1. Introduction to Strategy

2. Sources
Strategic Management: Concepts and Cases by A. Thompson and A. Strickland
Chapter 2: Establishing Company Direction Developing a Strategic Vision, Setting Objectives, and Crafting a Strategy
Chapter 3: Industry and Competitive Analysis

3. The Mission Statement Customer needs, or what is being satisfied
Customer groups, or who is being satisfied
The company’s activities, technologies and competencies, or how the company goes about creating and delivering value to customers and satisfying their needs
Good mission statements are personalized – unique to the company

4. Strategic Vision
What changes are occurring in the market where we operate, and what implications do these changes have for us?
What new or different customer needs should we be moving to satisfy?
What new or different buyer segments should we be focusing on?
What new geographic or product markets should we be pursuing?
What should the company’s business look up in five years?
What type of company should we be trying to become?

5. Objectives Converts vision into specific performance targets
Objectives should be measurable and contain deadline for achievement
Strategic objectives need to be competitor-focused, often aiming at unseating a competitor
Financial objectives: revenues, earnings, profit margins, return on capital, credit rating, cash flow, diversified revenue base, stable earnings
Strategic objectives: market share, time to market, product quality, quality, on time delivery, geographic coverage, customer satisfaction

6. Business Strategy
It includes moves to produce successful performance in one specific line of business:
Forming responses to changes under way in the industry, economy, regulatory and political arena, and other relevant areas
Crafting moves that can lead to sustainable competitive advantage
Building valuable competences
Uniting the strategies of functional departments
Addressing specific issues facing the company
Crafting a strategy that creates competitive advantage, includes:
Deciding what product/service attributes to offer
Develop resources that set the company apart from rivals
Trying to insulate the company from actions of rivals

7. Industry and Competitive Analysis
What are the industry’s economic features?
What is the competition like?
What is causing the industry’s structure to change?
Which companies are in the strongest/weakest positions?
What strategic moves are rivals likely to make next?
What are the key factors for competitive success?
Is the industry attractive and profitable?

8. The Five Forces of Competition
Michal E. Porter
Competitive Strategy: Techniques for Analyzing Industries and Competitors
1980
The rivalry among competing sellers in the industry
The potential entry of new competitors
The market attempts of companies in other industries to win customer over to their own substitute products
The competitive pressures stemming from supplier-seller collaboration and bargaining
The competitive pressures stemming from seller-buyer collaboration and bargaining

9. 1. Rivalry Among Sellers
Rivalry intensifies as the number of competitors increases and as competitors become equal in size and capability
Rivalry is usually stronger when demand is growing slowly
Rivalry is more intense when price cuts are used to increase volume
Rivalry is stronger when customer’s costs to switch brands are low
Rivalry is stronger when a competitor is dissatisfied with its position
Rivalry increases in proportion to the size of the payoff
Rivalry tends to be more vigorous when it is costly to get out of a business
Rivalry becomes more volatile the more diverse competitors are
Rivalry increases when strong outside companies acquire weak insiders

10. 1. Rivalry Among Sellers number of competitors Demand growing slowly
price cuts are used to increase volume
customer’s costs to switch are low
competitor is dissatisfied with its position
in proportion to the payoff
costly to get out of a business
diverse competitors
strong outside companies acquire weak insiders

11. 2. The Potential Entry of New Competitors
Entry Barriers, related to
Economies of scale
Cost disadvantage of current industry
Learning effects
Specialized technology and know-how
Brand preferences and customer loyalty
Capital requirements
Access to distribution channels
Regulation
Tariffs

12. 3. Attempts to win customers to substitute products
Threats from substitute products is related to
Whether attractively priced substitutes are available
Whether buyers view the substitutes as being satisfactory in terms of quality performance, and other relevant attributes.
Whether buyers can switch to substitutes easily

13. 4. The competitive pressures stemming from supplier-seller collaboration and bargaining
Whether suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor
The extent of supplier-seller collaboration in the industry

14. 5. Seller-Buyer Collaboration and Bargaining
Bargaining leverage of buyers
If they buy a lot
Offer the seller market exposure or prestige
If buyers’ costs of switching to competing brands or substitutes are low
If the number of buyers is small or if a customer is important
If buyers are well informed about sellers’ prices and costs
If buyers can do it themselves (‘backward integration’)
If buyers have discretion in whether and when they purchase the product

15. Porter’s Competitive Forces
McFarlan’s
Technology Questions
The rivalry among competing sellers in the industry
The potential entry of new competitors
The market attempts of companies in other industries to win customer over to their own substitute products
The competitive pressures stemming from supplier-seller collaboration and bargaining
The competitive pressures stemming from seller-buyer collaboration and bargaining
Can IT change the basis of competition?
Can IT build of reduce barriers to entry?
Can IT add value to existing products and services or create new ones?
Can IT change the nature of relationships and the balance of power among buyers and suppliers?
Can IT increase or decrease switching costs?