WEEK 3

Key Concepts & Definitions from Strategic Management Week 3

Strategic Management Process

1.​ External Environment Analysis (Opportunities & Threats)

○​ Uses models like Porter’s Five Forces and Industry Analysis (I/O
Perspective).
2.​ Internal Environment Analysis (Strengths & Weaknesses)
○​ Focus on Resource-Based View (RBV), Capabilities, and
Competencies.
3.​ Strategy Formulation
○​ Corporate, Business, and Functional Strategies.
4.​ Strategy Implementation
○​ Organization structure, systems, processes.
5.​ Evaluation & Adjustment
○​ Continuous improvement cycle.

Industry vs. Resource-Based View of Strategy

I/O Model (Industrial Organization)

●​ Emphasizes industry selection over internal decisions.

●​ Assumes similar resources across firms, leading to similar strategies.
●​ Mobility of resources across firms reduces long-term differentiation.

Resource-Based View (RBV)

●​ Internal resources & capabilities define strategy.

●​ Resources = Tangible + Intangible assets.
●​ Capabilities = Ability to use resources effectively.

Types of Resources

Tangible Resources

●​ Physical: Factories, equipment.

 ●​ Financial: Cash, borrowing capacity.
●​ Technological: R&D facilities, patents.
●​ Organizational: Information systems.

Intangible Resources

●​ Brand Reputation: Apple, Tata.

●​ Human Capital: Skilled employees.
●​ Innovation & Knowledge: R&D, Intellectual property.
●​ Culture & Relationships: Strong networks, goodwill.

Capabilities & Competencies

●​ Capability = Ability to combine resources effectively.

●​ Competence = Activity performed consistently well.
●​ Distinctive Competence = Better than competitors.
●​ Core Competence = Key to firm’s competitive advantage.

VRIN Framework for Sustainable Competitive Advantage

A resource/capability must be:

1.​ Valuable – Provides value to customers.

2.​ Rare – Not widely available.
3.​ Imperfectly Imitable – Difficult to copy.
4.​ Non-Substitutable – No direct alternative.

Barriers to Imitation:

●​ Physical Uniqueness: Exclusive resources (e.g., oil reserves).

●​ Path Dependency: Historical development (e.g., Johnson & Johnson's baby
care expertise).
●​ Causal Ambiguity: Competitors unsure what makes success possible (e.g.,
3M's innovation process).
●​ Scale Deterrence: High entry barriers (e.g., preemptive investments).

Dynamic Capabilities
 ●​ Ability to adapt and modify existing capabilities.
●​ Example: Toyota’s Hybrid Tech Innovations.
●​ Key components:
○​ Timely responsiveness.
○​ Flexible product innovation.
○​ Resource reallocation.

Value Chain Analysis

●​ Identifies activities that add value to a product/service.

Primary Activities

1.​ Inbound Logistics – Raw material handling.

2.​ Operations – Production/Manufacturing.
3.​ Outbound Logistics – Distribution/Delivery.
4.​ Marketing & Sales – Branding, Advertising.
5.​ Service – After-sales support.

Support Activities

1.​ Procurement – Sourcing & purchasing.

2.​ Technology Development – R&D.
3.​ Human Resource Management – Hiring, training.
4.​ Firm Infrastructure – Planning, finance, legal.

Competitive Advantage from Value Chain Analysis:

●​ Cost Reduction – Optimize processes.

●​ Customer Willingness to Pay – Improve service & branding.

Benchmarking

●​ Comparing a firm’s practices with best industry practices.

●​ Focuses on:
○​ Best-in-class processes.
○​ Cost efficiency.
○​ Performance improvements.
Competitive Positioning within Industry Value Chain

1.​ Choke Points – Strategic control over distribution (e.g., Microsoft Windows in
PCs).
2.​ Industry Profit Pools – Identifying where profit accumulates in an industry.

Ethical & Unethical Competitive Intelligence

●​ Legal: Public data, trade fairs.

●​ Unethical: Bribery, industrial espionage.
●​ Grey Areas: Talking to suppliers/customers.

