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Tutorial 1 (T12)
Strategies and
Competitive Advantage
2025 Spring
Intended Learning Objectives
1. Identify and analyze the key factors affecting
organizational performance
2. Apply theories to construct alternative strategic options
for different stages of the strategic management process
3. Evaluate and select recommendations on strategic
decisions
© McGraw Hill 2
Strategies in daily life?
© McGraw Hill 3
What is strategy?
“Strategy” has a military origin.
Comes from the Greek word “strategia”, which
means “office of the general”;
“the science or art of military command… overall
planning and conduct of large scale combat
operations”;
“a military maneuver designed to deceive or
surprise an enemy”;
“Strategy is the goal (and tactics are the means).”
“Strategy is long-term thinking (and that tactical, or
operational was short-term thinking)”
© McGraw Hill 4
What is strategy?
https://www.youtube.com/watch?v=Hz4FNBj1APA
Sun Tzu: The Art of War: first plan
your strategy and then act
(“謀定” 而 ”後動” ; 情報為 “體” 、兵學
為用。)
R. Porter: “…winning in the market
not based on the warfare, but the
planning in the conference room…”
https://zh.wikipedia.org/wiki/%E5%AD%99%E5%AD%90%E5%85%B5%E6%B3%95
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What is strategy in the business sense?
In the business world, Strategy refers to ideas,
decisions, and actions that enable a firm to succeed.
The essence of strategic management is the study
of why and how some firms outperform others.
Aims of having strategies:
To increase competitive advantage
To gain more customers and revenue
To sustain your business
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The essence of strategic management is the
study of why some firms outperform others.
Two Fundamental Questions
1. How should we compete in order to create a
competitive advantage in the marketplace?
2. How can we create competitive advantages in
the marketplace that are unique, valuable, and
difficult for rivals to copy or substitute?
Note: Operational effectiveness is not enough to
sustain a competitive advantage.
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Strategic Management 策略管理
Strategic Management:
A process for analyzing a company’s situation, developing the company's strategic
goals, and devising a plan of actions and allocation of resources.
Business organizations engage in
generic strategies.
Examples of some generic strategic
types – “cost leadership, differentiation,
or focus” Developing strategies for
achieving company’s goals in
current environment
Porter's Generic Competitive Strategies (ways of competing)
© McGraw Hill
Examples of Competitive Advantage
Taobao:
Walmart:
Airbnb:
Uber:
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What is Competitive advantage?
Competitive advantage = a firm’s resources and
capabilities that enable it to overcome the
competitive forces in its industry.
Operational effectiveness = performing similar
activities better than rivals.
Sustainable competitive advantage is possible only
by performing different activities from rivals or
performing similar activities in different ways.
© McGraw Hill 10
Competitive Advantage
The Ability to Create More Economic
Value Than Competitors
• there must be something different about a firm’s
offering vis-à-vis competitors’ offerings
• competitive advantage is the result of doing
something different and/or better than competitors
• if all firms’ strategies were the same, no firm
would have a competitive advantage
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Types of Competitive Advantage (duration)
Temporary versus Sustainable
Some competitive advantages are sustainable if:
competitors are unable to imitate the source
of advantage
no one conceives of a better offering
Of course,
in time, even sustainable competitive advantage
may be lost
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Types of Competitive Advantage (Value created)
Competitive Parity
the firm’s offerings(products/services) are ‘average’
people do not have a preference for the firm’s offerings
the firm does not have an advantage over other companies
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Types of Competitive Advantage (Value created)
Competitive Disadvantage
people may have an aversion to the firm’s offering
the firm may have a cost disadvantage
a firm may have outdated technology/equipment
a firm may have a negative reputation
Example:
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Competitive Advantage
Competitive Advantage Economic Returns
Advantage Above Normal
exceeding investors’ expectations
r＞ i
Parity Normal
meeting investors’ expectations
r= i
Disadvantage Below Normal
failing investors’ expectations
r < i
© McGraw Hill 15
Case Study
Houston-based Mattress Firm was founded in 1986 and eventually grew to more than 3,200 stores and
$3 billion in annual revenues. However, its pursuit of growth and dominance—largely via acquisition–in
the industry led to its eventual demise.
A turning point came in 2015 when it purchased one of its chief rivals, Sleepy’s, for $780 million. Steve
Stagner, Mattress Firm’s CEO at the time asserted, “This transformational acquisition unites the nation’s
two largest mattress specialty retailers providing customers with convenience, value, and choice.”
However, things certainly didn’t turn out as he had hoped. Acquiring Sleepy’s 1,000 stores left Mattress
Firm severely over-retailed. As store traffic slowed, costly leases turned into an albatross around the
firm’s neck. In bankruptcy court filings, the rapid expansion led to the “cannibalization” of stores that were
clustered too closely and put them in direct competition with each other. This was poignantly stated by
Hendre Ackermann, the firm’s CFO: “There are many examples of a Mattress Firm store being located
literally across the street from another Mattress Firm store.” Mattress Firm’s fortunes were also eroded by
a set of more nimble competitors: online upstarts, including Casper, Lessa, Tuft & Needle, and Sapira.
For example, Casper Sleep, Inc., founded in 2014, raised $240 million to sell mattresses directly to
consumers. It provided easy on-line ordering, hassle-free delivery, and returns of reasonably affordable
mattresses. Within a year, Casper booked sales of $100 million.
The online rivals also had another major advantage over Mattress Firm: Shoppers had grown weary of
the traditional mattress-buying experience. This involved going into a store, testing out a slew of
mattresses for a few minutes, and rushing into a decision on an expensive item designed to last for years.
And, customers were often annoyed by complicated and expensive delivery options. As noted by
Casper’s co-founder and CEO, Philip Krim, “Traditional mattress retailers have been alienating customers
for decades and are now buckling under pressure. Casper has turned a tired industry on its head with
innovative products and a superior shopping experience.” Recently, Casper expanded its direct-to-
consumer online business into a wide variety of products including bed frames, sheets, pillows, and dog
mattresses.
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Case Study
Discussion Question:
1. What do you think was the factor causing Mattress Firm’s competitive
disadvantage?
2. What is Casper’s competitive advantage?
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Strategic Management Process
Strategy Strategy
Implementat-
ion Analysis
Strategy
Formulation
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Strategic Management Process
Exhibit 1.3 The
Strategic
Management
Process.
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END of TUTORIAL
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