Strategic management
Class 1:
Introduction:
- Case die in klas wordt uitgelegd
- 1u prep. time – oral (3 questions) + additional questions
- Spoilt exam questions! (400?!) → online (partially)
- Improviseert vragen, denk, ga niet zomaar akkoord!
Theme 1: What is strategy?
Lecture
Explain me the story of Netflix:
- Any start-up is an answer to a question or a challenge
- Netflix (by Hastings): he forgot to bring a dvd back to a videothecary because he
had to pay a fine. He started netflix as a competitor (not charging fines), allowing
costumers to rent dvd’s. When internet developped he started as a first
organisation to stream videos/films. Now you could subscribe and look at a movie
that is streamed on the internet. Not always good in countries without good
internet. When internet got really mature (about 2010) he decided to create
contents himself (or with studio’s) e.b. orange is the new black. He moved away
from a logistic company to compete with them (and streamed other peoples
movies).
Why/how is Netflix so succesfull?
- Today once you watch a movie they leave a trace and they know who likes what
kinda movie (because they have millions of subscribers). The algorithm can quite
accurately tell if people will like the movie Netflix wants to create.
- Problem: Netlix has data in an algorithm, this algorithm allows them to be
competitive but there are not the only ones anymore (e.g. Disney).
- Next step?: they have lower subscription with advertisement
1
,Definition of strategy (question iof you are failing so study this!)
What is th essence of Strategic thinking & implementation
- Strategically speaking, 10 years ago Netflix was comfortable but now they’re
under heavy competition. There is never guarantee, even with a perfect strategy.
If you want succes as an organisation, I can guarantee you that it will not last.
Strategy is about continously adapting to changing situation. It is an infomed bet,
the future is unceartain but you have certain data and information and investment
on which you can base your choise on what to de next.
Competiton rising => value lowers → ecosystems
- Meaning: think about collaborating with certain partners (because competition
lowers)
- E.g. Nvidia invested in Intel, they invested because Intel is really focussing on PC
and another focusses on AI, now they (both, intel and Nvidia can compete with
AMD)
- Competition is the fundamental notion in strategy!
Competitive advantage
- Competitive advantage
o Meeting customer needs more effectively, with products or services that
customers value more highly, or more efficiently, at lower cost.
- Sustainable Competitive Advantage
o Giving buyers “lasting” reasons to prefer a firm’s products or services over
those of its competitors (creating loyalty)
Strategic approach choices
Building competitive advantage
- Low-cost provider (Ryanair, Ikea, Aldi) → lowest price
- Differentiation on features (Apple) → unique features/quality
- Focus on differentiation market niche (Ferrarri, Asten Martin) → target niche
- Focus on cost market niche (Primark) → target low cost shoppers
2
,The evolving nature of an organisations strategy
Realized (current) strategy is a blend of:
- Proactive (deliberate) strategy elements including continued and new initiatives
- Reactive (emergent) strategy elements that are requiered due to unanticipated
competitive developments and fresh market conditions
What’s the difference between proactive and reactive strategy (example Honda)
- Honda had (in 1950s) an intended strategy (clear strategic plan). They would
export their 75CC to california, to compete with harley because it was cheaper
than Harley. Their 75 buy was not a succes because of the different climate (tokyo
vs America) and it was leaking (so deliberate strategy not working). The deliberate
strategy became the unrealised strategy. As an emergent strategy they decided
to sell a different bike, with a great strategy (bike for everybody including women).
They had great adds and Muppet bike became the succes story of Honda. After
years they could also bring back the 75cc.
- Adapting is crucial, strategies have to change.
Verduidelijking:
- WTP (Willingness To Pay): de maximale prijs die een consument bereid is te betalen.
- WTS (Willingness To Supply): de minimale prijs waarvoor een aanbieder (hier: de mall
owner) bereid is te verkopen/verhuren.
- Customer delight: wanneer klanten erg tevreden zijn, meer waarde ervaren en daardoor
meer bereid zijn te betalen.
- Surplus: het verschil tussen WTP en de prijs (voor consumenten) of de prijs en WTS
(voor aanbieders).
