Theme 1: Basic concepts of strategy

Strategy is the coordination of actions in order to achieve business objectives

Industrial strategy: is the coordination of actions at the industrial level in order to achieve production
or productivity objectives.

Sales strategy: is the coordination of actions at the sales level in order to achieve sales volume
objectives.

Competitive advantage: an advantage over competitors gained by offering greater value to the
consumers

Business strategy is concerned about how the firm competes within a market or industry

Functional strategy is detailed deployment of resources at the operational level

Strategic planning: management procedure that consists on setting objectives to be achieved over a
time table and providing resources for it.

 Maneuver concerns the operational level

 Tactics concerns the organizational level
 Strategy concern the corporate level

Mission statement/vision statement

Mission statement is a brief description of a firm's fundamental purpose (why does it exist?)

 It's the only way of making sure that everyone understand the business
 It's often the result of group consensus efforts
 It's a part of company's public face

Vision statement is a description of what a firm wants to achieve in the mid and long term future

Business model: is how the company creates value for the shareholders.

Business plan: is the forecast evolution of the activity of the company

Break event point: is a point at which the company starts making as much money as it has invested.

Strategic segmentation: is the act of dividing the whole company into homogeneous units. This units
are called SBU (subpart of the company which is possible to allocate or withdraw resources from it)

Marketing segmentation is a process of dividing a market or a population into segments with similar
characteristics
Theme 2: Strategic diagnosis

Two dimensions of strategic diagnosis:

Internal assessment: what are the strengths and weaknesses in relation to the strategic project?

External assessment: what are the threats and the opportunities related to the environment

1 – External assessment
PESTEL analysis: tool used to analyses the risk of the environment of the company based on 6
dimensions: Political, economic, social, technological, environmental, legal

The scope of industry/market structures: tool that analyzes the market structures which are 4:

 Competition: many firms, low entry/exit barriers, homogenous products, low lobbying
effects, very high strategy effect
 Oligopoly/Duopoly/Monopoly: 3 to one firm, high entry/exit barriers, potential for products
differentiation, high lobbying effect, low strategy effect, high level of information asymmetry

The S curve life cycle: At first, the growth is slow, and then it develops more rapidly, as the company
gain more demand…

Porter's model: tool that analyzes market competition based on 5 actors: rivalry among existing
firms, bargaining the power of suppliers and buyers. And facing the threat of new entrants,
substitutes. In fact we have two types of competitive profiles:

 Convexity: high level of competitiveness  need for regulations

 Concavity: low level of competitiveness

External factor evaluation (EFE) matrix: strategic management tool used for the assessment of the
current strategy efficacy and efficiency. To make it we follow these steps:

1. Make a list of the external factors and divide it into two groups: opportunities and threats
2. Assign weight to each factor (value between 0 and 1)
3. Assign a rating to each factor based on the company's performance to the factor( between 1
and 4)
4. Multiply weight by rating to get weighted scores
5. Add all weighted scores to get the EFE score
 If the EFE score is close to 1. It means that the company is not avoiding threats and making
use of the opportunities
 If the EFE score is close to 4. It means that the company doing good on avoiding threats and
taking advantage of the opportunities

Resources, capabilities, skills and core competence

Resources are assets employed in the activities and processes of an organization, they can tangible or
intangible, obtained internally or externally. They fall within several categories: human, financial,
physical, informational.

Strategic resources: are the ones that guarantee the acquisition of a competitive advantage.
Core competences: are combinations of resources and capabilities which are unique to an
organization and which are responsible for generating its competitive advantage.

Resources + capabilities = core competences

! : Not all capabilities are core competences. Only those that add greater value than those of the
competitors

Internal assessment
SWOT ANALYSIS: tool that analyzes the strengths/weaknesses, opportunities/threats of an
organization.

 Strengths: refers to a capacity that the organization has in house. This capacity must
influence the acquisition of a competitive advantage
 Weaknesses: refers to an insufficiency of which the company suffers internally
 Opportunities: refers to a part of the market from which the company can benefit through its
CA.
 Threats: refers to constraints in the market that may attempt the survival of the
organization.

TOWS (SWOT level 2):

 Strengths/opportunities: attack strategy, taking advantage of strength in favor of the

opportunity
 Weaknesses/opportunities: defense strategy, overcoming a weakness by taking advantage of
opportunity
 Strengths/threats: adjustment strategy, taking advantage of strength to face the threat
 Weaknesses/threats: survival strategy, minimization of weakness, and avoidance of the
threat

! : A company's weaknesses are the competitors 'strengths, and vice versa. This is called the crossed
effect. Also the competitors may have similarities in the external side (opportunities and threats)

Porter's value chain: a tool that analyzes that activities which results the final value of a business's
product. In fact it divides those activities into

Support activities: HR, Technology development…

Primary activities: marketing, operations…

BCG matrix: portfolio analysis used in evaluating an organization's balance of its SBUs
Funding flow principal (look at the course)

Internal factors evaluation (IFE):

1. Make a list of internal factors
2. Assign weight to each one of these factors (ranges from 0 to 1)
3. Assign a rating from 1 to 4 to each factor based on if this factor is a weakness or strength for
the company (a major weakness is represented by 1, minor by 2. Minor strength by 3, Major
by 4)
4. Multiply each weight to its rating to get the weighted score
5. Sum all the weighted scores to get The IFE score
  The more the IFE score is close to 1. The more the internal situation is weak
 The more the IFE score is close to 4. The more the internal situation is strong.

Theme 3: Corporate strategy

Corporate strategy: the way a company creates value through the coordination and configuration of
its multimarket activities

Diversification strategy: Diversification strategies are used to expand firms' operations by adding
markets, products, services… to the existing business

Concentration strategy: a strategic approach in which the company focuses on a single market or
product

Disengagement strategy: used to reduce diversity. This strategy is often used to cut expenses with
the goal of becoming a more stable business

Reasons for diversification

 Growth:
 Risk spreading: spreads risk among activities
 Economy of scales: sharing tangible and intangible resources and transferring tangible
capabilities across businesses

Basic concepts of diversification

The more the company moves away from its core business, the higher the level of diversification

Two type of diversification:

 Concentric: happens when a firm adds related products or markets

 Conglomerate: occurs when a firm diversifies into areas that are unrelated to its core
business

Two modes de diversification:

 Internal: happens when a company market existing products into new markets. Or market
new products into existing markets.
 External: happens when the company enters a new area of business by purchasing another
company or business unit

Two directions of diversification:

 Vertical: when a company expands its business in the forward or backward direction. In fact
forward integration means that company enters the business of distribution or selling…
whereas backward integration means that the company enters the business of producing
raw materials and inputs
 Horizontal: it means adding paroral products/service to the existing products/services line