Management 1

02.10.
2019
Theory and Practice of Strategic

Management:
The Environnement
Professor: Thomas Straub
Theory and Practice of Strategic Management: The Environnement - © Professor Thomas Straub
Grüezi mitenand !
Bonjour à toutes et à tous!
Welcome everybody!
Theory and Practice of Strategic Management: The Environnement - © Professor Thomas Straub 2
1
02.10.2019
Contact
Thomas Straub, PhD
Professor of International Management

Vice dean - Director of the Executive
Education
Faculty GSEM – Geneva School of

Economics and Management
University of Geneva
Email: Thomas.Straub@unige.ch
Who are you …. ?
• Name
• Professional experience
• Reasons for studying in this Institution?
• Where do you want to work afterwards?
2
02.10.2019
What is strategy ?
Why strategy is it important ?

Theory and Practice of Strategic Management: The Environnement - © Professor Thomas Straub 1-5
Literature
Title:
Exploring corporate strategy
Authors:
Gerry Johnson,
Kevan Scholes,
Richard Whittington
8th, 9th or 10th Edition (without cases)
Pearson Education
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Teaching methods
Teaching
Structure Case studies
Mini Cases
Models, approaches and concepts

Methods Tools and methods
Practical Examples
Reading
Course requirements
Participation in class
Introducing Strategy
Professor : Thomas Straub
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Learning Outcomes
 Understand the characteristics of strategic decisions and

what is meant by strategy and strategic management,
distinguishing them from operational management
 Understand how strategic priorities vary by level: corporate,
business, and operational
 Understand the basic vocabulary of strategy
 Understand the three key elements of the Exploring
Corporate Strategy strategic management model
 Understand the kinds of people involved in strategy –
managers, in-house specialists and strategy consultants –
and the work they do
What is strategy (M.E. Porter)?
According to Porter (1996)
Operational effectiveness is not strategy because it is simply

performing similar activities (better) than rivals.
Strategy (or strategic positioning) is performing different activities from

rivals, or performing similar activities in different ways.
Recommended reading: What is strategy? (Porter,

1996)
https://www.youtube.com/watch?v=ibrxIP0H84M
© Ecole hôtelière de Lausanne

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02.10.2019
What is strategy (M.E. Porter)?
1. Strategy is the creation of a

unique and valuable
position, involving a
different set of activities
2. Strategy is making
Strategy is a race to tradeoffs in competing, and
one ideal position choosing what not to do
3. Strategy involves creating

fit among a company’s
activity

What is Strategy?
Strategy is the direction and scope of an

organisation over the long term, which
achieves advantage in a changing
environment through its configuration of
resources and competences with the aim
of fulfilling stakeholder expectations.
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Characteristics of Strategic Decisions
 Long-term direction
 Scope of an organisation’s activities
 Competitive advantage
 Strategic fit with business environment
 Organisation resources and competences
(capability)
 Values and expectations of power players
Implications of Strategic Decisions
 Complexity  Integration
 Uncertainty  Relationships and
networks
 Operational
decisions  Change
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Levels of Strategy
CORPORATE
Corporate Strategy HEAD OFFICE
Business Strategy Division A Division B Division C
R&D R&D R&D

HR HR HR
Finance Finance Finance
Functional Strategy Operations Operations Operations
Marketing Marketing Marketing
19/09/2017 15
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Corporate
Strategy: Audi
What is a Strategic Business Unit?
A strategic business unit (SBU) is a

part of an organisation for which
there is a distinct external market for
goods or services that is different
from another SBU.
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Example of strategic reflexions
Vocabulary of Strategy
 Mission  Strategic capability

 Vision  Strategies
 Goal  Business model
 Objective  Control
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Vocabulary of Strategy: Nokia
Vision/Mission
Connecting is about helping people feel close
to what matters. Wherever, whenever, Nokia
believes in communicating, sharing, and in
the awesome potential in connecting the 2
billion who do with the 4 billion who don’t.
Vocabulary of Strategy:
E.g. Kingston University
Mission
To promote participation in higher education,
which it regards as a democratic entitlement; to
strive for excellence in learning, teaching, and
research; to realise the creative potential and fire
the imagination of all its members; and to equip
its students to make effective contributions to
society and the economy.
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World Vision International

