Lecture – overview & content

Strategic Management - B-KUL-Y00927 & Y50703

Strategie & Ondernemerschap - B-KUL-Y05068

Organisatie & Ondernemerschap

Prof. drs. N.C. Dijkman

Academic Year 2023-2024
 Table of contents
• Teaching team

• Course as part of a learning track

• Table of contents of the course

• Previous knowledge

• Course format and study material

• Evaluation and feedback

• Student feedback

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Teaching team

Niels Dijkman
niels.dijkman@kuleuven.be

And of course for practicalities FEB: feb.antwerpen@kuleuven.be and

referring to your course

• In which ways can students ask questions?

• During class time e.g. directly to prof or in discussion forums in class

• Via Ultra environment
• Questions via email are answered in class, no reply via direct emailing

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 Course as part of a learning track
Course
• Strategic management analyses how company performance is driven by the
industry and the broader environment of a company as well as by how a
company competes in this environment.

• Part of the learning track in the program

• First confrontation with Strategy in your education program @ KUL
• Strategy is the direction a firm is heading for: an unclear strategy will lead to failures on all
levels in the company and ultimately to a failure of the company
• Contribution to professional profile/future self of the student is that you are able:
• to independently interpret and criticize strategic decisions made by companies.
• to master the different theoretical concepts and frameworks discussed in class
• to integrate and synthesize them while taking strategic decisions.

Moreover, you can apply these frameworks to real world examples. In particular, you can
identify those factors which are critical for the success of the company

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 Table of contents of the course & readings
1. What is strategy?
1. Ghemawat, P. (2001). Strategy and the Business Landscape, Chapter 1: The Origins of Strategy, 1-
9.
2. Porter, M.E. (1996). What is Strategy? Harvard Business Review, November-December, 61-78

2. Drivers of value creation

1. Koller, T . (1994). What is value-based management? The McKinsey Quarterly, 3, 87-101.
2. Koller, T., Goedhart, M., Wessels, D. (2010). Valuation: Measuring and Managing the Value of
Companies. McKinsey & Company.
‒ Chapter 3: Fundamental Principles of Value Creation
‒ Chapter 5: Frameworks for Valuation
‒ Chapter 6: Thinking about Return on Invested Capital and Growth
3. Baghai, M., Smit, S., Viguerie, S.P. (2007). The Granularity of Growth. The McKinsey Quarterly, 2,
41-51.

3. Industry analysis
1. Porter, M.E. (2008). The Five Competitive Forces that Shape Strategy. Harvard Business Review,
January, 78-91.
2. McGahan, A.M. (2004). How Industries Change. Harvard Business Review, October, 87-94.

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 Table of contents of the course
4. Competitive strategy and competitive advantage
1. Ghemawat, P. (2001). Strategy and the Business Landscape, Chapter 3: Creating Competitive
Advantage, 44-67.
2. Prahalad, C.K., Hamel, G. (1990). The Core Competence of the Corporation. Harvard Business
Review, May-June, 1-15.
3. Kim, W.C., Mauborgne, R. (1997). Value Innovation: The Strategic Logic of High Growth. Harvard
Business Review, January-February, 103-112
4. Eisenhardt K.M. & Martin J.A. (2000). Dynamic Capabilities: what are they. Strategic Management
Journal, 1105-1121
5. Collis, D.J., Montgomery, C.A. (2008). Competing on Resources. Harvard Business Review, July-
August, 140-150.

5. Corporate strategy & resources

1. Collis, D.J., Montgomery, C.A. (1998). Creating Corporate Advantage. Harvard Business Review,
May-June, 71-83.
2. Porter, M.E. (1987). From Competitive Advantage to Corporate Strategy. Harvard Business Review,
May-June, 1-21
3. Kaplan, R.E., Norton D (2008), Mastering the Management System, Harvard Business Review,
January, 63 - 77.
4. Carlesi, L., Verster, B., Wenger, F. (2007). The new Dynamics of Managing the Corporate Portfolio.
McKinsey Quarterly, spring, 1-8.

