1. STRATEGY & COMPETITIVE ADVANTAGE

2. Business Proposition Profits = Quantity (Revenue - Cost) MARGIN
3 most fundamental variables in Business

3. Definition
The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals
Alfred Chandler, Strategy and Structure

4. Levels of Strategy
Corporate strategy... defines the scope of the business in terms of the industries and markets in which it competes.
includes decisions about diversification, vertical integration, acquisitions, new ventures, divestments, allocation of scarce resources between business units
Business strategy... is concerned with how the firm competes within a particular industry or market... to win a business unit must adopt a strategy that establishes a competitive advantage over its rivals.

5. Domain of Strategy strategic competitiveness and above normal returns
concerns managerial decisions and actions which materially affect the success and survival of business enterprises
involves the judgment necessary to strategically position a business and its resources so as to maximize long-term profits in the face of irreducible uncertainty and aggressive competition
strategy is the linkage between a business and its current and future environment

6. Concepts of Firm Performance
firm survival
accounting profits (ROA, ROE, ROS)
surplus of revenues over expenses
economic profit/rent (economic value added, positive NPV)
normal return on capital
abnormal return - surplus after all inputs
shareholder value/market value…(EVA, Tobin’s q)
Change in market value over time

7. Common Elements in Successful Strategy
EFFECTIVE IMPLEMENTATION
Long-term, simple
and agreed upon
objectives
Profound
understanding of
the competitive
environment
Objective
appraisal of
resources $
Source: Adapted from Robert S. Grant, 1991 2

8. Sources of Superior Performance
Above Normal Profits
(in Excess of the Competitive Level)
Avoid Competitors
Be Better Than Competition
Attractive Industry
Attractive Strategic Group
Attractive Niche
Cost Advantage
Differentiation Advantage
Entry Barriers
Mobility Barriers
Isolating Mechanisms

9. Types of Competitive Advantage
Low Cost
Differentiation

10. Sources of Competitive Advantage Theoretical Frameworks
The Industrial Organization View
The Resource-based View
Relationship between these two views

11. The Emergence of Competitive Advantage
External Sources of Change
(fast food, cars, oil)
Responsiveness to Change
(soft drink, retail)
Innovation
(book-selling, video games)

12. Sustaining Competitive Advantage
Causal Ambiguity and Uncertain Imitability
Isolating Mechanisms
-first mover advantage
-deterrence and preemption
-resource constraints
-dynamic capabilities