3 Overarching Themes of Strategic Management

1. Firms and industries are dynamic in nature
2. To succeed, the formulation of a good strategy and its implementation should be extricably connected
3. Strategic leadership is essential if a firm is able to both formulate and implement strategies that create value

Under Armour and its competitors Nike and Addidas

• Started line of athletic clothing with moisture-wicking microfiber
• Advertising campaign: "Click-Clack: I think you hear us coming!"
• Now dominates the sports apparel market 

Strategic Leadership

• CEO
• Responsible for strategy formulation
• Players with key roles in strategy implementation by making substantive resource allocation decisions and developing key-stakeholder support for the strategy
• Keep in mind: a significant part of the organization's overall strategy often emerges from the decisions and actions of lower level managers

Strategic Management

• Process by which an organization manages the formulation and implementation of its overall strategy
• Formulation: figuring out the overall strategy, what to do?
• Implementation: getting everyone in the organization to do the things that support the overall strategy

Strategy

• Comes from the Greek word Strategos, "the (military) general's view" where the general creates the holistic "big picture" and the lower level officers create the tactical details
• The overarching, coordinated means by which an organization seeks to achieve its goals and objectives
• Encompasses the pattern of actions that have been taken (planned and unplanned) and actions that are planned to be taken by an organization in pursuing its objectives
• More than just planned actions
• The firm attempting to gain an advantage over other potential providers of similar products and services
• Helps a firm accomplish its objectives in the fact of competition 

Benefits of Understanding Strategic Management

• Help better understand the firm's  overall mission, goals and objectives
• Help better understand the challenges in a company's competitive environment (i.e. opportunities and threats)
• Help better understand the kinds of internal resources and capabilities that are critical to a firm's success (i.e. internal strengths and weaknesses)
• Can make you a more valuable employee

Strategic Management Process

• Strategy Formulation

1. Vision and Mission: fundamental organizational purpose, organizational values
2. Goals and Objectives: specific targets, measurable outcomes
3. Strategy: The central integrated means by which a firm seeks to achieve its objectives through internal and external strategic analyses of Arenas, Vehicles, Differentiators, Staging, and Economic Logic

• Strategy Impementation

Corporate-Level and Business-Level Strategy

• Corporate-Level

1. In which markets do we compete today?
2. In which markets do we want to compete tomorrow?
3. How can we, as a corporate parent, add value to our various lines of business

Strategy Formulation and Implementation

• Formulation: Process of deciding what to do
• Implementation: process of performing all the activities necessary to do what has been planned

Intended and Realized Strategy

1. Intended or Planned Strategy: comes from rational and methodical planning (Deliberate strategy)
2. Unrealized Strategy: unplanned pattern of decisions and/actions (Emergent strategy)
3. Realized or Actual Strategy: combination of both

Strategy of For-Profit Business Firms

• Basic goal: earning profits that depend on value created for customers by firms' products/services which drives customer willingness-to-pay, and the costs associated with delivering firms' products/services
• Integrated set of choices (the means) through which it seeks to achieve this goal

Business Strategy Diamond: Arenas

Where will we be active and with how much emphasis?

• Which product categories?
• Which channels?
• Which market segments?
• Which geographic areas?
• Which core technologies?
• Which value-creation strategies?

Business Strategy Diamond: Vehicles

How will we get there?

• Internal development?
• Joint Ventures?
• Experimentation?
• Acquisitions?

Business Strategy Diamond: Differentiators

How will we win, in what ways are what we offer "better" than what others offer?

• Image?
• Customization?
• Pricing?
• Styling?
• Product reliability?
• Speed to market?

Business Strategy Diamond: Staging

What will be our speed and sequence of moves?

• Speed of expansion?
• Sequence of initiatives?

Business Strategy Diamond: Economic Logic

How will returns be obtained?

• Lowest cost through scale advantages?
• Lowest cost through scope and replication advantages?
• Premium prices due to unmatchable service?
• Premium prices due to proprietary product features?