Who we are
Our vision for every child, life in all its fullness; Our prayer for every
heart, the will to make it so
World Vision is a Christian relief, development and advocacy

organisation dedicated to working with children, families and
communities to overcome poverty and injustice.
Inspired by our Christian values, we are dedicated to working with the
world’s most vulnerable people.
We serve all people regardless of religion, race, ethnicity or gender.
Our Mission
World Vision is an international partnership of Christians whose mission
is to follow our Lord and Saviour Jesus Christ in working with the poor
and oppressed to promote human transformation, seek justice and bear
witness to the good news of the Kingdom of God.
http://www.wvi.org/
What is Strategic Management?
Strategic management includes

understanding the strategic position
of a organisation, making strategic
choices for the future, and managing
strategy in action.
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Two views on Strategy

Economic View Resource-Based View
Superior performance Internal firm resources

is an outcome of that constitute superior
market positioning and performance in the
first-mover advantages. marketplace.
Focus: Focus:
Environment and Resources and
competition competences
Deliberate strategy Emerging strategy
Joe Bain (1956): Barriers to Penrose (1959): Firm

New Competition performance varies in same
(S-C-P paradigm) industry

Chapter Summary
 Strategy as direction and scope of an organisation
over the long term
 Strategic decisions made at multiple levels in an
organisation
 Strategic position, strategic choices, and strategy
in action as the major elements of strategic
management
 Two primary streams include strategy content and
strategy process
 Strategy is a kind of job
 Strategic issues best seen through several lenses
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Case Example: Electrolux
1. Which issues that Electrolux is facing

are strategic?
2. What levels of strategy can you identify?
The Strategic Process

The manager needs to define the
positioning of a company
according to: Part 1. Diagnosis
 its external environment
 its internal capacities
 its stakeholders
Part 3.
Execution
Part 2.
Formulation
Based on the diagnosis, the The manager needs to

manager determines the implement the selected strategy
different options at: according to:
 the corporate level  Controls, KPI
 the business unit level  Levels of implementation
 the operational level  Required resources, changes
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02.10.2019
The Environment
Professor : Thomas Straub
Learning Outcomes
 Analyse the broad macro-environment of organisations in

terms of political, economic, social, technological,
environmental and legal factors
 Identify key drivers in this macro-environment and use these
key drivers to construct alternative scenarios with regard to
environmental change
 Use five forces analysis in order to define the attractiveness
of industries and sectors for investment and to identify their
potential for change
 Identify strategic groups, market segments, and critical
success factors, and use them in order to recognise
strategic gaps and opportunities in the market
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02.10.2019
Why do we need to understand

the environment?

Did you know 2019
16
02.10.2019
The past decades The future decade?
DVDs Public pay Photo Keys External cash

phones film hard drive
Fax Phone Business Remote Computer

Encyclopedias
machines books cards controls Mouse
Alarm Gas Post wires

Road maps CDs
clocks stations offices

Understanding the environment….
“I used to think that the biggest challenge in developing strategy was understanding
the external environment, properly gauging how industry structure was changing,
understanding the way competitors were moving, and so on….”
A discussion with Michael Porter (1999),

Organizational Dynamics.
Recommended reading

17
02.10.2019
The role of strategy
Strategy is a mediator between the firm and the environment
(Mintzberg, 1986)

