A Strat Man English CB [Kompatibilitätsmodus]hochschule.drbuer.com/fileadmin/Skripte/A_StratMan_English_CB.pdf · Comparative competitive advantage as goal of strategic management

Strategic ManagementChapter: A

Prof. Dr. Christian Buer

Strategic management: Table of content

A. Fundamentals of strategic management B. Analysis and planning of business objectives and field of activitiesC. General Strategic Management Concepts D St t i A l i d l i i t tD. Strategic Analysis and planning instruments

2Prof. Dr. Michael Erner · International Strategic Management · SS 10

Fundamentals of strategic management

I St t i tI. Strategic management1. Objective2. Challenges and functions

II Market orientation of strategic managementII. Market orientation of strategic managementIII. Competitive advantage as goal of strategic managementIV. Success factors as central control parameters of strategic managementV Perspectives of strategic managementV. Perspectives of strategic managementVI. The strategic management process

3By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12

I.1 ObjectiveObj ti f t t i tObjectives of strategic management

General Strategic management aims to design the developmentGeneral definition

Strategic management aims to design the development of a company

Obj ti f t t i t i t th

Special definition

Objective of strategic management is to ensure the organizational success via competitive advantages, e.g. to achieve the best fit between several elements of strategic management such as strengths and weaknesses of thedefinition management such as strengths and weaknesses of the company as well as threats and opportunities of the economic, legal, social and technological environment

4By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: According to Müller-Stewens, 2005; Herrmann

I.2 Challenges and functionsCh ll d f ti f t t i tChallenges and functions of strategic management

Functions of Practical challenges

Describes thoughts and

strategic management

Unpredictability (Control)

Practical challenges

actions Replace coincidence by

error

p y ( )

Diversity of occurrence

(single / global activities)

How

Ensure systematic procedure

(single / global activities)

Contradictory

D l t f Ambiguity

Lack of decomposability

Development of competitive advantages W

hat

5By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: According to Müller-Stewens (2005)

I.2 Challenges and functionsF l i b “ lf id t” tiFalse prognosis by “self-evident” assumptions

Electronic computerAutomotive at 1900 Telephone

““I think there is a world market

for maybe five computers.” T. J.

Watson (1943)

There will be at most 20.000

vehicles in the world, cause there

are no more chauffeurs available

The post in England refused the

telephone because letter post

and messenger were sufficientWatson (1943)

In the fifities of the last century

they estimated a world market of

40 80 units

are no more chauffeurs available

Chauffeurs had “self evident” an

engineering education.

and messenger were sufficient,

trusted as well as at a lower price

and the labor union of the

messengers would make40 – 80 units

„Self evident assumption: no more

demand, high costs, a lot of

i d

messengers would make

difficulties

The mayor of Seattle said, he

could imagine that over the nextrequired space

In 1980 the management of IBM

thought that personal computers

could imagine that over the next

100 years every town in the US

will have a telephone

will never be a mass product

False prognosis

6By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Trommsdorff


I B i f St t i tI. Basics of Strategic managementII. Market orientation of strategic management

1. Fundamentals of market-oriented management2 Market orientation elements2. Market-orientation elements

III. Competitive advantage as goal of strategic managementIV. Success factors as central control parameters of strategic managementV Perspectives of strategic managementV. Perspectives of strategic managementVI. The strategic management process


II.1 Fundamentals of market-oriented managementF d t l f k t i t d tFundamentals of market-oriented management

Market oriented managementMarket-oriented management

CompetitorsCustomer

Create & sustain competitive advantages

8By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Steffenhagen, 2003a

II.2 Market-orientation elementsA t f k t i t tiAspects of market-orientation

C t i t tiCustomer orientation means e.g.:

Question the own work concerning benefit for the customer (point of view)of view)

Assure customer orientation in every value adding step Understand the business processes of the customersUnderstand the business processes of the customers

(Customer process competence) Make it easier for the customer (Readiness for service) Quick and individual reaction to customer requests

(Problem solving - reaction) A friendly, respectful and attentive contact to the customery, p Ensure ongoing customer satisfaction


II.2 Market-orientation elementsHi hi l V l M lt f l dd iHierarchical Value Map as a result of laddering

