Chapter 1

What is strategy?
Lecture: Doan Van Ha
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Mobile: 0988688371
Learning objectives
• Explain the role of strategy in a firm’s quest for competitive advantage.
• Define competitive advantage, sustainable competitive advantage,
competitive disadvantage, and competitive parity.
• Assess the relationship between stakeholder strategy and sustainable
competitive advantage.
• Conduct a stakeholder impact analysis.
• Explain the Analysis, Formulation, Implementation (AFI) Strategy
Framework
Strategic management
• The integrative management field
• Combines analysis, formulation, and implementation in the
quest for competitive advantage
• Mastery of strategic management enables you to
– View a firm in its entirety.
– Think like a general manager.
– Position your organization for superior performance.
Strategy
• of goal-directed actions a firm takes to gain and sustain superior
performance relative to competitors
• To achieve superior performance, companies compete for resources:
– New ventures:
– Existing companies:
– Charities:
– Universities:
– Sports teams:
– Celebrities:
Strategy
• What is a good strategy?
– enables a firm to achieve superior performance and sustainable
competitive advantage relative to its competitors.
– Good strategy is based strategic management process
– A diagnosis of the competitive challenge.
– A guiding policy to address the competitive challenge.
– set of coherent actions to implement the firm’s guiding policy.
Strategy
• A good strategy
– a good strategy defines the competitive challenges facing an
organization through a critical and honest assessment of the
status quo.
– a good strategy provides an overarching approach on how to
deal with the competitive challenges identified. The approach
needs to be communicated in policies that provide clear
guidance for employees.
– a good strategy requires effective implementation through a
coherent set of actions.
Crafting a good strategy at Tesla
• 1. What is the competitive challenge of Tesla?
• 2. What is their guiding policy?
• 3. What are the action they implemented?
• three steps are crucial in the strategic management process:
Strategy
• Competitive advantage
– Superior performance relative to other competitors in the same
industry or the industry average
– To assess competitive advantage, compare the firms’ performance
to benchmark
• Sustainable competitive advantage
– A firm that is able to outperform its competitors or the industry
average over a prolonged period
Strategy
• Competitive disadvantage
– Under- performance relative to other competitors in the same
industry or the industry average.
• For example, is 15% ROIC superior?
• Competitive Parity: two or more firms that perform at the same
level
How to gain competitive
advantage
• Provide goods or services that:
– Consumers value more highly than those of its competitors,
– Are similar to the competitors’ at a lower price
• The reward of super value creation
– Profitability.
– Market share.
How to gain competitive
advantage
• Strategic positioning
• a unique position within an industry that allows the
firm to provide value to customers, while controlling
costs
• Value creation minus costs equal economic
contribution
– The greater, the better.
– Enhances the likelihood of competitive advantage
• Require trade-off
– Walmart vs. Nordstrom
How to gain competitive
advantage
• Unique Strategic positioning
• A successful combination of strategic activities
• Competitive advantage has to come from
– performing different activities
– performing the same activities differently than rivals
What strategy is not
1. Grandiose statements:
– “We will be number 1, “We will win.”
2. A failure to face a competitive challenge:
– Blockbuster didn’t address Netflix, Redbox, Amazon Prime,
and Hulu.
3. Operational effectiveness, competitive benchmarking, or
tactical tools:
– Examples: “pricing strategy,” “operations strategy,” “brand
strategy.”
– These are good policies or initiatives, but not a strategy.
Stakeholder Strategy and
competitive advantage
• Value creation
• Companies with a good strategy are able to provide products or
services to consumers:
– At a price point that they can afford.
– That enables the company to make a profit.
• Value creation lays the foundation for a successful economy:
Stakeholder Strategy and
competitive advantage
• Stakeholder
• Organizations, groups, and individuals:
– Can affect or can be affected by a firm’s actions.
– Have an interest in the performance or survival of the firm.
• Internal vs. external stakeholder
Stakeholder Strategy and
competitive advantage
• Stakeholder attribute
– power: when the stakeholder can get the company to do
something that it would not otherwise do.
– legitimacy: perceived to be legally valid or otherwise appropriate.
– urgency: require a company’s immediate attention and response.
Stakeholder Strategy and
competitive advantage
• Stakeholder strategy
• an integrative approach to managing a diverse set of stakeholders
effectively in order to gain and sustain competitive advantage
• effective stakeholder management can benefit firm performance:
– Cooperative stakeholders reveal important information.
– Increased trust lowers business transaction cost.
– Can lead to greater adaptability and flexibility.
– More predictable and stable returns.
– Stronger reputation
Stakeholder Strategy and
competitive advantage
• Stakeholder impact analysis
• A tool for for Stakeholder strategy
• helps strategic leaders to recognize, prioritize and address stakeholder needs
• is a 5 step five-step process of recognizing stakeholders’ claims
Stakeholder Strategy and
competitive advantage
• STEP 1: Define stakeholder
• STEP 2: identify
stakeholder’s claim and
interest
• STEP 3: identify
opportunities and threats
• STEP 4: identify the social
responsibility
• STEP 5: address the
stakeholder’s concern
The Pyramid of Corporate Social Responsibility
• Exhibit 1.3
• Adapted from Carroll, A.
B. (1991, July—August),
“The pyramid of
corporate social
responsibility: Toward
the moral management
of organizational
stakeholders,” Business
Horizons: 42.

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