Strategic Management & Business Policy

Re-sequenced, Exam-Focused Study Guide

Course MBA/MM/POM/QM ZG611 · built from your six lecture decks

Why this guide exists

Your six decks are organised by lecture, not by idea — so the same topic is split across files
and the logical build-up is scrambled. RBV is split across Session 4.1 and Module 4; Blue
Ocean is in both; competitor analysis appears in Module 3/4 and Session 5; and Porter’s
generic strategies are buried inside the “Strategic Group Analysis” deck.
This guide re-orders everything into the natural strategic-management flow and merges the
duplicates, so each concept is learned once, in the right place. Use the concept map on the
next page as your mental skeleton; each numbered stage below maps to one box on it.

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Course Concept Map
How the six decks connect. Read top to bottom — it is the Strategic Management Process.

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Reading roadmap — where each deck now lives
If you want to read the original slides alongside this guide, follow this order rather than the file
order:

Stage Topic (this guide) Original deck(s)

1 Foundations: what strategy is Module 1
2 Crafting strategy & strategic direction Module 2
3 External analysis (environment, 5 forces, Module 3/4 + Session 5 (groups/maps)
competitors, strategic groups)
4 Internal analysis (RBV, VRIO, value chain, Session 4.1 + Module 4 (RBV 5 tests)
strategic intent)
5 Competitive strategy (generic strategies) Session 5
6 Strategy shapes structure & Blue Ocean Module 4 + Session 4.1 (alignment)

Tip: the exam usually rewards naming the framework, listing its parts, and giving one example.
Each stage below is built that way — definition, the framework’s components, then a worked
example.

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Stage 1 · Foundations: What Is Strategy?
Origin. “Strategy” comes from the Greek strategos (stratos = army, agos = to lead) — originally
military, later adapted to business. In management it means acquiring a competitive advantage
over rivals.
Core definition. Strategy is an integrated set of choices that positions an organisation within its
environment to achieve its vision over the long term. A sound strategy is consistent in three
ways:
• External consistency — fit with the environment/industry.
• Internal consistency — the activities reinforce each other.
• Dynamic consistency — it holds up as conditions change over time.

1.1 Operational Effectiveness (OE) vs. Strategy — Porter’s key distinction

This is the most-tested idea in Module 1. Porter argues the root problem for managers is failing
to distinguish OE from strategy.
• Operational Effectiveness: performing similar activities better than rivals (faster, fewer
defects). Necessary, but easily imitated, so it rarely sustains advantage — everyone
converges.
• Strategic positioning: performing different activities from rivals, or similar activities in
different ways. This is what creates durable advantage.

The arithmetic of superior profitability

Greater value → lets a firm charge a higher average unit price.
Greater efficiency → gives lower average unit cost.
Activities are the basis of advantage: cost advantage comes from performing particular
activities more efficiently; differentiation comes from the choice of activities and how they are
performed.

1.2 Four principles of strategic positioning

1. Strategy is the creation of a unique and valuable position involving a different set of
activities.
2. Strategy rests on unique activities — being different (e.g. Southwest Airlines’ distinctive
activity mix).
3. A sustainable position requires trade-offs — choosing what NOT to do; more of one thing
means less of another.
4. Fit drives advantage and sustainability — activities must reinforce one another, not just be
individually good.
Three sources of strategic positions (ways of serving customers):
• Serving few needs of many customers — Jiffy Lube.
• Serving broad needs of few customers — Bessemer Trust.
• Serving broad needs of many customers in a narrow market — Carmike Cinemas.

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1.3 Mintzberg’s 5 Ps of strategy
The “P” Meaning
Plan A consciously intended course of action; looking ahead / preparing for the future.
Ploy A specific manoeuvre or tactic to outwit a competitor.
Pattern Consistency in behaviour over time (strategy as realised, whether intended or
not).
Position Locating the organisation in a market / niche.
Perspective The organisation’s ingrained way of seeing the world; its vision.

