Strategic Management Final Exam

Key Terms

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Key Terms

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Key Terms

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Inertia

In organizations refers to the tendency for established strategies, practices, and routines to be repeated over and again, such that forces for change are mitigated and the organization continues, reliably, to move in the same direction and to function in much the same way.

Satisficing

A common occurrence in decision making and is the tendency to accept adequate solutions, rather than to continue searching for solutions that could in fact be optimal.

Licensing

A means of commercializing a product, technology, or piece of intellectual property. In a licensing arrangement, the license holder grants another party, for a fee, the right to use, sell, or manufacture the licensed property.

Institutionalization

A term coined by Philip Selznick (1957) and refers to the process of infusing an organization with value, over and above the tangible value of its assets.

Generalizable

A term referring to the ability of a framework or principle to apply across a range of settings. Strategic management is a generalizable discipline because it provides a framework that can be useful across a range of firms, organizations, and settings.

Institutional Investors

Aggregate funds from individual investors and then invest collectively. Mutual funds and retirement funds are common institutional investors. Because they represent such large sums of money, these investors can be powerful actors in corporate governance.

CHAPTER 7

BE SURE TO STUDY THE END OF CHAPTER 7 IN THE OTHER QUIZLET (CONCLUDING THOUGHTS AND CAVEATS)

2) Communicating and Motivating (Her Notes and Mine)

Communicating and Motivating - Mission, vision and strategy all hinge on communicating to the organization. - Strategic planning Strategic --> implementation - Leadership --> building and managing to accomplish goals. - One leadership theory: -- Leader-Member Exchange (LMX) model by Graen and Uhl-Bien, 1995). -- Originally Vertical dyad Linkage theory (VDL) Author - Dansereau, Graen, and Haga, 1975 -- What does the theory state? -- Comes out of the transactional style of leadership -- Dyad relationship between leader and subordinates -- Emphasis on leader-group structure -- Loyalty to the leader concept -- REVIEW SLIDE 7 OF CHAPTER 10 PDF (PICTURE) Contingency Theories of Leadership: - Situational leadership theory (SLT) is a contingency theory that focuses on the followers. -- Successful leadership is achieved by selecting the right leadership style, which is contingent on the level of the followers' readiness. -- Considers combinations of: --- Ability --- Willingness - Path-goal theory: -- Contingency model of leadership that focus on initiating structure and consideration and the expectancy theory of motivation. Strategic Leaders: - Through all leadership roles (top management team) and others. -- Communicate the vision and strategy -- Link the strategy to the tasks and roles -- Motivate My Notes: - Vision is worth little until it is connected to the people and resources throughout the organization - Strategy cannot be separated from implementation because the two are judged together by their final results - It is simply not possible to have a great leader who does not deliver great outcomes - Thus, the vision, mission and strategy are all inextricably linked to the communication and motivation that occur throughout the organization - Leaders have been noteworthy because of their communication skills and because of their ability to rally effort around their causes - Leadership is certainly about casting a vision, but it is also about building and managing an organization that can bring that vision into reality; thus, it is about communicating with and motivating others Leader-Member Exchange - Academic research that looks at the relationship between leaders and their followers - This stream of research considers how leaders engage and motivate the support of their immediate followers - In this view, leadership occurs through a series of interpersonal relationships - Leaders likely have some symbolic influence at the organizational level, through their vision and public statements; however, most of their tangible effect is transmitted through their immediate followers - Thus the relationship between the leader and each member of this small circle is of key importance; each of these lieutenants is also a leader of his or her own circle of followers, and so on throughout the organization - In this view, leadership can be seen as a series of interpersonal relationships, with leaders and followers taking on different roles and negotiating different responsibilities, as a function of their ability to influence, inspire, and deliver - Because it focuses on individual dyads, leader-member exchange is often thought to be outside the scope of strategic management and of little importance to organizational-level performance (couldn't be farther from the truth) - The ability of a leader to connect with individual followers and to influence them towards the right goals is the key driver of success - Research and practical experience have both shown that strategic management is a shared activity - CEO's in virtually every major corporation rely on a trusted inner circle of managers-TOP MANAGEMENT TEAM-who have substantial influence over the operation of the organization - This inner circle typically consist of vice-presidents, division managers, key board members, and various functional heads - Together they share the leaderships of the firm, allocating responsibilities, promoting specific initiatives, and executing the vision through their various functional roles - The relationship between the CEO and these top management team members is strategically significant; each member of the team likely has his or her own group of followers, providing similar support and sharing similar responsibility - The implementation of strategy can be viewed as a series of intra-organizational linkages and cascading responsibilities - One of the great deficiencies of many top managers is an inability to connect these dots, to understand the implications of a particular strategy to all those impacted, and adequately to divide, assign, and support the necessary roles and responsibilities - Too often this detailed and tedious work can seem unglamorous and unworthy of a leader's time - However, the ability to make the necessary connections, to communicate the essential elements of the vision and strategy, and to relate those elements to the specific tasks of the various functions and roles within the organization is a key function of leadership - Leaders simply must be able to break down the strategy, to articulate it in terms of its operational implications, and to motivate every individual to make their needed contributions - This is true of any firm -- No firm would be where they are today if it were not for the contributions of many different individuals, all performing well in the roles outlined by their leadership and by the strategy - Thus, as a practical matter, it is impossible to separate leadership from the need to communicate with and motivate followers in the behaviors necessary to make the leader's vision a reality

1) Casting a Vision (Her Notes and Mine)

Components of Strategic Leaders - Mission driver: Why does the organization exist? - Vision: activates and energize the efforts of the organization. "We want to become the world leader, recognized by all cyclists" What do we hope to become in the future? - At the very core, strategy is about setting the direction of the organization My Notes: - Casting a vision or purpose is among the most familiar issues in leadership and it is one of the first challenges of strategic management - Even though they scholars and consultants often make distinctions between mission, value, vision; practically speaking, they all serve much the same purpose in the day-to-day reality of most organizations - That purpose is to provide a common principle or logic for the organizations and its actions - To answer: "Why does this organization exist and what ideals over its actions and approach to the future?" - For each organizations, the purpose will be a little different - These statements impart general sense of direction that serves to unify, to build a common identity, and to guide decision making and action - Simply writing it down does not guarantee success - For leadership to have its desire effect, this vision must activate and energize the efforts of the organization and its various stakeholders; must tap into the basic needs of the customers and into unseen opportunities in the environment - Leadership looks looks very much like entrepreneurship in this regard - Good leaders articulate a message hat resonates with the needs of their constituents, providing something new and different that heretofore had not been obvious and available elsewhere - This message has a meaning not just for the customers or constituents but also from the employees and internal stakeholders of the org, serving to energize and rally their efforts - In casting a vision, leadership provides important value and momentum, both substantively and symbolically; it points the way forward, towards better opportunities, it provides guidance and direction for implementation and it serves to motivate effort, connecting actions to outcomes and providing energy and enthusiasm - A well-crafted vision is important to organizational performance; but simply understanding that is not enough - Easier said than done and some will do it better than others - It helps for leaders or potential leaders to understand basic strategic management - At its core, strategy is about setting direction; the framework, models, processes of strategic management are designed to facilitate that; strategy should then service the purposes of leadership, enabling the leader to better assess environmental conditions and to identify needs and opportunities; it should help leaders to understand organizational competencies and resources better, son s to leverage them to their fullest effect; it should help to make clear the linkages between cause and effect, allowing every member of a firm to understand the relevance of their function to value creation and CA - It is no exaggeration to say that good strategic management is the essence of leadership and that leadership is a key responsibility of strategic management; nowhere is this more clear than in the role of casting a vision

Eurozone

Consists of the 16 European countries that are both members of the European Union (EU) and have adopted the euro as their official currency.

Prospect Theory

Developed by Kahneman and Tversky (1979), prospect theory deals with decision making under conditions of uncertainty or risk. Its basic premise is that the starting condition, or reference point, of a decision maker influences the valuation of the potential outcomes.

Strategy Selection (Her Notes, I didn't see anything on this in the book)

Strategy Selection - Select a strategy (solution) that will improve the performance of the organization. - Go beyond the surface, use scenario planning, identify the possible outcomes - Will the organization have flexibility and capacity to move to a different scenario or change the strategy? Plan for Implementation - How will you implement the strategy? 1. What activities need to be performed? 2. What is the timeline? 3. How are you going to finance the proposal? 4. What outcome is your plan likely to achieve? -- Specific -- Measurable -- Achievable -- Timely in nature Implementation Framework - People, skills and organizational structure -- When do the strategies need to be implemented -- Who is going to do the strategy? Do they have the skills? -- Do the employees understand their roles? Do you need to train? -- Do you need to hire or lay people off? If so, how should this be done? -- Is the structure of the organization right for the strategy? Does anything need to change? Implementation Framework - Organizational Culture -- Does the organizational culture support the strategy? -- What parts of the culture does not support a proposed strategy? -- What parts of the culture can you leverage (strength)? Implementation Framework - Reward systems: -- Is a reward structure in place to accomplish the strategic goal? --- What rewards need to be in place to support a strategic goal? --- Will employees be rewarded? If so, how? --- Will employees be asked to do more? --- How will this be communicated? Implementation Framework - Resource requirements -- What resources are needed (financial or other) to implement the strategy? -- Are they in place? (This could be a lead indicator) -- How do you obtain the required resources? Implementation Framework - SupportingActivities -- How is the implementation supported? -- What policies or procedures, or IT resources are needed? -- Does the organization need additional help? Consultants, professional services (marketing, legal)? Why is it needed? - Strategic Leadership -- What types of leaders are required to make the change happen? -- Does the organization have them internally? -- Does the organization need to hire externally? Implementation Tactics - Once the strategy is decided on, how do you go about putting it in motion? - Make your plan proposal -- What is your plan, based on your analysis -- Why did you select it, based on your analysis -- How will you realize the plan? --- Who, which department, group or unit? --- What will be done? --- Timelines? Short/long, --- Measure? How? Frequency - FIGURE ON SLIDE 12 OF LECTURE 3 CHAPTER 8 Balanced Score Card: Views Firm From Four Perspectives - Develop metrics, collect data and analyze in these four areas. -- The Learning & Growth Perspective -- The Business Process Perspective -- The Customer Perspective -- The Financial Perspective - Strategy Mapping - tells the story of how value is created for the organization. The areas are cascading; improving the first areas affects the others. - FIGURE ON SLIDE 14 OF LECTURE 3 CHAPTER 8 Evaluation of the Strategy - Go beyond the plan/act mode - Learning from experience - Learning from the experience - Studying the success and failures - Transferring the lessons learned After Action Review - Four Review Questions -- what was the intent? -- what actually happened? -- Why did it happen? -- how can we do better? Communication Plan - Present the plan to the organization? - What mode works? - Members response? - Frequency?

A Highly Generalizable Discipline (Online Book)

- An Exploratory Examination of the Knowledge Transfer of Strategic Management Concepts from the Academic Environment to Practice (Link) -- Paul G. Simmonds, David D. Dawley, William J. Ritchie, and William P. Anthony explore how strategic management is taught, learned, and applied in the academic world - Strategic management is a highly generalizable discipline in that its basic framework can be applied to all kinds of businesses in all kinds of environments. The key is translating the framework to fit the specific context. Concepts like competitive advantage, bargaining power, buyer elasticity, imitation, and value creation are at work in all competitive environments, and are key elements in the strategy of any business. These concepts should not be simply viewed as academic ideas then, but as points of practical application in the strategic process.

Industry with many companies selling commodity type products, none of which are in a position to determine industry price?

- Fragmented industry (also known as perfect competition) -- first part of question = low-cost

When expanding into international markets—if you needed to have high presence, would exporting be an option? (book, didn't cover in class)

- No, low level of control, presence, and investment

McKinsey 7-S Model (Her Notes and My Notes)

- PICTURE OF THE FIGURE ON SLIDE 4 (LECTURE 1 CHAPTER 8) OR ON PAGE 201 OF THE BOOK - Fit can always be tightened and improved. -Just as competitive advantage can always be strengthened, so too can the various connections across the firm be strengthened. - How can we apply this model to the bicycle company you are studying, or to any other organization? - Each category must complement one another as well as the strategy - Other examples? My Notes: - It is a depiction of the various facets within a firm that are likely to affect its performance - The seven factors are all connected, either through direct causal linkages or through indirect consequences - The model illustrates how performance is attributable to more than just a good strategy, more than just good human resources practices or good logistics - Rather, performance results from all of these things, working together in combination, to produce value for the customer - While robust in its implications, the model is often dismissed for its simplicity - In reality, it is a powerful analytical guide the can help to diagnose dysfunction or to design structures and practices to complement a strategy - Its use involves some intuition and judgment and can at times seem tedious and unstructured - It involves working through a variety of linkages which are often straightforward in isolation but which can produce indirect effects that are subtle and complex - Overlooking the indirect effects can lead managers to decisions about structures/systems that can seem reasonable at a high level but that can produce unintended and indirect effects detrimental to success - The use of the 7-S model should be thorough and detailed, with full consideration given to the realities of each relationship, direct and indirect - It is powerful in its implications, there is nothing magical about the actual items (skills, staff, style, etc) - It is likely that the number of items and the themselves were chosen intentionally to create the alliteration, which helped to make the model familiar and easy remembered - The items are just broad categories - There is some over lap between them and without doubt different terms that would work better for different organizations - What is important though, is that the model represents a robust set of activities, characteristics, or functions common to virtually all firms that are necessary for strategy to become reality - Structure: refers to the way work is organized and the way that products, processes, and information flow through the firm -- route system, terminals and ground infrastructure, aircraft inventory - Systems: take in things like the online reservation system and the procurement system that deliver fuel to the plans and schedule the flight crews and maintenance - Staff: peoples from managers to the baggage handlers - Skills: all the abilities of ^ people, the attributes that go into their selection and training, and the institutional memory of how things get done -- every strategy requires certain skills for its effective implementation, and those skills are a reflection of the people the firm hires as well as the training and development it provides - Style: refers to the personality of organization -- every firm has a personality - Shared Values: can also be called culture, which is simply the core of what the people in the firm believe - The 7 elements must complement one another as well as the strategy - This model can provide a clear and cohesive guide - A good strategist will review continually the linkages and relationship depicted in the model in an effort to improve, to identify potential problems, or to work through the implications of changes in strategy - When performance is poor, the cause can usually be traced to some inconsistency or lack of fit in what the firm seeks to do and what it is actually doing - In concluding this model. two issues need to be reinforced and understood 1) Many of the important determinants of performance are subtle and indirect, embedded in the linkages among the elements of the model -- thus it can be complex and even tedious, requiring detailed evaluation, imagination, and expert judgment -- effective implement depend upon a combination of events and factors -- the challenge is to understand all of those linkages and their implications and to use that understanding to create a firm that can deliver on the promise of its strategy 2) Because of all of the complexity, fit can always be improved -- the various connections across the firm can be refined and strengthened -- one way to put relentless pressure on the competition is by continually tightening the fit among the elements of the 7-S model

Who are the different parties who affect or are affected by the firm?

