25.09.

2024

Strategic Management
1pm-3pm

6 Chapters

 7th – 8th week -> Mid-term exam (25% grade): explain the concept
through the example, NO DEFINITION
 COURSE:
o Internal and external analysis of a company (with tools such
as PESTLE)
o Examples of global company expansions (Nike, Coca-Cola,
Starbucks)
o Analysis of company decisions and competition analysis (with
tools and matrixes such as the BCG matrix).
 Project presentation (25% grade) -> strategic analysis of the
company within groups
 Final exam (50% grade) -> word limits
o Questions to understand whether we grasp the concept.
Explain answers with examples (no examples from the
course.)

Minimum grade: 35/100

Chapter 1: Introduction

What is strategy?

It has military origins.

 Ethimology: (Stere/stratos) to spread, to lead= spreading leadership

 Gain advantage and acquire an edge on competitors
 Requires situation analysis and coming up with actions (having a
proactive and reactive approach)

Why is it important?

 With strategy, we have a better vision on the environment of a

company, which consequently impacts actions
 Everyone in an organization is responsible for strategic
management
 Why use it?
o To adapt to internal/external changes happening
o To cope with lack of information on the future: risk
management
o To guide the organization

What is strategic management?

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Strategy is a series of goal-directed plans and actions that align an

organization’s skills and resources with the opportunities and threats in its
environment.

The cycle of Strategic management:

4.
Evaluating
1. Situation
cross-
analysis
functional
decisions

3.
2.
Implementi
Formulating
ng

After gauging the impact,

we use that strategy on other situation analysis, in new cycles.

 Strategic management = assessing events

 The need to adapt to change leads to key strategic management
questions: questioning field, business reshaping and business
models, newcomers in industry, new technologies to invest in…
 Strategic Management is based on experiences and subjective
judgements to make strategic decisions (especially in situations of
great uncertainty). These elements will influence the main
outcomes, therefore objective information should also be used.
Effectiveness of strategies lead to profitability and profit growth,
which both lead to shareholder value.

Shareholder
value
Profitability
Effectiveness of
strategies
Shareholder
Profit growth
value

Profitability = ratio that includes cost.

How to grow profits?
o Selling products in growing markets
o Gain market share
o Increase the amount of sold products
o Expand internationally
o Diversify the products
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Profit growth = comparison between revenues.

Managers need to grow profits and have sustained profitability over
time.
Shareholder value = Managers face challenge: high profitability and
increased profits are needed at the same time.

Example: Apple

Between 2001 and 2010, net profit from $25 million to $14 billion

 Blue ocean strategy by diversifying their products

Due to increased net profit, Apple’s Earning per share increased

massively: making the share more valuable = appreciation in the value of
Apple’s share (if $390 stock market invested in 2001, today that would be
$226k) and stock market.

 Profit growth because of effective strategic management.

Red ocean = existing industries markets (rules of competition are well

defined. Fierce competition and competitive strategy

Blue ocean = “market creating strategy” how to create and capture

unknown markets (new industries, new boundaries

 Value innovation: diversification, new relations between value

and costs.

Four characteristics of Strategic Management:

 Interdisciplinary nature of the process: everyone is responsible

(sales, manufacturing, HR, engineering, legal,…)
 External focus: we cannot be isolated from the external environment
of the company
o Following economy, competitors, market demographics
 Internal focus: understand resources and capabilities that the
company has or does not have.
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 Future direction: decisions, planning, shifts or changes in

products/markets.

