Strategy Lecture 1-2 PDF

Lecture 1 – Introduction to Strategy Prof. Dr. Eva Niesten Use Edusign QR code to register attendance  Why a Strategy Course? The decline of many firms is caused by failure to renew their strategy in a continuously changing world All managers and entrepreneurs, all kinds of firms a...

Lecture 1 – Introduction to Strategy Prof. Dr. Eva Niesten Use Edusign QR code to register attendance  Why a Strategy Course? The decline of many firms is caused by failure to renew their strategy in a continuously changing world All managers and entrepreneurs, all kinds of firms and organizations are concerned with strategy Reach objectives and meet constraints Strategy has a fundamental role in successful decision making  How can firms create and sustain a competitive advantage in today’s hyperconnected and fast-changing world?  Why a Strategy Course? Master fundamental concepts in strategic management □ Strategy identification and evaluation □ Industry analysis □ Challenges to competition □ Firm and industry evolution □ How and where to compete Understand the impact of environmental forces and strategic actions on business and corporate strategy Become proficient in analytical and critical thinking and develop skills in reporting strategic recommendations with evidence LECTURE 1 – Introduction to Strategy Lectures (CM) Tutorials (TD) Coordination 1. Course Instructors Couse content Course guidelines 2. Course Components Course material Smart book 3. Assessment Criteria Mid-term and final exam Mid-term and final consultancy project 4. Introduction to Strategy Strategic fit Strategy = Planned emergence 5. Value & Strategic Value creation & capture Positioning Cost leadership and differentiation 1.1 Course Instructors Lectures and Tutorials Prof. dr. Eva Niesten Full Professor of Strategy and Sustainability at SKEMA Business School, Paris campus Director of SKEMA Centre for Sustainability Studies Email: [email protected] Office hours: On appointment 1.1 Course Instructors Course Coordination Dr. Bruno Cirillo Associate Professor of Strategy and Entrepreneurship at SKEMA Business School, Sophia Antipolis Email: [email protected] Dr. Ambra Mazzelli Associate Professor of Strategy and Organizations at SKEMA Business School, Paris campus Email: [email protected] Office hours: On appointment 1.2 Course Components Theory ► Explore theory and strategic tools (“tell me”) CM (increase awareness of managerially relevant problems and Lecture halls analyze solutions through readings, videos, in-class discussions, and exercises) Cases CM ► Explore empirical contexts (“show me”) Lecture halls (show application of strategic tools with four detailed case studies) ► Consultancy project (“involve me”) TD (apply the strategic frameworks and tools to analyze the strategy of Team-project Project tutorials a chosen firm) 1.2 Course Components CM Lecture Halls (Theory focused) 6hr [4 x 1.5h sessions] of lectures CM Lecture Halls (Case focused) 6hr [4 x 1.5h sessions] of case study discussions Large audience (70-200 students) 9hr [6 x 1.5h sessions] of strategic tool application Team-based 5 pre-recorded video tutorials on strategic We give students the analysis in Excel freedom to form their TD own teams by the week [(i) Online search and data collection; (ii) Industry analysis; (iii) Internal Team-Project Tutorials analysis; (iv) Strategic positioning; (v) Corporate strategy analysis; (vi) Effective before the first tutorial, (Application focused) communication] passed the deadline assignments are at the 6hr [2 x 3h sessions] of student project instructor’s discretion presentations Small groups (30-50 students)  CM CM 1.2 Course Components Lecture hall Case Study TD Tutorials  CM CM 1.2 Course Components Lecture hall Case Study TD Tutorials  CM CM 1.2 Course Components Lecture hall Case Study TD Tutorials 1.2 Course Components Traditional teaching philosophy Teaching philosophy of this course The instructors are the only experts The instructors are knowledge managers They tell students what’s right and what’s They manage their knowledge and the wrong. Students memorize the lectures and knowledge of the class to create an engaging what is in the textbook learning environment 1.2 Course Components Get informed and be prepared before each lecture and tutorial! 1.2 Course Components CM: Prepare lectures in advance by studying the prerequisite readings of each session in the CONNECT platform. Progress in the SmartBook assignments will be graded at the end of the course. CM: Read the case study and watch videos on the case. Be prepared to debate and analyse the case in class. TD: Submit checklist: data downloaded, analyses performed, variables used, questions for your TD instructor. 1.2 Course Components Attendance is mandatory! If you must miss a class, we expect you to notify your instructor by email in advance. 