Strategic
Management:
Creating
Competitive
Advantages
Chapter 1 through 6
Prepared by Shawna Chen
McGraw-Hill/Irwin
All rights reserved.
A Hierarchy of Goals
Exhibit 1.6
2
Question
What are the criteria for meaningful strategic
objectives?
 Hint:
• Page 31
 Answers:
•
•
•
•
Measurable
Specific
Realistic
Timely
3
Application
How should you proceed with final project?
 Hint:
• Caitlin’s house had a plumbing problem
 Solutions:
• 8 common types of challenges
• Internal/external environment analyses
• McKinsey’s 3 horizons or Deloitte’s growth framework
4
Application
8 common types of challenge







Falling profits
New product introduction
Entering a new product/service market
Entering a new geographic market
Mergers & acquisitions
Competitive response
Government/regulatory environment response
5
Application
McKinsey’s 3 horizons
6
Application
Deloitte’s growth framework
7
STRATEGIC MANAGEMENT PROCESS
8
Business-Level
Strategy:
Creating and
Sustaining
Competitive
Advantages
Chapter Five
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Question
Business-level strategy
vs.
Corporate-level strategy
10
Question
What are 3 generic strategies?
11
Application:
Combination Strategies
Exhibit 5.2
12
Application:
Stages of the Industry Life Cycle
Exhibit 5.12
5-13
Question
Overall cost leadership
 Pros? (Hint: Porter’s 5 forces)
 Cons?
Differentiation
 Pros?
 Cons?
Focus
 Pros?
 Cons?
14
Overall Cost Leadership
Pros (5):
 Protects a firm against rivalry from competitors
 Protects a firm against powerful buyers
 Provides more flexibility to cope with demands
from powerful suppliers for input cost increases
 Provides substantial entry barriers from
economies of scale and cost advantages
 Puts the firm in a favorable position with respect
to substitute products
15
Overall Cost Leadership
Cons (5):
 Too much focus on one or a few value-chain
activities
 All rivals share a common input or raw material
 The strategy is imitated too easily
 A lack of parity on differentiation
 Erosion of cost advantages when the pricing
information available to customers increases
16
Differentiation
Pros (3):
 Creates higher entry barriers due to customer
loyalty
 Provides higher margins that enable the firm to
deal with supplier power
 Establishes customer loyalty and hence less
threat from substitutes
17
Differentiation
Cons (6):





Uniqueness that is not valuable
Too much differentiation
Too high a price premium
Differentiation that is easily imitated
Diffusion of brand identification through
product-line extensions
 Perceptions of differentiation may vary between
buyers and sellers
18
Focus
Pros (2):
 Creates barriers of either cost leadership or
differentiation, or both
 Used to select niches that are least vulnerable to
substitutes or where competitors are weakest
19
Focus
Cons (3):
 Erosion of cost advantages within the narrow
segment
 Focused products and services still subject to
competition from new entrants and from
imitation
 Focusers can become too focused to satisfy
buyer needs
20
Application:
Internet-Enabled
Which generic strategy?
 Answer: Focus
5-21
Application:
Internet-Enabled
Which generic strategy?
 Answer: Overall cost leadership
5-22
Application:
Internet-Enabled
Which generic strategy?
 Answer: Differentiation
5-23
Application:
Team Exercise
Present your final project company’s
“business-level” strategy
Critique





If it fits vision
If it’s a good combination
If it suits product life cycle
If it responses to the Internet era
Can competitive advantage be sustained?
24
CorporateLevel Strategy:
Creating Value
through
Diversification
Chapter Six
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Question
Related diversification
Vs.
Unrelated diversification
26
Related Diversification
Economic of scope
 Leveraging core competencies
 Sharing activities
Market power
 Pooled negotiating power
 Vertical integration
27
Question
 Which related diversification strategy Carpet Tech
uses?
 Example of related diversification using economic of
scope
 Procter & Gamble
 3M
 Example of related diversification using market
power
 Automotive industry
28
Example
U.S. Automobile Industry’s Profit Pool
Exhibit 5.8
5-29
Unrelated Diversification
Restructuring
 Definition?
 Example?
Parenting
 Definition?
 Example?
Portfolio management
 Definition?
 Example?
30
Example
 Church & Dwight has a well balanced portfolio of
products, which includes








Arm & Hammer
Trojan condoms
Oxi Clean
AIM toothpastes
First Response
Nair
Xtra laundry detergent
Brillo
Source: www.churchdwight.com
31
Application
What are the differences among:




Holding company
Investment company
Conglomerate
Keiretsu
6-32
Means to Achieve Diversification
Mergers and acquisitions (M&A)
Pooling resources of other companies with a
firm’s own resource base
 Joint venture
 Strategic alliance
Internal development
 Corporate entrepreneurship
6-33
Question
What are the differences between merger and
acquisition?
M&A
 Pros?
 Cons?
34
Mergers and Acquisitions
Pros
 Can be a means of obtaining valuable resources
that can help an organization expand its product
offerings and services
 Can lead to consolidation within an industry and
can force other players to merge
 Corporations can also enter new market
segments by way of acquisitions
35
Mergers and Acquisitions
Cons
 Competing firms often can imitate any
advantages realized or copy synergies that result
from the M&A.
 There can be many cultural issues that may
doom the intended benefits from M&A
endeavors.
36
Question
What are the differences between joint
venture and strategic alliance?
Joint venture & strategic alliance
 Pros?
 Cons?
37
Strategic Alliances and Joint
Ventures
 Pros
 Introduce successful product or service into a new
market
• Lacks requisite marketing expertise
 Join other firms to reduce manufacturing (or other)
costs in the value chain
• Pool capital, value-creating activities, facilities
 Develop or diffuse new technologies
• Use expertise of two or more companies
• Develop products technologically beyond the capability of
the companies acting independently
38
Strategic Alliances and Joint
Ventures
Cons
 Improper partner
• Each partner must bring desired complementary
strengths to partnership
• Strengths contributed by each should be unique
 Partners must be compatible
 Partners must trust one another
39
Antitakeover Tactics
 Greenmail
 payment by a firm to a hostile party for the firm’s stock at
a premium, made when the firm’s management feels that
the hostile party is about to make a tender offer
 Golden parachute
 a prearranged contract with managers specifying that, in
the event of a hostile takeover, the target firms managers
will be paid a significant severance package
 Poison pills
 Used by a company to give shareholders certain rights in
the event of takeover by a another firm
40
Application:
Team Exercise
Find tv/movie moments as examples of
 Greenmail
 Golden parachute
 Poison pills
41