STRATEGIC
MANAGEMENT
PROFESSOR
SCHOOL OF MANAGEMENT
FUDAN UNIVERSITY
1
CLASS
OVERVIEW
2
COURSE OVERVIEW
• WE TRY TO INTRODUCE THE BASIC
CONCEPTS, FRAMEWORKS AND
METHODOLOIES USEFUL TO MANAGERS
FORMULATING AND IMPLEMENTING
BOTH BUSINESS UNIT AND CORPORATE
LEVEL STRATEGY.
• PROBLEM SOLVING DRIVEN THAN
TRADITIONAL THEORETICAL DRIVEN
• LECTURE, CASE STUDY,GUEST
SPEAKER, TEAM PROJECT TOGETHER
OVERVIEW
3
READINGS AND
TEXTBOOK
• Sharon ,
“ Modern Competitive Analysis”
• Michael A. Hitt, R Duane Irelandand Robert E.
Hoskisson
“ Strategic Management”
• Readings and Cases
OVERVIEW
4
GRADING
The class will graded as follows:
Class participation 30%
Group project 20%
Written assignments 20 %
Final exam 30%
OVERVIEW
5
CLASS PARTICIATION
• Offering your analysis of the strengths and
weaknesses of the reading’s central argument.
• Identifying the key issues, problems and
opportunities facing the central protagonist, to
articulate and evaluate alternative approaches to
the problems, and to describe the course of
action that you recommend and the reasons for
your recommendations.
OVERVIEW
6
TO BE A GOOD
PARTICIPANT
• Is the participant a good listener?
• Are the point made relevant to the discuss? Are they linked to the
comments of others that the class is exploring together?
• Do the comments add to our understanding of the situation?Are
they incisive?Do they cut to the core the problem?
• Is there a willingness to challenge the ideas that are being
expressed?
• Is there a willingness to test new idea, or are all comments” safe”?
• Does the participant integrate material from past classes or the
readings where appropriate? So the comment reflect cumulative
learning over the course, or does the participant merely consider
each case in isolation?
OVERVIEW
7
STUDY GROUP
& GROUP PROJECT
• Each group---5-6 students
• Group project is for you to
formulate a strategy for a particular
company and a division in a
company.
• Group project should be a real case
• Writing report plus presentation
OVERVIEW
8
CLASS
ONE
9
INTEGRATED MARETING
• Philosophy
marketing
• Strategy
marketing
• Marketing
mixture
CLASS ONE
10
THE ROLE STRATEGY IN
SUCCESS
• Goal are simple, consistent and long
term
• Profound understanding of the
competitive environment
• Objective appraisal of resources
• Effective implementation
CLASS ONE
11
THE BASIC HISTORY OF
STRATEGY
• Origin and military antecedents
• Toward a general theory of strategy
• The development of business
strategy
• The role of competition and quest
for competitive advantage
• The evolution of the strategy
CLASS ONE
12
THE HISTORY OF
BUSINESS STRATEGY
• Pre-1950s ---” Business police”: general management
and leadership skill
• 1950s-1960s -- budget control and long-term detailed
planing methods stressed
• 1960s-1970s --corporate diversification, portfolio
planning
• 1970s-1980s --decline of formal planning system;Porter
analysis of industries and competition; search for
profitable niches and industries; run from tough
competition
• 1980s-1990s --emphases on cultivating organizational
capabilities rather than just positioning: notion that
firms can create their own good fortune
CLASS ONE
13
THE FALLACIES OF
STRATEGIC PLANNING
• The fallacy of prediction
• The fallacy of detachment
• The fallacy of formalization
CLASS ONE
14
SOME KEY POINTS FROM
THE STRATEGY HISTORY
• Competition provides the rationale for strategy
• competition occurs whenever resources are finite and
competitors’ objectives are mutually inconsistent
• Our priority in strategy formulation will be less on”
playing competitive games” through anticipating
competitors’ move and engaging in bluff and counter
bluff,threat and deterrence, and much more on seeking
insulation from the uncertainties of competitive
interaction by establishing a position of sustainable
advantage over rivals.
