Portfolio summary. Include every item (chapter write-ups, interviews and consult). Organize your portfolio in a professional manner and include a table of contents. Save an electronic copy of your
Chapter 1: Strategic Management
A good strategy benefits the stakeholders and the shareholders
It involves the analysis of activities and plans which can be employed to ensure business success.
Strategic management aims at achieving a competitive advantage.
For a strategy to be successful, the factors to consider include:
The attractiveness of the market
How to sustain competitive advantage once it has been achieved
How to offer unique value relative to the competition, and
The resources or capabilities necessary to deliver the unique value
Competitive advantage can be achieved by understanding the market, focusing on customers, access to resources, and planning how to mitigate barriers.
Good strategies are costly and takes a long period of time for competitors to implement. Unique value as a strategy can be achieved by differentiation, cost leadership, and high value products.
In order to deliver unique value at firm-level, the firm can adopt the strategies of low cost for efficiency, premium value (differentiation), and value (best value for the price).
Marketing, research and development, technological advances are some of the strategies.
Strategies are formulated from the corporate strategies, the business unit strategies, the functional strategies, and the functional strategies.
Strategies are implemented based on functional strategies within the organization, and the organizational structure, systems, staff, skills, style, and shared values designed to facilitate the implementation of the strategy.
Chapter 2: Analysis of External Environment-Opportunities and threats
Porter’s five forces of competitive strategy are customer bargaining power, supplier bargaining power, competitor rivalry, threat to new entrants and the threat of substitutes.
Rivalry refers to the competition among firms within an industry. Exists when firms try to steal profits from each other or the market share.
The factors that keep competition out include the scale of economies, the capital requirements, the scope of the economies, entry deterring regulations, product complexity, the learning curve, access to scares resources, and switching costs.
The factors that determine how competitive an industry is include number of competitors, rate at which the industry grows, ease of entry and exit, and lack of differentiation.
Technological changes, resource availability, legal policies, and economic factors among others shape profitability.
Availability of resources make it easy for a business to produce in plenty.
The process for a successful entry includes:
Identifying specific barriers to entry in the industry
Developing a strategy to eliminate each barrier
Avoiding direct assault on incumbents’ customers.
Technological advancements improve and fasten processes, thus high quality and volume of products.
Legal policies could hinder or favor production. All these have an impact on profits gained by a business.
Chapter 3: Internal Analysis-Strengths, Weaknesses and Competitive Analysis
Internal analysis involves examining the strengths and weaknesses that could hinder a firm from gaining a competitive advantage.
Technological innovation is a strength that can profit a firm to a large extent.
Another strength is differentiation. Provision of unique customer value gives a business the ability to compete effectively.
To compete successfully, a value chain is essential. This is a visual representation of all the necessary steps through which raw materials are converted to products and services. In value chain, all key stages are well-defined to ensure quality.
Availability of resources is a strength to competitive advantage.
To compete sustainable, value, rarity and inimitability are essential factors.
Competition can be parity, can fail or even sustained.
Weaknesses to competitive advantage include lack of access to resources, lack of value of chain and poor technology in the firm.
Chapter 4: Cost Advantage
There are two main generic strategies used:
Cost advantage
Differentiation advantage
The economies of scale arise from four main principles sources:
Ability to spread fixed costs of production
Ability to spread non-production costs
Specialization of equipment
Specialization of people
Some sources of cost advantage in a firm are economies of scale, experienced and knowledgeable employees, low cost of production resources and business model.
The larger the firm and the size of its market share, the higher the profit.
The more the experienced the employees are, the less the output cost and thus a strategy for investing more, pricing, and benchmarking.
When employees have enough experience and knowledge, processes and activities are carried out precisely.
The experience curve works because decreasing variable costs per unit due to learning and decreasing the fixed costs per unit due to scale.
This, for example in the production process, eliminates disconformity to quality, and cost of compliance. This can be achieved by providing training to employees.
