This document is a summary of course Strategy, given at Tilburg University, as part of the premaster TISEM.
This document summarizes all chapter, except from the "Strategy in Depth" articles.
Resume*
Strategy
Premaster TISEM (2023)
Tilburg University
Niels Hering
*“Strategy in Depth” is not included in this resume
,Table of contents
PART 1: The tools of strategic analysis ............................................................................................................. 4
CHAPTER 1: What is Strategy and the Strategic Management Process? ........................................................... 4
Objective 1.1: Define strategy and describe the strategic management process ......................................... 4
Objective 1.2: Define competitive advantage and explain its relationship to economic value creation ...... 5
Objective 1.3: Describe two different approaches to measuring competitive advantage ............................ 5
Objective 1.4: Explain the difference between emergent and intended strategies ...................................... 8
CHAPTER 2: Evaluating a Firm’s External Environment ...................................................................................... 9
Objective 2.1: Describe the dimensions of the general environment facing a firm and how this
environment can affect a firm’s opportunities and threats .......................................................................... 9
Objective 2.2: Describe how the structure-conduct-performance (S-C-P) model suggests that industry
structure can influence a firm’s competitive choices .................................................................................... 9
Objective 2.3: Describe the five environmental threats and indicators of when each of these threats will
enhance or reduce the attractiveness of an industry .................................................................................. 10
Objective 2.4: Discuss the role of complements in analyzing competition within an industry ................... 12
Objective 2.5: Describe four generic industry structures and specific strategic opportunities in those
industries ..................................................................................................................................................... 13
CHAPTER 3: Evaluating a Firm’s Internal Capabilities ...................................................................................... 15
Objective 3.1: Describe the resource-based view and how it differs from S-C-P model ............................. 15
Objective 3.2: Describe the VRIO framework and how it relates to the resource-based view ................... 16
Objective 3.3: Be able to apply the VRIO framework to identify the competitive implications of a firm’s
resources and capabilities ........................................................................................................................... 17
Objective 3.4: Discuss important implications of the resource-based view................................................ 18
PART 2: Business-level strategies ................................................................................................................... 21
CHAPTER 4: Cost leadership ............................................................................................................................. 21
Objective 4.1: Define business level strategies ........................................................................................... 21
Objective 4.2: Define cost leadership as a business level strategy and identify six reasons firms can differ
in their costs ................................................................................................................................................ 21
Objective 4.3: Describe how cost leadership can create economic value for a firm ................................... 23
Objective 4.4: Identify the bases of cost leadership that are more likely to be rare and costly to imitate
and those that are less likely to be rare and costly to imitate .................................................................... 23
Objective 4.5: Explain how firms use a functional organizational structure, formal and informal
management controls and compensation policies to implement cost leadership strategies ..................... 24
CHAPTER 5: Product differentiation ................................................................................................................. 26
Objective 5.1: Define product differentiation, describe 11 bases of product differentiation and how these
bases of product differentiation can be grouped into three categories ..................................................... 26
Objective 5.2: Describe how product differentiation can create economic value ...................................... 27
Objective 5.3: Describe; (a) those bases of product differentiation that are not likely to be costly to
duplicate, those that may be costly to duplicate and those that will be often be costly to duplicate → (b)
the main substitutes for product differentiation strategies ........................................................................ 28
Objective 5.4: Describe how organizational structure, control processes and compensation policies can be
used to implement product differentiation strategies ................................................................................ 29
Objective 5.5: Discuss whether it is possible for a firm to implement cost leadership and product
differentiation strategies simultaneously .................................................................................................... 30
CHAPTER 6: Flexibility and real options ............................................................................................................ 31
Objective 6.1: Define strategic flexibility and real options .......................................................................... 31
Objective 6.2: Specify the conditions under which strategic flexibility and real options will be valuable for
firms ............................................................................................................................................................. 32
Objective 6.3: Identify when strategic flexibility and real options can be a source of sustained competitive
advantage .................................................................................................................................................... 32
, Objective 6.4: Identify the organizational challenges associated with implementing strategic flexibility and
a real options strategy ................................................................................................................................. 33
CHAPTER 7: Collusion ....................................................................................................................................... 34
Objective 7.1: Define explicit and tacit collusion and explain why collusion is typically inconsistent with
social welfare in an economy ...................................................................................................................... 34
Objective 7.2: Describe how collusion can create economic value ............................................................. 34
