This is a complete summary of the course International Business Strategy taught at KU Leuven, campus Brussels including complete notes from all classes. The course is part of the track module of the Master of Business Administration - Strategy, Innovation & Entrepreneurship.
Chapter 1: What is strategy and why is it important?
Historical perspective of strategic thinking:
Accor (ibis, Swissotel,...)
- Keeping the identity of the different brands; integrating the culture of the brands
Three elements of strategy:
- Potash: if a company lacks potash, it may be said that that is the strategic (or limiting) factor
- Interdependence: focus on interdependence of adversaries’ decisions and on their expectations about
each other’s behaviour
- Goals and objectives: strategy is the determination of the basic LT goals and objectives of an
enterprise; taking strategic decisions that will lead to your goals
Summary of strategic thinking
- History through mid 1970s
- Early history of strategy affected by military concepts
- Sociology influenced the early concepts; mostly by business school professors
- Consulting firms: disseminated academic insights; developed sets of tools to monitor SBUs
- Disillusionment of tools set in: fragmented agenda for future strategic R&D
What is the link between your strategy and your business model? SLIDE 35
Business model (4 elements): system of choices and consequences; differs from strategy (way of creating and
capturing value)
- Customer value proposition
- Profit formula
- Key resources: ppl, money, research etc
- Key processes: how to transform input into output
- → influences company’s value creation and value eg price influences scale economies and bargaining
power
How to compete w other companies w your business models by
- Strengthening own virtuous cycles
- Weakening competitors’ cycles eg Microsoft teams copied a lot of things from zoom vs linux which is a
minority but it keeps the competition going
- Turning competitors into complements
,External analysis: five forces of Porter
Industry matters: creating competitive advantage
Managerial agency leads to better
EBITDAs, margins: differentiation vs cost
reduction vs focus strategy → not stuck in
the middle
Chapter 2: The competitive landscape
Environment matters
The industry in which a company operates has a strong influence on its economic performance; when you look
at a sector like eg airline industry, on average companies are making losses; business cycle explains a bit of
profitability ; differences between industries are smaller than differences within industries
Three-dimensional landscape metaphor
- Profitability of direct competitors tends to have a common industry-specific component
- Businesses in some industry group (eg pharmaceuticals) have generally operated on profit plateaus
- Others (eg airlines) have mostly remained stuck in deep troughs
- The deviation of individual players is a result of their chosen strategy (how to compete)
FIVE FORCES PORTER:
Degree of rivalry/industry competitors:
, - If fixed costs are high compared to value created: there is pressure/sunk cost (those who spent it
already have an advantage)
- Number and size of direct competitors
- Capacity utillisation influences pricing: high fixed costs, excess capacity, slow growth, no product
differentiation -> rivalry up
- Behavioural determinants: diverse competitors, high exit barriers, high strategic value to industry
position -> rivalry up
Threat of entry/new entrants:
- Industry profitability influenced by potential competitors and existing competitors
- Entre barriers (eg economies of scale, brand names, differentiation, capital requirements) prevent
influx of firms into an industry and rest on irreversible resource commitments
- Strategic groups; expected retaliation: eg Lacoste might retaliate on the fake lacoste products
- Can change over time
Threat of substitutes:
- Price-to-performance ratios: different products or services customers can use to satisfy the same basic
need
- Switching costs incurred: retraining, retooling, redesign
- Eg for airline: railway, low-cost busses, cars etc
Buyer power:
- Vertical force:
o Influences appropriation of value created by industry
o Size and concentration of customers: small # is powerful
o If buyer purchases high volumes relative to the size of the vendor, good information about
prices, attributes, low switching costs, backward integration
o Perceived risk of failure associated w product’s use (eg high personal cost of substitute’s
failure)
o Brand identity: forward and backward integration
Supplier power:
- The higher the bargaining power of suppliers, the lower the profitability
- Mirror image of buyer power (also vertical force)
- Focuses on relative size & concentration of suppliers relative to industry participants and degree of
differentiation in the inputs supplied
- Ability to charge customers different prices when market
characterised by high supplier power and low buyer power
- Switching costs: depends on the preferences of the ppl
The process of mapping business landscapes
- Gathering information: think broadly about sources of (public)
information -> overload
- Drawing the boundaries: challenge of industry definition +
choice of horizontal/vertical/ geographical scope
- Identifying groups of players: especially think about ‘other’
categories
- Understanding group-level bargaining power: macro instead of micro (firm level) – identify which
groups of players get how much of pie)
- Thinking dynamically: as it will be > as it was
- Shaping the business landscape: strategic action
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