Strategic Management Introduction Mar2017 v1

Strategic
Management:
Introduction to Module
Ground Rules
All University students are adults and will be respected
as adults.
Arrive on time
Turn off your handphone
Critique ideas, not people. Avoid put-downs (even humorous ones).
If you are offended by anything, acknowledge it immediately.
Ask questions if you are confused.
Try not to distract or annoy your classmates.
Encourage one another. Everyone Learn
1. What I hear, I forget

2. What I hear and see, I remember a little
3. What I hear, see, and ask questions about and
discuss with someone else, I begin to understand.
4. What I hear, see, and discuss, and I do, I acquire
knowledge and skills.
5. What I teach to another, I master
Module Code and Module Title Title of Slides
2
Hello my dear Dr Jugindar,how are you
doing? This is me -------
035355)UCT1606IBM.
Sir i have an issue of poor attendance and i
really need you help to give me some
percentage in order to get my docket to sit
the exams.The reason of absence class's i
was sick most of the time and whenever i
am sick i can not go clinic because i don't
have money to go.My exams starting
24/10/2016.
Best regards.
Module Code and Module Title Title of Slides #
Week 1 : Introduction
Learning Outcomes for the module.

Key terms.
Learning methods, subjects to be covered.
Introduction to the subject including
definitions and discussion of applications.
Assessment briefing.
Introduction to strategy The strategic
Management Process
Aim:
Recognise the important role that strategic

management plays in their organisations
performance
Appreciate the underlying reasons for that. Strategic

management involves assessing your situation today
and predicting the future
Develop such insights, coupled with creativity and

foresight are the fundamental ingredients strategic
planning

Learning Outcome
On successful completion of this module, you should be able to:
Demonstrate a systematic understanding and critical evaluation of the

key aspects of the strategic management process.
Demonstrate the ability to compare different theories and perspectives

of strategic management and use and appraise them appropriately.
Critically evaluate theories and concepts of strategic management.
Demonstrate the ability to communicate complex issues.

Assessment
An individual assignment length 2,500

words weighted at 60%
An Exam length 2 hours weighted at 40%

Strategic
Management: A
Competitive
Advantage Approach,
Concepts and Cases,
16th Edition
Fred R. David,
Forest R. David
2017
| Pearson
| Available
Ch 1 -8
Module Code and Module Title Title of Slides Copyright 2007 Prentice Hall
Download
Ch 1 -9
Strategy: Definitions and Meaning
Strategy is a term that comes from the Greek strategia,
meaning "generalship."
In the military, strategy often refers to maneuvering troops into position before
the enemy is actually engaged
Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning
Strategy is a plan, a "how," a means of getting from here to there.
Strategy is a pattern in actions over time;
Strategy is position;
Strategy is perspective, that is, vision and direction.
Decisions and actions over time.
This pattern in decisions and actions defines what Mintzberg called
"realized" or
intended or
emergent strategy.
Means by which long-term objectives are achieved
Ch 1 -10
Key Terms
Strategies Strategy a
Some Examples comprehensive action
Geographic expansion plan that identifies long-
Diversification term direction for an
Acquisition organization and guides
Market penetration
resource utilization to
Retrenchment
Liquidation
accomplish
Joint venture organizational goals with
sustainable competitive
Copyright 2007 advantage. Ch 1 -11
Prentice
Module Code and Module Title Hall Title of Slides
12
Basic concepts of strategy:

Competitive advantage operating with an
attribute or set of attributes that allows an
organization to outperform its rivals.
Sustainable competitive advantage one that is

difficult for competitors to imitate.
Management - Chapter 9

Key Terms
Competitive Strategy
Michael Porter - Harvard Business Review Michael E. Porter is a University Professor at Harvard,
Competitive strategy is "about being different."
"It means deliberately choosing a different set of activities to deliver a unique mix
of value."
Strategy is about competitive position, about differentiating yourself in the eyes of

the customer, about adding value through a mix of activities different from those
used by competitors.
Porter defines competitive strategy as "a combination of the ends (goals) for
which the firm is striving and the means (policies) by which it is seeking to get
there."
Strategy as both plan and position.

