Slides from my first lecture in the Strategy module in the 2011 Media Management Course at Stockholm School of Economics and the Royal Institute of Technology. here is more information on the course: http://nordicworlds.net/2011/01/21/strategy-course-focuses-on-virtual-worlds-and-gaming-industries/

1. Strategy January 21 - Morning Media Management – Module 1 Robin Teigland [email_address] www.knowledgenetworking.org January 2011

7. Live Case Teams – 16 Teams total

11. What is a strategy course about?

12. Performance varies across industries Reproduced from Ghemawat (2000), Strategy and the Business Landscape Above-average returns (15%) (10%) (5%) 0% 5% 10% 15% 20% Toiletries/Cosmetics Steel Pharmaceuticals Soft Drink Tobacco Foo d Processing Household Products Electrical Equipment Financial Services Specialty Chemicals Newspaper Bank Integrated Petroleum Telecom Retail Store Tire & Rubber Electric Utility - Central Electric Utility - East Medical Services Machinery Auto & Truck Computer & Peripheral Paper & Forest Air Transport

13. Performance varies within industries

14. Where does superior profitability come from? RATE OF RETURN ABOVE THE COST OF CAPITAL How do we make money? INDUSTRY ATTRACTIVENESS Where should we compete? COMPETITIVE ADVANTAGE How should we compete? CORPORATE STRATEGY BUSINESS STRATEGY Grant 2008

15. What is the role of strategy in an organization? Strategy as Decision Support Strategy as Coordination and Communication Strategy as Target Improves the quality of decision making Creates consistency and unity Improves performance by setting high aspirations Grant 2008

17. Why do we use analytical models in strategy? Reducing complexity to something manageable Identifying what needs the most attention Highlighting relationships Creating a common language and shared understanding My view…. Making views explicit Strategy Culture Structure Systems Vision

19. Strategic analysis Environment Organization Industry Internal analysis RBV Model Inside->Out External analysis I/O Model Outside->In

21. All the things right, but not the right thing!

26. The basic framework INDUSTRY ENVIRONMENT • Competitors • Customers • Suppliers STRATEGY STRATEGY FIRM • Goals & Values • Resources & Capabilities • Structure & Systems Grant 2008 The LINK between the FIRM & its ENVIRONMENT

27. Generic strategies: Strategy is about making choices… Scope (Customer/ variety) Type of competitive advantage Broad Narrow Differentiation Low cost Differentiation Cost leadership Differentiation- based focus Cost-based focus Porter

28. Features of cost leadership and differentiation strategies Generic strategy Key strategy elements Resource & organizational requirements COST Scale-efficient plants. Access to capital. Process LEADERSHIP Design for manufacture. engineering skills. Frequent Control of overheads & reports. Tight cost control. R&D. Avoidance of Specialization of jobs and marginal customer functions. Incentives for accounts. quantitative targets. DIFFERENTIATION Emphasis on branding Marketing. Product and brand advertising, engineering. Creativity. design, service, and Product R&D. quality. Qualitative measurement and incentives. Strong cross- functional coordination Grant 2008

29. Generic strategies in the auto industry Scope (Customer/ variety) Type of competitive advantage Broad Narrow Differentiation Low cost ??? (Differentiation) ??? (Cost leadership) ??? (Differentiation- based focus) ??? (Cost-based Focus) Porter Can you give an example for each box?

30. Avoid being stuck in the middle Market share Return on investment High High Low Low Differentiation Cost leadership Porter

32. What is the goal of strategy?

35. The world’s most valuable companies (2006): Performance under different profitability measures Grant 2008 #1 #2 COMPANY MARKET CAP. ($BN.) NET INCOME ($BN) RETURN ON SALES (%) RETURN ON EQUITY (%) RETURN ON ASSETS (%) RETURN TO SHARE-HOLDERS (%) Exxon Mobil 372 36.1 19.9 34.9 17.8 11.7 General Electric 363 16.4 10.7 22.2 14.7 (1.5) Microsoft 281 12.3 40.3 30.0 18.8 (0.9) Citigroup 239 24.6 22.0 21.9 1.5 4.6 BP 233 22.3 9.9 27.9 10.7 10.2 Bank of America 212 16.5 27.0 14.1 1.2 2.4 Royal Dutch Shell 211 25.3 14.7 26.7 11.6 11.8 Wal-Mart 197 11.2 5.5 21.4 8.1 (10.3) Toyota Motor 197 12.1 10.7 13.0 4.8 (22.1) Gazprom 196 7.3 28.1 9.8 7.1 n.a. HSBC 190 15.9 23.0 16.3 1.0 (11.8) Procter & Gamble 190 8.7 17.3 13.7 6.4 7.2

38. How has Microsoft achieved success? Which concepts are discussed (either explicitly or implicitly)? Successful strategy Long-term, simple, and agreed objectives Deep understanding of competitive environment Objective appraisal of resources EFFECTIVE IMPLEMENTATION Grant 2007

40. What is a firm? Why does it exist? What is a business model? What is strategy? What is vision/mission? Grant 2008

43. What makes a successful strategy? Grant 2008 Successful Strategy Long-term, simple, and agreed objectives Deep understanding of competitive environment Objective appraisal of resources EFFECTIVE IMPLEMENTATION

44. The basic framework INDUSTRY ENVIRONMENT • Competitors • Customers • Suppliers STRATEGY STRATEGY FIRM • Goals & Values • Resources & Capabilities • Structure & Systems Grant 2008 The LINK between the FIRM & its ENVIRONMENT

45. Where does superior profitability come from? RATE OF RETURN ABOVE THE COST OF CAPITAL How do we make money? INDUSTRY ATTRACTIVENESS Which industries should we be in? COMPETITIVE ADVANTAGE How should we compete? CORPORATE STRATEGY BUSINESS STRATEGY Grant 2008