Copyright Jeff Dyer, 2001 An Introduction to Strategic Management Key Issues in Strategic Management

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Copyright Jeff Dyer, 2001 Strategic Management Issues What does it mean to have a strategy? What is the “goal” of strategic management? How can you evaluate a “good” or “bad” strategy?

Copyright Jeff Dyer, 2001 Strategic Management StrategyProfit Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace Competitive Advantage: ability to transform inputs into goods and services at a maximum profit on a sustained basis, better than competitors Firm Competitive Advantage Shareholder Value

5 The Goal of Strategy: Imperfect Competition Numerous sellers and buyers (no monopolies) Perfect Information Homogenous products No Barriers to entry or exit Normal/Average Profits Few competitors, numerous suppliers and buyers Asymmetric Information Heterogeneous Products Barriers to entry Supernormal Profits Perfect CompetitionImperfect Competition

Copyright Jeff Dyer, 2001 Mini-Case: Marketing Strategy at Delta In the mid 1980s Delta’s market researchers found that customers (particularly business customers) were strongly influenced to choose a particular airline by the airline’s frequent flyer program. Consequently, to motivate customers to choose Delta, they teamed up with American Express (an exclusive arrangement) to offer a special program: customers could receive triple miles if they would fly on Delta and purchase the tickets using the American Express card. How would you evaluate Delta’s strategy? (Good or bad?)

7 Evaluating Good Strategy What is the cost of the strategic initiative? How long will it take for competitors to replicate the strategic initiative? What is the Barrier to Imitation???What is the Barrier to Imitation???

Copyright Jeff Dyer, 2001 Strategic Management Fundamental Assessment of: –What business and markets should we compete in? –What are the key success factors in this business? –What resources and capabilities are necessary for competitive advantage?

Copyright Jeff Dyer, 2001 BUILDING COMPETITIVE ADVANTAGE Examples of Competitive Success Cost Changing the Rules of the Game Differentiation Southwest Airlines Wal-Mart IKEA Amazon.com (Internet model) Harley Davidson Toyota (Quality)

Copyright Jeff Dyer, 2001 Strategy Module Focus: –Introduction to strategic models/frameworks for creating sustainable competitive advantage How can we better understand and address the challenges facing firms in the 2000s? What models/frameworks can we as managers use to help guide our decision making as we respond to these challenges? Sessions are meant to be discussions, not lectures –Focus on thinking strategically