Strategy Situation
evaluation analysis

Strategy
Strategy
implementati
formulation
on

Strategy formulation:

 Corporate strategies:
o What direction? Top decision level
o Example: merges and acquisition, subsidiaries
o Example: Volvo group bought Renault trucks
o Ferrero group: has dairy brands and beverage drinks brands
 Competitive strategies:
o How are we going to compete in chosen business? Which
business model?
o Example of Carrefour vs Lidl = expensive vs low-cost strategy
(targeting metrics such as purchasing power, location)
o Example: Turkish airlines vs EasyJet
o Example: Low-cost strategy
 Functional strategies:
o Related to departments. What resources do we have to
support these two?
 Production-operations
 Marketing
 Research & Development
 Human resources
 Financial-Accounting
 Information technology & support

Competitive advantage:

A company has a sustained competitive advantage when:

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 The competitive advantage is sustainable, having above average

profitability for a number of years.
 Sustained competitive advantage = market share gain from rivals;
growing profits more rapidly
 In turn, competitive advantage will also lead to higher profit growth
 Example of failure for a company, that was able to correct it:
Samsung did not test new batteries before launching the phones,
but then changed their supplier and recovered (thanks to presence
in various sectors, financial background

Strategy formulation:

Business model

Mission vision
values goals

External Internal

SWOT

Corporate /
Competitive/
Functional
decisions

Strategy implementation:

 Strategies must not only be formulated, they must be implemented:

o Implementation = putting the various stages of strategy into
action
o Implementation must be carefully studied and planned.

Strategy evaluation:

 Evaluating both outcomes of strategies and how they have been

implemented
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o Determine if they produced the expected strategic goals by

measuring them
o Helps with evaluation process and modification of strategies

 Strategic management = process in action = continuous cycle

Chapter 2: Environmental Analysis – External Analysis

Environmental Analysis

Understanfing of the environment (certainty and complexity)

Analyzing the effects of the environment (PESTEL)

Close environment analysis (positioning in sector & competition

analysis)

Position in the competition

Determining the

Strategic position

Environment:

Global external
environment
Close environment

National external
Internal environment
environment
Employees/ Culture
Social/cultura/legal…

PESTEL analysis:
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PESTLE Analysis is a concept with marketing principles:

Political: these factors determine the extent to which a government may

influence the economy or a certain industry

 Trading policies, government changes, shareholder and

fundings, leadership
 Wars
 Political conflicts
 Joining alliances and international organizations
 You will have to change the way you do business (location,

Economic: These factors are determinants of economy’s performance

that directly impacts a company

 Unemployment level, foreign level

 Tax rates, exchange rates, inflation, prices
 Example of tourism agencies: exchange rates impact pricing
policies

Social (socio-cultural): these factors scrutinize the social environment of

the market and gauge:

 Ethnic religious factors, health, consumer buying patterns

 Brand preferences, education, history, consumer opinions,
change in lifestyle (healthy, working life…)
 Cultural trends
 Demographics
 Population age
 Example: colgate has a special flavour with siwak
 SEB Group: water distributors and people’s drinking habits
(tap water or water distributors in the DACH area (Switzerland-
Austria – Germany)
 Starbucks: different drinks depending on country
 Kitkat: special chocolates in Japan
 Chobani: Chobani has used people’s shift in lifestyle towards a
more healthy one, and introduced slightly healthier yogurts in
the market.

Technological: innovations in technology that may affect the operations

of the industry and the market favorably or unfavorably.

 Technological development, R&D, patents, licensing

 Example: Svarowski had a huge percentage of defects in
production (60% of defects). They changed their operations
model and now have almost 0% of defects.
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 Example: Patents, e-banking, mobile industry, cloud computing

for data analytics
 Example: Renault trucks and their new manufacturing system

Legal: these factors have both external and internal sides.

There are certain laws that affect the business environment in a certain
country while there are certain policies that companies maintain for
themselves.

Legal analysis takes into account both of these angles and then charts out
the strategies in light of these legislations.

Examples:

 Laws imposing to automotive industry players to be carbon

neutral by 2050
 Employment law, consumer protection, regulations, future
legislation
 Pesticides, tax on online shopping (strict limitations on
Aliexpress and temu)Animal testing in China (Cosmetic brands
limited in Europe)

Environmental: these factors include all those that influence or are

determined

 Customer values
 Examples: electric cars (Renault)
 Reusable plastic
 Example: Stella McCartney only uses recycled materials

This framework gives a view of the whole environment from many

different angles while contemplating on a certain idea.

