Strategic Management Past Paper PDF 2024-2025

Strategic Management B-KUL-Y00927 Prof. dr. Sam Arts 2024-2025  Course set- up Lectures – Monday: 13:30-15:30, CAR 1.09 – Facultative (attend only if interested!) – Video recordings of all lectures (except introduction lecture) from previous year available...

Strategic Management B-KUL-Y00927 Prof. dr. Sam Arts 2024-2025  Course set- up Lectures – Monday: 13:30-15:30, CAR 1.09 – Facultative (attend only if interested!) – Video recordings of all lectures (except introduction lecture) from previous year available on Toledo – Read readings on beforehand – Print 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 – Questions via email are answered in class, not via email Learning material (Toledo) – Slides + everything discussed in class – Make notes, solution cases/exercises will not be made available afterwards – Readings (yes! part of the learning material) 2 Reading s What is strategy? 1. 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 3 Forces that Shape Strategy. Harvard Business Review, January, 78-91. 2. McGahan, A.M. (2004). How Industries Change. Harvard Business Review, Reading s 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. Collis, D.J., Montgomery, C.A. (2008). Competing on Resources. Harvard Business Review, July-August, 140-150. 5. Corporate strategy 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. Carlesi, L., Verster, B., Wenger, F. (2007). The new Dynamics of Managing the Corporate Portfolio. McKinsey Quarterly, spring, 1-8. 4 Evaluation 3 ECTS Written exam, closed book (100% final grade) – Two hours – End of first semester – Sample exam from last years on Toledo – 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 5 +-30 to 50% failed for the exam, grade of 9 or less on 20 Right or wrong + explain 6 Theory questions 7 Apply theory to real world examples 8 Calculate and interpret financial ratios 9 Class schedule (preliminary) September 23 November 18 Introduction Corporate strategy What is (1/3) 25 November strategy? September 30 No Drivers of value class 2 December creation October 7 Corporate strategy Industry analysis (2/3) 9 December (1/2)14 October Corporate strategy No (3/3) 16 December class21 October Wrap up, Industry analysis Q&A (2/2)28 October Competitive strategy (1/2) 4 November Competitive strategy (2/2) 11 November 1 0 No class (public holiday) Contact, remarks, or questions Ask during/after lectures or [email protected] 1 1 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 13 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 14 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 15  1. Clear and consistent long-term goals Long term performance of companies, maximize value creation Sales growth Sales margin Capital turnover, Resource utilization 1 6 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 17  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 – PEST (macro environmental: political, environmental, social, technological) – Porter 5 forces SUPPLIER POWER THREAT OF ENTRY INDUSTRY RIVALRY SUBSTITUTES BUYER POWER 18  Why is the tobacco industry profitable? Why is the airline industry not profitable? 1 9 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 advantag a competitive e WTP Value Value Captur Created ed Pric e Consu mer Value Captur ed Compa ny Avera ge cost 2 0 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 Differentia Cost Both competito tion advant differentiatio r in advantag age n and cost industry e advantage 2 1  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. 22 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 23 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, … 24 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 25 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 26  Strategic fit: strategy as interface THE INDUSTRY ENVIRONMENT THE FIRM Competitors Goals STRATE Customers Resources and capabilities Supplier Structure, systems and GY Substitutes culture Entry Firm- Environme Strateg nt- y Strategy Interfa Interface ce 27 How to describe a strategy? STRATEGY AS STRATEGY AS POSITIONING DIRECTION Where are we What do we want to competing? become and Product market achieve? scope Vision Geographical statement scope Vertical (Why do we integration exist?) How are we Performance competing? goals What is our competitive How will we get advantage? there? Growth 2 modes: organic COMPETING FOR THE 8 PREPARING FOR THE growth, M&A, FUTURE PRESENT 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) 29 All decisions and activities need to be aligned and coherent 30 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 31  Corporate strategy vs. competitive strategy Corporate strategy Scope in terms of industries and markets Diversification, vertical integration, M&As, divestments, … Corporate How can corporate center center reinforce the competitive advantage of the SBU’s? Competitive or business strategy SBU or SBU or SBU or How to compete in a particular division division division industry or market? How and in what markets can the strategic business unit (SBU) gain Marketing and Product and sustain a competitive Manufacturing sales development advantage? 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 such strategy. 32 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 33  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 3 4 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 35 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 36 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 37 Capabilities and Strategic Management. Strategic Management Journal 18: 509-533  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 38  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 39 elements of her strategy (How does she compete)? Madonna: sustaining success in a fast moving business 40 1. What business/industry is Madonna in (where does she compete)? 41 2. Are these businesses related? Are there synergies between different businesses (i.e. can she use resources and capabilities across different businesses)? 42 3. What are the key resources and capabilities in the particular industry? How does Madonna score on these? 43 4. Why has Madonna been so successful? What are the main elements of her strategy (How does she compete)? 44