• Strategy is a deliberate search for a plan of action that
will develop a business’s competitive advantage and
compound it
CLASS ONE
15
THE DIFFERENT CONCEPTS
OF STRATEGIES
• Strategy as Plan
• Strategy as Ploy
• Strategy as Pattern
• Strategy as Position
• Strategy as Perspective
CLASS ONE
16
THE ROLE OF STRATEGY
• Strategy as a support for
decision making
• Strategy as a vehicle for
coordination and communication
• Strategy as target
CLASS ONE
17
STRATEGIES
•Cooperate strategy
•Business strategy
•Functional strategy
CLASS ONE
18
THE STRATEGY MAKING
PROCESSS
• Criticism of the
“Rationalist”approach
• Strategy making as “ Crafting”
• Strategy intent
CLASS ONE
19
STRATEGY SPECTRUM
Deliberate Strategy Emergent Strategy
Analytical “ Crafting”
Formal Planning Pattern of action
Inflexible flexible
incremental change Radical change possible
CLASS ONE
20
QUESTIONS TO
DISCUSSION
1. Why are there different definitions of “strategy”? How do they relate
to each other?
• 2. How has the field of strategy evolved over the past several decades?
How have the emphases changed?
• 3. What are the features of a successful strategy according to Grant?
• does Mintzberg view strategy? What is his major argument? Do
you agree?
• 5. How does “strategic intent ”differ from “strategic planning”?
• 6. What do Hamel and Prahalad criticize about common approaches to
strategy in . firms?
CLASS ONE
21
CLASS
TWO
22
SOCIETAL ENVIRONMENT
• Economic environment
• Technological environment
• Political-Legal environment
• Sociocultural environment
CLASS TWO
23
TASK ENVIRONEMENT
• Marketing analysis
• Competitor analysis
• Supplier analysis
• Governmental analysis
• Community analysis
• Interest group analysis
CLASS TWO
24
INDUSTRY ANALYSIS---
COMPETITIVE ANALYSIS
Industry Rivalry
among existing
competitors
Substitute Potential
entrant
Supplier power
Buyer power
CLASS TWO
25
Rivalry (Intensity of competition)
• Intense rivalry reduces average profitability
• Coordination on prices can increase total
profits within an industry
• Where coordination yields excess profits,
there are incentives to shade (cut) prices a bit
to increase market share
• Large number of competitors reduce
coordination opportunities
• Rivalry usually more intense if firms are of
the same size
CLASS TWO
26
• The more similar firms are, the easier
will be coordination
• Industries with substantial specific assets
exhibit high barriers to exit and thus
intensified rivalry
• Variability in demand (and supply)
creates more rivalry in an industry, and
can make flexibility more important,
giving an advantage to small or more
flexible firms
Rivalry (Intensity of competition)
CLASS TWO
27
SUBSTITUTES
• Presence of good substitutes
limits profits
• Cross-elasticity of demand a
factor in this
CLASS TWO
28
BUYERES
• Number of buyers and the size/distribution of
their purchase critical:Large number of buyers
with small purchases reduces buyer power
• Standardization of products increase buyer
power, usually, because they can play off one
supplier against another
• When buyer integrate backward to produce
some of the good themselves, this can increase
their bargaining power
• The more open transactions are, the more
power buyers have because this reduces search
costs for producers
CLASS TWO
29
SUPPLIERS
• Large number of suppliers reduces
supplier power
• Standardization of products reduces
supplier power
• Threat of backward integration by
buyers reduces supplier power
• More open information reduces supplier
power
CLASS TWO
30
CASE STUDY QUESTIONS
(CC&C)
• Is this an “attractive” industry?
• What has been Crown Cork ‘s strategy under
Connelly? Has it been successful?
• What kinds of strategies have CC&S’s competitors
followed? Why? Have they been successful?
• What are CC&S’s organizational competencies? How
are they developed? How are they supported by the
firm’s functional strategies?
• Why wasn’t CC&S’s strategy widely imitated?
• What are the major problems facing Crown Cork and
what recommendations would you make to
management?