The implications of the scale or experience curve include the fact that fast movers will secure a widening cost advantage, can be used as the basis for planning the future, to assess how each company is managing its costs, and to provide data on how much costs will likely decrease if two firms combine their volume or scale.
Chapter 5: Differentiation Advantage
Differentiation is the provision of unique value to customers by a firm.
Through differentiation, a firm is able to control the price of its products and services with customers still willing to purchase.
When the customers are not willing to pay more, then it is difficult to achieve differentiation.
The various sources of differentiation for a business are quality features of products, superior product features, availability or easy access to products and the company brand.
The quality features of products helps to achieve a better job on the existing features and helps to do something that nothing else could do.
Differentiation comes with various advantages to the firm. For example, there is a higher net promoter score that is only obtained when one uses differentiation compared to when one uses other ordinary means.
There is also better quality and reliability obtained from using differentiation since the products last longer.
Differentiation can turn one’s customers into their own customer representatives!
For effective differentiation, an analysis is required to identify the segment of market to serve and the consumption behavior of customers.
Segmentation can occur on basis of product features, demographics, and customer characters. Therefore, it can only be achieved through extensive analysis.
Chapter 6: Corporate Strategy
Two strategies exist when it comes to governing a business.
These are corporate strategy and the business unit strategy.
The business unit strategy aims at finding means to compete effectively within an industry.
The Corporate strategy, on the other hand, aims at gaining success by undertaking various activities.
For a successful corporate strategy can be achieved by either horizontal diversification or vertical integration.
Vertical integration can occur through either the backward integration or through the forward integration.
Horizontal integration can occur through either diversification of through formation of alliances/coalitions.
Diversification can be by Greenfield where one “goes it alone” or by acquisition where one has to buy their way in.
Integration and diversification involve exploitation and expansion of resources respectively. Additionally, an organization can develop and expand new resources.
The mechanisms used to create value include synergy, slack, and also through shared knowledge.
Acquisition integration strategies in business include burying, building new company, blending or bolting- on companies.
Diversification can also be used to destroy value. This can be achieved through poor management, poor governance and incentives, Hubris (no arrogance), imitation, and sunk-cost fallacy.
The BCG Matrix outlines that a company should try to evaluate the market since it you are not first you are last, and also if you are not first then you are out.
Chapter 7: Vertical Integration and Outsourcing
Outsourcing is one aspect of business integration.
Outsourcing involving contacting a firm’s business processes or activities to an external supplier.
Vertical integration, also called insourcing, brings back initially contracted out business activities to being performed in-house
Vertical integration can also be achieved through creation of a value chain in the organization.
Value chain refers to the sequence of all activities that are conducted by a firm in order to convert raw materials into finished products which are then sold to the buyers.
The main reasons for vertical integration include providing the level of capabilities a firm owns in performing activities, to coordinate activities internally and to control scarce resources.
Outsourcing can be used to increase flexibility in handling activities, lowers operational costs, increases focus on the firm and minimizes capital investments.
To prevent subcontractors from becoming competitors, one can build barriers to imitation, restricting the subcontractors to know everything about making the product, using multiple subcontractors, and doing a joint venture or taking a minority equity stake.
Chapter 8: Strategic Alliances
A corporate arrangement where at least two firms come together and combine resources and capabilities to provide new value.
A strategic alliance is built on three aspect: build, buy, or get an ally.
Also called partnership.
Strategic inputs:
Inputs can differentiate the products of a firm in the minds of the customers.
Inputs that influence the brand of the firm or its reputation.
High value inputs and activities that contribute a high percentage of the total costs.
Inputs or activities that require significant coordination in order to achieve the desired fit, quality or performance.
In so doing, the firms develop a very new vision that drives their activities.
Value creation focuses on both suppliers and customers
The various types of strategic alliances are contractual, equity and joint venture alliances. Each is preferred under different conditions.
Strategic alliances can be formed horizontally or vertically. Vertical alliances occur between firms that occupy different stages along the value chain. One focuses on suppliers while the other focuses on customers.
