Strategic Management
B. Cassiman
Lecture notes and syllabus summary
Academic Year 2025–2026
1
,1) What is Strategy?
2
,1. Important Characteristics
Competitive landscape = the industry context in which the firm competes (rivals, market
structure, profitability levels).
Industry value system = vertical chain of players through which value flows from raw
inputs to end users.
Competitive advantage = a firm has a competitive advantage when it has driven a wider
wedge between willingness to pay and costs than its competitors have achieved.
Product and customer scope = the What and Who dimensions of strategy: which products
to offer, to which customers.
Geographical scope = the Where dimension: which regions the firm operates in.
Activities = the concrete tasks the firm performs to deliver its value proposition.
Resources = the firm’s tangible and intangible stock of assets.
Capabilities = the firm’s ability to deploy resources in activities.
Business model = how the firm captures value from its activities (revenue model + cost
model).
Corporate strategy = strategy for a multi-business firm: which activities are integrated
across business units (group level) vs. kept individual (BU level).
Corporate social responsibility (CSR) = the firm’s obligation / contribution to society
beyond pure profitability strategy is not only profit!
2. Definition
Strategy = The choice of a future for the organization and of a way to reach that future,
understood as the framework that coordinates, unifies and integrates the company's decisions
and actions, positioning a business in an industry so as to generate superior financial returns
over the long run.
Four building blocks:
Choice – strategy is a deliberate selection among options.
Future – strategy is forward-looking, multi-year horizon.
Framework – strategy is a structure that holds many decisions together.
Integrates – strategy unifies different parts of the firm into a coherent whole.
Closing condition: positions a business in an industry so as to generate superior financial
returns over the long run the performance test of any strategy.
3. Strategy statement 3
,A strategy statement has three elements (all required):
1) Objective – the goal / the ends
2) Scope – the domain in four dimensions: What, Who, Where, How.
3) Competitive advantage – how the firm will win (the means)
Example: Ryanair strategy statement:
“The strategy of Ryanair is to achieve the lowest-cost position in the airline industry so that it
can offer the lowest fares to price-conscious European travellers, by means of spartan
service, high capacity utilization, and high-powered incentives.”
o Objective: achieve lowest-cost position in the airline industry.
o Scope:
Who: price-conscious European travellers
Where: European short-haul
What: low-fare air transport
How: spartan service + high capacity utilization + high-powered incentives
o Advantage: cost leadership (lowest fares)
4. Characteristics of a good strategy
A good strategy has three characteristics:
1) Uniqueness: be different from competitors what you do and/or how you combine the
elements of your business.
2) Trade-offs: choose what NOT to do:
Serving one position well means deliberately giving up another.
Productivity frontier = curve of max value deliverable at a given
cost.
y-axis: nonprice buyer value delivered.
x-axis: relative cost position.
Frontier curve = state of best practice.
Shows trade-offs visually. Along the curve: more value =
more cost.
Impossible to be at high value & low cost at the same time.
3) Fit: activities reinforce each other = Coherence (now) + Consistency (over time): 4
, o Coherence = decisions fit together at one point in time.
o Consistency = decisions remain aligned over time.
o Hard because decisions are interdependent:
Internal coordination (between decisions inside the firm):
Decisions must align with each other (fit & trade-offs).
Some are hard to reverse commitment effect (ex. size of investment or
timing of the decision).
External interdependence (with players outside the firm):
Reactions of competitors, suppliers, customers, complementors,…
Especially important when there are few players.
Managing both is what produces fit!
5. Which decisions are strategic?
Strategic decision = a decision is strategic if it is investigated or announced as part of the
optimal strategy.
Why strategy is valuable?
Inside a firm, different decisions are made by different people (ex. Product Dev,
Marketing, Operations,…).
Each person, left alone, picks the option that’s best for their own area.
BUT decisions are often complements they create extra value when they’re aligned
with each other.
Ex.: a premium product only works if marketing positions it premium and operations
delivers premium quality.
Without communication, each person picks locally alignment is lost value left on
the table.
The strategist’s job = announce which decision everyone should align around !
