Strategy

Strategy – Course 1
What is strategy ?
Strategy is communicated, it alters the behavior of people in your organization (not a secret
neither a goal).
Customer value: all the stuff that the customer is willing to pay for.
Ex: Value adding activities means doing stuff that the customer is willing to pay for.
3 pillars of strategy:
 Value Creation
 Value Delivery
 Value Capture
Many definitions of strategy:

- A set of goals and the means to achieve them (M. Lockstrom)
- A firm’s theory about how to compete successfully (J. Barney)
- The way to achieve organizational objectives (Hatten & Hatten)
- Commitments and actions designed to exploit core competencies and gain
competitive advantages (Hitt, Ireland & Hoskisson)
- A plan that specifies which choices (the player) will make in every possible situation
(Von Neumann & Morgenstern)
2 purposes  Direction (strategy for the future) & Positioning (where you want to be at the
present, how you should act at a given moment)
Strategy ≠ Tactics
Strategy is where you want to go, what you decide before the battle.
Tactics is everything you are doing “during the battle”. Shorter planning when you have
already entered a certain market.
Ex: Nestle for example segments the market with different brands to reach different
customer needs.
All managers are concerned with strategy, and everyone must support strategy execution!
The general model of strategic management depends on the mission, the objectives, the
strategies, the company profile and an environmental analysis.
 A vision statement is concerned with the future the organization seeks to create.
Answer questions like “what do we want to achieve” or “where do we want to be in
the future”.
Ex: Nike’s visions is “to bring inspiration and innovation to every athlete in the world”.
 A mission statement aims to provide employees and stakeholders with clarity about
what the organization is fundamentally there to do. Answer question like: “How do
we generate customer value?” or “how shall we survive while striving toward our
vision?”.  a mission statement explains how to generate customer value and survive
in the long term.
What determines the level of profit in an industry?
3 keys external influences:
1. Value perceived by customers through marketing essentially.

2. The intensity of competition.
3. Relative bargaining power at different levels
A firm gains a competitive advantage if it creates value for its customers both greater than
the costs of supplying them and superior to that of rivals.
Sharholder approach vs stakeholder approach
Shareholder approach  Firm exists to maximize the wealth of its owners

Stakeholder approach  The firm is a coalition of interest groups – it seeks to balance their
different objectives
For the purpose of strategy analysis, we assume that the primary goal of the firm is profit
maximization
Value capture (rajouter le schema avec Ricardian rents vs monopoly rents).
3 stages of the strategic management process
Strategy development process

External and internal assessment, based on that we set goals and through that we determine
gap analysis and put on an action plan
SWOT Analysis
Strategy – Course 2
Industry analysis and evolution
In the Environment-Strategy interface, profit arising from 2 distinct sources:
- Industry structure (rules of competition)
- Relative position within the industry (sources of competitive advantage)
Strategy must encompass both.
The most favorable industry structure relies less on intangible assets like software for
example. In software you can increase revenues, but your cost will not increase.
For instance, there is a low profitability in Airline Industry especially because of the large
overhead cost (huge aircraft), if you don’t have enough traffic (COVID19) it will be a money
loosing business.
Pre-requisites for success need to answer to two questions:

- What do customers want?
- How does the firm survive competition?
A frim’s external envrionement is broken down into three parts:

- General
- Industry
- Competitor
A firm’s strategic actions are influeocned by the conditons in all three parts.
Strategic Groups
A set of firms emphasizing similar strategic dimensions and using
similar strategies.
There is more heterogeneity in the performance of firms within

strategic groups (similar market positions, similar products, similar
strategic actions).
Strategic Dimensions
Firms within a strategic group are direct competitors (offer similar products), thus rivalry can
be intense. The greater the rivalry the greater the threat to each firm’s profitability. The
closer the strategic groups in terms of strategy, the greater the likelihood of rivalry.
Strategic dimension are the drivers, or channels, through which customer value is being
created and delivered.
Ex: Name a few strategic dimensions for an electric vehicle company : driving autonomy,
driving comfort, design, AFS services
Competitive advantage
A strategic (competitive) dimension is a parameter that drives customer value.
If we perform better than our competitors along that dimension, we are said to have a
competitive advantage along that dimension.
We can have competitive advantage along some dimensions but not at others, rendering a
partial competitive advantage.
Drawing industry boundaries

 An industry is a group of firms producing products and services that are essentially
the same (ex: the automobile industry and airline industry).
 A market is a group of customers for specific products or services that are essentially
the same (ex: the market for luxury cars in Germany, the market for family car in US).
In the market we have different segments (ex: Renault vs Porsche).
Competitor analysis
Set of data and information the firm gathers to better understand and anticipate
competitors’ objectives, strategies, assumptions, and capabilities.
Substitutes vs Complements
 Substitute goods are products which all satisfy a common want.
 Complementary goods are products which are consumed together.
 Demand for a product’s substitutes increases and demand for its complements
decreases if the product’s price increases.
Ex: Example of substitute products and complementary products.
Substitutes: PC vs Tablet, Glasses vs contacts, E-bike vs E-scooter, Pepsi vs Coke.
Complements: Vinyl and vinyl plate, Smartphone and charge, Printer and ink.
External Environment Analysis

- Identifying opportunities and threats is an important objective of studying the
general environment.
- Opportunity is a condition in the general environment that if exploited effectively,
helps a company achieve strategic competitiveness.
Ex: Procter & Gamble (P&G) is reorienting beauty products to better serve both men and
women.
 Threat is a condition in the general environment that may hinder a company’s effort to
achieve strategic competitiveness. Ex: Microsoft is experiencing a severe external threat as
smartphones are expected to surpass PC sales in the near future.
The threat could also be an opportunity, at the end of the day it’s how you respond to
them.
Internal Analysis: strengths and weaknesses
External analysis: opportunities and threats
PESTEL Framework
We need to try to predict the future. The PESTEL is the basis for the long-term analysis.
Industry attractiveness
An industry’s profit is a function of the five forces of competition:
1) Threat from new entrants
2) Threat from products substitutes
3) Bargaining power of suppliers
4) Bargaining power of customers
5) Intensity of rivalry
Strategies are chosen, in part, because of the influence of an industry’s characteristics.
The Five Forces Analysis shows uncovered opportunities to create supply advantage.
The bigger these 5 forces, the lower the industry attractiveness.
Blue Ocean Strategy

 Best value-creating opportunities are not existing industries (“red oceans”) but
seeking uncontested market space.
 “Blue oceans” may be entirely new industries created by technological innovation
(such as artificial intelligence and nanotechnology).
 They are more likely to be the creation of new market space within existing indsutries
using existing technologies.
 Blue ocean strategy involves a quest for “uncontested market space”.
 The challenge is “to create new rules of the game by breaking the existing bvalue/cost
trade-off”.
 Common to many blue ocean strategies is offering superior customer value through
reconciling low price with differentiation.
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Strategy – Course 1

Many definitions of strategy:

What determines the level of profit in an industry?

3 keys external influences:

1. Value perceived by customers through marketing essentially.

Sharholder approach vs stakeholder approach

Shareholder approach  Firm exists to maximize the wealth of its owners

Value capture (rajouter le schema avec Ricardian rents vs monopoly rents).

3 stages of the strategic management process

Strategy development process

Pre-requisites for success need to answer to two questions:

A frim’s external envrionement is broken down into three parts:

There is more heterogeneity in the performance of firms within

Drawing industry boundaries

External Environment Analysis

Blue Ocean Strategy

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