Alliances can be used to create value through combining unique resources, creating new alliance-specific resources, pooling similar resources, and building trust through lowering transaction costs.
Horizontal alliance occurs between firms that lack any supplier-buyer relationships. They all belong to the same stage of value chain.
Although alliances seem good on paper, they are fraught with risks, trust issues and equity issues that affect alliances.
Chapter 9: International Strategy
International strategy are the goals and policies set to gain competitive advantage over others.
Success of the international strategies is affected by legal systems, public tolerance for foreign systems, reliability and even existence of basic infrastructure like roads and electricity, government regulations, and the customer tastes, needs and income levels.
Determinants of success are geographic distance, economic distance, cultural distance and administrative distance. The smaller the distance, the better.
The types of international strategies include transnational which seeks to achieve both integration and differentiation and multi-domestic strategy.
An example of transnational is a pharmaceutical industry and Samsung.
Increasing FDI (Foreign Direct investment) would be achieved through exporting, franchising, and joint ventures or alliances.
Advantages of exporting include minimal risks, faster to enter the market, and utilizes existing facilities to maximize scale.
Disadvantages of exporting are the trade barriers and tariffs, transport costs, viewing company as outsider, and lack of adequate local information.
Franchising can help minimize the risk, speed marketing, and increase returns on investment. However, there is lack of control over asset use, competition from licensee, and knowledge spillovers.
Chapter 10: Innovative Strategies that Change the Nature of Competition
Innovation involves three things: is it new (novel), can it be used, and can it be implemented?
Two types of innovation exist; incremental innovation and radical (or disruptive) innovation.
Incremental innovations are the changes provided in a firm aimed to promote more profits from customers. They are new added features in the business operation activities and processes. They allow for addition of new feature after a few period through the upgrades and new versions.
Can be a replacement for older ways of operation or older products. For example, replace of LED TVs with 3D TVs.
Radical innovative strategies include reconfiguration of value chain to eliminate some other activities and low end disruptive innovations among others.
The categories of innovative strategies based on radical innovations include:
Reconfigure the value chain to eliminate the activities
Low End Disruptive Innovations
High End Disruptive Innovations
Reconfigure the value chain to allow for mass customization
Blue Ocean Strategy- creating new markets by targeting non-consumers.
Innovation thus is a business management strategy.
Chapter 11: Competitive Strategy
The competitive strategy would require a firm to know the competitive landscape, evaluate the competition, beat the competition, then understand the market structure and competitive environment.
Barriers to mobility include the inability to reconfigure activities or activity systems. For example, it is hard to move from one brand to another.
A strategy canvas can be used to assess the relative strengths and weaknesses against specific customer purchase criteria and identify new ways to compete with rivals.
A competitor response profile can be used to evaluate the competition. This shows what drives the competitors, what the competitor is capable of, and how the competitor responds to specific moves.
The Game Theory defines some strategies to use: For example, Nash Equilibrium, dominant strategy, and tit-for-tat strategy.
To beat the competition, one needs to know the strengths like resources and weaknesses like high costs, to bring strength against weaknesses, to protect and neutralize vulnerabilities, and then develop strategies that cannot easily be copied or be imitated.
Perfect competition requires a market with many firms and homogenous goods where the firms are the price takers rather that the prices setters.
The strategic moves employed include merging or consolidating markets, pursuing low cost strategies, creating switching costs, and pursuing a differentiation strategy.
Chapter 12: Implementing Strategy
The three elements of implementing a strategy include execution, alignment, and change.
Execution refers to getting things done, alignment refers to getting the right things done, while change refers to getting new things done.
The 7S Model should be used which basically has the Hard Triangle which are easy to pull to create alignment or realignment (strategy, systems, and structure) and the Soft Square which are difficult to codify and take longer to influence and change (staffing, skills, style, and shared values).
The phases of organizational change include the unfreezing where leaders recognize and publicly admit that their current situation is not producing adequate outcomes, change where the organization learns new behavior to adapt change, and refreezing where formalization of new behaviors, methods, processes or routines are implemented.