B fit fBenefit forthe customer

Higher prize realizable

HigherOutputCost savings Effect

High quality paper

Extended service intervals

Reduction of complaint frequency

Less retention resources needed Effect

Cause

Effects

Prevention of cockling

Reduction of stretch effect Effect

Cause

Objectives Retention Dimen- Reduction misting of Reduction of

cockling stretch effect Effect

ObjectivesCharacteristics

Retentionincrease sional

stability

gpulp-containing

paperclean water absorption

Cause


II.2 Market-orientation elementsA t f k t i t tiAspects of market-orientation

C tit i t tiCompetitor orientation means e.g.:

Know objectives, structures and behavior of competitors

Be oriented towards competitors

Be aware of competitive advantages and strengthen this ones Be aware of competitive advantages and strengthen this ones

Exploit competitive advantages

Take the competitors seriously

Quick and individual reaction to competitors

Gain respect of competitors

11By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: According to Steffenhagen, 2003a

II.2 Market-orientation elementsId tifi ti f t d t ti l titIdentification of current and potential competitors

Requirements (problem) of userq (p )

identical similar totally different

Direct,current competitors

Technology congruent, potential competitors

(easy market entry possible)identical

vide

r

Congruent

( y y p )

similary of

pro

v

grequirements,

potential competitors Market (segment)-absent competitors

similar

chno

logy

(substitution competitors)

totally differentTe

c



I B i f St t i tI. Basics of Strategic managementII. Market orientation of strategic managementIII. Comparative competitive advantage as goal of strategic management

1 D l t f ti titi d t1. Development of comparative competitive advantages2. Analysis of comparative competitive advantages3. Characterization of comparative competitive advantages

IV Success factors as central control parameters of strategic managementIV. Success factors as central control parameters of strategic managementV. Perspectives of strategic managementVI. The strategic management process


C titi d t b fitIII.1 Development of comparative competitive advantagesCompetitiveness and customer benefit

Competitiveness has to be reflected in pcustomer benefits

EfficiencyEffectiveness

More / better Service (Performance)

Less effort for the customer Or(Performance)

oreffectiveness for the customer

Orhigher efficiency for the

customerCompetitive advantages

(with equal effort for the customer to the status quo)

(with equal service for the customer to the status quo)


III.1 Development of comparative competitive advantages S f titi d tSources of competitive advantages

Competitive advantages / disadvantagesCompetitive advantages / disadvantages

Customer assessmentCapabilities / resources

Analysis of strengths and Analysis of strengths and Analysis of strengths and weaknesses Customer assigns (does

not assign ) positive

Analysis of strengths and weaknesses The company does / does

not have the appropriate performance criteria to the company, which are significant for suppliers preference

resources to compete successfully

preference


III.2 Analysis of comparative competitive advantages C titi d t l i b d d t fCompetitive advantage analysis based on product performance (example of mobile operator)

Very good

Value Profile

Very bad1 2 3 4 5

Importance forthe customer

Network coverage

Network quality

2,7

3,0

Service

Distribution

1,3

2 8Distribution

Prize

B d

2,8

4,9

3 7Brand

Telephone

3,7

4,1


III.2 Analysis of comparative competitive advantages C titi d t t iCompetitive advantage matrix

Featuresce

Example:

1.Price12high

mpo

rtan

c

2.Network coverage

3.Network quality

Im 4.Technical support34lo

w

outnumbered on the edge

to the competitor

Relative competitive strength

17By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: According to Steffenhagen, 2003a

III.2 Analysis of comparative competitive advantages C titi d t l i b dCompetitive advantage analysis based on resourcesRelation between consumer requirements and necessary resources compared to competitors

Capabilities / resources compared to competitors

Consumer requirements Required capabilities / resources:

•on the edge•outnumbered+20 +1-1-2

Network coverage • Number and distribution of mobile antennas

• Technical level of existing

Service

• Technical level of existing infrastructure

• Knowledge andKnowledge and motivation of employees

• Competence of solving the problem

Price • Cost level and structure

18By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: According to Steffenhagen, 2003b

III.2 Analysis of comparative competitive advantages P ibilit t i titi d t d di d tPossibility to summarize competitive advantages and disadvantages

Fulfillment of consumer requirements

Worse than competitors

Better than competitorscompetitors

(Strengths)competitors(Weakness)

Better than „degradable „solides Better than competitors(Strengths)

„degradable

disadvantages“

„solid

advantages“

Res

ourc

e

Worse than competitors

„real „unstable

abili

ties

/

competitors (Weakness) disadvantages“ advantages“C

apa

19By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Steffenhagen, 2003b

III.3 Characterization of comparative competitive advantages C titi d t d i t t thCompetitive advantages and requirements to the company