! Strategy is valuable when alignment / coordination is needed ! (if decisions were
independent, strategy would add nothing)
What makes a decision the right one to announce as strategic?
High own value (you want this decision picked anyway).
AND strong “pulling power” on other decisions (other areas will align with it because it
raises their value too).
Further insights: 5
, Reliability of strategy: the strategist may be wrong minimize that risk by anchoring
strategy on stable factors, not volatile ones.
Commitment makes strategy more valuable: irreversibility (or the option to commit) locks
the announced direction in others align more strongly.
6. Integrative framework
o Vision, Mission, Values the long-term inputs that orients the firm.
o These feed into strategic choices about two things:
The industry value system (external context).
The firm-specific aspects (internal choices).
o These two are tied together by strategic decision the integrating logic of uniqueness,
interdependence (which produces trade-offs), and alignment-fit.
o The output flows into implementation.
CR01: The Origins of Strategy (Ghemawat, 2009)
1° From military origins to business strategy
Strategy = originally military term (Greek strategos = military commander), refined by
Clausewitz in the 19th century.
Migrated to business only when firms became large enough to shape markets:
1st Industrial Revolution (mid-1700s – mid-1800s): firms too small no strategy
needed (Adam Smith’s “invisible hand”).
2nd Industrial Revolution (late 1800s, US): mass markets + large firms strategy
becomes necessary.
6
,Early business thinkers: Sloan (General Motors) and Barnard (New Jersey Bell, “strategic
factors”).
WWII catalyst for formal tools: operations research, game theory, learning curve,…
Postwar: Selznick introduces distinctive competence (= what an organization is uniquely
good at) foundation for later strategic thinking !
! Strategy migrated from military to business once firms became large enough to shape, not
just react to, markets !
2° Academic frameworks (1950’s – 60s)
Business schools, especially Harvard, developed the first frameworks for business strategy
(Harvard Business Policy course trained managers to think strategically).
Smith & Christensen: does a company’s strategy match its environment?
Andrews: every business needs a clearly defined direction; firms should build on their
distinctive competence.
SWOT framework: matches internal capabilities with external environment.
Levitt’s “Marketing Myopia”: firms fail when they focus too narrowly on their product
instead of customer needs.
Ansoff’s product / mission matrix: present / new products x present / new mission 4
growth strategies: market penetration, product development, market development,
diversification.
! Academics in this era turned strategy from intuition into a structured framework matching
internal strengths to external opportunities !
3° The rise of strategy consultants (1960s – 70s)
Strategy consulting firms emerged and turned strategy into quantitative, packaged tools.
Boston Consulting Group (BCG): believed in “powerful oversimplifications” (songle
concepts, applied broadly).
Experience curve: every doubling of cumulated output ~20% reduction in total cost
(from scale, learning, innovation).
Growth-share matrix: first portfolio planning tool:
Star (high growth, high share) invest.
Cash cow (low growth, high share) milk for cash.
Question mark (high growth, low share) invest selectively.
Dog (low growth, low share) divest.
McKinsey + GE: developed an alternative: Strategic Business Units (SBUs) + Nine-block
matrix.
PIMS program: empirical database to identify what drives ROI. 7
,! Consultants turned strategy into packaged matrices and quantitative benchmarks. By 1979,
45% of Fortune 500 companies used portfolio planning !
4° Problems, promise, and what lasted
o Experience curve came under fire:
Abernathy & Wayne: obsessive cost-cutting reduces ability to innovate.
1973 & 1979 oil shocks disrupted historical experience curves showed the model
wasn’t universal.
o Portfolio planning came under fire:
Different techniques gave different recommendations for the same business unit no
consistent answer.
Gluck: packaged techniques “rarely beat existing competition”.
Hayes & Abernathy: too much analytic detachment + short-term cost focus US
industrial decline.
o Despite the criticism, portfolio planning left a lasting framework: the two-dimensional
way of thinking: Industry attractiveness x Competitive position.
CR02: What is Strategy? (Porter, 1996)
1° Operational effectiveness is not strategy
Operational effectiveness (OE) = performing similar activities better than rivals (ex. fastest,
cheaper, fewer defects,…).
Strategic positioning = performing different activities than rivals, or similar activities in
different ways.
