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Summary of Strategy and Technology lectures
- Instelling
- Universiteit Leiden (UL)
Summary of Strategy and Technology lectures as part of the MSc BioPharmaceutical Sciences and Business Studies Specialization (2nd year).
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Summary Strategy & TechnologyMSc BPS Business Specialization 2022-2023
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Lecture 1 - Introduction to Strategy and industry analysis 1
Case study: Apple Inc. in 2015 4
Lecture 2 - The concept of competitive advantage 6
Case study: eHarmony 7
Lecture 3 - Industry dynamics – disruptive versus sustaining innovations 8
Case study - Netflix in 2011 10
Lecture 4 - People as a source of competitive advantage 13
Case study- Southwest Airlines 17
Lecture 5 - Leveraging external resources 19
Case study - Millenium 23
Lecture 6 - Business model design 25
Case study - Merck 27
Lecture 7 - The exploratory organization 29
Case study - Intel Research 31
Lecture 8 - The dynamics of competitive advantage - Feedback loops 34
Case study - Hey Google vs. Alexa vs. Siri 36
Case study - Voice War: Hey Google vs. Alexa vs. Siri 38
Lecture 9 - Experimentation and innovation 40
Case study - Booking.com 41
Lecture 10 - Design thinking (not in exam 2022) 44
Case study - IDEO (not in exam 2022) 45
Exam questions (without answers) 48
Answer Key 51
,Lecture 1 - Introduction to Strategy and industry analysis
What is strategy about? → What trade-offs does a company face, and what actions should the
company take to create and maintain a sustainable advantage in a competitive market?
● What capabilities distinguish the company from others?
○ A business capability, or simply a 'capability', defines what a business does.
● What’s the company’s comparative advantage?
○ Comparative advantage refers to a business's ability to produce a cheaper
product compared with other businesses.
● What’s the company’s competitive advantage?
○ Competitive advantage refers to a company's ability to differentiate itself over
its competitors.
● What business(es) should the company be involved in?
● Who are the customers that define the target market?
● What is the value proposition of the company’s products and/or services? Which
capabilities enable the company to deliver this value proposition better than any
competitor?
○ A value proposition refers to a business or marketing statement that
summarizes why a consumer should buy a product or use a service.
Innovation is a strategic imperative for every business; however, not all innovation leads to
successful products or services. Timing and defining the target market are crucial.
→ SWOT analysis: a framework to evaluate a company’s competitive position and to develop
strategic planning.
Strengths: Strengths describe what an organization or product excels at and what separates it
from the competition: a strong brand, loyal customer base, a strong balance sheet, unique
technology, and so on.
Weaknesses: Weaknesses stop an organization from performing at its optimum level. They
are areas where the business or product needs to be improved to remain competitive: a weak
brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack
of capital.
Opportunities: Opportunities refer to favorable external factors that could give an
organization or product a competitive advantage. For example, if a country cuts tariffs, a car
manufacturer can export its cars into a new market, increasing sales and market share.
Threats: Threats refer to factors that have the potential to harm an organization or product.
For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce
the crop yield. Other common threats include things like rising costs for materials, increasing
competition, and tight labor supply.
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,Example: Google Glasses.
Strengths:
- Google is an established and well-known company, with a loyal and large customer
base.
- Google Glasses are a unique and innovative technology
- Google already owns incredible amounts of customer data which can be used for the
Google Glasses business model (displaying advertisements)
- The geographic presence in almost all regions of the world optimizes the Google
Glasses technology
Weaknesses:
- Design; the Google Glasses are perceived as ‘not cool’.
- Unclear target market: Google did not define who will benefit from the glasses
- Unclear value proposition: Google were not able to define what solution Google
Glasses would give to its users
Opportunities:
- Pioneer innovation
Threats:
- Invasion of privacy of people surrounding the user
Initially Google Glasses failed because the design was perceived as ‘uncool’ by the average
customer. Moreover, Google failed to define who should wear the glasses and why. Hence,
they changed their strategy by discovering niche target markets in which technique is far
more important than design, such as children with autism, surgeons, and warehouse staff.
Competitive advantage: the relative wedge a firm is able to drive between Willingness to
Pay (WTP → how much the customers will pay for your product or service) and the costs
associated with the products/service.
https://www.masterclass.com/articles/economy-of-scope-explained
Economies of scale: the more units you produce, the lower the per-unit cost. An economy of
scale is one in which a business lowers its marginal costs by producing additional units of the
same product. This works particularly well in manufacturing, where the greatest fixed costs
come from building a factory, setting up an assembly line, and hiring core employees. A
factory that produces few items with these resources will have a high per-unit cost, but as the
factory scales up to higher levels of production, the unit price goes down. Examples:
1. Retail store: A large retail store can buy in bulk and lower their cost per unit. They can
then choose to keep the savings to increase the business’ profits or to use the savings
as a competitive advantage by passing the savings on to the consumer and offering
lower prices than their competitors.
2. Car manufacturing: The government wants to increase the production of hybrid cars,
so they offer a 15% tax break to any car manufacturers that produce more than 50,000
hybrid cars. Car manufacturers can choose to expand their line of hybrid cars or
increase the amount of production of their existing lines of hybrid cars and lower their
overall average cost of production because of the tax break incentive.
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, 3. Manufacturing: A larger manufacturing firm can invest in more efficient production
technology that smaller manufacturing firms simply can’t afford to invest in. This
investment leads to more efficient production of each unit and thus lowers the overall
cost per unit.
4. Banks: Banks tend to view larger companies as being more creditworthy and a lower
financial risk. This gives larger companies access to better financing options and lower
interest rates. This means a larger company can save more in their production costs
because they can access more capital at lower costs because of access to better
financing terms.
Economies of scope: An economy of scope provides cost savings to businesses with a
diversified product line. It allows for greater output with a relatively small uptick in fixed costs.
With economies of scope, businesses can glean more value from the real estate, machinery,
and raw goods they already own. Diversifying their product line also helps them hedge
against fluctuating market trends. Product diversification can lower the average total cost of
production when compared to manufacturing a single product. Examples:
1. Airlines: Passenger airlines frequently transport freight cargo underneath the plane.
This optimizes the use of the plane, the fuel, and the flight crew already needed to run
a passenger flight.
2. Warehouses: Many warehouses store goods belonging to multiple companies, with
each renting out sections based on square footage. This maximizes the physical
investment in building, buying, or leasing the warehouse itself.
3. Breweries and distilleries: Breweries and distilleries produce raw ethanol as a
byproduct of their beer and liquor manufacturing. Some have turned this ethanol into
hand sanitizer, resulting in a new profit stream.
Porter’s Five Forces: framework that assesses and evaluates the competitive strength and
position of an organization. Porter's Five Forces Model is an important tool for understanding
the main competitive forces at work in an industry. This can help you to assess the
attractiveness of an industry, and pinpoint areas where you can adjust your strategy to
improve profitability. → Assess factors shaping industry profitability.
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