Objective 7.3: Describe different ways that collusive agreements can fall apart, and how it is possible to
use the attributes of an industry to anticipate how sustainable these agreements are likely to be .......... 35
Objective 7.4: Describe two unique challenges associated with organizing to implement a collusion
strategy ........................................................................................................................................................ 37
PART 3: Corporate strategies.......................................................................................................................... 38
CHAPTER 8: Vertical integration ....................................................................................................................... 38
Objective 8.1: Define corporate strategy .................................................................................................... 38
Objective 8.2: Define vertical integration, forward vertical integration and backward integration ........... 38
Objective 8.3: Discuss how vertical integration can create value ............................................................... 39
Objective 8.4: Describe conditions under which vertical integration can be a source of sustained
competitive advantage ................................................................................................................................ 40
Objective 8.5: Describe how the functional organization structure, management controls and
compensation policies are used to implement vertical integration ............................................................ 41
CHAPTER 9: Corporate diversification .............................................................................................................. 42
Objective 9.1: Define corporate diversification and describe five types of corporate diversification ........ 42
Objective 9.2: Specify the two conditions that a corporate diversification strategy must meet to create
economic value ............................................................................................................................................ 43
Objective 9.3: Specify the circumstances under which a firm’s diversification strategy will be a source of
sustained competitive advantage................................................................................................................ 45
CHAPTER 10: Organizing to implement corporate diversification .................................................................... 46
Objective 10.1: Describe the multidivisional, or M-form, organizational structure and the roles of the
board of directors, institutional investors, the senior executive, corporate staff, division general
managers, and share activity managers in making the M-form structure work ......................................... 46
Objective 10.2: Describe three management control processes are used to help implement a corporate
diversification strategy ................................................................................................................................ 47
Objective 10.3: Describe the role of management compensation in helping to implement a corporate
diversification strategy ................................................................................................................................ 49
Compensation policies and implementing corporate diversification ....................................................... 49
CHAPTER 11: Strategic alliances ....................................................................................................................... 50
Objective 11.1: Define a strategic alliance and give three specific examples of strategic alliances ........... 50
Objective 11.2: Describe how strategic alliances can create value for firms .............................................. 51
Objective 11.3: Describe how adverse selection, moral hazard, and holdup can threaten the ability of
alliances to generate value .......................................................................................................................... 51
Objective 11.4: Describe the conditions under which a strategic alliance can be rare and costly to
duplicate ...................................................................................................................................................... 52
Objective 11.5: Describe how contracts, equity investments, firm reputation, joint ventures and trust can
all reduce the threat of cheating in strategic alliances ................................................................................ 54
CHAPTER 12: Merger and acquisitions ............................................................................................................. 55
Objective 12.1: Describe different types of merger and acquisition ........................................................... 55
Objective 12.2: Describe how mergers and acquisitions can create economic value ................................. 55
Objective 12.3: Describe three ways that bidding firms might be able to generate economic profits for
implementing mergers or acquisitions ........................................................................................................ 58
Objective 12.4: Describe the major challenges that firms integrating acquisitions are likely to face ......... 59
, PART 1: The tools of strategic analysis
CHAPTER 1: What is Strategy and the Strategic Management Process?
Objective 1.1: Define strategy and describe the strategic management
process
Defining strategy
A firm’s strategy is defined as its theory about how to gain competitive advantages. A good
strategy is a strategy that generates such advantages.
The Strategic Management Process
The strategic management process is a sequential (i.e. successive order) set of analyses and
choices that can increase the likelihood that a firm will choose a good strategy.
o A firm’s mission
The long-term purpose of a firm. A mission can have a different effect on firm’s
performances. Some missions may not affect firm performance, some missions can improve
firm performance and some missions can hurt firm performances.
o Objectives
Specific measurable targets a firm can use to evaluate the extent to which it is realizing its
mission.
o External and internal analysis
By conducting an external analysis, a firm identifies the critical threats and opportunities in
its competitive environment. By conducting an internal analysis, a firm identifies its
organizational strength and weaknesses.
o Strategic choice
The strategic choices available to firms fall into two large categories: business-level
strategies and corporate-level strategies. Business-level strategies are actions firms take to
gain competitive advantages in a single market or industry. Corporate-level strategies are
actions firms take to gain competitive advantages by operating in multiple markets or
industries simultaneously.
o Strategy implementation
The implementation of the strategy occurs when a firm adopts organizational policies and
practices that are consistent with its strategy.
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