- Shareholders or (Stakeholders**) -- can affect the organization—variety of parties

Adaptation and Learning (Her Notes and My Notes)

- Strategy changes to fit the environment, to remain competitive, not for the sake of change. -- Adaption asks what is the current strategy and what is the current environment, do they fit? -- Do we have what we need to create value in the future? -- How does the organization structure change to meet the strategy? - Argyris - Theories in Action (Action Science) (look this up??) -- PICTURE ON SLIDE 20-22 OF LECTURE 2 CHAPTER 8 PDF ******* LOOK AT THESE !!!!!!!!!!!!!! Best information for Adapting and Learning Comes from: - Front lines of the firm: immediate feedback - Most involved see the new technologies and the competitors - Best place to experiment with alternatives, new adaptions and feedback for changes - Funnels into the feedback loops of strategy - Natural, organic process - Organization must be set up to facilitate this process My Notes: - The ultimate goal of the prescriptions is an organization that can learn and adapt, that can redesign itself in an ongoing and continuous way, and by so doing stay focused on the bulls-eye of a moving target - Strategy implementation involves building structures, system,ms, skills, shared values that complement the strategy, but implementation must also provide for the continuous redesign of the organization, as necessary, to stay fit to an ever changing strategy - Strategy, does not change for its own sake, though - It changes to maintain fit with the environment - Fit between the strategy and the environment is the key to a CA - To do well over time, firms must create value for their customers both in present and future - Implementation then, involves two equally vital imperatives 1) To ensure the creation of value in the present 2) Enable the sort of learning and adaption necessary for the creation of value in the future -- It is only by accomplishing both that strategy and CA maintain currency and relevance in the marketplace over time - CA is closely relate to the process of adaptation and learning - Yet these processes are rarely connected to the nuts and bolts of strategy implementation - Rather, adaptation and learning are often viewed as academic topics, of corner to theorists and consultants but of little tangible value to practicing managers - That view is unfortunate - Organizational learning and adaptation that follows are natural by-products of strategy implementation and essential contributors to CA and performance - When practiced effectively, strategy implementation should stimulate creativity and innovation, provide previews of emerging changes and prepare the firm to adapt - Virtually, all depictions of the strategy process show feedback paths - These loops ar meant to symbolize how information on the results of a strategy feeds back to the beginning of the strategy process - Whether called feedback, strategic control, or learning, the effect is the same--to incorporate the best, most relevant, and the most current information into the formulation of new strategy - The best source for such current, relevant, and high-quality information is the front of the line of the iim, where the feedback is the most immediate and tangible - The front line is also the best place to experiment with alternatives, to try new things, and refine current offerings - This sort of experimentation is the first step in learning - Creativity is encouraged, innovations in products and processes are attempted, new combination are tried, and the responses are evaluated - All of the resulting information then feeds back into the crafting and development of new strategy - This approach to implementation enables the firm to learn, in process, enables ongoing adaptation and evolution, without ever requiring radical overhaul of the firm's structure and systems, and it allows all this to happen naturally, on the basis of information that comes to the firm through its normal activities - This sort of thing can happen only if the firm is minimally committed to the status quo, willing to reexamine things continuously, able to get outside of itself and so view the world realistically, and then willing to change even before the need to change becomes urgent - It is this process of continuous learning, adaptation, and change that will emerge form the prescriptions outlined earlier - A firm that can resist the pressure towards excessive rationality, consensus, and consistency can take advantage of the information that flows naturally from its own operations - Once it has achieved minimal affluence, it can direct resources towards experimentation and innovation, rather than just building slack to buffer the current advantage - By feeding information earned through implementation drizzly into the strategy-making process, the first can capitalize on first-hand awareness of the environment - With the ability to experiment and learn, the firm can begin the process off planning and adaptation before it is forced to change by pressure from the outside - As a result, the firm can understand and be ready for the future even before that future fully arrives - When done well and when integrated throughout the whole of the strategic process, implementation, learning, and adaptation can sow the seeds of truly sustainable CA

Agency Problems (My Notes)

- The issue of greatest concern in the governance of publicly held firms is the separation of ownership and control - Typically the principals or stockholders do not directly manage the firm themselves, despite the fact that they are its legal owners - Rather, the managers of most publicly traded firms are hired professionals, who act as agents of the owners - These professional managers control the firms but frequently bear few of the risks of ownership - As a result, their motivations, along with their orientation towards risks and rewards, can be quite different than those of the owners, thus creating the potential for MORAL HAZARD - As a result, managers may simply behave differently than owners because of the differences in their perceptions and motivations - Sometimes the owner and the manager have different interests on what to do to the firm based on long and short term goals - The separation between the two also creates asymmetries in knowledge - Professional managers will typically have much better information about the firm and its activities than absentee owners; and the owners must rely on the managers for the information that they receive - Thus, a manager could be completely self-interested while effectively hiding that fact from the owners - This situation favors managers and creates a problem for owners; and so many of the issues in corporate governance deal with ways to overcome agency problems and make sure the agents or mangers act in the best interests of the principals they represent - Two key mechanisms by which this occurs: 1) Oversight System - through which management actions are monitored and owners are kept informed of firm activity 2) Composition System - which employs incentives to align the interests of managers to owners - To understand how these systems function, it is important to identify some of the key roles and actors - First, BOARD OF DIRECTORS: every corporation has a board, charged with the FIDUCIARY RESPONSIBILITY of representing the interests of the owners in the governance of the firm -- the board recruits, hires, and oversees the chief executive officer, who then sets strategy and is responsible for producing results that increase the value of the firm for its owners -- the board is charged with monitoring this performance and making sure that the firm operates within the law and in the best long-term interests of the stockholders - These mechanics can be quite complex in practice - Fueling this complexity are the number and variety of owners - Retirement funds and mutual funds, for instance, may invest heavily in a particular firm on behalf of their members -- these INSTITUTIONAL INVESTORS, as they are called, plan an important role in governance by consolidating and giving weight to the voices of individual stockholders -- they also exert pressure on firms, as their decisions to purchase or sell large blocks of a particular stock can substantially influence the perception and price of that stock in the marketplace - Other owners may represent themselves but control large blocks of voting shares -- according to the US law, when the ownership of these large block holders reachers 5% they must be publicly disclosed, as large voting blocks can substantially influence board decisions and firm policy - Finally, firms can issue stock in different classes, some of which may include voting rights, some of which may not - With different types of stocks, there can be any different types of stockholders, with many different profiles and interests - Many owners are individual investors, with little expertise in the business, no direct knowledge of its operations, and little say in its strategy - Because these individual investors are seen as being so essential to the functioning of the capital markets and yet are so weak in terms of their influence, there is the Securities and Exchange Commission (SEC) -- Created by the Securities and Exchange Act of 1934, the mission is "to protect investors, maintain fair, orderly and efficient markets, and to facilitate capital formation" -- The SEC enforces rules on ownership, voting rights, proxies, stockholder protection, and what firms can and must disclose to the public about their operations -- Compliance with SEC regulations is the responsibility of the BOARD, and various different committees within the board will typically be charged with different responsibilities --- for example, boards will generally have an audit committee (responsible for hiring an independent auditor to review the firm's operations and financial performance; this committee will work with the independent auditor to make certain tat all information is current and correct and to disclose information, as necessary, to keep the current and prospective owners informed about the firm's activities), they may also have a governance committee (accountable for nominating and overseeing the election of new board and committee members; this committee may be in charge of setting compensations and retirement policy for board members as well as polices for resolving disputes; this committee is essentially answerable for assuring the independence of the board, as necessary, for the board to fulfill its fiduciary obligations), and there will typically be a compensation committee (responsible for compensation of the CEO and other key executives; charged with providing compensation sufficient to attract the best managers to the firm, while structuring that compensation so that it aligns the interests of the managers with the interests of the owners). - Compensation of the CEO and the other top executives is an especially controversial issue; but it is among the most important responsible of the board - Ultimately, the board wants the CEO and other top managers to act as effective leaders of the firm; meaning mangers should be good stewards of the value and resources entrusted them, while also being visionary and assertive in creating opportunities and building CA - Absentee owners expect that mangers will focus on creating value, not just on maximizing earnings - Drucker "Managers are to do the right things in addition to doing things right" - Owners expect that mangers will act in the interests of the owners, will behave appropriately, and will do all that is in their power and ability to leave the organization in a better position than it was when they encountered it - To achieve its goals and to encourage this kind of leadership, the board will usually offer packages consisting of both present and deferred compensation, paid in the form of cash salty, incentive bonuses, stocks, and options - The purpose of mixing various forms of compensation and then paying that compensation over extended periods of time is twofold -- first, the board wants to hire the best and brightest managers to run their companies, as doing so is in the best interests of the stockholders; but, because of agency problems, these hired mangers may not think and act like owners; thus, incentive-based compensation, often in the form of stock or stock options, can serve to align the interests of mangers with the interests of owners - Here again, the actual process can be very complex and often produce unintended consequences; many executives have received extraordinary sums as the result of bonuses, stocks, and options -- such as the CEO of Disney earning over $700 million during a 5-year period -- many have argued that these sums are justified based on gains in the companies' stock values--gains which benefited the shareholders -- others, see these payments as evidence of agency problems gone amok -- and there is evidence that the highest-paid CEOs also have the highest-paid followers, which may reflect this disproportionate power and influence on the part of the CEO -- all of this has contributed to an atmosphere of populist anger and a widely shared belief that effective oversight by many boards of directors in inadequate

Corporate Governance (Online Book)

Best Practices in Corporate Governance (Link) - Anil Shivdasani and Marc Zenner interpret two decades of research and make conclusions on how to best govern a corporation Risk and Return of Publicly Held Versus Privately Owned Companies (Link) - Simon H. Kwan weighs the pros and cons of both public and private ownership in the banking industry The Joint Determinants of Managerial Ownership, Board Independence, and Firm Performance (Link) - Jeffrey L. Coles, Michael L. Lemmon, and Yan (Albert) Wang describe the optimal elements of managerial and independent governance within a firm in order to achieve optimal performance In practical terms, when people think of the leader of a corporate organization, they think of the CEO. While this is understandable, in reality there are many people who assume roles of leadership, and the responsibility it entails within an organization. Corporate governance is the area of strategy concerned with who assumes leadership roles, and how they go about it. One area where corporate governance practice diverges significantly is between privately and publicly owned firms. Privately owned firms tend to have simpler governance structures since a smaller number of owners means less dissonance amongst ownership. Because of this, privately owned firms often follow more closely the desires of their owners. The problem in large, publicly owned firms is the difference between ownership and control. The people who actually own the firm do not oversee its day-to-day operations, this is left in the hands of hired professional managers, and these managers' visions may be different from the owners' visions. Mechanisms such as a board of directors are put in place to help make decisions on behalf of all the owners. Decisions such as hiring chief executive officers and determining their pay are made by the board acting in the best interest of the owners. Because of this power, seats on a board are highly coveted, and they are often held by high ranking officers within a firm. This raises a complex dilemma. These high ranking officers are certainly qualified with great knowledge of the company's operations, and they all have vested interest in the firm's success, but will they monitor their own performance objectively and punish or reward themselves accordingly? Board independence is especially important, but often not easily achieved. Good governance is an intangible resource effective in the creation and maintenance of competitive advantage. It helps to create an environment of trust and high morale within an organization. Perhaps most importantly, good governance can help keep a firm from collapsing in the face of difficult adversity.

Corporate Governance (Her Notes and My Notes)

Corporate Governance: - Concept of corporate governance: refers collectively to the processes, structures, and systems by which all of the various actors mentioned above interact and by which organization are ultimately governed. -- Speaks for the enterprise and make decisions -- Set the values that the strategy is based upon -- Determines the level of acceptable risk -- Sets performance levels -- Sets goals and who's interests are represented -- Identifies the authority and responsibility in the strategic process My Notes: - Talking about strategic leadership often means talking about the CEO - CEO's are the visible face of the organization; they are the ones held responsible for its performance and they are the ones who are expected to cast the vision, to establish the purpose, and to connect the strategy to implementation, the ones whom we look for answers when things go poorly and they can serve as handy scapegoats when there is no one else to blame - The picture is much more complex in larger firms over smaller or newer firms - CEO's are just one of several different actors in the overall management structure of most large organizations - There is also the top management team--that circles of senior managers just below the CEO in the firm's hierarchy - There are the many middle-level mangers, whose understanding, consent, and involvement are so important to effective implementation and to strategic success - Finally, there are the owners or stockholders of the business who may or may not be actively involved in it's day-to-day operation but whose principles and expectations establish its direction and values - It takes all of the different groups, working together and with the CEO to produce the desired results - GOVERNANCE refers collectively to the processes, structures, and systems by which all of the various actors mentioned above interact and by which organizations are ultimately governed -- who has the authority to speak for the firm and to make key decisions? who sets the agenda and the values that will drive the strategy? who determines what level of risk is acceptable and what constitutes good performance? etc. - The answers to these questions describe how the firm is governed and identify the key sources of authority and responsibility in the strategic process - Given some recent and well-publicized scandals over corporate ethics, concerns over stockholder rights, and recurring frustrations over executive compensation, corporate governance has become an increasingly popular topic of academic research and political debate - But even before that, governance was important because of its connection to leadership and strategy and its effect on organizational action and performance - SOX (2002) = Sarbanes-Oxley Act was the law that sets new standards of behaviors and accountability for public firms, top executives, the board of directors, and auditors; was a response to a host of well-publicized corporate scandals in firms; most far-reaching legislation affecting corporate governance, oversight, and accounting standards since the Securities and Exchange Act

Entrepreneurship (Her Notes)

Major Sections Under Entrepreneurship: 1) Entrepreneurship 2) Parallel Models 3) New Complexities 1) Entrepreneurship: - Schumpeter (1942) early contribute, identified the creative destruction process finding opportunities that previously were not identified. - Entrepreneurs find gaps in demand and opportunities that created new industry and markets and destroyed old standards, or outdated competitive advantages. - Entrepreneurship can be seen as an ongoing way of economic growth. Management's Perspective on Entrepreneurship and Strategic Management: - Concerned with: -- How entrepreneurs organized their businesses -- How they could be more successful -- How they could gain the greatest profits * - Similar concerns of the strategist in all other business environments and therefore the concerns of strategic management because useful to entrepreneurs. - SLIDE 9 OF CHAPTER 9 PDF (Picture) 2) PARALLEL MODELS - REVIEW PICTURE (DRAW) ON SLIDE 11 OF CHAPTER 9 PDF ("A general model of the entrepreneurial process") Differences in Entrepreneur Model: - Venture Capitalist: Relies on capital from investors vs. the revenues from the firm. -- Requires a strong business plan with future growth and profitability -- Expectation of positive returns -- Expectation of the length of the investment and value if it is sold. -- NPV analysis can be used to estimate the value of the investment. 3) New Complexities - Other factors of Entrepreneurs: -- Liabilities of newness - (Stinchcombe, 1965) -- Unfamiliarity, lack of example - -- Creates greater uncertainty of sale and profit -- Requires educating customers and investors -- Franchising? -- Licensing? Not under any sub-heading: Entrepreneurial Strategies--(4) DRUCKER 1) The fustest with the mostest: creating a business that dominate the market or a new industry. --- Must be totally on target, a slight miss and this strategy is difficult to adjust or alter. 2) Hit them where they ain't: creative imitation, builds on what someone else has done successfully. Exploits the success of others. Aimed at market or industry dominance, but less risky than #1. 3) Entrepreneurial judo: aims at getting a foothold in the market and a revenue stream, then move onto the rest of the market. --- Aims at becoming a leader in the market --- Works well when the market or industry changes quickly 4) Ecological niche, the specialty market: aims at control, or a monopoly in a small areas. --- Through toll-gate, a product essential to another process (Alcon enzyme needed for all cataract surgeries). --- Specialty skills - high skill early in the industry --- Specialty market -

Billions Served

McDonalds' Homepage (Link) McDonalds' History (Link) - Interactive timeline of McDonalds over the years What Entrepreneurs can Learn from McDonalds (Link) - Michael Gerber reveals the secrets to McDonalds' success over the years Online Book: McDonalds is a great example of a firm that has had long term success due to good strategy and good strategy implementation. Despite being over 50 years old, McDonalds has continued to grow and adapt to its competitive environment, and has continued to demonstrate great potential for growth and profits. McDonalds has endured fierce competition, as well as some controversy over the years, but it has maintained its competitive advantage by remaining connected to its customer base. Customers and their satisfaction are the driving forces of competitive advantage, and McDonalds has always been able to attract customers and to keep those customers satisfied. My Notes: - Despite various changes in the environment and competitors, McDonald's continues to thrive - It continues to maintain its position as the leader in the fast-serve restaurant market, continuing to expand, to deliver good value to its customers, and to grow and profit as a result - The most important lesson the McDonald's example will offer is: STRATEGY IS ULTIMATELY ABOUT WHAT YOU DO TO CREATE VALUE FOR YOUR CUSTOMERS - Firms that stay connected to their customers, that continue to offer products and services their customers value and that do so at a profitable price, will maintain their competitive advantage, and as a result, continue to perform well - Strategy is ultimately about action, about doing things that create value and so enable competitive advantage - Because the things that create value and enable CA will change along with the environment, so too must a firm's actions change as necessary to stay fit to the environment t - Those two issues, fit and change, are the subject of this chapter - Throughout the discussion of fit and change, a parallel and important distinction will become salient - That distinction is between the short term and the longer term and the different types of thinking and actions that good strategists will use to prepare and perform well in both - A short-term focus will often be at odds with a longer-term focus - In the same way, long-term thinking will often conflict with short-term realities - Thuis, there is an inevitable tension between the two, just as there will be an inevitable tension between fit and change - One is about immediacy and efficiency; the other is about flexibility and the creation of options - But, both are essential to success over time

