Лист за преговор: Strategic Management Fundamentals

📋 Course Outline

1. What strategy is and why it matters
2. Strategy versus operational effectiveness
3. Competitive advantage and strategic choices
4. Strategy statement goals scope capabilities
5. External analysis: environment and competitive forces
6. PESTEL and industry analysis tools
7. Internal analysis: RBV and VRIO
8. Value chain, benchmarking and SWOT TOWS
9. Strategic management process and SBUs
10. Generic strategies and hybrid strategy risks
11. Corporate strategy: vertical integration and outsourcing
12. Diversification tests and corporate parent value

📖 1. What strategy is and why it matters

🔑 Key Concepts & Definitions

• Strategy : Strategy is a company’s long-term direction that sets where it wants to go and how it plans to succeed over time.
• Long-term direction : Long-term direction is the multi-year positioning of a firm that guides major choices affecting future performance and market standing.
• Operational decisions : Operational decisions are day-to-day choices focused on routine tasks rather than the firm’s overall future direction.
• Effectiveness : Effectiveness is the selection of the right goals so the organization pursues objectives that fit what it truly wants to achieve.
• Efficiency : Efficiency is the best use of resources to reduce waste and increase productivity while carrying out chosen activities.

📝 Essential Points

• Strategy addresses where the organization is going, how it will compete, how it will create value, and how it will reach superior performance.
• Strategy is not about short-term scheduling or daily technical problem-solving, which are operational rather than strategic.
• Effectiveness focuses on choosing the right objectives, such as investing in sustainability when managers expect future importance.
• Efficiency focuses on doing things correctly by minimizing waste and maximizing productivity through actions like cost reduction and faster production.
• Operational effectiveness means matching competitors’ activities but doing them better, which can raise short-term performance.
• Because competitors can copy operational improvements quickly, operational effectiveness alone usually cannot deliver a sustainable competitive advantage.

💡 Memory Hook

Strategy = Direction + Value + Competition; Operations = Daily execution.

📖 2. Strategy versus operational effectiveness

🔑 Key Concepts & Definitions

• Competitive advantage : Competitive advantage is superior firm performance that persists over time relative to rivals in the same market.
• Sustainable competitive advantage : Sustainable competitive advantage is competitive advantage that remains in place over a long period.
• Competitive disadvantage : Competitive disadvantage is when a firm’s performance is consistently worse than competitors in the same market.
• Competitive parity : Competitive parity is when firms perform at a similar level, leaving no clear performance gap versus rivals.
• Operational effectiveness : Operational effectiveness is delivering better day-to-day execution than rivals, without necessarily changing the firm’s long-term competitive position.

📝 Essential Points

• Performance is relative: it is evaluated against other firms in the same market rather than against an absolute standard.
• A firm with sustained superior performance is said to have sustainable competitive advantage.
• If a firm performs worse than competitors, it faces competitive disadvantage.
• If all firms perform similarly, the market is at competitive parity.
• Strategy focuses on long-term positioning, while operational effectiveness focuses on improving execution in the present.

💡 Memory Hook

Advantage = relative + time; operations = today’s execution.

📖 3. Competitive advantage and strategic choices

🔑 Key Concepts & Definitions

• Capabilities : Capabilities are a firm’s unique strengths and resources that explain how it can achieve its goals.
• Goals : Goals are the outcomes an organization wants to achieve, such as growth or profitability.
• Corporate strategy : Corporate strategy sets the overall scope of the firm across businesses and markets.
• Business strategy : Business strategy explains how the firm competes in a specific market.
• Functional strategy : Functional strategy supports higher-level strategy through operational areas like marketing or finance.

📝 Essential Points

• Competitive advantage is linked to how capabilities and goals guide strategic choices.
• Strategy is structured into three levels: corporate, business, and functional.
• Corporate strategy defines the firm’s overall scope rather than a single market.
• Business strategy focuses on competition within one market.
• Functional strategy translates the chosen direction into day-to-day operational functions.
• External analysis treats performance as shaped by both managerial decisions and outside forces.