Strategy Diamond Example: Jet Blue

• Objective: to "bring humanity back to air travel"
• Arenas: low fare commercial air carrier in under-served but over-priced US cities
• Vehicles: start from scratch and achieve all growth internally (i.e. do not purchase a regional airline)
• Differentiators: high level of service compared to low fare competitors (e.g. leather eating, satellite TV), lower fares
• Staging: grow from one rout between two cities to serving 20 cities in just 3 years
• Economic Logic: secure cost advantage by being willing and able to perform key tasks differently (i.e. one type of plan, JFK home base, secondary location)

Strategy Implementation

• Process of executing the firm's strategy
• Taking actions that put the strategy into effect
• Ensuring that ongoing decisions (big and small) are consistent with the strategy

Goals of Strategy Implementation

1. To translate good ideas into actions that can be executed (and sometimes use execution to generation or identify good ideas)
2. To make sure strategy formulation is comprehensive and well informed

Key Levers of Strategy Implementation

1. Organization Structure: tall versus flat, centralized versus decentralized
2. Organizational Systems and Processes: control and incentive systems, information systems, budgeting systems
3. Organizational People and Rewards: selection processes, training and development

Determinants of Firm Profitability: External Perspective

• "Positional View"
• Contends that variations in a firm's competitive advantage and performance are primarily a function of industry attractiveness
• Companies should therefore either (1) position themselves to compete in attractive industries or (2) adopt strategies that will make their current industries more attractive

Determinants of Firm Profitability: Internal Perspective

• "Resource-Based View"
• Contends that firms are heterogeneous bundles of resources and capabilities 
• Firms with superior resources and capabilities enjoy competitive advantage over other firms. This advantage makes it relatively easier to achieve consistently higher levels of performance

Determinants of Firm Profitability: Dynamic Perspective

• Suggests that in dynamic, rapidly changing markets, both internal and external sources of high rates of profit are often not long lasting

Competitive Advantage

• Firms tend to focus on beating their rivals
• Exists to the extend that a firm has a certain something that gives it the potential to earn higher profits than competitors
• Sustained Competitive Advantage "the holy grail": exists to the extent that firm can earn higher profits than competitors over a long period of time

Xerox's Turnaround 

• 1959: Introduces the Xerox 914 copier which transformed the workplace
• Chartered member of the "nifty 50", 50 stocks most favored by institutional investors
• Since 1970s, crippled by competition 
• 2001, Mulcahy takes over and Xerox reports first quarterly loss in 16 years
• Mulcahy lacks product development and financial experience but gets the job because the board has confidence in her "strategic mind"
• She refines Xerox mission and reminds people of core values in mission statement
• Aligns operation with the refined mission and values
• Sells Exerox's China and Hong Kong operations and half of a stake in a joint venture with Fuji, closes down inkjet printer business
• Xerox reaches profitability through cutting expenses, selling non-core assets, reducing long-term debt 
• In 2002, generates 1.9 billion in operating cash flow, 91 million in net income on 15.8 billion in sales

Leadership versus Strategic Leadership

Executive Roles: Interpersonal

• Figurehead: performs ceremonial activities that have symbolic benefits (breaking ground at new facility)
• Leader: provides direction and motivation to organizational members
• Liaison: maintains relationships with key external stakeholders (customers, suppliers)

Executive Roles: Informational

• Monitor: collects/filters information about the firm and its competitive environment (largely through social contracts/networks, written reports)
• Disseminator: communicates understandings to internal constituents (employees), value-based as well as factual information
• Spokesperson: communicates understandings to external stakeholders

Executive Roles: Decision

• Most important role of top leaders
• Entrepreneur: designs overall firm strategy, focus on voluntary, proactive initiatives (the intended strategy)
• Disturbance handler: handles unanticipated strategic issues, threats to well-being of firm but also opportunities
• Resource allocator: key to success executing strategy, manages trade-offs inherent in allocating resources to alternative activities, resources committed to one initiative are not available for other initiatives
• Negotiator: executes non-routine transactions involving other organizations (acquisitions of other companies)