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 Table of contents of the course
6. Sustainability & Wrap up
- Business practitioner will do class
- Literature will follow

- Wrap up class (18.12) will be used to go over open ends in course

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 Previous knowledge
• No particular courses were already in your program

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 Course format
• Lectures
‒ Monday: 10:30 -12:30h CAR 2.09 Strategie & Ondernemerschap
Alleen op 2.10 andere tijd: 15:30 -17.30h CAR 0.05

‒ Monday: 13:30- 15:30h CAR 0.06 Strategic Management

‒ Facultative (attend only if interested!)
‒ Read readings on beforehand
‒ Print or have available on computer slides and bring to class (to make notes, Q for
cases, …)
‒ Interactive: participate in discussion and raise questions in class!
‒ Mix between theory, examples, case discussions

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 Study material
• Clarification of the choice
• More business oriented, not pure theory
• No book needed – although many books are available on the
topic strategy
• All by prof selected readings are part of the learning material

• Where available?
• Via Ultra – provided by prof.
• Per cluster of courses: material (presentation & literature) one
week in advance available

• Tips and best practices to use the study material

• read your literature in advance

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 Evaluation
• During the semester (before exam period)
• Compulsory tests or assignments
• Not available
• Trial exams or exercises on Ultra
• This class we will discuss some exam questions; 2 exams will be
uploaded
• Info about the exam organisation (ECTSfiche and Ultra)
• See Ultra

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 Evaluation

• 3 ECTS

• Written exam, closed book (100% final grade)

‒ Two hours
‒ End of first semester; on campus
‒ For preparation: slides, verbal explanations of prof during course, selected articles.
‒ Questions (see next slides)
‒ Right or wrong + explain
‒ Theory questions (e.g. explain a concept, discuss one of the papers from the readings)
‒ Apply theory to real world examples (different cases but similar to cases discussed in
class)
‒ Calculate and interpret financial ratios
‒ Simple calculator allowed

• ~ 30% failed for the exam (grade of 9 or less on total of 20)

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 Feedback
• Exam feedback session with the professor
• Time & Place will be communicated in December
• For further learning
• No place to negotiate about grade
• Only to be attended by exam takers

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 Student Feedback
• Feedback through various channels
• Student evaluation of teaching
• Conducted annually after each examination period

• Informal feedback students throughout the year

• After the class professor is available to discuss open points or
unclear issues

• Changes OPO compared to previous academic years

• New professor
• A class about sustainability

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Right or wrong + explain

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Theory questions

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Apply theory to real world examples

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Calculate and interpret financial ratios

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Class schedule
September 25 November 6
• Introduction • Corporate strategy (1/3)
• What is strategy? November 13
October 2 • Corporate strategy (2/3)
• Drivers of value creation November 20
October 9 • Corporate strategy (3/3)
• Industry analysis (1/2) December 4
October 16 • No class (*)
• Industry analysis (2/2) December 11
October 23 • Business practitioner on Sustainability ->
• Competitive strategy (1/2) 2 classes in one session (UK)
October 30 December 18
• Competitive strategy (2/2) • Wrap up, Q&A

* Due to business travel this may also fall in November – announcement via Ultra in time
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1. What is Strategy?
What is Strategy?
Readings
• Ghemawat, P. (2001). Strategy and the Business Landscape, Chapter 1:
The Origins of Strategy, 1-9.
• Porter, M.E. (1996). What is Strategy? Harvard Business Review,
November-December, 61-78

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What is Strategy?
Objectives
• Understand what strategy is
• Understand the importance of strategy for firm performance
• How to describe a strategy
• Understand the role of strategy
• Basic framework for strategy analysis
‒ External analysis of industry and competition
‒ Internal analysis of resources and capabilities

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What is Strategy?
“The determination of long-run goals and objectives of an enterprise and
the adoption of courses of action and the allocation of resources
necessary for carrying out these goals”
Chandler A., Strategy and Structure, MIT press, 1962

Successful strategy
1. Clear and consistent long-term goals
2. Good understanding of the competitive environment
3. Building and using the resources and capabilities to achieve the goals, to
develop a competitive advantage
4. Effective implementation
5. Strategic fit between goals, environment, resources and capabilities, and
implementation

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 1. Clear and consistent long-term goals

Long term performance of companies, maximize value creation

Sales growth

Sales margin
Capital turnover,
Resource utilization

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Sales growth, sales margin and capital turnover are

the 3 determinants of a company’s value creation
 Example: McDonald’s goals
and strategy
• Focus on growing sales with same capacity

Capital turnover

Sales growth

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 2. Good understanding of the competitive
environment
• Good understanding of all the (potentially) important determinants of industry
profitability (average profitability of firms active in the industry)
• Positive as well as negative determinants
• Use of frameworks to determine industry structure and profitability
‒ PESTEL (macro environmental: political, environmental, social, technological,
environment, legal)
‒ Porter 5 forces

SUPPLIER POWER

THREAT OF ENTRY INDUSTRY RIVALRY SUBSTITUTES

BUYER POWER
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 Why is the tobacco industry profitable?

