Basic Principles of Strategic ManagementDistinctive competenceSlide 4Levels of strategyBusiness people spend most time at business & functional levelsBusiness modelThe basic modelDeliberate vs. emergent strategyStrategic IntentInternal analysisValue chainSlide 13External analysisSlide 15Measuring successThose are the central ideasIssues in functional-level strategyIssues in business-level strategySlide 20Issues in technology industriesGlobal strategiesSlide 24A basic change processKey issues in corporate governanceSlide 27Basic Principles Basic Principles of Strategic Managementof Strategic ManagementReview for Final – Review for Final – Business 189Business 189Stuff that’s worth Stuff that’s worth rememberingrememberingDistinctive competenceDistinctive competenceVery important strengthsVery important strengths, unique , unique to the particular firm, that create to the particular firm, that create competitive advantagecompetitive advantage•Built from resources and capabilitiesBuilt from resources and capabilitiesResource = Resource = possessions of the firm possessions of the firm •Tangible – factoriesTangible – factories•Intangible – brand namesIntangible – brand namesCapability = skills at putting resources to Capability = skills at putting resources to productive useproductive useA A competencecompetence = a bundle of = a bundle of resources and capabilities that does resources and capabilities that does something something fundamental fundamental and and hard to imitatehard to imitateA competence is said to be A competence is said to be distinctivedistinctive when it gives or has when it gives or has clear potential to give the firm clear potential to give the firm competitive advantagecompetitive advantageStrategies – actions and plans to Strategies – actions and plans to attain one or more business goals attain one or more business goalsLevels of strategyLevels of strategyCorporate level Corporate level •What businessesWhat businesses should we be in? should we be in? •What are our What are our basic attitudesbasic attitudes to them? to them?Business level Business level •Strategy for a unit that operatesStrategy for a unit that operatesan an entire businessentire business Functional level Functional level •Strategy for a unit that performs a Strategy for a unit that performs a particular functionparticular function for a business unit for a business unit (or (or for the organization as a whole)for the organization as a whole)Business people spend most time Business people spend most time at business & functional levelsat business & functional levelsThe critical goal is usually The critical goal is usually competitive advantagecompetitive advantage•Higher returns than others in their Higher returns than others in their industryindustryThe ultimate goal is The ultimate goal is sustained sustained competitive advantagecompetitive advantage•For this, hard-to-imitate competencies For this, hard-to-imitate competencies are criticalare criticalBusiness modelBusiness modelManagement’s theory of how it will attain Management’s theory of how it will attain competitive advantage competitive advantage •Or, especially when considering corporate-level Or, especially when considering corporate-level strategy, simply strategy, simply high profitshigh profitsThe basic modelThe basic model Good business modelGood strategiesDistinctive competences you can defendHigh profits –Higher return than competitorsDeliberate vs. emergent strategyDeliberate vs. emergent strategyEmergent strategy = actions that happen Emergent strategy = actions that happen without planningwithout planningDeliberate strategy can be considered in Deliberate strategy can be considered in terms of terms of •Strategy formulationStrategy formulation•Strategy implementationStrategy implementationStrategic IntentStrategic IntentBig goalBig goalWidely shared at all levels in the Widely shared at all levels in the organizationorganizationPursued for a long periodPursued for a long period•with both deliberate and emergent with both deliberate and emergent strategiesstrategiesInternal analysisInternal analysisValue creation Value creation Cost, including cost of capitalProfit marginPriceValue to customerConsumer surplusValue chainValue chainThe distinctive competence can be The distinctive competence can be anywhere on the value chainanywhere on the value chain•In primary activities or support activitiesIn primary activities or support activitiesBarriers to imitationBarriers to imitation•Very diverseVery diverse•But capabilities that are hard to explain But capabilities that are hard to explain are typically hard to imitateare typically hard to imitateInertiaInertiaIcarus paradoxIcarus paradoxExternal analysisExternal analysisIndustry – firm and its close Industry – firm and its close competitorscompetitors•Sector Sector •SegmentSegmentStages in industry evolutionStages in industry evolution5-forces analysis5-forces analysisGlobalizationGlobalizationThe competitive advantages of The competitive advantages of national industriesnational industries•Factor endowmentsFactor endowments•Demand conditionsDemand conditions•Related and supporting industriesRelated and supporting industries•Rivalry RivalryMeasuring successMeasuring successReturn on invested capitalReturn on invested capitalReturn on equityReturn on equityThose are the central ideasThose are the central ideasThe rest of the course examined The rest of the course examined issues in issues in •Functional level strategy Functional level strategy •Business-level strategyBusiness-level strategy•Technology strategyTechnology strategy•Global strategyGlobal strategy•Corporate strategyCorporate strategy•Managed changeManaged change•Corporate governance Corporate governance •Ethics EthicsIssues in functional-level strategyIssues in functional-level strategyEconomies of scaleEconomies of scaleThe The experience curve experience curve – – a combination of a combination of •Economies of scale Economies of scale andand•Learning effects Learning effectsIssues in business-level strategyIssues in business-level strategyProduct/service differentiationProduct/service differentiationMarket segmentationMarket segmentationGeneric strategiesGeneric strategies•Cost leadershipCost