Summary of all classes about Strategic Management from professor Verhezen. I received high distinction for the oral exam.
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Course
Strategic Management (TEWMBA2101)
Institution
Universiteit Antwerpen (UA)
Very complete summary of all courses about Strategic Management from professor Verhezen. All explanations, cases and examples the professor gave in class are included. Very clear structure. I received high distinction for the oral exam. The first few pages consist of a table of contents which bring...
Theme 1: What is strategy and why is it important? ..................................................................................... 6
The concept of strategy........................................................................................................................................ 6
Backgroud and practical information .............................................................................................................. 6
What is strategy?............................................................................................................................................. 6
Business = value creation ................................................................................................................................... 10
3 players: ....................................................................................................................................................... 10
Personal perspective ..................................................................................................................................... 11
Value creation by Apple ................................................................................................................................ 11
What is strategy about?..................................................................................................................................... 12
Definition of a strategy ...................................................................................................................................... 12
The basic framework: strategy as a link between the firm and its environment .............................................. 13
Framework: 3 circles ..................................................................................................................................... 13
Michael Porter: 3 big mistakes ...................................................................................................................... 13
The future...................................................................................................................................................... 13
Ingredients of success ........................................................................................................................................ 14
Effective implementation: simple, consistent, long-term goals.................................................................... 14
Profound understanding of the competitive environment ........................................................................... 14
Business = creating + capturing of economic value ........................................................................................... 15
HOW: actions to be taken is visualized by a value chain .............................................................................. 16
Examples of value creation ................................................................................................................................ 16
Theme 2: organizational direction and external analysis ............................................................................. 18
Purpose (why) and strategy ............................................................................................................................... 18
Adopted strategies to a new perspective........................................................................................................... 18
Vision: ............................................................................................................................................................ 18
Mission: ......................................................................................................................................................... 19
Linking vision and mission with core values ................................................................................................. 19
Purpose needs to be embedded in strategy ................................................................................................. 19
The two essential kinds of objectives ................................................................................................................. 20
Financial objectives: ...................................................................................................................................... 20
Strategic objectives ....................................................................................................................................... 20
Executing the strategy ....................................................................................................................................... 20
Who is involved in strategy making?............................................................................................................. 21
Describing strategy: current positioning, future direction ................................................................................. 21
Ambidexterity................................................................................................................................................ 21
Business model................................................................................................................................................... 22
Taylor Swift .................................................................................................................................................... 22
Industry evolution .............................................................................................................................................. 22
Evolution of video equipment market: the continuous replacement of technologies and standards ......... 23
Management = leadership? ............................................................................................................................... 23
What leaders versus managers do? .............................................................................................................. 23
Strategic leadership ....................................................................................................................................... 24
Improve performance and learn from Thrivers ............................................................................................ 25
An Industry or external analysis ......................................................................................................................... 25
The components of an organisation’s macro environment .......................................................................... 25
Attractiveness of industries ........................................................................................................................... 25
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Analyzing the industry: 5 forces of Michael Porter ............................................................................................ 26
Industry attractiveness and intensity of competition ................................................................................... 26
The five competitive forces (Michael Porter)................................................................................................ 27
Structural determinants of the competitive forces ...................................................................................... 28
Difficult to distinguish complements and substitutes................................................................................... 28
PEST analysis of industry .................................................................................................................................... 28
SUMMARY: drivers of industry development ..................................................................................................... 29
Combination of the five forces ...................................................................................................................... 29
Does industry matter?........................................................................................................................................ 29