Why is the airline industry not profitable?

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Industry analysis = exhaustive overview of factors affecting industry profitability

ROE= return on equity, measure for profitability of a firm, net income / shareholders equity
 3. Building and using the resources and capabilities
to achieve objectives, to develop a competitive
advantage
WTP Value Value
Captured
Created Consumer
Price
Value
Captured
Company

Average
cost

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A company has a competitive advantage if it creates more value than its competitors, i.e. a larger
difference between the consumers’ willingness to pay and the average cost
3. Building and using the resources and capabilities
to achieve objectives, to develop a competitive
advantage
Willingness to pay

Average cost

Average Differentiation Cost Both

competitor in advantage advantage differentiation and
industry cost advantage
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 3. Building and using the resources and capabilities
to achieve objectives, to develop a competitive
advantage

Competitive strategy and

position is more important
for performance than the
industry!

Critical to be in an industry in
which you can obtain a
competitive advantage,
even if the industry is not
profitable for the average
firm.
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Very often entrepreneurs are attracted to profitable or “fashionable” industries (e.g. early internet startups, airlines),
even in case their company has no competitive advantage
Example: Ryanair in airlines

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3. Building and using the resources and
capabilities to achieve objectives
• Competitive advantage
‒ Cost versus differentiation advantage

• Relies on resources and capabilities

which are
1. Unique/scarce
2. Relevant/valuable
3. Durable
4. Not transferable
5. Not replicable

• Reputation, brands, technology, expertise, …

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4. Effective implementation
• The ultimate success of the firm depends on how the strategy is
implemented, i.e. how the firm is organized

• Intended strategy > emergent strategy > realized strategy

• “Strategy is what you have in mind until you get the first blow”
Mike Tyson, heavy weight champion

• Organization has three key pillars:

1. structure
2. systems
3. culture

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5. Strategic fit
The strategy is consistent with
‒ Internal environment
‒ Resources and capabilities
‒ e.g. Corning in optical fiber vs. Kodak/ Agfa in digital imaging

‒ External environment
‒ e.g. Nokia and the failure in smartphones

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 Strategic fit: strategy as interface

THE INDUSTRY
ENVIRONMENT
THE FIRM • Competitors
• Goals STRATEGY • Customers
• Resources and capabilities • Supplier
• Structure, systems and culture • Substitutes
• Entry

Firm- Environment-
Strategy Strategy
Interface Interface

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How to describe a strategy?
STRATEGY AS POSITIONING STRATEGY AS DIRECTION

Where are we competing? What do we want to become

Product market scope and achieve?
Geographical scope Vision statement
Vertical integration (Why do we exist?)
Performance goals
How are we competing?
What is our competitive
How will we get there?
advantage?
Growth modes: organic
growth, M&A, alliances,
R&D?
…

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COMPETING FOR THE PRESENT PREPARING FOR THE FUTURE

Strategic decisions
• Key for long term success of a company (every successful company has a
good strategy)
‒ Where and how do we compete

• Typically hard to reverse

‒ Commitment
‒ Size of investments, e.g. development Airbus 380

• Provoke reaction from competitors (game theory)

• Coordinating decisions necessary for coherence and consistency (next slide)

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All decisions and activities need to be aligned
and coherent

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Role of strategy in the firm
Decision support
‒ Bounded rationality and complex decision-making
‒ Act as an heuristic

Coordination and communication device

‒ How to coordinate decisions and actions of all employees?
‒ Identity and vision

Target
‒ Strategic intent

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 Corporate strategy vs. competitive strategy
Corporate strategy
• Scope in terms of industries and
markets
• Diversification, vertical integration,
M&As, divestments, …
• How can corporate center reinforce
Corporate the competitive advantage of the
center SBU’s?