CLASS TWO
31
THE LESSONS FROM
CROWN CORK&SEAL
• Profitable segments and competitive
positions exist even in unattractive
industries.
• Entrepreneurial insight versus
conventional wisdom critical
• Combining low cost( efficiency) with differentiation
( service, flexible) with focus ( not a full-
line packaging producer)
CLASS TWO
32
THE LESSONS FROM
CROWN CORK&SEAL
• Implementation critical--functional
strategies to support competitive
positioning,and development of unique
capabilities-- that’s why imitation was
difficult.
• Knowledgable individuals and leadership
matter at and
implementation of strategy are as critical
as having a good strategy.
CLASS TWO
33
THE LESSONS FROM
CROWN CORK&SEAL
• Change 5 forces in the industry,such as
from technological innovation, can
hamper a successful strategy.( .
Growth of substitute, new product
design,new entrant from self-
manufacture,regulation)
CLASS TWO
34
THE LESSONS FROM
CROWN CORK&SEAL
• The optimal strategy can change over
&S was so successful that it later
made sense to buy out competitors and
take more advantage of scale
also decided to diversify
into other packaging as cans became less
attractive ( first went into aluminum,
and then plastics through acquisition)
CLASS TWO
35
THE LESSONS FROM
CROWN CORK&SEAL
• Be careful about where scale is important
( . Plant level Vs. Company level)
CLASS TWO
36
CLASS
THREE
37
BARRIERS TO
ENTRY/POTENTIAL ENTRY
What Porter leaves out:
• Government also affects industry profitability
and rivalry by regulation,anti-trust laws, trade
agreements
• History and institutions also affect
profitability: Some firms in some industries in
some countries are better at coordinating and
exchanging information, such as through
informal means or trade associations
CLASS THREE
38
ENTRY BARRIERS
• Expectation of incumbent
reactions influence entry.
• The size of payoffs influences
entry.
• Exit costs influence the rate of
entry.
CLASS THREE
39
FORECASTING
• Extrapolation.
• Brainstorming
• Scenario writing
• Synthesis of external strategy
factors ----EFAS
CLASS THREE
40
• Do a five forces analysis of the ‘bricks and
mortar’ book retailing industry. Was this an
attractive industry?
• How does Amazon’s entry change the nature of
the book retailing industry? Is it more or less
attractive now?
• Analyze B&N’s move on-online. Would you
recommend they to things differently? What
should they do now? Why?
• Repeat this analysis for
CLASS THREE
CASE STUDY QUESTIONS
Barnes& Noble vs
41
Lessons of vs.
Barnes and
• Take a dynamic view of the 5 Forces
• Competition is not only around price
• The Internet may have permanently changed the
nature of competition in some markets
• Therefore, e-commerce markets are somewhat
different
• But e-commerce markets are not completely
different
• Strategy, capabilities, and implementation, as well
as industry structure and change dynamics all
matter
CLASS THREE
42
CLASS
FOUR
43
RESOURCE
Financial
Resource
Physical
Resource
Visible
Resource
Skilled
People
Team
Work
Moti-
vation
Human
Resource
Technology
Resource
Reputation
Invisible
Resource
Resource
CLASS FOUR
44
RESOURCE-BASED
COMPETITIVE ADVANTAGE
Imitability
Replicability
Transferability
Transparency
Durability
Competitive
Advantage
Resource
(VRIO
framework)
Value
Rareness
Imitability
Organization
Resource
Sustainability
CLASS FOUR
45
RESOURCES
RESOURCES
Slow-cycle
resources
STANDARD
CYCLE
RESOURCES
FAST-CYCLE
RESOURCE
CLASS FOUR
46
A RESOURCE-BASED
APPROACH TO STRATEGY
resources
capabilities
Competitive
advantages
Strategic goal
Resource gaps
between the need
and reality
CLASS FOUR
47
APPROACHES TO
INTERNAL ANALYSIS
• PIMS Analysis
• Value Chain Analysis
• Functional Analysis
• Synthesis of internal strategic
factors ----IFAS
CLASS FOUR
48
TYPICAL VALUE CHAIN FOR
A MANUFACTURED PRODUCT
Retailer
Raw
Materials
Distributor
Primary
Manufac
-turing
Fabrication
Product
Producer
CLASS FOUR
49
A CORPORATION’S VALUE
CHAIN
Profit
MarginInbound
Logistics
(raw materials
handling and
warehousing)
Operations
(matching,
assembling,
testing)
Outbound
Logistics
(warehousing
and
distribution
of finished
product)
Marketing
and Sales
(advertising,
promotion,
pricing,
channel
relations)
Service
(installation,
repair,parts)
Firm Infrastructure
(general management, accounting, finance, strategic planning)
Human Resource Management
(recruiting, training, development )
Technology Development
(R&D, product and process improvement)
Procurement
(purchasing of raw materials, machines, supplies)S
up
po
rt
A
ct
iv
iti
es
Primary Activity
CLASS FOUR
50
CASE STUDY QUESTIONS
(INTEL)
• What business or industry is Intel in? Who are
the main players? How do they make money?