Performance difference between companies are difficult to explain........................................................... 30
Value for 2 airlines: Ryanair and British Airways ........................................................................................... 33
Ecosystems changing the strategic landscape ................................................................................................... 33
Example: car industry .................................................................................................................................... 33
Example: DBS bank........................................................................................................................................ 34
Example: Netflix ............................................................................................................................................ 34
Theme 3: Internal analysis ........................................................................................................................ 36
Evaluating a firm’s internal situation: this are the questions you need to answer. ........................................... 36
Key financial ratios ............................................................................................................................................. 36
The impact of resources and capabilities........................................................................................................... 36
Resources and capabilities ............................................................................................................................ 36
Analyzing resources and capabilities: the interface between strategy and the firm.................................... 37
Competitive assets ........................................................................................................................................ 37
The resource base ......................................................................................................................................... 37
Identifying capabilities .................................................................................................................................. 38
Business level strategy .................................................................................................................................. 38
Some strategic tools: SWOT & 7s + VRIO model ................................................................................................ 38
SWOT-analysis ............................................................................................................................................... 38
7-s model of Mc Kinsey ................................................................................................................................. 39
Resource and capability analysis. .................................................................................................................. 39
Appraising the strategic importance of resources and capabilities .............................................................. 40
Testing sustainability ..................................................................................................................................... 40
Use your distinctive capabilities wisely .............................................................................................................. 40
“Strategizing” distinctive capabilities ................................................................................................................ 41
Distinctive capabilities as a consequence of “childhood” experiences: the oil majors ................................ 41
Porter’s value chain + benchmarking ............................................................................................................ 41
The value chain in changing .......................................................................................................................... 41
Ways to improve distribution-related value chain activities ........................................................................ 42
Theme 4: Competitive Advantage through Positioning ............................................................................... 44
Positioning adopting to existing structure ......................................................................................................... 44
The Product Offering: industries, markets and businesses/firm .................................................................. 44
Competitive advantage based on 3 value disciplines ................................................................................... 44
Competitive advantage through positioning ................................................................................................ 44
Competitive strategy as positioning .............................................................................................................. 45
Positioning through low cost.............................................................................................................................. 47
Low-cost provider strategies ......................................................................................................................... 47
The cost-drivers ............................................................................................................................................. 47
Positioning through differentiation .................................................................................................................... 49
Gaining competitive advantage ......................................................................................................................... 50
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,Strategic Management Master MPC 2023-2024
Overview competitive advantage ................................................................................................................. 50
Preliminary strategic options… in reality some combination of options will be necessary. ......................... 50
Competitive advantage ................................................................................................................................. 51
Cases on positioning ..................................................................................................................................... 53
Reinterpreting “positioning”: addressing the supply and demand side ............................................................ 58
Tailored Value chain creating customer value .............................................................................................. 58
Competitve advantage and a good strategy ................................................................................................. 60
Positioning: taking advantage of supply & demand networks .......................................................................... 61
Bussiness evolution & bussiness model innovation ..................................................................................... 62
Theme 5: Blue Ocean Strategy & Non-Disruptive Innovation = “creating” a new demand ............................ 64
Positioning: adapting to the industry & bussiness model innovation................................................................ 64
Reconstructionist perspective: shaping the industry: The Principles of Blue Ocean Strategy ........................... 64
Value innovation and Blue Ocean Strategy ................................................................................................... 64
The principles of Blue Ocean Strategy .......................................................................................................... 65
The four grid framawork to understad Blue Ocean ...................................................................................... 67
Choosing the right Strategic Approach ......................................................................................................... 67
Non-disruptive strategic innovation .................................................................................................................. 72
Disruptive innovation: examples:.................................................................................................................. 72
Non-disruptive innovation: ........................................................................................................................... 73
Growth models .............................................................................................................................................. 73