Customer Value Proposition (CVP): giving customers what they want at a price they feel is
worth it. If customers think the product is very valuable (high WTP = willingness to pay) and the
price is low → They feel they get a good deal.
Value Capturing (VC): A company creates value by: Making customers willing to pay more
(better product, better service) and paying suppliers/employees less (without lowering quality)
The company captures some of this value by choosing prices and wages.
Supplier & Employee Value Proposition: Suppliers and employees also get value (a “surplus”):
Supplier value = what the company pays them minus the supplier’s minimum acceptable price
(WTS = willingness to sell). Employee value = their salary minus the lowest salary they would
accept. If this difference is positive, they feel satisfied
3
, Business = value creation (but for whom?)
The value creation opportunity
- When companies find ways to increase costumer delight, employee satisfaction,
and supplier surplus, they expand the total amount of value they create and
position themselves for extraordinary financial performance.
o Think value (WTP & WTS), not profit!
o It’s not about just making money, money is a consequence of something
else (taking care of constumers, suppliers).
o Main aim is to increase the pie, not sqease anybody out.
The Costumer Value Proposition:
= satisfying buyer’s wants and needs at the price
costumers will consider a good value. The greater the
value provided (V or WTP) and the lower the price (P),
the more attractive the value proposition to costumers
Value Capturing
= Companies create value by increasing WTP and
decreasing WTS. These companies capture value by
setting prices and compensation.
The Supplier & Employee Value Proposition
= The share to the supplier is the difference between
how much they get paid by the firm (i.e. the firm cost)
and their Value or WTS. Think of it as a surplus that the
suppliers earn from the transaction. A similar logic
applies to the employee. The coompensation – WTS
represents the satisfaction of the employee
Life of an organisation
o In the beginning they pay the market pay, and you will be the slave of their
organisation. After 4 or 5 year you hopefully have a career in front of you.
You are going to be able to sell yourself for a much higher price. They don’t
have to increase the pay, they give opportunities. This is the WTS
4
Class 1:
Introduction:
- Case die in klas wordt uitgelegd
- 1u prep. time – oral (3 questions) + additional questions
- Spoilt exam questions! (400?!) → online (partially)
- Improviseert vragen, denk, ga niet zomaar akkoord!
Theme 1: What is strategy?
Lecture
Explain me the story of Netflix:
- Any start-up is an answer to a question or a challenge
- Netflix (by Hastings): he forgot to bring a dvd back to a videothecary because he
had to pay a fine. He started netflix as a competitor (not charging fines), allowing
costumers to rent dvd’s. When internet developped he started as a first
organisation to stream videos/films. Now you could subscribe and look at a movie
that is streamed on the internet. Not always good in countries without good
internet. When internet got really mature (about 2010) he decided to create
contents himself (or with studio’s) e.b. orange is the new black. He moved away
from a logistic company to compete with them (and streamed other peoples
movies).
Why/how is Netflix so succesfull?
- Today once you watch a movie they leave a trace and they know who likes what
kinda movie (because they have millions of subscribers). The algorithm can quite
accurately tell if people will like the movie Netflix wants to create.
- Problem: Netlix has data in an algorithm, this algorithm allows them to be
competitive but there are not the only ones anymore (e.g. Disney).
- Next step?: they have lower subscription with advertisement
1
,Definition of strategy (question iof you are failing so study this!)
What is th essence of Strategic thinking & implementation
- Strategically speaking, 10 years ago Netflix was comfortable but now they’re
under heavy competition. There is never guarantee, even with a perfect strategy.
If you want succes as an organisation, I can guarantee you that it will not last.
Strategy is about continously adapting to changing situation. It is an infomed bet,
the future is unceartain but you have certain data and information and investment
on which you can base your choise on what to de next.
Competiton rising => value lowers → ecosystems
- Meaning: think about collaborating with certain partners (because competition
lowers)
- E.g. Nvidia invested in Intel, they invested because Intel is really focussing on PC
and another focusses on AI, now they (both, intel and Nvidia can compete with
AMD)
- Competition is the fundamental notion in strategy!