1.4 Other foundation items (quick recall)

• 4 C’s of an effective strategy: Choice, Clarity, Commitment, Congruence.
• Types of strategy: Stability/consolidation (continue current activities, no major change in
direction) and Defensive (fend off an attacker) — two approaches: blocking competitors, or
passive.
Common themes across all definitions: purpose & long-term direction; scope & actions;
meeting challenges; building on strengths; delivering value to people.

Strategy vs. Policy (likely compare-and-contrast question)

Basis Strategy Policy
Meaning Comprehensive plan to accomplish Guiding principle for logical
goals decisions
What is it? Action plan Action principle
Nature Flexible Fixed (allows exceptions)
Orientation Action Thought & decision
Formulated by Top + middle management Top management
Approach Extroverted Introverted
Describes How to achieve the target What should / should not be done

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Stage 2 · Crafting Strategy & Strategic Direction
Crafting strategy (Mintzberg). Mintzberg likens strategy-making to craft — dedication,
involvement with the material, mastery of detail, harmony. “Managers are craftsmen and
strategy is their clay.” The craftsman senses rather than only analyses, linking hand and mind.

2.1 Which strategy, when? (matching strategy to the industry)

Before choosing, look at: (1) your immediate circumstances (is the industry stable, dynamic, or
in between; where are products in their life cycle?), (2) your resources, and (3) the relationships
among those resources (tightly linked like Wal-Mart vs. loosely linked like Google).
Assess resources with VRIN: Valuable, Rare, Inimitable, Non-substitutable. (This is the bridge
into RBV in Stage 4.)

Framework Use when the industry is… Example

Position strategy Stable —
Leverage strategy Moderately changing Pepsi
Opportunity strategy Dynamic / unpredictable Fast-moving tech markets

2.2 Globalisation, innovation, sustainability — the Triple Bottom Line

Modern strategy is judged on three “accounts”:
• Profit — traditional profit/loss.
• People — social / people account.
• Planet — environmental account (e.g. LEED buildings).

2.3 The hierarchy of strategy statements

A strategy statement sits inside a top-to-bottom hierarchy:

VISION — what we want to be

MISSION — why we exist
VALUES — what we believe in / how we will behave
STRATEGY — our competitive game plan (Objective = Ends, Scope = Domain, Advantage
= Means)
BALANCED SCORECARD — how we monitor & implement the plan

Vision
What the firm ultimately wants to become — broad, all-inclusive, forward-thinking; “more of a
dream” and a powerful motivator. Components: audacious goals + vivid description. It should be
clear, achievable, understandable. E.g. NTPC: “To be one of the world’s largest and best
utilities, powering India’s growth.”

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Mission
Translates the vision into action — the fundamental, unique purpose that sets the firm apart and
answers “What is our business?” Characteristics: clear, broad, distinct image, realistic, specific,
motivating. States the core ideology = core purpose + core values.

Goals vs. Objectives

Goals Objectives
What the firm hopes to accomplish in a future The specific result expected in the long run
period
Broader, close-ended; set whenever top Concrete products of specific thinking;
management wishes structured & supported by goals
Set in the budgeting process; time-bound Measurable, controllable, time-framed,
interrelated, challenging

2.4 Elements of a strategy statement (Rukstad)

Mike Rukstad: a good strategy statement has exactly three components.
5. Objective — the ends the strategy is designed to achieve (don’t confuse with
mission/values).
6. Scope / domain — where the firm will operate. Three dimensions: customer/offering,
geographic location, vertical integration.
7. Advantage — the means: how the firm will win (its competitive edge).

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Stage 3 · External Analysis
This stage answers “what is the outside world doing to our profit potential?” It runs:
environmental scanning → Porter’s Five Forces → competitor analysis → strategic groups.
(Combines Module 3/4 with the competitor/group material from Session 5.)

