Strategy & Strategic Analysis

Applied Market & Business Strategy (the “Strategy & Management Game”) - NIT / TUHH, Hamburg · part of my Technology Management MBA · study notes for revision.

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This first chapter answers two questions that sound simple but trip up most people: what is a “strategy”, really? and how do you analyse a company and its market well enough to build one?

The trap is that “strategy” gets used for everything - a goal, a wish, a to-do list, a slogan. So before any tool, let’s pin the word down.

Tip

Working definition (the one I’ll use all course): a strategy is a plan and a set of goal-directed actions to build and sustain a competitive advantage in selected markets. Notice the three parts: it’s deliberate (a plan), it’s about being better than rivals in a way that lasts (sustained competitive advantage), and it’s focused (selected markets - not everyone, everywhere).

1 · Can you say what your strategy is?

A famous test from Collis & Rukstad: most executives cannot state their strategy in a single clear sentence - which usually means there isn’t one. A good strategy sits in the sweet spot where three things overlap:

Customer needswhat the market wants

+

Company capabilitieswhat we’re uniquely good at

+

Competitor gapswhat rivals can’t easily do

→

The sweet spotyour defensible position

A durable strategy lives where genuine customer needs meet what your company does best and rivals can’t easily copy.

1.1 The strategy statement - one sentence, three parts

Collis & Rukstad argue a strategy can and should be compressed into a single sentence with three components. Their worked example (a financial-advice firm):

“To grow to 17,000 financial advisers by 2030 [objective], by offering trusted, convenient, face-to-face advice to conservative individual investors who delegate their financial decisions [scope], through a national network of one-adviser offices [advantage].”

Part	Question it answers	Why it’s hard
Objective	Where are we going, by when?	Must be single, specific, measurable and time-bound - not a vague “grow”
Scope	Who do we serve, where, through which channels?	Every word is also a boundary - “conservative investors” deliberately excludes day-traders
Advantage	Why would the customer pick us?	This is the one others copy; it must be genuinely defensible

Note

Don’t confuse the strategy statement with the company’s mission (why we exist), values (what we believe) or vision (what we want to become). Those set the mood; the strategy statement makes the hard choices about who and how.

2 · The schools of strategic thought

“Strategy” as a field isn’t one idea - it’s several traditions that disagree about where strategy comes from. Knowing them helps you see which lens a given tool belongs to. They split into two families: prescriptive (what a firm should do) and descriptive (what firms actually do).

School	Key thinker	Core idea	Family
Planning	Ansoff	Systematically analyse external and internal factors, then choose among options	Prescriptive
Positioning	Porter	Analyse industry forces to find a defendable position	Prescriptive
Resource-based view (RBV)	Barney	Advantage comes from controlling unique internal resources	Prescriptive
Learning / configuration	Mintzberg	Strategy is partly emergent - it settles as a course of action stabilises	Descriptive
Strategy-as-practice	Whittington	Strategy is the day-to-day doing of the people who make it	Descriptive

The practical takeaway: the “outside-in” schools (Positioning) and “inside-out” schools (RBV) are two ends of the same conversation. Good analysis uses both - look outward at the industry and inward at your resources.

3 · Where advantage comes from: EVA and the generic strategies

Why does one firm beat another? The clean way to see it is Economic Value Added (EVA) - the gap between what a customer would maximally pay and what the product costs the firm to make.

Economic Value AddedEVA = V − C

V the customer’s maximum willingness-to-pay

C the firm’s cost to produce

A firm has a competitive advantage when its EVA is bigger than a rival’s - it can create more value for the same cost, or the same value at lower cost. There are only really two levers, which give Porter’s three generic strategies:

	Broad market	Narrow niche
Lower cost (↓ C)	Cost leadership	Concentration (focus on a niche, via either lever)
Higher value (↑ V)	Differentiation

The three generic strategies. Chasing both cost leadership and differentiation across the whole market at once (“stuck in the middle”) usually fails - pick a lever and a breadth.

