COURSE OUTLINE

1. Introduction and Course Practicalities

2. External Analysis
3. Internal Analysis
4. Business Strategy
5. Corporate Strategy
6. International Strategy
7. Mergers & Acquisitions, and Strategic Alliances
8. Group Projects and Course Wrap Up

ASSESSMENT
1. Class Participation (20%)  Attendance, Quality, Quantity (Session 2 through 9) [at least one
high quality thing per class]
2. Term Project (40%) (May 5th 2024 at 7 p.m. (the end of week 7))
a. Written report
b. Power-point presentation
3. Final Exam (40%)  reference in Session 7 or 8, 2 types of questions:
a. 20 – 30 Multiple Choice
b. Open-ended questions (Question with several sub-questions), mini case and mini
frameworks:
i. Define the framework
ii. Apply the framework
iii. Assess the case
iv. Come up with solution
STRATEGY

ALIGNMENT of an Organization
with its business environment

Strategy is Different form Tactics.

- Strategy: More Important, Involves significant commitment of resources, Not easily
reversible
- Tactics. A scheme for a specific manoeuvre, Involves Less Commitment of resources, more
flexible and easily reversible

Strategy is emergent: Intended (100%), Realized (10% - 30%), Emergent (70% - 90%)

Strategy: Business Strategy vs Corporate Strategy

- CORPORATE STRATEGY: WHERE to compete?
- BUSINESS STRATEGY: HOW to compete?

Is Strategy Quantitative or Qualitative?  it is actually both. However, in this course we will focus on
QUALITATIVE aspect. Quantitative is important, but we need to give QUANTITATIVE data a
QUALITATIVE MEANING.

Weakness of SWOT: it is myopic, biased, and so random. What can be an opportunity can also be a
threat. It is only a good visualization, but we need to explore and dig deeper to understand

The meaning behind that visualization.

Strategy  You have to create VALUE for YOUR STAKEHOLDERS and YOURSELF

Importance of GOAL and TARGET  Decision Making, Communication, Alignment, Measuring

Performance
Formulating GOAL and TARGET will depend on translation of VISION and MISION
- VISION: what the firm want to be, wan to achieve, foundation
- MISSION: Specific vision, which business to compete, which consumer to serve

Performance feedback and diagnoses based on:

- Historical Comparison (compare yourself with the old you)
- Peers Comparison (compare yourself with your competitor)

After you understand where your strategy is falling short, you can evaluate:
- How can you adjust?
- Do you have the resources? Can you develop the resources?
- How will you competitor retaliate?

Maximize value to SHAREHOLDERS or STAKEHOLDERS?

- STAKEHOLDERs approach is also the best interest for SHAREHOLDERs.
- Shareholders: focus only on profit
- Stakeholders: focus not only on profit, but also a broader horizon (Customer, Employee,
Supplier, Environment), therefore ensuring continuality
- STAKEHOLDERS will maximize value in THE LONG RUN, while Shareholders focus is only focus
on the short term.

CSR (Corporate Social Responsibility)  VOLUNTARY action for improving/creating VALUE for
stakeholders, including shareholders. This way, it will also create VALUE for yourself too in the long
run.

We want Substantive (not-Symbolic), Sincere (not-Insincere), Focus (not-Broad), and Consistent (not-
Inconsistent CSR. It is okay to have internal/external based on the environment and type of firm. It
will be best if CSR is done with Company’s available resources.

CSR has to be ALIGNED with your VISION and MISSION of the firm.

The most important thing in CSR is about ALIGNMENT:

- Align CSR with your strategy
- Align CSR with the internal context
- Align CSR with the external context
EXTERNAL ANALYSIS

PESTEL Framework (Politic, Economic, Social, Technology, Environment, Legal)

Competitor Strategic Group

Firms cannot control demographic, and other external factors. Therefore, it is much smarter to be
FLEXIBLE and position yourself strategically.

Aspects of assessing environment:

- Exogenous Aspects (you cannot control)
o => To limit threat: Flexibility, Insurance, Avoidance
- Endogenous aspects (might be controlled)
o => Reshape environment. e.g. reduce competition by acquiring competitor

What to avoid:
- Avoid myopia
- Avoid Bias
- Avoid being distracted by irrelevant factors.