Sample MCQs

(Answers provided at the end)

Basic Strategic Management Concepts

1.​ Which of the following is NOT part of the strategic management process?​
a) Strategy Formulation​
b) Marketing Campaigns​
c) Implementation​
d) Evaluation & Adjustment
2.​ Which framework analyzes external industry forces?​
a) Resource-Based View​
b) VRIN Framework​
c) Porter’s Five Forces​
d) Value Chain Analysis

Industry vs. Resource-Based View

3.​ The Industrial Organization (I/O) Model assumes that:​

a) A firm’s internal resources determine success.​
b) Industry structure is more important than managerial decisions.​
c) Unique firm capabilities create sustained competitive advantage.​
d) Resources are immobile between firms.
 4.​ Which of these is a tangible resource?​
a) Brand Reputation​
b) Intellectual Property​
c) R&D Facilities​
d) Customer Relationships

VRIN & Dynamic Capabilities

5.​ Which characteristic is necessary for a firm’s resource to provide a

sustainable competitive advantage?​
a) Transferability​
b) Substitutability​
c) Imitability​
d) Rarity
6.​ Dynamic capabilities refer to:​
a) Standardized industry practices.​
b) The ability to modify and enhance existing competencies.​
c) Physical infrastructure investments.​
d) Competitive benchmarking techniques.

Value Chain Analysis

7.​ Which of the following is NOT a primary activity in Value Chain Analysis?​
a) Operations​
b) Marketing & Sales​
c) Procurement​
d) Inbound Logistics
8.​ Which support activity involves recruiting and training employees?​
a) Firm Infrastructure​
b) Human Resource Management​
c) Procurement​
d) Outbound Logistics

Competitor Analysis

9.​ Which practice is considered an unethical way to gather competitor

intelligence?​
a) Attending trade fairs​
b) Hiring a competitor’s ex-employee for insider information​
c) Reviewing annual reports​
d) Conducting customer surveys
 10.​Which of the following is an example of a company leveraging a "choke
point" for competitive advantage?​
a) Apple’s App Store​
b) McDonald's franchise system​
c) Uber’s ride-sharing algorithm​
d) Amazon’s website interface

Answers

1.​ b) Marketing Campaigns

2.​ c) Porter’s Five Forces
3.​ b) Industry structure is more important than managerial decisions.
4.​ c) R&D Facilities
5.​ d) Rarity
6.​ b) The ability to modify and enhance existing competencies.
7.​ c) Procurement
8.​ b) Human Resource Management
9.​ b) Hiring a competitor’s ex-employee for insider information
10.​a) Apple’s App Store

WEEK 4

Key Concepts & Definitions from Strategic Management -

Week 4
Business Strategy & Value Creation

●​ Business Strategy: Determines a firm’s business model and includes

decisions on:
○​ Customer Value Proposition (CVP): What unique value will be offered?
○​ Target Market: Which customer needs will be met?
○​ Competitive Advantage: How to differentiate from competitors?
○​ Investment in Competencies: Where to invest for long-term success?
●​ Value-Based Strategies
○​ Willingness to Pay (WTP) – Maximum price a buyer is willing to pay.
○​ Price – Amount charged for the product.
 ○​ Cost – Expenses incurred in production.
○​ Opportunity Cost – The next best alternative foregone.
○​ Value Created = WTP - Cost
○​ Buyer’s Share = WTP - Price
○​ Firm’s Share (Profit Margin) = Price - Cost
○​ Supplier’s Share = Cost components from external sources.

Generic Business-Level Strategies (Porter’s Framework)

1.​ Cost Leadership Strategy – Competing on low cost.
2.​ Differentiation Strategy – Offering unique products/services.
3.​ Focus Strategy – Targeting a niche market.
4.​ Best-Cost Strategy (Hybrid) – Combining cost leadership & differentiation.

