BUSS1000 Lecture Notes - Lecture 5: Longrun, Sunk Costs, Cost Leadership
5 Jun 2018
School
Department
Course
Professor
Understand the role of strategy in business
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Learn how analyses informs strategy
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Understand Porter's Generic Strategies
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Know how to use the Strategic Diamond
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LO:
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” (Porter, 1996, p. 64)
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“An integrated, overarching concept of how the business will achieve it’s objectives”
(Hambrick & Fredrickson 2001 , p 3)
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“Strategy is the direction and scope of an organisation over the long terms, which achieves
advantage in a change environment through its configuration of resources and competences
with the aim of fulfilling stakeholder expectations” (Johnson, Scholes, & Whittington, 2008, p
3)
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Definitions and Perspectives of "Strategy":
Is it align with the long-term direction of the organization?
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Is the proposed solution within the scope of the organizational activities?
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Will we gain some advantage over the competition?
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What about strategic fit within the prevalent business environment?
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Do we have relevant resources and competencies?
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Does it align with the values and expectations of powerful actors in and around the
organization
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Real life problems have many other questions depending on the problem
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Have to discuss with stakeholders (especially shareholders)
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Solutions Need to Meet:
Need to make changes to support strategy --> achieve goal
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Strategic Management Process:
Lecture 5 - Strategy
Thursday, 5 April 2018
1:54 PM
Lecture Page 1
First have to complete inputs then actions to achieve outcomes
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In real life, strategy can began at any point and progress
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You can look at Strategy as
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Design: usage of evaluative and analytic processes to establish clear strategic direction
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Experience: Importance of history and previous experiences in shaping decisions. Avoiding
heavy reliance on models/analysis.
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Ideas: Importance of promoting diversity, to promote new ideas which solve uncertainty and
problems as they arise
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Discourse: Using language to shape strategy and guide via influence, power, and legitimacy.
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The strategy lenses:
Draws on Five Forces.
Strategies are contextual and relative to an industry.
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Overall Cost Leadership
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Differentiation
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Focus
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Porter (1980) argued that there are three internally consistent generic strategies that allow an
organization to outperform competitors in the long-run.
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Each however, ultimately seeks to create value that customers buy.
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Porter's Generic Strategies
Differentiation matters depending on the product (pen vs laptop, laptop brand and type if
important but pens differentiation is not). Same occurs with cost leadership
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Aim: A firm which finds and exploits all sources of cost advantage and aims at becoming a lot
cost producer in the industry is said to pursue a sustainable cost leadership strategy.
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Cost leadership strategy:
Lecture Page 2
Document Summary
Does it align with the values and expectations of powerful actors in and around the organization. Real life problems have many other questions depending on the problem. Need to make changes to support strategy --> achieve goal. First have to complete inputs then actions to achieve outcomes. In real life, strategy can began at any point and progress. Design: usage of evaluative and analytic processes to establish clear strategic direction. Experience: importance of history and previous experiences in shaping decisions. Ideas: importance of promoting diversity, to promote new ideas which solve uncertainty and problems as they arise. Discourse: using language to shape strategy and guide via influence, power, and legitimacy. Strategies are contextual and relative to an industry. Porter (1980) argued that there are three internally consistent generic strategies that allow an organization to outperform competitors in the long-run. Each however, ultimately seeks to create value that customers buy.