The Basics of Leadership (Her Notes and My Notes)

Multiple Thoughts on Leadership: - Leadership is multifaceted and has many possible approaches. - Function of a leader: 1. Set the mission and vision 2. Communication and motivation to others 3. Promoter of innovation and change 4. Results oriented - Each of these activities has been associated with leadership and each is essential to long-term value and performance - As a result, each is inextricably linked to strategy, to the exercise of strategic leadership, and to organizational performance My Notes: - Leadership: influencing others towards the achievement of a common goal -- leaders are the individuals who exercise that influence, settings goals and directing others towards their attainment - Not every scholar agrees on what is effective leadership or the behaviors that produce its effectiveness; others conclude as well that it is a complex and multifaceted phenomenon, involving many layers of action, interaction, and response - As a consequence, studying leadership has proven to be a challenge and understanding leadership in all of its various forms and appearances has proven especially difficult - Like performance, leadership transcends most simple definitions; yet, just like performance, we can certainly recognize and appreciate it when we see it

Short-Term Fit, Long-Term Flexibility (Online Book)

Path Dependence (Link) - Stan J. Liebowitz and Stephen E. Margolis examine the theory of path dependence and its ramifications in the business world Prospect Theory (Link) - Website containing various resources and articles concerning prospect theory Camping on Seesaws (Link) - Bo L. T. Hedberg, Paul C. Nystrom, and William H. Starbuck's publication outlines their theories on balancing short and long term strategy with the use of Hedberg's six mechanisms - Even with tight fit among the facets in the 7-S model, there is no guarantee of long term success. This is because of the paradox of success born from the difficulty of balancing short and long term strategy. Resources invested in the short term could have greater long term costs, and long term strategies may require short term sacrifices; balancing the two is made especially difficult by an unpredictable environment. Complicating things is the principle of path dependence; once a strategy is chosen, it determines structure and practice, but if structure and practice are set, they determine future strategy, and so on. This can be a trap that managers can fall into quickly; by following the status quo, they could actually be setting themselves up for disaster in a changing environment. Because of this, firms that are older and more established in their ways suffer the curse of incumbency; they become inflexible relative to new firms and so become vulnerable to new competition. This principle is reinforced by something known as prospect theory. Prospect theory explains that gains and losses are seen differently by individual firms based on their unique reference points. A firm used to high profits is disappointed by modest profits, but a firm that has suffered poor performance is very pleased with modest performance. This effects what is seen as a worthwhile strategy by the firm. A firm with high profits will not be willing to invest a large amount of resources in a strategic change that only increases performance slightly, while to the poorly performing firm, this may be a key strategy in turning things around. - Hedberg, Nystrom and Starbuck offer advice on avoiding this paradox and on balancing short and long term investments. They conclude that investment in the short term should only be made as is necessary to maintain success and secure competitive advantage, but nothing over or beyond that is healthy in the longer term. Any other resources should be invested adaptation and learning. This helps firms avoid stagnation. Hedberg's six mechanisms: minimal consensus, minimal contentment, minimal affluence, minimal faith, minimal consistency, and minimal rationality (see chapter Three), also help to avoid stagnation.

Public and Private Ownership (Her Notes and Mine)

Public and Private Ownership: - Public and privately held firms may use different measures to gauge their performance. - Publicly held enterprises -- More visible and complicated structures -- Receive more public attention -- Stocks listed on public exchange and accessible to public ownership -- Many owners controlling varying amounts of stock -- Many different goals and objectives -- Leadership more challenging -- Agency problems - Privately held enterprises -- Ownership is closed to the public -- Can be one person, a family, a large number of people connected in some way. -- Stocks are not listed on public exchanges, and not available for public purchase -- Less concern about agency problems -- Leadership and ownership are closely related - owners influence the My Notes: - Privately held firms are those were access to the ownership rights is closed to the public -- ownership of these firms can be by a single individual, by members of a family, or by a large number of individuals who are connected in some other way -- the stock is not listed on any public exchange, nor is it available for public purchase -- commonly smaller than publicly held firms, but large firms can be privately held firms too -- even when they are quite large, they tend to have simpler governance structures than their public counterparts -- ownership is less diffused, so there is less opportunity for divisions among the interests of the stockholders -- because most or all of the stockholders share some relationship or connection, either as family members or as employees, they are better known to one another and so less likely to act in ways injurious to the group a a whole -- because there is often a closer relationship between ownership and management, there is less concern over AGENCY PROBLEMS -- so, they are typically subject to less intrusive oversight and regulation -- while governance is still important in privately held firm, it is frequently less complicated because the number of owners is smaller, the interest of the owners are often more homogeneous, and the pressure from the external regulators is lower -- management and leadership of these firms often reflects much more directly the desires and interests of the owners -- all of the stockholders, or at least a large majority of the voting stockholders, remain committed to those same, original, core values and to the same mission as established by the founder -- leadership and ownership are closely related and owners influence directly and heavily the leadership of the firm - Publicly held firms -- much more visible and complicated and so receive much more attention - are those whose stocks are listed on public exchanges and so are accessible to public ownership -- largest of these firms may have billions of shares of stock outstanding, with the potential for millions of different owners -- with potentially millions of different owners, each controlling different amounts of stock, and with those many different owners having different goals and objectives and exercising different levels of attention and involvement, it is easy to see why governance in public held firms is so important and how it can be so complex -- also easy to see how the challenge of leadership in these firms is completed by the presence of many different and varied interests and by the diffused and complex nature of organizational authority

Entrepreneurship (Online Book)

Seven Questions about Entrepreneurship (Link) - In this video, Andrew Zacharakis gives a general explanation of entrepreneurship and its purposes Rebuilding Schumpeter's View of Entrepreneurship (Link) - Richard Swedberg breaks down Schumpeter's theories of entrepreneurship and applies them to the modern economic world The Liability and Asset of Newness and Stakeholder's Assessment (Link) - Young Rok Choi examines the increased mortality risks of new ventures as opposed to established ones Entrepreneurship is the initiation, organization and operation of a business venture for the purpose of earning a profit. Entrepreneurship draws from many academic disciplines such as management, economics, marketing, and finance. Entrepreneurs are a critical component of the creative/destructive process in the market pointed out by Joseph Schumpeter. Entrepreneurs recognize untapped potential in an area of the market, create a new product or service which creates new profits, but destroy the competitive advantage of previously successful firms. Entrepreneurship is a critical function, which can be subsumed within the larger framework of strategic management. Key steps in the entrepreneurial process are: 1) opportunity recognition 2) feasibility and environmental analysis 3) business plan development 4) gathering key resources 5) promoting the plan to secure investment 6) launching the venture These steps each represent vital strategic processes and mechanisms. In this light, entrepreneurs are simply strategists operating under special circumstances unique to their environment. The unique challenges associated with entrepreneurship generally fall into the realm of the liabilities of newness. There is a heightened level of uncertainty in any entrepreneurial venture since it involves new products and new environments. Some methods such as franchising a location of a proven company or licensing a proven idea help entrepreneurs to reduce some level of that uncertainty.

Structures and Strategy--Stages of Growth (Her Notes, Not in Book)

Simple Structure - Small organization - Low complexity - Founders tend to make decisions - Run day to day operations - Entrepreneurial ventures Functional Structure - Groups employees into distinct functional areas based on expertise. - Functions often correspond to the functional areas of the value chain (R&D, Engineering & manufacturing, marketing and sales, etc.). - Org. charts showing reporting structures to CEO - Coordination and integration to accommodate growth. -- Cost-leadership -- Differentiation -- Blue ocean Multi-Divisional Structure--M-form - Consist of several distinct business units, each with own profit and loss responsibility. - Each unit led by a CEO or manager - Own BU strategy and daily operations - Reports to the corporate headquarters. - Diversification with business units across product lines and geographies. - Can have different structures that meet the needs of the BU -- e.g., functional or matrix

Strategic Leadership (Her Notes and Mine)

Strategic Leadership - What does it do? -- Driving force in the strategic process -- Provides direction and motivation for action -- Is forward looking, challenges status quo, looks for possibility, anticipates and creates a future. -- As always, leadership is judged by the results. My Notes: - It requires an ability to envision a future that is not yet visible to everyone else or even possible under the current conditions - Convince others that you are right and to convince them to join in your efforts - Requires a keen understanding of the customers, the market, the industry, and the nuts and bolts of how to make things happen - Requires conviction and tenacity in the face of obstacles, especially from within the industry where style and ambition can clash with the traditional culture and approach - Required moving people in a direction in which they did not know they needed to move and taking them to a place that they did not know they needed to go - Strategic Leadership is best understood as the catalyzing force in the strategic process * - Providing strategic leadership means providing both the direction and the impetus for action, such that the desired results are achieved - It is about knowing the right things to do and then instilling in others the understanding, motivation, and energy to get those things accomplished - It employs all the tools of the strategic process, but it is more than just dedication and rational analysis - Rather, it is forward looking and forward reaching - It challenges the status quo, pushes the envelope of possibility, anticipates and creates a desired and different future, while also building support and buy-in throughout the organization - It is complex and a multi-faceted process involving a variety of skills and inputs (FIGURE 10.1 ON PAGE 255*) - However, it is still a process that is judged by its results - It is that potential that makes strategic leadership such a fascinating and important topic and such a common feature in business books and business school curricula

Implementation (Online Book)

The Process of Strategy Development and Implementation (Link) - Clayton M. Christensen and Tara Donovan's article documents strategy from the developmental stages to an end product - The Secret to Strategic Implementation - Virtual Strategist video guide to strategic implementation -- VIDEO ON THIS Ryanair Strategy (LINK) - Ryanair's strategy as explained on their own website The McKinsey 7-S model Framework (LINK) - Mindtool's detailed explanation of the 7-S model - Implementation is the structure created by and around the strategic plan. It is the sum of the infrastructure and actions that bring the strategy to life. Too often students, consultants, and managers overlook implementation, but it is an essential aspect of strategy. No strategy can be effective without solid implementation. Indeed, even the best strategies and plans will typically need to be changed or adapted, once the process of implementation begins. So implementation is also a process by which new strategy is created. - The concept of a strategy needing to fit its environment is applicable here as well. Just as strategy must fit the environment, so must it also fit the organization. In essence, the organization must be structured in accordance with needs and demands of the strategy. Thus, a strategy that works in one firm may be poorly fit to another. Ryanair's success in the European airline market is a direct result of its infrastructure fitting its strategy. However, that strategy would be less successful if adopted by other airlines, with different structures. - The McKinsey 7-S model depicts seven facets of an organization that are likely to affect performance. These seven facets are all connected, and good performance results when all seven work together. These facets are strategy, systems, skills, style, staff, structure, and shared values. While some will dismiss the model as overly simplistic, it is still a powerful tool for guiding strategic management. Indeed, conducting a full, detailed 7-S analysis can often be tedious, but the benefits can be well worth the effort. Constantly adjusting different aspects of the model within a business can help maintain growth and good performance.

Concluding Thoughts and Caveats (Online Book)

Understanding Dynamic Capabilities (Link) - Sidney G. Winter explains dynamic capabilities and their vital role for firms The Promise and Peril of Real Options (Link) - Aswath Damodaran examines the pros and cons of real options for businesses - Because a competitive advantage produces value for its firm, competitive advantages themselves have a value. The harder they are to imitate or substitute, the more valuable they are. However, this can lead to managers getting caught up in the pursuit of a perfect resource to give them a highly valued, sustainable competitive advantage. However, managers should focus instead on where to go next when current advantages cease to be valuable. The ability of firms to move from advantage to advantage over time represents their dynamic capabilities. These are the firms' abilities in adapting to an ever changing environment. The focus then for managers should not be on the development of the perfect resource, but on developing dynamic capabilities. Some firms may purchase an option on the future, such as a patent on technology still under development, with the hope that it will provide some form of value in the future while giving the firm time to evaluate and lean on the market. The potential value of these options actually represents real value for the firm. These are known as real options. The real options approach allows firms to invest modestly in many different areas and decide after further education which to discontinue and which to pursue fully. NPV (Net Present Value) analysis is a powerful tool for managers in identifying the best ways to allocate resources. However, there is a subtle and inherit flaw in this approach. By discounting future opportunities, in relation to current opportunity costs, a firm biases itself against risky investments. This can support the tendency for managers to fall into the trap of simply reinforcing the status quo, which can breed stagnation. Ultimately every firm should be viewed as a means to an end, not an end unto itself. Firms simply serve a purpose and that purpose is to create value, for the customers, the owners, and the other stakeholders. By focusing on value creation, for customers first and then for the other stakeholders, a firm strengthens its competitive advantage and makes itself more valuable. However, a firm that rests in its own accomplishments is doomed ultimately to failure.

The Value of Good Governance (Her Notes and Mine)

Value of Good Governance - WHY? - Creates conditions for competitive advantage - Builds trust and the firms reputation to suppliers, investors, employees and customers. - Can prevent disasters and scandals as seen in our recent past. - Adds value to the firm beyond the assets. - Overall - provides a direction to the enterprise and sets the values on which strategic decisions are made My Notes: - As important as governance may be, it is still a means to an end rather than an end to itself - The real end is the success of the firm, measure din relation to its mission and purpose - Viewed this way, governance is just one more responsibility of leadership and strategic management - Like international business and entrepreneurship, corporate governance is a highly specialized area, with its own vocabulary and requiring considerable and specialized understanding - Nevertheless, it is still just one of many issues of importance to strategic leaders/managers - And so it must be understood in the proper context - Good governance is necessary but is not sufficient for good leadership to emerge and good results to occur - Good governance can contribute to the development of a CA but it is not a competitive advantage in and of itself - Good governance creates conditions in which CA can grow, but by itself it cannot overcome a highly competitive environment, a poorly designed product, or a poorly marketed service, nor can it overcome a resource base that is outdated and easily imitated - Rather, good governance is an intangible resource, something that interest with and adds value o there things - GG enables good leadership and good management and undergirds a firm's reputation, providing assurance to suppliers, investors, employees, and customers; it facilitates trust and lasting relationships, it contributes to loyalty and commitment, and it can promote involvement, investment, and effort; it adds new value, over and above the obvious value of a firm's assets; it enables others to succeed, encouraging them with resources and autonomy and then monitoring the results to assure accountability - Beyond these affirmative benefits, GG can also help to prevent disasters; many of the scandals of the past decade that occurred in firms can be traced to lack of vigilance by the board of directors; and lack of vigilance is a failure of corporate governance - As a result of the scandals, many firms failed; while some others survived, they did so only after great turmoil - For all these firms, though, there was great embarrassment and substantial economic loss - Better governance, then, is like a healthy habit; it builds a stronger organization while also helping to prevent catastrophe - As a result, it is among the many important influences on strategic leadership and the many key responsibilities of strategic management

The Basics of Leadership (Online Book)

Why Should Anyone be Led by You? (Link) - Rob Goffee and Gareth Jones discuss main ideas from their book - Why Should Anyone be Led by You? Measuring Institutionalization (Link) - David Piper's multimedia presentation explains how to properly apply the institutionalization process in a business Casting a vision is determining a common principle or logic for the organization and its actions. It is finding a unifying theme that all branches of an organization operate under. Simply having a vision is not enough though; it must effectively inspire fellow members within the organization. This is where the second aspect of leadership, communicating and motivating, comes in. A leader's ability to connect with his or her followers, and influence them in a positive way is critical. This positive influence will then spread throughout the organization. The third aspect of leadership: catalyzing innovation and change, emphasizes the importance for an organization to not become stuck in its ways. An organization must constantly be changing and adapting to its competitive environment in order to survive. This change does not happen without a catalyst, and this responsibility often rests in the hands of leadership. It is up to leaders to make sure their followers do not become too set in their habits, and this is where the final aspect of leadership, driving for results, comes in. A leader must constantly be pushing those he or she leads towards his vision. It is the leader's job to continue forging ahead, and to prevent complacency. At the heart of this is the idea of institutionalization. Every organization has an identity, and a leader must shape this identity effectively.