3.1 Environmental scanning

Environmental scanning (a.k.a. environmental monitoring) = gathering information about the
organisation’s environment, analysing it, and forecasting the impact of predictable trends. It
splits into two layers:

Layer What it contains

Micro / operating Suppliers, Customers, Competitors, Public/intermediaries, Market —
(immediate, partly plus internal: employees, funding sources, inbound logistics, local
controllable) communities.
Macro / remote Economic, Political-Legal, Socio-cultural, Demographic, Natural,
(uncontrollable) Technological, Global/International (i.e. PESTEL-type forces).
Micro forces to remember: Suppliers (single-supplier dependence = risk), Customers
(Drucker: “the aim of business is to create and retain a customer”), Competitors, Public, Market.
Macro forces to remember: Economic (system, monetary/fiscal policy, inflation, tax/interest
rates), Political-Legal (stability, ideology, law & order), Socio-cultural (attitudes & values),
Technological (internet, new products, switching).

3.2 SWOT — the bridge between external and internal

SWOT compares Strengths, Weaknesses (internal) with Opportunities, Threats (external). Its
central purpose: identify strategies that best align the firm’s resources & capabilities to the
demands of its environment, to create and sustain competitive advantage. It (1) gives a logical
framework, (2) presents a comparative account matching internal & external, (3) guides strategy
identification, (4) helps craft a business model.

SWOT quick-fill prompts

S — powerful strategy, strong finances, brand/intangibles, market leadership, scale
economies, cost advantages, innovation.
W — no clear direction, obsolete facilities, weak balance sheet, high costs, missing skills,
narrow product line, weak brand.
O — new customer groups (KIA into India), product-line expansion, e-commerce, falling
trade barriers, acquisitions, alliances.
T — new entrants, substitutes, rising rivalry, tech change, FX shifts, regulation, shifting buyer
tastes, demographics.

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3.3 Porter’s Five Forces — the core of industry analysis
Average industry profitability is shaped by five competitive forces; their intensity determines the
potential for abnormal profits. The right profitability measure is ROIC (Return on Invested
Capital), not return on sales or profit growth. The strongest force(s) matter most for strategy.

Force It is STRONG when… Example

1. Threat of new Entry barriers are low and little retaliation is Caps profit potential
entrants expected (Starbucks)
2. Bargaining power of Concentrated, not dependent on the Microsoft; Bloomberg
suppliers industry, high switching costs, terminals
differentiated, can integrate forward
3. Bargaining power of Few/large buyers, standardised product, Soft-drink vs. bottlers
buyers low switching cost, can integrate backward,
price-sensitive
4. Threat of substitutes Attractive price-performance trade-off; low Video-conf vs. travel; e-
switching cost mail vs. mail
5. Rivalry among Many/equal competitors, slow growth, high Airlines, steel, cement
existing firms fixed costs, high exit barriers, perishable
product

Barriers to entry (force 1, expanded)

Supply-side scale economies; demand-side benefits of scale (network effects — eBay);
customer switching costs (ERP software); capital requirements (steel, telecom); incumbency
advantages independent of size (first-mover); unequal access to distribution channels;
restrictive government policy (liquor, defence licensing).

Factors, not Forces — common traps

Don’t mistake visible attributes for industry structure: industry growth rate (fast growth ≠ always
attractive), technology/innovation, government, and complementary products are NOT a “sixth
force.” They matter only through their effect on the five forces.

3.4 Using the Five Forces — strategy implications

8. Positioning the company — find a spot where the forces are weakest. Paccar focused
on owner-operators, customised trucks delivered in 6–8 weeks, roadside assistance →
customers pay a 10% premium, avoiding buyer power & price rivalry.
9. Exploiting industry change — spot new positions opened by change (Apple’s iPod,
2003, exploiting the shift in the music industry).
10. Shaping industry structure — (3.1) re-divide profitability in your favour (neutralise
suppliers/buyers/substitutes/entrants) and (3.2) expand the total profit pool (Sysco shifted
competition from price to value-added services). Leaders have special responsibility;
improved structure is a public good.
11. Defining the relevant industry — not too broad, not too narrow; the forces also reveal
geographic scope (global vs. local).