Competitive or business strategy

• How to compete in a particular industry
SBU or SBU or SBU or
division division or market?
division
• How and in what markets can the
strategic business unit (SBU) gain and
sustain a competitive advantage?
Marketing and Product
Manufacturing
sales development

Functional strategy
• Not discussed in this course

SBU= Strategic Business Unit, a unit of a company or a group that is responsible for its strategy in its markets and
controls the resources and capabilities to implement 40
such strategy.

Competition takes place at the industry (SBU) level and not at the corporate level.
Philips: three large divisions

Within each division possibly

Philips different business units

Consumer life
Healthcare Lighting
style

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 Who is involved in strategic decisions?
Involvement

Responsibility
Renewal
Strategic Strategy Strategy Imple- Strategic
of strategy
Expert advice analysis formulation approval mentation control
(next slide)

Board of
directors

Top
management

Business
management

Consultants

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A board of directors consists of elected or appointed members who oversee the activities of a company. The board of directors
appoints the Chief Executive Officer of the corporation.
When should a strategy be reviewed?
• Results are disappointing and not attributable to slowdown of market
• Important changes take place in the market, by competitors, changes in
technology, …
‒ e.g. competitive advantage is threatened if a new firm enters the market
• Existing resources and capabilities and underutilized
‒ e.g. can we use our technology for different products? In different markets?
• Top management is replaced
• Shareholders want a different strategy
• New opportunities arise and substantial investments need to be made

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History of strategy
• Military strategy
• Business strategy
‒ Corporate planning
‒ Long term development of the firm
‒ Macro-economic forecast
‒ Goals and objective for product and business areas
‒ Guiding diversification strategies in the 1960s

‒ Strategic management
‒ Increased competition, economic shocks
‒ Focus on competition, a company’s position in an environment, industry
analysis (Michael Porter)
‒ (sustainable) competitive advantage
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History of strategy
‒ Resource based view
‒ Shift from industry analysis to sources of profits within the firm
‒ Focus on internal resources and capabilities as sources of competitive
advantage
‒ Key article: Wernerfelt, B. (1984), A resource-based view of the firm. Strategic
Management Journal, 5: 171–180

‒ Dynamic capabilities
‒ Continuous change, relentless innovation and competition
‒ Shift from sustainable competitive advantage to ability to create successive
temporary advantages
‒ Ability to reconfigure resources and capabilities to address changing
environment
‒ Key article: Teece D., Pisano G. and Shuen A.(1997). Dynamic Capabilities and
Strategic Management. Strategic Management Journal 18: 509-533

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Strategic management as a field of study
• Lots of crappy definitions and concepts, not much theory (combination of
industrial organization, corporate finance, … )
• No exact science or clear recipes for ultimate success, every industry and
company is different, changes over time
• Not one particular framework or methodology
‒ Different guru’s, different theories
‒ Consultants use different frameworks
• Objective of the course: stimulate careful strategic analysis and thinking so
that you can apply the concepts and frameworks to new real world
situations
• Importance of case studies

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 Madonna: sustaining success in a fast moving
business since 1980

1. What businesses/industries is Madonna in

(where does she compete)?

2. Are these businesses related? Are there synergies between different

businesses (i.e. can she use resources and capabilities across different
businesses)?

3. What are the key resources and capabilities in the particular industry? How
does Madonna score on these wrt competitors?

4. Why has Madonna been so successful? What are the main elements of her
strategy (How does she compete)?
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Madonna: sustaining success in a fast moving
business
Madonna Louise Ciccone[a] (/tʃɪˈkoʊni/; Italian: [tʃikˈkoːne]; born August 16, 1958) is an American singer, songwriter, and actress. Known as the
"Queen of Pop", Madonna has been widely recognized for her continual reinvention and versatility in music production, songwriting, and visual
presentation. She has pushed the boundaries of artistic expression in mainstream music while maintaining control over every aspect of her career.[2]
Her works, which incorporate social, political, sexual, and religious themes, have generated both controversy and critical acclaim. A prominent
cultural figure spanning both the 20th and 21st centuries, Madonna remains one of the most "well-documented figures of the modern age",[3] with a
broad array of scholarly reviews, literature, and art works about her, as well as an academic mini subdiscipline devoted to her called Madonna
studies.