More than just understanding the market, this framework represents one
of the vertebras of the backbone of strategic management

Porter Analysis:

 Five forces analysis assumes that there are five important forces
that determine competitive power in a business situation
1) Supplier power: here you assess how easy it is for suppliers to
drive up prices.
How easy is it for my suppliers to raise the prices up?
 This is driven by
a. Number of suppliers for each key input
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b. The uniqueness of their product or service

c. Their strength and control over you
d. The cost of switching from one to another
The fewer the supplier choices you have, the more the
suppliers have power.
 Suppliers are powerful when:
o Domination by few companies in fragmented industry
o There are few or no substitute products
o The industry is not an important customer
o The product is important to the buyer
o The supplier’s product is differentiated
o The supplier has ability to provide products that your industry
provides
 Example: Samsung was the main supplier of
touchscreens for Apple

2) Buyer Power:
How easy is it for buyers to drive prices down?
 The number of buyers
 The importance of each individual buyer to your business
 The cost to them of switching from your products and services
to those of someone else

Factors that can make a buyer powerful:

o The buyer purchases large volumes of the seller’s goods

o Products purchased represent signification portion of the
costs
o Products purchased are undifferentiated
o Products require little switching costs
o If the product does not add value to the quality of the
buyers life
o If the product offers low profits
o The buyer has the ability and resources to access the
products they are buying from other industry sources
o If they have full information about the consumer demand,
market prices, and supplier costs

3) Competitive rivalry: what is important here is the number and

capability of your competitors
 If you have many competitors, and they offer equally
attractive products and services, you will have little power
(because buyers and suppliers will go elsewhere)
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 Eight conditions that contribute to intense rivalry

1) Numerous or balanced competitors: they will be
jockeying for the same position
2) Slow industry growth: the demand is not going to
grow, we are at the peak of the life cycle, the
product has achieved maturity, and there is
saturation within the market. After that comes
decline. Companies seek new strategies, hence
the high competitiveness.
3) High fixed costs: solutions -> increase the amount
of produced products to divide the costs through
economies of scale)
a. When costs are fixed, firms seek to operate
at capacity, spreading out those costs over a
larger volume
b. Intense rivalry is created when firms cut
price
c. If products are difficult or costly to store,
companies seek to sell their products
quickly, by cutting prices
4) Lack of differentiation or switching costs
a. If an industry product is perceived to be a
commodity (not unique), then customers
make purchase decisions largely on price
and service
b. The restaurant industry is an example of
how a company will seek differentiation
through themes and atmosphere, while
customers might make purchase decisions
based on price
5) Addition of capacity in large increments
6) Diverse competitors
When competitors differ in their strategic
approaches, it is difficult to judge how they will
react
This diversity increases the level of rivalry
7) High strategic stakes
8) High exit barriers
(economic/strategic/emotional/legal) : preventing
the company from exiting in business (liquidating
equipments, highly specialized assets that cannot
be used in other ways…) , even though they may
have low or negative returns on investment
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4) Threat of Substitution

This is affected by the ability of your customers to find a different way of

doing what you do.

Example: providing software that automates an important process, it can

be substituted by doing the process manually.

Easy substitution = weaker position.

5) Threat of New entry:

Is it easy to enter the market as a new player?

 If it costs little in time or money to enter your market and compete

effectively,
 If there are few economies of scale in the market
 If there is a lack of patents for your key technologies, then
competitors can quickly enter your market.

If you have strong and durable barriers to entry, you will have less market
entrants.

 We can also use new market entrants for merges and acquisitions.
 Threats of new entrants depends on the reaction by current
competitors to the threats posed.

Example: Facebook and Instagram.

As Cola Turka started having a consequent market share and was almost
replicating the same Coca cola taste, Coca cola decided to bury Cola turka
under legal complaints to eliminate the threat.

