What is Strategy?

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Create Strategy?
• To achieve superior performance, companies compete for resources:
• New ventures: financial and human capital
• Existing companies: profitable growth
• Charities: donations
• Universities: the best students and professors
• Sports teams: championships
• Celebrities: media attention
Analysis: Diagnosis of the competitive challenge
Formulation: Guiding policy to address the competitive challenge
Implementation: Set of coherent actions to implement the firm’s guiding
policy

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What is competitive advantage?
• Competitive Advantage:
• superior performance relative to industry competitor
• Always relative, not absolute
• Compare firm performance to a benchmark (industry competitors, average)

• Strategic positioning:
• Stake out a unique position within an industry to Create
• Value for customers while controlling costs

• The greater the difference between value creation and cost:

• the greater the firm’s economic contribution
• the more likely it will gain a competitive advantage
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Strategic positioning requires trade-offs
Managers must make conscious trade-offs

•How to allocate resources

•Which activities to pursue

Competitive advantage has to come from:

•Performing different activities or

•Performing the same activities differently than rivals

Example: Walmart

•Strategic activities strengthen its position as cost leader

•Big stores, low overhead, low wages, low prices

Vs Nordstrom: Differentiator, Professional salespeople / luxury setting

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Sustained competitive advantage

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Tesla
Analyze environments
• Vision: “accelerate the world’s Implement a set of coherent actions
transition to sustainable transport.” • Ramp-up production volumes
• Achieve economies of scale
• Goal: zero-emission electric vehicles
• Cutting edge robotics
that are attractive and affordable
• Secure steady supply of batteries
• Network of charging stations
Formulate effective guiding policy • Sharing of technology
• Cost-competitive mass-market vehicle
• $5B investment in lithium-ion battery
plant in Nevada
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Why strategy evolves over time
A strategy changes over time as:
Competitors make unexpected moves
The needs and preferences of buyers change
New market opportunities emerge
Managers develop new ideas to improve the strategy
Evidence mounts that the strategy is not working well
A strategy evolves:
Incrementally or dramatically
Proactively and adaptively

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What strategy is not
1. Grandiose statements
Example: “We will be No. #1”

2. A failure to face a competitive challenge

Example: Blockbuster didn’t address Netflix, Redbox, Amazon Prime,
and Hulu

3. Operational effectiveness, competitive benchmarking, tactical tools

Examples: “pricing strategy," “operations strategy," “brand strategy”
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Vision, Mission and Values
The first step in gaining and sustaining a competitive advantage

Vision:
What do we want to accomplish ultimately?
Mission:
How do we accomplish our goals?
Values:
What commitments do we make, and what guardrails do we put in place, to
act both legally and ethically as we pursue our vision and mission?

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 Strategic Management
• David Zhu - Strategic management
• Key Questions
1. What kind of business is the company involved with?
2. What kind of future does the company’s leaders
expect?
3. What are the company’s values and beliefs?

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 • Mission
• Specifies its present business or businesses and the customers it intends to
serve
• Vision
• Enduring word picture of what a firm wants to be and expects to achieve in
the future
• Value
• Are the fundamental beliefs upon which a business and its behavior are
based. They are the guiding principles that the company uses to manage its
internal affairs and its relationship with external stakeholders.
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 Who determines the company’s mission, value
and beliefs? What do strategic leaders do?

• Determine strategic direction and develop a

long-term vision
• Effectively manage resource portfolio
• Establish balanced organizational controls
• Sustain an effective organizational culture and
emphasize ethical practices
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 How do businesses gain and sustain competitive
advantage?

Who are the stakeholders?

What is the importance of a firm's stakeholders in

forming strategies?

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