Organizations should make two types of
decisions
1) Strategic decisions
2) Strategically driven decisions
Company A
Company B
Company C
Strategic Management Defined
 decisions and actions required for the firm to create value
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and earn returns higher than those of competitors
formulation and implementation of plans designed to
achieve objectives
unifying theme that gives coherence and direction to
organizational/individual decisions
game plan management has for positioning the company
in its chosen market, competing successfully, satisfying
customers, and achieving good business performance
integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a
competitive advantage
What is a competitive advantage?
Competitive Advantage
 When a firm implements a strategy that rivals
can’t duplicate, or find it too expensive to do
try to imitate
 Competitive advantages become sustainable
competitive advantages when rivals stop
trying to replicate
The Strategic Management Process
Strategic analyses
• Internal
• External
Strategy
Vision and mission
• Fundamental
•
•
•
•
•
Arenas
Vehicles
Differentiators
Staging
Economic logic
organizational
purpose
• Organizational values
Implementation levers
and
Strategic leadership
The central, integrated,
externally oriented concept of
how a firm will achieve its
objectives
Two levels of Strategy
Corporate-level strategy
• In which markets do we compete
today?
?
• In which markets do we want to
compete tomorrow?
• How does our ownership of a
business ensure its
• competitiveness today and
in the future?
Business-level strategy
• How do we compete in this
?
market today?
• How will we compete in this
market in the future?
What is Strategy?
Strategy is not doing similar activities better
than your rivals – that’s operational
effectiveness
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continual improvement not a sustainable
advantage
industry-wide cost reductions do not lead to
increased profitability
examples: PCs, automobiles, airlines
What is Strategy?
1)
Strategy is performing different activities or performing similar activities in
a different way
What is Strategy?
1) Strategy is performing different activities or performing similar
activities in a different way
Strategy is about positioning
a) Variety-based positioning
 offering a unique choice of goods/services - Chic-fil-a,
GameStop
b) Needs-based positioning
 serving most/all of a particular group of customers’ needs Babies R Us
c) Access-based positioning
 serving a set of customers that require unique access –
Kinkos, Movie Gallery, Superette
What is Strategy?
2) Strategy is about choosing a position which requires
tradeoffs, choosing what not to do

without tradeoffs, all firms would imitate
vs.
vs.
vs.
vs.
Time Magazine
 So why haven't American, United, US Airways and the three
other full-service carriers, which lost $11 billion last year and
stand to lose an additional $5 billion this year, followed the lead
of the profitable discounters by cutting costs and fares?
Because that's not the way their business works. They have
made, and lost, their money by providing the frequent
departures, quick connections, spacious seats and other
amenities that have been demanded by business flyers and
charging them dearly for that service — more than five times the
cost of a discount fare.

HARD TO STRADDLE AND
REPOSITION!
What is Strategy?
2) Strategy is about choosing a position which requires
tradeoffs, choosing what not to do

without tradeoffs, all firms would imitate
Tradeoffs arise from
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inconsistent image/reputation
different activities, products, equipment,
employees, skills, systems, machines
priorities, internal coordination, and control
What is Strategy?
3) Strategy is about combining activities as advantages
come from fit and reinforcing
What is Strategy?
3) Strategy is about combining activities as advantages
come from fit and reinforcing
Operational effectiveness is about excellence in
individual activities
Fit/integration increases sustainability by reducing
imitability
What is Strategy?
4) The desire to grow is most threatening to an
effective strategy
What is Strategy?
4) The desire to grow is most threatening to an
effective strategy
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Blurs uniqueness
Creates compromises
Reduces fit
Erodes original advantages
Four Perspectives on Competitive
Advantage
 Industrial/Organization (I/O)
Economic Model – External
Perspective
 Resource-Based View – Internal
Perspective
 Dynamic Perspective –
Combination of the two
 Stakeholder Approach
The Industrial/Organization (I/O)
Model of Above-Average Returns
 Basic Premise of the I/O Model
– to explain the dominant influence
of the external environment on a
firm's strategic actions and
performance
The Industrial/Organization (I/O)
Model of Above-Average Returns
 Underlying Assumptions
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That the external environment imposes
pressures and constraints that determine the
strategies resulting in above-average returns
That most firms competing within a particular
industry or industry segment control similar
strategically relevant resources and pursue
similar strategies in light of those resources
The Industrial/Organization (I/O)
Model of Above-Average Returns
 Underlying Assumptions (cont.)

That resources for implementing strategies
are highly mobile across firms, and that due
to this mobility any resource differences
between firms will be short lived
The
Industrial/
Organization
(I/O) Model
of AboveAverage
Returns
The Industrial/Organization (I/O)
Model of Above-Average Returns
 Michael Porter’s Five-Forces Model
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Reinforces the importance of economic
theory
Offers an analytical approach that was
previously lacking in the field of strategy
Describes the forces that determine the
nature/level of competition and profit
potential in an industry
Suggests how an organization can use the
analysis to establish a competitive
advantage
The Resource-Based Model of
Above-Average Returns
 Basic Premise of the ResourceBased Model – to propose that a firm's
unique resources and capabilities
should define its strategic actions and
be used effectively to exploit
opportunities in the external
environment to ensure successful
performance
The Resource-Based Model of AboveAverage Returns
 Underlying Assumptions


That the internal environment imposes
pressures and constraints that determine the
strategies resulting in above-average returns
That most firms competing within a particular
industry or industry segment control unique
strategically relevant resources and pursue
dissimilar strategies in light of those
resources
The Resource-Based Model of AboveAverage Returns
 Underlying Assumptions (cont.)