Summary (Her Notes and My Notes)

- Implementation contributes to CA in 2 crucial ways 1) It is the process of converting strategic intent into tangible action -- Thus it involves organizing and margin the nuts and bolts of the firm is such a way that the strategy functions as it was intended to do -- Organizational structures and systems, along with processes, practices, style and culture, must work tougher for strategy to create value and produce CA -- Just as strategy must fit the environment, so too must the firm fit the strategy -- That internal coherence--between the strategy, structure, systems, skills, staff, style, and shared values of the firm-was illustrated in the 7-S model -- Each of the elements is important in its own right; however, they are all much more important as part of a larger whole -- The fit of that larger whole is essential to the effective implementation strategy -- Strategy that is well fit to the environment and that is supported by coherent alignment of these elements will produce CA and superior advantage -- Moreover, where there is little or no CA and where performance is poor, the cause can be traced to one of two causes-- either poor fit between strategy and the environment or poor alignment between the organization and its strategy -- Understanding the 7-S model and learning to apply it to different strategies and organization configurations, then, is a key skill for every strategist 2) The second way that strategy implementation contributes to CA is by providing the sensory inputs to the firm -- As it implements strategy, learning to create value and renting the process for delivery it, the firm also gathers information about the environment -- This info is immediate and practical and customer to each firm and each environment -- Through implementation, customers and potential customers are engaged as a resource for identifying new opportunities, new competitors, and new technologies -- When strategy is implemented, firms should be gathering feedback on what works and what fails to work, on what customers like and what they object to, an don what changes are likely as the industry evolves; this info should then be an input for innovation, new product and process development, and the formulation of new strategy -- This process of "learning by doing" is designed to keep the firm ahead of changes in its environment, enabling it to learn, adapt, and redesign itself as necessary to sustain CA; but this is difficult to achieve and manage; most challenging in highly competitive environments and in the most successful firms -- This is paradox that relates directly to the conundrum of long and short-term thinking -- To thrive in the short term, providing the value customers demand while outperforming competitors, firms must use they resources efficiently, tightening the fit between the strategy and the firm and strengthening their own internal alignment so as to eliminate waste and to maximize return on investment -- This sort of efficiency, however, leaves little room for creativity, innovation, and novelty -- These things, by their very nature, are uncertain, inefficient, and speculative -- As the quote by Thomas Edison illustrated, the pursuit of creative and novelty involves certain failure on some things, as needed, to learn about others; even in the best cases, learning about the future and developing the right products, processes, and strategies for it will involve diverting some resources and some attention away form the present and away from the current CA - Resolving this dilemma, in both long and short term, involves reprogramming the strategy and the strategists - Managers should seek to minimize internal commitment, consensus, consistency, affluence, rationality, and faith - While still doing what is necessary to create value for customers and to develop CA, firms and mangers should also cultivate a health sense of insecurity, discontent, and urgency - They should seek better products and processes, challenge their own assumptions and priorities, and try to improve upon the status quo - Rather than defend their own advantages, they should look to overthrow them, before some competitor does - Paradoxically then, to create the greatest value the firm must be its own fiercest competitor, constantly feeding new information gathered through implementation back into the formulation of better strategy - Fail at this, and the firm will eventually drift out of favor and relevance, losing touch with customers and being surpassed by innovate competitors - Succeed in this, and the firm will move from strength to strength, maintaining its alignment with the environment and sustaining its CA

What is the value chain attempting to accomplish?

- An analysis of a firm to create value through at least one of the activities and makes sure that it is delivered to the customer - Support and Primary activities

Entrepreneurship (My Notes)

1) Entrepreneurship - Defined: THE INITIATION, ORGANIZATION, AND OPERATION OF A BUSINESS VENTURE FOR THE PURPOSE OF EARNING A PROFIT -- reflects the origins of the word entreprendre (a French word that means "to undertake" or "to initiation") - Entrepreneurship has grown to take on much broader connotations and now includes a host of issues involving innovation, private equity, new eventide management, and small business management - Those who study Entrepreneurship examine a range of varying issues: characteristics of Entrepreneurs and Entrepreneurial teams, strategies of new ventures, franchising, environmental influences on venture success, the commercialization of new technologies, resource protection, and firm capitalization - Most schools have programs for Entrepreneurship - In both theory and practice, Entrepreneurship is interdisciplinary with scholarly roots in both economics and management, the field draws form finance, marketing, and other disciples as well - Earliest interest in Entrepreneurship arose in economics, through the work of Joseph Schumpeter (1942) -- recall his concept of creative destruction (new products replacing old ones) in relation to innovation and change -- innovation and change are important to all types of firms but are especially salient here, as the creatively destructive force in economic systems that he identified was Entrepreneurship - At the macroeconomic level, creative destruction was the collective manifestation of many individual Entrepreneurs, acting to seize opportunities in the environment that had previously gone unrecognized -- Entrepreneurs were able to discern gaps of unsatisfied demand and untapped potential; they then marshaled the resources and launched the businesses to provide innovative products and services to fill those gaps; sometimes it worked: the gap materialized as expected and the new products and services were valued and purchased by the customers; other times, it did not work and the venture failed; that risk, though, of initiating and organizing was borne by the Entrepreneur - When it worked and the venture was successful, the result was both creative and destructive; the new venture provided better value to customers, which led to new revenues and profits; in doing so, though, they set new standards, established new norms, and created new industries and markets; these new ventures, with their new products and services, destroyed the status quo along with the competitive advantage of many existing firms - This phenomenon was of great interest to economists, who saw Entrepreneurship as an ongoing source of economic growth; with each successful occurrence, Entrepreneurs created new value for themselves and the economy, inspiring others to look for similar opportunities and creating the conditions in which new gaps could rise - The recognition of Entrepreneurship and the realization that it often led to the creation of new firms attracted interest and scrutiny from management scholars, who were concerned less with the economic and societal impact of Entrepreneurship than they were with the normative issues associated with the operation, management, and performance of the new firms - Those interested in Entrepreneurship examined issues such as how Entrepreneurs organized their businesses, how they could be made more successful, and how they could be managed to yield the greatest success -- because of this, Entrepreneurship came to be associated with strategic management -- indeed, at one level the two are almost indistinct - Strat mgmt is concerned with the whole enterprise and with performance at the level of the firm;the same is true of Entrepreneurship -- thus, Entrepreneurship, along with the range if issues related to new venture management, can be considered a sub discipline within the larger framework of strategy 2) Parallel Models (UNDERSTAND BETTER ON PAGE 234 OR SLIDE 11 OF PDF--CHAPTER 9) - Key steps in the Entrepreneurial process--specifics may differ a little, but the basics remain largely the same 1) Opportunity Recognition - Mission/vision (Strat MGMT) - Important to see the pursuit of this opportunity as the purpose of the Entrepreneur - Can create it or identify it - Purpose can be explicit and formalized in written statements or implied and understood through action and common direction - Strategies of the firm, new and existing, will be directed by this basic purpose 2) Feasibility and Environmental Analysis - Environmental scan (OT) (Strat MGMT) - Challenge here is to evaluate the opportunity in light of the environmental forces - Example: Will customers really value and buy the new product or service? Will the anticipated demand continue over time? Can a competitive advantage be achieved and sustained in light of anticipated competitor reactions? - Very similar to larger strategic management model - Entrepreneurial ventures would want to assess macro and competitive environments and would do well if they used provers five forces model and the product/industry lifecycle - When doing the analysis, both Entrepreneurs and existing firms are looking for the same sort of things--evidence of opportunity and sustainability, insight into the elasticity and strength of the demand, and clues about the behavior of competitors, customers, and suppliers - Both are interested in identifying space or a position within the environment that their firms can fill and, in so doing, generate revenues and earnings 3) Business Plan Development - Identify resources and capabilities (Strat MGMT) - Begin assessment of own resources and capabilities in light of the conditions identified through the environmental analysis - In strategic management this happens through the use of the value chain - In Entrepreneurship it happens through business plan development and through the prioritization and securing of the key resources - Focus on the business plan is ubiquitous (existing at the same time) and intense - BUSINESS PLAN: IS AN ARTICULATION OF THE STRATEGY AND IS USED TO SECURE FINANCING AND SUPPORT; IT SPECIFIES HOW THE NEW FIRM WILL MAKE MONEY BY DETAILING HOW THE VENTURE WILL CAPITALIZE ON OPPORTUNITIES IN THE ENVIRONMENT - Any good business plan will include an analysis of the resources and capabilities of the venture itself; that analysis will resemble the value-chain analysis and take into consideration the resources needed to support strategy, along with some assessment of the value, rarity, imitability, and substitutability of those resources going forward - A good business plan, will fulfill the same requirements as the basic competitive analyses described in chapters 4 and 5 (resource based view, value chain, five forces) - Both are designed to assess the opportunities and threats in the environment, both should capture the strengths and weaknesses of the firm or venture, and both are designed to articulate how the firm will make money through specific activities in a specific competitive environment 4) Gathering Key Resources - Identify resources and capabilities (Strat MGMT) - ^ Same information applies here as it does in #3 5) Securing Investment - Implementation (shared between 5 and 6) (Strat MGMT) - After business plan is complete and the conceptual part of the strategy is in hand, implementation is next - That often means promoting and selling the plan to investors - These new firms require resources even though they may not yet have a product or service to sell - So, rather than rely on revenues, they rely on capital supplied by investors - In the world of Entrepreneurship, these investors--often called VENTURE CAPITALISTS OR ANGELS--supply the necessary cash flow, allowing the venture to operate while it develops and gets to market its products and services -- these investors are motivated by economic opportunity aka, they expect to make a profit from their investments -- because they frequently have a variety of other opportunities, they are typically very deliberate and sophisticated in their assessment of every new firm -- they study the firm, their management teams, external environments, etc.. very closely to estimate the value of the competitive advantage both now and in the future -- they want a strong return, like any investor -- when they are connived the opportune is right, they invest, providing capital, connections, and expertise in return for a portion of the equity 6) Launching the Venture - ^ same information applies here as it does in #5 Even though obtaining new venture investment is complex, it still reflects the same basic elements of any other form of investment (expectation of positive return) - thus, the firm must offer the prospect of future cash flows - there is an understand that the investment must be competitive (venture capitalists can choose who they want to invest in--just like a private investors chooses among a variety of stocks, bonds, real estate, etc.) Finally, there is a horizon over which the investment will be held and a terminal value if it is sold - value can be estimated using NPV analysis - it is still helpful to see it in terms of its net value even though Entrepreneurial venture is a unique type of investment - helpful to think of the venture itself, along with its management, its resources, and its capabilities, as a product that the investor buys - as with all transactions of this type, there is an exchange value or price; in this case, the price reflects the amount invested and the amount of equity provided in return - there is bargaining power at work in this exchange reflecting the relative desire of the two parties to reach a deal - there is competitive advantage; high potential ventures, with strong prospects, quality resources, and good potential, attract more investment and at better terms, while less attractive ventures must give up more in order to get less Entrepreneurs ultimately face the same challenge as any other strategist: they must design a strategy that creates and delivers value, despite the opposition of competitive forces and the friction of organization processes; they must craft a plan that identifies the opportunity while addressing the threats; they must identify the sources of value and rareness and then acquire the resources necessary to bring their strategy about; and they must take into account the potential for responses from the competition and the dangers of imitation and substation. And they must do all of this in such a way that all the other potential stakeholders--investors, business partners, suppliers, and employees--will see and understand the potential the new venture represents. Finally, they must deliver on that potential, creating value in the form of transactions that lead to revenues and profits. Viewed in this way, Entrepreneurs are simply strategists who happen also to be operating under special circumstances and so grapple with a variety of special challenges unique to their setting 3) New Complexities - Most of those special challenges associated with Entrepreneurship fall broadly into a category knows as the LIABILITIES OF NEWNESS -- newness, in most any endeavor, carries with it some unique problems related to unfamiliarity and the lack of example or precedent -- entrepreneurs create new products and services or offer existing products and services in new places or in different ways -- as a result, they often face greater uncertainty and ambiguity than the mangers of other types of business -- introducing new products or services means education customers; could mean creating new process, training new workers, or retraining existing workers in new methods; may mean developing new supplier networks, introducing a new business model, or educating investors on the risks and prospects of a new business model -- this requires Entrepreneurs to be good strategists while also dealing with heightened uncertainty on their own as well as on the part of others - Many of the special issues and topics have been studied and are reflections of these special challenges and liabilities -- FRANCHISING: an organizational form that enables growth by leveraging the financial resources of multiple independent owners, while also providing those independent owners access to a recognized name, to proven systems, and to tested products and services -- LICENSING: mechanism whereby new firms can commercialize an invention ora piece of intellectual property without incurring the risk and uncertainty associated with market research and product development --- research into the various roles of venture capitalists reflects the fact that these individuals can and often do contribute more than just money to the success of their ventures --- having invested with other Entrepreneurs and in other new firms, these VCs will often have expertise and connections that can be leveraged to reduce uncertainty and to improve the chances of venture success; but for learning purposes in this book, it is helpful to view Entrepreneurship as a special case of strategic management Section Conclusion on Entrepreneurship: - specialization by academics and managers has become a necessary reality in the face of overwhelming complexities throughout the business world - though, specialization can be a double-edged sword when an intense focus on how things are different prevents us from seeing how they are still the same - while Entrepreneurship is different and specialized in many ways, it is still simply and best understood as a special application of strategic management - it is still about fit, still about resources, still about creating value and competitive advantage, and still about providing a return on an investment - while the terminology and issues may change, and while the challenges may be somewhat specialized, those basics remain very much the same

International Business (My Notes)