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3.5 Competitor analysis
Competitor (competitive) analysis = identifying and evaluating competitors to understand their
strengths, weaknesses, strategies and market position. It lets a firm estimate rivals’ likely
strategy changes, predict their responses to your moves, and anticipate their reactions to
industry shifts. Remember you have both existing and potential competitors.
Identify competitors two ways: demand-side (products customers see as substitutes) and
supply-side (firms with similar resources/capabilities).
Five things to size up about each rival: (1) their strategies, (2) their objectives (profit max?
market share?), (3) their position, (4) strengths & weaknesses, (5) the aggression factor (how
fiercely they attack/defend — e.g. Dell).

3.6 Strategic Group Analysis & strategy maps

Definition. A strategic group (Porter, 1980; term coined by Michael Hunt, 1972) is a set of firms
in an industry following the same or similar strategy along key strategic dimensions — similar
cost structure, product diversification, organisation, control systems, and customer service.
Rivalry is fiercest within a group, because members chase the same customers (e.g. fast-food
chains vs. fine-dining).
Strategic group map. A visual of the competitive landscape that clusters firms with similar
positions. Purpose: see whether clusters of similarly-positioned firms exist, and examine rivalry
within the industry.
How to build one: (1) define the industry (value-chain position + scope); (2) identify
distinguishing, measurable variables; (3) divide firms into groups; (4) draw the map — list similar
firms, sub-group them, pick two variables customers care about, study group positions, then
develop strategy.
Strategy maps for competitor analysis. Ordinary competitor analysis is qualitative (who are
rivals? what do they offer? where? what resources?) but doesn’t answer the key question “HOW
do our rivals compete?” (“Wal-Mart competes on low prices” is only a half-truth). The strategy
map articulates and compares rivals’ actual strategies — rivalry rests on the intensity and the
basis of competition (e.g. low-cost airlines AirTran / JetBlue / Southwest).

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Stage 4 · Internal Analysis
Where external analysis looks outward, internal analysis looks inward: what do WE have that
drives profit? (Merges the RBV split across Session 4.1 and Module 4 into one place.)

4.1 Resource-Based View (RBV)

RBV explains why some competitors are more profitable than others: it sees firms as distinct
collections of physical and intangible assets and capabilities. A firm succeeds when it has the
best, most appropriate stock of resources for its business and strategy — superior performance
comes from a competitively distinct set of resources deployed in a well-conceived strategy. To
matter, a resource must pass external market tests (it must help produce something customers
will pay for).

RBV — the five resource tests (Module 4 version)

A resource is strategically valuable if it passes five tests:
12. Hard to copy (inimitability) — via physical uniqueness, path dependency (Gerber’s
brand built over time), causal ambiguity, or economic deterrence.
13. Depreciates slowly (durability) — sustains advantage over time (Disney brand).
14. Value is controlled by your company (appropriability) — the firm, not
employees/suppliers, captures the value.
15. Not easily substituted — a different resource can’t trump it.
16. Better than competitors’ similar resources — superior on a relative basis.

4.2 VRIO framework (Barney) — the same idea, four questions

Treat VRIO and the five tests as two lenses on one concept. Barney’s four questions:

Question Asks Logic

Value Does it raise revenue / cut cost vs. not Without value → weakness
having it?
Rareness Do rivals NOT possess it? Valuable but common → parity
Imitability Is it costly/slow to imitate? Hard to copy → lasting edge
Organization Is the firm organised to exploit it? Else value is left on the table

VRIO ladder (memorise this)

Valuable only → competitive parity.
Valuable + Rare → temporary advantage.
Valuable + Rare + hard-to-Imitate (and Organised) → sustained competitive advantage.

4.3 Strategic implications of resources

Most firms’ resources do NOT pass the market tests (e.g. IBM’s mainframe culture; Xerox vs.
Canon). The best resources are often intangible — culture, technology, transformational
leadership. Three moves:

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 • Invest in your most valuable resources (Disney, M&S) — but watch industry attractiveness
(Masco).
• Upgrade resources (Intel, AT&T).
• Leverage resources into new areas (Disney).
Three costly leverage errors: (1) overestimating the transferability of specific assets (M&S);
(2) overestimating ability to compete in highly profitable industries; (3) assuming generic
resources like lean manufacturing transfer easily (Chrysler).