14
Basic concepts of strategy (cont.):
Strategic management the process of formulating

and implementing strategies to accomplish long-term
goals and sustain competitive advantage.
Management - Chapter 9

Strategic Management Defined
Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives. Fred R David

In short,
Strategic Management is about how an

organization adds value and competes
in its environment.

Strategic Management
In essence, the strategic plan is a

companys game plan
The prime task of strategic management is thinking through the overall

mission of the business. Peter Drucker
What is our Business

Ch 1 -17
Relationship between Resources, Capabilities,
Competitive Advantage and Strategy
Resources Competitive Strategy
Advantage
Shapes
Transforms
Organizational Builds
Capabilities
Strategy a comprehensive action plan that identifies long-term direction for an

organization
Competitive Advantage: Refers to anything that a firm does exceptionally well
compared to its competitors (include superior customer service, innovative products,
strong distribution channels or low pricing)
Resources refer to the inputs such as equipment, human resources, processes,
patents or finances used by a firm to create its products or services
Capabilities refer to the firms capacity to transform its resources into outputs valued
by the firms customers and which can generate profits for the firm.
19
Three levels of strategy in
organizationscorporate,
business, and functional
strategies.

Levels of Strategies
The typical business firm usually considers three levels of
strategy: corporate, business and functional

A. Corporate Level Strategies
Corporate level strategies are meant to be
considered for the overall movement of the
organization and the decisions have to be made
at the top corporate level with the inputs and
participation from the various divisions.
It typically fits within the three main categories of
stability, growth and retrenchment.

B. Business Level Strategies
Business level strategies usually occur at the

business unit or product level. They emphasize
on the improvement of the competitive position of
a corporations products or services in the specific
industry or market segment served by that
business unit.
The business strategies are grouped into three
generic strategies: cost leadership, differentiation
and focus.

C. Functional Level Strategies
Functional strategies (also known as

departmental level strategies) are the actions to
be considered at the various functional or
operational levels of the organization.
The strategic issues at the functional level
actually are related to business processes and
the value chain.

The strategic
Management
Process

Stages of Strategic Management
Strategy Strategy Strategy

formulation implementation evaluation
Copyright 2017 Pearson Education, Inc.

1-25
Stages in Strategic Management
Strategy Formulation: Vision, Mission, environment study,
long term objectives, choosing the strategies to pursue
Determines competitive advantage
Strategy implementation: Annual objectives', policies, m

motivation of staff, allocate resources
Action stage mobilize to achieve the strategy
Strategy evaluation: Measure performance, take corrective

action
Whether the strategies are working.

Strategy Formulation
developing a vision and mission
identifying an organizations external
opportunities and threats
determining internal strengths and weaknesses
establishing long-term objectives
generating alternative strategies
choosing particular strategies to pursue

1-27
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -28
Decisions
What new businesses to enter
What businesses to abandon
Whether to expand operations or diversify
Whether to enter international markets
Whether to merge or form a joint venture
How to avoid a hostile takeover

1-29
Strategy Implementation
requires a firm to establish annual
objectives, devise policies, motivate
employees, and allocate resources so
that formulated strategies can be
executed
often called the action stage

1-30
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -31
Strategy
Implementation
Action Stage of Strategic

Management
Most difficult stage

Mobilization of
employees & managers
Interpersonal skills
critical
Consensus on goal
pursuit
Ch 1 -32
Strategy Evaluation
Determining which strategies are not
working well
Three fundamental activities:
reviewing external and internal factors that
are the bases for current strategies
measuring performance
taking corrective actions

1-33
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Ch 1 -34
Strategy
Evaluation
Final Stage of Strategic
Management
Subject to future
modification
Todays success no
guarantee of future success
New & different problems
Complacency leads to
demise
Ch 1 -35
Comprehensive strategic management model
External
Audit
Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Internal
Audit

