Perspectives of strategy
Conglomerate (unrelated) diversification:
Involves diversifying into products or services with no relationship to the existing business (zone D).
Related diversification
Involves diversifying into products or services with relationships to the existing business. Example: Zone B, developing new products for its existing markets. Zone C, bringing its existing products into new markets
Diversification
Involves increasing the range of products or markets served by an organisation.
when outsourcing?
Where a part of vertically integrated operations is not adding value to the overall business, or a partner organisation can manage it better, it may be replaced through outsourcing or subcontracting. The argument for outsourcing to suppliers is often based on their unique capabilities that allow lower costs to the sourcing organisation. Suppliers may have lower wages, scale economies, expertise, more professional employees and better incentives it also allows the organisation to be more flexible,
In order to do a good job board members need to
Operate independenly of management - the role of non-executives is crucial Being competent to scrutinies (granska) the activities of managers Having time to do their job properly Appropriate behaviours, including constructive friction
Competing models of strategy
Orkar inte göra denna just nu
What is the governance chain
The governance chain shows the roles and relationships of different groups involved in the governance of an organisation *In small family business, the governance chain is simple. * In large publicly-quoted corporations, however, influences on governance can be complex
What are the key drivers of differentiation?
The key drivers of differentiation are: *Product and service attributes - providing better or unique features (apple, dyson bmw) *Customer relationsships - customer service and responsiveness (Zalando etc); Customisation (SAP) or marketing and reputation (Coca cola) *complements - building on linkages with other products/service (apple and itunes)
What is the The value chain
The value chain describes the categories of activities within an organisation which, togehter, create a product or service The value chain invites the strategist to think of an organisation in terms of set activities - sources of competetive advantage can be analysed in any or all of these activities
Business model patterns
Three typical business model patterns are: *Razor and blade - named after the classic Gilette strategy of selling razors cheaply and profiting from sales of high priced blades (mobile phones, ink-jet printers) Freemium - named by combining free and premium. Basic services are free to attract customers who then upgrade to premium services (spotify, calm). Peer-to-peer. Bringing together two or more distinct but interdependent groups of customers (Uber, classifieds, Zipcar, etc).
Threshhold vs distinctive capabilities
Threshold capabilities: Those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market. 'Required to be able to compete in a market'. Without threshold capabilities the organisation could not survive over time (think about start-ups). There are threshold recourses and threshold competences to meet customers' requirements. Threshold capabilities do not of themselves create competitive advantage; it should be distinctive or unique capabilities that are value to customers and to competitors. Identifying and managing threshold capabilities raises two significant challenges: • Threshold levels of capability will change: as critical success factors change / through the activities of competitors and new entrants. • Trade-offs: may need to be made to achieve the threshold capability required for different customers (businesses have found it difficult to compete in market segments that require large quantity of standards products and also added-value specialist products). Distinctive capabilities: Required to achieve competitive advantage. -Distinctive resources underpin competitive advantage and that others cannot imitate or obtain (powerful brand). -Distinctive competences are ways of doing things that are unique to that organisation and effectively utilised so as to be valuable to customers and difficult for competitors to obtain/imitate (building of excellent relations)
What can strategic groups be used for?
To identify direct competitors and strategic opportunities
Describe Strategic drift
When you don't change your strategy to keep up with the environmental changes (digitalization etc). Can lead to a scenario when you either die or have to do a transformational change of the company.
diversification and integration model for a car manufactor
forward integration start car retail backword integration start car components manufactor horizontal integrations (diversication) start Bus manufactor or start truck manufactor
Describe market penetration
(zone A): implies increasing share of current markets with the current product range. This is the most obvious strategic option; penetration of its existing market with its existing products. Same thing in the same market. The strategy builds on what they have and do not require to venture into unknown territory. The organisation's scope is exactly the same. It may face two constraints: o Retaliation from competitors Penetration could cause rivalry as other competitors in the market defend their share. It could involve price wars or expensive marketing battles, which may cost more. When retaliation (revenge) is a danger, organisations seeking market penetration need strategic capabilities that give a clear competitive advantage. o Legal constraints Greater market penetration can raise concerns from official competition regulators concerning excessive market power. The European Commission, as example, has an overview of the whole European market and can similarly intervene. Retrenchment: Withdrawal from marginal activities in order to concentrate on the most valuable segments and products within their existing business. You are leaving the market in a planned way.
