Strategy

“Strategy is about making choices; it’s about deliberately choosing to be different.”

- Michael Porter
 What makes a manager great?

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They are based on goals that are simple, consistent, They objectively consider a company’s resources and
and long-term exploit them in an effective manner

Successful strategies

The goals the company wants to achieve have been And finally, the people responsible for achieving
formulated after a deep analysis of the competitive these goals are strong-willed and have solid
environment decision-making capabilities

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 Corporate vs. Business strategy

Corporate strategy Business strategy

Which industry or industries should the company

compete in?

What would be the geographical scope of our

operations – national, international, global? What type of resources and capabilities should our
company develop to gain a competitive advantage over
competitors?
Should we diversify our business, and if yes, at what
level?
What is an efficient way to manage different business
units to achieve strategic synergies?
Organization in terms of product development,
marketing, production, sales, customer service, and
distribution? In-house, or outsourced? How should the company monitor the industry
environment, so its strategies conform to the market
needs?
Should the company enter alliances or make
acquisitions?
 Mission statement, vision statement, values

MISSION STATEMENT addresses the question

“What is the fundamental reason for our organization’s existence?”

“To accelerate the advent of sustainable transport by bringing compelling mass

market electric cars to market as soon as possible”, Tesla

VISION STATEMENT describes the desired future position of the company

“What do we want to achieve in the future?” and “Who do we want to become?”

“To create economic opportunity for every member of

the global workforce.” LinkedIn

VALUE STATEMENT defines the firm’s values and place constraints on how the organization pursues its goals

“Impactful, dynamic, bold, open, and socially

responsible behaviour”, Facebook
 The industry lifecycle model

Stage Characteristics Action Example

INTRODUCTION Low customer awareness, high

capital needs, low competition
Pioneer the industry
Consumers learn of the
GROWTH industry & sales and profits Consumer robotics
grow Enter the industry
Car sharing services
All companies have entered the
Compete and generate cash
MATURITY market, high competition, sales Personal care
flow
peak and strop growing
Vinyl records
Absolute decrease of sales, Look for new opportunities
DECLINE customers abandon the market

LOREM IPSUM
 Porter’s Five Forces
Analysing the competitive environment in an industry
0
1 Forces Response
Create barriers to entry: cost advantage, Economies of
THREAT OF NEW ENTRANTS scale, product differentiation, access to channels of
distribution, government policies, expected retaliation
 Porter’s Five Forces
Analysing the competitive environment in an industry
0
1 Forces Response
Create barriers to entry: cost advantage, Economies of
THREAT OF NEW ENTRANTS scale, product differentiation, access to channels of
distribution, government policies, expected retaliation
0
2 Difficult to prevent: pinpointing which substitute products
THREAT OF SUBSTITUTE PRODUCTS take the most business is challenging, as is creating barriers
to entry for products in different industries
 Porter’s Five Forces
Analysing the competitive environment in an industry
0
1 Forces Response
Create barriers to entry: cost advantage, Economies of
THREAT OF NEW ENTRANTS scale, product differentiation, access to channels of
distribution, government policies, expected retaliation
0
2 Difficult to prevent: pinpointing which substitute products
THREAT OF SUBSTITUTE PRODUCTS take the most business is challenging, as is creating barriers
to entry for products in different industries

Estimate concentration ratio, determine how fragmented

RIVALRY AMONG EXISTING FIRMS the competition in an industry is, and adapt your
0 competitive model accordingly

3
 Porter’s Five Forces
Analysing the competitive environment in an industry
0
1 Forces Response
Create barriers to entry: cost advantage, Economies of
THREAT OF NEW ENTRANTS scale, product differentiation, access to channels of
distribution, government policies, expected retaliation
0
2 Difficult to prevent: pinpointing which substitute products
THREAT OF SUBSTITUTE PRODUCTS take the most business is challenging, as is creating barriers
to entry for products in different industries

Estimate concentration ratio, determine how fragmented

RIVALRY AMONG EXISTING FIRMS the competition in an industry is, and adapt your
0 competitive model accordingly

3
Higher switch costs, and fewer options minimize it. Also, the
BARGAINING POWER OF BUYERS more fragmented the number of clients is, the smaller their
bargaining power

0
4
 Porter’s Five Forces
Analysing the competitive environment in an industry
0
1 Forces Response
Create barriers to entry: cost advantage, Economies of
THREAT OF NEW ENTRANTS scale, product differentiation, access to channels of
distribution, government policies, expected retaliation
0
2 Difficult to prevent: pinpointing which substitute products
THREAT OF SUBSTITUTE PRODUCTS take the most business is challenging, as is creating barriers
to entry for products in different industries

