Lecture 1

1. Understand how current trends are affecting strategy

2. Critically apply elementary and advanced strategic

concepts

3. Sharpen analytical thinking and constructively discuss

exemplary cases

Imagine you want to start a lemonade stand in your neighborhood. There are some things you'd need to think about to make sure your stand does well. Porter's 5 Forces is like a checklist to help you understand those things:

• Competitors: Think about other kids who might also have lemonade stands. If there are many lemonade stands around, you'll have to make your lemonade extra special or sell it at a better price to attract customers.

• New Lemonade Stands: What if a new kid moves into the neighborhood and starts their own lemonade stand? You'd want to be prepared for that. Maybe by having a secret recipe or offering cookies with your lemonade.

• Alternative Drinks: Not just lemonade stands, but what if someone starts selling iced tea or soda? Those are different, but people might like them too. You'd need to think about how to make your lemonade stand out.

• Customers: Think about the kids and adults in your neighborhood. If they love your lemonade, you have the power. But if they can easily go to the store and buy a drink, you'd need to give them a reason to come to your stand instead.

• Suppliers: You need lemons, sugar, and water to make lemonade. If the store near your house starts selling lemons at a very high price, it might be hard for you to make a profit. So, you'd want to think about where you get your supplies and how much they cost.

So, Porter's 5 Forces helps you think about all the things that can affect how well your lemonade stand does! It's like a game plan for your business.

• Sixth Force: The nature of this sixth force can vary based on interpretation and adaptation. Some common sixth forces include:

• Government or Regulatory Forces: Examines the impact of laws, regulations, and government actions on an industry.

• Complementary Products and Services: This considers the impact of products or services that are used together with the industry's offerings. For example, apps for smartphones or games for a gaming console.

• Technological Change: Some adaptations might consider the rapid pace of technological innovation as a separate force influencing industries.

• Resources: what a firm has

• Capabilities: what a firm does

• Core Competencies: what a firm is very good at (above average)

The resource-based view (RBV) of a firm is a strategic management concept that suggests a company's competitive advantage and performance are primarily determined by the resources it possesses. These resources can be tangible (like factories, capital) or intangible (like brand reputation, patents, expertise). For a resource to provide a sustainable competitive advantage, it must be valuable, rare, inimitable (hard for competitors to copy), and non-substitutable. The RBV focuses on the internal strengths of a company, in contrast to other views that emphasize external factors like industry structure.

This diagram illustrates how a competitive advantage can emerge for businesses. It is divided into two main sources of change: external and internal.

External sources of change include:

• Changing customer demand: Businesses must adapt to what customers want.

• Changing prices: Companies need to adjust to fluctuating costs and pricing in the market.

• Technological change: Firms must innovate or adopt new technologies to stay competitive.

Internal sources of change involve a company's unique capabilities, including:

• Firms that can quickly and effectively exploit changes in the market.

• Firms that possess greater creativity and innovative abilities.

The diagram highlights that due to resource heterogeneity—meaning each firm has different resources—the impact of changes will differ from one firm to another. For instance:

• Some firms are faster and more effective in exploiting change, such as IBM, known for anticipating market trends.

• Others, like Zara, demonstrate strategic agility, quickly responding to fashion trends.

Lastly, firms with greater creative and innovative capability can achieve competitive advantage through:

• Strategic innovation in their products, services, and business models.

• Adopting a "Blue Ocean Strategy," which focuses on creating new, uncontested market spaces, thereby making the competition irrelevant.

In summary, competitive advantage comes from how well a firm can respond to external and internal changes, utilizing its unique resources and capabilities to stand out in the marketplace.

• Causal ambiguity

• social complexity

• historical conditions

1. Portfolio Manager:

   • The corporate parent in this role has a small central office and is mainly involved in managing the portfolio of businesses by investing and divesting to maximize financial returns. The emphasis is on monitoring performance and allocating resources effectively, with decisions primarily directed downward to the subsidiaries.

2. Synergy Manager:

   • Here, the corporate parent has a large corporate office and focuses on creating synergies across different business units. The goal is to facilitate cooperation and sharing of resources or capabilities between the units to create additional value that wouldn’t be realized if the units operated independently.

3. Parental Developer:

   • The corporate parent with this role also has a large office but focuses on providing the subsidiaries with capabilities and support to improve their performance. This can include providing expertise, sharing best practices, or investing in shared services to enhance the competencies across the entire organization.

Each role represents a different way that the corporate parent can add value to its subsidiaries. The Portfolio Manager is more about financial structuring, the Synergy Manager is about operational integration, and the Parental Developer is about capability development.

they can compete on different levels of scope:

• vertical scope (Tesla and LG)

• product scope (Nintendo and Sony Playstation)

• geographical scope (regional banks)

1. Value Creation: This is about what the company offers and to whom. It involves understanding customer needs and problems, providing value and benefits to the target customer and market segment, and also considering the value provided to other participants like partners or suppliers.

2. Value Configuration: This pertains to how the company's value proposition is structured. It involves the composition and selection of resources and activities, how these activities are linked within the system, and identifying which participants perform specific activities. Essentially, it's the operational side of how the value is actually produced and delivered.

3. Value Capture: This component focuses on the economic aspect—how the company makes money from its value proposition. It includes defining the revenue stream and payments, understanding the cost structure and its drivers, and determining how the value is apportioned among different stakeholders, including shareholders, employees, and partners.

Hyper-competition refers to a market environment characterized by intense and frequent competitive actions, where traditional competitive advantages are quickly eroded. Key features include rapid technological changes, short product life cycles, aggressive competitive moves, disruptive strategies, and global competition. In such an environment, sustainable competitive advantages are hard to maintain, requiring businesses to focus on continuous innovation, flexibility, strategic agility, and building core competencies. Hyper-competition is increasingly common in many industries, driven by technological advancements and globalization, and it demands that companies be highly adaptable and responsive to constantly evolving market conditions.

• merger mania

• crowd mania

• social forces (Growth in sustainable investments is outpacing traditional investment)