Competitive advantage
- Competitive advantage
o Meeting customer needs more effectively, with products or services that
customers value more highly, or more efficiently, at lower cost.
- Sustainable Competitive Advantage
o Giving buyers “lasting” reasons to prefer a firm’s products or services over
those of its competitors (creating loyalty)
Strategic approach choices
Building competitive advantage
- Low-cost provider (Ryanair, Ikea, Aldi) → lowest price
- Differentiation on features (Apple) → unique features/quality
- Focus on differentiation market niche (Ferrarri, Asten Martin) → target niche
- Focus on cost market niche (Primark) → target low cost shoppers
2
,The evolving nature of an organisations strategy
Realized (current) strategy is a blend of:
- Proactive (deliberate) strategy elements including continued and new initiatives
- Reactive (emergent) strategy elements that are requiered due to unanticipated
competitive developments and fresh market conditions
What’s the difference between proactive and reactive strategy (example Honda)
- Honda had (in 1950s) an intended strategy (clear strategic plan). They would
export their 75CC to california, to compete with harley because it was cheaper
than Harley. Their 75 buy was not a succes because of the different climate (tokyo
vs America) and it was leaking (so deliberate strategy not working). The deliberate
strategy became the unrealised strategy. As an emergent strategy they decided
to sell a different bike, with a great strategy (bike for everybody including women).
They had great adds and Muppet bike became the succes story of Honda. After
years they could also bring back the 75cc.
- Adapting is crucial, strategies have to change.
Verduidelijking:
- WTP (Willingness To Pay): de maximale prijs die een consument bereid is te betalen.
- WTS (Willingness To Supply): de minimale prijs waarvoor een aanbieder (hier: de mall
owner) bereid is te verkopen/verhuren.
- Customer delight: wanneer klanten erg tevreden zijn, meer waarde ervaren en daardoor
meer bereid zijn te betalen.
- Surplus: het verschil tussen WTP en de prijs (voor consumenten) of de prijs en WTS
(voor aanbieders).
Customer Value Proposition (CVP): giving customers what they want at a price they feel is
worth it. If customers think the product is very valuable (high WTP = willingness to pay) and the
price is low → They feel they get a good deal.
Value Capturing (VC): A company creates value by: Making customers willing to pay more
(better product, better service) and paying suppliers/employees less (without lowering quality)
The company captures some of this value by choosing prices and wages.
Supplier & Employee Value Proposition: Suppliers and employees also get value (a “surplus”):
Supplier value = what the company pays them minus the supplier’s minimum acceptable price
(WTS = willingness to sell). Employee value = their salary minus the lowest salary they would
accept. If this difference is positive, they feel satisfied
3
, Business = value creation (but for whom?)
The value creation opportunity
- When companies find ways to increase costumer delight, employee satisfaction,
and supplier surplus, they expand the total amount of value they create and
position themselves for extraordinary financial performance.
o Think value (WTP & WTS), not profit!
o It’s not about just making money, money is a consequence of something
else (taking care of constumers, suppliers).
o Main aim is to increase the pie, not sqease anybody out.
The Costumer Value Proposition:
= satisfying buyer’s wants and needs at the price
costumers will consider a good value. The greater the
value provided (V or WTP) and the lower the price (P),
the more attractive the value proposition to costumers
Value Capturing
= Companies create value by increasing WTP and
decreasing WTS. These companies capture value by
setting prices and compensation.
The Supplier & Employee Value Proposition
= The share to the supplier is the difference between
how much they get paid by the firm (i.e. the firm cost)
and their Value or WTS. Think of it as a surplus that the
suppliers earn from the transaction. A similar logic
applies to the employee. The coompensation – WTS
represents the satisfaction of the employee
Life of an organisation
o In the beginning they pay the market pay, and you will be the slave of their
organisation. After 4 or 5 year you hopefully have a career in front of you.
You are going to be able to sell yourself for a much higher price. They don’t
have to increase the pay, they give opportunities. This is the WTS
4