Estimate concentration ratio, determine how fragmented

RIVALRY AMONG EXISTING FIRMS the competition in an industry is, and adapt your
0 competitive model accordingly

3
Higher switch costs, and fewer options minimize it. Also, the
BARGAINING POWER OF BUYERS more fragmented the number of clients is, the smaller their
bargaining power. Differentiate, build brand recognition

Suppliers can raise prices, lower the quality of supplied

0 BARGAINING POWER OF SUPPLIERS materials, reduce product availability. Aim to be or seem
supplier independent, then their bargaining power is low
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 Porter’s Five Forces
Example: an analysis of the global sportswear industry (mature market)

Low. Globally, many barriers to Nike, Adidas, Asics, UA, Puma B2C market, customers cannot
entry: marketing, know-how, Concentration ratio 38% negotiate prices, but they have a
design. Competing locally or in a Market is fragmented but there are lot of choice. Differentiated
niche market is easier global giants, compete at local level only products are best

NEW POWER OF
ENTRANTS RIVALRY
BUYERS

POWER OF
SUBSTITUTE SUPPLIER
PRODUCTS

Little uncertainty. Other clothing is Large companies obtain materials

a substitute but not cheaply, novel entrants must pay
overwhelmingly in demand higher prices or come up with
innovative alternative
 Game Theory
Because decisions made by one company depend on decisions made by others

ZERO-SUM NON-ZERO-SUM
Situations in which for one party to Competitors can choose whether
win, the other must lose they want to cooperate or compete

CO-OP NON-CO-OP
The optimal outcome depends on Like poker, tennis, basketball
cooperation and communication.
Like in the prisoner’s dilemma
 Prisoner’s dilemma

Two criminals arrested, suspected in a robbery. Police officers hold the two criminals in different interrogation rooms and offer them the following options.
If one confesses and the other one doesn’t, the one who’s confessed walks away free, while the other receives a 10-year sentence.
If both confess, they will receive a 5-year sentence each.
And if neither one confesses, they will both walk away free.

If a player chooses a strategy and other players can’t benefit by changing their strategies.
For example, if one of the prisoners confesses, they would face 0-5.

NASH’S
EQUILIBRIUM

Deny confessing altogether

OPTIMAL GLOBAL
SOLLUTION
 Prisoner’s dilemma
Tobacco company example (real life)

In 1971, the American government banned cigarette companies from advertising their products on TV. Instead of hurting their business, because less
consumers would see their brand advertising…
All four major tobacco companies registered higher profits than before.

Win 50 million each, without spending money on advertising

OPTIMAL
SOLUTION

If both companies advertise, each wins $40 million

NASH’S
EQUILIBRIUM

If Company A advertises and Company B doesn’t, then

Company A will win $60 million, and Company B will win
$25 million, and vice versa
WORSE OPTION
 The lifecycle of a company
SEED
When the business idea is born. Define
business plan, financial, ownership
structure, etc.

START-UP
Take a product/service to market. Fine
tuning, product improving

GROWTH
Selling to an increasing number of customers.
Breaking even. Invest in new management
and accounting systems. More personnel.

ESTABLISHMENT
Operations are standardized, a stable
revenue stream. Outsourcing, automation.

EXPANSION
Geographical or across products and
distribution channels

MATURITY
Stable sales and profits. Growth revenues slow
down. Strong competition. Must decide whether
to expand further or exit the investment
 The lifecycle of a company (ctnd)

EXIT
Selling the company to another firm operating in
the same industry or to financial investors
 Competitive advantage

A company has competitive advantage if

Competitive advantage: when a company provides buyers
and only if one or more of the following
with comparable value more efficiently than other firms in
aspects is better than that of its competitors
its industry or creates more value for its buyers

Great products High brand recognition

Talented staff Large distribution networks

 Sources of sustainable competitive advantage

01 Intellectual property,
PATENTS technological breakthrough,
know-how

02 Proven teams of
professionals who are
LOYAL TEAMS unwilling to leave the brand
for the competition

DISRUPTIVE
03 A business model that breaks
BUSINESS MODEL the status quo, like Facebook