💡 Memory Hook

3 levels of strategy: Corporate = scope, Business = competition, Functional = operations.

📖 4. Strategy statement goals scope capabilities

🔑 Key Concepts & Definitions

• Strategic groups : Strategic groups are clusters of firms in the same industry that pursue similar strategies.
• Mobility barriers : Mobility barriers are factors that make it hard for firms to move between strategic groups.
• Resource-Based View RBV : RBV is the view that competitive advantage mainly comes from a firm’s internal resources and capabilities.
• Resources : Resources are assets a firm owns or controls, such as capital, technology, or skills.
• Capabilities : Capabilities are what a firm can do with its resources to carry out activities and create value.

📝 Essential Points

• Industries evolve through consolidation, fragmentation, and convergence, changing competition and profitability over time.
• Firms in the same strategic group compete more directly than firms in different groups.
• Strategic groups help explain why performance differs even within the same industry.
• External analysis supports identifying opportunities and threats and anticipating environmental change.
• Without external analysis, firms may form strategies that do not fit market reality.
• RBV treats competitive advantage as driven more by internal assets and how they are used than by external conditions alone.

💡 Memory Hook

Strategic groups = “same playbook”; RBV = “win from within” (resources + capabilities).

📖 5. External analysis: environment and competitive forces

🔑 Key Concepts & Definitions

• External analysis : External analysis is the part of strategic management that studies the environment and competitors to understand opportunities and threats.
• Benchmarking : Benchmarking is a method that compares a firm’s performance with competitors or best-in-class organizations to locate gaps.
• SWOT analysis : SWOT analysis is a framework that combines internal strengths and weaknesses with external opportunities and threats.
• TOWS matrix : The TOWS matrix is an extension of SWOT that turns SWOT elements into possible strategic options for decision-making.

📝 Essential Points

• External analysis feeds strategy formulation by clarifying how the environment and competition shape opportunities and threats.
• Benchmarking identifies performance gaps and points to specific improvement opportunities relative to competitors or best-in-class firms.
• SWOT separates internal factors (strengths, weaknesses) from external factors (opportunities, threats) to structure the strategic situation.
• The TOWS matrix uses SWOT elements to generate strategic options rather than only describing the situation.
• Benchmarking supports competitive positioning by revealing where the firm lags or leads versus relevant peers.
• SWOT and TOWS are strategic tools used to connect external conditions to concrete choices.

💡 Memory Hook

SWOT = Strengths/Weaknesses (inside) + Opportunities/Threats (outside); TOWS = SWOT → Options.

📖 6. PESTEL and industry analysis tools

🔑 Key Concepts & Definitions

• PESTEL analysis : PESTEL analysis is a framework that scans external forces by Political, Economic, Social, Technological, Environmental, and Legal factors.
• Industry analysis : Industry analysis is the set of tools used to understand how competitive forces shape profitability and strategic choices in a market.
• Value line : Value line is the minimum price–quality trade-off customers consider acceptable, and it shifts as competitors change offerings.
• Strategy Clock : Strategy Clock is a positioning model that links price and perceived value to identify competitive positions and risks like being stuck in the middle.

📝 Essential Points

• PESTEL focuses on external drivers that can change customer needs, costs, and constraints before choosing a strategy.
• Industry analysis helps explain why some firms can sustain advantage by revealing how competition affects margins and customer willingness to pay.
• The value line moves upward when a differentiator improves quality, raising the bar for acceptable offers.
• The value line hardens when an intermediate competitor lowers prices, forcing differentiators to innovate or cut prices.
• A firm stuck in the middle shows high price with low perceived value, creating a non-competitive position on the Strategy Clock.
• When a low-cost entrant appears, responses depend on whether it targets current vs future customers and whether customers will pay more for added benefits.

💡 Memory Hook

PESTEL = “outside forces”; Value line = “customer’s minimum bargain”; Strategy Clock = “price vs perceived value”.