Benefits of Strategic Management
Strategic management allows an

organization to be more proactive than
reactive in shaping its own future;
It allows an organization to initiate and

influence (rather than just respond to)
activitiesand thus to exert control over
its own destiny.
1-38
Benefits to a Firm That Does
Strategic Planning
1-39
Financial Benefits
Businesses using strategic-management

concepts show significant improvement in
sales, profitability, and productivity compared
to firms without systematic planning activities
High-performing firms tend to do systematic

planning to prepare for future fluctuations in
their external and internal environments

1-40
Nonfinancial Benefits
Enhanced awareness of external threats

Improved understanding of competitors
strategies
Increased employee productivity
Reduced resistance to change
Clearer understanding of performance
reward relationships

1-41
Why Some Firms Do No Strategic
Planning
No formal training in strategic
management
No understanding of or appreciation for
the benefits of planning
No monetary rewards for doing planning
No punishment for not planning
Too busy firefighting (resolving internal
crises) to plan ahead
View planning as a waste of time, since no
product/service is made
1-42
Why Some Firms Do No Strategic
Planning
Laziness; effective planning takes time
and effort; time is money
Content with current success; failure to
realize that success today is no guarantee
for success tomorrow; even Apple Inc. is
an example
Overconfident
Prior bad experience with strategic
planning done sometime/somewhere

1-43
Pitfalls in Strategic Planning
Using strategic planning to gain control over decisions
and resources
Doing strategic planning only to satisfy accreditation or
regulatory requirements
Too hastily moving from mission development to strategy
formulation
Failing to communicate the plan to employees, who
continue working in the dark
Top managers making many intuitive decisions that
conflict with the formal plan
Top managers not actively supporting the strategic-
planning process
Failing to use plans as a standard for measuring
performance
1-44
Pitfalls in Strategic Planning
Delegating planning to a planner rather than
involving all managers
Failing to involve key employees in all phases of
planning
Failing to create a collaborative climate
supportive of change
Viewing planning as unnecessary or unimportant
Becoming so engrossed in current problems that
insufficient or no planning is done
Being so formal in planning that flexibility and
creativity are stifled

1-45
Competitive Advantage
An advantage
over competitors
gained by offering consumers
greater value than
competitors offer.
Anything that a firm does especially well

compared to rival firms
Module Code and Module Title Title of Slides 18- 46
any activity a firm does especially well compared to
activities done by rival firms,
any resource a firm possesses that rival firms desire.
Cost Leadership Differentiation

Quality
Efficient scale
Innovation
Standardization
Design
Design for low production cost
Credibility
Control of overheads and R&D Brand name
Avoid marginal customers Reputation
Customer service
Integrated services
Resources Competitive Strategy

Advantage
Organizational
capabilities
Cost advantage
Competitive
advantage
Differentiation advantage
-By establishing low cost advantage: e.g. provide products or services similar to
those of its competitors but at a lower cost
-By establishing a differentiation advantage: e.g. provide a unique product for

which the customer is willing to pay a premium.
48
Something that places a company
or a person above the competition
How to Gain and Sustain
To gain and sustain

competitive
advantages, a firm
must create and
nurture a clear vision
and mission, and then
systematically
formulate, implement,
and evaluate
strategies

1-50
How can competitive
advantage be sustainable?
The firm must seek competitive advantage in combining
resources & capabilities
Develop resources and capabilities, which are rare, valuable
Make those resulting competences sustainable by precluding

imitation or substitution by competitors
The firm must offer competitive products
51
Getting and keeping competitive
advantage is essential for long-term
success of an organization
1 Continually adapting to changes in:
external trends and events
internal capabilities, competencies and resources,
2 Effectively formulating, implementing and evaluating

strategies that capitalize upon those factors.
For eg. newspaper circulation in the United States is
steadily declining. Most national newspapers are rapidly
losing market share to the Internet, and other media that
consumers use to stay informed.

