-term sustainability
• Explain by stating contributing factors – e.g., declining revenue, market share etc.
Analysis:
• Did not follow use of relevant models and frameworks
 Performance – Performance ratios
 Current strategy – Strategy Triangle (components of strategy)
 Environment – 5-Forces Analysis and/or PEST Framework
 Competitive advantage of organization resources/capabilities - VRIO Framework
• Lack of conclusions from analysis – identify key constraints and opportunities
Options:
• Did not evaluate each option using key insights/conclusions from analysis
Recommendations:
• Choose best option to address issue identified and support it with links to analysis
Organization and Coherence:
• Lack of interpretation of information – key insights/conclusions of analysis
• Lack of connection between issue, analysis, options and recommendation
• Not tied together
You are a consultant to Amazon.com. In 2001, Amazon was
facing tremendous pressures from Wall Street and shareholders
to achieve profitability. Please advise the CEO, Mr. Jeff Bezo on
which option the company should pursue.
1. Pursue other partnerships similar to the one with Toys “R” Us

2. Close unprofitable aspects of business
3. Increase penetration into book/music/video markets
REPORT DUE: April 9th in Brightspace

• Executive Summary: be clear and concise; complete summary
• Issue identification: major issue -- make clear, compelling and comprehensive
• Analysis: using relevant models and frameworks
 Performance – Performance ratios
 Current strategy – Strategy Triangle (components of strategy)
 Environment – 5-Forces Analysis and/or PEST Framework
 Competitive advantage of organization resources/capabilities - VRIO Framework
 Conclusions from Analysis – identify key constraints and opportunities
• Options: evaluate each option using key insights/conclusions from analysis
• Recommendations: choose best option to the issue(s) identified and support it with
clear links to analysis
• Communication: excellent logic, organization, sentence structure; beware of
spelling/grammatical errors
1. What is the main issue of the case?
2. What is the performance of the organization?
• Use Performance ratios
3. What is the current strategy of the organization?
• Use Strategy Triangle – components of strategy
4. Are there changes in the environment?
• Use 5-Forces Analysis and PEST Framework
5. What are the core resources & capabilities of the organization?
• Use Value Chain analysis
6. Do the resources and capabilities provide a competitive advantage?
• Use VRIO Framework
7. Does the organization need to re-align its strategy?
• Use Diamond-E Framework – look at all parts after answering questions 1-6
 Need clearly identified criteria linking back to analysis; applied
consistently to all options identified
 Options are:
 supported by analysis and well-explained
 take advantage of opportunities in the case
 solve the tensions in the case
 Recommendation:
 is a choice among the options
 link back to the issue and explain as a well supported solution
 clear linkage to issues/constraints identified in analysis
 do everything is not a good recommendation
Page limit: 8-10 max. Be clear and concise.
Format:  Typed and double-spaced
 12-point Times New Roman font
 1-inch margins on all sides
Cover page: Please indicate:

 Your name and student number.
 Word count of paper (exclusive of exhibits and
cover page).
 “Section 081 - Final project”.
• Follow instructions in Brightspace!
• Exhibits are not a substitute for text; they should add value
- don’t reproduce exhibits from case
• State your assumptions
• Tie different parts of the report link together
• Careful to meet DEADLINE – April 9th in Brightspace

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FACULTY OF BUSINESS

B7000: STRATEGIC MANAGEMENT

Organization Strategy Environment Industry Analysis (5 Forces)

ROA = Net Income/Total Assets

ROE = Net Income/Shareholder’s Equity

What are the components of the strategy?

When all are low, the 5 forces are not strong

No - - - Competitive Below normal

Yes Yes Yes Yes Sustained Above normal

• Do the goals reflect what we “want” to do?

• Do core activities reflect what we “can” do? Do we have the organization,

Organization Strategy Environment

1. Pursue other partnerships similar to the one with Toys “R” Us

REPORT DUE: April 9th in Brightspace

Cover page: Please indicate:

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