Barriers to entry:

 Economies of scale are cost savings realized from producing more

volume as fixed costs drive the cost per unit down
 Cost disadvantages: established firms enjoy cost advantages that
cannot be duplicated
 Product differentiation (linked with patents and product protection):
money spent by established companies for unique product
identification
 Capital requirements: investments to satisfy customer demands
may be difficult for new entrants
 Switching costs: one-time costs associated with switching from one
product to another
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 Access to distribution channels: an established outlet to sell or

distribute the product.
 Government policy: laws and regulations (licensing, pollution
standards, product safety and testing, access to raw materials)

EXAMPLE COCA COLA:

New entrants:

Entry barriers are medium for the beverage industry:

There is no consumer switching cost and low capital requirement

Increasing amount of new brands appearing in the market with similar

prices than coke products

Threat of substitute: high pressure

 Health concerns pushing healthier drinks (milk-based drinks, coffee,

sparkling water, juice).
 Cultural drinks (yogurt drink, tea…).

Buyer power: Low pressure

 Who are the customers?

o Individuals or supermarkets, chains, …

Large retailers, like Walmart have bargaining power because of the large
order quantity, but the bargaining power is lessened because of the end
customer loyalty. Walmart also needs Coca-Cola to sell.

Competitive rivalry: High pressure

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Currently the main competitor is Pepsi which also has a wide range of
products.

There are other soda brands in the market that became popular, like Dr.
Pepper, because of their unique flavours.

Supplier power: low pressure

There are many suppliers on the market, which means Coca-Cola has the
choice.

The main ingredients for soft drink include: carbonated water, phosphoric
acid, sweetener, caffeine?

External Analysis:

 To scan external environment for threats and opportunities facing

the organization.
 Threats are negative external trends or changes that may hinder an
organization’s performance.
 Organizations are open systems:
o They interact and respond to their environment
o They are interrelated and interdependent but function as a
whole
o Change in one part creates change in another

Example: with the introduction of smartphones, how we communicate,

how we do business has changed

Studies of organizational interaction with their environment can be

summarized from:

a) Information perspective
 The environment provides organizations with a source of
decision-making
 Environmental uncertainty is a key element
o This is the amount of change and complexity in an
organization’s environment (example of changing
environment: automotive industry)
o The environment can be dynamic or stable
o Dynamic environment is changing rapidly
o A stable environment is one in which change is slow or
minimal (example: water industry, fuel industry)
 Environments can also be simple or complex
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This is related with the number of components in the

environment
o Few number of components = simple environment
o Many components = complex environment
b) Resource perspective
 The environment is viewed as a source of scarce and
necessary resources
 The more hostile the environment the scarce the resources
and the greater the uncertainty
 Managers are challenged to acquire critical resources

Environments: external environment sectors

 Specific environment includes customers, competitors’ suppliers,

other industry players.

Analyzing the specific environment involves looking at the industry and

competitive variables

Industry:

 General environment includes economic

Finding information:

Finding valuable information and interpreting is essential to organizational

success.

Examples include:

 Data specific to the context

 Statistics: Turkish statistics foundation
 Predictions and forecasts: using past data to guess future values
of a variable of interest with an independent value (regression
analysis)
 Inferences or statements by experts

Benefits of external analysis:

 Enables managers to be proactive, not reactive

o Anticipate change
o Create plans for those changes
o Influence the organizational performance
 External analysis enables strategies to
o Adapt to opportunities and threats
o Neutralize competitor moves
o Improve organizational opportunities
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 Altering strategies should align the organization based on

information about
o Markets
o Customers

Challenges of external analysis:

 Rapidly changing environment,

 Resources and people dedicated to that forecasting
 Doing an external analysis is time consuming
o Key is making the process efficient and effective
o Requires making value judgement about what to monitor and
evaluate
 No process of analysis provides perfect information

Chapter 3: Internal analysis

Formulate appropriate and effective strategies, knowing what an

organization can and cannot do -> assessing a company’s assets, skills,
and other resources

Organizational resources:

Resources = assets. They can be financial, physical, human, tangible,

intangible, structural, cultural.

o Among financial resources: dept capacity…

o Human resources, competencies of employees

The value of resources is context dependent: based on what it seeks to do

From resources to organizational capabilities

 To reach its goals an organization must generate value from its

resources
 Organizational routines and processes are regular, predictable…
 Employees learn how to best use organizational resources and
processes, creating core competencies and distinctive
organizational capabilities
o Capabilities result from learning and are more than the mere
possession of resources
o Some organizations are unable to develop capabilities to
survive
 Capabilities are not self-sustaining in today’s complex and dynamic
environment
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 Today’s environment demands dynamic capabilities

o The ability to build, integrate and reconfigure capabilities to
address the rapidly changing environment.