Comparing Business and
Military Strategy
A fundamental difference between military

and business strategy is that business
strategy is formulated, implemented, and
evaluated with an assumption of competition,
whereas military strategy is based on an
assumption of conflict
Both business and military organizations
must adapt to change and constantly improve
to be successful
1-53
Excerpts from Sun Tzus The Art of
War Writings
War is a matter of vital importance to the

state: a matter of life or death, the road either
to survival or ruin. Hence, it is imperative that
it be studied thoroughly
Know your enemy and know yourself, and in
a hundred battles you will never be defeated
Skillful leaders do not let a strategy inhibit
creative counter-movement
Copyright 2017 Pearson Education, Inc. 1-54

Key Terms in Strategic
Management
Strategists
Individuals most responsible for the success
or failure of an organization
Help an organization gather, analyze, and
organize information

1-55
Key Terms
Strategists Firms success/failure

Individuals most responsible for the success or failure of an organization
Various Job Titles:
Chief Executive Officer (CEO)

Chief Strategy Officer (CSO)
President
Owner
Board Chair
Executive Director
Ch 1 -56
Management
Vision and Mission Statements
A vision statement answers the question What do we
want to become?
A mission statement answers the question What is
our business?
Microsoft Vision
Empower people through great software anytime,
anyplace, and on any device
Google Mission
To organize the worlds information and make it
universally accessible and useful Google
1-57
Management
Long-Term Objectives
specific results that an organization
seeks to achieve in pursuing its basic
mission
long-term means more than one year
should be challenging, measurable,
consistent, reasonable, and clear

1-58
Key Terms
Long-term Objectives
Essential for ensuring the firms success

Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning, motivating, and
controlling
Ch 1 -59
Copyright 2007
Prentice
Module Code and Module Title Hall Title of Slides
TERM DEFINITION A PERSONAL EXAMPLE
Mission Overriding purpose in line with the Be healthy and fit
values or expectations of
stakeholders
Vision Desired future state: the aspiration of To run the London
the organisation
Goal General statement of aim or Lose weight and strengthen muscles
purposes
Objective Quantification or more precise Lose 10 pounds by 1 September and
statement of the goal run the marathon next year
Core Resources, processes or skills which Proximity to a fitness centre,

provide competitive advantage supportive family and friends and
Competences past experience of successful diet
Strategies Long-term direction Associate with a collaborative

network (e.g. join running club),
exercise regularly, compete in
marathon locally, stick to appropriate
diet
Strategic Combination of resources, processes Specific exercise and diet regime,
and competences to put strategy into appropriate training facilities etc.
Architecture effect
Control The monitoring of action steps to: - Monitor weight, miles run and
Assess effectiveness of strategies measure times: -
and actions If satisfactory progress, do nothing;
Modify strategies and/or actions a If not consider other strategies and
Module Code and Module Title
necessary Title of Slides
actions
Tutorial

Questions
Define strategic management
Discuss the benefits of strategic

management to an organization.

Benefits of Strategic Planning
1. Defines a companys vision, mission and future

goals.
2. Identifies the suitable strategies to achieve the
goals.
3. Improves awareness of the external and internal
environments, and clearly identifies the
competitive advantage.
4. Increases managers commitment to achieving the
companys objectives.
5. Improves coordination of the activities and more
efficient allocation of companys resources.
6. Better communication between managers of the different
levels and functional areas.
7. Reduces resistance to change by informing the employees of

the changes and the consequences of them.
8. Strengthens the firms performance.
9. On average, companies using strategic management are

more successful than the companies that dont.
10. Strategic planning allows the organization to become more

proactive than reactive.