Hierarchy of Leader Capabilities

• Level 5 Leaders (Executive Leaders): Build greatness through combination of will and humility
• Level 4 Leaders (Effective Leaders): Present clear and compelling vision and lead a group to superior levels of performance
• Level 3 Leaders (Competent Manager): Organize people resources to accomplish predetermined objectives
• Level 2 Leaders (Contributing Team Member): Work effectively with others as a member of a team to achieve group objectives
• Level 1 Leaders (Highly Capable Individual): Make individual contributions through talent and work ethic

Level 5 Leaders, Executive Leaders

Professional Will and Professional Modesty

Professional Will

• The ability to translate strategic intent into the resolve needed to pursue a strategy
• Willing/able to make hard choices over a period of time

Characteristics of a CEO

• Little consensus on whether personality or background matters more
• Personality: high tolerance for risk/ambiguity, novelty, complexity, charismatic
• Background/Demographic: White males, 45-60, Ivy League education, more diversity in smaller/privately-held companies
• Competencies: talent for strategy thinking, decision-making toughness (willingness/ability to change organization's strategy, even when change means departure from traditional way of doing business)

What Makes an Effective Executive Team?

• Effectively responds to a complex and changing environment
• Can manage the needs of interdependent but often diverse units, arenas or functional areas
• Valuable and effective social network with each team member possessing an extensive network outside the team
• Able to develop a coherent plan for executive succession

Vision and Mission

Vision

• Simple statement of where the firm is going, and what the firm's leaders want it to be in the future
• Forward-looking: Identifies the firm's desired, long-term status and what the firm's leaders want the firm to look like many years from now
• Emphasis on ambition (force the firm to stretch) and ambiguity (allows flexibility for changing strategy or implementation tactics)

Goals and Objectives

• Goals: broad indication of organizational intentions 
• Objectives: specific measurable steps
• Provide a bridge between the vision and the strategy
• An effective vision and mission is anchored by goal and objectives

Strategic Coherence

• Exists to the extent that the key elements of a firm's strategy are consistent and "fit" together
• Most effective strategies are coherent
• Promoted through well-understood vision and mission
• Symmetrical co-alignment of the 5 elements of a firm's strategy
• Congruence of policies in functions (finance, production, marketing) with the firm's 5 elements of strategy
• Overarching fit of various businesses under the corporate umbrella

Stakeholders 

• Individuals or groups who have an interest in an organization's ability to deliver intended results and maintain the viability of its products and services 

Steps in Identifying Key Stakeholders

Stakeholder Analysis

Benefits of using Stakeholder Analysis

1. Can use the opinions of the most powerful stakeholders to shape your strategy and tactics at an early stage
2. Gain support from powerful stakeholders to help win more resources
3. Can ensure that stakeholders fully understand what you are doing and understand the benefits of your project
4. Can anticipate what people's reactions to your project may be and build actions into the plan that will win people's support

Strategy: Ethics and Biases

SWOT Analysis

• An analysis of the internal and external environment
• Internal: Strength, Weaknesses, Capabilities, Relationships
• External: Opportunities, Threats

Blurring of Industry Boundaries

• Example: Bright House! (Combination of Cable, Internet, Long Distance Telephone)
• With fewer companies providing these services, the power of buyers will be impacted
• As services are bundled, the cost to switch to another service provider will be greate

External Environment of the Organization

1. Organization
2. Strategic Group (groupings of firms that seem to be more similar in certain ways than other members of the larger industry)
3. Industry Environment
4. Macro Environment (Political, Economic, Sociocultural, Technological, Environmental, Legal)