From capabilities to core competencies & distinctive capabilities

 Core competencies: capabilities that lead to competitive advantages

o Value creating capabilities that an organization possess that
are essential to their business
o Contribute to improving and enhancing other organizational
capabilities
o They are the result of accumulated knowledge and actual
work activities

Characteristics of distinctive capabilities:

1) Must contribute to superior customer value and offer real benefits to

customers
2) Must be difficult for competitors to imitate
Requires balancing a complex array of employee skills and
knowledge.
3) A distinctive capability should be used in a variety of ways:
organizational routines and processes developed in one area should
be transferable to other areas
a. Example of transferred capabilities Honda:
i. Reliable, fuel-efficient drive trains for cars, motorcycles,
boats, lawnmowers, snow blowers, and power
generators
ii. Dyson’s engine technology: substantial value for
customers, hard to imitate since they have their own
technology
iii. Apple’s operating system
iv. Example: Volvo’s durability: Volvo uses specific
processes and has
v. Example: Airbus’s reliability, and fuel efficiency
capabilities

S&W:

The role of strengths and weaknesses

Strengths: these are the resources that the organization possesses and
capabilities that it has developed:

These can be exploited and developed into a sustainable

competitive advantage
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Not all strengths will lead to competitive advantage

Weaknesses: are resources and capabilities that are lacking or deficient

and prevent the organization from developing competitive advantage

Organizational weaknesses must be corrected if they are in critical

areas that prevent the organization from competing effectively

Value chain analysis

 The full range of activities including design, production, marketing

and distribution, business conduct to bring a product or service from
conception to delivery.
 Every organization needs customers:
 The premise is that there is a demand for some type of value
 How to add that value?
 Value chain activities are specific organizational routines and
processes that create varying levels of customer value:

Value chain analuysis evaluates:

 The internal environment

 Organization s&w

Value chain analysis assesses nine activities:

 Five primary activities: create customer value

o Inbound logistics: routines and processes that bring resources
into the organization
o Operations: processing the resources into goods and services
(Economic Order Quantity)
o Outbound logistics: physically distributing these to customers
o Marketing/ sales: appealing to customers
o Customer service: service customer needs
 Four support activities:
o Procurement: gathering resources
o Technology: provide efficiencies and improve operational
efforts
o Human resources: recruit, select, train, retain employees
o Infrastructure: refers to an organization’s structure, its
management, planning, accounting, finance and quality
control
 Related to cost advantage and differentiation
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SKIPPED PART OF THE COURSE (Assessment) – Will not be in Mid-

term

VRIO – Analysis - Barney

According to VRIN framework
 Valuable – only a resource that brings value to the business
 Rare – resource can’t bring significant competitive advantage unless
its rare among competitors
 Imperfectly imitable – competing businesses that don’t possess a
certain resource shouldn’t
 Organized
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VRIO Example - Starbucks

John Kay’s Distinctive capabilities

John Kay identified 3 types of Distinctive Capabilities;

Determining strengths and weaknesses

Internal analysis:
Past performance (financial measures, production measures,
customer satisfaction, employee productivity statistics, quality
control (defects percentage -> analysis of the trend during the
month);
Organizational goals are a second way to determine strengths and
weaknesses and they provide the means.

Industry Perspective
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Identifies competitors as organizations that are making or selling the

same or similar goods or services.

Market perspective
Believes that competitors are organizations that satisfy the same
customer needs.
Strategic groups concept:

This is based on the idea that there are groups of firms competing in an
industry with similar strategies, resources, and customers.