1. Cost Leadership Strategy

●​ Objective: Provide products/services at the lowest cost while maintaining
profitability.
●​ Key Features:
○​ Economies of Scale – Producing in bulk reduces cost.
○​ Experience Curve Effects – Learning from experience improves
efficiency.
○​ Tight Cost Control – Minimized overhead and operational costs.
○​ Operational Efficiency – Streamlined supply chain & production.

Approaches to Achieve Cost Leadership

1.​ Efficient Execution of Value Chain Activities

○​ Reduce waste & optimize supply chain.
○​ Minimize R&D and marketing costs.
○​ Utilize learning curve effects.
2.​ Reconfiguring the Value Chain
○​ Cut out intermediaries (e.g., direct selling like Dell).
○​ Use online sales models (e.g., Amazon, Netflix).
○​ Standardize product design for mass production.

When Cost Leadership Works Best

 ●​ Highly competitive, price-sensitive markets.
●​ Standardized products with minimal differentiation.
●​ Switching costs for customers are low.

Pitfalls of Cost Leadership

●​ Over-focus on cost-cutting may compromise quality.

●​ Cost advantage may not be sustainable if competitors imitate.
●​ Price wars may erode profit margins.

2. Differentiation Strategy
●​ Objective: Offer unique features that justify a price premium.
●​ Sources of Differentiation:
○​ Superior product performance (e.g., Apple iPhones).
○​ Brand image & reputation (e.g., Rolex, Tesla).
○​ Customer experience & after-sales service (e.g., Ritz-Carlton Hotels).
○​ Technology & innovation (e.g., Dyson vacuum cleaners).

How to Achieve Differentiation?

1.​ Lower the Buyer’s Cost of Usage

○​ Example: Energy-efficient appliances reduce electricity bills.
2.​ Enhance Product Performance
○​ Example: Tesla’s autopilot feature.
3.​ Increase Customer Satisfaction
○​ Example: Nike’s customization options.

When Differentiation Works Best?

●​ Customers have diverse needs.

●​ Few rivals offer similar unique features.
●​ Technology-driven industries where continuous innovation matters.

Pitfalls of Differentiation

●​ Too much spending on differentiation may reduce profitability.

●​ Features must provide real value – otherwise, buyers may not pay extra.
●​ Competitors can copy certain differentiators.
3. Focus (Niche) Strategy
●​ Objective: Concentrated effort on a specific customer segment.
●​ Types of Focus Strategies:
1.​ Focused Cost Leadership – Low-cost advantage in a narrow market.
2.​ Focused Differentiation – Unique features for a specialized market.

Examples of Niche Strategies

●​ Apparel: Plus-size clothing brands.

●​ Automobiles: Sports cars (Ferrari).
●​ E-commerce: FirstCry (baby products), Hopscotch.

How to Choose a Niche?

●​ Big enough to be profitable.

●​ Not a critical segment for industry leaders.
●​ Difficult for large firms to serve efficiently.

Pitfalls of Focus Strategy

●​ Over-specialization may limit growth.

●​ Niche may shrink over time.
●​ If niche is profitable, large firms may enter.

4. Best-Cost (Hybrid) Strategy

●​ Objective: Provide good quality at lower prices (value-for-money).
●​ Examples:
○​ Toyota – Affordable yet high-quality cars.
○​ IKEA – Stylish furniture at lower prices.

Risks of Best-Cost Strategy

●​ Caught between cost leadership & differentiation – may fail in both.

●​ Competitors may excel in one area (cost OR differentiation).
Competitive Positioning & Timing Strategies
1.​ First-Mover Advantage
○​ Establish brand loyalty (e.g., Coca-Cola in soft drinks).
○​ Secure scarce resources (e.g., Amazon in e-commerce).
○​ Set industry standards (e.g., Microsoft Windows).
2.​ First-Mover Disadvantages
○​ High costs of pioneering (e.g., Sony’s failed VCR).
○​ Risk of market uncertainty (e.g., early electric vehicles).
○​ Followers can learn from mistakes & improve (e.g., Apple after Palm
PDAs).
3.​ Fast Second Strategy
○​ Wait for pioneers to make mistakes, then enter & improve (e.g.,
Microsoft after Apple).

