1. PROF. DR. LÜTFİHAK ALPKAN Gebze Yüksek Teknoloji Enstitüsü İşletme Fakültesi Strategic Management

2. Course Outline Part 1 Introduction to Competitive Analysis Chapter 1 Planning & Measuring for Competitive Advantage Part 2 SWOT Analysis Chapter 2 External Analysis of Opportunities and Threats Chapter 3 Internal Analysis of Strenghts and Weaknesses Part 3 Choice of Strategy Chapter 4 Grand Strategies Chapter 5 Strategic Business Unit (SBU) Level Strategies Part 4 Global Competition Chapter 6 National Sources of Global Competitive Power

3. WEEK DATE TEACHING PLAN 1 15. 09 INTRODUCTION 2 22. 09 Ch. 1: Planning & Measuring for Competitive Advantage 3 29. 09 Ch. 1: con’t. (Comparison of Competitiveness) 4 06.10 Ch. 2: External Analysis of Opportunities and Threats 5 13. 10 Ch. 2: con’t. (RBV & Value Chain Analysis) 6 20. 10 QUIZ 1 7 27. 10 Ch. 3: Internal Analysis of Strengths and Weaknesses 8 03. 11 MIDTERM EXAM 1 9 10. 12 Ch. 4: Grand Strategies (Growth Strategies) 10 24. 12 Ch. 4: con’t. (Cooperation & Downscoping Strategies) 1 1 01. 12 Ch . 5: Strategic Business Unit (SBU) Level Strategies 12 08. 12 QUIZ 2 13 15. 12 Ch . 6 : National Sources of Global Competitive Power 14 22.12 MIDTERM EXAM 2 15 29.12 OVERVIEW

4. Planning & Measuring for Competitive Advantage Part 1 Introduction to Competitive Analysis Chapter 1

14. Strategic Intent s Vision Winning competitive battles through deciding how to leverage resources, capabilities, and core competencies. Mission An application of strategic intent in terms of products to be offered and markets to be served.

15. What an organization should look like once its has successfully implemented its strategies and achieved its full potential. WHAT IS A VISION ?

17. A declaration of organizational purpose provid ing the social justification for its existence. WHAT IS A MISSION?

34. Actual Value (AV) vs. Expected Value (EV)

40. Chapter 2 External Analysis of Opportunities and Threats Part 2 SWOT Analysis

42. I/O Model of Superior Returns The Industrial Organization Model suggests that above-average returns for any firm are largely determined by characteristics outside the firm. The I/O model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm.

44. Action required: External Environment General Environment Industry Environment Competitive Environment Study the external environment, especially the industry environment . I/O Model of Superior Returns

45. An Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Action required: Locate an industry with high potential for above-average returns. I/O Model of Superior Returns External Environment General Environment Industry Environment Competitive Environment

46. Action required: Identify strategy called for by the industry to earn above-average returns. I/O Model of Superior Returns Selection of a strategy linked with above-average returns in a particular industry Strategy Formulation External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible

47. Action required: Develop or acquire assets and skills needed to implement the strategy. Assets and Skills Assets and skills required to implement a chosen strategy I/O Model of Superior Returns External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above-average returns in a particular industry

48. Strategy Implementation Selection of strategic actions linked with effective implementation of the chosen strategy I/O Model of Superior Returns External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above-average returns in a particular industry Assets and Skills Assets and skills required to implement a chosen strategy Action required: Use the firm’s strengths (its assets or skills) to implement the strategy.

49. Action required: Maintain selected strategy in order to outperform industry rivals. I/O Model of Superior Returns External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above-average returns in a particular industry Assets and Skills Assets and skills required to implement a chosen strategy Strategy Implementation Selection of strategic actions linked with effective implementation of the chosen strategy Superior Returns Earning of above-average returns

53. The Model of Industry Competition Threat of new entrants Bargaining power of buyers Bargaining power of suppliers Threat of Substitute products and services Adapted from Exhibit 2.2 Porter’s Five Forces Model of Industry Competition Porter’s Five Forces Model of Industry Competition

66. The World Automobile Industry: Strategic Groups Adapted from Exhibit 2.8 The World Automobile Industry: Strategic Groups

