Introduction to Strategic Management Class Notes

Administrative Information and Course Logistics

• Course Title: Strategic Management: Introduction to Strategic Management (Class $1/12$)

• Department: Department of Strategic and International Management

• Academic Year/Location: Moscow, $2026$

• Instructor: Knatko D.M., PhD in Economics

Course Objectives and Learning Outcomes

• DIAGNOSE: The course aims to teach a critical selection of analytical tools used for evaluating business performance and health within the specific contexts of $VUCA$ and $BANI$ conditions.

• DESIGN: Students will learn to design adaptive strategies and business models intended for long-term resilience.

• CREATE VALUE: The concept of "Shared Value" is central, focusing on balancing corporate profit with social and environmental responsibility.

Grading System and Assessment Formula

• Assessment Breakdown:

  • Exam (Block): $40\%$

  • Project: $20\%$

  • Case Study: $15\%$

  • Tests ($4$ pieces): $12\%$

  • Attendance: $10\%$

  • Entry Test (Block): $3\%$

• Entry Test Requirement: Serves as a "Pass" to the course.

• Grading Scale (Percentage to Mark):

  • $10$ (Excellence): $96-100\%$

  • $9$: $90-95\%$

  • $8$: $80-89\%$

  • $7$: $75-79\%$

  • $6$: $70-74\%$

  • $5$: $60-69\%$

  • $4$ (Pass Threshold): $50-59\%$

  • $3$ (Fail): $40-49\%$

  • $2$ (Fail): $30-39\%$

  • $1$ (Fail): $0-29\%$

Critical Course Rules and Requirements

• Attendance and Punctuality:

  • More than $50\%$ absences results in an automatic final grade of $0.1$ points.

  • Being late by more than $10\,\text{min}$ is recorded as a full absence.

• Integrity:

  • Fake registration results in a grade of $0.1$ points.

  • Plagiarism results in a score of $0$ for the assignment.

• Group Project Parameters:

  • Groups must consist of $4-5$ people.

  • The project must be a feasibility study including a financial model and risk assessment, not merely a descriptive presentation.

  • Defense: Every group member is responsible for their specific part.

  • "Free riders" will face individual grade reductions, potentially leading to a fail grade.

• Reading: Mandatory requirement to read assigned articles.

Course Materials, Platforms, and Structure

• Platforms:

  • SmartLMS: Used for lectures, cases, assignments, and tracking deadlines.

  • TG Group (Telegram): Used for additional materials and answering questions.

• Main Resources:

  • Main Textbook: Thompson A.A., Strickland A.D.

  • Supportive Material: Cases and articles distributed for seminar sessions (assignments follow lectures and seminars).

• Course Structure ($12$ topics divided into $3$ parts):

  • Part $1$: Analysis (Topics $1-6$): Goals, Macroenvironment, Industry analysis, Resource-Based View (RBV), and Value Chain.

  • Part $2$: Selection (Topics $7-10$): Competitive Strategy, Innovation, Corporate Strategy, and Global Strategy.

  • Part $3$: Execution (Topics $11-12$): Execution, ESG, and Resilience.

The Historical Context and Military Roots of Strategy

• $5th$ Century BC (Strategos): Originates from the ancient Greek word for "military leader." It involves managing limited resources to achieve victory.

• $5th$ Century BC (Sun Tzu): Author of "The Art of War." Famous for the principle "Win without fighting." He emphasized knowing oneself and the enemy, which serves as a prototype for modern SWOT analysis.

• $1832$ (Clausewitz): Author of "On War." He introduced the concept of the "Fog of War," representing uncertainty and incomplete information.

• Transition to Business ($1960s$): Many military principles transferred to the corporate world, including the management of limited resources, competition for position, the necessity of choice (trade-offs), and dealing with uncertainty.

Evolution of Management Systems

• Budgeting ($1900-1950$):

  • Predictability: The past repeats itself (history-driven).

  • Speed of Change: Slower than the organization.

  • Focus: Stability.

• Strategic Planning ($1970-1990$):

  • Predictability: New events can be predicted.

  • Speed of Change: Faster than the organization.

  • Focus: Prediction.

• Strategic Management ($1990+$):

  • Predictability: Only weak signals exist, if any.

  • Speed of Change: Much faster than the organization.

  • Focus: Innovativeness.

Navigating VUCA and BANI Realities

• VUCA (Established in the $2000s$):

  • Volatility: Market turbulence.

  • Uncertainty: Unpredictability of events.

  • Complexity: A high number of interconnected variables.

  • Ambiguity: A lack of clarity regarding the causes of events.

  • Old Paradigm: Plan and control.

• BANI (Established $2020+$ by Jamais Cascio):

  • Brittle: Fragility of global systems (e.g., the pandemic).

  • Anxious: Anxiety caused by too much information (infodemic).

  • Nonlinear: Small causes lead to massive consequences.