📖 7. Internal analysis: RBV and VRIO

🔑 Key Concepts & Definitions

• Resource-Based View RBV : A strategic perspective that explains advantage by focusing on the firm’s internal resources and capabilities rather than only industry forces.
• VRIO framework : An internal analysis tool that tests whether a resource or capability is valuable, rare, costly to imitate, and organized to capture value.
• Valuable resources : Resources or capabilities that help the firm exploit opportunities or neutralize threats in its environment.
• Rare resources : Resources or capabilities that are not widely possessed by current or potential competitors.
• Imperfect imitability : A condition where competitors cannot easily copy a resource or capability due to barriers such as complexity or causal ambiguity.

📝 Essential Points

• RBV links sustainable competitive advantage to internal resources and capabilities that outperform what rivals can access.
• VRIO evaluates each resource/capability by four questions: value, rarity, imitability, and organization for value capture.
• If a resource is not valuable, it cannot support competitive advantage even if it is rare.
• If a resource is valuable but not rare, it may create parity rather than sustained advantage.
• If a resource is valuable and rare but easily imitated, advantage is temporary because rivals can catch up.
• If a resource is valuable, rare, and hard to imitate, the firm can gain sustained advantage if it is organized to exploit it.

💡 Memory Hook

RBV asks “what do we have?”; VRIO checks “Value–Rare–Imitate–Organize” to predict advantage duration.

📖 8. Value chain, benchmarking and SWOT TOWS

🔑 Key Concepts & Definitions

• Transaction cost economics (TCE) : Transaction cost economics explains make-or-buy choices by comparing costs of using markets versus organizing internally.
• External transaction costs : External transaction costs are expenses of using outside partners, including searching, contracting, monitoring, and enforcement.
• Internal transaction costs : Internal transaction costs are expenses of performing the activity inside the firm, including hiring, pay, organization, supervision, and labor control.
• Transaction attributes : Transaction attributes are features of exchanges that determine risk and therefore the governance choice.
• Vertical integration : Vertical integration is organizing multiple stages of production or supply under the same firm to capture coordination and cost advantages.

📝 Essential Points

• Make-or-buy rule: choose integration (MAKE) when external transaction costs exceed internal transaction costs, and outsource (BUY) when the reverse holds.
• Frequency effect: higher transaction frequency and volume make integration more profitable by spreading fixed internal organization costs.
• Asset specificity effect: when assets are dedicated to a relationship, they are hard to redeploy, increasing mutual dependence and opportunism risk.
• Uncertainty effect: higher environmental unpredictability makes complete contracting harder, pushing toward governance that reduces contracting complexity.
• TCE governance alignment: the more frequency, asset specificity, and uncertainty rise, the more an integrated hierarchical structure is preferred.
• Vertical integration technical economies: combining stages can create physical synergies and reduce transport delays between separate plants.

💡 Memory Hook

TCE = MAKE when Market costs > Firm costs; risk rises with Frequency, Specific assets, Uncertainty → integrate.

📖 9. Strategic management process and SBUs

🔑 Key Concepts & Definitions

• Strategic management process : A corporate approach that sets long-term choices about where to compete and how to organize activities to create value.
• SBUs : Strategic Business Units are semi-autonomous business entities managed with their own objectives, resources, and competitive scope.
• Vertical integration : A strategy where a firm expands control over upstream or downstream stages of the value chain rather than relying only on external partners.
• Tapper integration : A hybrid strategy that mixes integration in some stages with outsourcing in others, combining market exposure with flexibility.
• Diversification : A corporate strategy that defines the firm’s scope of activity by choosing which products to offer, in which markets, and with what growth ambitions.