! OE and strategy are both essential, but they work in different ways ! :
OE: moving toward the productivity frontier.
Strategy: choosing where to sit on the frontier.
(Productivity frontier = curve of maximum value deliverable at a given cost, using today’s
best practises when a firm improves OE, it moves toward the frontier, not along it).
Why is OE alone not enough to outperform rivals over time?
Rapid diffusion of best practices competitors quickly imitate (consultants spread
techniques fast).
Competitive convergence the more firms benchmark, the more they look alike
strategies converge no one wins leads to zero-sum competition and wars of
attribution that only stop with mergers.
! OE is necessary but never sufficient for sustainable advantage. Without strategy, firms just
run faster to stay in place ! 8
,2° Strategy rests on unique activities
Strategy = the creation of a unique and valuable position, involving a different set of activities
The essence of strategic positioning: choosing activities that are different from rivals !
Position = the unique spot a firm occupies in the market (what it offers, to whom, and how).
Activities = the concrete tasks that deliver the position.
A position only becomes a real strategy if it's backed by a tailored set of activities that no
rival can easily copy.
3 sources of strategic positioning:
o Variety-based positioning = based on a narrow slice of products/services.
Distinctive feature of the position product / service variety itself.
Works when distinctive activities allow the firm to deliver that variety better than
rivals
Examples: Jiffy Lube (only oil changes, not full repair), Vanguard (low-cost mutual
funds with predictable performance).
o Needs-based positioning = serving most or all needs of a specific customer group.
Distinctive feature of the position the customer group, with all their varied needs.
Works when customer groups have differing needs and a tailored activity set serves
them best (difference in needs alone is not enough).
Examples: Bessemer Trust (families with $5M+; 1 officer per 14 families; meetings on
yachts/ranches; rarely loans), Citibank private bank (families with $250K+; lending-
focused; 1 officer per 125 clients).
o Access-based positioning = segmenting customers reachable in a specific way (geography,
scale, etc.).
Distinctive feature of the position how the customer is reached, not what they want.
Example: Carmike Cinemas (small-town theaters only — populations <200,000;
standardized low-cost theater complexes, lean management, lower overhead).
In a real firm, the 3 sources can overlap !
Example: IKEA is partly needs-based (young price-conscious buyers) & variety-based
(modular furniture).
Source Distinctive feature Question it answers
Variety The product / service “what do we sell that’s different?”
Needs The customer “Whose needs de we serve uniquely?”
Access The reach “Who can we reach in a way others can’t?”
9
, 3° Trade-offs make strategy sustainable
Choosing a unique position is not enough for sustainable advantage a valuable position
attracts imitators !
2 types of imitation:
Repositioning = competitors abandons its position to fully match the superior performer.
Straddling = competitors keeps its existing position while grafting features from the
rival’s position.
Trade-offs are what deter both make the strategy hard to copy !
Trade-off = a choice where more of one thing requires less of another; the two positions are
incompatible.
3 sources of trade-offs:
Inconsistencies in image / reputation: a firm known for one kind of value loses
credibility delivering another.
Activities themselves: different positions require different equipment, skills, systems
optimizing for one position weakens the other (most important).
Limits on internal coordination and control: trying to be everything = confusion in
day-to-day decisions; employees can’t make consistent choices without a clear
framework.
! The essence of strategy is choosing what NOT to do !
(Not every cost / quality dilemma is a real trade-off. False trade-offs come from poor
execution. Real trade-offs only kick in at the productivity frontier)
4° Fit drives competitive advantage and sustainability
Fit = how activities relate to and reinforce each other.
Strategy = combining activities into a system !
Fit > individual “core competencies” or “key resources”. Competitive advantage comes
from the system, not the parts.
3 types of fit:
o First-order fit: simple consistency = each activity is aligned with the overall strategy.
Consistency makes the strategy easier to communicate and execute.
o Second-order fit: reinforcement = activities strengthen each other.
o Third-order fit: optimization of effort = activities are coordinated to eliminate redundancy
and minimize wasted effort (ex. product design can eliminate the need for after-sale
service; supplier coordination can eliminate in-house training,…).