The emerging forces for non disruptive creation .......................................................................................... 75
Path to disruptive value creation .................................................................................................................. 76
Path to non-disruptive value creation ........................................................................................................... 76
Path to blue ocean value creation ................................................................................................................ 76
Theme 6: The importance of innovation to sustain competitive advantage.................................................. 77
Only a few success stories of Transformative leadership ............................................................................. 78
The importance of strategic innovation ............................................................................................................. 80
Advantage of First Mover: Amazon: .............................................................................................................. 80
What top innovators get right ....................................................................................................................... 82
Strategic innovation ...................................................................................................................................... 83
Biggest spenders on R&D .............................................................................................................................. 83
Most innovative countries ............................................................................................................................ 83
Timing innovation: to lead or to follow? ....................................................................................................... 83
(Digital) innovation ............................................................................................................................................ 84
Innovation (McKinsey) .................................................................................................................................. 85
Applied AI ...................................................................................................................................................... 85
Strategic innovation: a job to be done ............................................................................................................... 85
Niche oriented procucts/services – a job to be done ................................................................................... 86
The advantage of Big Data: the new digital business models ........................................................................... 86
Digital innovation .......................................................................................................................................... 86
Artificial intelligence .......................................................................................................................................... 87
What kind of AI: ............................................................................................................................................ 88
“The good” or benefits of AI & Digitalization/Deep Learning (all based on BigData) ....................................... 88
Serving customers through algorithms: stick fix ........................................................................................... 89
The comparative advantages of humans and computers ............................................................................. 90
The “bad” & “ugly” side of artificial inteligence ................................................................................................ 93
The bad side of AI: ethical challenges & risks of AI & digitalization/deep learning...................................... 93
The “Ugly” side of AI ..................................................................................................................................... 94
How to control and address the dark side of AI............................................................................................ 94
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How to compete in Industry 4.0 ......................................................................................................................... 94
The changed reality and new logic of competition ....................................................................................... 94
How to generate better ideas and thus better decisions? ............................................................................ 95
From DVD logistics over streaming to entertainment firm: Netlfix ................................................................... 95
How culture is related to strategy ................................................................................................................. 96
Theme 7: Global strategy for competing in international markets ............................................................... 99
Multinational companies: operating beyond national borders. ................................................................... 99
Why competing across national borders makes strategy making more complex ........................................... 100
Industry competitiveness factors that vary from country to country. ........................................................ 100
Strategic options for entering and competing in international markets .................................................... 103
Competing Internationally: the three main strategic approaches................................................................... 105
The benefits of a global strategy ................................................................................................................. 106
The benefits of global integration versus national differentiation. ............................................................ 107
Theme 8: The Corporate Strategy in a diversified multi-business organization ........................................... 108
Scope of operations.......................................................................................................................................... 108
The dimensions of Firm Scope .................................................................................................................... 108
Integrating forward to enhance competitiveness ....................................................................................... 109
Strategic alliances and partnerships ........................................................................................................... 109
Creating value in a diversified firm .................................................................................................................. 110
Difference between “corporate stratgy” and “business strategy” ............................................................. 110
Strategic challenges face by multi-business groups .................................................................................... 111
Six ways to create synergy........................................................................................................................... 112
......................................................................................................................................................................... 113
Synergies among business units?..................................................................................................................... 113
Synergy killers: ............................................................................................................................................ 113
Corporate composition ............................................................................................................................... 114
Types of differentiation (to be distinguished from diversification)............................................................. 116
The definition of scope: .............................................................................................................................. 116
Key concepts for analysing firm scope ........................................................................................................ 117
The scope of the firm: specialisations versus integration ........................................................................... 117