70. Chapter 3 Internal Analysis of Strenghts and Weaknesses Part 2 SWOT Analysis

74. Ratio of Market Value to Book Value for Selected Companies Annual Market Book Ratio of Sales Value Value Market to Company ($ billions) ($ billions) ($ billions) Book Value Exhibit 4.1 Ratio of Market Value to Book Value for Selected Companies eBay 1.2 30.8 3.9 7.9 Microsoft 28.4 254.1 58.3 4.4 Intel 26.8 142.1 35.4 4.0 General Motors Corp. 182.1 20.0 9.4 2.1 Nucor (Steel) 4.8 3.9 2.3 1.7 J. C. Penney 32.3 5.0 6.4 .78 Note: The data on market valuations are as of June 16, 2003. All other financial data is based on the most recently available balance sheets and income statements.

77. Human Capital: The Foundation of Intellectual Capital Exhibit 4.2 Human Capital: Three Interdependent Activities

78. Microsoft Employees Who Have Left the Company for Other Businesses Company What It Does Defectors from Microsoft Exhibit 4.4 Microsoft Employees Who Have Left the Company for Other Businesses Source: Reprinted by permission of the Wall Street Journal , Copyright ©2000 Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 397221136576. Crossgain Builds software around 23 of 60 employees XMl computer language ViAir Makes software for Company declines to wireless providers specify CheckSpace Builds online payment Company says “a good service for small businesses chunk” of its 30 employees digiMine Sells data mining service About 15% of 62 employees in addition to the 3 founders Avogadro Builds wireless notification 8 of 25 employees software Tellme Networks Offers information like stock About 40 of 250 employees; quotes and scores over the another 40 from the former phone Netscape

85. R esources’ Characteristics and Implications * AIR = Average Industry Returns valuable? rare? difficult or costly to imitate? Non - substitutable? Consequences Performance Implications No No No No Competitive Disadvantage Below AIR * Yes No No Yes/No Competitive Parity AIR Yes Yes No Yes/No Temporary Advantage AIR to Above AIR Yes Yes Yes Yes Sustainable Competitive Advantage Above AIR

87. An Unweighted Competitive Strength Assessment KSF/Strength Measure Quality/product performance Reputation/image Manufacturing capability Technological skills Dealer network/distribution New product innovation Financial resources Relative cost position Customer service capability Overall strength rating ABC Co. Rival 1 Rival 2 8 5 10 8 7 10 2 10 4 10 1 7 9 4 10 9 4 10 5 10 7 5 10 3 5 7 10 61 58 71 Rival 3 1 1 5 3 5 5 3 1 1 25 Rival 4 6 6 1 8 1 1 1 4 4 32 Rating Scale: 1 = Very weak; 10 = Very strong

88. A Weighted Competitive Strength Assessment KSF/Strength Measure Quality/product performance Reputation/image Manufacturing capability Technological skills Dealer network/distribution New product innovation Financial resources Relative cost position Customer service capability Rival 1 Rival 2 5/0.50 10/1.00 7/0.70 10/1.00 10/1.00 4/0.40 1/0.05 7/0.35 4/0.20 10/0.50 4/0.20 10/0.50 10/1.00 7/0.70 10/3.50 3/1.05 7/1.05 10/1.50 ABC Co. 8 / 0.80 8/0.80 2/0.20 10/0.50 9/0.45 9/0.45 5/0.50 5/1.75 5/0.75 Rival 3 1/0.10 1/0.10 5/0.50 3/0.15 5/0.25 5/0.25 3/0.30 1/0.35 1/0.15 Rival 4 6/0.60 6/0.60 1/0.10 8/0.40 1/0.05 1/0.05 1/0.10 4/1.40 4/1.60 Weight 0.10 0.10 0.10 0.05 0.05 0.05 0.10 0.35 0.15 Rating Scale: 1 = Very weak; 10 = Very strong Sum of weights 1.00 Overall strength rating 6.20 8.20 7.00 2.10 2.90

92. Support Activities Primary Activities Value Chain Analysis Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service helps to identify which resources and capabilities can add value MARGIN MARGIN