• Cost leadership - be the lowest-cost producer, so you can win on price and still profit.
• Differentiation - make the offer worth more to customers (brand, design, service), so they’ll pay a premium.
• Concentration (focus) - apply one of the above to a narrow, well-chosen niche rather than the whole market.

4 · The analysis toolkit - an overview

The rest of the chapter is the diagnostic kit you run before deciding anything. Three complementary lenses, each with a different centre of gravity:

5 Csthe whole context

→

Five Forcesindustry attractiveness

→

RBV / VRIOour internal resources

→

SWOTpulls it together into choices

Run the wide-angle scan (5 Cs), zoom into the industry (Five Forces) and into ourselves (RBV), then converge everything into SWOT to generate strategic options.

5 · The 5 Cs - a structured scan of the whole situation

The 5 Cs is a checklist that makes sure you look at every angle of a company’s situation, not just the obvious ones.

C	Looks at	Key questions
Customers	Needs & buying behaviour	What needs (functional, emotional, social) does the product meet? Are those needs met today, by whom, how well? Who influences the purchase?
Context	The macro-environment	The PESTEL-style scan - Political/legal, Economic, Socio-cultural, Technological, Ecological forces shaping the market
Company	Us	How do we make money? Which generic strategy do we pursue? What’s our real advantage (→ RBV)?
Collaborators	Partners	Suppliers, distributors, allies - which relationships are strong enough to build on?
Competitors	Rivals	Their business models, positioning, price points, channels - who’s gaining/losing share and why?

Note

Context = PESTEL in disguise. The “Context” C expands into the classic environmental scan: Political/legal, Economic, Socio-cultural, Technological, Ecological. For CERMEDES, the socio-cultural strand alone throws up overlapping gender roles, an ageing workforce and rising health/sustainability values - all of which change what a power tool should be.

6 · Porter’s Five Forces - how attractive is the industry?

The Five Forces framework asks a single question: how much profit is available in this industry, and who captures it? An industry where all five forces are strong is a brutal place to compete; where they’re weak, profits are easier to hold.

Potential entrantsthreat of new competition

↓

Supplier power→

Industry rivalrythe central contest

Buyer power←

↑

Substitutesthreat of a different solution

Rivalry sits in the centre, squeezed by suppliers and buyers on the sides and threatened by new entrants and substitutes above and below.

Force	Strong (bad for profits) when…
Industry rivalry	Many equal competitors, slow growth, high fixed costs, low differentiation
Threat of new entrants	Low entry barriers - easy and cheap for newcomers to join
Threat of substitutes	Good, cheap alternatives exist that do the same job a different way
Buyer power	Buyers are few, big, price-sensitive, face low switching costs, or could make it themselves
Supplier power	Suppliers are few/concentrated, offer unique inputs, or could integrate forward

Tip

Porter’s best-practice tip: the most favourable industry to be in has high entry barriers (hard for others to join you) but low exit barriers (easy to leave if it sours). And don’t just rate the forces today - assess how each is likely to change, and whether your own moves could shift them.

6.1 A simple way to record it

Rate each force today and in the future, with a one-line reason - this keeps the analysis honest and shows where the industry is heading:

Force	Today	Future	Note
Rivalry	Med	High	Few rivals now, but market stagnating → fiercer fight for share
Buyer power	Med	Med	Large retail chains hold leverage
Supplier power	Med	High	Key component suppliers concentrating
Substitutes	Low	Low	Few real substitutes for a power drill
New entrants	Med	High	Low-cost imports and online-native brands arriving

7 · The resource-based view (RBV) and VRIO

Five Forces looks outward; the resource-based view looks inward and asks which of our resources actually gives us an edge? A resource earns its keep only if it passes the VRIO test - four yes/no questions:

1. Valuable? - does it help exploit an opportunity or neutralise a threat?
2. Rare? - do few or no competitors have it?
3. Costly to Imitate? - is it hard or expensive for others to copy?
4. Exploited by the Organisation? - is the firm actually organised to capture its value?