10
B. Cassiman
Lecture notes and syllabus summary
Academic Year 2025–2026
1
,1) What is Strategy?
2
,1. Important Characteristics
Competitive landscape = the industry context in which the firm competes (rivals, market
structure, profitability levels).
Industry value system = vertical chain of players through which value flows from raw
inputs to end users.
Competitive advantage = a firm has a competitive advantage when it has driven a wider
wedge between willingness to pay and costs than its competitors have achieved.
Product and customer scope = the What and Who dimensions of strategy: which products
to offer, to which customers.
Geographical scope = the Where dimension: which regions the firm operates in.
Activities = the concrete tasks the firm performs to deliver its value proposition.
Resources = the firm’s tangible and intangible stock of assets.
Capabilities = the firm’s ability to deploy resources in activities.
Business model = how the firm captures value from its activities (revenue model + cost
model).
Corporate strategy = strategy for a multi-business firm: which activities are integrated
across business units (group level) vs. kept individual (BU level).
Corporate social responsibility (CSR) = the firm’s obligation / contribution to society
beyond pure profitability strategy is not only profit!
2. Definition
Strategy = The choice of a future for the organization and of a way to reach that future,
understood as the framework that coordinates, unifies and integrates the company's decisions
and actions, positioning a business in an industry so as to generate superior financial returns
over the long run.
Four building blocks:
Choice – strategy is a deliberate selection among options.
Future – strategy is forward-looking, multi-year horizon.
Framework – strategy is a structure that holds many decisions together.
Integrates – strategy unifies different parts of the firm into a coherent whole.
Closing condition: positions a business in an industry so as to generate superior financial
returns over the long run the performance test of any strategy.
3. Strategy statement 3
,A strategy statement has three elements (all required):
1) Objective – the goal / the ends
2) Scope – the domain in four dimensions: What, Who, Where, How.
3) Competitive advantage – how the firm will win (the means)
Example: Ryanair strategy statement:
“The strategy of Ryanair is to achieve the lowest-cost position in the airline industry so that it
can offer the lowest fares to price-conscious European travellers, by means of spartan
service, high capacity utilization, and high-powered incentives.”
o Objective: achieve lowest-cost position in the airline industry.
o Scope:
Who: price-conscious European travellers
Where: European short-haul
What: low-fare air transport
How: spartan service + high capacity utilization + high-powered incentives
o Advantage: cost leadership (lowest fares)
4. Characteristics of a good strategy
A good strategy has three characteristics:
1) Uniqueness: be different from competitors what you do and/or how you combine the
elements of your business.
2) Trade-offs: choose what NOT to do:
Serving one position well means deliberately giving up another.
Productivity frontier = curve of max value deliverable at a given
cost.
y-axis: nonprice buyer value delivered.
x-axis: relative cost position.
Frontier curve = state of best practice.
Shows trade-offs visually. Along the curve: more value =
more cost.
Impossible to be at high value & low cost at the same time.
3) Fit: activities reinforce each other = Coherence (now) + Consistency (over time): 4
, o Coherence = decisions fit together at one point in time.
o Consistency = decisions remain aligned over time.
o Hard because decisions are interdependent:
Internal coordination (between decisions inside the firm):
Decisions must align with each other (fit & trade-offs).
Some are hard to reverse commitment effect (ex. size of investment or
timing of the decision).
External interdependence (with players outside the firm):
Reactions of competitors, suppliers, customers, complementors,…
Especially important when there are few players.
Managing both is what produces fit!
5. Which decisions are strategic?
Strategic decision = a decision is strategic if it is investigated or announced as part of the
optimal strategy.
Why strategy is valuable?
Inside a firm, different decisions are made by different people (ex. Product Dev,
Marketing, Operations,…).
Each person, left alone, picks the option that’s best for their own area.
BUT decisions are often complements they create extra value when they’re aligned
with each other.
Ex.: a premium product only works if marketing positions it premium and operations
delivers premium quality.
Without communication, each person picks locally alignment is lost value left on
the table.
The strategist’s job = announce which decision everyone should align around !