RequirementsCompetitive advantages

I Superior service compared to competitors, …

Competitive advantage clearly definedC t ti

II which concerns a feature requested by the customer, …

Concentration on a few clear competitive advantagesProd ct

III which is perceived as described by the customer, …

Product advantages translate into competitive

IV and which isn't easy to imitate by the competitors

d hi h t b

competitive advantages

Face the dynamic of competitive

V and which can not easy be

undermined by surrounding influences.

padvantages

20By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Trommsdorff

III.3 Characterization of comparative competitive advantages E l f t t i titi d tExamples of strategic competitive advantages

BMW Leitz Mercedes Sony

Examples

High product quality

Strategic competitive advantages

American Express, Hilton

BMW, Leitz, Mercedes, Sony

High service quality

High product quality

Hewlett-Packard Microsoft Nokia

Coca-Cola, Ferrero, Nivea, PampersStrict brand policy

Chanel, Rolex, Rolls Royce,

Hewlett-Packard, Microsoft, Nokia, 3M

Exclusive image

Continuous innovation

Aldi, Lidl, Fielmann, Media Markt, ratiopharm

Low price

McKinseyExclusive image

21By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Bruhn, 2001

p

III.3 Characterization of comparative competitive advantages Ch t i ti f titi d tCharacteristics of competitive advantages

Tenable/defendable

a competitive

relevantPerceivebaleRecognizable

advantage is …

relevant Recognizable

22By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Backhaus, 2005

III.3 Characterization of comparative competitive advantages Si ifi f titi d tSignificance of competitive advantages

Value Profilevery important

very good

Value Profileless importantbad

1 2 3 4 5

Importance Degree of performance

Network coverage

Network quality

Service

Distribution

Prize

Brand

Importance Degree of performance

Telephone

23By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Compare Backhaus, 2005

III.3 Characterization of strategic managementP ti f titi d tPerception of competitive advantages

Vase or two faces

24By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Backhaus,2005


Old or young woman



Bigger or smaller?

A.

B.


III.3 Characterization of strategic managementD f bilit f titi d tDefense capability of competitive advantages

Defense capability is critical with all efforts to gain competitive

Reed / DeFilipi

Defense capability is critical with all efforts to gain competitive advantage.

Competition consist of innovation and imitation. A competitive advantage can continue as long as no competitor is able to imitate the new solution.

E l Ik E l ClExample Ikea Example Claas

Transfer a part of the capability to the customer

First CLAAS Service, high degree of service and reliability

27By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Backhaus, 2005; Reed/DeFilippi, 1990


I B i f St t i tI. Basics of Strategic managementII. Market orientation of strategic managementIII. Comparative competitive advantage as goal of strategic managementIV S f t t l t l t f t t i tIV. Success factors as central control parameters of strategic management

1. Definition of success factors2. Empirical success factors in the PIMS Program

• Objectives and hypotheses• Objectives and hypotheses• Main impacts and their relation• Evaluation

V. Perspectives of strategic managemente spec es o s a eg c a age eVI. The strategic management process


IV.1 Definition of success factors

Success factor

Strategic success factors are defined in business administration as

contents of strategies that (should) directly lead to successcontents of strategies that (should) directly lead to success.

Processes can also count as success factor depending on the

tiperspective.


IV.2 Empirical success factors in the PIMS-ProgramObj ti f PIMS PObjectives of PIMS - Program

The PIMS – Program (Profit Impact of Market Strategies)

… allows to analyze the influence of market strategies in the

situative context on the performance of companies based on asituative context on the performance of companies based on a

cause and effect relation.


H th i f PIMS PIV.2 Empirical success factors in the PIMS-Program

Hypothesis of PIMS - Program

Initial hypothesis:

The success of business units is determined by characteristics of

market situation (market structure), structural parameters of the ( ) p

company (competitive position) as well as concept alignment

(strategies) independent of industry-specific given facts(strategies) independent of industry specific given facts.