Fail Shows little knowledge on the benefits of strategic management OR
0-4 marks did not answer/focus on the question. Answer covers less than 2 of the
above criteria. The narrative demonstrates very weak depth, weak
level of knowledge and depth of understanding of the body of
knowledge or evidence of wider reading, contextualization and
application. The language is weak and suffers from spelling and
grammatical errors.
Pass Fairly generic discussion but with low depth. Answer cover less than
5-6 marks 3 of the benefits strategic management. The discussion demonstrates
limited knowledge. Limited amount of reading and literature related to
question, little evidence of wider reading, contextualization and
application. The language is satisfactory but has spelling and
grammatical errors.
Credit Skilled, fairly detailed and good quality narrative explanation and
7 marks discussion with fairly good depth. Fairly detailed answer covers at
least 3 of the benefits of strategic management. The discussion
demonstrates considerable knowledge. Comprehensive reading &
literature is clearly related to question and shows some clear evidence
of wider reading, contextualization and application. This is supported
by reasonably good use of language, clarity in writing, has spelling
and grammatical errors.
Distinction Skilled, detailed and high quality narrative with strong depth. Detailed
8-10 marks answer covers at least 4 of the benefits of strategic management. The
narrative demonstrates thorough and insightful knowledge. Exemplary
reading and literature explicitly related to question shows strong
evidence of wider reading, contextualization and application. This is
supported by good use of language, coherent flow of information,
clarity in writing, no or minimal spelling and grammatical errors.
Questions
Discuss the reasons given for why

.
some firms do no strategic planning.

1. No formal training in strategic management;
2. No understanding of or appreciation for the benefits of planning;
3. No monetary rewards for doing planning;
4. No punishment for not planning;
5. Too busy "firefighting" (resolving internal crises) to plan ahead;
6. To view planning as a waste of time, since no product/service is made;
7. Laziness; effective planning takes time and effort; time is money;
8. Content with current success; failure to realize that success today is not a guarantee for
success tomorrow; even Apple Inc. is an example;
9. Overconfident;
10. Prior bad experience with strategic planning done sometime/somewhere.
Fail Shows little knowledge on why organizations do no strategic planning.
0-7 marks Work is weak and is wholly descriptive OR did answer/focus on the
question. Answer covers less than 2 of the above criteria with very low
level of depth. The narrative shows little or no discussion, little or no
evidence of wider reading, contextualization and application. The
language is weak and suffers from spelling and grammatical errors.
Pass Fairly generic narrative mostly descriptive with low depth. Answer
8-9 marks covers less than 3 of the above criteria. The narrative shows limited
level of discussion, little evidence of wider reading, contextualization
and application. The language is satisfactory but has spelling and
grammatical errors.
Credit Skilled, fairly detailed and good quality narrative with good depth.
10-11 marks Detailed answer covers at least 3 of the above criteria, with reasonable
balanced discussion for each. The narrative shows some critical
analysis, some evidence of wider reading, contextualization and
application. This is supported by reasonably good use of language,
clarity in writing, has only minimal spelling and grammatical errors.
Distinction Skilled, detailed and high quality narrative with strong depth. Detailed
12-15 marks answer covers at least 4 of the above criteria, with balanced discussion
for each. The narrative shows strong exemplary critical discussion,
good evidence of wider reading, contextualization and application.
This is supported by good use of language, coherent flow of
information, clarity in writing, no or minimal spelling and grammatical
errors.
Questions
Describe the strategic-management process
Discuss the three stages of strategy formulation, implementation,

and evaluation activities.
In most large organizations that engage in strategic management,

the formulation, implementation, and evaluation of strategy
activities occur at three hierarchical levels: corporate; divisional or
strategic business unit; and functional. Describe the levels
Which stage in the strategic-management process is the most difficult?

Explain why.
Compare and contrast strategic planning with strategic

management.
Define and give examples of key terms in strategic management

Case Study Nokia
What went wrong

NOKIA IN NEW AGE:
In 1992, Nokia launches its first digital handheld
GSM phone, the Nokia 1011.
In 1994, Nokia launches the 2100 series, the first
phones to feature the Nokia Tune ringtone
The Nokia 2100 series goes on to sell 20 million
phones worldwide. Nokias target was 400,000.
By 1998, Nokia is the world leader in mobile
phones.
Between 1996 and 2001, Nokias turnover
increases almost fivefold from EUR 6.5 billion to
EUR 31 billion.
Nokia- The leader in mobile technology
In 1999, Nokia launches the Nokia 7110, a phone
capable of rudimentary web-based functions,
including email.
Then in November 2001 Nokia launches its first
phone with a built-in camera, the Nokia 7650, and in
September 2002 its first video capture phone, the
Nokia 3650.
In 2002 nokia 6650 is launched with the 3g
technology.
In 2005, Nokia sold its billionth phone a Nokia 1100
in Nigeria, and global mobile phone subscriptions
passed 2 billion. Two years later, Nokia is recognized
as the 5th most valued brand in the world.
Competition
While it was not totally unexpected, what caught Nokia off-

