Strategic Management

1

• Strategic Management
• Review of the Basics

Sharon F. Matusik, Ph. D. Rice University
2
What is Strategy?

• The creation of a unique and valuable position
  involving a different set of activities from
  those of your competitors.
• choosing what to do and what not to do.

Adapted from Michael Porters, What is
Strategy? 1996.
3
Strategy Frameworks from Vault Guide

• Industry level analysis
• Porters 5 Forces
• PIE application
• Firm level analysis
• SWOT
• Core competencies
• Value Chain
• Seven S Model
• Other forms of analysis
• BCG 2x2 Matrix
• Benchmarking, best practices

4
Porters 5 Forces

• Risk of Entry
• (Barriers to Entry)
• brand loyalty
• absolute cost advantages
• econ of scale, cap reqt
• government regulations
• distribution access

• Bargaining Power of Buyers
• High if
• few large buyers
• product unimportant to output
• buyers purchase in large quantities and purchase
  large percentage of industry output
• low switching costs, little differentiation
• threat of vertical integration backward

• Bargaining Power of Suppliers
• High if
• product has few substitutes and
• is important, few suppliers
• supplier has many other outlets for product
• high switching costs
• threat of vertical integration forward

• THE INDUSTRY
• Rivalry Among Established Firms
• competitive structure
• demand conditions
• exit barriers

• Threat of Substitute Products
• existence of different products that serve
  consumers needs in
• a similar way

5
Firm level analysis

• First, consider units of analysis
• Corporate level
• Business level
• Global level
• Implementation of strategy

6
Units of Strategic Analysis

• Corporate level strategy
• Level and type of diversification
• Business level strategy
• Low cost, differentiation, niche
• Variety, needs, access based
• Global level strategy
• Global, international, transnational,
  multi-domestic

7
Firm level analysis

• SWOT
• Firm level strengths and weaknesses, matched to
  opportunities and threats from competitive
  environment

8
Mission, Goals
Internal Analysis (strengths, weaknesses)
Strategic Choice (SWOT)
External Analysis (opportunities, threats)
Strategies --Corporate Level undiversified,
diversified --Global transnational, global,
intl, multidomestic --Business Level low
cost, differentiate, niche/focus OR variety,
needs, and access based
Strategy Implementation Match Strategy,
Structure, Controls
9
Pursuing Competitive AdvantageCore Competencies
imitability
Assets
Core Competencies ? Core Products
Super-normal profits
Competitive Advantage
Tangible
Intangible
leading to
--Valuable market access contributes to
perceived customer value --Rare --Difficult to
Imitate --Nonsubstitutable
Capabilities
10
Value Chain
Chain of activities to transform inputs into
outputs that customers value.
Support Activities
Company infrastructure Human resources Materials
management
Primary Activities
Mktg Sales
RD
Services
Production
11
Seven S ModelOrganizational Alignment
Staff Style Shared Values
Systems
Strategy Skills Formal Structure
Environment
12
Other Tools/Models

• Vault Analyses
• BCG 2X2 Matrix
• Benchmarking, best practices
• Others
• Game Theory
• Stakeholder Analysis
• Aligning Corporate Strategy
• Resource continuum

13
Game Theory

• Assumes interdependence among players
• Allocentrism vs. egocentrism
• Consider how you can shape the game, dont just
  play the game you find

14
Game Theory

• Elements of the game
• Players
• Added value
• capturing vs. creating value
• Rules
• Tactics
• Scope

15
Potential to Cooperate
?
From Savage, Nix, Whitehead Blair, 1991
16
The Resource Continuum
general
nature of resources
specialized
wide
scope of businesses
narrow
sharing
transferring
coordination mechanisms
(continued)
17
The Resource Continuum
general
nature of resources
specialized
operating
control systems
financial
small
corporate office size
large