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Unit 5 Strategy Discussion Outline. We look at sustainable competitive advantage, defined here as a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate.

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unit 5 strategy discussion outline
Unit 5 StrategyDiscussion Outline
  • We look at sustainable competitive advantage, defined here as a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate.
  • We answer the questions of how a company can establish such an advantage against competitors and the significant benefits of doing so.
  • We then move into the steps involved in the strategy-making process. This is followed by a discussion of three different kinds of strategies: corporate-level strategies, business-level strategies, and operational strategies.
strategy is an action managers take to achieve superior performance
Strategy is an Action Managerstake to achieve Superior Performance





requires …

Growth in

profits over


competitive advantage
Competitive Advantage
  • Competitive advantage – an advantage obtained when a firm outperforms its rivals, and it helps a firm to provide greater value for customers than its competitors can.
  • Distinctive competency – a unique strength (S) that rivals lack and helps a firm attain a competitive advantage. Core capabilities are those that produce distinctive competencies and are less visible.
  • A sustained competitive advantage – when a distinctive competency that rivals cannot easily match or imitate.
things that protect distinctive competencies of a company examples
Things that Protect Distinctive Competencies of a company: Examples
  • Barriers to imitation - factors that make it difficult for a firm to imitate the competitive position of a rival.
  • Legacy constraints - prior investments in a particular way of doing business that are difficult to change and limit a firm’s ability to imitate a successful rival.
competitive advantage1
Competitive Advantage



Low costs







If protected from copying by

barriers to imitation and

legacy constraints

competitive advantage

will be sustained

characteristics of the distinctive resources
Characteristics of the “Distinctive” Resources

Resources (e.g., assets, capabilities, processes, employee time, information, and knowledge that a firm controls) that help a firm to outperform its rivals are characterized as follows:

  • Owned
  • Valuable
  • Rare
  • Imperfectly imitable
  • Non-substitutable
strategy making

The strategy-making typically involves three steps:

  • Assessing need for strategic change
  • Conducting a situational analysis
  • Choosing strategic alternatives
  • The need assessment is difficult because there is a lot of uncertainty in business.
  • Top managers should avoid competitive inertia, since they are often slow to recognize the need for strategic change.
  • Managers must be aware of strategic dissonance.
u s hospitals an example
U.S. Hospitals: An Example
  • In the 20th Century, U.S. Hospitals were considered as the premier, top-notch facilities for healthcare
  • 21st Century has brought the competitive pressures from focused providers
  • Result: Competitive disadvantage and the need for change
situational analysis
Situational Analysis
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
internal analysis
Internal Analysis
  • An analysis of a company’s strengths (S) and weaknesses (W), often begins with an assessment of its distinctive competencies and core capabilities.
  • A distinctive competence is something that a company can make, do, or perform better than competitors and is tangible – for example, a product or service is cheaper, better, or faster.
  • A core capability is something that is less visible, such as internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs.
external analysis
External Analysis
  • Environmental scanning
  • Strategic group - group of companies within an industry that top managers choose to compare, evaluate, and benchmark strategic threats and opportunities
  • Competitive intelligence
choosing strategic alternatives
Choosing Strategic Alternatives

According to strategic reference point theory, managers choose between two basic alternative strategies:

  • Conservative risk-avoiding strategy
  • Aggressive risk-taking strategy
risk tolerance and strategic alternatives examples
Risk tolerance and StrategicAlternatives: Examples
  • In responding to changes in the external environment, managers can choose between aggressive risk-taking strategy or a conservative risk-avoiding strategy:
    • Prospector
    • Analyzer
    • Defender
  • In terms of your emphasis on growth, managers can choose between:
    • Growth-oriented strategies
    • Stability-oriented strategies
corporate level strategy
Corporate-Level Strategy

Corporate-level strategy concerned with deciding which industries a firm should compete in and how the firm should enter or exit industries.

  • Portfolio strategy and BCG Matrix
  • Diversification
  • Vertical integration
  • International expansion
  • Diversification – Entry into new business areas.
  • Related diversity – Diversification into a business related to the existing business activities of an enterprise.
  • Unrelated diversity – Diversification into a business not related to the existing business activities of an enterprise.
  • Vertical integration – either a backward (upstream) integration or a forward (downstream) integration.
business level strategy
Business-Level Strategy
  • Cost leadership
  • Differentiation
  • Focus
the low cost value cycles
The Low-Cost Value Cycles

Lower costs



and profit



of scale

Lower prices



options for exploiting differentiation
Options for Exploiting Differentiation


prices more

than costs

Option 1





and profit


Option 2



Moderate or

no price


Economies of

scale and

lower costs

choosing segments to serve focus strategies
Choosing Segments to Serve: Focus Strategies
  • Markets are characterized by different types of consumers.
  • Focus Strategy: Serving a limited number of segments.
  • Broad market strategy: Serving the entire market.
configuring the value chain operational strategy
Configuring the Value Chain: Operational Strategy
  • Primary activities: Activities having to do with the design, creation, and delivery of the product; its marketing; and its support and after sales services.
  • Support activities: Activities that provide inputs that allow the primary activities to occur.
  • Organization architecture: The operations of the firm are embedded within the internal organization architecture of the enterprise, which includes the organization structure, incentives, control systems, people, and culture of the firm.
competitive tactics
Competitive Tactics
  • Competitive tactics: Actions that managers take to try to outmaneuver rivals in the market.
  • Tactical pricing Decisions
    • Razor and razor blade pricing
    • Price war
  • Tactical Product decisions:
    • Product proliferation
    • Bundling