In a single industry there will be several strategic groups depending on

what is

Traditional approaches to define competitive strategy:

Miles and Snow’s adaptive Strategies

Prospector: one in which the organization continually innovates by

finding and exploiting new product and market opportunities
(Samsung, apple technology industry, nike adidas in sports apparel)
Found in dynamic markets
This creates uncertainties for the competitors, as they do not know
what to expect from competitors.

Defender: established market, they do not rely on innovation. Used

by organizations to protect current market share by emphasizing
existing products and producing a limited product line.
These firms have a well-established business (Coca-cola, bic)

Analyzer: this is a strategy of analysis and imitation.

Analyzers watch for and copy the successful ideas of prospectors.
They systemically assess and evaluate whether their move is
appropriate for them.
Most of the firms fall into this category because they all want to
maintain their customer base as well as develop new products
markets also. Organizational culture, it is their way of doing business
(Xiaomi).

Reactor: companies who lack a coherent strategic plan (generally

speaking small or medium sized companies)
Reactors simply react to environmental changes and make
adjustments only when forced to do so by environmental pressures.
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Often, reactors are unable to respond quickly to perceived changes

in the environment.

Porter’s Generic Competitive strategies – cost leadership

1) Cost-leadership: a low-cost strategy where the company seeks to

reduce costs levels below those of competitors.
Drawbacks of cost leadership strategy:
- Lowering costs too much: taking away its advantage
- Competitors are easily able to imitate what the cost
leader is doing

2) Differentiation: Competing by providing unique products,

providing goods valuable to customers.

The differentiator will have broad and wide product lines: many
models, features, price ranges

Whilst you are coming with an innovative product, competitors can

find it before you: instead of being differentiator, you become a
follower.

3) Focus: Competes in a niche, a segment of the market.

A differentiation focuser can use whatever forms a differentiation

they wish: product features, innovations, quality

The advantages of a focus strategy

The drawbacks:

 Operating on a small scale makes it difficult to lower costs

significantly,
 Needs of niche customers might change quickly

4) Stuck in the middle: products are not differentiated enough and

costs are not low enough.

Contemporary views on competitive strategy

Integrated low cost: differentiation strategy

- Org can pursue an integrated approach that involves

achieving low costs and high levels of differentiation
- Mcdonalds, Toyota
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Mintzberg’s generic competitive strategies

Six possible strategies from which to choose:

- Differentiation by price: requires charging below-

average market prices
 Example: Shein for clothes
- Differentiation by marketing is an attempt to create a
certain image in customers minds and uses that image
as a competitive weapon
 Example: Apple
- Differentiation by product design is an attempt to
compete on the basis of providing desirable product
features and design configurations
 Example: Dyson
- Differentiation by quality is an effort to deliver higher
reliability and performance at a comparable price
 Example: Mavi for clothes, Honda for automotive
industry
- Differentiation by product support emphasizes customer
support services (for example: delivery, warranty),
- Undifferentiated strategy

Chapter 5 : BCG Matrix/ McKinsey Matrix / Ansoff

Matrix
Market share = your sales/ Total market sales

Relative market share = your share/ strongest competitor market share

Market growth rate = (S(i) – S(i-1))/S(i-1)

1) Classification of SBU’s

Stars: leaders in business, big cash consumption and generation, heavy

investment to maintain the market share

Cash cows: The stars of yesterday, generate more cash than required, as
little as possible investment, economy of scale and high profit margin,
mature industry

Dogs: low growth rate, low market share, no potential to bring cash, it
would be wise to go out of these businesses but there may be exit barriers
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The question marks: low market share, but the market is growing quickly,
requires high investment start point of most businesses, potential to
become a star

Benefits: BCG matrix is

simple and easy

Limitations: BCG matrix

uses only two
dimensions relative to
market share and
growth market rate

GE Mackinsey matrix

Introduction:

BCG is converted to a wider version: from 2X2 to 3x3

Business strength replaces market share

Industry and Market attractiveness replaces market growth rate

Business strength can be determined with the following criteria:

- Market share
- Market share growth
- Product quality
- Brand reputation
- Distribution network
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Ansoff Matrix

1) Market penetration:

Increase sales to the existing market

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Penetrate more deeply intro the existing market

2) Product development:

New product developed for existing markets

3) Market development

Existing products sold to new markets

4) Diversification

New products sold in new markets

New market = new competitors

 Related diversification
 Unrelated diversification
 Vertical integration: related to supply chain, either do what supplier
is doing or what customer is doing

Failures: nescafe instant coffee “keyf-I turk” or lipton’s tea “tek dem”.