Blue Ocean Strategy vs. Red Ocean Strategy

Aspect Blue Ocean Red Ocean Strategy
Strategy

Market Space Uncontested Existing

Competition Irrelevant Beat rivals

Demand Creation New demand Compete for existing

demand

Value-Cost Break it Make trade-offs

Trade-off

Example Cirque du Soleil Traditional circuses

Four Actions Framework for Blue Ocean

1.​ Eliminate – What industry standards should be removed?

2.​ Reduce – Which factors should be minimized?
3.​ Raise – Which factors should be improved?
4.​ Create – What new value propositions can be introduced?
Sample MCQs
(Answers at the end)

1.​ Which strategy aims to provide the lowest cost while maintaining
profitability?​
a) Differentiation​
b) Cost Leadership​
c) Focus​
d) Best-Cost
2.​ Which of the following is a risk of Differentiation Strategy?​
a) Price wars​
b) Product attributes can be easily copied​
c) Market segmentation challenges​
d) No cost advantage
3.​ Which of the following is NOT a characteristic of a Blue Ocean Strategy?​
a) Creating new demand​
b) Competing in the existing market​
c) Breaking value-cost trade-offs​
d) Making competition irrelevant

Answers

1.​ b) Cost Leadership

2.​ b) Product attributes can be easily copied
3.​ b) Competing in the existing market

🚀
This covers everything from your slides in an easy-to-understand way. Let me know if
you need more sample MCQs or any specific focus areas.

You said:
more mcqs for this file
ChatGPT said:

Here are more MCQs based on the Week 4 slides, categorized by topics. Answers are
provided at the end.
MCQs on Business Strategies & Value Creation
1.​ Which component of value creation represents the difference between
willingness to pay and cost?​
a) Firm’s Share​
b) Supplier’s Share​
c) Buyer’s Share​
d) Value Created
2.​ Which of the following is NOT a key factor in a firm's business strategy?​
a) Customer Value Proposition (CVP)​
b) Functional Level Strategies​
c) Supply Chain Logistics​
d) Target Market Selection

MCQs on Generic Strategies (Porter’s Framework)

3.​ Which of the following is NOT one of Porter’s Generic Strategies?​
a) Cost Leadership​
b) Differentiation​
c) Innovation Leadership​
d) Focus
4.​ A firm that targets a niche market and provides unique offerings is
following which strategy?​
a) Cost Leadership​
b) Focused Differentiation​
c) Best-Cost​
d) Low-Cost Leadership
5.​ Which of the following is an example of a company following a Cost
Leadership Strategy?​
a) Apple​
b) Rolex​
c) Walmart​
d) Louis Vuitton
6.​ A Cost Leadership strategy is most effective when:​
a) Buyers have diverse preferences​
b) Competition is based on unique features​
c) Price competition is high​
d) Customer loyalty is high
 7.​ Which of these is a common pitfall of a Cost Leadership Strategy?​
a) High investment in branding​
b) Relying on cost-cutting methods that can be easily copied​
c) Ignoring customer service​
d) Focusing too much on luxury products

MCQs on Differentiation Strategy

8.​ Which of the following is NOT a common differentiation method?​
a) Brand reputation​
b) Cost-cutting measures​
c) Superior product features​
d) Customer service enhancements
9.​ What is the primary goal of Differentiation Strategy?​
a) Offer the lowest price in the market​
b) Provide unique features that justify a premium price​
c) Target cost-conscious customers​
d) Eliminate competition completely
10.​A firm that relies on innovation, quality, and branding to attract premium
customers is following which strategy?​
a) Best-Cost Strategy​
b) Differentiation Strategy​
c) Focused Cost Leadership​
d) Market Penetration