Motives for Diversification .......................................................................................................................... 117
The vertical chain for steel cans .................................................................................................................. 118
Different types of vertical relationship ....................................................................................................... 118
Portfolio organization versus integrated organization ................................................................................ 119
Wich diversification path to pursue? .......................................................................................................... 120
Economies of scope differ from economies of scale................................................................................... 120
Theme 9: Making a strategy work: governance, ethics & sustainability ..................................................... 121
Independency of business, government and civil society .......................................................................... 121
What is crucial today for investors/shareholders? ..................................................................................... 122
Assessing global risks .................................................................................................................................. 122
Sustainable development goals: 17 goals ................................................................................................... 123
Strategy and sustainability .............................................................................................................................. 124
Definition of CSR ......................................................................................................................................... 124
Opening case: the guld of mexico disaster (2010) ...................................................................................... 124
Stakeholder versus shareholder model ...................................................................................................... 125
Aligning objectives of stakeholders with (long term) shareholders ........................................................... 127
The importance of long-term relations in fashion ...................................................................................... 127
Current practice: the Nove Nordisk Way .................................................................................................... 128
Corporate citizenship and stewardship: from smart to wise leadership: “wising up” ..................................... 128
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‘net positive’ leaders ................................................................................................................................... 129
Today’s ethical, ecological and societal challenges demand a different kind of leader ............................. 129
Corporate social responsibility ......................................................................................................................... 130
ESG: investing for a more sustainable future .............................................................................................. 130
Does doing good, help Ceos do well? ......................................................................................................... 131
Does ESG focus guarantee success? NO ..................................................................................................... 132
Enhancing circular economy and its effect on “valuation” ......................................................................... 133
Does “sustainable” fashion exist? ............................................................................................................... 133
A different business model: circular lighting Schipol Lounge 2 .................................................................. 134
The most smart and green building on the planet: The Edge in Amsterdam ............................................. 134
Building a strong ethically organization ...................................................................................................... 134
Reputational effects in valuation framework .............................................................................................. 135
Strategic Alignment between Business objectives and Societal Goals? .......................................................... 135
Responsibility and profitability ................................................................................................................... 135
Succesful strategies and CSR ....................................................................................................................... 136
Corporate governance: ............................................................................................................................... 136
Theme 10: Strategy in turbulent times ..................................................................................................... 139
A framework for linking strategy and financial performance.......................................................................... 139
Overview strategies-competitive advantage .............................................................................................. 139
Good strategy versus bad strategy .................................................................................................................. 140
Why is a good strategy so rare? .................................................................................................................. 140
A “bad” strategy .......................................................................................................................................... 140
The crux? ..................................................................................................................................................... 141
Strategy in turbulent times .............................................................................................................................. 142
How Game Theory can help to make good strategic choices .......................................................................... 145
Prisoner’s Dilemma: trust ........................................................................................................................... 145
Conclusion: ....................................................................................................................................................... 149
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Theme 1: What is strategy and why is it
important?
How to firms achieve competitive advantage in a sustainable manner?
The concept of strategy
Backgroud and practical information
- Basic: slides
- Exam:
o Oral (1 hour to prepare, 3 questions)
o Take one paper with question
o Always additional questions
- Strategy is life → not just a framework in the air but it is what we do everyday and what
organizations do everyday
- Cases = show relevance of frameworks of how organization deals with providing a future (= that is
what a strategy basically is)
- Not repeat what prof said but explain it on exam
- If you understand the course = high grades
o Take a risk? Higher or lower
- If you come up with own examples = do it, than you can score really high. If you go beyond course
material, it would impress professor
- What is business?
o Not just making money
o Strategy is a term that comes from military: how to outmaneuver your enemy
o Concrete: strategy (in terms of business) how do you see the future
o Solving a problem or addressing a challenge (usually for a customer, not always)
What is strategy?
- It is not just making money?
- Strategy is a term from military: how you outmaneuver your enemy. In terms of business: it means
how you see the future. Solving a problem or addressing a challenge, that is usually for the
customer.
- GENERIC DEFENITION: Strategy is really about the future. It is not because you were once
competitive, that you will keep competitive. Blockbuster was doing fine but ten years later bankrupt
because of Netflix. Once you have a strategy, it is great but context is changing (fashion changed,
new technology, political issues, …) so you need to continuously prepare for an uncertain future,
and that is what strategy is. In a way you could say, it’s an informed bet about the future direction
of an organization. But in order to know if you have a good strategy, you have to look at figures, you
need to translate a strategy into financial terms.