3 Subheadings 1) International Business 2) International Strategies 3) Implementation and Fit 1) International Business - The world of business is becoming increasingly global - In addition, the birth of new industries may yet provide even more impetus for other new firms to expand and grow into global giants - The amount of international business is growing rapidly - 50 yrs ago international trade was barely more than 1% of the world GDP; by 2006 it represented 30% and that proportion continues to grow - FOREIGN DIRECT INVESTMENT (FDI): direct investment in foreign assets by firms and individuals -- FDI has risen drastically over past 30 years to the point that it is over 25% of world GDP - This same period has seen an explosion of treaties, agreements, and new organizations intended to facilitate international business and trade - Perhaps the most significant of these was the establishment of the euro as the standard currency among the majority of nations in the European Union which is now used and accepted in over 20 countries, making trade between individuals and businesses in those countries virtually seamless - Others that have impacted international trade: -- The North American Free Trade Agreement (NAFTA) created a free-trading bloc among Canada, Mexico, and the U.S. --> ASEAN similar/same thing as NAFTA between Southeast Asia called AFTA (Asian Free Trade Area) which is designed to leverage bargaining power and to facilitate trade and economic growth - WTO (World Trade Organization) was created in 1995 for the purpose of liberalizing world trade; now has 153 members--80% of the 192 nations recognized by the US - Two things are clear 1) The trend towards GLOBALIZATION of business is pervasive and ongoing -- the world can be viewed as a series of regional economic blocs and many believe that this regionalism represents movement along a continuum, away from fragmentation and towards true globalization -- there will be periods where levels of it decline, but the overall trend is undeniable and likely to continue -- the world is moving closer and closer to becoming a single market where goods and services are made and sold with little regard for national boarders -- as the experience of the EUROZONE has shown, there is a continuing trend towards TRANSNATIONALISM, where national identities are blurred and pose increasingly smaller constraints on the conduct of business 2) International business will be an increasingly important and common concern for strategic managers -- international business has often been viewed as so unusual and complex that it was the province of only the largest companies and only the most sophisticated and dedicated specialists -- today, it is more and more normal and an everyday part of strategy and of increasing importance to the success of every firm and a challenge of every strategic manager - International business is defined here as transactions between individuals and businesses that cross national borders -- wide range of issues implied by this definition; currency, trading policy, cultural and attitude differences, patents, taxation, accounting rules, etc... -- these issues affect the performance of international firms, we well as the competitive environments of most non-international firms -- given this, international business must somehow fit into the larger framework and logic of strategic management - While there is much about international business that is specialized, technical, and complex, there are also many issues that parallel the basic framework and logic of strategy - This section outlines some parallel issues along with some common implications meant to help students and managers translate across the contexts, from the basics of strategic management to the practical realities of international business and then back again 2) International Strategies - One important parallel comes in the area of basic strategy and competitive advantage -- CA derives from one of two sources--low cost or differentiation -- these generic stages are really reflections of market conditions and demand elasticity (characteristics of differentiation and low cost and what that means from that customer standpoint) - The same is true in the international context: elasticity of demand, along with issues like product substitutability and bargaining power, still shapes strategy and competitive advantage - In the international context, though, the scale and complexity of the market is much greater - Thus, the opportunity emerges for two different kinds of generic strategy and leverages the same principles discussed in chapter 5 but does so in a way that is unique to the international context. Both reflect basic realities about the international market and about how firms compete within it. 1) Global Strategy - follows an ecumenic logic that is very similar to the low-cost strategy; leveraging things like efficiency, scale economy, and portability to offer products and services that appeal to elastic customers - but, it does so by treating the world as a single, large, and seamless market where on product or product category can be adapted easily to suit all of the global demand - standardization around one basic model provides enormous scale advantages, lowering cost per unit dramatically - standardization and scale enable firms to source their materials at lower costs - firms with global strategy use their bargaining power to lower its costs and to make its products and services more accessible and attractive to more and more customers, enabling greater competitiveness in an industry marked by high elasticity of demand - Firms that have adopted this approach: -- large financial institutions -- automobile industry (Ford, GM, etc) --- these firms leverage common technologies, designs, and platforms to gain tremendous operational efficiencies --- size gives them enormous bargaining power over their suppliers and they enjoy tremendous scale economies, as necessary, to gain market share and profitability in an industry where substitutability and bargaining power of the buyer are high - Indeed, in every industry where the conditions are ripe for low-cost-based CA, there are also opportunities for a global strategy - Just as those same basic forces drive domestic competition towards low-cost strategies, so too do they drive international competition towards global strategies 2) Multi-Domestic Strategy - Firms operating with many different products in many different markets - Huge spectrum of tastes and preferences, maze of laws and regulations, different cultural norms and histories - Must position products very uniquely and different so they are worthy of a premium price - To do so, but be able to do 2 things 1) Must recognize and understand those differences in all of the various different countries and regions in which it operates 2) Must adjust its strategy to meet the specific needs of each of those various and different markets - It must see the world as a patchwork of different markets, each with its own characteristics and variations and each warranting its own strategic variations - This approach yields a host of different small strategies tailored to the contours of the local marketplace but together all part of the larger corporate whole - This approach is uniquely international, too - It involves operating in multiple different domestic environments - However, this strategy leverages some of the same principles as a domestic strategy based on differentiation, as it seeks to segment the demand and to match products and services to individual tastes and preferences - This type of strategy leans towards customization and away from standardization - It seeks to capitalize on familiarity and loyalty, which can reduce elastic of demand, increasing prices and margins - But this all requires local information on the preferences and tastes of the different regions and customer groups as well as they systematic flexibility to provide products appealing to a wide array of tastes - Any where that there is the opportunity for this sort of customization/differentiation, there is the opportunity for a multi-domestic strategy (YUM! brands for example--chain of restaurants operating all over the world) - Not all global strategies are low-cost based and not all multi-domestic strategies are based purely on differentiation, though - All international strategies and every CA combine some elements of both - FIGURE 9.2 ON PAGE 246 DESCRIBED -- figure adapted form 6.2 -- it is offered to illustrate the same point, only this time in a different context: that every strategy is a combination of two basic and generic motivations -- whether in a domestic or international setting, even the most cost-conscious consumers will have some desire to have their individual preferences met (so companies must offer local customization or be willing to make some small accommodations to adapt to those regional or national tastes)--on the other hand, those customers with the greatest desire for customization and local responsiveness will still care about costs and still factor them into their purchasing decisions (so companies may still look for opportunities to standardize and to leverage scale economies to reduce their costs) - International firms, then, seek to design strategies that fall somewhere along the curves in FIGURE 9.2, blending together elects of both approaches to fit their specific markets and to produce CA -- position A represents focus that is almost entirely global; to this firm, the world is one large and homogeneous marketplace, and so its products and services would be highly standardized, enabling scale economies and lower costs per unit -- position X would represent just the opposite; to this firm, the world looks like a patchwork of distinct and different markets; thus, its products and services would reflect local tastes and adaptations, enabling premium pricing and higher margins, but offering fewer opportunities for scale economies -- firm C would represent some point between the two, somewhat less attractive to the most elastic customers than firm X --- however, depending upon the nature of the market, this position could still be advantageous, by offering modest local responsiveness while still providing a reasonably low transaction cost -- virtually any position on curve 2 would offer advantages over a position on curve 1 -- recall that changes in technology, practice, and capability can enable firms to offer more of both lower costs and greater differentiation; same is true for generic international strategies -- the creation of a common currency, the availability of a new technology, or a reduction in carriers to trade could all represent a shift in the horizon of possibilities from curve 1 to curve 2 -- that shift would enable some firms to provide greater levels of customization and local responsiveness, while also better leveraging economies of scale and so providing lower transaction costs; such a position would clearly be advantageous and valuable, at least until it was imitated or encroached upon by competitors - The lesson in all of this, then, is that the same basic economic principals that guide strategy development in a domestic context should also guide strategy development in the international context; the international context is decidedly larger and more complex, offering greater opportunity and greater potential risk - Amid all this added complexity, the same basic forces are still at work, and so the sources of CA remain largely the same - As a result, the two generic international strategies, correspond both logically and practically to the two generic strategies of low cost and differentiation 3) Implementation and Fit - Beyond just the nature of the strategy and CA, there is another level of similarity between the basic strategic framework and international business - That similarity lies in the relationship between strategy and implementation - Strategy should drive the shape of the organization - Just as form follows function, so should the attributes of the organization reflect the imperatives of the strategy if the strategy is to work as intended - This was the point of the 7-S model and the rationale underlying the idea of fit between strategy and things like structure, skills, style, staff, and shared values - The relationship is just as important in the international context as in the domestic one - Success still depends upon having the right capabilities, the right people, and the right organization for the strategy - Success depends upon how well systems, people, skills, and capabilities fits the intended strategy; must develop strategy appropriate to its position in the market they are in; and must construct sorts of structures and systems needed to support that strategy - Whether in a global or a domestic market, these relationships are universal - These parallels and similarities notwithstanding, no one should underestimate the complexity of the international marketplace - Cultural, legal, economic, even geographic distances can extract a tremendous toll on a firm's strategy and success - Ghemawat --> DISTANCE MATTERS -- but fear of such costs should never overshadow the size of the opportunity - International competitors that follow the principles of strategic management will often enjoy substantial advantages over purely domestic firms - Thus, international business is a reality for virtually every manager, if not now then in the not so distant future - The challenge is to understand what is similar and what is different, to adapt and apply what is similar, and to identify and account fully for the costs of what is different - While a full examination of all of this is beyond the scope of this book, the matter is nevertheless central to performance and so fully within the purview and responsibility of the strategist

Implementation (Her Notes and My Notes)

Implementation: Doing things that create Value - Value creation changes as the environment does, and the org. must then change to stay "fit." - Fit - immediate and efficient - strategy fits with the environment and results in success. - Change - Flexible and options My Notes: - Implementation is an integral part of SM -- Defined: deployment and operation of organization structures, facilities, human resources, and support systems, as necessary, to bring a strategy to fruition - The guiding principle of strategy implementation goes back to the work of Alfred Chandler and the idea that structure should follow strategy - Structure: all of they systems, processes, and functions of the organization - Structures take shape according to the design of strategy--if the strategy is the plan, then implementation is the execution - The distinct between planning and execution, or between what theorists typically call formulation and implementation, is both intuitive and seductively simple - Som planning should precede action and resource deployments should be guided by some thought and purpose - Over the years, implementation has come to be seen by students and practitioners as being less and less "strategic" - Both students and managers too often view implementation as less meaningful; implementation is what comes after strategy and is the work of others, somewhere lower in the organization - The reality, though, is that formulation and implementation are intertwined in a very complex way - Each impacts the other and each exerts great influence over the performance of the firm - A well-formulated strategy should specify what a firm intends to do and how it intends to do it - Even a well-formulated strategy is of no use if nothing ever actually happens - Something tangible must occur: some actions must be taken, someone must do something for the intentions of a strategy to become a reality and so ave their intended effects on customers, competitors, and CA - Implementation is that something; thus implementation is key to strategic success - Mintzberg described strategy using the metaphor of a potter and a lump of clay - The potter starts with a plan for what the clay will become - The clay is unaffected by the plans - Rather, it is the actions of the potter that shape the clay - If they clay has a flaw, or if some accident leads to a surprise discovery, the potter may reconsider her plans and undertake something different than what she intended originally - He makes the point that there is always an initial plan--what we would call the formal strategy - The reality of the outcome emerges from a process of doing - The clay is shaped by the potter but the potter also responds to the clay, acting to convert her plans into reality and learning how best to achieve her objectives, given the details of the situation, as they unfold - The illustration makes clear two important points 1) Implementation requires some action or some change of assets from one purpose or state to another--plans aside, the potter gets the outcomes she wants only by getting her hands dirty; it is action that converts plans to reality 2) Strategy is simply a means to an end; it is not an end unto itself--no one should be surprised when the strategy changes, most especially the strategist--rather good strategists expect it - Mike Tyson "Everyone has a plan, until they get hit" -- no battle plan survives its contact with the enemy--no one can anticipate every contingency and every change in circumstance; in fact, no one should try - Instead, good strategists must prepare to respond as needed as the situation changes - Good strategists should be obsessed with implementation - It is how plans are converted to reality and how firms interact with the environment, so as to learn about new opportunities and threats

Summary (Online Book)

Implementation is the physical application and conduct of strategy. Without proper implementation, a strategy is worthless. However, without firm structures and resources that are properly fit to the strategy, implementation cannot succeed. In addition to carrying out strategy, it is through the process of implementation that firms can gather valuable information from the front lines to filter back into the ongoing strategic process.

4) Driving for Results (Her Notes and Mine)

Result Oriented: - Leaders are judge by results In the present and the future. - Leaders take many small actions (episodes) that lead to success through collections of individuals, resources, routines until they become institutionalized. - The org. then takes on a personality of its own, sometimes called culture. My Notes: - Focusing on success leads directly to the discussion of the final dimension - Leadership is judged by its results, both in the present and into the future - Tension between the short and the long term is natural and common; these sorts of questions (listed in the book) are pervasive in day-to-day management and yet significant to overall performance, and so they demand answers; thus, they are opportunities for leadership as well as the sorts of moments where real strategy is made - End results are typically a function of many small actions and seemingly obscure decisions - CA and organizational performance are manifestations of many discrete competitive episodes - Firms that reform well over time do so by doing well in these episodes - A strong CA and strong organizational performance, then, are the aggregated out-comes of many individual instances of good decision making, where value is created for individual customers and where lessons about the purpose, commitment, and values of the firm are taught and learned - Linking all of those discrete episodes together and connecting them to the overall mission and strategy of the firm is the job of leadership - In his seminal work Philip Selznick described this as the process of INSTITUTIONALIZATION - A business is simply a collection of individuals and resources, performing routines and taking actions, based on the costs and benefits at hand (to an objective researcher or detached theorists) - To real people, whether customers, investors, employees, suppliers, or competitors, a business can seem much more than merely that - Firms can take on a personality and they can have clear and discernible styles - Their products can have nostalgic value and they can make lasting contributes to society - Firms can have an identity and grow into positions of familiarity and trust - In essence, through the consistency and value of their actions, firms can come more than mere collections of individuals, resources, and routines; instead, they can become institutions, whose place and value is recognized, understood, and even sought out by many - This process of institutionalization is a function of leadership and the exercise of good strategic management - Institutionalization does not occur on its own; it must be organized and directed - Leadership must provide the impetus and the energy to move a firm from a mere collection of and actions to being an institution, where every job, every office, and every routine is infused with meaning and purpose; this is what it means to drive to results, never to be satisfied or complacent, never to be content with wasted effort or with lost opportunities, always look for new options and to be one's own toughest competitor - This drive must from from somewhere, because the natural inertia of the firm, along with the friction of bureaucratic necessity and individual habit, will be pushing against it - Firms can too easily settle into a peaceful routine, especially when in a secure competitive position - That sort of peace can be misleading and that sort of settling can be dangerous - Without new challenges, without some recognized and unifying threat, without some common purpose to connect the different specialists, departments, and locations of an organization, work quickly devolves into a collection of routines, where no one provides extra effort and where creativity and initiative are quickly lost - Leadership should provide that drive, identifying the threats, outlining the challenges, and connection the solutions to day-to-day decisions and actions - The mandate for every strategic manager is to increase the NPV of the firm; now and in the future - Focusing on value creation removes the tension between the short and the long term and provides a way to link discrete actions to long-term performance - Focusing on value provides a lens through which to assess the environment and to identify opportunities and threats - By focusing on value, strategists are better able to assess and evaluate their resources and capabilities, to organize their own structures and systems, and to create and evaluate new options - Following the basic logic of strategic management, every action should enable value creation and every decision should point towards competitive advantage

Short-Term Fit, Long-Term Flexibility (Her Notes and My Notes)

