SKK Business School Strategic Management Chapter 1. What is Strategy? Joonhyung Bae Chapter 1 Outline What is strategy? - Gaining and sustaining competitive advantage - What is competitive advantage? - Industry vs. Firm effects in determining firm performance Stakeholders - Type of stakeholders Chapter 1. What is Strategy? Are you sure you have a strategy? • “Our strategy is to be the low-cost provider.” • “We’re pursuing a global strategy.” • “The company’s strategy is to integrate a set of regional acquisitions.” • “Our strategy is to provide unrivaled customer service.” • “Our strategic intent is to always be the first-mover.” • “Our strategy is to move from defense to industrial applications.” (from Hambrick & Fredrickson, 2001) Chapter 1. What is Strategy? “Strategos” • Greek “Strategos”: the knowledge of the general Dominate Europe! • Analysis: Diagnosis of the competitive challenge • Formulation: Guiding policy to address the competitive challenge • Implementation: A set of coherent actions to implement the firm’s guiding policy Chapter 1. What is Strategy? Strategy • Strategy: a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors • What are fundamental questions that need to be addressed to develop strategies? – Where do firms compete? • Market analysis – What resources and capabilities do firms have? • Internal analysis – What unique value do firms bring? • Strategic position – How do firms sustain the unique value? Chapter 1. What is Strategy? Let’s see what Prof. Porter thinks about strategy • Michael Porter – Professor at Harvard Business School – 5 forces model https://www.youtube.com/watch?v=NY4myVa5Wkw https://www.youtube.com/watch?v=q8NZfbcNMrM Chapter 1. What is Strategy? Competitive Advantage • Competitive Advantage: a firm that achieves superior performance relative to other competitors in the same industry or the industry average – Always relative, not absolute • To assess competitive advantage: – Compare firm performance to a benchmark • Performance of other firms in the same industry • An industry average Chapter 1. What is Strategy? Competitive Advantage Chapter 1. What is Strategy? Competitive Advantage: Key Points • Competitive Advantage – Superior performance relative to other competitors in the same industry or the industry average • Sustainable Competitive Advantage – Outperforming competitors or the industry average over a prolonged period of time • Competitive Disadvantage – Underperformance relative to other competitors in the same industry or the industry average • Competitive Parity – Performance of two or more firms at the same level Chapter 1. What is Strategy? Strategic Positions • Stake out a unique position within an industry to provide value to customers, while controlling costs. • The greater the difference between value creation and cost: – the greater the firm’s economic contribution. – the more likely it will gain competitive advantage. Chapter 1. What is Strategy? Strategic Positions Trade-offs • Managers must make conscious trade-offs. – Enables competitive advantage • In the retail industry, for example: – Walmart vs. Nordstrom Chapter 1. What is Strategy? Industry vs. Firm Effects in Firm Performance Chapter 1. What is Strategy? Industry vs. Firm Effects in Firm Performance Chapter 1. What is Strategy? Stakeholders • Stakeholders: • Organizations, groups, and individuals • They can affect or are affected by a firm’s actions. • Have a vested claim or interest in the performance and continued survival of the firm. https://www.youtube.com/watch?v=VHGTsEwbOJY Chapter 1. What is Strategy? Internal and External Stakeholders Chapter 1. What is Strategy?
