1. Introduction to Corporate StrategyBy
Professor G.S. (Andy) Andrews PhD.

2. Five Definitions Strategy as…
a consciously and purposefully developed plan;
a ploy to outmaneuver a competitor;
a pattern in a stream of actions, whether intended or not;
a position defined either with respect to a competitor, in the context of a number of competitors, or with respect to markets; and as
a perspective, i.e. a certain mindset of how to perceive the world.
Mintzberg, H. (1987). "The Strategy Concept I: Five Ps For Strategy." California Management Review 30(1) Fall:

3. What is Strategy? A Definition
The choice of a future for the company and of a way to reach that future, understood as the framework that coordinates, unifies and integrates the company’s decisions and actions

4. Another definition…. - Chandler
.. .the determination of the basic long term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out those goals
- Chandler

5. “Strategy is what you have in mind until you get the first blow.”
Mike Tyson, heavy weight champion.
“No plan survives contact with the enemy”
Von Clausewitz –”On War”

6. Source: Henry Mintzberg
Strategy Formation
Source: Henry Mintzberg

7. $199 B
$130 B
$210 B
$174B
$243 B
$566 B
$172B
$42 B

8. What do they have in common?
They re-constructured their industries Or re-invented their industries! Through a process of Innovation Led Change!
$61 B
$101 B
$243 B
$89 B
$21 B

9. Who created $40 billion of market value right under their noses?

10. What is Strategy? Choice of a Future
Industry Value System
Users
Customers
Competitors
Suppliers
Implementation
Vision & Mission
Values
Long term
Shared
Communicated
Strategic Decisions
Commitment
Hard to reverse
Firm-specific Aspects
Scope
Activities
Resources and Capabilities

11. Key Questions for Strategy
How do we create value?
How do we capture value?
How can we sustain this value?

12. The five major elements of strategy
Economic Logic
Arenas
Staging
Differentiators
Vehicles
Where will we be active?
How will we obtain our returns?
What will be our speed
and sequence of moves?
How will we get there?
How will we win in the market place?
“Are you sure you have a strategy?” Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4

13. The five major elements of strategy
OMV Strategy & Finance
February 2007
The five major elements of strategy
Strategy is an integrated set of choices.
Arenas Where will we be active?
Vehicles How will we get there?
Differentiators How will we win in the market place?
Staging What will be our speed and sequence of moves?
Economic Logic How will we obtain our returns?
“Are you sure you have a strategy?” Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4

14. What drives competition in the industry? Porter’s Five Forces
Threat of new entrants
Potential Entrants
Suppliers
The Industry
Buyers
Bargaining power
of suppliers
Competition within
the industry
Bargaining power of
customers / buyers
Substitutes
The threat of
substitue products
An industry =
the group of companies
producing products
fulfilling the same
customer needs.

15. The Activity System Value Chain
An activity system is an integrated set of value creation processes leading to the supply of product and/ or service offerings. This activity system is frequently referred to as the value chain. (Porter, 1985)
“Strategy: Process, Content, Context” 3rd edition De Wit & Meyer Thomson Learning 2004

16. Key Questions for Strategy - Let us start with the first question..
How do we create value?
How do we capture value?
How can we sustain this value?

17. How do you create customer value?
Apple 1978
...an easy-to-use computer to every man, woman and child!
Wal-Mart 1962
...to put good-sized stores into little one-horse towns which everybody else was ignoring...
Canon
...to build a low-volume desk-top copier, 50% cheaper than conventional copiers, 10 times as reliable and maintenance free .
In Star Trek words, being different is… (read)
What does being diff mean in real companies?
For ex, Apple differed from competitors at the vision level back in 1978 with the idea to create a computer for everyone.
Or Wal-Mart differed at the vision level by deciding to serve rural americans with huge stores where they could find anything.
Or Cannon… who was serving the copier market before Cannon entered? XEROX. How was XEROX making money? From service to machines that would break down often. Cannon comes in with copiers that were half the price and didn’t break down
Bruno ex of how entrl firms get started… I had this vision and my old company didn’t back me up!

18. Key Questions for Strategy
How do we create value?
How do we capture value?
How can we sustain this value?

19. How do we determine strategy?
Understand the Industry
Income Statement
Decide what the Firm Can and Will Do
External consistency
Internal consistency
Dynamic consistency

20. Do we create value? Do we capture value?
Value Created
willingness to pay
costs of providing good or service
Value Captured
WTP
Value
Created
Value
Captured
Client
Price
Value
Captured
Firm
Cost

21. Position in the Industry affects Results
Explains forward integration?
Different industries = different structures!
Source: McKinsey

22. What do you look for in an industry?
Entry Barriers
Users
Industry Value System
Suppliers
Customers
Rivalry
Substitutes
Income Statement
Income Statement
Firm
Results
Firm Specific Factors

23. What do you look for inside?
Industry Value System
Income Statement
Scope
Activities
Resources & Capabilities
Firm Specific
External consistency
Internal consistency
Dynamic consistency
Strengths vs weaknesses
Opportunities and threats +

24. Positioning: Scope Product Scope “What do I sell?” Customer Scope
“For whom?”
Geographical Scope
“Where?”
Value created:
Ind str
Positioning:
scope: what we do
Activities: how we do it
R&Cs
* customer scope: TO WHOM through certain customers
* product scope: WHAT products w/ which we cover user needsdon’t forget them!!
Product orientation: what I know how to do
Customer orientation: buyer / final user
Geographic scope: WHERE
3. Defining the bzn: segmentation  individual customer  ??  aggregate: our own decision
KEY: the way we define the bzn shapes the way we think of it (back to product/customer)
Q: why is segmentation and bz definition important?
Given the scope I’ve chosen: how do I configure activities?:
which ones to keep in?
Which ones not?
How?
Selection of the part of the value system that the firm internalizes (make or buy)

25. Competitive Positioning
Buyer value generated (willingness to pay)
Costs incurred (including opportunity cost of capital)
Successful differentiated competitor
Competitor with dual advantage
Successful low-cost competitor
Industry average competitor
Source: Ghemawat (2006)

26. Key Questions for Strategy
How do we create value?
How do we capture value?
How can we sustain this value?

27. What are Resources and Capabilities?
Intangible
Technology
Reputation
Patents
Tangible
Physical
Financial
Organizational
Knowledge
Integration
Motivation

28. Apple Computer
Sales
1902
2661
4071
5284
5558
Cost of sales
891
1296
1991
2695
2606
I+D
128
192
273
421
478
Operating income
274
371
620
634
712
Net Income
154
218
400
454
475
ROS
8,10%
8,19%
9,83%
8,59%
8,55%
ROA
13,28%
14,75%
19,21%
16.55%
15,96%
ROE
28%
28%
44%
36%
32%

29. APPLE loses 700 M. in just one Q in 1996!
Q: when do you think these losses were originated?
During the years when Apple’s results were excellent (we’ll see this when we discuss the Apple case)
This is just one company, but let’s look at the aggregate

30. 1996

31. 2000

33. Strategy is about the choices you make…
Thank you!!