Success factors of business segments


Th PIMS di f titi t tIV.2 Empirical success factors in the PIMS-Program

The PIMS paradigm of competitive strategyStrategiesMarket structure Performance measures

Market differentiation Market growth Market entry conditions Level of labor union

Price policy R&D investments New product launch Change of relative

Profitability (ROS, ROI) Growth Cash flow Increase of value

organization Capital intensity Size of order

gquality and product range

Marketing investments Distribution channels Relative vertical

Share price

Relativecompetitive position

integration

Relative perceived quality

Relative market share Relative capital intensityp y Relative costs

32By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Buzzel/Gale, 1989

IV.2 Relation between several influencesM j i fl t f ROIMajor influence parameters of ROI

Market attractiveness Cost attractiveness Short and long-term market growth Degree of concentration on supplier

side Degree of concentration on customer

R&D investment Marketing investment

N b f d t l h Degree of concentration on customer side

Export rate

Relative competitive position

Number of new product launches

Common company featuresRelative competitive position Relative market share Relative product qualityInvestment attractiveness

Common company features Company size Degree of diversification

Investment attractiveness Investment and capital intensity Vertical integration Productivityy Capacity utilization

33By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Meffert, 1994

R l ti b t k t h d ROIIV.2 Relation between several influences

Relation between market share and ROI

Henderson PorterJacobson &

Aaker

ROI

Market share


R l ti b t lit k t h d ROIIV.2 Relation between several influences

Relation between quality, market share and ROI

ROI (%)

h th d

67%

have the edge on

33%

60%

high

lowRelative qualityoutnumbered

25%

60%

Relative market share


R l ti d t lit d fit bilit (ROI)IV.2 Relation between several influences

Relative product quality and profitability (ROI)

Relative RelativeRelativemarket share (gain

market share)

Relative costs

(lower)

Relative perceived Profitabilityp

quality (have the edge on)

Profitability(higher)

Relative prize(higher)


IV.3 EvaluationE l ti f th PIMS d lEvaluation of the PIMS model

+ - Empirically established data

Identification of central perfor-

Strategic rules are only approximate assessments with major individual variations

Identification of central perfor-mance measures

Basic aspects for strategy definition

Moment view, the analysis includes time-comprehensive relations between several indicators and ROI

ROI as central success measuredefinition ROI as central success measure too unilaterally

No direct comparison to main competitors given

„Intensity of factors to company success depends on contextual conditions “„Intensity of factors to company success depends on contextual conditions



I B i f St t i tI. Basics of Strategic managementII. Market orientation of strategic managementIII. Comparative competitive advantage as goal of strategic managementIV S f t t l t l t f t t i tIV. Success factors as central control parameters of strategic managementV. Perspectives of strategic management

1. Basic orientation of strategic management2 Development in time2. Development in time

VI. The strategic management process


V.1 Basic orientation of strategic managementO iOverview

Market-based-view

M k t St t M k t C d t P fMarket Structure Market Conduct Performance

Resource-based view

Potential(resources, skills,

competencies)Strategy Performance

39By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: In Anlehnung an Bea/Haas (2005)

M k t b d iV.1 Basic orientation of strategic managementMarket-based-view

e Long term company success

ectiv

e Long-term company success

f f

ersp

e Identification of attractive Market segments

e-In

-Pe

Creation of superior customer benefit

utsi

de

Building up necessary

Ou g y

Resources Capabilities


R b d iV.1 Basic orientation of strategic managementResource-based view

e Long term company success

ectiv

e Long-term company success

Identification and further

ersp

e Identification and further development of core

competencies as bundle of company specific resources

Out

-Pe

Market selection, in which the core competencies can be

side

-O core competencies can be utilized effectively

Ins Creation of superior

customer benefit


C t iV.1 Basic orientation of strategic managementCore competencies

Core competencies (CC) are complex and dynamic combinations of individual know

Definition according to Rasche

Core competencies (CC) are complex and dynamic combinations of individual know-how, routines/intangible assets embodied in the organizational structure and material resources. CC build a “special form” of company specific resources, providing a basis for competitive advantages.

Company specific

Requirements on core competencies as success potential generating resources

Not substitutable Inimitable due to:

- Corporate history- Confusion about the causation- Interdependencies of resources- Time-induced Inefficiencies of development of competencies

M lti l i ff t f d l t f t i- Multiplying effects of development of competencies Prove value from customers point of view Usable in many different sales markets

42By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Steffenhagen, 2003b; Rasche, 1994

K k t B i i l d j i h U t hV.1 Basic orientation of strategic management

Products Precision mechanics Fine Optics Microelectronics

Kernkompetenzen am Beispiel der japanischen Unternehmung Canon (excerpt).