Pressures Favoring Industry Globalization 

• Markets: homogeneous customer needs, global customer needs, global channels, transferable marketing approaches
• Costs: large scale and scope economies, learning and experience, sourcing efficiencies, favorable logistics, arbitrage opportunities, high R&D costs
• Governments: favorable trade policies, common technological standards, common manufacturing and marketing regulations
• Competition: interdependent countries, global competitors

Key Success Factor (KSF)

• Key asset or requisite skill that all firms in an industry must possess in order to be a viable competitor 
• Soft Drink Example (Barriers to Entry): ability to meet competitive pricing, extensive distribution, ability to raise consumer awareness, broad product mix, global presence, well positioned bottlers and bottling capacity

Industry Concentration and Fragmentation 

Key Determinant of Rivalry

• Highest Concentration: Monopoly
• Very Concentrated: Duopoly
• Less Concentrated: Oligopoly 

PESTLE Analysis

• Simple but useful tool for analyzing the wider, macro environment that a company operates in
• Political, Economic, Social, Technological, Legal, Environmental
• Directs our attention to each of these key elements of the macro environment 
• Particularly beneficial in decisions about entering new geographic markets

PESTLE Analysis: Political

PESTLE Analysis: Economic

• What are the relevant macro-economic conditions and trends?
• Interest rates? Level of inflation? 
• Local employment levels per capita? GDP per capita?
• Exchange rates between critical markets and how will they affect your production and distribution of your goods?

PESTLE Analysis: Socio-cultural

• What are the prevailing norms, values, and attitudes that are relevant to your industry and company and how are they evolving?
• Especially important when considering new geographic markets
• What are the current demographics and how are they changing? 
• Level and distribution of education and income? 
• Dominant local religions and influence on consumer attitudes 
• What is the level of consumerism and what are popular attitudes toward it? 
• What pending legislation affects corporate social policies (domestic-partner benefits, maternity/paternity leave)?
• What are the attitudes toward work and leisure?

PESTLE analysis: Technological

• What are the technological trends in the wider environment that are relevant to your industry and company?
• What is the level of research funding in government and industry and are those levels changing?
• What is the status of intellectual-property issues in the local environment?
• Are potentially disruptive technologies in adjacent industries creeping in at the edges of the focal industry?

PESTLE Analysis: Legal

• What are the critical laws and regulations that are relevant to your industry and company?
• Closely linked to political conditions
• What are the regulations regarding monopolies and private property?
• Does intellectual property have legal protections?
• Are there relevant consumer laws?
• What is the status of employment, health-and-safety, and product-safety laws?

PESTLE Analysis: Environmental

• What are pending environmental issues that are relevant to your industry and company?
• What are prevailing environmental laws and regulations?
• How might your company be impacted by actions of environmental groups?

Porter's Five Forces Model

• Helps figure out the underlying reasons for differences in profitability of firms in different industries
• Forces: Threat of New Entrants (and Entry Barriers), Buyer Power, Supplier Power, Threat of Substitutes, Degree of Rivalry
• Also: Complementors

Five Forces: Firms in a particular industry will earn low profits to the extend that..

• Rivalry/Competition is intense: price competition (airlines)
• Barriers to Entry are low
• Threat of Substitutes is high
• Buyers of industry firms' products/services are powerful
• Suppliers of the stuff that goes into industry firms' products/service are powerful

Five Forces: Rivalry

• Increased rivalry = lower industry profitability
• Examples: PC, soft drink industry

Five Forces: Threat of New Entry

• Easier for new firms to enter industry = lower industry profitability
• Examples: PC, restaurant, soft drink industry

Five Forces: Power of Suppliers

• Negotiations over what price is paid for supplies
• Suppliers powerful = lower industry profitability
• Example: DeBeers in the Diamond industry

Five Forces: Power of Buyers

• In terms of what price industry firms can charge for their product
• Two kinds of buyers: channels of distribution, end consumers
• Buyers powerful = lower industry profitability

Five Forces: Threat of Substitutes

• Substitutes readily available = lower industry profitability
• Example: MP3 Player and satellite radio, soft drinks and bottled water, movie rentals and cable tv
• Other products that provide the same kinds of benefits that the industry firms' product provides for about the same price and customers tend to substitute one for the other

