Strategic Management – I

Learning Diary
By 17P102 – Rohith Kumar Karwa

Pre-Midterm we started with strategic analysis which comprised of internal and external analysis. In
external analysis we discussed the Porter’s Five Forces Model to gauge the industry attractiveness.
The Porter’s Five Forces are

These forces are to be gauged with respect to the incumbent (Existing) Players. The main drawback of
this model is that it gives the analysis of the Industry at a point in time and hence is not dynamic.

After external analysis we discussed the value chain analysis and VRIO framework under the internal
analysis for a company.

Value chain analysis is a strategy tool used to analyse internal firm activities. Its goal is to recognize,
which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the
firm and which ones could be improved to provide competitive advantage.
VRIO analysis stands for four questions that ask if a resource is: valuable? rare? costly to imitate? And
is a firm organized to capture the value of the resources? A resource or capability that meets all four
requirements can bring sustained competitive advantage for the company.

We then discussed a paper on Strategies for Two sided markets. In traditional markets value chain,
the value moves from left to right, to the left of the company is Cost and to the right is the revenue.
But in case of two sided markets the cost and revenues are on both the sides.

In two-sided market strategies we studied the network effects and how they are important in
achieving the scales. We also discussed the various challenges we face while devising the strategy for
two sided markets.

These challenges are

1. Pricing the platform

2. Winner takes all dynamics and
3. The threat of envelopment.

In two sided markets there is a money side and a subsidy side. If we provide subsidy to one of the
sides and increase their presence on the platform then due to positive cross side network effect the
money side numbers increase which then can be monetized. Hence it is important to determine which
side to subsidize and which side to monetize.

In the last class we discussed the blue ocean strategies.

Blue ocean strategy generally refers to the creation by a company of a new, uncontested market space
that makes competitors irrelevant and that creates new consumer value often while decreasing costs.

We discussed the four-action framework to change the value curve to create a blue ocean within the
existing space.

The Four Actions Framework is used to reconstruct buyer value elements in crafting a new value curve
or strategic profile. To break the trade-off between differentiation and low cost in creating a new value
curve, the framework poses four key questions, shown in the diagram, to challenge an industry’s
strategic logic.