Strategic Management 1-4

1. Overview Chapter1

1. Defining Strategy p3

CC - A company’s strategy
is the set of actions that
its managers take to
outperform the company’s
competitors and achieve
superior profitability.

2. Quest for competitive advantage p4

5 frequently used strategies

3. The business model p9

deliberate strategy
emergent strategy
realized strategy

4. Crafting & Execution p12

Identifying a Company's strategy p5

A low cost provider with an emphasis on cost-based advantage over competitors.

A broad differentiation strategy – aimed to differentiate the company from competition by appealing to broad segment of consumers, offering more superior attributes.

A focused low cost strategy – concentrating on a narrow consumer segment and offering lower price.

A focused differentiation strategy – concentrating on a narrow consumer segment and offering customised attributes that meet customers’ needs.

A best-cost provider – hybrid strategy that combines the attributes of low-cost provider and differentiation strategies.

Sustainable competitive advantage. p7

Customer Value Proposition

Profit Formula

'Value Price Cost' Framework

CC - A company’s business
model sets forth the
logic for how its strategy
will create value for
customers and at the same
time generate revenues
sufficient to cover costs and
realize a profit.

A winning strategy must pass:
1.The Fit Test
2.The Competitive Advantage Test
3.The Performance Test

Good Strategy + Good Strategy Execution = Good Management

2. Process crafting and executing strategy Chapter 2

1. Developing a strategic vision (vision, mission, core values) p20

2. Setting objectives
p27

3. Crafting a strategy (especially the strategy-making hierarchy)
p30

4. Executing the chosen strategy
p35

5. Monitoring developments, evaluating performance, and initiating corrective adjustments p36

The Strategy Making & Executing Process. p20

A strategic vision portrays a company’s aspirations for its future

A mission describes the scope and purpose of its present business

The values are the beliefs, traits, and behavioral norms

Objectives are an organization’s performance targets

Stretch objectives set performance targets high to stretch an organization

Strategic intent is when it relentlessly pursues an ambitious strategic objective

Financial objectives relate to the financial performance targets

Strategic objectives relate to target outcomes that indicate a company is strengthening its market standing

The balanced scorecard concept

Strategy making hierarchy p33

Strategic plan - lays out its future direction, business purpose, performance targets, and strategy.

• Create a strategy-supporting structure.
• Staff the organization to obtain needed skills and expertise.
• Develop and strengthen strategy-supporting resources and capabilities.
• Allocate ample resources to the activities critical to strategic success.
• Ensure that policies and procedures facilitate effective strategy execution.
• Organise the work effort along the lines of best practice.
• Install information and operating systems that enable company personnel to perform.
• Motivate people and tying rewards directly to the achievement of performance objectives.
• Create a company culture conducive to successful strategy execution.
• Exert the internal leadership needed to propel implementation forward.

6. Corporate Governance p36

Board responsibilities
• Oversee the company’s financial accounting and financial reporting practices.
• Critically appraise the company’s direction, strategy, and business approaches.
• Evaluate the calibre of senior executives’ strategic leadership skills.
• Institute a compensation plan for top executives that rewards serve shareholder interests.

Corporate strategy – concerned with the future of the entire group
Business strategy – crafted performance in one specific business
Functional area strategies – concerned with functional departments
Operating strategies – concerned with changes to operating units

3. Evaluating a company’s external environment Chapter 3

1. Components of a company’s external environment p45

2. Assessing the industry and competitive environment p47

3. Five forces framework p48

4. Strategic group analysis p67

5. Key success factors (KSFs) p72

The macro-environment encompasses the broad environmental context in which a company’s industry is situated.

PESTEL analysis can be used to assess the strategic relevance of the six principal components of the macro-environment: P olitical, E conomic, S ocial, T echnological, E nvironmental, and L egal/ Regulatory forces.

  1. How strong are the industry’s competitive forces?
  2. What are the driving forces in the industry, and what impact will they have on competitive intensity and industry profitability?
  3. What market positions do industry rivals occupy – who is strongly positioned and who is not?
  4. What strategic moves are rivals likely to make next?
  5. What are the industry’s key success factors?
  6. Is the industry outlook conducive to good profitability?

The five sources that put competitive pressures on a company are:
• rivalry among competing sellers
• the threat of potential new entrants
• the threat of substitute products
• supplier bargaining power
• buyer/customer bargaining power.

Analysing the five forces step-by-step in the framework:
a) helps the strategy maker assess whether the intensity of competition allows good profitability
b) promotes sound strategic thinking about how to better match company strategy to the competitive character of the marketplace.

The strongest of the five forces determines the extent of the downward pressure on an industry’s profitability.

Knowing where our company is in the industry is a very important aid to determining what steps we need to take to be more competitive in the future.

Positioning allows us to see the effect of driving forces on competitors and to contemplate their potential strategic moves and thereby stay ahead of them.

Group Mapping p69

Key success factors are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry.

An industry’s key success factors can always be deduced by asking the same three questions:

  1. On what basis do buyers of the industry’s product choose between the competing brands of sellers? That is, what product attributes and service characteristics are crucial?
  2. Given the nature of competitive rivalry prevailing in the marketplace, what resources and competitive capabilities must a company have to be competitively successful?
  3. What shortcomings are almost certain to put a company at a significant competitive disadvantage?

4. Evaluating a company’s resources, capabilities and competitiveness Chapter 4

1. The company’s present strategy p79

2. Resources and capabilities p83

3. SWOT analysis p89

4. Impact of the value chain of a company on its cost structure and customer value proposition

5. Competitive strength assessments p104

best indicators of whether a strategy is working:
• whether the company is achieving its stated financial and strategic objectives
• whether the company is an above-average industry performer
• whether the company is gaining customers and increasing its market share.

Identifying the Components of a Single-Business Company’s Strategy p80

A resource = competitive asset that is owned or controlled by a company.


A capability = the capacity of the company to perform some internal activity competently, through the deployment of the company’s resources.

Competitive power of a company’s resources and capabilities can be determined by the following four tests:
• Is the resource or capability competitively valuable?
• Is the resource or capability rare?
• Is the resource or capability inimitable?
• Is the resource or capability non-substitutable?

The VRIN tests for sustainable competitive advantage p87

Four Components of SWOT, Draw Conclusions, Translate Implications into Strategic Actions p94

• a company’s value chain
• an industry’s value chain
• activity-based costing
• benchmarking.

A competence = activity that a company has learned to perform with proficiency.
A core competence = activity that is also central to its strategy and competitive success.
A distinctive competence = competitively important activity performs better than its rivals — a competitively superior internal strength.