04 Pretty self-explanatory, isn’t

BRAND
it? ☺
RECOGNITION
 Resources vs Capabilities

RESOURCES CAPABILITIES

A company’s ability to deploy

Assets acquired with money
resources towards a specific goal

Tangible resources – financial or

Using resources in an optimal way
physical

Intangible – tech, patents, brand Core competence – an activity the

awareness, copyrights firm does exceptionally well

Core competences can be

Human resources – know-how,
found in different functional
motivation, communication
lines of a company

LOREM IPSUM LOREM IPSUM

Companies should build a resource-based strategy that fully exploits their current capabilities
 Gaining a competitive advantage

ASSESS RESOURCES
Identify the key success factors in your industry and the ASSESS RESOURCES
resources that would help gain them

APPRAISE RESOURCES
Identify and secure those resources that are scarce in the
industry. The scarcer the resource, the likelier the
competitive advantage
DEVELOP THE RESOURCES
Invest in the resources and make sure their potential is used
to the fullest

DEVELOP THE APPRAISE

RESOURCES RESOURCES
 Competitive advantage
Cost leadership

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ECONOMIES OF SCALE PROCESS DESIGN
The more products are sold, the lower the cost per Obtain a cost reduction from a change in the way a
product process is being carried out. For example, if less
input is needed for each unit of output provided

COST-LEADERSHIP

ECONOMIES OF SCOPE LOWER INPUT COST

Operating more than one business, selling Lower wage rates, access to low-cost raw materials,
complementary products (production of milk and or an ability to negotiate well with suppliers and to
cheese) excel at procurement

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 Competitive advantage
Differentiation

1 If a company wants to be successful in

the long-term, it needs both types of
PRODUCT DIFFERENTIATION differentiation
Creating a better product than offered by competitors

DIFFERENTIATION

ECONOMIES OF SCOPE
Creating an image, symbols, and an overall positioning
that reflect the way a company wants to be perceived

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 Competitive advantage
Niche / Focus strategy

SPECIALIZE CORE COMPETENCE SUPPLIERS

Specialise in Develop specific core Disadvantage: suppliers
understanding the needs competence which will have a higher bargaining
of a specific group of decrease the bargaining power because niche
people power of buyers companies purchase

D P smaller quantities

S DIFFERENTIATION
C CONSUMER
S
Offer a differentiated PREFERENCES
product within the market Disadvantage: consumer
segment preferences may change
over time
 Competitive advantage
Using hybrid strategies

01 Create separate business units and brands to carry out each

of the competitive strategies you have chosen
SEPARATE
BUSINESS
UNITS

02 For each unit or brand create different policies and culture

that best reflect the chosen strategy
POLICIES

03 Associate the brand reputation with the corresponding

prices of the products: customers associate prices with the
COORDINATE
product quality, do not confuse them
 Organic vs inorganic growth
Organic growth – growing by expanding the existing business

If you enter an industry in its Identify unsatisfied needs in your Offer a new product in a new
growth phase, your company will already existing customers and launch a market, diversify. Added bonus, if
grow with the market new product in an existing market one of the industries declines, the
company will be safe

GROWTH UNSATISFIED NEW PRODUCT

STAGE NEEDS

MARKETING NEW
INNOVATION TERRITORIES
TARGETING

If you’re in a mature stage, you must win Offer your existing products or
market share from your competitors services in new territories with
with great marketing, product little or no adjustment necessary
innovation, and niche targeting
 Organic vs inorganic growth
Inorganic growth – expanding the business through an M&A

HORIZONTAL VERTICAL
INTERGRATION INTEGRATION

Acquiring or merging with another Expanding the company activities

company that operates in the same across the supply chain, undertaking
industry and the same activity new aspects of the business

Done because it makes sense from Allows the company to play a larger
a strategic perspective role in the value delivered to customers

Or because the target company has Increases control and decreases

great growth potential and has dependence on suppliers and
developed a product that’s growing resellers, which improves the
faster than the industry company’s bargaining power

The goal: gain market share and expand But this also increases the
to new markets without the expense of organizational complexity and
starting a business from scratch creates a more rigid structure

LOREM IPSUM LOREM IPSUM

 SWOT Analysis

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STRENGTHS (INTERNAL) OPPORTUNITIES (EXTERNAL)
Core competences, competitive advantage Favorable factors existing in a company’s industry
and have the potential to improve its current results
and competitive positioning

SWOT
ANALYSIS

WEAKNESSES (INTERNAL) THREATS (EXTERNAL)

Areas tat need improvement, and place the company Arise in the external environment and may harm the
at a disadvantage when competing with other firms company’s current business

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