Strategic Management

Review of the Basics

Sharon F. Matusik, Ph. D.
Rice University

What is Strategy?
The creation of a unique and

valuable position involving a

different set of activities from
those of your competitors.
choosing what to do and what

not to do.
Adapted from Michael Porters, What is Strategy? 1996 .

Strategy Frameworks from Vault

Guide
Industry level analysis
Porters 5 Forces

PIE application

Firm level analysis

SWOT
Core competencies
Value Chain
Seven S Model

Other forms of analysis

BCG 2x2 Matrix
Benchmarking, best practices

Porters 5 Forces
Risk of Entry
(Barriers to Entry)
brand loyalty
absolute cost advantages
econ of scale, cap reqt
government regulations
distribution access

Bargaining Power of Buyers

Bargaining Power of Suppliers

High if:
product has few substitutes and
is important, few suppliers
supplier has many other outlets
for product
high switching costs
threat of vertical integration
forward

THE INDUSTRY
Rivalry Among
Established Firms
competitive structure
demand conditions
exit barriers

Threat of Substitute Products

existence of different products
that serve consumers needs in
a similar way

High if:
few large buyers
product unimportant to output
buyers purchase in large
quantities and purchase large
percentage of industry output
low switching costs, little
differentiation
threat of vertical integration
backward

Firm level analysis

First, consider units of

analysis
Corporate level
Business level
Global level
Implementation of strategy

Units of Strategic Analysis

Corporate level strategy
Level and type of diversification

Business level strategy

Low cost, differentiation, niche
Variety, needs, access based

Global level strategy

Global, international,
transnational, multi-domestic

Firm level analysis

SWOT
Firm level strengths and
weaknesses, matched to
opportunities and threats from
competitive environment

Mission, Goals
Internal Analysis
(strengths, weaknesses)

Strategic Choice
(SWOT)

Strategies:
--Corporate Level
undiversified, diversified
--Global
transnational, global, intl, multidomestic
--Business Level
low cost, differentiate, niche/focus
OR variety, needs, and access based

Strategy Implementation:
Match Strategy, Structure, Controls

External Analysis
(opportunities, threats)

Pursuing Competitive Advantage:

Core Competencies
imitability

Assets
Tangible

Intangible

Capabilities

Core
Competencies

Core Products

leading
to

Competitive
Advantage:
--Valuable
*market access

Supernormal
profits

*contributes to perceived customer value

--Rare
--Difficult to Imitate
--Nonsubstitutable

Value Chain
Chain of activities to transform inputs into outputs that customers value.

Support
Activities

Primary
Activities

Company infrastructure
Human resources
Materials management

R&D

Production Mktg &

Sales

Services

Seven S Model:
Organizational Alignment
Staff

Style

Shared Values

Systems

Strategy

Skills
Environment

Formal Structure

Other Tools/Models
Vault Analyses
BCG 2X2 Matrix
Benchmarking, best practices

Others
Game Theory
Stakeholder Analysis
Aligning Corporate Strategy:

Resource continuum

Game Theory
Assumes interdependence

among players
Allocentrism vs. egocentrism

Consider how you can shape

the game, dont just play the

game you find

Game Theory
Elements of the game

Players
Added value

capturing vs. creating value

Rules
Tactics
Scope

STAKEHOLDER ANALYSIS

Potential to Threaten
Low

Potential to Cooperate

High
High

STAKEHOLDER TYPE 4 STAKEHOLDER TYPE 1

MIXED BLESING
SUPPORTIVE
STRATEGY:
COLLABORATE

STRATEGY:
INVOLVE

STAKEHOLDER TYPE 3 STAKEHOLDER TYPE 2

NONSUPPORTIVE
MARGINAL
Low

STRATEGY:
DEFEND

STRATEGY:
MONITOR
From Savage, Nix, Whitehead & Blair, 1991

The Resource Continuum

general

wide

transferring

nature of resources

scope of businesses

coordination mechanisms

specialized

narrow

sharing

(continued)

The Resource Continuum

general

financial

small

nature of resources

control systems

corporate office size

specialized

operating

large