This section of the book goes as follows: Main heading: Short-Term Fit, Long-Term Flexibility Sub Headings: - The paradox of success - Exploitation versus experimentation - When less is more Short-Term Fit, Long-Term Flexibility - How is it that firms that once held dominant positions in their industries and that once performed well above the average somehow manage to slip and lose their advantages to unforeseen or upstart competitors? - Success is paradoxical due to the concept that it generally cannot be held! - Do you think short-term or long-term, sometimes they are mutually exclusive! - Flexibility is required for success - Short-Term - investing here often means giving up flexibility in the long run. - Long-Term - often means giving up opportunities or short term benefits. - No simple answers on serving both investments - some balance is needed in both areas. My Notes: - Better fit along cannot guarantee long-term success - There are subtle trade-offs and hidden consequences in this principle of fit - Success is somehow paradoxical and difficult if not impossible to sustain over time - The connection between fit and change, strategy implementation, and the paradoxical nature of performance mirrors the relationship between short-term and long-term thinking - Often, doing what is necessary for the short term means sacrificing some flexibility in the long-term - Alternative, building for the long term may involve forgoing some benefits in the short term - There is no formal and no rule by which managers can know exactly how to balance these two imperatives - Nevertheless, they must both be served: -- firms must do what is necessary to profit and thrive in the short term -- however, they must also invest in new resources and capabilities in they hope to survive in the long term The Paradox Of Success (Her Notes): • Paradox of success: two challenges - Tightening the fit (the current strategy) (1) - Developing the future (2) - Decision making: Path-goal dependence My Notes: - The dilemma maps onto two specific challenges in strategy implementation 1) To make sure the organization fits the strategy as it exists in the current competitive environment -- involves aligning the elements of the 7-S model both to the strategy and to one another -- it also involves continually fine-tuning and refining the alignment, working to improve, tighten the fit, and to strengthen the competitive advantage of the firm 2) To look beyond the current strategy and the current environment in an effort to build new capabilities and new strategies for the future -- environment change is inevitable--if hopes to sustain a CA over time, firms must change too by developing new assets, new resources, and new capabilities - The problem is that these two processes--strengthening fit in the present and developing capabilities for the future--are largely incompatible -- Tightening the fit between the strategy and the various parts of the organization requires eliminating unnecessary effort, reinforcing successful routines and prices, and relentlessly pursuing efficiency and consistency -- Strengthening fit means identifying and consolidating the practices that contribute to CA while elimination virtually everything else - But, building new capabilities requires a different type of effort altogether--experimenting with new, unfamiliar, and often unproven practices; it requires speculative investment in the development of new ideas and novel resources that may one day prove valuable but are likely to provide little immediate benefit - The challenge of improving fit involves a short-term focus and an immediate set of imperatives and rewards - Increasing efficiency and consistency in structures and systems can yield all sorts of befits in areas like the costs of current produce and services, the speed of moving products to market, and the ability to measure and respond to customer feedback - Meanwhile, cultivating future resources and capabilities involves a longer-term focus and a less tangible set of imperatives and rewards - Environmental change is uncertain - Managers are unsure which capabilities to develop or which to resources to acquire - Building for the future, will involve investing in some hits and some misses--some will succeed and some will not - Finding those winning new technologies, products, and services will mean enduring the losses and frustrations associated with some place failures; those losses will place a real drag on short-term fit and efficiency - Speculative and uncertain investments in the future will divert energy and effort away from the current CA , hampering competitiveness and fit in the present - However, while eliminating speculative and uncertain initiatives can improve short-term fit and performance, it can also leave the firm unable to adapt to the future - Exacerbating the problem is a subtle dynamic knows as PATH DEPENDENCE - PATH DEPENDENCE: the basic idea is simple; current decisions reflect outcomes from decisions made in the past -- Illustrated by a quote from Winston Churchill: "we shape our buildings, thereafter they shape us" -- The point is simple and powerful: the design and construction of a building reflect the intentions of its builders; once constructed, though, the building becomes a fixture that constrains the future plans; in essence, then, rather than structure following strategy, structure begins to determine it - A similar observation was offered by Sam Walter Foss in his poem "The Calf Path" -- this story illustrates a pervasive behavioral principle: people tend to follow the path of least resistance in reasoning and decision making; the tendency is less about lethargy, though, than about efficiency and certainty; in an effort to capitalize on experience and familiarity, to economize effort, and to reduce uncertainty and risk, people rely on known patterns and precedents -- a number of psychological and organizational processes, like problematic searching, satisficing, filtering, and framing combine to produce this pattern -- the poem illustrates, the pattern will often produce suboptimal decisions and ultimately poor performance - What is so vexing is that the path dependence can masquerade as sensible and even strategic decision making - In the normal course of managing it makes good sense to follow established precedents, rely on proven practices, and stick to familiar frameworks; so doing so reduces uncertainty, increases efficiency, and promotes reliability and consistency - However, this sort of thinking reinforces the status quo and limits the consideration of options and alternatives - Problematically, then, managers seek to maximize fit and efficiency, doing what seems right at each and every step and making decisions abased on the best examples and the data available from the current strategy and environment - And yet, in doing so, they can create and reinforce processes that, over time, will produce suboptimal decisions in which can leave them unable to compete effectively in the future - This phenomenon has contributed to a number of surprising missteps by well-known firms Exploitation Versus Experimentation - Paradox of success - Structure must follow strategy - Inertia -- Mastery of and fit with the current environment -- Success, usually measured by financial measurements. -- Structures , measures, and systems to accommodate and manage size. -- A resulting organizational inertial that tends to minimize opportunities and challenges created by shifts in the internal and external environment. -- Strategy <---> Structure My Notes: - Curse of Incumbency: the tendency for strong and established firms to look inward and focus on ways to strengthen their current advantage while failing to develop new products and processes for the future - Incumbent firms are often larger and more bureaucratic than their smaller and more entrepreneurial competitors -- as a result, they may be slower and less flexible, with more vested in the continuation of the status quo than newer rivals - Larger and more flexible firms have neutral inertia that is not displayed by smaller, newer, and less successful firms - While providing ism advantages, the size and tradition of these large incumbents can prove to be a liability over time, as they can restrict creativity and the creation of new options - One way that size and tradition limit creativity and flexibility is by influencing the way that mangers frame and make decisions - Researchers have noted how success can create a sense of creeping defensiveness in the minds of top managers - To understand this tendency, consider this principle: the more successful a strategy is, the less attractive any alternative strategy will appear in comparison to it - The current strategy is familiar, well understood, and easily implemented - Any alternative to that current strategy will be more difficult, involving change, additional effort, and the risk of failure - So, as long as that current strategy is successful, there is a tendency to continue exploiting it, rather than exert the time and effort looking for something else - As new alternatives emerge over time, in the form of new products, markets, technologies, and business models, managers will begin to view those alternatives as threats to the status quo, rater than as opportunities for learning, innovation, and change - This phenomenon relates to PROSPECT THEORY - Prospect Theory: deals with decision making and risk and the effects of context on the evaluation of alternatives -- at the heart is an S-Shaped value function (PAGE 211) ** -- the function depicts the values associated with all the potential outcomes to a decision, from large losses to large gains -- 1)most important feature of this function is that it is not linear -- while outcomes are typically quantified in standardized units, the actual values associated with different outcomes can be quite different -- where the firm starts (the reference point) affects how it values its outcomes -- the references point moves, based on historical precedent and future aspirations -- the higher the reference point, the more difficult it is to have outcomes that feel like gains and the easier it is to have outcomes that feel like losses -- 2) second most important characteristic is its asymmetric S-shape--which suggests two things --- 1) beyond some point, marginal gains and losses become increasingly less important; over time as a firm continues to absorb losses, the effect diminishes; losses cease to be a suppose and come to be expected--at that point, the value or significance of each additional loss is low --- 2) near the center, where the outcomes are nearest to the references point, people will work harder to avoid a loss than to achieve a gain of similar size; the only time this is not true is when they are so far below the reference point that additional losses seem unimportant; at that point, there is an incentive to risk even a great deal in an effort to produce even a small turnaround in performance - Taking together the effects of incumbency with the tendencies illustrated by the prospect theory, it is easy to see why success can be so difficult to sustain - As firms become established, large, and successful, they are, without knowing it, sowing the seeds of their own demise - Firms and managers can grow depended upon the strategies and practices that produces their success; in doing so, they can fail to invest in experimentation, to take the changes needed to learn, and to notice when events create new opportunities; as a result, history shows that the most successful firms are often least likely to undertake novel courses of action, to introduce radical innovations, and to engage in the sort of creative destruction of the status quo that can bring about new CA and spawn new industries - This pattern has been called the paradox of success - It is subtle, embedded deeply in the process of strategy implementation, and of tremendous important to the ability of a firm to sustain its CA - It is pervasive in the sense that it reflects sublet natural tendencies, shared by virtually all managers and firms - Finally, it is an ongoing conundrum with no simple solution or fix--there is no formal a manger can apply to know exactly how much emphasis to place on it and the exploitation of the current CA versus how much to place on innovation and experimentation, as necessary, to develop potential advantages for the future - Rather, mangers must simply sort this out, day by day, doing what is necessary in the short term to sustain success and provide resources, while also investing those resources for the long term in an effort to prepare for change before it is thrust upon them When Less is More - Ways to address stagnation in successful organizations-- ways the pattern can be broken - Only do what is necessary for the short-term (to gain CA and maintain success), and then put all the rest of your efforts into the future (and towards the cultivation of new alternatives, options, and ideas) - 6 specific prescriptions designed to prevent the paradoxical tendency 1) Minmum Consensus -- firms can suffer from too much consensus -- managers can becomes too insular and distant; they can restrict the low of information and limit the sources form which they receive information -- in doing so, they may sharpen their focus, reduce their disagreements, and maximize their own efficiency -- however, without knowing it, they may also be cutting off the very sources of creativity and insight that can stimulate innovation and new ideas -- while some minimal level of consensus among mangers and key decision makers in necessary, the idea that cooperation is synonymous with consensus is counter-productive and dangerous, providing the illusion of satisfaction and success in the short term but stifling initiative and opportunities for learning in future 2) Minimal Contentment -- most stakeholders desire some level of satisfaction and contentment -- what possible advantage could there be in fomenting discontent?; to understand, it is important to comprehend problemistic search -- it applies in this context because the search for alternatives is typically motivated by discontent -- when a gap exits between the current and the desired state, when there is pressure to improve upon current performance, or when there is a sense of restlessness and uneasiness with the status quo, decision makers are motivated to take the risks and make efforts necessary to learn -- when there is too much contentment and too much comfort, there is little incentive to change 3) Minimal Affluence -- firms and mangers are typically judged on their financial success; so as affluence rises, discontent declines -- with affluence comes the ability to build slack resources (which enable a firm to absorb mistakes and to insulate itself against shocks from the environment; firms with slack resources have a buffer than can be used to absorb mistakes and to mitigate oversights) -- deep pockets protect a firm form immediate threat and provide the luxury of time hone responding to change -- as a result, affluence can have the unintended effect of making a firm less aware of its surroundings; with a cushion of affluence, changes in the competitive landscape will arouse less urgency -- early signs of dissatisfaction among the customer base may be bet with little more than a shrug, while promising new products and technologies get lost amid the bureaucratic shuffle -- some affluence is necessary--firms must have resources to operate in the present and to investing the future; affluence can buy the best talent, best technology, and the best locations; can enable rational reasoned decision making -- experimentation and learning cost money, and so affluence can provide for both while also offering greater margin for error -- the danger is too much affluence--which can hinder the cultivation of wealth in the longer term; thus managers must decide how much affluence is absolutely necessary, and then keep no more than just that 4) Minimal Faith -- an organisation solde plan its future but not rely on its plans -- plans can never remove all of the uncertainty from the future -- there will always be surprises -- too much planning or too much detail can be counterproductive -- plans, shaped in one context and for one reality, end up shaping behavior in another -- managers must plan minimally: set direction, articulate goals, provide the guiding princes and the ongoing support and attention, but otherwise allow the details to evolve over time 5) Minimal Consistency -- environment is inconsistent -- a firm must adapt constantly and appropriately; must reassess its market, its competitors, reduces, business model regularly; search out new technologies and products; must listen to its customers, anticipating their motivations and dating in response -- firms are under continual pressure to keep up by changing themselves as well; the only way to stay fit to the environment is to adapt and change with it -- but change can increase uncertainty and reduce efficiency, can undermine the value of existing resources, and it can dilute focus and energy -- change can make firm appear inconsistent -- but, when a firm fails to change, pressure from the environment builds up; this pressure may build slowly, so that is it barely perceptible, or it may build quickly; ultimately, though, it will force change by the firm; the only question is whether the firm will be able to survive that change and respond; often the answer is no, because the change is simply too dramatic and unfamiliar 6) Minimal Rationality -- "not just intelligent behavior, but behavior motivated by a conscious calculation of advantages, a calculation that is based on an explicit and internally consistent value system" -- specialization and the division of labor are rational practices, designed to limit redundancy and increase asset and knowledge utilization -- creativity and imagination will often seem less rational than other, more productive options -- "we know a thousand ways not to make a light bulb" -- an overly developed sense of rationality can drive these creative energies out of a firm, leaving an organization that may do things right but may not do the right things -- firms can be well managed, follow the best practices, apply the best models, and so avoid blunders and mistakes; yet those same firms can overlook creative alternatives; can miss key opportunities and forego chances to seize new advantage by focusing too heavily on their own practices, process, and consistency -- that is the hazard of rationality and that is why strategists must view it cautiously -- what i learned: basically if you don't view your failures in positive terms, (even though they still will represent real losses of time, effort and money), you will not succeed--"those Edison did not give up after his first 900 failures with the light bulb--if he had given up on that 901th time, he never would have succeeded--some rationality is good but you can't be over rational or else you will lose sight of possible creativity and opportunities

Concluding Thoughts and Caveats (Her Notes and My Notes)

Thoughts and Exceptions - Dynamic capabilities - - Going from strength to strength, from advantage to advantage . - Real Options - - A means to an End My Notes: Dynamic Capabilities - Sustainability should be seen in continuous rather than categorical terms - Managers should be asking how long the advantage can be sustained, not if the strategy can be sustained - The ongoing process of redesign, as necessary, to move the firm from strength to strength and from advantage to advantage reflects its DYNAMIC CAPABILITIES - Dynamic Capabilities: the "ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments" -- they are the firm's ability to learn, adapt, and change as necessary to stay fit to the environment, even as it changes -- these capabilities transcend resources and strategies and deal with ow resources and strategies are used - DC are analogous to the knowledge, thought process, and structure that govern how the firm's assets are used and how strategy is applied in the day to day - DC perspective places less value not he sorts of resources that show up on the balance sheet than how those resources are used and how a firm learns and adapts - Environment is constantly changing so every advantage is ultimately at risk - The challenge is to cultivate the sorts off midgets, processes, and paths that will enable the firm to learn and adapt before the change is faced from the outside - Such capabilities will enable the firm to sustain CA by changing and to create value by continually learning, adapting, and moving forward Real Options - Option: the ability to do something in the future - Having options represents some value - The value of option derives from two sources 1) The actual commercial value of the product or technology in the future 2) The value of the learning and information that can be acquired as the option is being developed - The value of any firm is a combination of the value of its current operations and resources, as well as the value of its options on the future - That future option value van be cultivated and managed, just like the current operations and resources - The option value of the firm should be an integral part of the firm's strategy * - This is what is known as the REAL OPTIONS view and is relatively new development - It is extremely important to the pursuit of sustained CA and to the long-term value of the firm - The real options approach is a little different than the traditional approach to developing and hanging strategy - Students/managers are traditionally taught to think about strategic initiatives and the range of strategic alternatives in terms of NPV; alternatives are assessed in terms of risk and potential ash flow, and managers selects and invest in those initiatives with the highest NPV; in doing so, though, they also choose not to invest in the others - The real options view changes this approach; rather than seeking to eliminate potential initiatives, it suggests keeping the options open until there is better information on which to base a go or no-go decision - No firm has the resources to invest in everything; so seizing every initiative and trying to fund every potential alternative is simply not possible; instead, the firm invests modestly in many different projects, thereby purchasing options on those projects into the future - Those options are then managed just like an investment portfolio - As time moves forward, the firm learns about the market for such failure options; invests in the refinement and development of these emerging products, markets, or technologies; when firm has better information on the future potential of each option, it can choose to reallocate its resources, doubling down on the best options and discontinuing or selling the others - The result of all this is a pipeline of options that move systematically from the farfetched to the probable and from the highly risky to the highly certain - Adopting the real options approach, can no more guarantee success than can acquiring any particular resource or following any particular strategy; rather, the value in the real options view comes form its effect on strategic thinking; the sort of continuous learning and redesign of the firm retries reprogramming of the strategists and the strategic process; adopting this approach to strategy development can be mechanism for accomplishing that sort of reprogramming - Managers view their jobs as the creation and management of options to yield an ongoing stream of emerging, high-value initiatives, so will the internalize the process of learning and adaptation - In this view, strategy becomes less about analytical precision and efficient execution and more about the ongoing process of continuous evolution and change - However, the change is no longer a speculative and clumsy process where managers try to guess about and make bets on the future; instead, it is a process where the firm, through the cultivation of options and the implementation of its strategy, actually learns its way forward - When done well, this process yields a continuous stream of CA, creating an ongoing harvest of value and performance Problems with Net Present Value - NPV works by discounting future cash flow based upon uncertainty and the opportunity cost of the investment capital; this sort of discounting is reasonable and sensible and is meant to guard against poor investments - Risky propositions must produce large retunes to justify investment, and even good returns may not be sufficient if the capital can be allocated to better purposes - A good manger will carefully weigh potential initiatives against the risks and opportunity costs - Remember the principle that them ore successful a particular strategy is now, the less attractive an alternative strategy will look in comparison to it - But, given that an existing and successful strategy is likely to be well practices and understood, the risks associated with any alternative strategy will be higher almost by definition - As a result, NPV has a built-in bias favoring the status quo in those instances where the status qui is successful--in other words, successful firms that apply NPV analysis to the range of their various strategic alternatives will almost find that their best course of action is too increase investment in the current strategy, reinforcing their core competencies and buttressing the existing CA - Highly successful firms will find it very difficult to try new things, to justify experimentation, and to promote innovate because the more successful a firm is, the stronger the bias is - This is part of the mechanic underlying the curse of incumbency - 2 things interesting about this phenomenon 1) Intriguing how the potential for bias in the use of this tool parallels the effects of prospect theory on decision making--the portion about the reference point, in which is called the drains of gains, is flatter than the portion of the cure below the reference point-thus, marginal gains are less value than marginal losses of comparable size -- meaning, decision makers will often work harder to avoid a loss than they will to achieve a gain of the same amount; in the region where the cute flattens out almost completely (a point beyond the reference point), the effect of current performance or of the current resource position is so strong that even a large potential gain offers little incentive to change the status quo 2) Second issue of interest, is whether our analytical methods are reflecting and amplifying our own biases -- "as long as the firm has the ability to increase investment in the current strategy and to double down on its existing competencies and advantage, no stream of future cash flows from any alternative strategy would produce a positive NPV" --many mangers apply good reason and choose quite rationally to forego new strategic alternatives because the numbers actually favor the status quo A Means to an End - The end is the creation of value (for customers, owners, employees, stakeholders, etc.) - Meeting this expectation, though, requires seeing the organization as a tool for the creation of value rather than a result unto itself; easier said than done - Managers build slack resources is the form of cash reserves, stock repurchases, redundant capacity, excess infrastructure, and reputation; the often use that slack to filter information that threatens the status quo, to resist even the most inevitable changes and to buffer themselves against the very environmental forces that are essential to their success - Mangers often choose to see the firm as an end rather than a means, so they work to consolidate their positions, reduce ambiguity, to promote predictability and clarity, and to provide a large measure of security and consistency for themselves and those around them; which can seem natural and reasonable in the short term - But, the value both now and in the future is the responsibility of managers in the present - Understanding this, many have begun to focus on sustained CA as the key to long-term value; but the quest to focus for sustained CA is complicated by an ever changing environment; and such tests are destined to end in frustration - Rather, the key to sustainable advantage is the ability to learn and adapt ahead the demand and the competition - Firms that create an ongoing stream of real options, that build and invest in DC, and the maintain their hunger for new value creation and growth are actually able to create and enjoy multiple, temporary advantages; teach periodic advantage reflects a fit between the environment, the strategy, and the firm at a specific point in time; each periodic advantage leads to revenue and profits, which can be intend in the creation of more options and the cultivation of greater DC - Thus, while the firm is enjoying benefits of one resource, one position, and one advantage, it is simultaneously investing in the development of resources and positions that may lead to other advantages in the future - This ongoing process will necessarily involve change on the part of the firm and those within it - A firm may enjoy a substantial advantage in one particular environment but later decide that the time is right to evolve into something different, etc.; but what does not change, what endures across every form that the company may take, is the pursuit of value - Understanding that, a firm and its managers become better able to implement strategy in the present and to learn and adapt as necessary for the future