Where a resource “drops out” of the ladder tells you exactly what kind of advantage (if any) it gives:

Valuable?	Rare?	Costly to imitate?	Organised?	Implication
No	-	-	No	Competitive disadvantage
Yes	No	-	Limited	Competitive parity (just keeping up)
Yes	Yes	No	Partly	Temporary advantage
Yes	Yes	Yes	Yes	Sustained competitive advantage

Note

For CERMEDES, “Made in Germany” quality is valuable and arguably rare among low-cost rivals - but is it costly to imitate and is the firm organised to monetise it (brand, premium pricing, the right channels)? RBV forces that honesty: a nice-sounding strength is only an advantage if it clears all four bars.

8 · SWOT - converging analysis into choices

SWOT is where the outward and inward analyses meet. It’s a 2×2 that sorts findings by internal vs external and helpful vs harmful:

Strengths internal · helpful

• Capabilities superior to rivals and relevant to customers

Weaknesses internal · harmful

• Capabilities inferior to rivals but relevant to customers

Opportunities external · helpful

• Favourable trends that could lift sales/profit

Threats external · harmful

• Unfavourable trends that could hurt sales/profit

Strengths and Weaknesses are about us (internal); Opportunities and Threats are about the world (external). Keep O and T as trends - not as strategies.

The most common mistake is to stop at the four lists. SWOT is a starting point, not the answer. The real work is combining the quadrants into strategic options:

Combine…	…into a strategy	Logic
S + O	SO - attack	Use a strength to seize an opportunity
W + O	WO - build	Fix a weakness so you can grab an opportunity
S + T	ST - defend	Use a strength to blunt a threat
W + T	WT - avoid	Minimise a weakness to survive a threat

Caution

SWOT best practice. Keep to ~4-5 items per box (only things that can materially move sales, profit or positioning); be precise (a weakness is not a strategy); and always push through to SO/WO/ST/WT options. A SWOT that ends as four bullet-lists has done half a job.

9 · The Business Model Canvas - the one-page summary

Once you understand the situation, the Business Model Canvas (BMC) is a single page that captures how the whole business creates, delivers and captures value. Nine boxes, grouped into three jobs:

Create value how it’s built

Key Partners · Key Activities · Key Resources

Deliver value to whom, how

Value Propositions · Customer Relationships · Channels · Customer Segments

Capture value the money

Cost Structure · Revenue Streams

The nine BMC blocks sorted by the three things every business model must do - create, deliver and capture value.

Block	The question it answers
Customer Segments	Who are we creating value for?
Value Propositions	What problem do we solve / need do we meet?
Channels	How do we reach and deliver to customers?
Customer Relationships	What kind of relationship does each segment expect?
Revenue Streams	How, and for what, do customers pay?
Key Resources	What assets are essential?
Key Activities	What must we do well?
Key Partners	Who do we rely on outside the firm?
Cost Structure	What are the biggest costs?

Big firms use the BMC well beyond start-ups: to clarify a new business unit, to run innovation labs, to align functions around how value flows, and to size up an acquisition’s model quickly. Its power is that it’s visual and whole - you see the trade-offs between boxes at a glance.

Revision summary

Tip

The one-minute recap

• A strategy is a plan + goal-directed actions to build a sustained competitive advantage in selected markets - and it should compress to one sentence: objective + scope + advantage.
• Advantage comes from EVA = V − C; the levers give three generic strategies - cost leadership, differentiation, concentration. Don’t get stuck in the middle.
• Analyse outward and inward: 5 Cs for the whole picture, Five Forces for industry attractiveness, RBV/VRIO for your own resources.
• VRIO: a resource only gives sustained advantage if it’s Valuable, Rare, costly to Imitate and exploited by the Organisation.
• SWOT converges it all - but its job is to generate SO/WO/ST/WT options, not four lists.
• The Business Model Canvas is the nine-box, one-page summary of how the business creates, delivers and captures value.

Next: Segmentation, Targeting & Positioning → - choosing exactly who to serve and how to occupy a place in their mind.