MCQs on Focus/Niche Strategies

11.​What is the main focus of a Niche Strategy?​
a) Serving a broad customer base​
b) Targeting a specific, well-defined market segment​
c) Offering the lowest price to all customers​
d) Competing in mass markets
12.​Which of the following is NOT an example of a niche market?​
a) Plus-size clothing​
b) Luxury sports cars​
 c) Generic household products​
d) Organic pet food
13.​Which of the following is a risk of using a Focus Strategy?​
a) The niche market may shrink over time​
b) The company may face higher production costs​
c) The company may lose focus on cost control​
d) The company may need to compete in mass markets

MCQs on Best-Cost (Hybrid) Strategy

14.​Best-Cost Strategy aims to:​
a) Offer high-end premium products​
b) Provide a mix of affordability and differentiation​
c) Focus only on cost reduction​
d) Target a very specific niche
15.​Which company is an example of a Best-Cost Strategy?​
a) Toyota​
b) Gucci​
c) McDonald's​
d) Rolex

MCQs on Competitive Positioning & Strategic Moves

16.​A first-mover advantage is beneficial when:​
a) There are no barriers to entry​
b) The company can set industry standards​
c) Competitors can easily imitate the innovation​
d) There are no switching costs for customers
17.​Which of the following is NOT a disadvantage of being a first-mover?​
a) High investment costs​
b) Risk of market uncertainty​
c) Strong brand loyalty from early customers​
d) Competitors can improve on initial innovations
18.​A company that waits for pioneers to make mistakes before entering the
market follows which strategy?​
a) First-Mover Strategy​
 b) Blue Ocean Strategy​
c) Fast Second Strategy​
d) Guerrilla Warfare

MCQs on Blue Ocean Strategy

19.​Blue Ocean Strategy focuses on:​
a) Competing in existing markets​
b) Creating new, uncontested market spaces​
c) Beating existing competitors​
d) Maintaining cost leadership
20.​Which of the following is NOT a characteristic of Blue Ocean Strategy?​
a) Breaking the value-cost trade-off​
b) Competing in existing market spaces​
c) Creating new demand​
d) Making the competition irrelevant
21.​The Four Actions Framework in Blue Ocean Strategy consists of:​
a) Develop, Implement, Review, Improve​
b) Analyze, Compare, Choose, Implement​
c) Eliminate, Reduce, Raise, Create​
d) Enter, Grow, Optimize, Sustain
22.​Which of the following companies successfully applied Blue Ocean
Strategy?​
a) Cirque du Soleil​
b) Walmart​
c) Coca-Cola​
d) McDonald's

MCQs on Strategic Timing & Warfare

23.​Which of the following is a defensive competitive maneuver?​
a) Frontal Assault​
b) Flanking Maneuver​
c) Market Signaling​
d) Blitzkrieg
 24.​Guerrilla Warfare in business strategy refers to:​
a) A market leader defending its position​
b) A company engaging in surprise, quick, and hit-and-run tactics​
c) Expanding into multiple new markets at once​
d) Dominating the entire market with aggressive advertising
25.​What is an example of a First-Mover Disadvantage?​
a) The company can set industry standards​
b) Customers face high switching costs​
c) High costs of pioneering innovation​
d) Competitors struggle to catch up

Answers
1.​ d) Value Created
2.​ c) Supply Chain Logistics
3.​ c) Innovation Leadership
4.​ b) Focused Differentiation
5.​ c) Walmart
6.​ c) Price competition is high
7.​ b) Relying on cost-cutting methods that can be easily copied
8.​ b) Cost-cutting measures
9.​ b) Provide unique features that justify a premium price
10.​b) Differentiation Strategy
11.​b) Targeting a specific, well-defined market segment
12.​c) Generic household products
13.​a) The niche market may shrink over time
14.​b) Provide a mix of affordability and differentiation
15.​a) Toyota
16.​b) The company can set industry standards
17.​c) Strong brand loyalty from early customers
18.​c) Fast Second Strategy
19.​b) Creating new, uncontested market spaces
20.​b) Competing in existing market spaces
21.​c) Eliminate, Reduce, Raise, Create
22.​a) Cirque du Soleil
23.​c) Market Signaling
24.​b) A company engaging in surprise, quick, and hit-and-run tactics
25.​c) High costs of pioneering innovation
WEEK 2

