Strategy Management

1. What is strategy?

1) Strategy is the creation of a unique and valuable position, involving a different set of activities. The essence of strategic positioning is to choose activities that are different from rivals.

2) Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do. Without trade-offs, there would be no need for choice and thus no need for strategy.

3) Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well, not just a few, and integrating among them.

2. Industry analysis

1) Industry value chain: Suppliers --- Rivals (firms) --- Buyer1 --- Buyer2

2) Five forces: Buyer power, Supplier power, Threat of rivalry, Threat of substitutes (LOW if the firm does not offer an attractive price and relative high quality product to the industry’s product AND the buyer’s cost of switching to the substitute is high), Threat of new entrant (LOW if the high barriers to entry AND high threat of retaliation)

3) Typical steps in industry analysis

I) Define the relevant industry:

What products are in it? Which ones are parts of another distinct industry? What is the geographic scope of competition? Identify the participants and segment them into groups.

II) Identify the players:

Who are the buyers and buyer groups? Who are the suppliers and supplier groups? Who are the competitors, the substitutes, and the potential entrants?

III) Assess the strength of each force and determine which forces are strong and which are weak and why.

IV) Is the industry an “Attractive industry” (the threat of each force is LOW and the industry average profits are likely to be HIGH)

3. Competitive advantage

1) A successful firm does not simply participate in an attractive industry. It also strives to generate more economic profits than typical firm in its industry. ADD VALUE.

2) Typical steps in Competitive advantage analysis

I) Firm level value chain (Qualitative): Support activities (Firm infrastructure, Human resource management, Technology development, Procurement), Primary activities (Inbound logistics, Operations, Outbound logistics,