• What is Intel’s competitive strategy?
• Go through a quick “Porter 5-forces analysis”
of the industry? What seem to be the most
important factors affecting competition and
profits?
• Overall, is this a “good industry”? If so, why
don’t more companies enter and challenge
Intel?
CLASS FOUR
51
• What have been the effects of Intel’s strategy
on the market as well as on competitors
potential new entrants and customers?
• Is there anything that microprocessor of PC
producer can do to reduce Intel’s influence?
• What are the choices and risks that Intel faces?
How would you advise the CEO?
• What are main “lessons” of the Intel case?
CASE STUDY QUESTIONS
(INTEL)
CLASS FOUR
52
THE LESSONS FROM
“INTEL” CASE
• Distinction between business and
corporate strategy
• Consistent vision but incremental
evolution of business and corporate
strategies
• Strategy and capabilities must go
together to “create” an advantage
CLASS FOUR
53
THE LESSONS FROM
“INTEL” CASE
• Strategy and capabilities must evolve
together to “sustain” an advantage
• Insightful managers and powerful firms
can manipulate industry structure
CLASS FOUR
54
CLASS
FIVE
55
MIXING THE INTERNAL
AND EXTERNAL
STRATEGIY FACTORS
• Boston Matrix
• GE Matrix
• SWOT Analysis
CLASS FIVE
56
BCG GROWTHSHARE
MATRIX
Relative Competitive Position
B
us
in
es
s
G
ro
w
th
R
at
e
0
10
10
Question
Marks
Stars
Dogs
Cash
Cows
CLASS FIVE
57
GE MATRIX
Strong Medium Weak
L
ow
H
ig
h
M
ed
iu
m
BUSINESS STRENGTH
M
A
R
K
E
T
A
T
T
R
A
C
T
IV
E
N
E
SS
Invest/grow
Selecting/earning
Harvest/diverse
CLASS FIVE
58
TOWS MATRIX
INTERNAL
FACTORS
(IFAS)EXTERNAL
FACTORS
(EFAS)
Strengths (S)
list 5-10 internal
strengths here
Weaknesses (W)
list 5-10 internal
weaknesses here
Opportunities (O)
list 5-10 external
opportunities here
Threats (T)
list 5-10 external
threats here
SO Strategies
Generate strategies here that
use strengths to take
advantage of opportunities
ST Strategies
Generate strategies here
that use strengths to avoid
threats
WO Strategies
Generate strategies here that
take advantage of
opportunities by
overcoming weaknesses
WT Strategies
Generate strategies here
that minimize weaknesses
and avoid threats
CLASS FIVE
59
CASE STUDY QUESTIONS
(LITTLE SWAN)
• 在1994年，“小天鹅”公司新面临的市
场威胁和机遇是什么？
• “小天鹅”的优势和劣势在哪里？
• 围绕着洗衣机市场的争夺，“小天鹅”
作为该市场的领先者，深深地感到竞争
的压力，那么在诸多的竞争对手当中，
究竟谁是最强的对手呢？理由是什么？
• “小天鹅”如要保持市场领先，其战略
的基本要领是什么？
CLASS FIVE
60
WHAT WE LEARN FROM
THE LITTLE SWAN
• 在中国改革开放，企业转轨，走向市场的过程中，企
业战略意识的提高是一个渐进的过程。这其中市场意
识、竞争意识是基础。
• 企业战略的制定和落实，企业领导人往往扮演最重要
的角色，因为他们为企业指明方向。
• 企业的成长是一个渐进的过程，战略需要不断地加以
调整。其成长过程中的目标也往往是不连续的。
• 企业战略是依靠一系列的企业实际经营管理的功能来
加以落实并得以完善的。
• 企业事业的界定和环境的界定，需要我们深深地懂得
未来究竟意味着什么？
CLASS FIVE
61
CASE STUDY QUESTIONS
(Pharmaceutical Industry )
Read “ The alchemists: A survey of
the pharmaceutical industry” from
The Economist, Do not concentrate
on the technical detail. Instead, focus
on trying to understand the nature
of competition in the pharmaceutical
industry.