For change to be successful: generate a sense of urgency, build a guiding coalition, create vision, communicate the vision, empower individuals to act, Garner short term wins, consolidate gains and move on for more change, and institutionalize the change.
The progress of change van be measured through the principle of Line of sight and a balanced scorecard.
Principle of Line of sight where individuals should connect their daily work and tasks to the overall strategic goals of the organization.
Balanced Scorecard is a tool that measures the areas of organizational performance like financial results, customer goals, internal goals, internal business processes, and learning and growth.
Chapter 13: Corporate Governance and Ethics
In the shareholder primacy model, the shareholder comes first.
In the stakeholder primacy model, stakeholders are involved in the creation of competitive advantage. All the stakeholders are involved in decision making process.
Agencies may bring problems due to different interests and hurting principles.
This can be solved through monitoring the agents and aligning incentives.
Establishment of a Board of Directors can also solve the situation as the Board works at the best interest of the owner.
Incentives like bonuses, stock options and stock grants can also be used to make the agents act like principles due to a common interest.
The four ethical views to be considered include the utilitarianism, rights of the people, liberty and ethics of control.
Corporate ethics seeks to deal with the ethical values and the ethical behavior of the firms.
Ethical concerns that should be adhered to include avoiding harm to others, fairness and honesty, recognition of sacred, and liberty and overcoming oppression.
Chapter 14: Strategy and Society
Types of value: economic, social and shared value.
Economic value can be quantified through increase in income, wealth, or profits.
The social value is measured through increases in well-being in non-economic areas.
The shared value involves creating economic value in addition to creating social value.
The advantages of a sustainable stakeholder include the repeat transactions and the ability to consistently gather resources from key stakeholders.
The Corporate Social Responsibility entails the philanthropic responsibilities, the ethical responsibilities, the legal responsibilities, and the economic responsibilities.
The economic responsibility includes the firm’s obligation to generate economic profits.
Legal responsibility represents a firms’ obligation to obey the written and codified laws of the countries where the laws apply.
Philanthropic responsibility refers to the obligations of a firm to contribute to the enhancement of communities in which it operates.
Finally, ethical responsibility refers to the obligations of a firm to abide by the unwritten ethical standards, norms, and values of the communities in which it operates.
Social entrepreneurs are involved in capacity building and institutional change.
The skills of social entrepreneurs include social Bricoleur, social constructionist, and social engineer.
The challenges of social entrepreneurship include the Base of Pyramid (BoP) and the Hybrid Organization where the firm pursues more than one goal.
References
Chapter 1: Strategic Management. Retrieved from https://youtu.be/MPD5bmnBaWI
Chapter 2: Analysis of external environment-opportunities and threats https://youtu.be/oA8cXYLB96o
Chapter 3: Internal analysis-strengths, weaknesses and competitive analysis. Retrieved from https://youtu.be/oA8cXYLB96o
Chapter 4: Cost advantage. Retrieved from https://youtu.be/7rRwa_Z899M
Chapter 5: Differentiation advantage. Retrieved from https://youtu.be/4Eefd6tbMIs
Chapter 6: Corporate strategy. Retrieved from https://youtu.be/4Eefd6tbMIs
Chapter 7: Vertical integration and outsourcing. Retrieved from https://youtu.be/xz6k3lDYQWg
Chapter 8: Strategic alliances. Retrieved from https://youtu.be/xz6k3lDYQWg
Chapter 9: International Strategy. Retrieved from https://youtu.be/MrgCkLSas9I
Chapter 10: Innovation. Retrieved from https://youtu.be/xz6k3lDYQWg
Chapter 11: Competitive Strategy. Retrieved from https://youtu.be/MrgCkLSas9I
Chapter 12: Implementing Strategy. Retrieved from https://youtu.be/U9cKP8Yqqic
Chapter 13: Corporate Governance and Ethics. Retrieved from https://youtu.be/U9cKP8Yqqic
Chapter 14: Strategy and Society. Retrieved from https://youtu.be/U9cKP8Yqqic