1.2 Course Components Free Riding: ► You are expected to remain engaged and contribute to the team assignments throughout the course ► Free riding will be sanctioned by your instructor, who reserves the right to apply grade penalties shall free riding be detected  1.2 Course Components Compulsory readings (CONNECT) Rothaermel FT. 2024. Strategic Management, 6th Edition. McGraw-Hill. The SmartBook is available on the McGraw-Hill CONNECT learning platform. Thompson et al. 2021. Crafting & Executing Strategy: Concepts & Cases, 23rd Edition. McGraw-Hill. The PDFs of the cases are available on the McGraw-Hill CONNECT learning platform. The e-books are available on the CONNECT learning platform. Book chapters and related quizzes are to be read by the end of the course.  1.2 Course Components Course pack (K2) Course syllabus Video tutorials on strategic analysis in Excel (necessary for consultancy project) Case study materials and questions Lecture and TD slides (posted after each class) Instructions for consultancy project Assignment submission links → check common resources and instructor’s pages 1.2 Course Components 1. Financial data from BVD Orbis 2. Sources on Kcenter (https://learn.skema.edu) Dow Jones Factiva (company news; press releases; trade articles; …) Statista (industry, country and company data) Marketline (intelligence reports and analysis; industry and company data) ProQuest (company, financial and banking data) 3. Other public sources Public company data: Google Finance; Yahoo Finance; … GoogleSearch is not considered a sufficiently reliable data source 1.2 Course Components Use video of course coordinator Ambra Mazzelli to learn more about using databases for this course 1.3 Assessment Criteria 1. Class preparation and participation [10%] ► CONNECT Smart Book statistics (End of semester) Theory 2. Mid-Term exam [20%] ► 5 multiple-choice questions Cases ► 1 open-ended question based on a selected company (data analysis required) Course coordinators Project 3. Final exam [30%] create and grade the exams ► 5 multiple-choice questions ► 1 open-ended question based on a selected company (data analysis required) 1.3 Assessment Criteria 4. Mid-term Consultancy Report Presentation [20%] Grading criteria (from 0 to 20 points each): □ Relevance and reliability of the data sources (0-5) Theory □ Appropriateness of analysis (0-5) □ Result interpretation (0-5) □ Clarity of the presentation (0-5) Cases 5. Final Consultancy Report Presentation [20%] Grading criteria (from 0 to 20 points each): □ Relevance and reliability of the data sources (0-5) Project □ Appropriateness of analysis (0-5) □ Result interpretation (0-5) □ Clarity of the presentation (0-5) 6. Bonus/Malus (Ad-hoc)  1.3 Assessment Criteria Team Project: Consultancy Project - Team composition: You will choose your own team of 5 students and communicate it to your TD instructor before your first TD session. - Assignment: Each team will work on a different company. You will select a company to study from a list provided by your TD instructor and communicate your choice to the instructor. - The team project must be an original work. Each project will be checked for plagiarism. Any plagiarism case will be dealt with according to SKEMA’s fraud and plagiarism policy.  1.4 Introduction to Strategy Why is strategy important? Competitive Successful Strategy Advantage EFFECTIVE IMPLEMENTATION Clear, consistent, Profound Objective long-term goals understanding of the appraisal of competitive resources environment Source: Rothaermel, Strategic Management 1.4 Introduction to Strategy Why is strategy important? Strategy as the Link between the Firm and its Environment The Firm The Goals & Industry Vision Environment Strategic Fit STRATEGY Resources & Competitors Capabilities Customers Structure & Suppliers Systems Superior & Sustainable Profits  1.4 Introduction to Strategy Why is strategy important? A good strategy is based on AFI Framework: Step 1: ANALYSE the firm’s external and internal environments Step 2: FORMULATE the firm’s (corporate and business) strategy Step 3: IMPLEMENT strategy through a coherent set of actions Source: Rothaermel, Strategic Management 1.4 Introduction to Strategy The decline of Nokia (which lost over 90% of its stock market value in the four years up to July 2012) may be attributed to a strategy which failed to take account of a major change in its external environment: the growing consumer demand for smart phones. 1.4 Introduction to Strategy The evolution of strategic management 1.4 Introduction to Strategy What is strategy? “The determination of the 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.”  