- Strategy is about competing differently from rivals
o Doing what they don’t do or doing it better!
o Doing what they can’t do!
o Doing that which sets the firm apart and attracts customers
o Deciding what we should or should not do to produce a competitive edge
o Can be described as adopting a particular position
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The quest for competitive advantage
DEFENITION COMPETITIVE ADVANTAGE: Meeting customer needs more effectively, with products or
services that customers value more highly, or more efficiently, at lower cost.
DEFENITION SUSTAINABLE COMPETITVE ADVANTAGE: Sustainable not in an ecological definition but
meaning of longer terms. Giving buyers “lasting” reasons to prefer a firm’s products or services over those
of its competitors. Buyers are loyal to come back, for example Apple.
But there is the problem of different cultures. In America, they will say it is all about ‘the maximalization of
profits’, and that is also creating of value but for the shareholders. The Europeans have a slightly different
perspective on this, they will endorse a stakeholder theory which means they should treat their employees
well, treat customers well. Employees are something fundamentally important in Europe. (Think about the
fact that Karl Marx was born not so far from here)
Also example with Covid: most governments did support the economy but in the US, it would be much
easier to lay of people than under the European law.
So many businesses have created great products or services for their customers and for society, but if you
don’t grab, or capture some of that value for you as a organization, you are not going to survive as an
organization. This leads to a lot of misperceptions and misbehaviors. You need a balance.
CASE: Netflix
Problem? How established?
- Existing corporation at that time: blockbuster (where you can rent videos)
- Hastings (founder of Netflix) = customer of blockbuster
- Business always about: problem (customer not being addressed)
o Netflix case: Hastings (founder)
o Rent video apollo 13 → forgot to bring back
o Pay fine when bringing back too late
o Sooo upset with Blockbuster (fine for every minute you are late = how they made money, it
was their businessplan)
o Netflix was reaction to that problem: I will not fee customers for bringing up too late
o So doing the same: renting without being too late
o He will rent it without giving fees
o Bringing DVDs to customers
o When internet came: broadcast
▪ =Second problem-solving: what blockbuster could not do
o Netflix started developing own content
▪ = Third change: not just logistic company anymore (providing videos to your home
or to the internet)
• Moved to entertainment company
• Why? They are know providing content themselves
- AQ: How do you explain from a strategical perspective why the stockprice of Netflix is down right
now?
o Because we have competition: HBO, Apple, Dinsey+,….
o If someone makes money, it attracts attention
o Profitability goes down, that is why the stockprice goes down. Netflix is still doing well but
they are under pressure
Strategic approach choices
The way you can gain competitive advantage, you can do it because of a lower cost (examples: Aldi, Colruyt
Delhaize) and than you can have a market niche. An example of differentiation market niche in
Lamborghini, Ferrari or Rolls Royce in car business or Apple in the smartphone business, they are focusing
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,Strategic Management Master MPC 2023-2024
in services, on quality and the other one is more on cost. For example the Chinese smartphone brands, they
may not excel but 300 dollars (versus an Iphone of 900 dollars). It depends what perspective you take, and
that perspective is what we call strategy. Are you going for cost leadership? Or differentiation? And that
leads to a competitive advantage
What is true for organizations is also true to yourself. So whatever will be explained in this course (what
strategy means, what strategy is for organisations, …) that is also applicable to your own life. Because we
will enter the labour market and when we have a job interview: what is it that stands out? Having a degree
is an entrance ticket, it is not what determines your success. It is nothing but a ticket to play in the game.
What is going to make you the champion to success? It is basically something that is special.
For example, in organizations, is it better to be the best in class or is it preferable to be unique? Is there a
best phone (Iphone, Nokia, Samsung, …)? There is no right answer. There is just no best in class. The same
counts with cars, there is no best car. A Porsche is also stuck in traffic, in the heat with the rest of the cars.
