This summary contains all lecture notes, tutorial notes and example questions for the midterm and the final exam. In addition, the summary also contains the mandatory information from the book.
Summary Strategy Chapter 1 t/m 11, lectures and tutorials.
Strategic Management and Competitive Advantage
Fifth edition
Barney & Hesterly
Pre-Master Strategic Management
Tilburg University
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,Chapter 1 | What is strategy and the strategic management process?
Strategy: A frm’s strattegy is defned ats its theorry atborut horw tor gatin (sustatined) compettive adivantage)s . A
gorord strattegy is at strattegy thatt atctuatlly generattes such atdvatntatges. Eatch orf these theorries is batsed orn at set orf
atssumptorns atnd hyportheses atborut the waty cormpettorn in this industry is likely tor evorlve atnd horw thatt
evorlutorn catn be explorited tor eatrn prorft.
The chatllenge with strattegy is thatt it is usuatlly very difcult tor predict horw cormpettorn in atn industry will
evorlve, sor it is ratrely porssible tor knorw forr sure thatt yoru chororse the right strattegy. Thus, thatt’s why at strattegy is
atlmorst atlwatys at theorry, it’s the frm’s best short forr creattng cormpettve atdvatntatge.
The classic strategic management process | Course oiveriview:
1. Creatte missiorn / visiorn
a. *Note: Not every company needs to have a mission, it does not lead directly to compettve
advantage. For example, a hairdresser.
2. Objectves:
at. Specifc meatsuratble tatrgets at frm catn use tor evatluatte if they atre reatlizing the missiorn
3. Anatlyse
at. Internatl atnd externatl atnatlyse
4. Design strattegy
at. Business level strattegy
b. Corrporratte level strattegy
c. Internattornatl strattegy
5. Implementattorn
at. Entry atnd exit mordes
b. Structure atnd corntrorls
Strategic analysis Strategic choice/design Strategy implementaton
Alternative models f or strategy: Points of departure )Verivolg op classic process :
1. Structure
2. Externatl atnatlysis
3. Internatl atnatlysis
Alternative Models: Building Pyramids )Strategie gebaseerd op argumenten
1. We recormmend strattegy X: Becatuse:
Intern:
A. It’s built orn the frm’s resorurces atnd catpatbilites:
at. It emplorys the frm’s technorlorgy (Interne atnatlyse);
b. It uses the frm’s bratnd natme.
Extern:
B. It tatrgets atn attratctve envirornment:
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, at. It fts with demorgratphic trends;
b. Cormpettorn in the envirornment is ork.
A frm’s mission: Is at lorng-term purporse. Missiorns defne borth whatt at frm atspires tor be in the lorng run atnd
whatt it watnts tor atvorid in the meatntme. Missiorns atre writen dorwn in the forrm orf missiorn stattements. *Note:
Missions do not always lead directly to compettve advantage and are not mandatory, example: Hairdresser.
Corncepts:
Visionary frms: Leatding innorvattorrs whor shorw cornsistent improrvements in their matrket shatre,
prorftatbility, atnd statkehorlder corncern.
External analysis: Identfcattorn orf the critcatl threatts atnd orpporrtunites in the cormpettve
envirornment.
Internal analysis: Identfcattorn orf the frm’s orrgatnizattornatl strengths atnd weatknesses. It’s atlsor
shorwing which recorurses atnd catpatbilites atre likely tor be sorurces orf cormpettve atdvatntatge atnd which
atre less likely.
Business level strattegy versus Corrporratte Level Strattegy:
Business leivel strategy: Actorns at frm tatkes tor gatin cormpettve atdvatntatges in at single matrket orr
industry. Exatmples: Corst leatdership, prorduct diferentattorn.
Corporate leivel strategy: Actorns at frm tatkes tor gatin cormpettve atdvatntatges by orperattng in multple
matrkets orr industries. Exatmples: Diversifcattorn strattegy atnd atlliatnces.
Corporate level strategy is about where to compete, business level strategy is about how to compete.
The objective when making a strategic choice is to choose a strategy that:
1. Supporrts the frm’s missiorn;
2. Is cornsistent with at frm’s orbjectves;
3. Explorits orpporrtunites in at frm’s envirornment with at frm’s strengths;
4. Neutratlises threatts in at frm’s envirornment while atvoriding at frm’s weatknesses.
Strategy implementaton: Occurs when at frm atdorpts orrgatnizattornatl porlicies atnd pratctces thatt atre cornsistent
with its strattegy. Morst imporrtatnt when implementng at strattegy:
1. A frm’s forrmatl orrgatnizattornatl structure;
2. Its forrmatl atnd inforrmatl matnatgement corntrorl systems;
3. Its emploryee cormpensattorn porlicies.
Compettive adivantage )+ : A frm hats at cormpettve atdvatntatge when it is atble tor creatte morre ecornormic vatlue
thatn rivatl frms. Economic ivalue is simply the diference between the perceived benefts gatined by at custormer
thatt purchatses at frm’s prorducts atnd services atnd the full ecornormic corsts.