Stakeholder mapping issues
-Determining purpose and strategy - whose expectations need to be prioritised? -Who are the key blockers and facilitators of strategy? -Is it desirable to try to reposition certain stakeholders? -Can the level of interest or power of key stakeholders be maintained? -Will stakeholders positions shift according to the issue/strategy being considered?
Strategies in Highly competitive environments
-Dynamic repositioning -Overcoming competitor's moves *Blocking first-mover advantages *Counterattack competitors market (segment) *Imitate competitors moves -Overcoming competitors barriers *Technology advancement *Undermining competitors deep pockets
The focus of Strategic choice
-How organisations relate to competitors in terms of their competitive business strategies -How broad and diverse organisations should be in terms of their corporate portfolios -How far organisations should extend themselves internationally -How organisations are creative and innovative -How organisations pursue strategies through organic development, acquisitions or strategic alliances.
Key issies in the Value network
-Identifiation of key activities for an organizations strategic capability -Identification of profit pools -(profitable areas in value network) -Outsourcing decisions of particular activities -Partnering and extent of partnering
Limitations to Highly competitive environments
-Mixed empirical support for HC -Ignores that competition & co-operation can coexist -Sometimes companies shoudn't enter next level of dynamic competitive interaction and better focus on co-operative competition = coopetition
Conflicts of stakeholder interests and expectations
-Pursuit of short-term may suit shareholders and managerial bonuses but come at the expense of investment in long-term projects. -Family business owners may want business growth, but also fear the loss of family control if they need to appoint professional managers to cope with larger-scale operations. Investing in growth strategies may require additional funding through share issues or loans, but thereby risk financial security and independence. Going public on the stock market may raise funds, but require unwelcome degrees of openness and accountability from management. Expanding into mass markets may require a reduction in quality standards. In public services, excellence in specialised services might divert resources from standard services used by majority (e.g heart transplats come at the cost of preventive dentistry) In large multinational organisations, conflict can result because of a local division's responsibilities simuntaneoously to the company head-office and to its host country.
Why do firms internationalize?
1) Market-seeking motives 2) Asset-seeking motives 3) Efficiency-seeking motives
The NEW 7-S. 4 key goals
1. Disrupt the Status quo 2. creating temporary competitive advantage based on disruption 3. Take the initiative 4. Sustaining momentum (new 7-s = 1.Stakeholder satisfaction. 2.Strategic soothsaying. 3.Positioning for speed. 4.Positioning for surprise. 5.Shifting the rule of the game. 6.Signaling the strategic intent. 7.Simultaneous and sequential strategic thrust.
kotlers 8 steps for change maybe part 3 check later
1. Establish sense of urgency 2. form a powerful guiding coalition 3. create a vision 4. communicate the vision 5. empower others to act on vision 6. create short-term wins 7. consolidate gains and build more change 8. institutionalise the new approaches
International Strategy 4 risks
1.Cross-cultural risk. 2.Political. 3. Currency. 4.Commercial risk-->Liability of foreigness
M&A process
1.Target choice --> Negotiations-->integration-->results
BCG Matrix
: Uses market share and market growth criteria for determining the attractiveness and balance of a business portfolio. You have to look at the business units and not at 'Apple' itself. Products are a too low level. It also warns that high growth demands heavy investment (expand capacity or develop brands). There needs to be a balance within the portfolio. The growth/share axes of the BCG matrix define four sorts of businesses: o Star: Business unit within a portfolio which has a high market share in a growing market. Think about Apple. o Question mark: Business unit within a portfolio that is in a growing market, but does not yet have high market share. o Cash cow: Business unit within a portfolio that has a high market share in a mature market. o Dogs: Business units within a portfolio that have low share in static or declining markets; retrenchment. The BCG matrix provides a good way of visualising the different needs and potential of all the diverse businesses within the corporate portfolio. However, the disadvantages are: • Definitional vagueness It can be hard to decide what high and low growth or share means in particular situations. • Capital market assumptions It assumes that capital cannot be raised in external markets (they will keep it internal). • Unkind to animals Both cash cows and dogs receive ungenerous treatment; the first being simply milked, the second terminated or cast out of the corporate home. It can cause motivation problems or the danger of selffulfilling prophecy. Cash cows can become dogs more quickly than expected.
Dynamic capabilities
Ability to integrate, build, and reconfigure internal and external competences to adress rapidly changing environments
What are Interactive strategies
Business strategies depend on what competitors do (they are interactive).