Strategic Management Process Recap

The strategic management process involves:

1.​ External Environment Analysis – Identifying opportunities & threats

(PESTLE, Porter’s 5 Forces).
2.​ Internal Environment Analysis – Identifying strengths & weaknesses (RBV,
Competencies).
3.​ Strategy Formulation – Vision, Mission, Corporate & Business Strategies.
4.​ Strategy Implementation – Organizational structure, systems, and processes.
5.​ Evaluation & Adjustment – Feedback loop to refine strategy.

External Environment Analysis

The external environment consists of all forces that impact a firm’s fortunes. It is
divided into:

1.​ General Environment – Broad trends affecting all industries.

2.​ Industry Environment – Factors influencing profitability in a specific industry.
3.​ Competitor Environment – Actions and responses of rivals within a strategic
group.

Segments of the General Environment (PESTLE Analysis)

1. Political/Legal Segment

●​ Stability of the political environment.

●​ Government regulations (e.g., taxation, labor laws, antitrust policies).
●​ Trade policies, tariffs, and export/import regulations.

2. Economic Segment

●​ GDP growth, inflation, interest rates, and exchange rates.

●​ Disposable income, credit availability, and consumer spending patterns.
●​ Global economic conditions and stock market trends.

3. Socio-Cultural Segment
 ●​ Changing lifestyles, work-life balance, and career preferences.
●​ Population demographics: age, income, geographic shifts.
●​ Consumer attitudes toward sustainability, quality, and service.

4. Technological Segment

●​ Innovations like AI, robotics, 3D printing, and biotech.

●​ Adoption of digital technologies and process automation.

5. Environmental Segment

●​ Climate change, environmental protection laws, and sustainability trends.

●​ Impact of natural disasters on industries (e.g., tourism, insurance).

6. Legal Segment

●​ Intellectual property laws, employment laws, safety regulations.

●​ Government incentives for specific industries (e.g., electric vehicles).

Industry Environment & Porter’s Five Forces

Porter’s Five Forces help analyze industry competitiveness:

1.​ Inter-Firm Rivalry (Industry Competition)

○​ Intensity of price wars, product innovation, and advertising battles.
○​ Factors increasing rivalry: slow growth, high exit barriers, low
differentiation.
2.​ Threat of New Entrants
○​ Barriers to entry: economies of scale, capital requirements, brand loyalty.
○​ Incumbents’ retaliation power (e.g., price wars, legal barriers).
3.​ Threat of Substitutes
○​ Availability of alternative products/services.
○​ Low switching costs increase the threat.
4.​ Bargaining Power of Suppliers
○​ Strong when suppliers are concentrated, products are unique, or switching
costs are high.
5.​ Bargaining Power of Buyers
○​ Strong when buyers are few, price-sensitive, or have many alternatives.

Attractive industries have:

 ●​ High entry barriers.
●​ Weak supplier and buyer power.
●​ Few substitutes.
●​ Moderate competition.

Industry Structure & Competitive Advantage

I/O Model (Industrial Organization View)

●​ Industry characteristics (not firm-specific resources) drive profitability.

●​ Firms should select the most attractive industry and adopt either cost leadership
or differentiation.

Resource-Based View (RBV)

●​ Competitive advantage comes from unique, valuable, and inimitable

resources.
●​ Emphasizes core competencies as a basis for strategy.

Critical Success Factors (CSFs) in Industries

●​ Retail: Logistics, supplier relationships, customer service.

●​ Pharma: R&D effectiveness, new product pipeline, branding.
●​ Airlines: Route network, operational efficiency, reservations system.

Strategic Group Analysis

A strategic group is a cluster of firms with similar competitive strategies.

Strategic Group Mapping Steps:

1.​ Identify competitive characteristics (e.g., price range, technology, service

levels).
2.​ Plot firms on a two-variable map (e.g., price vs. dealer network).
3.​ Identify mobility barriers that prevent movement between groups.

