Copyright Jeff Dyer, 2001

An Introduction to Strategic ManagementAn Introduction to Strategic Management

Key Issues in Strategic Management

2

Copyright Jeff Dyer, 2001

Strategic Management IssuesStrategic 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 ManagementStrategic Management

Strategy Profit

Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace

Competitive Advantage: ability to transform inputs into goods andservices at a maximum profit on a sustained basis, better than competitors

FirmCompetitive Advantage

ShareholderValue

5

The Goal of Strategy: Imperfect CompetitionThe 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 Competition Imperfect Competition

Copyright Jeff Dyer, 2001

Mini-Case: Marketing Strategy at DeltaMini-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 StrategyEvaluating 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 ManagementStrategic 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 ADVANTAGEBUILDING COMPETITIVE ADVANTAGE

Examples of Competitive Success

CostChanging 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