1. Strategic Management: Creating Competitive Advantages
Chapter 1 through 6
Prepared by Shawna Chen
McGraw-Hill/Irwin
All rights reserved.

2. A Hierarchy of Goals
Exhibit 1.6

3. Question What are the criteria for meaningful strategic objectives?
Hint:
Page 31
Answers:
Measurable
Specific
Realistic
Timely

4. Application How should you proceed with final project? Hint:
Caitlin’s house had a plumbing problem
Solutions:
8 common types of challenges
Internal/external environment analyses
McKinsey’s 3 horizons or Deloitte’s growth framework

5. Application 8 common types of challenge Falling profits
New product introduction
Entering a new product/service market
Entering a new geographic market
Mergers & acquisitions
Competitive response
Government/regulatory environment response

6. Application
McKinsey’s 3 horizons

7. Application
Deloitte’s growth framework

8. Strategic Management Process8

9. Business-Level Strategy: Creating and Sustaining Competitive Advantages
Chapter Five
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

10. Business-level strategy vs. Corporate-level strategy
Question
Business-level strategy vs. Corporate-level strategy

11. Question
What are 3 generic strategies?

12. Application: Combination Strategies
Exhibit 5.2

13. Application: Stages of the Industry Life Cycle
Exhibit 5.12

14. Question Overall cost leadership Differentiation Focus
Pros? (Hint: Porter’s 5 forces)
Cons?
Differentiation
Pros?
Focus

15. Overall Cost Leadership
Pros (5):
Protects a firm against rivalry from competitors
Protects a firm against powerful buyers
Provides more flexibility to cope with demands from powerful suppliers for input cost increases
Provides substantial entry barriers from economies of scale and cost advantages
Puts the firm in a favorable position with respect to substitute products

16. Overall Cost Leadership
Cons (5):
Too much focus on one or a few value-chain activities
All rivals share a common input or raw material
The strategy is imitated too easily
A lack of parity on differentiation
Erosion of cost advantages when the pricing information available to customers increases

17. Differentiation Pros (3):
Creates higher entry barriers due to customer loyalty
Provides higher margins that enable the firm to deal with supplier power
Establishes customer loyalty and hence less threat from substitutes

18. Differentiation Cons (6): Uniqueness that is not valuable
Too much differentiation
Too high a price premium
Differentiation that is easily imitated
Diffusion of brand identification through product-line extensions
Perceptions of differentiation may vary between buyers and sellers

19. Focus
Pros (2):
Creates barriers of either cost leadership or differentiation, or both
Used to select niches that are least vulnerable to substitutes or where competitors are weakest

20. Focus Cons (3): Erosion of cost advantages within the narrow segment
Focused products and services still subject to competition from new entrants and from imitation
Focusers can become too focused to satisfy buyer needs

21. Application: Internet-Enabled
Which generic strategy?
Answer: Focus
Virtual organizing and online “officing” are being used to minimize firm infrastructure requirements.
Procurement technologies that use Internet software to match buyers and sellers are highlighting specialized buyers and drawing attention to smaller suppliers.

22. Application: Internet-Enabled
Which generic strategy?
Answer: Overall cost leadership
Direct access to progress reports and the ability for customers to periodically check work in progress is minimizing rework.
Collaborative design efforts using Internet technologies that link designers, materials suppliers, and manufacturers are reducing the costs and speeding the process of new product development.

23. Application: Internet-Enabled
Which generic strategy?
Answer: Differentiation
Personalized online access provides customers with their own “site within a site” in which their prior orders, status of current orders, and requests for future orders are processed directly on the supplier’s website.
Online access to real-time sales and service information is being used to empower the sales force and continually update R&D and technology development efforts.

24. Application: Team Exercise
Present your final project company’s “business-level” strategy
Critique
If it fits vision
If it’s a good combination
If it suits product life cycle
If it responses to the Internet era
Can competitive advantage be sustained?

25. Corporate-Level Strategy: Creating Value through Diversification
Chapter Six
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

26. Related diversification Vs. Unrelated diversification
Question
Related diversification Vs. Unrelated diversification

27. Related Diversification
Economic of scope
Leveraging core competencies
Sharing activities
Market power
Pooled negotiating power
Vertical integration

28. Question Which related diversification strategy Carpet Tech uses?
Example of related diversification using economic of scope
Procter & Gamble 3M
Example of related diversification using market power
Automotive industry

29. Example U.S. Automobile Industry’s Profit Pool
Exhibit 5.8

30. Unrelated Diversification
Restructuring
Definition?
Example?
Parenting
Portfolio management

31. Example
Church & Dwight has a well balanced portfolio of products, which includes
Arm & Hammer
Trojan condoms
Oxi Clean
AIM toothpastes
First Response
Nair
Xtra laundry detergent
Brillo
Source:

32. Application What are the differences among: Holding company
Investment company
Conglomerate
Keiretsu

33. Means to Achieve Diversification
Mergers and acquisitions (M&A)
Pooling resources of other companies with a firm’s own resource base
Joint venture
Strategic alliance
Internal development
Corporate entrepreneurship

34. Question What are the differences between merger and acquisition? M&A
Pros?
Cons?

35. Mergers and Acquisitions
Pros
Can be a means of obtaining valuable resources that can help an organization expand its product offerings and services
Can lead to consolidation within an industry and can force other players to merge
Corporations can also enter new market segments by way of acquisitions
Can be a means of obtaining valuable resources that can help an organization expand its product offerings and services
Can provide the opportunity for firms to attain the three bases of synergy—leveraging core competencies, sharing activities, and building market power
Can lead to consolidation within an industry and can force other players to merge
Corporations can also enter new market segments by way of acquisitions

36. Mergers and Acquisitions
Cons
Competing firms often can imitate any advantages realized or copy synergies that result from the M&A.
There can be many cultural issues that may doom the intended benefits from M&A endeavors.
The takeover premium that is paid for an acquisition typically is very high
Competing firms often can imitate any advantages realized or copy synergies that result from the M&A.
Managers’ credibility and ego can sometimes get in the way of sound business decisions.
There can be many cultural issues that may doom the intended benefits from M&A endeavors.

37. Question
What are the differences between joint venture and strategic alliance?
Joint venture & strategic alliance
Pros?
Cons?

38. Strategic Alliances and Joint Ventures
Pros
Introduce successful product or service into a new market
Lacks requisite marketing expertise
Join other firms to reduce manufacturing (or other) costs in the value chain
Pool capital, value-creating activities, facilities
Develop or diffuse new technologies
Use expertise of two or more companies
Develop products technologically beyond the capability of the companies acting independently

39. Strategic Alliances and Joint Ventures
Cons
Improper partner
Each partner must bring desired complementary strengths to partnership
Strengths contributed by each should be unique
Partners must be compatible
Partners must trust one another

40. Antitakeover Tactics Greenmail Golden parachute Poison pills
payment by a firm to a hostile party for the firm’s stock at a premium, made when the firm’s management feels that the hostile party is about to make a tender offer
Golden parachute
a prearranged contract with managers specifying that, in the event of a hostile takeover, the target firms managers will be paid a significant severance package
Poison pills
Used by a company to give shareholders certain rights in the event of takeover by a another firm

41. Application: Team Exercise
Find tv/movie moments as examples of
Greenmail
Golden parachute
Poison pills 41