guard is the rate at which competitors where innovating new
technology.
Since the launch of the iPhone/Android phones, Nokia failed to
keep up with the industry. While other kept proceeding ahead
aggressively by hook or crook.
Competition
If analyzed through the Technology Lens, Nokia primarily
failed to innovate attractive technology and features.
For example, though Nokia had touchscreen phones, it did

not attract customers as much as compared to Apple
iPhones.
The software being developed were using old development

models and newer concepts such as User Experience and
User Interface were being neglected.
Nokia was clinging onto Symbian OS

for too long. It had reached its peak.
Time for Change?
With the company facing fierce competition, Nokia started
reporting financial losses and started loosing grip on the
market.
Olli-Pekka Kallasvuo, as President and CEO, saw the

company's rise to become the world's preeminent mobile
brand but was also at the helm as Nokia fell distantly
behind a new wave of competition.
He was seen off by the management and he was succeeded

by Stephen Elop on September 21, 2010.
Wrong decisions.
While the entire smartphone OS industry was evolving,
manufacturers moved on and adopted various operating
systems like Android, Windows, Bada, Meego, et cetera,
Nokia decided to stick to Windows OS only.
As Android and iOS became more popular, Nokia and its
windows phones failed to attract any attention.
Though the new technologies

developed by Nokia were ground
breaking, they were not promising
enough.
Conclusion
From Technology perspective, Nokia did not deliver as per
expectations based on previous performance
From the Strategy perspective, though Nokia did eventually
come up with nice lucrative products, it lost in the race
against time due to poor strategies and sly competition.
From the organizational and people perspective, the new
CEOs attitude and competency proved to be fatal for the
company.
The entire Rubik of Organization , people and strategy failed
to deliver for Nokia.
Examples of
Strategy

1. Cornering a fledgling market
One very common business strategy is for larger firms to gain a stronghold in a growing
market through aggressive M&A activity. Think of the Fortune 500 firm that buys out a
competitor, or when a larger firm merges with a competitor to corner a young market.
Example: Facebooks Instagram acquisition
In April 2012, Facebook changed the mobile startup scene overnight by acquiring the
photo sharing startup, Instagram, for an unprecedented $1B. Keep in mind that until
then, Instagram had *just* 30M users and did not have an established presence on the
Android OS. To most outsiders and pundits, this looked like a rather rash decision from
a pre-IPO Facebook.
Fast forward to 2014 and Instagrams user base has shot past 150M. It is the dominant
photo sharing app on all mobile platforms. More importantly, it attracts the
adolescents and teens that are leaving Facebook in droves.
The Strategy
Facebooks strategy in acquiring Instagram was to a) corner the fledgling mobile image
sharing market, and b) hedge its bets for future growth. The $1B price tag may have
seemed exorbitant in 2012, but looks almost cheap today. Instagram allows Facebook
to compete in a market where it doesnt have a very strong presence, and helps it retain
younger users. Furthermore, by buying Instagram, Facebook ensured that it has a
competitive advantage over Google, Microsoft, and other competitors.
2. Product differentiation
Standing out from the competitors is a key requirement for business success. Unless
consumers can spot your product from me-too competitors, youll have a hard time
making sales. Businesses can do this either by highlighting their products superior
technology, features, styling, heritage, pedigree or price. You can see this strategy at
play in virtually every business, especially B2C businesses.
A great example of this can be seen in Apples approach to products.
Example: Apple iPad Air vs. competitors

