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Summary Content Strategy & Entrepreneurship
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- Katholieke Universiteit Leuven (KU Leuven)
Class Content + some notes KUL Campus Brussels - Bridging year
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STRATEGY AND ENTREPRENEURSHIPVincent.molly@kuleuven.be
TABLE OF CONTENTS
Chapter 0: Content overview ..................................................................................................................................... 3
CH0.1. Content ....................................................................................................................................................... 3
CH0.2. Curriculum overview................................................................................................................................... 3
Part 1: Introduction to strategy .............................................................................................................................. 4
Chapter 1: Definition and importance of strategy ..................................................................................................... 4
CH1.1. Introduction to strategy ............................................................................................................................. 4
Chapter 2: Strategy, vision & mission ...................................................................................................................... 12
CH2.2. The Strategy-Making, Strategy-Executing Process ................................................................................... 12
Part 2: Strategy: external and internal analysis .................................................................................................... 22
Chapter 3: External analysis ..................................................................................................................................... 22
CH3.1. Intro .......................................................................................................................................................... 22
CH3.2. The External Environment ........................................................................................................................ 22
Chapter 4: Internal analysis...................................................................................................................................... 35
CH4.1. Intro .......................................................................................................................................................... 35
CH4.2. Evaluating a Firm’s Internal Situation ....................................................................................................... 35
Part 3: Strategy development............................................................................................................................... 49
Chapter 5: Generic strategies................................................................................................................................... 49
CH5.1. The five generic competitive strategies .................................................................................................... 49
Chapter 6: Measures to support strategy ................................................................................................................ 58
CH6.1. MAXIMISING THE POWER OF A STRATEGY............................................................................................... 58
CH6.2. GOING ON THE OFFENSIVE ....................................................................................................................... 58
CH6.3. BLUE-OCEAN STRATEGY— A SPECIAL KIND OF OFFENSIVE ...................................................................... 59
CH6.4. DEFENSIVE STRATEGIEs – Protecting market position and competitive advantage................................. 59
CH6.5. TIMING A FIRM’S STRATEGIC MOVES ....................................................................................................... 60
CH6.6. STRENGTHENING A FIRM’S MARKET POSITION VIA ITS SCOPE OF OPERATIONS ..................................... 60
CH6.7. STRATEGIC ObJECTIVES FOR HORIZONTAL MERGERS AND ACQUISITIONS ............................................. 61
CH6.8. VERTICAL INTEGRATION STRATEGIES ....................................................................................................... 62
CH6.9. THE ADVANTAGES OF A VERTICAL INTEGRATION STRATEGY ................................................................... 62
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, CH6.10. OUTSOURCING STRATEGIES ................................................................................................................... 63
CH6.11. KEY DEBATE – INNOVATION: INSIDE OR OUT ......................................................................................... 63
CH6.12. STRATEGIC ALLIANCES & PARTNERSHIPS ............................................................................................... 64
CH6.13. ACHIEVING LONG-LASTING STRATEGIC ALLIANCE RELATIONSHIPS ....................................................... 65
Chapter 7: Internationalization ................................................................................................................................ 67
CH7.1. Competing Across National Borders ......................................................................................................... 67
CH7.2. Locating Value Chain Activities ................................................................................................................. 68
CH7.3. Political and Economic Risks ..................................................................................................................... 69
CH7.4. Strategic Management Principle .............................................................................................................. 69
CH7.5. Competing Internationally: The Three Main Strategic Approaches ......................................................... 70
Chapter 8: Diversification ......................................................................................................................................... 75
CH8.1. Crafting a Diversified Firm’s Overall or Corporate Strategy ..................................................................... 75
PART 4: Strategy Execution .................................................................................................................................. 77
Chapter 9: Strategy Execution .................................................................................................................................. 77
CH9.1. Execution Strategy .................................................................................................................................... 77
CH9.2. (1) Structure: structuring the work effort to promote successful strategy execution ............................. 78
CH9.3. (2) People: staffing the organization ........................................................................................................ 81
CH9.4. (3) Systems for strategy execution ........................................................................................................... 82
CH9.5. (4) Organizational processes, policies and procedures that facilitate strategy execution: ..................... 83
PART 5: Entrepeneurship ..................................................................................................................................... 88
cHAPTER 10: Entrepeneurship ................................................................................................................................. 88
CH10.1. Entrepreneurship intro ........................................................................................................................... 88
CH10.2. Entrepreneurship .................................................................................................................................... 90
CH10.3. Entrepreneurial process ......................................................................................................................... 91
CH10.4. Opportunity identification and evaluation (1) ........................................................................................ 91
CH10.5. Business plan development (2)............................................................................................................... 94
CH10.6. Access generation to required resources (3) .......................................................................................... 99
CH10.7. Venture acceleration and management (4) ......................................................................................... 100
EXtra on summary .................................................................................................................................................. 102
On campUs lectures ............................................................................................................................................108
(15/2) Introduction ................................................................................................................................................ 108
(1/3) CSR as strategy .............................................................................................................................................. 110
(29/3) SMEs and Strategy ....................................................................................................................................... 113
(19/4) MTG Case .................................................................................................................................................... 117
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,CHAPTER 0: CONTENT OVERVIEW
CH0.1. CONTENT
Strategy, vision and mission
Internal and external analysis
Strategy development
Strategy execution
Entrepreneurship
CH0.2. CURRICULUM OVERVIEW
Strategy, Innovation, Entrepreneurship
Management Strategic Entrepreneurship & Strategy &
Management
project management business planning entrepreneurship
(6 ECTS)
(6 ECTS) (3 ECTS) (3 ECTS) (3 ECTS)
Internationaal Innovation SMEs &
Management management entrepreneurship
( 6 ECTS) (6 ECTS) (6 ECTS)
Interdisciplinary lab in Innovative
Strategy, Innovation & Entrepreneurship
Entrepreneurship
(6 ECTS
(6 ECTS)
3
, PART 1: INTRODUCTION TO STRATEGY
CHAPTER 1: DEFINITION AND IMPORTANCE OF STRATEGY
CH1.1. INTRODUCTION TO STRATEGY
CORE CONCEPT
Strategy →Is about competing differently from rivals:
Doing what competitors don’t do or, even better, doing what they cannot do!