Form a strategic perspective, being the best in class is hard, because what does that mean? There are
different opinions, so a good strategist would opt for being unique. Being unique is easier to perform, to
find partial customers that like your products. Partial premium customers that feel that this product is not
just functionality, also statement, easy to use, fashion… and not focus on other customers.
In order to be successful in a job interview, be unique. We all have the same degree, but in the end it is
about: who are you? Any potential empoyer will feel, this is a person I can work with. The higher you go in
the hierarchy, not your degree is crucial but is their chemistry between the owners, board members and
you as the CEO? Can we work together? Success in organizations is dependent on strategy and therefore an
individual is also someone with a great strategy.
Success is dependent on two things: skillset + luck.
- Skillset: talent + skills/practice + resilience
o Resilience: means that you don’t give up, willing to continue to pursue goal in times of
crisis: that is an important factor for success (for individual and organisation)
▪ One of the most predictive variables to determine of somebody will be successful
o Skills/practice is directly related to effort (= related to trial and error)
o Insights that can lead to innovation: if you have great ideas, be creative
o Reduce errors in your thinking (= biases)
o If you have the ability to predict the future faster than anybody else, you grab the trends
easier, you see the fashion coming before somebody else
= Skillset is telling: WHAT is it that you do?
But also important: how do you do that?
- Psychological safety: it feels okay to make errors (trial and error) and that helps organization to
thrive
- See triangle: design 1
The evolving nature of an organizations strategy
Difference between proactive/deliberate and reactive/emergent strategy
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, Strategic Management Master MPC 2023-2024
- Proactive (deliberate) strategy elements that include both continued and new initiatives. You have
an idea how it works, but it may not work as you accepted so you may need to adapt. There is
where resilience comes in, you need to continue and adapt to a changed situation. Example: Honda
- Reactive (emergent) strategy elements that are required due to unanticipated competitive
developments and fresh market conditions.
CASE: Honda: deliberateness versus emergence
Honda decided in the 50s to try to conquer the American market, they had the following strategy. The
intended/proactive/deliberated strategy was brining from Tokyo the 700CC motorcycle into California (to
compete with Harley Davidson and the others). But California climate is different from Tokyo and
technological abilities of the Japanese those days were not yet from what was expected in California (engines
were leaking, didn’t really perform as was said by the salespeople, …) so it was not being successful. Honda
struggled to get into the market.
Until a moment of luck.
Japanese salespeople selling their big bikes were using the small bike. People saw that and were wondering
why they don’t sell that bike, and the Japanese were puzzled, why would they want that bike, we have all
kinds of Harley Davidsons.
The emerging strategy, that was not intended at all, that was not prepared by the Japanese, and they had to
adapt. This bike became an incredible success story.
They changed track, the deliberate strategy was left so they adapted and the small bike with a great
advertising campaign (‘this is a bike for everyone’) including the females that those days were not wearing
pants and they could also use that bike.
That’s how Honda grabbed the market, and it was not expected. It was similar to Vespa but nobody in the
US had this kind of bike. Once the public was accustomed to this smaller bike, they also liked the 700CC
initial bike. But inicial success was based on something they didn’t foresee at all. Emerging strategy
completely different form the one they had intended.
So, you may have a great idea, a solution for a problem but if that does not work (trial and error) you need
to adapt. You don’t stuck, don’t try to keep on going and allow a new emergent strategy to unfold.
Success is dependent on skillset
(innovative, faster in predicting future,
making efforts and being resilient). Honda
had a clear strategy about what they
wanted to do in the future (how to conquer
the US market), because it didn’t succeed,
they were smart enough to willing to adapt
where it was necessary (which became the
emergent strategy) so does that mean that
strategy is always reactive?
- Metaphor: this course is like trying
to teach how to create a painting.
The tools the professor will provide
are the explanation, the color schemes, the pencils, … that is the objective part of a science (in this
case, strategy). But making art is not just being a good technician. It is beyond that, it is something
you cannot teach, there is no codex.
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