GEST-S-406 Strategy

Course #1 - Introduction
2023
Plan for today
•Personal introductions

•Practical information (classes, references, cases, grades)

•Definition(s) of strategy

•Why should you care about strategy

•What is “winning” and why is winning being redefined

•Introduction to Friday and the “Cola Wars”

Practical information
Class organisation and practical information

• Class organisation:
• This course will be a mix of theoretical concepts and case studies, that will be discussed in class
• For each class, you will need to read and prepare a case study in advance
• This is a highly interactive course that requires attendance to fully understand concepts and case studies
(relying on slides and book will not be sufficient)

• Course schedule:
• Classes will be held in person at ULB
• Please check Time Edit for confirmation of dates & auditorium

• Course materials (e.g. case studies) and information about classes/ exam will be communicated by email

• For specific questions/ request, you can contact us via email:

• lucie.lejeune@bain.com
• francois.faelli@bain.com

BRU GEST-S406 - Industry analysis 3

Practical information
Course materials & resources

• Slides: slides presented in class will be made available, but they do not cover all the content covered in class
and are not meant to be a substitute for class attendance

• Case studies: case studies will be used to illustrate each topic covered in class and will be distributed ahead of
the class

• Reference book: Robert M. Grant, Contemporary Strategy Analysis; relevant pages/ chapters to read will be
communicated

• Others: other books, articles, podcasts will be used for certain classes; some of them are optional but we
highly encourage you to read it if you want to go deeper in some topics, and for your personal interest
• Book: Rebecca Henderson, Reimagining Capitalism in a World on Fire (mandatory)
• Book: Kate Raworth, Doughnut Economics (bonus)
• Podcast: Michael Sandel, Justice (bonus)

Detailed course outline and cases to prepare will be communicated by email

BRU GEST-S406 - Industry analysis 4

Practical information
Grading

• Final written exam (70%):

• The exam will consist of a mix of multiple choice questions and short cases to be analysed using concepts learned in
class (both on case studies covered in class and new ones); indicative split:
• 5-7pts/20 on theory (including theory from slides, reference book and elements from case studies covered in class)
• 10-12pts/20 on new case studies/ application of concepts seen in class
• 2-3pts/20 question on book “Reimagining Capitalism in a World on Fire”

• Group project (30%): by group of 4/5 students, to send by Monday 1/05 – guidelines will follow in 3 weeks

• Class participation (bonus – up to 5%): participation bonus based on the quality of your contributions when
answering/asking questions and offering examples

BRU GEST-S406 - Industry analysis 5

Introduction Planning subject to change
Content that will be covered this semester depending on progress

Class Date Hour Theme Sub-theme Concepts Case Reference book Other supports
1 Monday 6/02 8h-10h Introduction n.a. Definition of strategy n.a. Chapter 1: The
Definition of value creation (I) concept of strategy
Externalities
2 Friday 10/02 8-10h Industry Industry analysis basics Five forces of Porter Coke vs. Pepsi Chapter 3: Industry Harvard Business Review: “Profit
analysis Value chain analysis analysis Pools: A Fresh Look at Strategy”
Profit pool analysis (fundamentals)
3 Monday 13/02 8h-10h Industry analysis – Business definition and Uber Chapter 4: further
digital dynamic boundaries topics in industry and
4 Monday 13/02 10h-12h Industry analysis - ESG Negative externalities Unilever competitive analysis
5 Monday 6/03 8h-10h Business Competitive advantage Competitive advantage Walmart
strategy & basic
competitive
6 Monday 6/03 10h-12h Repeatable model Repeatable model TBD
advantage
7 Monday 13/03 8h-10h Environment New laws of strategy – Allbirds
competition vs. coopetition
8 Monday 13/03 10h-12h Corporate Corporate strategy Conglomerate premium/ Disney
strategy basics discount
9 Monday 20/03 8h-10h Operating model Role of the center Schneider Will be shared by email in the coming days
Incentives Electric
10 Monday 20/03 10h-12h Purpose & Purpose Vision/Mission/Purpose TBD
stakeholders
11 Monday 27/3 8-10h Stakeholder capitalism Staholders Amazon
Definition of value (II)
12 Monday 27/3 10-12h Back up
13 Monday 17/4 8-10h Back up
14 Monday 24/4 8-10h Back up
BRU GEST-S406 - Industry analysis 6
Plan for today