→A company’s strategy is the set of actions that its managers take to outperform the company’s
competitors and achieve superior profitability.
→How well a company performs is directly attributable to the calibre of its strategy and the
proficiency with which the strategy is executed.
Belbury case:
A son took over a fruit company and invented jam in a squeezing bottle. He wanted to sell it at supermarkets, but they stole the idea. He sticked
to authentic jam but defined his costumer more and created a luxury product he sold in other countries and not directly to the retail market
hotels, high level airlines..
Elements linked to strategy we can learn from this:
- Strategy is about being unique → standard products can be made unique
- Strategy is about making clear choices → what to do, what not to do
- Who is your costumer and who is not your costumer?
WHAT DO WE MEAN BY STRATEGY?
• What is our present situation? - CONTEXT
o Business environment and industry conditions
o Firm’s financial and competitive capabilities
• Where do we want to go from here? - CONTENT
o Creating a vision for the firm’s future direction
• How are we going to get there? - PROCESS
o Crafting an action plan for heading the firm in the intended direction
o Staking out a market position
o Attracting customers
o Achieving the targeted financial and market performance,
o Getting the firm where it wants to go
o = Its strategy
4
,WHAT IS STRATEGY ABOUT?
Strategy is all about How:
How to:
• Attract and please customers.
• Compete against rivals.
• Position the firm in the marketplace to capitalize on attractive opportunities for growth.
• Respond to changing economic and market conditions.
• Manage each functional piece of the business.
• Achieve the firm’s performance targets.
Strategy is about competing differently from rivals:
• Doing what they do not do or doing it better! (competitive advantage see later)
• Doing what they cannot do!
• Doing things in ways that attract customers and set a firm apart from its rivals.
• Doing things in a manner calculated to produce a competitive edge over rivals.
• Knowing what the firm must do and also what it must not do.
Some examples:
• Snip it is a good example: a hairdresser especially for kids, the kids want to come
• Shake Shack: unique because high quality and integration in environment, no bright colors like normally
• Peter and waterman book in search of excellence about benchmarking, doing what others are doing is not good
WHAT IS STRATEGY NOT ABOUT?
What strategy is not about…
Strategy ≠ Being the best, the biggest or the first (is volatile, can be copied and is unclear)
→ Companies resemble each other + danger of strategy illusion
Growth strategy : Growing because of growth + increase prestige and personal wealth of CEO’s
Even when growth destroys value
Strategy is not : Too much in marketing sphere
BE DIFFERENT
→See slides 8-10
Be different + make choices
Michael Porter
• “The essence of strategy is choosing what not to do”
• “If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very
successful”
• See slide 11
5
,Steve Jobs
• “It comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too
much”
IDENTIFYING A FIRM’S STRATEGY – PATTERN
Example Starbucks:
Key elements of Starbucks’s strategy:
• Train “baristas” to serve a wide variety of specialty coffee drinks that allow customers to satisfy their individual preferences in a
customized way.
• Emphasize store ambience and elevation of the customer experience at Starbucks stores.
• Purchase and roast only top-quality coffee beans.
• Foster commitment to corporate responsibility.
• Expand the number of Starbucks stores domestically and internationally.
• Broaden and periodically refresh in-store product offerings.
• Fully exploit the growing power of the Starbucks name and brand image with out-of-store sales.
THE QUEST FOR COMPETITIVE ADVANTAGE
Competitive Advantage
• A firm achieves a competitive advantage when it provides buyers with superior value compared to rival
sellers or offers the same value at a lower cost to the firm.
• Requires meeting customer needs either:
o More effectively (with products or services that customers value more highly)
o More efficiently (by providing products or services at lower cost)
➔Strategy is more about effectiveness
6
,Sustainable Competitive Advantage
→Companies should strive not only for competitive advantage but sustainable competitive advantage
• The firm achieves a sustainable competitive advantage if its advantage persists despite the best efforts of
competitors to match or surpass its advantage.