6th Force: Complements

• Product or service that is used together with industry firms' product that increases the value created by industry firms' product
• Any factor that makes it more attractive for suppliers to supply an industry on favorable terms or makes it more attractive for buyers to purchase products or service from an industry at prices higher than it would pay absent the complementor
• Lots of great complements = higher industry profitability
• Example: computer software and PCs, online music and MP3 players, milk and cookies, Delta plane orders and American Airlines plane orders (lower costs from Boeing)
• Availability of complements increases the price that buyers are willing to pay for industry firms' product

Industry Life Cycle

• Embryonic: niche market (selected products for selected markets), participants emphasize problem solving (product as "solution"), technological uncertainty
• Growing: market expands beyond niche, more competitors enter, customers become better informed
• Mature: proliferation of products and markets served, market volatility and beginnings of industry consolidation, aggressive customers
• In Decline: product/market contraction, further consolidation and industry regeneration

Technological Discontinuities 

• Occurs when a breakthrough technology is developed
• Product Innovation: development of a new breakthrough product (E.g. development of the PC, in disk-drive industry every new generation of technology led to the demise of the market leader)
• Process Innovation: new way of manufacturing a product/doing business (Dell's direct model of selling PCs, Southwest airlines business model changed by adopting new processes or point-to-point model)
• Competency-Enhancing Innovation: builds on key competencies of existing firms, typically developed by existing firms (microprocessor development)
• Competency-Destroying Innovation: challenges key competencies of existing firms, typically developed by outside firms (electronic calculator vs. slide rule)

Scenario Planning

An understanding of the big picture and a plan to manage uncertainty

1. Define target issue, time frame, and scope for scenarios
2. Brainstorm key drivers, decision factors, and possible scenario departure or divergence points
3. Develop the framework by defining two specific axes
4. Flesh out the picture
5. Specify indicators that can signal which scenario is unfolding
6. Assess the strategic implications of each scenario

Sources of Firm Success

• Much variation in profitability within particular industries
• Both industry and specific attributes of firm are important determinants of firm success
• Research suggests that specific attributes of firm are most important
• Many instances of firms that succeed in unattractive industries

Resources 

Resources and Capabilities: Fundamental building blocks of strategy

• Inputs that firms use to create goods and services
• Undifferentiated: land, unskilled labor, debt financing, commodity-like materials
• Firm-specific
• Tangible: rural real-estate or high traffic real-estate 
• Intangible: more likely to contribute to competitive advantage, knowledge, organizational culture, location selection, patents, trademarks, reputation, brand 
• Easy to acquire 
• Difficult to acquire: good managerial judgment, intellectual property, trade secrets, brand equity

Capabilities (Competence)

• Firm's skill in using its resources to create goods and services
• Combination of procedures and expertise that the firm relies on to engage in distinct activities in the process of producing goods and services (product design, manufacturing, marketing)
• Core competences: capabilities that are central to the main business operations of the firm 
• Distinctive competences: capabilities that set a firm apart from other firms (other firms aren't as good at a particular activity
• Examples: Wal-Mart (logistics), Vanguard (low cost structure), 3M (innovation)

VRINE Model

• Help us figure out whether a particular resource or capability promotes competitive advantage and the extent to which advantage is likely to be sustainable
• Value, Rarity, Inimitability, Nonsubstitutability, Exploitability  

VRINE Model: Value and Rarity

VRINE Model: Initimitability and Nonsubstitutability 

• Value and rarity are not sufficient to support sustained competitive advantage, must have..
• Initimitability: hard and/or costly for competitors to imitate resource/capability
• Nonsubstitutability: hard and/or costly for competitors to acquire/develop a substitute for the resource/capability (E.g. Amazon developed on-line substitute for retail stores)