Examples:
 ●​ Automobile industry: Maruti (low-cost), Honda (premium), Audi (luxury).
●​ Airline industry: Low-cost (IndiGo) vs. full-service (Vistara).

Competitor Analysis & Response Strategies

Analyzing competitors involves:

●​ Value chain analysis

●​ Benchmarking & cost analysis
●​ Competitive behavior profiling

Case Study: NutraSweet vs. HSC

●​ NutraSweet (market leader) used aggressive pricing and long-term

contracts to block HSC (new entrant).
●​ HSC struggled due to NutraSweet’s price cuts and dominance.
●​ Lesson: A strong incumbent can deter entry by leveraging cost leadership and
brand power.

Conclusion
●​ External environment analysis helps firms anticipate threats & opportunities.
●​ Porter’s Five Forces define industry profitability & competition.
●​ Strategic group mapping helps identify direct competitors and mobility
barriers.
●​ Understanding industry trends is key for sustainable competitive
advantage.

WEEK 1

1. What is Strategic Management?

Strategic management is the art and science of formulating, implementing, and
evaluating decisions that help an organization achieve long-term objectives.
Strategic Decision-Making

●​ Bounded Rationality – Decision-making is limited by cognitive capacity,

available information, and time constraints.
●​ Common Biases in Decision-Making:
○​ Availability Bias – Overestimating likelihood based on readily available
examples.
○​ Anchoring Bias – Relying too heavily on initial information.
○​ Confirmation Bias – Seeking information that confirms pre-existing
beliefs.
○​ Dunning-Kruger Effect – Overestimating one’s own competence.
○​ Framing Effect – Different responses based on how information is
presented.

How to Mitigate Biases?

●​ Increase awareness.
●​ Use structured decision-making frameworks.
●​ Leverage diverse perspectives.
●​ Rely on data-driven decisions.

2. Types of Strategies
1.​ Intended Strategy – Planned strategy.
2.​ Realized Strategy – The actual implemented strategy.
3.​ Unrealized Strategy – Plans that fail due to unforeseen circumstances.
4.​ Emergent Strategy – Adaptations made in response to evolving conditions.

Why Do Intended Strategies Fail?

●​ Poor communication and understanding within the organization.

●​ Incentive structures misaligned with strategic goals.
●​ External influences such as competition, shifting customer preferences, or
technological advancements.

External Forces That Influence Strategy

●​ Competitor moves.
●​ Market and consumer behavior changes.
●​ Technological disruptions.
 ●​ Regulatory changes.
●​ Crisis situations (e.g., pandemics, economic downturns).

3. The Purpose of a Firm

●​ Traditional view: Maximizing shareholder value.
●​ Modern perspective: Balancing shareholder and stakeholder value
(customers, employees, environment, society, etc.).

4. Fundamentals of Competitive Strategy

Key Concepts:

●​ Barriers to Entry – Factors preventing new competitors from entering an

industry.
●​ Barriers to Imitation – Challenges competitors face in copying a firm's strategy.
●​ Industry Structure vs. Firm Capabilities – Some advantages come from
industry positioning (Porter’s Five Forces), while others come from internal
resources (Resource-Based View).

Market Efficiency and Strategy:

●​ In perfect competition, no firm makes sustained profits.

●​ Strategy identifies and exploits inefficiencies to create competitive
advantages.

5. Value Creation, Delivery, and Capture

Key Financial Terms:

●​ Willingness to Pay (WTP) – Maximum price a customer is willing to pay.

●​ Price (P) – The amount charged for a product/service.
●​ Cost (C) – The total cost to produce and deliver a product.
●​ Value Created = WTP – Cost
●​ Buyer’s Share = WTP – Price
 ●​ Firm’s Share (Profit Margin) = Price – Cost

Sources of Competitive Advantage

1.​ Value Creation Advantage – Creating more value through superior products,
innovation, and brand power.
2.​ Bargaining Advantage – Using scale, reputation, or negotiation power to
capture more value from suppliers or customers.

