JHUNJHUNWALA BUSINESS SCHOOL
What Is Strategy?
• Distinguishing strategy from tactics:
• Strategy is the overall plan for deploying resources
to establish a favorable position.
• Tactic is a scheme for a specific maneuver.
• Characteristics of strategic decisions:
• Involve a significant commitment of resources.
• Not easily reversible.
Common Elements in Successful Strategy
Sources of Superior Profitability
RATE OF PROFIT
How do we make
should we be in?
How should we
Resources As the Basis for Superior
Rate of Profit
in Excess of the
Barriers to Entry
The Value Chain:
The Mckinsey Business System
TECHNOLOGY PRODUCT DESIGN MANUFACTURING MARKETING DISTRIBUTION SERVICE
The Porter Value Chain
HUMAN RESOURCE MANAGEMENT
INBOUND OPERATIONS OUTBOUND MARKETING SERVICE
LOGISTICS LOGISTICS & SALES
The Rent-earning Potential
of Resources and Capabilities
THE EXTENT OF THE
SUSTAINABILITY OF THE
OF A RESOURCE OR
The Framework for Analyzing
Resources and Capabilities
5. Identify resource gaps that need
to be filled.
4. Select a strategy
3. Appraise the rent-earning
potential of resources/
2. Identify capabilities
1. Identify the firm’s resources.
Appraise strengths and
• Acronym derived from Strengths, Weaknesses,
Opportunities, and Threats.
– Used for analyzing industry environments and
firms’ internal strengths and weaknesses.
• Performed in a 2-step process:
– Managers thoroughly evaluate their firm’s internal
strengths and weaknesses and its environmental
(external) opportunities and threats.
– Managers use the evaluation developed in the first
step to place the firm in one of the quadrants of the
SWOT matrix shown in Exhibit 5.
SWOT Analysis (Cont.)
• Advantages of SWOT analysis
• Easy to use.
• Can be helpful framework for getting managers to think
constructively about their firms’ external environments and internal
strengths and weaknesses.
• Drawbacks of SWOT analysis
• Biased by managers’ perceptions of their firms’ strengths and
SWOT Analysis (Cont.)
• For example, managers of strong firms will likely view environmental
phenomena as opportunities, while their counterparts in weak
companies will likely view them as threats.
• The use of SWOT analysis is likely to yield few clear-cut
The Emergence of Competitive
How does competitive
External sources of
•Changing customer demand
among firms means
Some firms faster
and more effective
in exploiting change
have greater creative
Sustaining Competitive Advantage Against
REQUIREMENTS FOR IMITATION ISOLATING MECHANISMS
Identification - Obscure superior performance
- Deterrence--signal aggressive
Incentives for imitation intentions to imitators
- Pre-emption--exploit all available
- Rely upon multiple sources of
Diagnosis competitive advantage to create
- Base competitive advantage upon
Resource acquisition resources and capabilities that are
immobile and difficult to replicate