Understanding the environment…and reactions

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02.10.2019
Layers of the business environment
Organisation
The Macro-Environment
Key
PESTEL
drivers
Scenarios
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02.10.2019
PESTEL Framework
Political Economic
Social Technological
Environmental Legal
PESTEL: Economic / Political
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02.10.2019
Example PESTEL: airline industry
Political Economic
•Government support
•National growth rates
•Security controls
•Fuel prices
•Restrict migration
Social Technological
•Fuel-efficient engines
•Rise travel elderly
•Security check technologies
•Student international study exchanges
•Teleconferencing for business
Environmental Legal
•Noise pollution control
•Restrictions on mergers
•Energy consumption controls
•Preferential airport rights for some carriers
•Land for growing airports
What Are Key Drivers for Change?
Key drivers for change are

environmental factors that are likely
to have a high impact on the success
or failure of strategy.
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02.10.2019
What is a Scenario?
Scenarios are detailed and plausible

views of how the business
environment of an organisation might
develop in the future based on key
drivers for change about which there
is a high level of uncertainty.
Industries or Sectors
Competitive Industry
forces life cycle
Competitive
cycles
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02.10.2019
Sector: Football Clubs
The Five Forces Framework
Potential
entrants
Competitive
Suppliers Buyers
rivalry
Substitutes
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The Threat of Entry: Barriers to Entry
Scale and experience
Access to supply and distribution channels
Expected retaliation
Legislation or government action
Differentiation
Certifications
Why Are Substitutes a Threat?
Substitutes can reduce demand

for a particular class of products as
customers switch to alternatives.
• Price/performance ratio
• Extra-industry effects
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The Power of Buyers
Are buyers concentrated?
What are the costs of switching?
Does backward vertical integration exist?
Does differentiation exist?
Novartis: Who are the Buyers?
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The Power of Suppliers
Are suppliers concentrated?
What are the costs of switching?
Does forward vertical integration exist?
Does differentiation exist?
Degree of Competitive Rivalry
 Competitor balance
 Industry growth rate
 High fixed costs
 High exit barriers
 Low differentiation
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02.10.2019
Managerial Implications
 Which industries should we enter or

leave?
 What influence can we exert?
 How are competitors differently affected?
Other Issues: Five Forces Analysis
 Define the ‘right’ industry

 Determine whether industries are
converging
 Identify complementary products
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02.10.2019
The Industry Life Cycle
What is Hypercompetition?
Hypercompetition occurs where the

frequency, boldness and
aggressiveness of dynamic
movements by competitors
accelerate to create a condition of
constant disequilibrium and change.
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02.10.2019
Competitors and Markets
Strategic Market
groups segments
Strategic
customers
What are
Strategic Groups?
Strategic groups are

organisations within an industry
with similar strategic
characteristics, following similar
strategies or competing on
similar bases.
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02.10.2019
Characteristics for Identifying

Strategic Groups
 Scope of activities  Resource
commitment
 Extent of product
diversity  Extent of branding
 Extent of geographic  Marketing effort
coverage
 Extent of vertical
 Number of segments integration
served
 Product quality
 Distribution channels
 Technological
leadership
 Organisational size
Strategic groups in the Indian

pharmaceutical industry
Source:
Developed from R. Chittoor and S. Ray, ‘Internationalisation paths of Indian pharmaceutical firms: a strategic group analysis’, Journal of International
Management, vol. 13 (2009), pp. 338–55
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02.10.2019
Benefits of Identifying
Strategic Groups
Understanding competition
Analysis of strategic opportunities
Analysis of mobility barriers
What is a Market Segment?
A market segment is a group of

customers who have similar needs
that are different from customer
needs in other parts of the market.
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02.10.2019
Some Bases of Market Segmentation
Blue ocean thinking

• ‘Blue oceans’ are new market spaces where
competition is minimised.
• ‘Red Oceans’ are where industries are already well
defined and rivalry is intense.
• Blue Ocean thinking encourages entrepreneurs and
managers to be different by finding or creating market
spaces that are not currently being served.
• A ‘strategy canvas’ compares competitors according
to their performance on key success factors in order to
develop strategies based on creating new market
spaces.
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02.10.2019
Strategy canvas
Strategy canvas for electrical components companies