Madonna moved to New York City in 1978 to pursue a career in modern dance. After performing as a drummer, guitarist, and vocalist in the rock
bands Breakfast Club and Emmy, she rose to solo stardom with her debut studio album, Madonna (1983). She followed it with a series of successful
albums, including all-time bestsellers Like a Virgin (1984), True Blue (1986), and The Immaculate Collection (1990), as well as Grammy Award
winners Ray of Light (1998) and Confessions on a Dance Floor (2005). Madonna has amassed many chart-topping singles throughout her career,
including hits such as "Like a Virgin", "La Isla Bonita", "Like a Prayer", "Vogue", "Take a Bow", "Frozen", "Music", "Hung Up", and "4 Minutes".

Madonna's popularity was enhanced by roles in films such as Desperately Seeking Susan (1985), Dick Tracy (1990), A League of Their Own (1992),
and Evita (1996). While the lattermost won her a Golden Globe Award for Best Actress, many of her other films were not as well received. As a
businesswoman, Madonna founded the company Maverick in 1992, which included Maverick Records, one of the most successful artist-run labels in
history. Her other ventures include fashion brands, written works, health clubs, and filmmaking. She contributes to various charities, having founded
the Ray of Light Foundation in 1998 and Raising Malawi in 2006, and she advocates for gender equality and LGBT rights.

With sales of over 300 million records worldwide, Madonna is the best-selling female recording artist of all time. She holds the record for being the
most successful solo artist in the history of the U.S. Billboard Hot 100 chart and has achieved the most number-one singles by a woman in Australia,
Canada, Italy, Spain, and the United Kingdom. With revenue exceeding US$1.5 billion from her concert tickets, she remains the highest-grossing
female touring artist worldwide. Forbes has named Madonna the top-earning female musician annually a record 11 times across four decades
(1980s–2010s). She was inducted into the Rock and Roll Hall of Fame in 2008, her first year of eligibility. VH1 ranked Madonna as the greatest
woman in music, while MTV and Billboard ranked her as the greatest music video artist ever. Rolling Stone also included her in their lists of the
greatest artists and greatest songwriters of all time.

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1. What business/industry is Madonna in (where does she
compete)?

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1. What business/industry is Madonna in (where does she
compete)?
• Multiple businesses (both related and unrelated to entertainment)
‒ Recorded music,
‒ Music videos,
‒ Concerts,
‒ Movies,
‒ Books,
‒ Music and video production,
‒ Publishing,
‒ Promotion/advertising

‒ Hard candy fitness chain

‒ …

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2. Are these businesses related? Are there synergies
between different businesses (i.e. can she use resources and
capabilities across different businesses)?

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2. Are these businesses related? Are there synergies
between different businesses (i.e. can she use resources and
capabilities across different businesses)?
• Corporate strategy: economies of scope across different businesses
‒ Use resources and capabilities across different businesses

• Exploits artistic creations and superstar image across different

businesses:
‒ Record releases,
‒ Videos,
‒ Concert tours
‒ Movies,
‒ Books,
‒ Music and video production,
‒ Publishing,
‒ Promotion
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‒ …
3. What are the key resources and capabilities in the
particular industry? How does Madonna score on these?

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3. What are the key resources and capabilities in the
particular industry? How does Madonna score on these?

• Singing,
• Musicianship,
• Songwriting,
• Acting,
• Dancing,
• Beauty

• Superstar image

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4. Why has Madonna been so successful? What are the main
elements of her strategy (How does she compete)?

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 4. Why has Madonna been so successful? What are the main
elements of her strategy (How does she compete)?

• Superstar image
‒ Advantage in any business she enters, whether it is music, movie acting, or as a producer
and manager

• Competitive strategy
‒ Early identification of key trends in music, style, and popular culture and incorporating such
themes into her own image and products.
‒ Periodic renewal of her “product life cycle” – each of these renewals based around a
coherent and complementary package of music, style, fashion, and personal demeanor.
Continual renewal and reinvention since 1980!
‒ an early street-kid-disco-grunge phase, a retro-Monroe-glamstar look, a black-leather-and-underwear
deviant sexuality phase, followed by more recent persona: Madonna-as-mother and the spiritually-
aware-mystic-Madonna
‒ Outsourcing to access resources and capabilities of others in order to complement her own
restricted range of resources and capabilities.
‒ Identifying and exploiting alliance partners (temporary partners with specific goals)
‒ Carefully selected team of songwriters, record producers, musicians, dancers, and the like
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‒ Maintenance of close control over the key elements of her intellectual property
‒ Maximum use of controversy (sex in particular) to maintain media and public interest