6. Measuring Firm Performance

Shareholder Value Creation

A firm is successful if it delivers higher returns compared to competitors.

●​ Key Metric: Economic Value Added (EVA)

○​ EVA = ROIC – WACC
○​ A firm creates value if its return on invested capital (ROIC) is higher
than its weighted average cost of capital (WACC).

Apple vs. Microsoft Financial Comparison (Example)

●​ Apple had higher Return on Invested Capital (ROIC) than Microsoft, showing
superior efficiency in utilizing resources.
●​ Microsoft spent more on R&D, while Apple focused on maximizing margins.

7. What is Strategy?
A firm’s theory on how to achieve a sustainable competitive advantage through
unique positioning and strategic actions.

Key Principles of Strategy

●​ Creating a unique and valuable position through distinct activities.

●​ Avoiding direct competition on the same set of activities – Operational
effectiveness alone is not enough.
●​ Making deliberate trade-offs to maintain distinctiveness.
Two Approaches to Strategy-Making

1.​ Rational Planning Approach

○​ Assumes the future is predictable and strategies can be planned
systematically.
○​ Uses formal planning tools and analysis.
○​ Weakness: Plans may become obsolete due to rapid external changes.
2.​ Incrementalism & Organizational Learning
○​ Assumes the future is uncertain and strategies must evolve over time.
○​ Encourages adaptability and implementation focus.
○​ Weakness: Lacks proactive long-term planning.

8. Vision, Mission, and Values

Hierarchy of Strategic Planning

1.​ Vision Statement – Defines the firm’s long-term aspirations.

2.​ Mission Statement – Explains why the firm exists and what it aims to achieve.
3.​ Core Values – The guiding principles and ethical foundation of the company.
4.​ Goals & Objectives – Measurable milestones to achieve strategic outcomes.

Examples of Vision & Mission Statements

●​ Google’s Mission: "To organize the world’s information and make it universally
accessible and useful."
●​ Microsoft’s Mission: "To enable people and businesses throughout the world to
realize their full potential."
●​ Ford’s Vision: "To make our cars better, our employees happier, and our planet
a better place to be."

Developing a Mission Statement – The “5 Whys” Approach

●​ Start with a simple statement: “We make X products.”

●​ Ask "Why is this important?" five times to uncover the deeper purpose.

Example:

●​ We pick up trash.
●​ Why? To help the environment.
●​ Why? To make cities cleaner and healthier.
 ●​ Why? To improve public health and quality of life.
●​ Final Mission Statement: "To contribute to a healthier environment by creatively
solving waste management challenges."

9. Levels of Strategy
1.​ Corporate Level Strategy – Overall direction of the firm (e.g., diversification,
acquisitions).
2.​ Business Level Strategy – Competitive positioning in specific markets.
3.​ Functional Level Strategy – Decisions within departments (e.g., marketing,
R&D, operations).

Case Study: Nestlé’s Vision-Driven Strategy

●​ In 1997, Nestlé shifted its vision to focus on nutrition, health, and wellness
(NHW).
●​ Actions Taken:
○​ Created a dedicated Nestlé Nutrition division.
○​ Increased R&D spending and acquisitions in health foods (e.g., Gerber
baby food, PowerBar).
○​ Introduced product innovations (reduced sugar, added whole grains,
Omega-3).

Risk: Could Nestlé become too narrowly focused and miss broader food & beverage
opportunities?

10. Core Values and Objectives

●​ Core Values – Guiding principles based on ethics, company culture, and
stakeholder priorities.
●​ Objectives – Concrete goals that guide decision-making.

Example Objectives

●​ Increase annual institutional sales from $1B to $1.5B in 2 years.

●​ Enter a new market every 18-24 months.
●​ Generate 30% of revenue from products introduced within the last 5 years.
Conclusion
●​ Strategy is about differentiation and creating long-term competitive
advantage.
●​ Vision, mission, and values guide decision-making.
●​ Successful firms align strategies with market trends, innovation, and
financial performance.