Strategy

Business Strategy
6

Competitive Positioning

Prof. Dr. Bernd Venohr
Berlin, May 2007

© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

Agenda
Introduction to Strategy
1
2
3

Course Overview and Strategy Concept
Economics of Strategy
Shareholder Value

Business Strategy
4
5
6

External Environment
Internal Environment
Competitive Positioning

Corporate Strategy
7
8
9

Diversification
Mergers & Acquisitions
Global Strategy

Strategy Process
10 Organizational Structure and Control
11 Strategic Leadership
© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

2

The “art of strategy”: to find an advantaged competitive position in an attractive industry

Advantage

Competitive position ns r g

sin a re

u et r

c

In

Disadvantage
Lo
Industry attractiveness

© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

Hi

3

Porter’s Theory of Competitive Advantage

Attractive
Relative
Position

Firm Success

Attractive
Industry
Structure

Sustainable Competitive
Advantage
Activities /
Value Chain
Drivers

Sourc e: Mi c hael Porter, Toward a dynami c theory of s trategy
© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

4

Deriving “Generic Strategies” leading to competitive advantage and economic profit
Profit = price - cost to increase profit, a firm must either :
Decrease cost below its competitors Increase price above its competitors “Cost leadership”

“Differentiation”

“Generic Strategies” (Porter)
Sourc e: Mi c hael Porter, Competi ti ve Advantage
© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

5

Basic economics of cost leadership and differentiation
PRICE = $12
PRICE = $10

PRICE = $8

COST = $5

COST = $2

PROFIT = $5
INDUSTRY
AVERAGE
© 2 0 0 7 P ro f. Dr. B e rn d V e n o h r

COST = $6

PROFIT = $6

PROFIT = $6

COST
LEADERSHIP

DIFFERENTIATION

6

Economics of overall cost leadership
If a product or service is of ‘standard’ quality, but