CLASS FIVE
62
CASE STUDY QUESTIONS
(Pharmaceutical Industry )
Please come to prepared to discuss the
following questions:
• Perform a “ five forces” analysis of the
pharmaceutical industry (A) before the
advent of biotechnology; and (B) in its
current state.
• Was “ Big pharma” historically an “
attractive” industry? IS it now? Why or why
not? Is it likely to be attractive in the future?
CLASS FIVE
63
Lessons from the
Pharmaceutical Industry
• Industry attractiveness
• Individual firm capabilities
• The value chain
• Factors (not in Porter’s 5 Forces)
that can change industry structure
CLASS FIVE
64
CLASS
SIX
65
CAPABILITIES AND
DISTINCTIVE COMPETENCE
• Resources are not normally productive on their
own. Productive tasks require the cooperation
of teams of resources
• Organizational capabilities refer to a firm’s
capability for undertaking a particular activity
• Distinctive competence describe those things
that an organization does particularly well
relative to competitors
CLASS SIX
66
CORE COMPETENCES
Distinguishing those capabilities that
are fundamental to a firm’s
performance and strategy from
those that are more peripheral
CLASS SIX
67
Identifying Capabilities
A functional
classification
The value
chain
Benchmarking
Integration mechanisms
Rules and
directives
Organizational
routines
Economies of
experience
There’s a trade-off
between efficiency
and flexibility
Factors
conductive to
integration
CLASS SIX
68
ANALYZING RESOURCE
AND CAPABILITIES
CapabilityFunctional Area Example
Corporate
Management
Effective financial
control systems
Expertise in strategy
Control of diversified
corporation
Effectiveness in motivating
and coordinating divisional
and BU management
Management of
acquisitions
Exxon
GE
Shell
Haier
ABB
CLASS SIX
69
ANALYZING RESOURCE
AND CAPABILITIES
CapabilityFunctional Area Example
Corporate
Management
Management
Information
Research and
Development
Value-driven, in-touch
Corporate leadership
Comprehensive and
effective MIS network, with
strong central coordination
Speed of new product
development
Capability in basic research
Ability to develop
innovative new products
Wal-Mart
Federal Express
Body Shop
.