Summary (My Notes)

- "Do not go where the path may lead, go instead where ether his no path and leave a trail" - Ralph Waldo Emerson -- captures challenge of strategic leadership - Creating value is the imperative of every firm no matter type or size - Every firm must transform the available inputs into desirable outputs if they are to generate revenues sufficient for their survival -- do this by creating customer value --enough to motivate transactions - Value creating is not easy -- things change, customers tastes and opinions change, etc. - Competitors are steadily pushing to create value for themselves; they will imitate the successes of others and offer substitutes where imitation is not practical; they will innovate as well and offer new products and services to customers all too happy to receive a better deal - Pressure form suppliers who seek constantly to increase their bargaining power and to extract and retain a larger portion of the revenue stream for themselves - Environmental pressure--changing demographics, evolving technologies, unforeseen catastrophes, and economic conditions can undermine even the strongest CA - Still, firms must find a way to create value, over and over again - The challenge then: how to succeed int he face of such demands - Sustained CA really means succeeding while others are trying to bring about your failure - Given this reality, simply choosing to follow a trail established by others is insufficient; while imitating the successes of others can serve as a reasonable defensive strategy for a time, there is no long-term advantage in simply doing what others already are - Challenge is to create NEWA value; requires doing things that are logical but not obvious, that leverage wisdom but are not conventional, and hat move people and their organizations in directions in which they do not yet realize they need to go - Meeting the challenge requires leadership; the role of leadership is to envision the possibilities, to catalyze the resources, and to focus and motivate the effort - Leadership is strategic, by its very nature - Leaders must understand their environments, the capabilities of their firms, and the opportunities and nature of CA - They must recognize that there are times to change radically, and times to change subtly and times to stay on the course - To be effective in building long-term value, leaders must appreciate the need for investment and the tradeoffs between exploiting strengths in the present and building options for the future - They must understand human behavior and motivation as well as organizational structures, systems, and processes; but more importantly, they must use all of this knowledge to et results and to provide a return that is better than than which investors can get elsewhere - Empowering and enabling a leader to do all of these things is the governance structure of the firm - Governance, across all of its various levels and components, is the skeleton of the organization - Without effective governance there would be no financing to enable the acquisition of resources and no authority to enable the formulation and implementation of strategy - Governance provides identity and direction for the firm more than anything else - Identity simply means a sense of values and consciousness - Strategy gives a firm a personality that can be sensed and understood by the marketplace, and the origins of that personality lie in the firm's governance - Strategy is about deciding where to go and how to get there, and governance should been seen as a starting point in that process -- what is the mission, what are its goals and how will it define and measure its own success? - The answers to those questions will set the direction for the firm and govern the way it formulates and implements its strategy - Research has shown that patterns establish early in a firm's development leave an IMPRINTING effect on its people, processes, and structures for many years to come - Governance controls the substance of that imprinted form, and so understanding it is essential to understanding leadership and to managing strategy - Leadership is judged on its results; and that reality links leadership and strategy tougher - Strategic leadership is leadership that envisions, catalyzes and enables the strategy of the firm and that, in delivering results, sets a pattern for others to follow - Strategic leadership is about creating new paths--paths that will lead to value creation for the customers and CA for the firm

Summary (My Notes)

- Focuses entirely on issues that are supplemental to the larger framework of strategic management (9 AND 10--why there is no exceptions and caveats) - Each of the these chapter topics are a discipline unto itself as well as an important part of the larger strategic management process - Each can be an important contributor to a firm's performance, but each is also sufficiently unique to justify its own vocabulary and its own scholarly identity and to be practiced by its own set of specialists - While this specialization offers advantages, there are also costs - Cost is seen in the form of redundancy, unnecessary complexity, and the inability to generalize across settings, the result of which is a more complicated landscape for students and less effective management overall - Thus, the purpose of this chapter has been to illustrate that, while these topics are specialized and important, they also share in common two essential things 1) They are drivers of firm value 2) They are among the responsibilities of strategic management - Entrepreneurship = -- creative value and providing good return on investment -- seeks pockets of unsatisfied demand and looks for opportunities to apply innovative methods and technologies -- requires planning and position, formulation and implementation, learning and adaptation -- Entrepreneurship create new ventures, and those ventures have value chains through which products and services are created and distributed to the environment; those ventures succeed do so because they develop a CA, giving customers a reason to buy at a price above the venture's costs; that CA enables revenues, profits, growth, and a positive return for the investors -- important to see that even though it is called a different name, Entrepreneurship is inseparable from the practice of strategy -- even inside large and well-established firms, the energy, vitality, and creative of Entrepreneurship can be harnessed to promote growth, to provide incentives, and to sustain CA; this harnessing of Entrepreneurial energy and thinking inside of existing organzations has been called INTRAPRENEURSHIP -- no matter what we label it, the challenge is still fundamentally the same: create value that will lead to CA and to sustain CA in the face of a changing competitive landscape -- important to understand how Entrepreneurship and strategy are fundamentally linked and then to leverage the understanding of each in the practice of the other -- it is inevitable that good Entrepreneurs will also be good strategists and that good strategists will understand the importance of Entrepreneurship - International Business = -- While involving a host of specialized conerns and technical issues, success in international business still rests on the basic precepts of strategic management -- Substitutability, bargaining power, and elasticity still characterize the competitiveness of the environment -- Rare, valuable, and inimitable resources still drive the uniqueness and CA across firms -- Disconnects between the strategy and the various elements of a firm's systems, style, structures, and staff still represent the greatest threats to success -- What then happens, as a firm moves from a domestic approach to an international one, is that a new layer of complexity is added -- Processes that worked in one market may not work in another -- The drivers of a product's value in one place may be very different than the drivers in another -- Potentially everything about the way a firm goes to market and manages its own structures and affairs may change as the landscape of laws, practice, and preferences change -- But those changes do not alter the basic formula of success -- In every context, whether domestic or international, in just one country, two countries, or in a dozens of countries simultaneously, success is still a function of value creation for customers and value capture through revenues over and above the firm's costs - Ultimately, better management and better organizational performance has been the point of the entire book - Performance is the crux of business and business education - And the ability to drive performance and deliver results is the goal of every business student, every manager, and every investor - Strategic management is nothing less than the single most valuable framework for understanding, directing, and delivering that performance - However, in addition to being valuable, it is highly generalizable - The basic framework and logic of strategic management can be applied to understand and to operate better in both entrepreneurial and international contexts - In both settings the challenge remains the same - Thus, in both settings the fundamental logic and basic principles of strategic management continue to apply

A Broad Value Proposition (Online Book)

All business firms, despite their different environments and markets, have many more similarities than differences. Any consultant or student who well understands the basic dynamics that all firms have in common can know a great amount about any firm without having had to study it specifically. My Notes: - Executive Assessment Institute (EAI); small boutique consulting firm specializing in talent management, strategic leadership, and leadership development; 5 full time employees; Fortune 100 firms as clients; clients are based in US and in other countries; some are publicly held and others are privately held - How can such a small firm service such a broad and varied array of clients? -- firms are more similar than they are different -- understanding the open systems model (input --> transformation --> output) is how we derive the principle of fit -- because they are open systems, their survival depends upon their fit with their environment -- other examples of how basic similarities are shared among different firms - By understanding the workings of these(^) basic dynamics and functions, which all firms share, a student could understand a great deal about any firm, even if that firm was unfamiliar--same with managers and consultants - This is how a firm like EAI adds value -- they leverage their understanding of two things: strategy and the value of human capital--in providing service to all sorts of firms in all sorts of places - Every firm, no matter what kind, must somehow fit its strategy to its environment and then connect that strategy to its organization and to its people - EAI consultants help firms develop the right kinds of talent for their own competitive environments and strategic challenges

Path Dependence

Analogous to the simple principle that history matters to the present. More formally, though, it suggests that current decisions and economic conditions are at least partly constrained and affected by the sequence of decisions and events that preceded them.

Summary (Online Book)

Entrepreneurship and International business are unique settings within the business world that offer their own unique challenges. Despite their differences, these two settings are still addressed well by the general framework of strategic management, and the principles used to operate in both settings are built on the same principles as for any business firm. The ultimate goal of every business remains creating value for the customers, and in turn, for the firm.

Structure of the Organizations (Her Notes, Not in Book)

Mechanistic Vs. Organic Models - PICTURE ON SLIDE 10 of LECTURE 2 CHAPTER 8 Mechanistic: - High specialization - Rigid departmentalization - Clear chain of command - Narrow spans of control - Centralization - High formulation Organic: - Cross-functional teams - Cross-hierarchial teams - Free flow of information - Wide spans of control - Decentralization - Low formulation

3) Catalyzing Innovation and Change (Her Notes and Mine)

Promote Innovation and Change - Role of innovator and catalyst - Overcome stagnation - The only way to have long-term success is to innovate and change My Notes: - Individual behaviors are essential to strategic success but they can be a potential threat to innovation and change - Successful behaviors can be repeated and reinforced to the point that they become ingrained habits that impede learning, adaptation, and change - Market leaders often defend the status quo against new technologies, fearing the loss of position and share - Key managers can grow defensive about new opportunities, as they fear an erosion of their own influence or as they seek to leverage existing investments to the fullest effect; these tendencies are a key challenge for leaders, who are to be catalysts for innovation and change - Innovation and change are key to strategic success - Without innovation, every firm will eventually stagnate and drift out of the mainstream market - Without change, every capability will eventually grow calcified and obsolete, becoming irrelevant to customers and competitors alike and eventually losing all competitive value and advantage - Innovation and change do not happen by themselves; firms naturally develop their own inertia, with all the weight of habit and history reinforcing practices form the past - Leaders must find ways to break this momentum and shift the energies of the organization in new directions; they must do this when the need for such change is less than fully obvious - Among the many responsibilities of leadership, this one is perhaps the most important and the most challenging, yet also the least well understood - Many who seek to be leaders fail to understand that the path to leadership is rarely traveled by the masses and rarely of immediate and obvious value when assessed in the present - At times, people need to be influenced - Leadership must take the initiative; it must set the course; if it does not, then people are likely to remain steeped in their routines and habits and content with the status quo - Without leadership to unite and motivate their efforts, people might never move towards even good goals; leadership involves influencing others towards a goal that they did not know they needed to achieve - Warren Buffett "The chains of habit are too light to be felt until they are too heavy to be broken"; the lesson is that the need for change is rarely obvious until it is too late to be effective - So, leaders must recognize the need for change sooner than others and so must also be prepared to shoulder the burned and the frustrations of going it alone, at least for a time - Leadership, again, looks much like entrepreneurship and very much like strategy; they both must anticipate and act based on expected realities and so both bear some risk of being wrong or of at least appearing to be wrong for a time - Leadership bears the responsibility for innovation and change, and that implies a significant burden and risk - This key dimension of leadership overlaps with a basic principle of strategic management - Adaption and change is a large part of the ongoing challenge of strategy implementation; through interaction with the environment, a firm learns what works and what does not; through many trials and error, firms introduce and perfect innovations, cultivating options and gathering information on which to base future strategies - This ongoing process of learning and adaptation is essential to success and so a fundamental components of strategy - But, it does not happen naturally; rather, it must be catalyzed and directed and its value just be articulated; it must institutionalized and promoted throughout the organization, encouraging managers at every level to innovate and take risks and reminding the organizations stakeholders of the hazards of inertia - Strategic management is the imperative of leadership; leaders must take action to make innovation and change happen, even when so doing is unpopular or seems contrary to the conventional wisdom - They must cast the vision, communicate the purpose, and motivate and direct others towards a goal that will likely not be obvious or well understood; they must understand when to change and when to stay the course so that the organization produces greater value and grows more valuable as a result - Like every facet of strategic management, change and innovation are tools for furthering competitive advantage; so, a hallmark of good leadership is the ability to catalyze and lead innovation and change when and as necessary to move the organization forward, from strength to new strength and from success to greater success

Leader-Member Exchange (LMX)

Refers to a body of academic research focusing on the dyadic relationships between leaders and their immediate followers. At the crux of this work is the understanding that leaders relate differently to different followers and that the nature of these relationships is key to leadership effectiveness.

Fiduciary Responsibility

Refers to a relationship of trust or obligation where a party in power is charged with the obligation to act on behalf of and in the interests of another, more vulnerable party.

Board of Directors

The group of individuals who oversee a company or organization. In publicly traded firms, the board has the fiduciary duty of representing the owners in hiring the CEO, setting policy, and monitoring the activities of the firm.

Foreign Direct Investment (FDI)

The ownership of business assets by a foreign party, either an individual or firm.

Transnationalism

Tthe name given to a social philosophy where national borders are largely inconsequential and so offer little resistance to the movement of people, goods, materials, and information. Large multinational firms may have no distinct national identity and so are said to be transnational.

Angels

Typically wealthy individuals who invest their own funds to finance entrepreneurial ventures in the earliest stages of development.

Venture Capitalists

Venture capitalists pool funds from individual investors to invest in entrepreneurial ventures. While specializing in different types of firms at different stages of growth, venture capitalists are all accustomed to high risks, with the prospect of relatively short-term and large returns.

What are the additional costs of doing business in an unfamiliar cultural and economic environment called?

- Liabilities of Foreignness

What type of structure involves only one or two, large and mature companies?

- Monopolies - Opposite of previous question (other end of spectrum)

Chapter 9

A General Framework: Strategy, Entrepreneurship, and International Business Book: As explained in this chapter, strategic management is a highly generalizable discipline. With this in mind, this chapter observes two aspects of business not yet highlighted in this book: Entrepreneurship and Globalization. Strategic management is just as important and effective when properly applied in these two areas as in any other in the business world.

Franchising

A business model where a franchisor, who owns a concept, brand, and set of practices, sells the rights to these assets to a franchisee, who pays in return an upfront fee and a royalty. This model facilitates rapid growth but involves shared ownership and profits, and so the potential for conflicts of interest between the franchisor and franchisee.

Filtering

A cognitive process by which individuals organize and attend to information from the environment. Because no one can gather and interpret all the available information, they attend selectively to particular issues, filtering out what is thought to be irrelevant and internalizing that which is thought to be significant.

Strategic Leadership (Online Book)

A firm may possess all the resources necessary to achieve competitive advantage, but without the right leadership these resources will never be used correctly. This chapter discusses key features necessary for leadership to succeed, as well as demonstrating how critical good leadership is to the performance of a firm. Applying Lessons Learned from Research about Strategic Research Development (Link) - Robert M. Fulmer and Jared L. Bleak weigh issues in strategic leadership and outline steps for improvement The story of McColl and Bank of America provides a great example of strategic leadership, which is a catalyst for strategic management. It involves all of the elements of strategic management, but with the added foresight of recognizing a need or opportunity in a market before the competition, or even the consumer. The danger is that failed strategies and poor leadership can ruin a firm. A general definition of leadership is the influencing of others towards a common goal, yet behind this simple definition is the complex nature of leadership that has been vigorously studied and debated. The most important and common aspects of leadership are: 1) casting a vision or purpose 2) communicating with and motivating others 3) catalyzing innovation and change 4) driving for results

Multi-domestic Strategy

A type of international strategy that leverages customization and local responsiveness in building competitive advantage across multiple countries. With its focus on local preferences and branding, it capitalizes on some of the same economic forces as a differentiation strategy.