4.4 Value-Chain Analysis (Porter)

An organisation is more than a random collection of machines, money and people. Value-chain
analysis identifies the separate value activities that produce something customers value, and
links them to competitive advantage. Activities split into primary and support.
Three steps: (a) break the firm’s functions into primary and support activities; (b) assess the
potential to add value in each; (c) formulate strategies focused on the key activities that build
and sustain advantage.
Three insights: (1) competitive advantage comes from superior performance in specific
activities; (2) there are two generic sources of advantage — low cost and differentiation (Wal-
Mart vs. Apple); (3) firms should focus on a few key activities.

4.5 Core competence, capabilities & distinctive competencies

Capabilities = the firm’s ability to use its resources effectively. Resources + capabilities together
form distinctive competencies, which (when valuable, rare, inimitable and organised) yield the
model of competitive advantage.

4.6 Strategic Intent (Hamel & Prahalad, 1989)

Strategic intent = an obsession with winning, with ambitions out of proportion to current
resources and capabilities (e.g. the Apollo Moon program; Japanese firms vs. Western
incumbents — Komatsu vs. Caterpillar, Canon vs. Xerox). It reconciles ends to means, focuses
the organisation on the essence of winning, motivates people, leaves room for contributions,
and guides resource allocation.
Four techniques Japanese firms used: (1) build layers of advantage (don’t rely on one source
like cheap labour); (2) search for loose bricks / stake out undefended territory (Honda — low-
end motorcycles); (3) change the terms of engagement (Canon vs. Xerox); (4) compete through
collaboration (Fujitsu).
Three features: captures the essence of winning; stable over time; sets a target deserving
personal effort and commitment.

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Stage 5 · Competitive Strategy: Porter’s Generic Strategies
Now external + internal analysis converge into the actual choice of how to compete. (This
material sits inside your “Strategic Group Analysis” deck — it belongs here.)
A firm’s relative position in its industry determines whether its profitability is above or below
average; the basis of long-run above-average profitability is sustainable competitive advantage.
There are only two basic types of advantage — low cost or differentiation — which, applied in a
broad or narrow scope, give three generic strategies (applied at the business-unit level; they are
not firm- or industry-specific).

Generic strategy Essence Scope

Cost leadership Be the low-cost producer at a given quality Broad market
level
Differentiation Offer unique attributes customers value & will Broad market
pay a premium for
Focus Serve one narrow group better than anyone Narrow niche
(cost-focus or differentiation-focus); breeds
loyalty

Stuck in the middle

Porter: to win long-term, pick ONE generic strategy. Trying more than one leaves a firm
“stuck in the middle” with no clear advantage.
Firms that do succeed at multiple strategies usually create separate business units for each.
(A minority view holds a single generic strategy isn’t always best.)

5.1 Cost leadership — internal strengths & how to achieve it

Internal strengths: access to capital, skill in designing products for efficient manufacture,
process-engineering expertise, efficient distribution channels.
How to achieve it: economies of scale, efficiency, standardisation, price competitiveness,
continuous improvement. Examples: Walmart, Southwest, McDonald’s, IKEA, Dell, Ryanair.
Beyond cost leadership (sustaining it): continuous monitoring, investment in
technology/innovation, strategic alliances, employee engagement & learning,
diversification/market expansion, CRM, risk management & scenario planning.

5.2 Differentiation — types, sources, costs, trade-offs

Internal strengths: access to leading research, a skilled & creative product-development team,
strong sales team, corporate reputation for quality and innovation.
• Two types: tangible differentiation and intangible differentiation (intangible matters most
once a customer has experienced the product — e.g. chocolate).
• Sources: value chain (the prime source — Cadbury), location, interrelationships, learning,
integration, scale, institutional factors.

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 • Costs of differentiation: more training, more advertising, expensive skilled salesforce,
higher-quality materials.
• Advantages: premium price, more units sold, brand loyalty, sustained advantage.
• Disadvantages: uniqueness not valued by buyers, over-differentiation, plain loss from
differentiating.
Exam link: be ready to explain how each generic strategy defends against the five forces (e.g.
cost leadership cushions against rivalry and buyer power; differentiation raises entry barriers
and reduces substitute threat).