That resources for implementing strategies
are not highly mobile across firms, and that
due to this immobility any resource
differences between firms can be sustainable
The
ResourceBased Model
of AboveAverage
Returns
Dynamic Perspective
 Market dynamism renders advantages
temporary
 Future advantages based on the ability
of the firms resources and capabilities
to develop a continuous flow of
advantages
The Stakeholder Model of Responsible
Firm Behavior and Firm Performance
 Basic Premise of the Stakeholder
Model – to propose that a firm can
effectively manage stakeholder
relationships to create a competitive
advantage and outperform its
competitors
The Three Stakeholder Groups
Secondary Stakeholders
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Government entities and
administrators
Activists and advocacy groups
Religious organizations
Other nongovernmental
organizations
The
Stakeholder
Model of
Responsible
Firm Behavior
and Firm
Performance
Ways Stakeholder Relationships
Contribute to Competitive Advantage
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A trustworthy reputation draws valuable
customers, suppliers, and business partners
to acquire or develop competitive resources
A trustworthy reputation attracts investors to
offer financial resources
Firms that have fair and respectful treatment
of employee relationships attract high-quality
human resources
Ways Stakeholder Relationships
Contribute to Competitive Advantage
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Transactions costs associated with making
and enforcing agreements can be reduced
Implementation of strategies can be
enhanced by improving commitment from
stakeholders who are involved with strategic
decisions
Responsible behavior can protect a firm from
the expense and risk associated with
negative actions (such as adverse
regulations, legal suits and penalties,
consumer dissatisfaction, employee work
outages, or bad press)
Charting a Good Strategy
 The Strategy Diamond
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Arenas
Vehicles
Differentiators
Staging & Pacing
Economic Logic
Strategy Diamond
Strategy is an
integrated set
of choices….
Arenas
Staging
Economic
Logic
Differentiators
Vehicles
Arenas
 Where are we going to be
active?
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Product categories
Channels
Market Segments
Geographic Segments
Core Technologies
Value-creating strategies
Arenas
Staging
Economic
Logic
Differentiators
Vehicles
Vehicles
 How are we going to get there?
 Means of participating in
Arenas
chosen markets
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Internal Development
Joint Venture
Licensing/Franchising
Alliances
Acquisition
Staging
Economic
Logic
Differentiators
Vehicles
Differentiators
 Product/service attributes that
beat competitors, for
example…
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Image
Customization
Price
Styling
Product reliability
Speed to market
Safety
Arenas
Staging
Economic
Logic
Differentiators
Vehicles
Staging
• Timing, pace and sequencing
of strategic moves
• When to launch moves
•
Function of resources,
urgency and market
signals
Arenas
Staging
Economic
Logic
Differentiators
Vehicles
Economic Logic
• How will returns be obtained?
•
•
Low cost through scale,
scope design, or process
advantages
Premium prices through
Staging
superior products or
service
Arenas
Economic
Logic
Differentiators
Vehicles
JetBlu’s Strategy
Low-fare commercial
airliner in
underserved/overprices US
markets, focusing on JFK
Focused initial
growth in NE
corridor, with
westward
expansion
Staging
Arenas
Low-costs through uniform, fuelefficient fleet, saving on maintenance,
and training. Favorable gate fees at
JFK. Secondary airports
Economic
Vehicles
Logic
Completely internalized
growth
Low price, mixed with exceptional service,
e.g. leather seating and in-seat satellite TV
JetBlu’s Strategy
Low-fare commercial
airliner in
underserved/overprices US
markets, focusing on JFK
Focused initial
growth in NE
corridor, with
westward
expansion
Arenas
Low-costs through uniform, fuelefficient fleet, saving on maintenance,
and training. Favorable gate fees at
JFK. Secondary airports
Economic
Vehicles
Logic
Completely internalized
growth
Low price, mixed with exceptional service,
e.g. leather seating and in-seat satellite TV
JetBlu’s Strategy
Low-fare commercial
airliner in
underserved/overprices US
markets, focusing on JFK
Arenas
Focused initial
growth in NE
corridor, with
westward
expansion
Low-costs through uniform, fuelefficient fleet, saving on maintenance,
and training. Favorable gate fees at
JFK. Secondary airports
Completely internalized
growth
Differentiators
Low price, mixed with exceptional service,
e.g. leather seating and in-seat satellite TV
JetBlu’s Strategy
Low-fare commercial
airliner in
underserved/overprices US
markets, focusing on JFK
Focused initial
growth in NE
corridor, with
westward
expansion
Staging
Arenas
Low-costs through uniform, fuelefficient fleet, saving on maintenance,
and training. Favorable gate fees at
JFK. Secondary airports
Completely internalized
growth
Low price, mixed with exceptional service,
e.g. leather seating and in-seat satellite TV
JetBlu’s Strategy
Low-fare commercial
airliner in
underserved/overprices US
markets, focusing on JFK
Focused initial
growth in NE
corridor, with
westward
expansion
Arenas
Economic
Logic
Low-costs through uniform, fuelefficient fleet, saving on maintenance,
and training. Favorable gate fees at
JFK. Secondary airports
Completely internalized
growth
Low price, mixed with exceptional service,
e.g. leather seating and in-seat satellite TV
Framework for Strategy
Implementation
Key Factors of Strategy Implementation
Implementation levers
• Organizational structure
Intended
Strategy
• Systems and processes
• People and rewards
Strategic leadership
• Lever- and resource-allocation decisions
• Decision support among stakeholders
Realized
and
Emergent
Strategies
Importance of execution
“The important decisions, the
decisions that really matter,
are strategic . . . [But] more
important and more difficult is
to make effective the course of
action decided upon.”
– Peter Drucker
When asked what he thought of his
team’s execution after another loss…
“I’m in favor of it”
– John McKay
Coach, Tampa Bay
Buccaneers
It’s all about prioritizing…