! Strategy is valuable when alignment / coordination is needed ! (if decisions were
independent, strategy would add nothing)
What makes a decision the right one to announce as strategic?
High own value (you want this decision picked anyway).
AND strong “pulling power” on other decisions (other areas will align with it because it
raises their value too).
Further insights: 5
, Reliability of strategy: the strategist may be wrong minimize that risk by anchoring
strategy on stable factors, not volatile ones.
Commitment makes strategy more valuable: irreversibility (or the option to commit) locks
the announced direction in others align more strongly.
6. Integrative framework
o Vision, Mission, Values the long-term inputs that orients the firm.
o These feed into strategic choices about two things:
The industry value system (external context).
The firm-specific aspects (internal choices).
o These two are tied together by strategic decision the integrating logic of uniqueness,
interdependence (which produces trade-offs), and alignment-fit.
o The output flows into implementation.
CR01: The Origins of Strategy (Ghemawat, 2009)
1° From military origins to business strategy
Strategy = originally military term (Greek strategos = military commander), refined by
Clausewitz in the 19th century.
Migrated to business only when firms became large enough to shape markets:
1st Industrial Revolution (mid-1700s – mid-1800s): firms too small no strategy
needed (Adam Smith’s “invisible hand”).
2nd Industrial Revolution (late 1800s, US): mass markets + large firms strategy
becomes necessary.
6
,Early business thinkers: Sloan (General Motors) and Barnard (New Jersey Bell, “strategic
factors”).
WWII catalyst for formal tools: operations research, game theory, learning curve,…
Postwar: Selznick introduces distinctive competence (= what an organization is uniquely
good at) foundation for later strategic thinking !
! Strategy migrated from military to business once firms became large enough to shape, not
just react to, markets !
2° Academic frameworks (1950’s – 60s)
Business schools, especially Harvard, developed the first frameworks for business strategy
(Harvard Business Policy course trained managers to think strategically).
Smith & Christensen: does a company’s strategy match its environment?
Andrews: every business needs a clearly defined direction; firms should build on their
distinctive competence.
SWOT framework: matches internal capabilities with external environment.
Levitt’s “Marketing Myopia”: firms fail when they focus too narrowly on their product
instead of customer needs.
Ansoff’s product / mission matrix: present / new products x present / new mission 4
growth strategies: market penetration, product development, market development,
diversification.
! Academics in this era turned strategy from intuition into a structured framework matching
internal strengths to external opportunities !
3° The rise of strategy consultants (1960s – 70s)
Strategy consulting firms emerged and turned strategy into quantitative, packaged tools.
Boston Consulting Group (BCG): believed in “powerful oversimplifications” (songle
concepts, applied broadly).
Experience curve: every doubling of cumulated output ~20% reduction in total cost
(from scale, learning, innovation).
Growth-share matrix: first portfolio planning tool:
Star (high growth, high share) invest.
Cash cow (low growth, high share) milk for cash.
Question mark (high growth, low share) invest selectively.
Dog (low growth, low share) divest.
McKinsey + GE: developed an alternative: Strategic Business Units (SBUs) + Nine-block
matrix.
PIMS program: empirical database to identify what drives ROI. 7
,! Consultants turned strategy into packaged matrices and quantitative benchmarks. By 1979,
45% of Fortune 500 companies used portfolio planning !
4° Problems, promise, and what lasted
o Experience curve came under fire:
Abernathy & Wayne: obsessive cost-cutting reduces ability to innovate.
1973 & 1979 oil shocks disrupted historical experience curves showed the model
wasn’t universal.
o Portfolio planning came under fire:
Different techniques gave different recommendations for the same business unit no
consistent answer.
Gluck: packaged techniques “rarely beat existing competition”.
Hayes & Abernathy: too much analytic detachment + short-term cost focus US
industrial decline.
o Despite the criticism, portfolio planning left a lasting framework: the two-dimensional
way of thinking: Industry attractiveness x Competitive position.
CR02: What is Strategy? (Porter, 1996)
1° Operational effectiveness is not strategy
Operational effectiveness (OE) = performing similar activities better than rivals (ex. fastest,
cheaper, fewer defects,…).
Strategic positioning = performing different activities than rivals, or similar activities in
different ways.