Products Precision mechanics Fine Optics MicroelectronicsBasic camera X X

Compact fashion camera X X

Electronic camera X X

EOS auto focus camera X X X

Video still camera X X X

Laser beam printer X X X

C l id i t X XColor video printer X X

Bubble jet printer X X

Basic fax X X

Laser fax X X

Calculator X

Plain paper copier X X X

Battery PPC X X X

Color laser copier X X XColor laser copier X X X

NAVI X X X

Still video system X X X

Laser imager X X X

43By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Quelle: Prahalad/Hamel (1990)

C t i t th J fi C ( t)V.1 Grundorientierung des Strategischen Management

Products Precision mechanics Fine Optics Microelectronics

Core competencies at the Japanese firm Canon (excerpt).

Products Precision mechanics Fine Optics MicroelectronicsBasic camera X X

Compact fashion camera X X

Electronic camera X X

EOS auto focus camera X X X

Video still camera X X X

Laser beam printer X X X

C l id i t X XColor video printer X X

Bubble jet printer X X

Basic fax X X

Laser fax X X

Calculator X

Plain paper copier X X X

Battery PPC X X X

Color laser copier X X XColor laser copier X X X

NAVI X X X

Still video system X X X

Laser imager X X X

44By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Prahalad/Hamel (1990)

C i f k t d b d iV.1 Basic orientation of strategic managementComparison of market- and resource-based view

Market-based View Ressource-based View

Intellectual figure

Company as business portfolioCompany as reservoir of resources and capabilities

G th th h d l tOverall objective

Growth through Cash-flow-Balance in the course of the SBU1-lifecycle

Growth through development, utilization and transfer of core competencies

S fSponsor of competition

Business unit against business unit Company against company

Competitive Performance-related price and quality Take advantage of company-wide basis

p q yadvantages

g p ycore competencies

Character of• Temporally, erodable • Permanent, hard to attack

Character of benefit

• Business-specific

• Observable

• Transferable in other markets

• Hidden („tacit knowledge“)1 Strategic business unit

45By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Steffenhagen, 2003b; Krüger/Homp, 1997

1 Strategic business unit

V.2 Development in timeHi t i d l t f t t i t

Short-term budget Long-term planning Strategic planning Strategic

Historic development of strategic management.

planning Long-term planning Strategic planning managementPhase 1

(‘till the beginning of the 1950s)

Phase 2 ( 1950s\1960s)

Phase 3 (1960s/1970s)

Phase 4 (since the 1980s)

Rather steady environment and little business complexity

Rationalization and

Increasing environmental dynamic

Analysis of long term business opportunities

Increasing discontinuities

High competitivepressure

External and internal strategic attitude

Planning and implementationRationalization and

standardization of business processes

Creation of efficiency standards

business opportunities

Forecasting

Multi-year budgets

pressure

Strategy planning to adapt to environment

SWOT-Mentality

implementation

Improvisation

Social/political aspectsstandards

Yearly budgets

Functional focus

Long term resource planning at given product market combinations

SWOT Mentality

Segmentation of strategies into strategic business units

Inclusion of discontinuities

Strategic early-warning systemssystems

46By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12Source: Bamberger/Wrona (2004)


I B i f St t i tI. Basics of Strategic managementII. Market orientation of strategic managementIII. Comparative competitive advantage as goal of strategic managementIV S f t t l t l t f t t i tIV. Success factors as central control parameters of strategic managementV. Perspectives of strategic managementVI. The strategic management process


VI. The Strategic Management ProcessA l iAnalysis

Analysis Planning Realization ControlAnalysis Planning Realization Control

Situation analysis Extern: Opportunities/Threat Intern: Strengths/Weaknesses


Pl iVI. The Strategic Management ProcessPlanning


Strategic corporate planning Definition of company goals and mission Definition of strategic objectives Description of the relevant market Characterization of strategic business units (SBU)

Strategic marketing planning Deduce business objectives and strategies Deduce market participant strategies Deduce instruments Strategy evaluation Budgeting


R li tiVI. The Strategic Management ProcessRealization


Strategy implementation Culture Systems Structure

Strategy realization Price Product Sales Communication


C t lVI. The Strategic Management ProcessControl


Strategy control


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A Strat Man English CB [Kompatibilitätsmodus]hochschule.drbuer.com/fileadmin/Skripte/A_StratMan_English_CB.pdf · Comparative competitive advantage as goal of strategic management