Strategy Samenvatting

PowerPoint 3
PESTEL = Political, Economic, Social, Technical, Environmental, Legal.

- Key drivers for change

- Reduce uncertainty for different scenarios
- The interaction and combined effort of forces brings structural changes

Industry Strategy = Competitive Strategy

Meso level: Intensity of competition between companies.

- Competitive power of enterprise within industry/sector

Five Competitive Forces (Porter’s five forces):

These five forces measure the attractiveness of an industry/market.

Micro Level: Level of scale between industry and enterprise.

- Strategic Group: Group of comparable companies

Environmental Vision: ‘Outside-in’: Environment → Organisation

- Strategy: Focus on strategic fit
- Positioning in/adaptation to environment
PowerPoint 4

Resource Based View (RBV): Core Competencies are being used to gain a competitive
advantage.

Organisation with strategic capability

- Have unique resources and use their core competencies to gain a competitive
advantage.
- Have the ability to bind and attract customers.

“Unique resources and core competencies provide the basis to outperform competitors or
demonstrably provide better value for money. They cannot be imitated or are difficult to
imitate.”

Unique Resources → VRIO (Value, Rarity, Inimitability, Organization)

Dynamic Capabilities: Being able to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments.

Benchmarking:
“An instrument to increase competitive power”
- Competitive position is relative.
- Learning from own performance or from those of competitors.
- Benchmarking: comparing and improving.

Forms of benchmarking:
- Internal: Performance of own organization in the past
 - External: Norms/standards in industry
- Best practices benchmarking

Resources Vision: ‘Inside-out’: Organisation → environment

- Competencies can change an industry
- Revolution: better to attack than to defend!
Integration with environmental vision in SWOT
- Strategy: Interaction of the organization and the environment.

PowerPoint 5
Business Level Strategy

Strategic Position: Activities that allow a firm’s capabilities to provide the best defense
against competitors (Porter)

Outside in → Strategic fit

Inside out → Strategic stretch

Business Level Strategy

- One Market
- Competitive advantage (superior value)

Four Main/Generic Strategies:

Outside In:
- External View
- Outperforming Competitors
- Supply on Demand
- Market pull

Inside Out:
- Internal View
- Use of resources in such a way to outperform competitors
- Resources are the source for a differentiation strategy
- Technology Push
Resource Leverage (Inside Out)
- Using resources to create a sustainable competitive advantage
- Using resources to facilitate development of core competencies:
1. Concentrate Resources
2. Accumulate Resources
3. Complement Resources
4. Conserve Resources
5. Recover Resources

Pioneer vs. Follower

Why do fast followers often beat first movers?

- Better Business Model
- Better Market Position
- Better Timing
- Better Platform Choices
- Better Management

Business Model
“Describes the rationale of how an organization creates, delivers and captures value.”

A business model is the logic of the firm and connects strategy with operations.

Components of a Business Model:

- Customer Segments
- Value Proposition (Offer)
- (Distribution) Channel(s)
- Customer Relationships
- Revenue Streams
 - Key Resources
- Key Activities
- Key Partners
- Cost Structure

Value Proposition: “A value proposition is a promise by a company to a customer or market

segment. It is an easy-to-understand reason why a customer should purchase a product or
service from that specific business.”

Commercial Value Proposition (CVP) vs. Impact Value Proposition (IVP)

CVP: “Great coffee, fresh food, personal service.”
IVP: “Sustainable employment for people who have been long-term unemployed.”

Customer Value: Making a customer better off, adding value to their life with your product
or service.

PowerPoint 7
Corporate Level Strategy

How to manage multi-business firms with a corporate composition? → Corporate

Management

Corporate Parent

Creating Value:
- Better allocation of resources
- Vision and control
- Facilitating
Destructing Value
- Costs head office: Bureaucracy and Inertia (slowness)
- Bureaucracy complexity
- Ambition managers: Kingdoms

Portfolio Analysis
- Analysis of Profitability
o Relation between enterprise and market
o Allocation of resources to SBUs (strategic business units)
o Recommendations for strategy of SBUs
- Instruments to establish a portfolio
o BCG-Matrix
o GE-McKinsey
BCG Matrix

Stars: Market Leaders in high growth rate markets → Resources should be invested to
maintain/increase leadership position.

Cash Cows: High market share in low growth rate markets, low investments needed → Cash
cows should be defended: Hold sales and/or market share. Excess cash should be used to
support stars, selected problem children and new product development.

Problem Children: High growth market with low market share → The choice is either to
increase investment to turn the problem child into a star or withdraw support either by
reducing or terminating investments in a product (harvest). Or find a small market segment
(niche) where dominance can be achieved.

Dogs: Weak products that compete in low growth markets → Cash dogs might not yield any
benefit or profit for the organization. Harvest or focus on a defendable niche.

Control Styles
Financial: Business units are autonomous and set objectives are financial.
Strategic: Relationships are closer between the parent and SBUs and the objectives are
strategic.
Strategic Planning: Business units have little autonomy and there is direct supervision from
the corporate parent.

Growth Strategies
In order to preserve a competitive advantage a number of strategies can be used:

Price Strategies: These are difficult to maintain as there is a continuous search for lower
costs.
Differentiation Strategies: The goal is to remain unique. When a company is truly unique it is
difficult to imitate their core competencies. One downside of following a differentiation
strategy is the imperfect mobility of resources.
Ansoff’s PMC Matrix: Growth Directions
According to this matrix there are two options, exploration of exploitation of a market
and/or product.

Diversification
Related
- Vertical: forward or backward integration in the value chain
- Horizontal: expansion in related direction/competitors

Unrelated
- Conglomeration: new markets and/or products no relation to own industry

Result diversification
- Advantages of spreading risks vs. core activities
- Risk

Strategic Alliances and M&A

Horizontal: Competitors
Vertical: Customers, Suppliers

A strategic alliance is a partnership or a voluntary agreement between two companies. In

this voluntary agreement information, facilities and services can be exchanged and/or
shared. As well as that products, technologies and services can be co-developed.

Conditions for an alliance:

- It must create value.
 - It has to be consistent with their strategy.
- There needs to be trust between the companies in the alliance.

Types of commitment:
- Level and time commitment
- Investment commitment
o Equity agreements: equity joint ventures and lesser equity agreements.
o Non-equity agreements: Joint R&D agreements, customer-supplier relations,
bilateral technology flows (cross-licensing), unilateral technology flows
(licensing).

Growth Methods
- In house development
- Network creation by alliances
o Informal/temporary (e.g. in projects)
o Contractual (e.g. licensing/franchising)
o Financial/legal (e.g. joint venture)
- Integration by acquisition or merger
o Value creation
o Recently: R&D ⇒ A&D

Merger: Integration of more or less equal organizations

Acquisition: Takeover of ownership

Challenges for acquisitions:

- Realization of the expected synergy between the acquiring and acquired company.
- Other challenges are:
o Consistency strategy
o Quality of the decision process
o Ability to integrate
o Learning capacity

Integration
- Strategic Interdependence: The sharing of heterogeneously distributed strategic
resources.
- Organizational Autonomy: Self-governing in deciding about goals and the direction
the company goes in.