Intel
Sony
3M
Canon
CLASS SIX
70
ANALYZING RESOURCE
AND CAPABILITIES
CapabilityFunctional Area Example
Efficiency in volume
manufacture
Capability for continual
improvements in
production process
Flexibility and speed of
response
Design capability
长虹
Toyota
CC&S
Sony
Manufacturing
Product
Design
CLASS SIX
71
ANALYZING RESOURCE
AND CAPABILITIES
CapabilityFunctional Area Example
Marketing Brand management
and brand promotion
Promoting and exploiting
reputation for quality
Responsiveness to
market trends
Coke-Cola
P&G
Mercedes Benz
The Gap
CLASS SIX
72
ANALYZING RESOURCE
AND CAPABILITIES
CapabilityFunctional Area Example
Sales and
Distribution
Effectiveness in
promoting and
executing sales
Efficiency and speed
of distribution
Quality and
effectiveness of
customer service
Microsoft
Federal Express
Dell
Walt Disney
Mc Donald
CLASS SIX
73
Scarcity
Relevance
Property rights
Relative bargaining power
Embeddedness of resource
The Profit
Earning
Potential of a
Resource or
Capability
The extent of
the competitive
advantage
establish
Sustainability
of the
competitive
advantage
Appropriability
Durability
Mobility
Replicability
CLASS SIX
74
COMPETITIVE
ADVANTAGE
When two firms compete ( . When they
locate within the same market and are
capable of supplying the same customers
), one firm possesses a competitive
advantage over the other when it earns a
higher rate of profit or has the potential
to earn a higher rate profit
CLASS SIX
75
The
Emergence of
Competitive
Advantage Through innovation
---identifying “new-
game” strategies
Through
responsiveness to
external change
CLASS SIX
76
STATIC VIEW OF
COMPETITIVE ADVANTAGE
• Advantage 1: Cost and Quality
• Advantage 2: Time and Know-How
• Advantage 3: Strongholds
• Advantage 4: Deep Pockets
CLASS SIX
77
CORE COMPETENCE OR
CAPABILITY
• Employee knowledge and skill
• Technical system
• Managerial system
• The values and norm
CLASS SIX
78
Sustaining
Competitive
Advantage
Entrepreneuriaship
Avoiding imitation
CLASS SIX
79
HYPERCOMPETITION
Instead of seeking a sustainable
advantage the strategy in
hypercompetitive environments now
focuses on the developing a series of
temporary advantage. Instead of trying
to create stability and equilibrium, the
goal of strategy is to disrupt the status
quo.
CLASS SIX
80
• Superordinate goals
• Structure
• Strategy
• System
• Style
• Skills
• Staff
THE OLD 7-S’s
CLASS SIX
81
• Super Stakeholder Satisfaction
• Strategic Soothsaying
• position for Speed
• position for Surprise
• Shifting the rules of competition
• Signaling Strategic intent
• Simultaneous and sequential Strategic
thrusts
THE NEW 7-S’s
CLASS SIX
82
CASE STUDY QUESTIONS
(DE BEERS)
• Would you characterize De Beers as a
successful company?
• How is value created in diamonds? Why does
De Beers care so much about price
stabilization?
• Why don’t De Beers’ supplies try to sell their
own diamonds direct to the retail market?
• What should De Beers worry about ? How
would you recommend that respond to the
Australian threat?
CLASS SIX
83
WHAT WE LEARN FROM
DE BEERS (A)
• Illustration of how a special market --- a
cartel --- operates. This is not an
“efficient market” in the economist’s
sense because supply is artificially
manipulated by the cartel leader, which
allows it and other players to earn
extraordinary profits. Politics also has a
lot to do with what prices are paid and
what margins are earned.
CLASS SIX
84
From Oster:
– A market is “efficient” if supply matches
demand, and prices are close to costs, so that
no one firm or player in the industry can
earn extraordinary profits.
– But markets become “efficient” only over
time; meanwhile, entrepreneurs or firms can
exploit profitable opportunities or unique
skills and competencies.
WHAT WE LEARN FROM
DE BEERS (B)
CLASS SIX
85
A powerful company can “create value” (.
establish and raise the prices that people will pay)
by:
limiting suppliers (holding, increasing, or
cutting inventories; limiting access of buyers)
stimulating demand (advertising)
setting prices and limiting collusion among the
buyers
WHAT WE LEARN FROM
DE BEERS (C)
CLASS SIX
86
WHAT WE LEARN FROM
DE BEERS (D)
A powerful company and a cartel can earn very
high returns but must keep the industry “stable” to
avoid challenges from player who may become
dissatisfied. In De Beers’ case, this involve:
stabilizing prices and profits
sharing the wealth (see the margins table)
cultivating trust, and fear when necessary
information to understand threats
credible threats to deter potential rivals
CLASS SIX
87