93. The Value Chain System Upstream Value Chains A Company’s Own Value Chain Downstream Value Chains Internally Performed Activities, Costs, & Margins Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners Activities, Costs, & Margins of Suppliers Buyer/User Value Chains

94. Grand Strategies Chapter 4 Part 3 Choice of Strategy

111. Grand Strategy Selection Matrix Overcome Weakness Maximize Strengths External Focus Internal Focus Vertical Integration Coglomorate Diversification Horizontal Integration Concentric Diversification, Joint Ventures Turnaround Divestiture Liquidation Concentration Market / Product Development Innovation

112. Chapter 5 Strategic Business Unit (SBU) Level Strategies Part 3 Choice of Straetgy

115. Three Generic Strategies Exhibit 5.1 Three Generic Strategies Source: Reprinted with permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. Competitive Advantage Uniqueness Perceived by the Customer Low Cost Position Strategic Target Particular Segment Only Industrywide

118. Value-Chain Activities Exhibit 5.3 Value-Chain Activities: Examples of Overall Cost Leadership Source: Adapted with the permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985 by Michael E. Porter. Shared purchasing operations with other business units Effective policy guidelines to ensure low cost raw materials (with acceptable quality levels) Expertise in process engineering to reduce manufacturing costs Effective use of automated technology to reduce scrappage rates Effective orientation and training programs to maxi- mize employee productivity Minimize costs associated with employee turnover through effective policies Standardized account- ing practices to minimize personnel required Few management layers to reduce overhead costs Effective layout of receiving dock operation Effective use of quality control inspectors to minimize rework on the final product Effective utilization of delivery fleets Purchase of media in large blocks Sales force utilization is maximized by territory management Thorough service repair guidelines to minimize repeat maintenance calls Use of single type of repair vehicle to minimize costs Firm infrastructure Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service

123. Value-Chain Activities: Examples of Differentiation Exhibit 5.5 Value-Chain Activities: Examples of Differentiation Source: Adapted with the permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985 by Michael E. Porter. Facilities that promote firm image Superior MIS—To integrate value-creating activities to improve quality Provide training and incentives to ensure a strong customer service orientation Programs to attract talented engineers and scientists Excellent applications engineering support Superior material handling and sorting technology Use of most prestigious outlets Purchase of high-quality components to enhance product image Superior material handling operations to minimize damage Quick transfer of inputs to manufactur- ing process Flexibility and speed in responding to changes in manu-facturing specs Low defect rates to improve quality Accurate and responsive order processing Effective product replenish-ment to reduce customer’s inventory Creative and innovative advertising programs Fostering of personal relation-ship with key customers Rapid response to customer service requests Complete inventory of replacement parts and supplies Widely respected CEO enhances firm reputation Firm infrastructure Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service

134. Stages of the Industry Life Cycle Adapted from Exhibit 5.8 Stages of the Industry Life Cycle

135. Stages of the Industry Life Cycle Generic strategies Differentiation Differentiation Differentiation Overall cost Overall cost leadership leadership Focus Market growth rate Low Very large Low to Negative moderate Number of segments Very few Some Many Few Intensity of competition Low Increasing Very intense Changing Emphasis on product design Very high High Low to Low moderate Stage Introduction Growth Maturity Decline Factor

136. Stages of the Industry Life Cycle Emphasis on process design Low Low to High Low moderate Major functional area(s) of concern Research and Sales and Production General Development marketing management and finance Overall objective Increase Create Defend Consolidate, market share consumer market share maintain, awareness demand and extend harvest, or product life exit cycles Stage Factor Introduction Growth Maturity Decline

143. GE Nine Cell Matrix Industry Attractiveness Business Strength Based on the subjective assessments on the levels of market attractiveness and business strengths, each SBU falls in one of the NINE different cells of strategic option . High Medium Low High Invest and Grow Selective Growth Grow or Let Go Medium Selective Growth Grow or Let Go Harvest Low Grow or Let Go Harvest Divest

147. Boston Consulting Group Matrix Key Each circle represents one of the firm’s business units Size of circle represents the relative size of the business unit in terms of revenue $ $

148. National Sources of International Competitive Power Chapter 6 Part 4 Global Competition

161. Porter’s Diamond of National Advantage: As Applied to India