! OE and strategy are both essential, but they work in different ways ! :
OE: moving toward the productivity frontier.
Strategy: choosing where to sit on the frontier.
(Productivity frontier = curve of maximum value deliverable at a given cost, using today’s
best practises when a firm improves OE, it moves toward the frontier, not along it).
Why is OE alone not enough to outperform rivals over time?
Rapid diffusion of best practices competitors quickly imitate (consultants spread
techniques fast).
Competitive convergence the more firms benchmark, the more they look alike
strategies converge no one wins leads to zero-sum competition and wars of
attribution that only stop with mergers.
! OE is necessary but never sufficient for sustainable advantage. Without strategy, firms just
run faster to stay in place ! 8
,2° Strategy rests on unique activities
Strategy = the creation of a unique and valuable position, involving a different set of activities
The essence of strategic positioning: choosing activities that are different from rivals !
Position = the unique spot a firm occupies in the market (what it offers, to whom, and how).
Activities = the concrete tasks that deliver the position.
A position only becomes a real strategy if it's backed by a tailored set of activities that no
rival can easily copy.
3 sources of strategic positioning:
o Variety-based positioning = based on a narrow slice of products/services.
Distinctive feature of the position product / service variety itself.
Works when distinctive activities allow the firm to deliver that variety better than
rivals
Examples: Jiffy Lube (only oil changes, not full repair), Vanguard (low-cost mutual
funds with predictable performance).
o Needs-based positioning = serving most or all needs of a specific customer group.
Distinctive feature of the position the customer group, with all their varied needs.
Works when customer groups have differing needs and a tailored activity set serves
them best (difference in needs alone is not enough).
Examples: Bessemer Trust (families with $5M+; 1 officer per 14 families; meetings on
yachts/ranches; rarely loans), Citibank private bank (families with $250K+; lending-
focused; 1 officer per 125 clients).
o Access-based positioning = segmenting customers reachable in a specific way (geography,
scale, etc.).
Distinctive feature of the position how the customer is reached, not what they want.
Example: Carmike Cinemas (small-town theaters only — populations <200,000;
standardized low-cost theater complexes, lean management, lower overhead).
In a real firm, the 3 sources can overlap !
Example: IKEA is partly needs-based (young price-conscious buyers) & variety-based
(modular furniture).
Source Distinctive feature Question it answers
Variety The product / service “what do we sell that’s different?”
Needs The customer “Whose needs de we serve uniquely?”
Access The reach “Who can we reach in a way others can’t?”
9
, 3° Trade-offs make strategy sustainable
Choosing a unique position is not enough for sustainable advantage a valuable position
attracts imitators !
2 types of imitation:
Repositioning = competitors abandons its position to fully match the superior performer.
Straddling = competitors keeps its existing position while grafting features from the
rival’s position.
Trade-offs are what deter both make the strategy hard to copy !
Trade-off = a choice where more of one thing requires less of another; the two positions are
incompatible.
3 sources of trade-offs:
Inconsistencies in image / reputation: a firm known for one kind of value loses
credibility delivering another.
Activities themselves: different positions require different equipment, skills, systems
optimizing for one position weakens the other (most important).
Limits on internal coordination and control: trying to be everything = confusion in
day-to-day decisions; employees can’t make consistent choices without a clear
framework.
! The essence of strategy is choosing what NOT to do !
(Not every cost / quality dilemma is a real trade-off. False trade-offs come from poor
execution. Real trade-offs only kick in at the productivity frontier)
4° Fit drives competitive advantage and sustainability
Fit = how activities relate to and reinforce each other.
Strategy = combining activities into a system !
Fit > individual “core competencies” or “key resources”. Competitive advantage comes
from the system, not the parts.
3 types of fit:
o First-order fit: simple consistency = each activity is aligned with the overall strategy.
Consistency makes the strategy easier to communicate and execute.
o Second-order fit: reinforcement = activities strengthen each other.
o Third-order fit: optimization of effort = activities are coordinated to eliminate redundancy
and minimize wasted effort (ex. product design can eliminate the need for after-sale
service; supplier coordination can eliminate in-house training,…).
10
