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Samenvatting/Notes Strategic Management
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A detailed summary of the Strategic Management classes at UA.
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Strategic ManagementChapter 1: Introduction Strategy
Q: What is business? What is the purpose of business?
A: Business is creating value for society. Serving customers, …
Relating business to strategy:
Strategy is a term that comes out from the military. It is about how you outmanoeuvre your
competition. That is how it historically and etymologically evolved. But concretely it (strategy
in relation to business) is about how do you see the future and more particularly it is about
solving a problem or addressing a challenge and that's usually for a customer not always. But
it is quite often a customer that has a problem.
What is the essence of Strategic thinking and implementation?
An Appealing Case: Netflix
Q: How did Netflix get started? What was the problem? What was the reason why it was
established?
The existing corporation at that time was Blockbuster (rent video). When the founder of
Netflix was being a customer of this company, he faced a serious challenge. Usually,
businesses are about an issue at stake, a customer that is not served or not served yet and
you try to address it or try to solve it. Back in the time, the founder of Netflix rented a video
but forgot to bring it back on time and had to pay a fine and he was very upset. They charged
for every minute that you were late. Netflix was the reaction to that particular problem: not
charging customers for being late. They started to compete with BB and did exactly the same
thing (renting videos and mail it to the customer) but customers wouldn’t be fined. When the
internet started to develop, they started streamlining movies to the internet (2nd problem
solving) which was something BB couldn’t do. And the third moment Netflix changed their
strategy was when they started developing their own content. They moved from a logistics
company into an entertainment company because they are providing content themselves
now.
→ EXAM QUESTION: explain the strategy of Netflix
Strategy is about the future. It is not because you were once competitive, that you will
continue to be competitive. E.g., Blockbuster was extremely profitable, but later got bankrupt
because of Netflix.
Once you have a strategy, you need to continuously prepare yourself for an uncertain future.
Because context is changing (new technology, new kind of customer demands, changed
fashion, geopolitical issues..). Strategy is an informed bet about the future direction of an
organization.
1
,In order to know if you have a good strategy, you’ll need to look at figures (shares). It’s when
Netflix started making their own content, it became a powerhouse.
The reason why the stock price of Netflix is down right now is because we have competition
(HPO, Walt Disney Plus, Amazon Prime etc.). As the competition is getting heavy and the stock
price goes down.
The quest for competitive advantage
Competitive advantage
- Meeting customer needs more effectively, with products or services that customers
value more highly, or more efficiently, at lower cost leads to CA.
Sustainable competitive advantage
- Giving buyers “lasting” reasons to prefer a firm’s products or services over those of
its competitors. E.g., Apple
- Sustainable = not in an ecological meaning but in a meaning of longer term.
Creation of value for society is what a business is about. A business that creates great
products and services for their customers and society also need to capture some of that
value for themselves. Otherwise, the organization won’t survive. Balance is key. Creation of
value is what a business is about, not only for shareholders but also for society. Where you
treat the customer, employees and your shareholders properly. The last ones invest money
in your business and take the risk. You cannot ignore that.
USA
- The mainstream theory and practice of businesses is really about maximizing
profitability = creation of value for shareholders
Europe
- Stakeholder theory: treating employees well. Especially treating employees very well
is fundamentally important (Karl Marx) – historical reasons
- During COVID it was way easier to lay off employees in USA than in Europe
Strategic approach choices
2
,Here are some ways to gain competitive advantage.
- Low cost e.g., Aldi, Lidl VS Delhaize
- Market niche e.g., Lamborghini, Ferrari, Apple are all focusing on services and quality
It depends what perspective you take, and that perspective is what we call strategy. Either
you go for cost leadership or you go for differentiation. And that leads to competitive
advantage.
NOT IN SLIDES: Uniqueness is important!
What is true for organizations is also true for yourself. A good strategist would opt for being
unique because it’s much easier to find customers who will like your product
E.g., Apple premium customers, customers that feel that it is not just about functionality but
also ecosystem, design etc. and we won’t focus on other types of customers.
In order to be successful in a job interview is by being unique. Who are you? And what is
that you want to achieve?
Success in an organization is dependent on strategy, and therefore an individual is also
somebody who has a great strategy.
Success = skillset + luck
Skillset = combination of talent and practice + resilience
- Practice is related to effort
3 factors of a successful individual (a triangle) = VALUE PROPOSITION (what you’ll offer as
an employee to an organization)
- Resilience or grid: not easily giving up
- Insights that can lead to innovation: great ideas, creativity
- The ability to reduce errors in thinking, biases and therefore the ability to predict the
future better than anybody else, grasping the trends faster than others
Summation of these type of individuals is a team in an organization.
But how do you implement these ideas? What is needed?
- Psychological safety (and confidence): feeling safe as an employee to make mistakes
that helps an organization to thrive and be successful
- Efficiency: knowing how to use money the most efficient way
- Purpose: purpose is reflecting the meaning of an organization and individual
→ these 6 will help you to create success in business = BUSINESS MODEL
3
, The evolving nature of an organization’s strategy
Realized (current) strategy is a blend of:
- Proactive (deliberate) strategy elements that include both continues and new
initiatives.
- Reactive (emergent) strategy elements that are required due to unanticipated
competitive developments and fresh market conditions.
o You have an idea of how it works (proactive) but it may not work as you
expected. So, you need to adapt. That’s where resilience comes in; you don’t
give up. You need to continue and adapt to a changed context or situation.
That is what a reactive strategy is.
Deliberateness vs emergence
→ EXAM QUESTION: explain the Honda case
Deliberate and emergent strategy
Example: Honda case
When Honda decided in the 50s to try to conquer the American market, they had the following
strategy. The intended or proactive or deliberate strategy was bringing the 700 CC motorcycle
from Tokyo into California – to compete with Harley-Davidsons and others.
But unfortunately, the climate in California is different from the climate in Tokyo and the
technological abilities of the Japanese in those days were not yet at par of what was expected
in California. The engines were leaking and were not performing as what was said by the
salespeople. So, unfortunately it was not very successful.
So, in the 50s Honda tried getting into the American market but really struggled quite a bit
until a moment of luck. The Japanese salespeople tried selling their big bikes to Sears (big
hypermarket). One of the Sears purchasing managers saw that the Japanese were using this
bike. That was the vehicle of the salespeople of Honda roaming around in California trying to
sell the big bikes to the customers in the US. The Sears purchasing officer saw them arriving
and said that he liked the bike and asked why he doesn’t sell it him. And the Japanese were a
bit puzzled and didn’t understand why they would want that kind of bike as they have Harley-
Davidson in that part of the world. But the Sears manager was insisting.
The emerging strategy was not intended at all, was not prepared by the Japanese. So, they
had to adapt, and they did adapt. And this bike became an incredible success story.
What happened was; they changed track, the deliberate strategy was left (didn’t work out).
So, they adapted and the emergent strategy that became the realized strategy was a small
bike with a great advertising campaign and the campaign was saying “this is a bike for
everyone” (including the females who in those days were not wearing pants yet).
This story mid 50’s-late 50’s became an incredible success story. It was with this bike that
Honda grabbed the US market which was non-existing at the time with the exception of Vespa
4
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