Strategies for Creating Value and
Generating Performance
3-438-06
Session 4
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
What is
Strategic Position?
Strategic position is
concerned with the
impact on strategy
of the external
environment, an
organisation’s
strategic capability
and the
expectations and
influence of
stakeholders.
1-4
SWOT Analysis
(Strengths, Weaknesses, Opprtunities, Threats)
Internal analysis of the organization
External analysis of the organization
What one can do
What needs to be done
Strengths
Opportunities
Weaknesses
Threats
Key success
factors
Strategic
capability
Action
Key Concepts: Strategic Capability
Strategic capability refers to the resources
and competences of an organisation needed
for it to survive and prosper.
Strategic Resources
 Strategic resources: the resources of a company that enable it to
attain competitive advantage
 Strategic resources can be:




Physical (manufacturing facilities, service centres, location)
Intellectual (patents, proprietary technology, expertise)
Organizational (employee relationships, customer relationships,
supplier relationships, community relationships, reputation)
Financial (cash, borrowing capacity, equity financing capacity)
 Strategic resources are generally hard to acquire and hard to copy –
they contribute the to uniqueness of the company
Dynamic Capabilities
 Dynamic capabilities are the processes and routines that a
company uses to achieve new resource configurations of strategic
resources
 A company’s dynamic capabilities can include:




Integrating (developing product, producing product)
Reconfiguring (replicating, collaborating)
Gaining (innovating, acquiring, alliancing)
Releasing (divesting, downsizing)
 Dynamic capabilities enable a company to transform its strategic
resources over time
Distinctive Competence
Strategic resources + dynamic capabilities
Core competences are the skills and abilities by which resources
are deployed through an organisation’s activities and processes
such as to achieve competitive advantage in ways that others
cannot imitate or obtain.
A key source of its sustainable competitive advantage
Internal Factors
Competitive Advantage
 Competitive advantage: the capacity to generate above average,
superior performance compared to competitors
 Resources and capabilities are the source of value creation in the
firm i.e. a source of competitive advantage
 Resources and capabilities give competitive advantage are (VRIN):




Valuable - someone willing to pay
Rare - unique
Inimitable - hard to copy due to complexity, ambiguity
Non-substitutable - resources and/or capabilities
 Superior performance is the result of scarcity and innovation.
The
Value
Chain
The Value Chain
Source: M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, Free Pres s, 1985. Us ed with permission
of The
Free Press,
a division of Simon & Schuster, Inc. © 1985, 1988 by M ichael E. Porter. All rights reserved.
Exploring
Corporate
Strategy
Exhibit 3.6
© Pearson Educational Ltd. 2005
Exhibit 3.6
Exhibit 3.7 The Value Network
Exhibit 3.8 An Activity System Map
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
What are Strategic Choices?
Strategic choices
involve understanding
the underlying bases
for future strategy at
both the business unit
and corporate levels
and the options for
developing strategy
in terms of both the
directions and
methods of
development
1-15
The Components of Strategic Management and
the Course Readings

Session 2: Competitive
dynamics

Session 3: Strategic
capability
 Session 4:

Strategies for
creating value
and generating
performance
Session 10:

Session 5: The Content
of Strategic Change

Session 6: The
Processes of
Strategic
Change

Session 7: The
processes of
developing a
strategy
Directions and
Methods of
development

Session 11:
Actors in the
strategic
process and
Corporate Social
Responsibility

Session 12: The
Practice of Strategy
Strategic Choices
 Corporate level choices, e.g.


diversification
internationalization
 Business unit level choices, e.g.:


product / market choices
pricing choices
 Functional level choices, e.g: .

marketing, production, finance, human resources, IT,
logistics, R&D, etc.
Strategic choices at different levels are connected.
Together, they should be coherent and mutually-reinforcing
Strategic Business Unit
SBU: A strategic business unit is part of an
organization with a distinct external market
for its goods or services.
SBUs can be identified through both
external and internal factors.
External
Same customer types
Same channels
Similar competitors
Internal
Similar
products/services
Similar technologies
Similar resources and
competences
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
Business Level Strategies
SBU strategies
focus on how
companies
compete and
generate
competitive
advantage in
different
products and
markets
Exploring Corporate Strategy
Exhibit5.1
© Pearson Educational Ltd. 2005
Strategy Clock:
Product and Price Choices
Exploring Corporate Strategy
Exhibit5.2a
© Pearson Educational Ltd. 2005
Note: The strategy clock is adapted from the work of Cliff Bowman (see D. Faulkner and C. Bowman,
The Essence of Competitive Strategy, Prentice Hall, 1995.) However, Bowman uses the dimenstion
‘Perceived Use Value’.
Product-Price Strategies:
Needs and Risks
Exploring Corporate Strategy
Exhibit5.2b
Strategies for Achieving Competitive
Advantage
 Staying competitive over time: sustainability of advantage
 Volatile Markets: advantages through hypercompetition
 Interdependent competitors: advantages through collaboration
 Interdependent competitors: advantages through game theory
Sustaining Competitive Advantage over Time
Exploring Corporate Strategy
Exhibit5.3
© Pearson Educational Ltd. 2005
Competitive Strategies in Hyper-Competition
Exploring Corporate Strategy
Exhibit 5.4
© Pearson Educational Ltd. 2005
Competition and Collaboration
Exploring Corporate Strategy
Exhibit 5.5
© Pearson Educational Ltd. 2005
Interdependent Competitors: Game Theory
 Strategist must anticipate competitor reactions
 Core assumptions:



competitor will behave rationally and try to win
competitor is in an interdependent relationship with
other competitors
competitors are aware of the interdependencies and
of the moves that competitors could take
 To benefit from game theory, strategists need to:


put themselves in the position of the competitor
identify if there is any competitor strategy that will
result in their domination of the market
Sustaining Competitive Advantage over Time
Which strategies give more sustainable advantages:
Price-based strategies?
or
Differentiation strategies?
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
Ansoff’s Matrix:
Product-Market Development Options
Each option has its own needs and risks
Exploring Corporate Strategy
Exhibit 7.1
© Pearson Educational Ltd. 2005
The TOWS Matrix
Options can be generated from a strategic diagnosis
Exploring Corporate Strategy
Exhibit 7.2
© Pearson Educational Ltd. 2005
Session Overview
 Session 3 Review (The diagnosis of the organisation)


Resources, Capabilities and Competitive advantage
Value Chain and Value Network
 Strategic Choice



Strategies for Creating Value
Product-Market Development Choices
Evaluating Strategic Choices
 Strategy Clock Exercise



Aerospase (Bombardier vs. Embraer)
Smart Phones (iPhone vs. Blackberry)
Automotive (Toyota vs. US manufacturers)
Success Criteria for Strategic Options
 Suitability


Whether strategy fits with the situation
Linked to strategic position
 Acceptability


Expected performance outcomes (e.g. risk/return)
Meeting expectations of stakeholders
 Feasibility


Whether strategy can be made to work in practice
Linked to strategic capability
Techniques to Assess Suitability
Techniques are useful to assess relative suitability of options.
In practice judgement is often required.
Exploring Corporate Strategy
Exhibit 7.6
© Pearson Educational Ltd. 2005
Why Strategies may be Unsuitable
 Biased

Not addressing all three factors of environment,
capability and expectations
 Relative suitability

Other options may be more suitable
 Elements of strategy not internally consistent

Competitive strategy, development direction and
development method
Criteria to Assess Acceptability
Exploring Corporate Strategy
Exhibit 7.7
© Pearson Educational Ltd. 2005
Determining Feasibility
 Financial feasibility


Funds flow forecasting – timing of new funding
Break-even analysis
 Resource feasibility


Resources and competences needed
Scale, quality of resource, timetable for change
Take-aways from Session 6
 Strategic choices are made at the corporate, SBU and
functional levels


They are connected and should be coherent
SBU strategies focus on how companies generate competitive
advantage in different products and markets
 Analytical tools can help identify and assess SBU strategies
 The Strategy Clock positions different price/product strategies
 Ansoff matrix sets out different product/market options
 TOWS matrix helps generate options from a strategic diagnosis
 Strategic options should be evaluated against 3 criteria
 Suitability – does it fit the situation?
 Acceptability – are the anticipated outcomes acceptable?
 Feasibility – can it be made to work in practice?
Strategy Clock Exercise
 Purposes
 To begin conducting an integrative diagnosis of strategy
 To examine the product/quality/price choices that different
companies make
 Advance Preparation
 Access the 10 articles for the exercise (see ZoneCours for
references)
 Read the articles before the class
 Review each session in Part 1 – we will apply these concepts
in the classroom exercise
Strategy Clock Exercise
Identify the position of the companies/products on the
strategy clock
2. Justify your decision
3. Discuss the external environment, strategic capabilities,
changes of strategic position and its potential risks:
1.
External
Environnement
Strategic
Capabilities
Sector, Industry,
Trends
(PESTEL, 5
forces)
Resources &
competencies
required;
Value adding
Activities;
Competitive
Avantages
Changes in
Strategic position
Potential Risks
Summarize these elements
Exercice: L’horloge stratégique
Aerospace:

Bombardier & Embraer
Automobile

Toyota; GM, Ford & Chrysler
Intelligent Phones

Apple & RIM
Strategy Clock Exercise :
INDUSTRIES
Groups A, B and G - **Smart Phones (Apple vs RIM)*
Groups C, D, and H- Aerospace (Bombardier vs Embraer)
Groups E, F, and I - Automotive (Toyota vs. US
manufacturers)
FORUM REMINDER!