VRINE Model: Exploitability

• Firm's ability to take advantage of its resources and capabilities
• Necessary for firm to benefit from resources that are valuable, rare, inimitable, and nonsubstitutable
• Example: Xerox invented networking of computers, laser printer, graphical-user interface operating system, computer mouse but wasn't able to bring any of these technologies to market

Sustainable Competitive Advantage

• Holy grail of firm success
• Depends on: inimitability, non-substitutability, durability, knowledge (tacit or non-codifiable knowledge)

Socially-Complex Resources

• Unique Culture: beliefs and values that organizational members share that guide their actions at work
• Routines for Performing Complex Activities: "Standard operating procedures" for performing key activities that are developed over time, frequently not consciously designed
• Trust: between organizational members and/or between the organization and external stakeholders (customers, suppliers) can help reduce costs
• Valuable and rare socially-complex resources are often key sources of sustained competitive advantage because they are typically art to imitate or substitute 

Dynamic Capabilities

• Exist to the extent that the firm is able to modify and revise its resources and capabilities to match a shifting environment
• Emphasizes the new to renew the firm's resources and capabilities to (a) adapt to change in competitive environment or (b) create (favorable) change in the competitive environment
• Especially critical in dynamic rather than static environments

The Value Chain

• Firms engage in a sequence of basic activities as they work to provide products/services to customers
• Each activity provide opportunities to add value for customers
• Generic value chain: Primary activities, secondary (support) activities
• Shorter-term advantage: find a better way to perform the same activities
• Longer-lasting advantage: find a different way to perform activities (E.g. Southwest, Ikea, Dell)

The Value Chain: Primary Activities

Internet Startup Example

• Inbound Logistics: inbound shipment of top titles, warehousing
• Operations: server operations, billing, collections
• Outbound Logistics: picking and shipment of top titles from warehouse, shipment of other titles from third-party distributors
• Marketing and Sales: pricing, promotions, advertising, production information and reviews, affiliations with other websites
• After-Sales Service: returned items, customer feedback

The Value Chain: Secondary (Support) Activities

Internet Startup Example

• Procurement: CDs Shipping, computers telecom lines, shipping services, media
• Technology Development: Inventory system, site software, pick and pack procedures, site look and feel customer research, return procedures
• Human Resources: recruiting, training, incentive system, employee feedback
• Firm infrastructure: financing, legal support, accounting

Analyzing Internal Source of Advantage

Business Strategy

• Choices that a firm makes about its competitive posture within a particular line of business (industry)

Strategic Positioning

• The ways that managers of a company situate (position) that company relative to it's rivals along important competitive dimensions
• Main goal: to reduce the effects of rivalry (crucial force in 5 Forces Model) and improve profitability

Economic Logic: Low Cost Approach

• Focus efforts on minimizing costs while providing a more or less equivalent product or service at lower cost
• Benefits: Capture market share by offering lower price or earn higher margins by maintaining price parity
• Example: Wal-Mart, Pacific Cycle, Gallo Wines, Southwest Airlines

Economic Logic: Differentiation Approach

• Focus their efforts on offering a product or service that customers see as providing extra value 
• Key is convincing customers that extra value is provided and create extra value in cost efficient ways
• Extra value can flow from several sources: quality, reliability, prestige
• Charge sufficiently higher prices to more than offset the added costs of differentiation 
• Capture market share by offering higher "value" product at same price or earn higher margins by raising prices over competitors
• Example: Mercedes-Benz, Trek Bicycles, Coke and Pepsi, Harley Davidson, Stouffers

Economic Arenas

• Narrow: 1 or just a few market segments in an industry (Porsche)
• Broad: Basically all market segments in an industry (Ford, GM)

Porter's Generic Strategies

• Broad low-cost leadership (Wal-Mart, Gallo Wines)
• Broad differentiation (Trek Bicycles, Coca-cola)
• Focused cost leadership (Jet Blue)
• Focused differentiation (Montague, Mercedes Benz in US)
• Integrated strategic position (Toyota: started low cost, over time invested in quality control, design and marketing and now command premium price while maintaining low costs)