1.4 Introduction to Strategy What is strategy? “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”  1.4 Introduction to Strategy What is strategy? Strategy is different from aspirations: Aspiration: “Our strategy is to be the #1 or #2 in the industry.” Strategy: “How do you get to be #1?” “What is unique about you?” “Why would you be #1?” Strategy is different from actions: Actions: “Our strategy is to merge.” “Our strategy is to internationalize the business.” Strategy: “What is the distinctive position you seek to occupy in the market?” “What is your unique advantage?” “Why are you going to win?” Source: Rothaermel, Strategic Management 1.4 Introduction to Strategy What is strategy? Mintzberg’s 5 P’s for Strategy: A pattern in a stream of actions. It is consistency in behavior. Patterns are realized strategy. Plan Ploy Pattern An ingrained way of perceiving the world. A perspective shared by members of an organization. A collective mind, common thinking and behavior. Position Perspective 1.4 Introduction to Strategy What is strategy? Strategy as direction Strategy as guidelines for Strategy as Last 50 years success detailed Strategy embraces plans More unstable, turbulent flexibility and and unpredictable responsiveness environment Mintzberg: 10-30% of intended strategy is realized; the primary determinant of realized strategy is emergent strategy: Decisions that emerge from complex processes in which managers interpret intended strategy and adapt to changing circumstances. Rothaermel: realized strategy = planned emergence = top-down strategic intent + bottom-up emergent strategy  1.4 Introduction to Strategy What is strategy? 2 Levels of Strategy Source: Rothaermel, Strategic Management  1.4 Introduction to Strategy “A company’s strategy can be found in three places: in the heads of managers, in their articulations of strategy in speeches and written documents, and in the decisions through which strategy is enacted. Only the last two are observable.” Vision: What do we want to accomplish ultimately? Mission: How do we accomplish our goals? Values: What commitments do we make to legally and ethically pursue our vision and mission? You can use corporate pages of companies’ websites or annual reports in your consultancy report + course databases Source: Rothaermel, Strategic Management; Grant, Contemporary Strategy Analysis 1.4 Introduction to Strategy Check strategy statements against decisions and actions, to reveal a (potential) gap between rhetoric and reality: Data collection via Factiva, Orbis etc. Where is the company investing its money? What new products have been released, major investment projects initiated, and top management hired? What technologies is the company developing? www.uspto.gov/patents-application-process/search-patents www.epo.org/searching-for-patents.html 1.5 Value & Strategic Positioning Value creation & capture The ultimate goal of strategy is value creation and capture, where value is: “Net rent earning capacity of an asset or resource, tangible or intangible” or “the monetary worth of a product or asset” The purpose of business is: 1. To create value for customers (and society) 2. To appropriate or capture some of that customer value in the form of profit.  1.5 Value & Strategic Positioning Value creation Successful firms ultimately create value for society: Strategic leaders must understand exchange relations with stakeholders, effectively manage these relations to enhance competitive advantage and avoid a sole focus on shareholders that undermines economic performance Source: Rothaermel, Strategic Management 1.5 Value & Strategic Positioning Value creation & capture Producer’s rent = Price of the product minus costs = profit The ultimate goal of a firm and its strategy is profit maximization. 1.5 Value & Strategic Positioning Value creation & capture Value creation = value captured by firms + consumer surplus Consumer surplus: Consumers pay less for the goods and services they buy than the value they derive from these purchases. 1.5 Value & Strategic Positioning Profitability ratios  1.5 Value & Strategic Positioning Two sources of competitive advantage: Porter’s generic strategies to achieve competitive advantage: 1.5 Value & Strategic Positioning Using performance data to determine the type of strategy: Commercial margin, nature of the firm in competitive system Net Income (or Operating Income) Return On Sales (ROS) = Efficiency at using firm Net Income assets to generate earnings (%) Sales Return On Assets (ROA) = Sales (or Total Revenues) Net Income (%) Asset Turnover (AT) = Total Assets Sales (coef) Total Assets Total Assets Capital intensity 1.5 Value & Strategic Positioning Using performance data to determine the type of strategy: Return on Sales (Net Income/Sales) Use video of course coordinator Ambra Mazzelli to calculate firm’s strategic Differentiation ROS1 positioning strategy Mixed strategy “Stuck in the Volume strategy: middle” cost-leadership ROS2 AT1 AT2 Asset Turnover (Sales/Total Assets)  What’s Next? Get ready for the next session: Watch the following video tutorials available on K2: (a) Data collection; (b) Strategic positioning analysis in Excel Read the case study and supplementary materials on Uber on K2 We will discuss Uber’s strategy based on the interview with Uber’s CEO Get ready to provide your answers to the case study questions on K2. Office hours for Q&As: Eva: by appointment Course coordinators (Bruno CIRILLO and Ambra MAZZELLI: by appointment)