MJF7 Strategy concepts overview 1. Basic concepts of strategy and SWOT analysis (Jan 17) 2. Resource based view of the firm (Jan 19) 3. Competitive, cooperative, and global strategies, (Jan 26) 4. Integration of SWOT analysis and VRIO framework

Objective To share the common ground among students in terms of the conceptual framework of strategy

MJF7 Strategy concepts overview (1): Basic concepts of strategy and SWOT analysis

Corporate environments and corporate/business strategies Exogenous environment Advancement of IT Deregulation Global competition Pre-market competition and de facto standard Shift of customer demands and/or technologies Shift of the rules of the game Value chain reconfiguration Intellectual property protection Endogenous resources Human resources Knowledge/ Technologies Financial resources StrategyPerformance Economic performance Social performance Key issues in strategy: Top management Strategic intent Value chain reconfiguration Competitive advantage Core competence Diversification Alliance Entrepreneurship Intellectual property R&D Mfg. t SalesEng.

1-1. Interaction between exogenous and endogenous environments: Strategy Strategy : A pattern of resource allocation that enables firms to maintain or improve their performance. Actions that the firm takes to neutralize threats and to exploit opportunities while capitalizing on its strengths and avoiding or fixing its weaknesses.

1-2. Interaction between exogenous and endogenous environments: Performance Performance = Expectation vs. actual Firm XFirm YFirm ZFirm A WorkersAABB WagesAABB PerformanceBAAB

2. SWOT analysis: Overview Exogenous environment: Uncontrollable conditions except in case of successful political strategies Endogenous environment: Controllable resources

2-1. Exogenous environment Demographic Economic Political/legal Sociocultural Technological Global/regional (See matrix) Industrial (Porter’s five forces model)

2-1. Exogenous environment

2-1. Exogenous environment analysis: Five forces model Porter’s five forces model of environmental “threats” Level of threat in an industry Threat of suppliers Threat of buyers Threat of entry Threat of rivalry Threat of substitute

Threat of entry = f (the cost of entry) –EOS+capital requirement –Product differentiation –Cost disadvantages independent of scale technology, knowledge, unique access to resources, locations, learning curve, deterrence Threat of suppliers = bargaining power –Limited numbers –Not substitutable –Not the significant customer –Critical to your business –Forward integration

Threat of buyers –Limited number –Large volume of purchase –Backward integration Threat of substitutes Threat of rivalry among competitors –Large numbers –Same size with the same influence –Slow industry growth –Lack of product differentiation –Productive capacity only to be added in large increments

2-2. Opportunities in industry environments Fragmented industry => Consolidation Emerging industry => First-mover advantages Mature industry => Product refinement, investment in service quality, process innovation Declining industry => Leadership, niche, harvest, divestment International industry => multinational, global, transnational

2-3. Interaction between exogenous and endogenous environments: SWOT Analysis Exogenous O and T <= 5 forces model Endogenous S and W <= VRIIO model The match between environmental opportunities and internal resources lead to “successful” strategy formulation and implementation.