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Stage 6 · Strategy Shapes Structure & Blue Ocean
The capstone: instead of accepting industry structure, can strategy reshape it? (Merges Module
4 with the Blue Ocean alignment material in Session 4.1.)

6.1 Two worldviews

Approach Logic
Structuralist (structure shapes Rooted in the structure-conduct-performance paradigm; industry
strategy) structure is given and you position within it. Dominated practice
for 30 years. Valuable when structure is fixed.
Reconstructionist (strategy Blue Ocean view: strategy can reconstruct industry boundaries
shapes structure) and demand. More appropriate in certain economic/industry
settings.
Three factors decide which approach fits: (1) the structural conditions the firm faces, (2) its
resources & capabilities, (3) its strategic mindset.

6.2 The three strategy propositions (must align)

Strategy = the development and alignment of three propositions to either exploit or reconstruct
the environment. Unless all three are consistent, the strategy won’t be high-performing or
sustainable.
• Value proposition — for buyers.
• Profit proposition — for the firm.
• People proposition — for those who deliver/enable the strategy.
Key rule: a strategy fails if value & profit are aligned around differentiation but the people
proposition targets low cost. Under a reconstructionist (Blue Ocean) approach, high
performance means all three propositions pursue
differentiation AND low cost simultaneously — breaking the usual either/or trade-off.

6.3 Blue Ocean alignment in action

Dubai (the worked case). Dubai overcame structural disadvantages by aligning all three
propositions around differentiation + low cost. Value: a foreign-investor package that is both
differentiated and low-cost (vs. Shanghai). Profit: revenues without corporate/personal tax — via
Nakheel (real estate) and Emirates Airline (“what’s good for business is good for Dubai”).
People: generous benefits for citizens and zero income tax + cheap housing for expatriates. The
three reinforce each other → unprecedented profitable growth.

The alignment lesson (frequent exam point)

Napster — a market-creating innovation that FAILED: it never built a people proposition,
declaring it would proceed with or without the record labels.
Apple iTunes Store (2003) — SUCCEEDED by building an attractive people proposition for
the major labels (BMG, EMI, Sony, Universal, Warner) → #1 US music seller within five
years.

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Takeaway: innovation is only the beginning; the real difference between success and failure
is strategy alignment.

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Last-Night Cram Sheet

Key thinkers & their one idea

Thinker Associated with
Michael Porter OE vs. strategy; Five Forces; generic strategies; value chain; strategic
groups
Henry Mintzberg Crafting strategy; the 5 Ps
Hamel & Prahalad Strategic intent; core competence
Jay Barney VRIO framework
Kim & Mauborgne Blue Ocean / reconstructionist; three propositions
Michael Hunt Coined “strategic group” (1972)
Mike Rukstad Strategy statement = Objective + Scope + Advantage

Frameworks by the numbers (fast recall)

• 5 Ps — Plan, Ploy, Pattern, Position, Perspective.
• 4 principles of positioning — unique position, unique activities, trade-offs, fit.
• 4 C’s — Choice, Clarity, Commitment, Congruence.
• Strategy statement — Objective, Scope, Advantage.
• Triple bottom line — Profit, People, Planet.
• 5 Forces — Entrants, Suppliers, Buyers, Substitutes, Rivalry (measure with ROIC).
• 5 Forces strategy uses — Position, Exploit change, Shape structure, Define industry.
• VRIO / RBV — Valuable, Rare, Inimitable, Organised → parity / temporary / sustained.
• Value chain — primary + support; low cost or differentiation; focus on a few activities.
• Strategic intent techniques — layers of advantage, loose bricks, change the terms,
collaborate.
• Generic strategies — Cost leadership, Differentiation, Focus; don’t get stuck in the
middle.
• Blue Ocean — align Value + Profit + People around differentiation AND low cost (Dubai;
Apple vs. Napster).

Good luck tomorrow. If a question stumps you, name the framework first, list its parts, then
anchor with one example — that structure earns marks even when memory is patchy.

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