Key Drivers of Cost Advantage

• Economies of Scale: average total cost for a unit of production is lower at higher levels of output, costs decrease as the scale of operation increases during any given period of time
  • Sources of Scale Economies: spreading fixed costs over greater output, superior inventory management, purchasing power
  • Sources of Scale Diseconomies: bureaucracy, high labor costs, inefficient operations
• Learning Curve: costs decrease with the cumulative level of production since the production of the first unit 
• Economies of Scope: if a firm produces two or more products and can share resources among two or more of these and lower the costs of each product (Mity-Lite: folding tables and chairs)
• Product Technology: new entrant tries to match or beat incumbents costs by introducing a production technology that is subject to different economics (Jet Blue, Nucor Steel)
• Product Design: Altered to lower a firm's production costs (Canon vs. Xerox in photocopiers)
• Location Advantages for Sourcing Inputs: attain lower production costs by locating their operations in cheaper labor markets (Pacific Cycle manufactures in China and Taiwan to achieve lower costs than Trek who manufactures in the US)

Key Drivers of Differentiation Advantage

• Premium Brand Image
• Customization
• Unique styling
• Speed
• More convenient access
• Unusually high-quality

Threats of Low-Cost or Differentiation Advantage

Low-Cost

• New technology
• Too low-quality
• Social, political and economic risks of outsourcing

Strategies for Industry Life Cycle: Embryonic

• Arenas: local
• Vehicles: internal development, alliances to secure missing inputs or distribution access
• Differentiators: target basic needs, minimal differentiation
• Staging: tactics to gain early footholds
• Economic Logic: prices tend to be high, costs are also high, focus is on securing additional capital to fund growth phase

Strategies for Industry Life Cycle: Growth

• Arenas: Penetration into adjacent markets
• Vehicles: Alliances for cooperation, acquisitions in targeted markets
• Differentiators: Increased efforts toward differentiation, low cost leaders emerge through learning/experience and scale
• Staging: Integrated positions require choice of focusing first on cost or differentiation
• Economic Logic: Margins can improve rapidly because of experience and scale, price premiums accrue to successful differentiators

Strategies for Industry Life Cycle: Mature

• Arenas: Globalization, diversification 
• Vehicles: More stable positions emerge across competitors
• Staging: Choosing international markets and new industry diversification, need rational sequencing
• Economic Logic: Consolidation results in fewer competitors (favoring high margins) but declining growth demands cost containment and rationalization of operatoins

Strategies for Industry Life Cycle: Decline

• Arenas: Some arenas may be abandoned if decline is severe, focus on segments which provide most profitability
• Vehicles: Acquisitions for diversifying moves, divestitures to exit for some competitors
• Economic Logic: Rationalizing cost

Testing the Quality of a Strategy

1. Does your strategy exploit your key resources?
   1. With your particular mix of resources, does this strategy give you an advantageous position relative to your competitors?
   2. Can you pursue this strategy more economically than competitors?
   3. Do you have the capital and managerial talent to do all you envision?
   4. Are you spread too thin?
2. Does your strategy fit with current industry conditions?
   1. Is there healthy profit potential where you're headed?
   2. Are you aligned with the key success factors of your industry?
3. Will your differentiators be sustainable?
   1. Will competitors have difficulty imitating you?
   2. If imitation cannot be foreclosed, does your strategy include a ceaseless regimen of innovation and opportunity creation to keep distance between you and the competition?
4. Are the elements of your strategy consistent and aligned with your strategic position (strategic coherence)?
   1. Have you made choices of arenas, vehicles, differentiators, and staging and economic logic?
   2. Do they all fit and mutually reinforce each other?
5. Can your strategy be implemented?
   1. Will your stakeholders allow you to pursue this strategy?
   2. Do you have the proper complement of implementation levers in place?
   3. Is the management team able and willing to lead the required changes?