📝 Essential Points

• Vertical integration can be risky when sheltered stages face weak competition, reducing efficiency and innovation incentives.
• Investing in unattractive sectors is risky when margins at some value-chain stages are structurally low.
• Risk accumulation can occur under internalization because uncertainties from multiple stages combine rather than diversify.
• Tapper integration can integrate upstream for part of supplies while outsourcing the rest, or own distribution while using third-party distributors.
• Tapper integration’s two main advantages are market-based performance comparison for internal units and operational flexibility under demand fluctuations.
• Nike’s example combines owned stores (Nike Direct) with distribution through multibrand retailers and online channels to balance experience control and coverage.

💡 Memory Hook

Vertical integration = chain control; tapper integration = control + market pressure; diversification = choose new “where to compete” via Ansoff.

📖 10. Generic strategies and hybrid strategy risks

🔑 Key Concepts & Definitions

• Market development : Market development is offering existing products to new users or new geographies to extend product life cycles and raise volumes.
• New products and services : New products and services is modifying or creating an offer for current markets, a form of related diversification.
• Economies of scope : Economies of scope are cost advantages from producing multiple goods or services together because resources and capabilities are shared.
• Conglomerate diversification : Conglomerate diversification is entering new products and new markets with no apparent link to the firm’s core business.
• Operational relatedness : Operational relatedness is synergy from sharing tangible and intangible resources across business units.

📝 Essential Points

• Market development challenges include cultural differences, local preference-driven adaptations, distribution costs, and market-specific regulation.
• New products and services is driven by economies of scope, where shared resources make joint production cheaper than separate production.
• Economies of scope should not be confused with economies of scale, since scale comes from large-scale output of the same good.
• Conglomerate diversification spreads risk across uncorrelated sectors and can use growth when core markets saturate, but it adds high risk and managerial complexity.
• Conglomerate diversification can also benefit from more efficient internal capital markets, though returns are uncertain due to large investments.
• Operational relatedness examples include shared distribution infrastructure, shared brand, and mutualized R&D across units.

💡 Memory Hook

Scope = shared inputs across different activities; Conglomerate = unrelated bets with higher complexity and uncertainty.

📖 11. Corporate strategy: vertical integration and outsourcing

🔑 Key Concepts & Definitions

• Vertical integration : Vertical integration is a corporate strategy where a firm expands into upstream or downstream activities it previously outsourced.
• Outsourcing : Outsourcing is a strategy where a firm delegates certain activities to external suppliers instead of performing them internally.
• Strategic relatedness : Strategic relatedness is the ability of headquarters to reuse common managerial competencies across different activities.
• Conglomerate logic : Conglomerate logic is diversification driven by transversal governance competencies rather than shared markets or products.
• Corporate parent : The corporate parent is the headquarters that manages business units and can create or destroy value through its interventions.

📝 Essential Points

• Vertical integration can reduce dependency on suppliers and capture more value along the chain, while outsourcing shifts execution to specialists.
• Outsourcing can improve flexibility and focus, but may weaken control over know-how and coordination across stages.
• Strategic relatedness relies on headquarters capabilities such as strategic planning, talent management, and capital allocation across diverse activities.
• Conglomerate logic is illustrated by Mitsubishi and General Electric, where transversal governance competencies drive the group’s coherence.
• The corporate parent creates value by setting a clear strategic vision, enabling cooperation among SBUs, centralizing support functions, and correcting weak performance.
• The corporate parent destroys value when bureaucracy rises, financial transparency of units worsens, or headquarters subsidizes failing units at the expense of stronger ones.

💡 Memory Hook

Integration = internal control; outsourcing = external control; relatedness = shared HQ skills; parent = value creator or value destroyer.

📖 12. Diversification tests and corporate parent value

🔑 Key Concepts & Definitions

• Portfolio management : Portfolio management is the process of allocating capital across a group’s SBUs through ongoing investment, redirection, and divestment choices.
• BCG matrix : The BCG matrix is a two-axis tool that classifies SBUs by market growth and relative market share into four strategic categories.
• GE-McKinsey matrix : The GE-McKinsey matrix is a nine-cell framework that evaluates SBUs using market attractiveness and competitive strength to guide investment or divestment.
• Parenting matrix : The Parenting matrix is a fit-based tool that judges whether headquarters understands a unit’s success factors and can add value, then recommends keep or divest.