The new Apple iPad Air costs $274 to make and retails for $499 a margin of 45%.
Competing tablets often cost nearly $200 less. Apple is able to command such
premiums because it has successfully differentiated its product from competitors. The
Apple iPad marketing, for instance, highlights following features:
Lightness: The iPad Air is lighter, thinner than competitors.
Display Quality: The Retina display is visually superior to competing tablets.
Software: Apple highlights both the base iOS and the bundled Apple software as
being better than what competitors offer.
Engineering: Apple seldom fails to highlight its superior engineering and material
quality than competitors.
Ease of Use: Since Apple makes both the hardware and software, it often
emphasizes its products ease of use.
Note that Apple almost never plays up its products price. The same is true for the iPad
Air, which is priced not to sell in volume, but to become an aspirational product. This
preserves Apples reputation as a superior,
Module Code and Module Title
aspirational brand.
Title of Slides #
3. Pricing strategies
Businesses essentially have two choices when pricing their products:
Keeping prices low to attract more customers. Since profit margins are very low, the
business must sell a lot of products to make money.
Pricing a product beyond the reach of ordinary consumers, and hence, giving it
aspirational value.
Example: Walmart, Ikeas low prices
Walmart uses its position as the largest retailer in the world to bargain for low prices with
suppliers and manufacturers. At the same time, Walmart keeps its profit margins very
low, selling in volume instead. This enables the company to price its products far below
competitors which ultimately helps it sell more.
The Swedish furniture brand Ikea follows the same approach. By selling its self-
assembled furniture pieces in large volumes (the retailer has 338 stores in 40 countries),
Ikea is able to price its products very aggressively.
Example: Ferarri prices its cars for exclusivity
Italian auto maker Ferrari pulled in revenues of $3.3B in 2012 with a net profit of $334M.
It sold a total of 7,318 cars over the year - into a profit of ~ $45,640 per car.
In contrast, the Hyundai motor corporation sold 2.94M cars in 2011 and made a profit of
$9B. This works out to a profit of ~ $3,058 per car.
This illustrates Ferraris pricing strategy. By pricing its products beyond the reach of
ordinary consumers, Ferrari is able to retain the air of exclusivity. This (and the
exceptional quality of the cars, of course) enables the company to retain such a huge
profit margin per car.

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Strategic

1. What I hear, I forget

Learning Outcomes for the module.

Recognise the important role that strategic

Appreciate the underlying reasons for that. Strategic

Develop such insights, coupled with creativity and

Module Code and Module Title Title of Slides #

Demonstrate a systematic understanding and critical evaluation of the

Demonstrate the ability to compare different theories and perspectives

Critically evaluate theories and concepts of strategic management.

Demonstrate the ability to communicate complex issues.

Module Code and Module Title Title of Slides #

An individual assignment length 2,500

Module Code and Module Title Title of Slides #

Basic concepts of strategy:

Sustainable competitive advantage one that is

Module Code and Module Title Title of Slides

Strategy is about competitive position, about differentiating yourself in the eyes of

Module Code and Module Title Title of Slides

Basic concepts of strategy (cont.):

Strategic management the process of formulating

Module Code and Module Title Title of Slides

Art & science of formulating,

Module Code and Module Title Title of Slides

Strategic Management is about how an

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In essence, the strategic plan is a

The prime task of strategic management is thinking through the overall

What is our Business

Strategy a comprehensive action plan that identifies long-term direction for an

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Business level strategies usually occur at the

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Functional strategies (also known as

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Strategy Strategy Strategy

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Strategy implementation: Annual objectives', policies, m

Strategy evaluation: Measure performance, take corrective

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Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

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Action Stage of Strategic

Most difficult stage

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Long-Term Generate, Implement Implement Measure &

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Strategic management allows an

It allows an organization to initiate and

Businesses using strategic-management

High-performing firms tend to do systematic

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Enhanced awareness of external threats

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Copyright 2017 Pearson Education, Inc.

Copyright 2017 Pearson Education, Inc.