• Personal introductions

• Practical information (classes, references, cases, grades)

• Definition(s) of strategy

• Why should you care about strategy

• What is “winning” and why is winning being redefined

• Introduction to Friday and the “Cola Wars”

BRU GEST-S406 - Industry analysis 7

What is your definition of “Strategy” or “Strategic”

BRU GEST-S406 - Industry analysis 8

What is A proprietary set of integrated

Strategy? actions that serve customers

better than competition

Strategy is: a plan of action designed Choices that set you on a

to achieve a specific goal… path to full potential
It’s flexible and adaptive …
and aligned with the overall mission.
It has clear objectives, actionable The art and science of
allocating scarce resources
steps and metrics of success
ChatGPT

Dynamic and evergreen

BRU GEST-S406 - Industry analysis 9

Two more references: the Collins dictionary and Michael Porter

A strategy is a general plan or set of

plans intended to achieve something, especially over a long period
Strategy is the art of planning the best way to gain an advantage or achieve
success, especially in war.

"...broad formula for how a business is going to compete, what its goals should be,
and what policies will be needed to carry out those goals" and the "...combination of
the ends (goals) for which the firm is striving and the means (policies) by which it is
seeking to get there."

BRU GEST-S406 - Industry analysis 10

To me, doing “Strategy” is answering these two questions

1 2
If your business If your business
doubled, what disappeared, what
would be the cost would humanity
to humanity? miss?
Plan for today

• Personal introductions

• Practical information (classes, references, cases, grades)

• Definition(s) of strategy

• Why should you care about strategy

• What is “winning” and why is winning being redefined

• Introduction to Friday and the “Cola Wars”

BRU GEST-S406 - Industry analysis 12

 To this…

From this…

BRU GEST-S406 - Industry analysis 13

 We are entering a period of accelerating turbulence and more frequent disruptions
Interstate wars Civil wars & rebellions Major pandemics Financial crises Climate change Bubble size indicates relative impact

Turbulence index: 1.4 Turbulence index: 0.5 Turbulence index: 1.5 Turbulence index: 0.8 Turbulence index: 1.6
Global
Crimean First The Great
Financial Crisis
War World War Depression Eurozone
(2007-09)
(1853-56) (1914-18) (1929-33) The Cold War Debt Crisis
Franco-
Cuban War of (2010-12)
Prussian War 9/11 and War
Independence Second
(1870-71) Russian in Afghanistan US-China
Indian (1895-98) World War
Revolution (2001-present) Trade Wars
Rebellion (1939-45)
(1917) Cuban Missile (2018-20)
(1857-58) American- Fall of the Soviet
Russo- Crisis (1962)
Spanish War Union (1991) Hottest
Dungan Turkish War 1930s Vietnam Dot Com
Revolt (1898) Korean War War Soviet-Afghan Crash (2000) decade ever
(1877-78) Tariff
(1862-77) Balkan Wars (1950-53) (1965-72) War (1979-89) recorded
Russian flu (1912-13) Wars
(2010-20)
(1989-90)