4 Generic component of analysing external environment:

- Scanning, Monitoring, Assessing, Forecasting

FORECAST and ASSESS  in this course we focus on ASSESS

Extended PEST analysis:

- Political / Legal
- Economic
- Sociocultural
- Technological
- Demographic
- Global
- Physical
Analysing Industry: What industry are we in?
 Approach 1
o If buyer willing to switch, probably you are in the same industry
o Is supplier can switch production between types of products, probably in the same
industry
 Approach 2
o Identify player (Supplier, Competitor, and Customer), if the same then you might be
in the same industry
 Approach 3
o Let stakeholder guide you (Stock Exchange), rely on analyst
 Approach 4
o Inductive approach (machine learning, content analysis)

LUXURY is not an industry, it is just a segment

When defining an industry DO NOT BE TO NARROW and DO NOT BE BROAD
DO NOT DEFINE YOUR INDUSTRY based on YOUR POSITIONING!!!

Frameworks for external analysis

PERSPECTIVE Matters. E.g. if you are new entrants, probably barrier to entry is bad for you. But it is
good for the industry players.

As industry practice, you rarely able to keep competing on differentiation. As industry mature, you
usually have to compete on price.

IMPORTANT: for PORTER 5 FORCES, you should look at it DYNAMICALLY instead of it as a snapshot.
Porter 5 forces:
 Threat of Substitutes: Substitutes are the ones that are not in your industry!!
o Mc Donald vs High end restaurant: this is competition and not substitute. However
arguably, it is an indirect competition
 o The substitute for McDonald is eating at home. And the threat of substitute has
increased because of online food ordering.
 Threat of New Entries:
o Capital requirement
o Economies of scale
o Absolute cost advantage
o Product differentiation
o Access to channels of distribution
o Legal and regulatory barriers
o Threat of retaliation
 Bargaining Power of Buyers and Suppliers:
o Number of buyers and suppliers
o %of share from buyers and suppliers
o Switching cost
o Think of next stage and previous stage on the value chain
 Rivalry between established competitor:
o Concentration
o Competitor similarity in size
o Industry Growth
o Diversity of Competitors
o Product differentiation
o Excess capacity and exit barriers
o Cost Conditions (Ratio of fixed to variable; extent of economies of scale)
When to use porter 5 forces?
 Understanding industry structure and forecast industry profitability
 Strategic positioning
 Strategies to restructure the industry and improve industry profitability
 Key Succes Factors

Determining Key Success Factors:

DO THIS EVERY PRODUCT LIFE CYCLE!!!

Identify strategic group:

- McDonald is direct rival with Burger King  because they are in the same strategic group
- McDonald is indirect rival with 3star resto  they are in different strategic group
CASE: CUBAN CIGAR INDUSTRY
HAND MACHINE
NEW ENTRY (+) High Skilled Labor (+) Capital requirements
(+) Product differentiation (+) Distribution channels
(+) Distribution channels (+) Economies of scale
----------------------------------
----------------------------------
(+)attractive because it is high (+) attractive because it is high
RIVALRY (+) Exit barriers are low (-) Exit barriers is high,
(+) Differentiation is high assuming they have invested in
(-) Industry is declining costly specific machinery
(-) Differentiation is low
(-) Industry is declining
---------------------------------- ----------------------------------
(+) attractive because rivalry is (-) rivalry is high
low (-) but for both, the aggregate
(-) but for both, the aggregate market is declining
market is declining
SUBSTITUTE (Fake Cigar might (+) Lower Substitute for (-) higher substitute
be substitute, because it is performance
illegal; Foreign Cigar might be ---------------------------------- ----------------------------------
substitute; Vaping) (+) Core value prestige, so it is (-) Core value is nicotine,
not that affected by substitute highly affected by substitute
B.P. SUPPLIER (+-) So So. More or less (+) fewer player, higher
customer and supplier need bargaining power over supplier
each other
B.P. BUYERS (+) Brand Loyalty (-) Buyer has more options
(+) Switching cost is high
---------------------------------- ----------------------------------
(+) More attractive (-) Less attractive

THE ACTUAL VIEW:

 SUPPLIER: Monopolized by GOVERNMENT
 BUYER: Monopolized by HABANO S.A.