• Requires giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors.
EFFICIENCY VERSUS EFFECTIVENESS
Difference between operational excellence and strategy:
• Both are essential, but the agendas are different.
o The operational agenda : Means continuous improvement and efforts; flexibility
→ There are no trade-offs.
o The strategic agenda : Is the right place to define a unique position
→ Where trade-offs need to be made.
• Difference between:
o Efficiency (doing things right)
o Effectiveness (doing the right things)
• Ed Welburn of General Motors: “Half of our people were spending all of their time preparing presentations, instead of designing great
cars”
WHY AN ORGANIZATION’S STRATEGY EVOLVES OVER TIME?
Managers modify strategy in response to:
• Changing market conditions
• Advancing technology
• Fresh moves of competitors
• Shifting buyer needs
• Emerging market opportunities
• New ideas for improving the strategy
→Strategy is constantly evolving
IS COMPETITIVE ADVANTAGE SUSTAINABLE IN THE 21 S T CENTURY?
Is competitive advantage sustainable in the 21st century?
• D’Aveni’s theory of hyper competition
o Suggests that sustainable advantage is no longer possible in many industries
o Porter did not agree with this, it has become more difficult but it should still be the goal
• Changes in technology, globalised markets and deregulation have all led to more frequent disruption and
changes in markets
• This can mean it is difficult or impossible to achieve a unique position which is long lasting
• Other experts, such as Michael Porter, disagree and state that managers’ behaviour can cause hyper
competition if they abandon the quest to seek long-term advantage
• A variety of studies both support and challenge D’Aveni’s theory
7
,STRATEGIC MANAGEMENT PRINCIPLE
Strategic management principle
• Changing circumstances and ongoing management efforts to improve the strategy cause a company’s
strategy to evolve over time
—A condition that makes the task of crafting strategy a work in progress, not a one-time event.
• A company’s strategy is shaped partly by management analysis and choice and partly by the necessity of
adapting and learning by doing.
THE EVOLVING NATURE OF AN ORGANIZATION’S STRATEGY
Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that include both continued and new initiatives.
• Reactive (emergent) strategy elements that are required due to unanticipated competitive developments
and fresh market conditions.
Strategy is combination of
both
THE RELATIONSHIP BETWEEN AN ORGANIZATION’S STR ATEGY AND ITS BUSINESS MODEL:
= A company’s business model sets
forth the logic for how its strategy will
create value for customers, while at the
same time generate revenues sufficient
to cover costs and realize a profit.
8
,A company’s business model
How the business will make money :
• By providing customers with value.
→The firm’s customer value proposition
• By generating revenues sufficient to cover costs and produce attractive profits.
→The firm’s profit formula
It takes a proven business model—one that yields appealing profitability—to demonstrate viability of a firm’s
strategy.
Business model elements
• The Customer Value Proposition
o Satisfying buyer wants and needs at a price customers will consider a good value.
o The greater the value provided (V) and the lower the price (P), the more attractive the value
proposition is to customers.
• The Profit Formula
o Creating a cost structure that allows for acceptable profits, given that pricing is tied to the
customer value proposition.
▪ V—the value provided to customers
▪ P—the price charged to customers
▪ C—the firm’s costs
o The lower the costs (C) for a given customer value
proposition (V–P), the greater the ability of the business
model to be a moneymaker.
IS OUR STRATEGY LIKELY TO BE SUCCESSFUL?
9
, What makes a good strategy
A winning strategy must pass three tests:
• The Fit Test (most import + complex)
→Does it exhibit dynamic fit with the external and internal aspects of the firm’s overall situation?
• The Competitive Advantage Test
→Can it help the firm achieve a significant and sustainable competitive advantage?
• The Performance Test
→Can it produce good performance as measured by the firm’s profitability, financial and competitive
strengths, and market standing?
Why crafting and executing strategy are important tasks?
Strategy provides:
• A prescription for doing business.
• A road map to competitive advantage.
• A game plan for pleasing customers.
• A formula for attaining long-term standout marketplace performance.
Good Strategy + Good Strategy Execution = Good Management
WHY ORGANIZATIONS NEED A STRATEGY
A firm does strategy:
• To improve its financial performance.
• To strengthen its competitive position.
• To gain a sustainable competitive advantage over its market rivals.
A creative, distinctive strategy:
• Can yield above-average profits.
• Increases competitive pressures on rivals.
Why organizations need a strategy:
• Enterprises that create the highest value: have and cherish a real strategic mission.
Those that destroy value and disappear: no real strategic mission
(study Financial Times; Managing for the long run, Miller & Le Breton-Miller).
• If you are not able to say who you are, what’s then your reason of existence
(why do they need to buy at your company)
• All noses in the same direction
• A touchstone for taking decisions
(penny wise vs. pound foolish decisions)
• Motivates/inspires/brings enthusiasm:
“If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders.
Instead, teach them to yearn for the vast and endless sea.”
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