STRATEGIC MANAGEMENT

LECTURE 4

How to build a long-term vision?

- fast changing technology
- volatile markets
- accelerating changes

Sources of profitability:
- industry attractiveness
- competitive advantage: superior resources and capabilities  source of P

1er concern: industry selection and positioning:

- company  adopt similar strategies
- competition increases, industries are often deregulated
Key to P (= profitability): exploit differences
- external environment focusing on LT trends
- internal resources and capabilities (innovation, WW presence, mass
production)

Profits arising from market power: monopoly rents

Profits arising from superior resources: Ricardian rents  Theory of comparative
advantage
KSF: as a starting point for the identification of the resources and capabilities

Ex: Edhec: KSF campus, teaching method, brand…

Prehalad, Hamel: CORE Competence: to define those capabilities fundamental to a

firm’s strat
- They make disproportionate contribution to ultimate customer value or to the
efficiency with which the value is delivered.
- Basis for entering new markets

Ex: French post example: mail distrib declines  bank postal

Benchmarking: process of identifying, understanding, and adapting out standing
practices from organizations anywhere in the world to help your organization improve
its performance:
- establishing performance metrics
- implicit assumption is that the benchmarked activity is independent from other
activities

Method:
- Ksf: to identify resources and capabilities
- Value chain
- Appraising resources and capabilities linked to the KSF

Ex: ducati: key strengths, weakness

 Focus on organizational learning, best practices, and capitalization…

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 Developing capabilities: systematic and LT process, capabilities, processes,
structure…  need to developed sequentially

 Strategic plan:

- Annual or bi annual process with board approval (no more than 10 years): mix
of top and bottom strat and initiatives
- The process is key: dialog, information sharing, consensus building
- Need for flexibility and adaptation: less LT eco forecast, more strat
directions, alternative scenarios, overall performance goals

- break down LT strategic plans into short term plans and actions, performance
monitoring
- perf targets: financial, operational, at unit level, annual operating budget
- need for sustainable growth
- changing buyer behaviours
- technology innovations offer new possibilities
- changing business requirements
 Budgeting process:
- can be part of the strategic planning process
- complementary to the operational planning
 based on continuity assumptions.