Source: Developed from W.C. Kim and R. Mauborgne, Blue Ocean Strategy, 2005, Harvard Business School Press
What is a Strategic Customer?
A strategic customer is the

person(s) at whom the strategy is
primarily addressed because they
have the most influence over which
goods or services are purchased.
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02.10.2019
What are Critical Success Factors?
Critical success factors (CSFs) are

those product features with which a
organisation must outperform the
competition because they are
particularly valued by a group of
customers.
Chapter Summary
 Environmental influences can be thought of as layers around
an organisation
 The macro-environment can be analysed in terms of
PESTEL factors
 Industries and sectors can be analysed in terms of Porter’s
Five Forces model
 Industry changes can be analysed in terms of the industry
life cycle, hypercompetitive models of competition, and the
comparative five forces radar plots
 The inner layer of the environment can be analysed with
strategic group analysis, market segment analysis, and the
strategy canvas
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02.10.2019
Key Debate: How Much Does

Industry Matter? (1)
1. There is a debate over whether strategy making
should be externally or internally oriented
2. Porter’s work suggests that industry factors
influence profitability more than firm-specific
factors
3. But, this varies by industry

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02.10.2019

1. Porter & McGahan’s study suggests that

some industries influence member’s firms
profitabilities more than others.
2. Why might some industries have a larger
influence on their members’ profitability
than others?
Case Example:
The European Brewing Industry
1. Complete a PESTEL analysis of the European
brewing industry.
2. Complete a five forces analysis for the industry.
3. How will the environment affect each of different
strategic groups?
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02.10.2019
New Trends:
Summer Beer
4 Breweries share the world of beer
http://www.tv5monde.com/cms/chaine-francophone/programmes/p-80-s2-z73-lg0-BRASSERIE-DU-CARDINAL-LE-GOUT-AMER-DU-CAPITALISME.htm?prg_id=625145&
37

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02.10.

Theory and Practice of Strategic

Thomas Straub, PhD

Professor of International Management

Faculty GSEM – Geneva School of

Who are you …. ?

• Reasons for studying in this Institution?

• Where do you want to work afterwards?

Why strategy is it important ?

8th, 9th or 10th Edition (without cases)

Models, approaches and concepts

 Understand the characteristics of strategic decisions and

What is strategy (M.E. Porter)?

According to Porter (1996)

Operational effectiveness is not strategy because it is simply

Strategy (or strategic positioning) is performing different activities from

Recommended reading: What is strategy? (Porter,

© Ecole hôtelière de Lausanne

What is strategy (M.E. Porter)?

1. Strategy is the creation of a

3. Strategy involves creating

© Ecole hôtelière de Lausanne

Strategy is the direction and scope of an

Characteristics of Strategic Decisions

Implications of Strategic Decisions

Business Strategy Division A Division B Division C

R&D R&D R&D

What is a Strategic Business Unit?

A strategic business unit (SBU) is a

Example of strategic reflexions

 Mission  Strategic capability

Vocabulary of Strategy: Nokia

World Vision International

World Vision is a Christian relief, development and advocacy

We serve all people regardless of religion, race, ethnicity or gender.

What is Strategic Management?

Strategic management includes

Two views on Strategy

Superior performance Internal firm resources

Joe Bain (1956): Barriers to Penrose (1959): Firm

© Ecole hôtelière de Lausanne

Case Example: Electrolux

1. Which issues that Electrolux is facing

2. What levels of strategy can you identify?

The Strategic Process

Based on the diagnosis, the The manager needs to

 Analyse the broad macro-environment of organisations in

Why do we need to understand

© Ecole hôtelière de Lausanne

Did you know 2019

The past decades The future decade?

DVDs Public pay Photo Keys External cash

Fax Phone Business Remote Computer

Alarm Gas Post wires

© Ecole hôtelière de Lausanne

Understanding the environment….

A discussion with Michael Porter (1999),

© Ecole hôtelière de Lausanne

The role of strategy

Strategy is a mediator between the firm and the environment

© Ecole hôtelière de Lausanne

Understanding the environment…and reactions

© Ecole hôtelière de Lausanne