HOMEWORK: KARACA TRADITIONAL COFFEE MACHINE RESEARCH

Space Matrix Method

The Strategic Position and Action Evaluation (SPACE) Matrix proposed by

Rowe et al. is a method that is relatively easy to understand and use as a
decision aid tool.

The SPACE matrix is a management tool that is used to analyze an

organization based on four dimensions in order to define an appropriate
strategy for that organization (rated from 0 to 6):

Internal dimensions:

1) Financial strength (y axis, rated positively)

Return on Investment – Dept ratio - liquidity

2) Competitive Advantage (x axis)

Market share, product quality, product life cycle, customer loyalty

External dimensions

3) Industrial strength (x axis, rated positively)

Growth and profit potential

4) Environmental stability (y axis)

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The sum of CA and IS (resp. FS and ES) values will give the final x (resp.
y) value of the organization’s suggested strategy type.

Once the above steps are executed, the appropriate strategy can be found
in either one of the following four strategic locations:

 Aggressive posture
 Competitive posture
 Defensive postire
 Conservative posture

Strategic postures:

1) Aggressive position
 An attractive and relatively stable industry,
 the company has a competitive advantage and it can protect it, a
critical factor is the possible entry of new competitors into the
industry,
 new acquisitions may be considered
 increasing market share and focusing on competitive products

If move from aggressive posture becomes competitive: there is less

environment stability, or less financial stability, or both.

2) Competitive position

Attractive and relatively unstable environment, the company has some

competitive advantage, acritical factor is the company’s financial strength
, the company should look for ways of their attachment,

the solution is the possibility of joining another company, increasing

production efficiency and strengthening cash flow

If we move from an aggressive posture to conservative posture: we do not

have the same competitive advantage or market is not that attractive, or
both

3) Conservative position

a stable industry with low growth rate and financially stable company,

acritical factor is ………………………………………….,

company should protect its …………………………….. and

……………………………………. and think about the possibilities of
…………………….. into more attractive industry and ………………………...
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4) Defensive posture

An unattractive industry,

the company lacks competitive products and financial resources,

acritical factor is the competitiveness

the company should reduce costs

Drawbacks:

 If you have near zero values, the result is not very telling since there
are only 4 postures.
 Should have more hybrid postures
 The factors under each dimension are assumed to be independent
from each other
 The scale is not detailed enough: how do we measure it?
 For a company, are all parameters in a dimension important? It can
depend on the country. Not all dimensions may also be equally
important

Chapter 6: Blue Ocean Strategy

History and background:

• BOS is the simultaneous pursuit of differentiation and low cost.

• The aim of BOS is not to out-perform the thereby competition in the

existing industry, but to create new market space or a blue ocean, making
the competition irrelevant.

6 principles of Blue Ocean Strategy:

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Blue Ocean Strategy Example: Nintendo wii -> opened an uncontested

market space in the gaming console market

Reaching beyond existing markets:

T1: using the Nintendo

T2: knowing what the Nintendo is but not using it.

T3: not knowing what that is. The mother of the person using Nintendo

Value and Costs = value innovation

 Raise: increase performance above average

 Create new factors

Blue ocean strategy tools:

Eliminate-Reduce-Raise Create (ERRC) Grid

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4 Actions framework:
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Reconstructing market boundaries

Across buyer groups: Nintendo wii using reduced complexity of graphics

and control -> could include all age brackets, game enthusiasts, casual
users children, old,

Assignment: 4 to 5 pages

Strategic position of company: choose multiple factors (multiple factors 3

to 7, 4 to 5 is fine) to score the company. Explain the decisions

Last 2 pages for calculations and comments.

To send tomorrow by 23:59