BUAD 497
Strategic Management
Summer 2021
Professor Jino Lu
Marshall School of Business
University of Southern California
Midterm Review
Midterm Review
v Midterm will be multiple choice, T/F, short answer, and a
short case where you will apply knowledge from
frameworks
§ Multiple choice, T/F will be similar to Kahoot.it
§ Example case was the Hot Dog Industry case we did in class
§ Example short answer may consist of a short paragraph/scenario
where you have to apply a course concept
v Some “definitions” and “concepts”
§ One part of a business education is learning the lingo
v Mostly “application” of concepts through questions
v You will not need to memorize the details of the case
Exam Structure/How to Study
v What will be on the exams?
§ Exams will consist of content in the assigned articles (the
non-cases), and lectures (e.g., industry life cycle)
§ Stuff on my slides or concepts that emerged from case
discussion fair game
w I will not ask you “why did Coke forward integrate into bottling”
v This limits what you needs to study, be able to apply
the concepts (cases are practice in application/critical
thinking)
§ Exams will not have specific case details, but general
“insights” which emerge from case discussion are fair game
First Day and Other Facts
v Key empirical facts
§ E.g., Variance in profitability explained by industry, etc.
Strategy and Strategic Positioning
v Key takeaways from Porter (1996)
§ What is strategy?
§ What strategy is not?
v Operational effectiveness vs. Strategic positioning
§ Types of strategic positioning
§ Types of “fit”
§ Importance of sustainability and competitive convergence
§ Competitive advantage is about the entire system
v Study strategy
§ Read the article, focus on the main ideas
§ PowerPoint review
§ Be able to recognize the concepts in action
Example Questions for Porter (1996)
v Campus candy is a retail candy shop which locates its
stores primarily in small college towns. Based on the
Porter article, this would best be an example of
__________.
§ Strategy-based positioning
§ Luxury-based positioning
§ Access-based positioning
§ Millennial-based positioning
v
v
v
Variety-based positioning – based on a subset of an industries products (serving the
few needs of many customers)
Needs-based positioning – based on particular customers (serving the broad needs
of a few customers)
Access-based positioning – based on segmenting customers who are accessible in
different ways, including geography (serving needs of customers in narrow market)
Example Questions for Porter (1996)
v (T/F explain). According to the article by Porter (1996),
performing the myriad of activities that your rivals do
to sell and deliver a product faster is the basis of
strategic positioning which can give rise to sustainable
competitive advantage
v False. The above statement describes operational effectiveness
– doing the same things better. Strategic positioning can be a
source of sustained advantage and refers to doing different
activities or similar activities in different ways.
Example Questions for Porter (1996)
v Based on the Porter reading, explain the link between
operational effectiveness and sustainable competitive
advantage.
v Operational effectiveness is often necessary but not
sufficient for sustainable competitive advantage.
Operational effectiveness can be a source of temporary
advantage but unless there is something unique about what
the company is doing (e.g., different activities) there will
tend to be competitive convergence which will erode any
advantages accrued.
Industry Analysis – 5 forces
v Porter “The Five forces that shape competitive
strategy”
w Know the factors that influence the relative strength of each force,
and be able to explain why (e.g., why and how do switching costs
influence buyer power?)
w The “6th force” of complementors
§ Understand limitations of the model
v Environmental analysis – PEST/PESTEL
§ How does PESTEl/PEST influence 5 forces model?
v Strategic Groups Model
v Etc.
Example Questions on 5 Forces
v When incumbent firms have high fixed costs, which
statement is most likely true:
§ Incumbents are likely to accommodate new market
entrants
§ Incumbents are likely to retaliate against new entrants
§ Incumbents are in a highly unattractive industry
§ Incumbents are engaging in a differentiation strategy
v Incumbents are likely to retaliate against new entrants
§ This is a barrier to entry, expected retaliation. High fixed costs often signal a need to retain
market share, which can create needs/motivation to cut prices/fill capacity
Example short answer question
v Assume you are an automobile manufacturer. You are
concerned about the profitability of the industry, in
particular due to the increasing power of suppliers to
appropriate value. Explain 3 things you, as firms, may
attempt to do to minimize supplier power.
v A correct answer will identify tactics that can mitigate
drivers of supplier power. Some examples would be to
standardize specifications to reduce switching costs,
use more suppliers, consolidate to increase relative
market power, make threat of backward integration,
etc.
Disruption and Industry Evolution
v Disruptive technologies – introduce a different
package of attributes and often perform poorly on
some metrics incumbents care deeply about
v Assessing disruptive technologies….
v Industry evolution and lifecycle
§ Key stages and characteristics of those stages
§ Crossing the chasm
Characteristics of each phase in
industry life cycle
Stage
Competition
Market Size
Key Issues
Introduction
Few firms. Focus on
features not price
Very small
•
Growth
Prices fall yet all
firms thrive
Shake-out
Fierce competition.
Prices fall. Weak
firms exit
•
Slow growth due to high
prices/unfamiliarity
Potential first mover disadvantage
Fast growth as initial
idea accepted
•
•
Dominant designs begin to emerge
Firms find competitive positions
Still strong, but
slowing
•
•
Arrival of dominant design
Winners often those with cost
leadership and specialized assets suited
to dominant design
Firms without clear strategic position in
trouble
•
Maturity
Decline
Smaller number of
larger firms
(consolidation)
Market reaches peak
size (demand driven
by replacement
•
High intensity rivalry
Drop in market size
•
•
•
Industry leaders work to improve
profitability
Increased barriers to entry
Companies often search for incremental
efficiencies
Leading firms may compete in wars of
attrition
Disruption Example Question
v Which of these is the key reason that disruptive
technologies can upset incumbent firms according to
Christensen?
A. Incumbent firms are not familiar with new technological
developments in their industry
B. Incumbent firms are not capable of keeping up with the
new technological developments of start-up firms
C. Incumbent firms are careful to develop new products that
they believe their existing customers currently want
D. Incumbent firms are too rigid and bureaucratic to
consider new technologies
E. Incumbent firms tend to be passive, unresponsive, and
run by fools
Comp. Advantage
v Reading and slides