Strategic Management
Lecture 01:
Introduction
Niels-Erik Wergin
Tutors
 Niels Wergin
• course leader, lecturer, tutor
 Richard Jump
• lecturer, tutor
 Peter Reid
• tutor
 Contact Details / Office Hour in handbook
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Strategic Management © Niels Wergin 2009
Timetable - changes
 Tutorial 7: Mon, 14:00-15:00, QA020,
NOT QM020 (as listed in timetable)
 Tutorial 5: moved to Mon, 14:00-15:00, QA020,
NOT 11:00-12:00 (as listed in timetable)
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Strategic Management © Niels Wergin 2009
Assignments
 Group Presentation (not marked)
 Individual Report (30%)
 Case Analysis (70%)
 All based on one of four cases:
• Horizontal integration
• Vertical integration
• Alliances
• Restructuring
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Strategic Management © Niels Wergin 2009
What We Expect From You
 Attend regularly
 Contribute to tutorials and group activities
 Buy the textbook
 Read the set chapters in advance
 Participate in / contribute to group presentation
 Prepare coursework (report, case analysis)
 Get familiar with library resources for SM
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Strategic Management © Niels Wergin 2009
Core Textbook
Barney and Hesterly
(2008):
Strategic Management
and Competitive
Advantage – Concepts
and Cases (2nd ed.)
Pearson Education
ISBN-10: 0131355023
Price: £47.49
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Strategic Management © Niels Wergin 2009
Additional Textbook
Johnson, Scholes, and
Whittington (2007):
Exploring Corporate
Strategy (8th ed.)
FT Prentice Hall
ISBN-10: 1405887338
Price: £44.99
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Strategic Management © Niels Wergin 2009
Walt Disney Company
1984 Profits: $242 Million
1984 Market Cap: $2bn
Theme Park Operations: 77 percent of profits
Consumer Products: 22 percent of profits
Filmed Entertainment: 1 percent of profits
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Strategic Management © Niels Wergin 2009
Walt Disney Company (2)
Hired Michael Eisner - 1984
1. Increased admission prices at theme parks
•
1984 - $186 m
1989 - $787 m
2. Focused on movie studios (character development)
•
1984 - $2.42 m
1994 - $845 m
3. Diversified into television (ABC), hotels, retail
stores, sport team, cruise line, publishing,
consumer products, licensing, etc.
Market Cap: 1984 = $2 billion 1994 = $28 billion
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Strategy – a Definition
Strategy: A firm’s theory about how to gain
competitive advantage
Strategic planning is planning for the long term
Eisner’s approach:
People will pay a premium price for extraordinary
entertainment. We have the necessary resources to
create extraordinary entertainment. Therefore, let’s
redeploy our resources in a different way and offer
something extraordinary to people.
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The Strategic Management Process
External
Analysis
Mission
Strategic
Choice
Objectives
Internal
Analysis
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Strategic Management © Niels Wergin 2009
Strategy
Implementation
Competitive
Advantage
The Strategic Management Process
External
Analysis
Strategic
Choice
Objectives
Strategy
Implementation
Internal
Analysis
Mission
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Competitive
Advantage
Objectives
• specific, measurable targets
• the things a firm needs to ‘do’ to achieve
its mission
• should influence other elements in the strategic
management process
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External and Internal Analysis
Systematic Examination
of the Environment
External Analysis
• interest rates
• demographics
• social trends
• technology
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Strategic Management © Niels Wergin 2009
Internal Analysis
• human resources
(knowledge)
• manufacturing
abilities
• technology
Strategic Choice
Internal
Analysis
External
Analysis
Strategic
Choice
Corporate
Level
Business
Level
• which
businesses?
• positioning
a business
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Strategy Implementation
•how strategies are carried out
•who will do what
•organizational structure and control
• who reports to whom
• how does the firm hire, promote, pay, etc.
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Strategy Implementation (2)
• every strategic choice has strategy
implementation implications
• strategy implementation is just as
important as strategy formulation
A Strategy Is Only As Good As Its Implementation!
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Strategic Management © Niels Wergin 2009
Competitive Advantage
Definition: the ability to create more economic
value than competitors
External
Analysis
Mission
Strategic
Choice
Objectives
Strategy
Implementation
Competitive
Advantage
Internal
Analysis
All elements of the strategic management process
are aimed at achieving competitive advantage
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Strategic Management © Niels Wergin 2009
Competitive Advantage
The Ability to Create More Economic
Value Than Competitors
• there must be something different about a firm’s
offering compared to competitors’ offerings
• if all firms’ strategies were the same, no firm
would have a competitive advantage
• competitive advantage is the result of doing
something different and/or better than competitors
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Two Types of Competitive Advantage
1) Advantage based on quality:
• people choose the firm’s products or services because
they are better than what competitors offer
• people are willing to pay a premium
Example: Waitrose, Mercedes, British Airways
2) Advantage based on cost:
• people choose the firm’s products or services because
they are cheaper than what competitors offer
• lower costs of production/distribution
Example: Lidl, Tata, Easy Jet
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Tata vs. Mercedes-Benz
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 Tata Nano
 Mercedes S600
 No airbag, radio, AC,
electric window lifts, central
locking etc.
 Very high build quality
 Price (new): £1390
 Price (new): ca. £150k
 All extras imaginable
Strategic Management © Niels Wergin 2009
Strategy Matters
Strategy is often the difference between:
• success and failure, between mediocrity and
excellence
 e.g. Rover vs. Toyota
• a great manager and average
managers
 e.g. Steven Jobs
• stumbling through life and moving ahead with purpose
 e.g. General Motors
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