Straunch Final

Comprehensive Notes on Strategy and Entrepreneurship

Introduction to Strategy

• Strategy is a goal-oriented plan a firm uses to gain and sustain a competitive advantage.

• Three levels of strategy:

  1. Corporate Strategy – Where to compete

  2. Business Strategy – How to compete

  3. Functional Strategy – Specific actions at operational levels to support business strategy.

• AFI Framework:

  • Analysis: Vision, mission, values, external and internal analysis.

  • Formulation: Developing corporate, business, and functional strategies.

  • Implementation: Structure, culture, and ethics.

External Analysis: Industry and Market Dynamics

• The goal is to identify opportunities and threats.

• PESTEL Analysis: External macroeconomic forces:

  • Political: Regulations, trade policies.

  • Economic: Inflation, unemployment, GDP trends.

  • Social: Cultural trends, demographics.

  • Technological: Innovations, automation.

  • Environmental: Sustainability concerns.

  • Legal: Intellectual property laws, safety standards.

Porter’s Five Forces Framework

1. Threat of new entrants – Barriers to entry (e.g., economies of scale, brand loyalty).

2. Bargaining power of suppliers – Dependence on suppliers, switching costs.

3. Bargaining power of buyers – Customer leverage, price sensitivity.

4. Threat of substitutes – Availability of alternatives, switching costs.

5. Industry rivalry – Competitor concentration, differentiation.

Industry Boundaries & Competitive Structure

• Industries evolve; they may merge or split into strategic groups.

• Market structures:

  • Perfect competition – Many small firms, low barriers.

  • Monopolistic competition – Many firms, some differentiation.

  • Oligopoly – Few large firms, high barriers.

  • Monopoly – Single firm dominates.

Internal Analysis: Resources & Capabilities

• Core Competencies are sources of sustainable competitive advantage.

• VRIO Framework: Evaluates a firm's resources:

  • Valuable – Creates value.

  • Rare – Uncommon among competitors.

  • Inimitable – Hard to copy.

  • Organized – Properly managed to deliver value.

• Types of Resources:

  • Tangible: Financial, physical assets.

  • Intangible: Brand reputation, innovation, human capital.

• Value Chain Analysis:

  • Primary Activities: Inbound logistics, operations, outbound logistics, marketing, service.

  • Support Activities: Infrastructure, HR, technology development, procurement.

Business-Level Strategies: Cost Leadership vs. Differentiation

Cost Leadership Strategy

• Minimizing costs to achieve lower prices while maintaining value.

• Key cost drivers:

  • Economies of scale – Spreading fixed costs over larger outputs.

  • Process efficiencies – Waste reduction, automation.

  • Supply chain advantages – Bargaining power over suppliers.

• Risks: Competitors may imitate, and innovation may disrupt efficiency.

Differentiation Strategy

• Offering unique products that customers are willing to pay a premium for.

• Value drivers:

  • Superior product features.

  • Customer service excellence.

  • Brand reputation and perceived quality.

• Risks: Over-engineering products, cost overruns, imitation by competitors.

Hybrid Strategy: Cost Leadership & Differentiation

• Blue Ocean Strategy: Creating a new market space rather than competing in an existing one.

• Example: Cirque du Soleil reinventing circus performances.

Innovation and Entrepreneurship

Types of Innovation

1. Incremental Innovation – Continuous improvements (e.g., iPhone generations).

2. Radical Innovation – Completely new technologies (e.g., first smartphone).

3. Disruptive Innovation – New products that reshape industries (e.g., Netflix vs. Blockbuster).

4. Architectural Innovation – Reconfiguring existing technologies for new markets.

First Mover vs. Fast Follower

• First-Mover Advantages:

  • Brand recognition.

  • Market share control.

  • Network effects.

• First-Mover Disadvantages:

  • High R&D costs.

  • Market uncertainty.

  • Risk of obsolescence.

Intellectual Property (IP) Protection

• Patents – Protects new inventions (20 years for utility patents).

• Trademarks – Protects brand names, logos, and symbols.

• Copyrights – Protects artistic and literary works.

• Trade Secrets – Confidential business information.

Key Considerations:

• IP protection is territorial (e.g., U.S. patents don’t apply worldwide).

• Provisional patents can be filed before a full application.

• Non-compete agreements protect trade secrets.

Platform Businesses & Network Effects

• Platforms connect producers and consumers (e.g., Uber, Airbnb, Amazon).

• Network effects:

  • Direct: Value increases as more users join (e.g., social media).

  • Indirect: More users attract complementary businesses (e.g., app stores).

Winning Platform Strategies

• Building an ecosystem – Encouraging third-party complementors.

• Leveraging user data – Personalization and targeted marketing.

• Price promotions & partnerships – Increasing adoption and scale.

Final Thoughts: Strategy Execution & Competitive Positioning

• Strategic Fit: Aligning internal capabilities with external opportunities.

• Dynamic Capabilities: The ability to adapt to changes in the market.

• Competitive Positioning: Finding and maintaining a unique and defensible market position.