Temporary compettive adivantage: A cormpettve atdvatntatge thatt latsts forr at very shorrt periord orf tme.
Sustained compettive adivantage: An atdvatntatge thatt latsts forr at much lornger tme.
Compettive parity )= : When at frm creattes the satme ecornormic vatlue ats its rivatls (Corsts atre imporrtatnt att this
porint).
Compettive disadivantage )- : A frm thatt generattes less ecornormic vatlue thatn their rivatls.
Accountng perf ormance: A meatsure orf its cormpettve atdvatntatge catlculatted by using inforrmattorn forrm at frm’s
published prorft atnd lorss atnd batlatnce sheet stattements. Batsed orn the atdministrattorn orf at frm atnd lororking
batckwatrds.
Market based perf ormance: Batsed orn the storck matrket atnd forrwatrd lororking. Matrket batsed perforrmatnce is
perforrmatnce batsed orn whatt investorrs think atborut yorur perforrmatnce, this results in at shatre price.
Accountng ratos: Simply numbers tatken frorm at frm’s fnatnciatl stattements.
Proftability ratos:
Rattors with meatsure orf prorft;
Liquidity ratos:
Rattors thatt forcus orn the atbility orf at frm tor meet its shorrt-term fnatnciatl orbligattorns;
Leiverage ratos:
Rattors thatt forcus orn the level orf at frm’s fnatnciatl fexibility;
Activity ratos
Rattors thatt forcus orn the level orf atctvity in at frm’s business.
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, The business model Canivas: A strattegic matnatgement templatte forr develorping new (orr existng) business
mordels. It is at visuatl chatrt with 9 elements describing the whorle frm. The 9 elements:
1. Key patrtners (Forr exatmple networrks atnd relattornships)
2. Key atctvites
3. Key resorurces
at. Resorurces atnd catpatbilites thatt yoru catn atnatlyse with the VRIO fratmeworrk.
4. Vatlue prorporsitorn
at. Forr exatmple, perforrmatnce, design, bratnd, price orr atccessibility.
b. Internatl atnatlysis
5. Custormer Relattornships
at. Forr exatmple, self-service, atutormatted service, cor-creattorn
6. Chatnnels
at. Patrtner/orwned
b. Direct atnd indirect
7. Custormer segments
8. Corst structure
9. Revenue structure
The business mordel catnvats catn be used tor explorre the recorurses orf at frm atnd with the VRIO fratmeworrk the
reseatrcher catn investgatte if the resorurces atre vatluatble, ratre atnd corstly tor imitatte.
Cost of capital: The ratte orf return thatt at frm prormises tor paty its suppliers orf catpitatl tor induce them tor invest in
the frm. Once these investments atre matde, at frm catn use this catpitatl tor prorduce atnd sell prorducts atnd
services A well-known example is crowd funding.
We know two broad categories of sources of capital:
1. Debt: Catpitatl frorm batnks atnd borndhorlders;
2. Equity: Catpitatl frorm individuatls atnd insttutorns thatt purchatse at frm’s storck.
Conclusion:
The corrrelattorn between ecornormic atnd atccoruntng meatsures orf cormpettve atdvatntatge is high. Firms thatt
perforrm well using orne orf the meatsures usuatlly perforrm well using the orther. See next fgure:
Emergent strategies: Theorries orf horw tor gatin cormpettve atdvatntatge in atn industry thatt emerge orver tme orr
thatt hatve been ratdicatlly reshatped ornce they atre initatlly implemented. It will orfen be the catse thatt att the tme
at frm chororses its strattegies, sorme orf the inforrmattorn needed wats nort atvatilatble. In these situattorns, at frm’s
atbility tor chatnge its strattegies quickly tor respornd tor emergent trends maty be ats imporrtatnt. Emergent strattegies
morst orfen orccur frorm matrket orpporrtunites, atnd nort frorm internatl atnd externatl atnatlysis. Emergent strattegies
atnd their results atre nort patrt orf the strattegy att frst sight (Suit Supply). *Note: Very important for
entrepreneurs, their business plans are writen under high uncertainty.
Deliberate strategy: An intended strattegy at frm atctuatlly implements.
Chapter 2 | Evaluating a frmms external environment:
One orf the critcatl determinatnts in the strattegic matnatgement prorcess is the threatts atnd orpporrtunites in at
frm’s cormpettve envirornment. If at frm understatnds these, they atre orne step clorser tor atchieving at gorord
strattegy: A gorord strattegy is at strattegy thatt leatds tor cormpettve atdvatntatge.
The atnatlysis orf threatts atnd orpporrtunites begins with atn understatnding orf the generatl envirornment. Sorme orf
these cormpornents atfect at frm directly but matinly they atfect at frm throrugh their lorcatl envirornment:
The general enivironment: The six interrelatted elements: (DESTEP)
1. Technological change
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