Strategy
Dr. Ananda Sabil Hussein
Strategy
An action managers take to attain
a goal of an organization.
Superior Performance
High
profitability
Superior
performance
requires …
Growth in
profits over
time
Wal-Mart
 First year of operation – 1962 – Rogers, Arkansas
 1960s – 15 Wal-Mart stores
 1979-80 – 276 stores with $1 billion in sales
 1989 – 1,400 stores with $26 billion in sales
 1983 – SAM’s Club
 1988 – Supercenters
 Today -- More than 1.8 million associates
worldwide, nearly 6,500 stores and wholesale clubs
across 15 countries, and over $312 billion in sales.
Source: www.walmart.com
Competitive Advantage
 Competitive advantage: Advantage obtained when a firm outperforms its
rivals.
 Distinctive competency: A unique strength that rivals lack.
 Sustainable competitive advantage: A distinctive competency that rivals
cannot easily match or imitate.
 Barrier to imitation: Factors that make it difficult for a firm to imitate the
competitive position of a rival.
 Legacy constraints: Prior investments in a particular way of doing business
that are difficult to change and limit a firm’s ability to imitate a successful
rival.
Competitive Advantage
Low costs
Distinctive
competencies
Competitive
advantage
If protected from copying by
barriers to imitation and
legacy constraints
competitive advantage
will be sustained
Product
differentiation
Superior
performance
Business-Level Strategy
 Business-level strategy: Strategy concerned with
deciding how a firm should compete in the industries in
which it has elected to participate.
 Low-cost strategy: Focusing managerial energy and
attention on doing everything possible to lower the costs of
the organization.
 Economies of scale: Cost advantage derived from a large
sales volume.
 Differentiation strategy: Increasing the value of a
product offering in the eyes of consumers.
The Low-Cost Value Cycles
Lower costs
Economies
of scale
Higher
profitability
and profit
growth
Increased
demand
Lower prices
Option 1
Options for Exploiting
Differentiation
Increase
prices more
than costs
Higher
profitability
and profit
growth
Option 2
Successful
differentiation
Moderate or
no price
increase
Increased
demand
Economies of
scale and
lower costs
Segmenting the Market
 Markets are characterized by different types of consumers.
 Some are wealthy, some are not.
 Some are old, some are not.
 Some are influenced by popular culture, some never watch TV.
 Some care deeply about status symbols, others do not.
 Some place a high value on luxury, some on value of money.
Consumer Markets
Consumer markets segmentation
characteristics:
 Geographic
 Demographic
 Psychographic
 Behavioralistic
Source: www.netmba.com
Choosing Segments to Serve
 Focus Strategy: Serving a limited
number of segments.
 Broad market strategy: Serving the
entire market.
Types of Business-Level
Strategy
Segments
served
Many
Few
Broad low cost
Broad differentiation
Focused low cost Focused differentiation
Low cost
Competitive
theme
Differentiatio
n
Configuring the
Value Chain
 Primary activities: Activities having to do with the
design, creation, and delivery of the product; its marketing;
and its support and after sales services.
 Support activities: Activities that provide inputs that
allow the primary activities to occur.
 Organization architecture: The operations of the firm
are embedded within the internal organization architecture of
the enterprise, which includes the organization structure,
incentives, control systems, people, and culture of the firm.
Strategic Fit
Supports
Supports
Operations
strategy
Internal
organization
architecture
Businesslevel
strategy
Supports
Fits
Industry
conditions
Competitive Tactics
 Competitive tactics: Actions that managers take to try to outmaneuver
rivals in the market.
 Tactical pricing decisions:
- Price war
- Price signaling
- Razor and razor blade pricing
 Tactical Product decisions:
- Product proliferation
- Bundling
Corporate-Level Strategy
 Corporate-level strategy: Strategy
concerned with deciding which industries a firm
should compete in and how the firm should
enter or exit industries.
 Vertical integration: Moving upstream into
businesses that supply inputs to a firm’s core
business or downstream into businesses that use
the outputs of the firm’s core business.
Diversification
 Diversification: Entry into new business areas.
 Related diversity: Diversification into a business related
to the existing business activities of an enterprise by distinct
similarities in one or more activities in the value chain.
 Unrelated diversity: Diversification into a business not
related to the existing business activities of an enterprise by
distinct similarities in one or more activities in the value
chain.