This module presents the basic tenets of strategy—what it is and what it is not. We will draw on the work of Professor Michael Porter, whose ideas have been widely implemented by consulting firms, policymakers, and organizations (large and small) worldwide. The key concept to understand is competitive advantage, as it forms the basis of business strategy. We will unpack the concept of competitive advantage in the context of the value chain, presenting the two main paths toward achieving competitive advantage and considering how economies of scale and economies of scope play into our strategy game.

In this module, we will learn one of the most popular frameworks to analyze strategy, Porter's Five Forces. This framework helps learners understand how the competitive forces in an industry shape a company's strategy and profitability. It highlights how competition (industry rivalry) is driven by multiple factors, including the threat of new entrants, the bargaining power of suppliers and buyers, and the threat of substitutes on a company's ability to succeed. By analyzing these forces, you will be able to advise companies in developing strategies to either defend against competitive pressures or exploit opportunities to gain an edge over rivals. Ultimately, Porter's Five Forces helps us strategize in positioning a company to minimize threats and maximize growth opportunities within its industry environment.

Understanding the macro environment is crucial in strategy because it shapes the broader context in which organizations operate, influencing both risks and opportunities. Strategic decisions that ignore these external forces can lead to misalignment with market realities and long-term failure. To systematically analyze these external influences, strategists often use a framework known as the PESTEL model. This tool helps identify key environmental factors that may impact an organization's performance and strategic direction.

Corporate strategy refers to the choices leaders make and the actions they pursue to gain a competitive edge across various industries and markets at the same time. It answers the critical question: where should we compete? This type of strategy defines a firm's boundaries in three key areas: vertical integration (its involvement in different stages of the industry value chain), diversification (its range of products and services), and geographic scope (the regions or countries it operates in, whether local, national, or international). Strategic leaders must shape corporate strategy by considering all three of these dimensions.