📝 Essential Points

• A business portfolio is the set of a group’s SBUs managed under a synergy logic with regular trade-offs.
• BCG axes are market growth (external attractiveness) and relative market share (competitive strength), producing Stars, Cash Cows, Question Marks, and Dogs.
• Stars have high growth and high share, so they need heavy investment but can deliver high profitability; the prescription is to maintain and invest for growth.
• Cash Cows have low growth and high share, so they generate high stable cash flows; the prescription is to maintain without overinvesting.
• Question Marks have high growth but low share, so they are precarious; the prescription is to increase market share or divest.
• Dogs have low growth and low share, so they create little value; the prescription is to divest or liquidate.

💡 Memory Hook

BCG: Stars need cash-in, Cows cash-out, Question Marks choose or quit, Dogs drop.

📊 Synthesis Tables

Strategy vs operational effectiveness

Aspect	Strategy	Operational effectiveness
Time horizon	Long-term direction over many years	Present-day execution of day-to-day activities
Core focus	Where to go and how to succeed; choosing the right goals	Performing the same activities as competitors, but better
Value creation logic	Creates value through long-term positioning and superior performance	Improves short-term performance via better execution
Sustainability	Operational improvements alone are usually not enough for sustainable advantage	Improvements can be copied quickly, so advantage is usually not sustainable by itself

⚠️ Common Pitfalls & Confusions

1. Confusing effectiveness with efficiency: effectiveness is choosing the right goals, while efficiency is using resources in the best way.
2. Thinking competitive advantage is absolute “being good”; it is relative performance versus other firms in the same market over time.
3. Mixing up the three strategy levels: corporate = overall scope, business = how to compete in a market, functional = supports via operational functions.
4. Assuming operational effectiveness can create sustainable advantage; competitors can copy improvements relatively quickly.
5. Treating economies of scope as economies of scale; scope comes from sharing resources across different activities, scale from large output of the same good.
6. Misapplying TCE’s make-or-buy rule by ignoring the comparison: integrate (MAKE) when external transaction costs exceed internal transaction costs, otherwise outsource (BUY).
7. Believing diversification is always beneficial; excessive unrelated diversification can erode performance due to coordination and influence costs.

✅ Exam Checklist

1. Define strategy and explain why it is needed (long-term direction, major decisions, changing competition).
2. Distinguish effectiveness, efficiency, and operational effectiveness with the correct “right goals / right execution / doing things correctly” logic.
3. Define competitive advantage, sustainable competitive advantage, competitive disadvantage, and competitive parity, emphasizing relative performance.
4. Explain how competitive advantage is linked to strategic choices and the role of capabilities and goals.
5. List and describe the three strategy levels (corporate, business, functional) and what each answers (where to compete/how to compete/operational functions).
6. Explain strategic groups and mobility barriers, and how they help interpret performance differences within an industry.
7. Describe external analysis: what it studies, why it matters, and how benchmarking, SWOT, and TOWS connect external conditions to strategic options.
8. Use PESTEL and industry analysis ideas: what PESTEL scans and how industry structure/competitive forces shape profitability.
9. Apply RBV and VRIO: define resources vs capabilities, then state the four VRIO tests and what each implies for advantage duration.
10. Explain value chain and benchmarking: how value chain analysis identifies key activities and how benchmarking finds performance gaps.
11. Describe the strategic management process at the business strategy level: mission/objectives plus external and internal analysis leading to formulation and implementation.
12. For business strategy, compute the logic of maximizing V − C and explain cost vs value logic and strategic trade-offs.
13. Define generic strategies (cost leadership, differentiation, focus) and the hybrid strategy, including the risk of being stuck in the middle using the Strategy Clock idea.
14. Explain interactive strategies: value line movement (differentiator up; intermediate competitor hardens) and how low-cost entry responses depend on current vs future customers and willingness to pay (plus possible syner­