  • Incomprehensible: A lack of understanding of the system's logic.

  • New Reality: Adapt or die.

Fundamental Distinctions: Ambition vs. Strategy vs. Tactics

• Ambition: High-level goals (e.g., "Become #1 in the market" or "Double revenue"). Ambition is a goal but lacks the plan to achieve it.

• Strategy: The connecting link. It answers "How will we get there?" It involves unique positioning, trade-offs, and a coherent system of activities.

• Tactics: Specific actions (e.g., "Cut prices by $10\%$" or "Launch ads on Instagram"). Tactics are individual actions rather than the underlying logic of competition.

Strategy vs. Operational Efficiency (Michael Porter Framework)

• Operational Efficiency (OE):

  • Definition: Doing the same activities as competitors but better, faster, or cheaper.

  • Tools: Six Sigma, Lean, TQM (Total Quality Management).

  • Metaphor: Everyone runs on the same track; the fastest wins.

• Strategy:

  • Definition: Doing something fundamentally different or performing the same activities in a different way.

  • Examples: Cirque du Soleil, Netflix, Nespresso, Costco.

  • Metaphor: Choosing a different track and creating a new game.

• The Productivity Frontier:

  • This represents the maximum value created at a given cost using best practices.

  • OE allows movement toward the frontier.

  • Strategy allows choosing a unique position ON the frontier.

  • Pitfall: If everyone focuses only on OE and ends up on the frontier, it results in competition to exhaustion.

Case Study: Southwest Airlines – Trade-offs as a Barrier

• Trade-offs (What they do NOT do):

  • No on-board meals.

  • No assigned seats.

  • No connections at major hubs.

  • No variety in aircraft types.

  • No business class.

  • Outcome: Each refusal reduces costs and speeds up aircraft turnaround.

• Activity Map (What they DO do):

  • Low prices (Fare leadership).

  • Fast turnarounds (less than $25\,\text{min}$).

  • Point-to-point flights.

  • Single fleet (Boeing $737$).

  • High flight frequency.

  • Logic: Every "YES" reinforces the core advantage of speed and price. Michael Porter notes that "Fit locks out imitators." To copy the success, one must copy the entire web of activities, not individual threads.

Henry Mintzberg’s 5 Ps of Strategy ($1987$)

1. Plan: An intended course of action.

2. Ploy: A specific tactical move to outwit a competitor.

3. Pattern: A consistent sequence of actions in a real-world setting. (Pattern is often more important than the plan).

4. Position: The company's place in the market environment.

5. Perspective: The organization's fundamental worldview.

• Strategy Flow: Intended (Planned) -> Deliberate (Conscious) vs. Emergent (Spontaneous) -> Realized (Resulting).

Case Study: Honda Super Cub ($1959-1965$)

• Planned (Deliberate): Attempted to sell large motorcycles ($350\,\text{cc}+$) to American bikers. This was a failure due to mechanical breakdowns and lack of interest.

• Emergent Reality: Employees began riding Super Cub $50\,\text{cc}$ scooters for personal use. Locals asked where to buy them.

• Spontaneous Decision: Decided to sell through sporting goods stores instead of motorcycle dealerships.

• Result: Captured $50\%$ of the US market with the slogan "You meet the nicest people on a Honda."

• Lesson: Success resulted from adaptability and the willingness to learn from the market and abandon the original plan.

Martin Reeves’ Strategy Palette Model ($2012$)

Strategy should be chosen based on the environment's unpredictability and the company's ability to change that environment.

• Classical (Be Big):

  • Environment: Stable.

  • Key: Scale and efficiency.

  • Example: Oil and gas industry, Toyota Production System.

  • Cycle: Analyze -> Plan -> Execute.

• Adaptive (Be Fast):

  • Environment: Chaos/Unpredictable.

  • Key: Reaction speed.

  • Example: Zara ($1000+$ collections per year with a $2$-week cycle).

  • Cycle: Experiment -> Select -> Scale.

• Visionary (Be First):

  • Environment: Ability to create a market.

  • Key: Innovation and vision.

  • Example: SpaceX (reusable rockets), Apple iPhone.

  • Cycle: Imagine -> Create.

• Shaping (Be a Platform):

  • Environment: Chaos combined with the ability to set rules.

  • Key: Ecosystems and network effects.

  • Example: Alibaba, Uber, iOS/Android.

  • Cycle: Orchestrate the ecosystem.

Why Great Companies Fail

• Cause $1$: Blindness to Change:

  • Example: Nokia ($2007-2013$). Once dominated $40\%$ of the market but lost the smartphone revolution by considering the iPhone a "toy."

  • Error: Using a Classical strategy in a Visionary environment.

• Cause $2$: Internal Inertia:

  • Example: Kodak ($1975-2012$). Invented the digital camera in $1975$ but suppressed it to protect the film business.

  • Error: Fear of cannibalization. Yesterday's success became today's weakness.