Session 01

- Ground Rules
- SM-I recap
- Hambrick and Fredrickson (2005)

Sasanka Sekhar Chanda

2019
Strategic Management - II
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Ground Rules
• Students are expected to come prepared to the class
▫ Studying in groups is encouraged
• Per my understanding the PGP Office will not
entertain any representation for excusing misses in
biometric attendance recording
▫ Therefore I am unable to help with attendance
▫ In the event of a missed biometric recording, a
student needs to inform the Academic Associate, only
on the same day, at the start or end of class.
Session 01

- SM-I recap
- Hambrick and Fredrickson (2005)

Sasanka Sekhar Chanda

2019
Strategic Management - II
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Re-cap SM-I: Business Strategy

• Started with core values and core purpose
• Learned to analyze the environment
▫ Look into the future, set goals as a function of core values
and purpose, walk back to present to determine the strategy
to attain those goals, given what a firm has & what it can do
• Moved on to Competitive strategy
▫ Analytic recourses to obtain an edge over rivals
 From the perspective of analysis of Five forces & value
chain
 Either be the Cost Leader, or obtain premium by
differentiation
 From the perspective of ownership of unique, valuable,
rare, inimitable, non-substitutable (VRIN) resources
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Some questions arise after SM-I

• If every company acted as per 5 forces and
value chain analyses, profitability should be
same across firms?
▫ Only stupid firms make less profits, and they die
• If everyone went after VRIN resources, their
prices would be bid up, nullifying advantage
of possession?
▫ Management would concern bribing officials to corner
VRIN resources at below market prices (Coal-block
allocation scam, 2G-spectrum scam …)
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Conceptual basis of Porter

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Functions of the Corporate Office

BOARD OF GOVERNORS

HEADQUARTERS
Functional Heads: FINANCE AND ACCOUNTS , IT, HR, OPERATIONS , R&D
Division Heads: SBU Leaders, COUNTRY Heads
Horizontal functions: Legal, Public Relations, Corporate Social Responsibility

SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

Strategic Business Unit (SBU) Functions

Analyze Product Market conditions, Respond to competitor moves and
technology changes by management of product life cycle, seek to deliver
higher value
Corporate Functions
Strategic Decision Making, Strategy Formulation, Strategy Implementation,
Diversification, Mergers and Acquisitions, Strategic Alliances, Internationalization,
Corporate Venturing, Knowledge Management , Organizational Structure
Control Function (TMT & Board of Directors) Leadership, Corporate Governance
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Hambrick DC, Fredrickson JW (2005)

Are you sure you have a strategy?

Academy of Management Executive, 15(4): 48-59

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Clarifying Elements of Business Strategy:

ARENA
• What business are we in? (Drucker p. 53)
▫ Product category, Market segment, Geographic
areas, core technologies, value creation segments
[Design, Mfg, service , distribution]
 E.g. Women’s high end fashion accessories;
countries with per-capita GDP > $5000; Inexpensive
contemporary furniture for young, white collar
(IKEA); Leading-edge Braking systems for high-end
passenger automobiles and off road vehicles (Brake
Products I)
• How does this help? Pros, Cons?
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Clarifying Elements of Business

Strategy: VEHICLES
• The means for attaining presence in a particular
product category, market segment, geographic
area or value creation stage
▫ Internal development; Joint venture; Licensing of
Franchising, Acquisitions (p. 54)
 E.g. Organic expansion with wholly owned stores
(IKEA) Internal development of new, leading edge
technology + Strategic alliances with suspension-
component manufacturers + Joint ventures with
brake companies in Asia (BPI)
• How does this help? Pros, Cons?
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Clarifying Elements of Business Strategy:

DIFFERENTIATORS
• Concerns what will make customers buy the
products/services of the firm (p. 55)
▫ Image, customization, price, styling, product
reliability (p. 54)
 E.g., there is no better value- quality for the price
than a Honda (car); Lowest possible fares and on-
time reliability (Southwest Airlines); Instant
fulfilment + reliable quality + low price + shopping
experience (IKEA); ABS & Electronic traction
control technology + system integrations capability
(BPI)
• What are pros and cons to making
differentiators explicit?
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Clarifying Elements of Business

Strategy: STAGING
• Concerns speed or sequence of moves (p. 55)
▫ No universally superior sequence (p. 55). Judgment
required as to what sequence is more useful, given a
firm’s resources and environmental constraints.
 E.g.: Regional Insurance Co. expanded in its neighboring
regions first, acquiring resources to enable larger
advertising expense on branding, paving the way for
more acquisitions at lower premium; International
expansion by region + expansion from one store in a
country(IKEA); Asian JVs and alliances with suspension-
component companies, followed by aggressive design and
marketing of system-integration offering (BPI)
• Should a firm broaden its suite of offering before
going international, or do the reverse? Pros, Cons?
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Clarifying Elements of Business

Strategy: ECONOMIC LOGIC
• Logic as to how profits will be generated, by
returns above a firm’s cost of capital (p. 56)
▫ Premium prices by offering customers a difficult-to-
match product (that they are willing to shell-out money for),
 e.g. NYT digital charges readers a fee for reading news
articles on their website (others Huffington Post, Rediff,
ToI do not).
▫ Lowest costs through scale/ scope advantages e.g. Walmart
▫ All the good stuff regarding Focus, CL and Diff (Porter)
• Don’t all differentiated products eventually become
commodities (e.g. cellphone features)?