Panic Panic
of 1884 of 1893 Japanese Iraq War
Panic of Crash (2003-11)
Paraguayan Spanish Civil Arab-Israeli Cuban
First Boer 1907 (1990)
War War (1936-39) Wars Revolution Polar Ice Melt
War
Taiping (1864-60) (1948-67) (1959) Gulf War Accelerates
(1880)
Rebellion Second Second Sino- (1990-91) (c.2000) COVID-19
The Long Polar Ice Caps
(1850-64) Boer War Japanese War (2020)
Depression Begin Melting Bosnian War
(1899-02) Boxer (1937-45)
(1873-79) Chinese (c.1970) (1992-95)
Rebellion OPEC Arab Spring
The Third Italian Wars of First Sino- (1899-01) Communist HIV/AIDS (2011)
shock
Plague Independence Japanese War Revolution (1981-present)
Russo-Japanese (1973) Syrian War &
(1855-c.1945) (1848-1866) (1894-95) (1946-49)
Wars (1904-05) Refugee Crisis
Irish War of Asian Financial (2011-present)
American Spanish flu End of British Iranian Crisis (1997)
Independence
Civil War (1918-19) Raj (1947) Revolution
(1919-21)
(1861-65) (1979)
1850 1900 1950 2000
BRU GEST-S406 - Industry analysis 14
We’ve seen
tremendous $2.5B+ Percent of the world’s
change in the Number of active Facebook users,
90% data created in the
past two years
past decade a 7x increase in the past decade

$35B Reduction in EV
Size of AWS in 2020,
84% battery costs since
from fledgling idea 10 years ago 2010

3.2B Percent of S&P 500

2010-2020
Number of smartphone users 85% publishing
sustainability/
globally responsibility reports
(42% penetration vs ~10% in 2010) (vs <20% in 2010)
Since 2010 the top global companies
have been reshuffled

New in top 10

Market cap
JAN 2010 JAN 2020
 And business leaders

Electronics
today face a

more
complex
array of
issues Environment and natural resource security
Future of economic progress

than ever before

Source: World Economic Forum

Plan for today

• Personal introductions

• Practical information (classes, references, cases, grades)

• Definition(s) of strategy

• Why should you care about strategy

• What is “winning” and why is winning being redefined

• Introduction to Friday and the “Cola Wars”

BRU GEST-S406 - Industry analysis 18

What is your take on “winning” ?

BRU GEST-S406 - Industry analysis 19

Most companies seek to outgrow their markets
Earnings growth target:

4x
Revenue growth target:

MARKET
2x
Only 1 in ~12 companies is a Sustained Value Creator

100%

29% 31%
22%
9%
Public companies Real revenue growth Real profit growth Positive EVA sum All three criteria -
>$500m revenue in >2x market over 10 >2x market over 10 across 10 years SVCs
2011 and >$1bn year period year period
revenue in 2021
Sustained Value Creation delivers higher TSR in the long run

Long term returns above Sustained Value

Real revenue growth + Real profit growth + cost of capital = Creation

Avg. TSR

# Criteria Met
Sustained Value Creation must be Sustainable into the future

Yesterday Today’s transition The new era

Top- and bottom-line growth ... with a sustainable business Externalities impacting
above market, and positive model, creating positive value customers, employees,
economic value added for customers, employees, environment and societies
environment and societies will be priced in
Externalities measure your hidden costs on the environment & society
Market value/ price
Externalities
Environment
−Negative: climate change,
biodiversity loss etc.
−Positive: bee pollination,
healthy travel (biking) etc.
Economic/
social
−Negative: child labor, occu-
pational risks etc.
−Positive: job creation,
education etc.
Health
−Negative: obesity, heart
disease, depression etc.
−Positive: healthy lifestyle,
herd immunity etc.
Do you know who this is?

David Ricardo

• 1772-1823

• Advocate of free trade

• Comparative advantage theory

Food system’s negative externalities are higher than its market value
I N D I C AT I V E

FOOD SYSTEM OVERALL

Starting from the market value and taking out all

the health, environment and economic hidden
costs, the food system is value destructive

Note: Natural capital costs is referring to land degradation, water scarcity, biodiversity loss and over-exploitation | Source: Food and Land Use Coalition “Growing Better: Ten critical transitions to transform food and land use”, 2019
Plan for today

• Personal introductions

• Practical information (classes, references, cases, grades)

• Definition(s) of strategy

• Why should you care about strategy

• What is “winning” and why is winning being redefined

• Introduction to Friday and the “Cola Wars”

BRU GEST-S406 - Industry analysis 27