A Leader in Banking (Online Book and My Notes)

Bank of America Homepage (Link) Bank of America Heritage Center (Link) - Bank of America's interactive history center from the Bank of America website Hugh McColl: Vision in Balance (Link) - In this video, citizens of Charlotte, North Carolina discuss Hugh McColl's talents as a leader Despite laws that limited banks' ability to operate in multiple states, North Carolina National Bank was successfully able to acquire other banks in other states through its use of its non-bank subsidiaries. As a result of its shrewd lobbying and other business dealings, NCNB was ultimately able to do business from coast to coast, revolutionizing the banking industry. NCNB became NationsBank and then Bank of America, which now operates in over 20 countries and is worth trillions of dollars. Much of that growth and success is attributable to the leadership of Hugh McColl. My Notes: - "hungry tiger" to describe the bank - found a way to operate in many states (law that you could not do this but they got around it) - acquisition with a failed bank - Became bank of america

Interlocks

Exist when multiple board members sit simultaneously on the boards of different companies. By creating reciprocal interdependence among the board members, interlocks are thought to mitigate independence.

Duality

Exists when the CEO of a firm is also the chair of that firm's board of directors. This one individual then holds these dual offices simultaneously.

Adaptation and Learning (Online Book)

Implementation then has two major facets: insure the creation of value in the present, and enable the sort of learning and adaptation necessary for the creation of value into the future. Without learning and adaptation, a presently successful firm will not be able to sustain that success when faced with the need for change. These aspects are often seen as too academic for managers to worry over, but in reality they are vital aspects of implementation, and the strategic process. It is through the implementation process that a firm gathers information to feed back into the strategic process.

Framing

Involves the categorization of complex issues under simple and discrete labels for the purpose of easing communication and decision making. Two common examples of frames used by managers are opportunity and threat.

Governing the Board (Her Notes and Mine)

Governing Board - Two mechanism that support corporate governance that can align managers and owners interests. -- Board of directors -- Institutional investors - Securities and exchange commission (SEC) Board Roles - Compliance with the Securities Exchange Commission (SEC) generally requires different board roles. -- Audit Committee -- Governance Committee -- Compensation committee My Notes: - Given the ability of the board to influence the firm, seats are often coveted - So maintaining the independence of the board can be challenging - Board independence is a key feature of organizational governance - Boards have a responsibility to the shareholders and are supposed to represent those interest, indecent of other influences - So maintaining independence is very important but also especially challenging where there is DUALITY - DUALITY: exists when the CEO and board share are the same individual -- while there are arguments for combing these roles, and while a majority of US firms still operate with this duality, there are also strong arguments against it, and most European firms have abandoned the practice -- the primary argument against is the challenge to independence --- as the one most responsible for a firm's strategy and performance, the CEO cannot be expected to monitor his or her own behavior effectively; quite contrary, it seems more likely that a CEO would want to influence opinion in such a way that he or she looked good as a result -- it would seem that the CEO, as chairman, could influence the governance committee, or whatever group was responsible for the board and committees nominations--all of which could threaten the independence of the board and so its ability to execute its responsibilities - Corporate governance experts often distinguish insiders from outsiders when discussing board membership -- insiders are members who are also executives of the firm; they are more likely beholden to the CEO and so more inclined to support his or her agenda and policies; in cases where there is duality, a high number of insiders could be especially problematic, allowing the CEO and other insiders to manage the firm for their own benefits and their own best interests, as opposed to the interest of the stockholders; -- outsiders holds position outside of the firm; many shareholder watchdog groups, along with most institutional investors, use the number of outside directors as an indication of a board's independence, encouraging firms to increase the number of outside directors - Trend away from duality and towards the increasing use of outside directors - While well intended, though, these moves may not necessarily increase the independence or quality of the board - There are advantages to duality and the use of inside directors - The role of the board member entails understanding a great deal about the business and its industry; there may be high levels of specialized and technical knowledge required, as well as a considerable investment of time and energy - Outside rectors may simply lack the knowledge or time to do a thorough and adequate job - There may also be conflicts of interest, where outside board members represent key suppliers, customers, or other constituents - Board members may be obliged to other board members because of appointments to other board s - These so-called INTERLOCKS may compromise independence, even among outside board members - Thus, while the question of board independence is an important one, there is no single or simple answer that will satisfy the issue fully

International Business (Online Book)

Global Strategy... In a World of Nations? (Link) - George S. Yip weighs the pros and cons of globalization Vodafone's Public Policy Page (Link) - News stories, downloadable case studies and various other media all related to the ongoing growth and operation of Vodafone. Our Management Approach (Link) - Johnson and Johnson's decentralized management approach as explained on Johnson and Johnson's website Globalization is an ongoing process that has begun moving very rapidly in the past two centuries. As transnational trade becomes more and more common, it becomes increasingly critical for strategists to include international business as a focal point. However, strategic management is a highly generalizable discipline, so even at the international level the same theories and mechanisms are used. Basic international strategies can be generally divided into two categories: global and multi-domestic. The global strategy operates by leveraging things like efficiency, scale economy and portability to offer products and services that appeal to elastic customers. A company like Vodafone, present in over 60 countries, and with a huge network, can afford to offer its services at a lower cost than its competition. Thus, it draws many elastic customers. Johnson and Johnson is a massive corporation with just as much global reach as Vodafone, but it operates very differently under a multi-domestic strategy. Johnson and Johnson produce hundreds of different products in many different areas, and operates through over 250 semi-autonomous subsidiaries. It focuses on value based products through these subsidiaries to reach inelastic customers. This strategy takes the principles of differentiation to an international level. While global and multi-domestic strategies are very different, many international strategies are actually a combination using elements of both. Just as the elements of the strategic management process are equally prevalent on the international level as on the domestic one, so too does implementation play an important role in the success of international firms. Firms must fit their infrastructure to that of their strategy, and must see it through to its fruition, or else it is ultimately worthless.

Adding Value (5? -> not technically included, just an extra section?) (Her Notes and Mine)

Leadership Adds Value - Leadership adds value to the organization through good strategic choices that guide the firm to higher levels of overall value. - Leadership and strategy are both judged by the results and both part of the conceptual framework. - Intangible, yet valuable. Notes: - Leadership, like strategy, is marked by the value it adds, over and above that which is obvious and readily available to everyone - Tobin's Q, key measure of a firm's performance -- calculated as the market value of the firm, divided by the replacement value of the firm's assets -- a higher number reflects greater utilization of the assets and greater value associated with their use -- so if two firms have similar assets and yet firm A has a higher Tobin's Q, it would be fair to say that firm A is using its resources to better effect - it also usually means they are better positioned, with a stronger brand and a stronger organization; means that management created greater value than the past actions and decisions of a different firm; means that A has accumulated a more valuable set of resources and options by charging a course that was substantively different from firm B - While leadership and strategy may be different in various specific details, they are still complementary and part of the larger whole; they interact to guide the firm in a way that enhances its overall value and they are judged in the same way, by the results that they produce - Strategic leadership is simply a term that captures this close relationship - Leadership and strategic management are inextricably bound together, such that each is incomplete without the other - Leadership is the driving force while strategy i the framework for analysis and action; together they add intangible yet significant value to the assets and resources of the firm - They do this by providing a coherent vision of what the firm should be and by communicating that purpose, motivating and enabling others to work towards it; together, they imitate change and innovation, as necessary, to keep the firm current, and they push for continued improvement and value in every transaction - Make no mistake, leadership matters, and it matters most when it is fully connected to the strategics process - Strategic leadership, then, represents the intersection of these two essential functions, leveraging both for the greatest effect on organization performance

Moral Hazard

Occurs when decision makers are separated from the risks associated with their decisions. In the principle-agent relationship, for instance, the agent has the bulk of the decision-making discretion and yet the principal bears the bulk of the risk of bad decisions.

A Second Level of Fit (Her Notes and My Notes)

- The concept of strategic fit applies at two levels: -- Between the environment and the strategy - is there an environment that will allow you to sell your product or service? -- Between the strategy and the firm's operations - is the organization able to carry out the strategy that has been set? - Incongruence anywhere along the chain threatens the ability of a firm to deliver the value that customers want. - Fixing an incongruence is one strategy. My Notes: - Strategic success is a reflection of fit - Until now, fit referred to the alignment or congruence between the competitive environment and the strategy - Ryanair is an airline that provides discount flights but charges for luggage and refreshments and priority seating--but still succeeds because of the savings they save overall from the discount--they fit the environment and know what the customers want - But, there is a second level of fit, where the ideas are the same but pieces are different - This is the fit between strategy and all of the elements of the organization's structure and operations - Differente strategies require different types of organizational structure and action - Organizations that performed well over time were organized and operated in ways that fit their strategy - When form was fit to function, good performance was the result - The principle of fit, then, applies at two levels 1) Between the environment and the strategy 2) Between the strategy and the organization (or the firm's operations) - Incongruence anywhere along the change threatens the ability of a firm to deliver value to the customer and, threatens performance - Important to remember two things: 1) The principle of fit goes both ways 2) Implementation works through a combination of elements

Global Strategy

A type of international strategy that leverages standardization and economies of scale in building competitive advantage across multiple countries. With a focus on consistency and per unit costs, it capitalizes on some of the same economic forces as a low-cost strategy.

Summary (Online Book)

At its root, the key to good leadership is strategy. Being a good leader requires more than a vision; it requires a knowledgeable strategy to effectively bring that vision to fruition. It is no good leading a firm down a path already taken by others, as this will not provide competitive advantage in a changing market. Success requires a leader who can think strategically and take a firm in directions that are not obvious or easily imitated by others.

Final Review Questions She Covered For the Exam

Regarding the 10 additional questions?

Agency Problems

The set of issues and complications arising from the separating of ownership and control — in particular the asymmetries in decision-making power and information between owners and managers.

Curse of Incumbency

The term used to describe a group of factors affecting large and established firms. Because of things like size, bureaucracy, and established practices, such firms can be rather inflexible and slow in responding to pressure or seizing emerging opportunities.

Imprinting

The term used to describe the institutionalization of practices and beliefs within an organization. Significant events, such as founding conditions or radical changes, are said to leave an imprint on an organization's strategy and practices.

Decision Making Models in Organizations--Bounded Rationality (Her Notes, Not in Book)

Decision Making Models in Organizations - Bounded Rationality - When situations or problems are too complicated or the ability to process all alternatives is too great, a less than optimal satisficing (satisfactory and sufficient) decision is made. - We simplify and use only the basic or essential parts of the problem (don't try to get at the complexity) and then make decisions or try to understand the problem. ** Bounded Reality at Work FIGURE ON SLIDE 10 of LECTURE 1 CHAPTER 8 - Identify problem and search for criteria alternatives - Criteria not exhaustive, just enough to think we have looked into the problem - Alternatives are selected that are highly visible familiar criteria or, tried and true solutions - Review alternatives focusing on choices that are close to the current state and then identify one that is good enough that is acceptable - The decision is made that is satisficing

Intrapreneurship

Refers to the encouragement and cultivation of entrepreneurial thinking and behaviors inside of existing organizations.

Liabilities of Newness

Refers to the various difficulties that arise from doing something new. Some examples are the lack of precedent, the lack of familiarity in a role, and the lack of legitimacy in the eyes of a supplier or customer.

Chapter 10

Strategic Leadership--Leading and Governing

Chapter 8

Strategy Implementation (Fit, Adaptation, and Learning) Online Book: A perfect strategy can be conceived and planned, but until it is put into action it is ultimately useless. This is where implementation plays a vital role for strategists; it is the physical process following the formulated strategy. This chapter examines the various nuances behind implementation, and explains how effective implementation can bring a strategy to fruition.

A Highly Generalizable Discipline (Her Notes and My Notes)

Strategic Management is Generalizable: - Strategic management has a basic framework that can be applied to all businesses. - All orgs. need to find competitive advantage - value to customers so that they make a transaction above the organizations costs. Competitive Advantage Same meaning across Organizations: - For all products and services and customers, there is some level of use value. - All transactions take into account resources and the qualities that make them valuable. Strategic Processes and Concepts are not Context Specific: - Bargaining power - Value creation - Competition - Buyer elasticity - Scarcity - Asset specificity - Customization - Resource attractiveness - Imitation - Efficiency - Option value - Fit Sub-Disciplines in Strategic Management: - Strategic management has specializations that have different jargon and special circumstances. The challenge is to apply the principles across specializations in strategy. - To deal with this, assess the context and ask. -- What are the similarities? -- What is generalizable? -- What is different? -- What is specific to this organization? My Notes: - No matter what kind of business or organization, every firm and manager practice some sort of strategic management - Across all of these various and different settings, the specific applications and workings of strategic management's principles, tools, and models will appear somewhat different -- thus, it is tempting to think that the practice of strategy itself somehow changes from firm to firm and from setting to setting -- this is true to an extent, but thinking this can also lead to problems - Strategic management is a highly GENERALIZABLE discipline, with a fundamental logic and framework that can be translated in some measure to every firm, every industry, and every setting - All of the elements that are present in competitive advantage through every transaction (value, exchange value, consumer surplus, some profit or loss), competitive advantage will hold the same meaning for every firm; it will be the key to success and survival in every setting - Jack Welch, former CEO of General Electric: "If you don't have a competitive advantage, don't compete." -- While settings differ, that basic truth remains the same - This (^) is true for all the processes, concepts and tools introduced in this book: For example, firms of all different shapes and sizes are affected in much the same way by bargaining power. All else being equal, firms with great bargaining power will perform better than those without it (just like competitive advantage) -- bargaining power, along with its tendency to benefit those who have it and penalize those who do not, is a constant across settings -- as a result, understanding how bargaining power works and how it is gained and lost is a powerful tool that can transcend in any particular context - Indeed, concepts like value creation, competition, buyer elasticity, scarcity, asses specificity, customization, resource attractiveness, imitation, efficiency, option value, and fit are at work in every business, every industry, and every type of market, and they affect the performance of every firm -- these concepts hold value for every business, in every setting; so it is essential that strategists understand them and know how to apply them -- the problem comes in translating the concepts fro the abstract to the practical and from the classroom to the specific setting of interest -- this has long been a stumbling block for many and has limited the ability of students, managers, and professors alike to reap the full benefits of strategic thinking and management -- too many managers view strategic principles merely as academic concepts that may work for others but that could not work for them --their businesses, they often think, are just too complicated and too unique -- students and professors often make the mistake of thinking one way in the classroom but then a different way in the business world -- realizing the full benefit of strategic management means understanding its generalizability and so learning how to think strategically in every setting and across every type of firm - There are just so many different settings that many find it overwhelming, and there are so many different conditions, contingencies, and nuances that no one can be an expert in them all -- so the field of strat mgmt has fragmented into a number of various sub disciplines, reflecting a wide range of specific issues, situations, and settings -- related, the practice of strat mgmt has fragmented too, with experts in different industries, in different technologies, and in different types of firms -- while all of this specialization offers some advantages, it also comes at a cost; that cost is what we lose the ability to understand quickly and to apply the generalizable principles of strategic management across different settings -- the challenge then becomes to assess the context and situation in an effort to understand what is similar and what is different, so as to be able to take the best from the logic of strategic management and apply it to the unique and particular setting of interest - That translation process, from the general to the specific, is the underlying theme of this chapter - This theme will be used to connote two particular issues to the generalizable framework of strategic management 1) Entrepreneurship 2) International Business - These two topics are extremely important and so have given rise to their own unique body of academic research, their own vocabulary, and their own set of practicing specialist - Because they both deal with and directly impact firm performance, they are inextricably intertwined with the larger framework of strategic management - It is, then, helpful to think of both as special topics or areas within the larger field of SM

Globalization

The name given to the homogenization of global markets, economies, and cultures. Notwithstanding some noteworthy ebbs and flows, the overall process and direction of globalization are undeniable over the course of time.

Top Management Team

The small group of managers at the highest levels of the organization who make the majority of the strategic decisions and control the firm's operations. The CEO is typically the leader of the team.

Problemistic Searching

The tendency for people to look for solutions only once problems have been identified, rather than searching continuously for opportunities to improve.