Disadvantage from parenting company, (value destroying)
Adding managemnet cos, The managers are often the most well paid at companies and if they aren't adding more value then they are costing it's waste Adding bureaucratic complexity, they need to coordinate with sister company and that can slow down and lead to compremises between comapnies, also double set up of managers obscuring financial performance . One danger in a large diversified company is that the under-performance of weak businesses can be obscured. Weak businesses might be cross-subsidised by stronger ones. Internally, the possibility of hiding weak performance diminishes the incentives for business unit managers to strive as hard as they can for their businesses: they have a parental safety net
Porter's 5 Forces
Analyze forces: Low-medium-high -Industry attractiveness -Strategies to influence forces -Forces have a different impact on organizations Analyse if the forces are of high, medium or low importance for the company or industry. impact on the organizations also
What are Core competences
Are the linked set of skills, activities and resources that together: -deliver customer value -Differentiate a business from its competitors -Potentially can be extended and developed as market change or new opportunities arise
Applying the VRIO framework
Asses each resource or capability separately concerning all VRIO criteria wheter this particular resource/capability provides a competitive advantage What to use VRIO for: Select one Capability and go through the checklist Always use it in the right order (value first etc) All of them have to be a yes for it to work well
Describe a red and a blue ocean strategy
Blue ocean (New market with low competition) Red Ocean (established markets with intense competition) Looking at critical success factors customers/cost advantage *CSF as a source of competitive advantage *Comparing competitor's performance on CSFs in strategy canvas
What is a CAGE-analysis? And what are the different parts of it?
CAGE framework: Emphasises the importance of culture, administrative, geographical and economic distance. It measures the match between countries an companies. Example: 'If you are going to Asia with the suits that we wear in the Netherlands it could be far too expensive or the fitting is not good. Does our company fits overseas.' • Cultural distance Relates to the differences in language, ethnicity, religion and social norms. 'Is the culture the same? Is it easy to enter? Different than that how we act?' • Administrative and political distance In terms of incompatible administrative, political or legal traditions. Institutional weaknesses (corrupt administration) can open up distance between countries, but also political differences can. • Geographic distance Not only the kilometres separating, but involves other geographical characteristics of the country such as size, sea-access and the quality of communications infrastructure. • Economic / Wealth distance Wealth distances are also important. There are huge disparities in wealth internationally.
Describe CSR
Corporate social responsibility (CSR) is the commitment by organisations to 'behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large' CSR is therefore concerned with the ways in which an organisation exceeds its minimum legal obligations. Increasingly, a company's CSR stance becomes an integral part of the overall strategy itself: a reputation for social responsibility can be a source of competitive advantage
Cost leadership strategy
Cost leadership strategy involves becoming the lowest-cost organisation in a domain of activity. How can it be achieved? -Lower input costs -Economies of scale -Experience -Product/process design (outsourcing could be part of this, for example cheap labour to africa/china) Low cost should not be pursued in total disregard for quality. Businesses have two options here: PARITY: - equivalent quality in terms of product or service features. The cost leader can the charge the same price of product or service features. PROXIMITY: - only slightly lower quality allows the cost leader offer a slightly lower price and still make higher profits.
Value network
Creating competitive advantage beyond the scope of a single operation by integrating with value chains of network, partners, such as suppliers, distributors, and customers.
Scenario analysis - Process
DEFINE SCOPE (industr, region, years) --> IDENTIFY KEY DRIVERS (PESTEL, forecasts, cube) --> Develop distinct scenario stories (name scenarios) --> Identify impacts (check and adapt strategies) --> Monitor progress (early warning indicators)
Boards of directors (executive and non-executive) have ultimate responsibility for organisational success, hence strategy. What are two key issues for board of directors?
Delegation: How much to delegate without having strategy "captured" by management? Engagement: Do board members have suffient time and expertise to engage with the complexities of strategy?
TO encourage innovation and be responsive to disruptive innovations 3 steps
Develop a portfolio of real options. Companies that are most challenged by disruptive innovations tend to be those built upon a single business model and with one main product or service. (positioning options, scouting options, real options) Corporate venturing. New ventures, especially when undertaken from a real options perspective, may need protection from the usual systems and disciplines of a core business. It would make no sense to hold the managers of a real option strictly accountable for sales growth and profit margin: their primary objective is preparation and learning.0 BMW, for example, set up a completely separate business unit to develop its first mass-produced electric car, BMW they were to afraid to be influenced of old habits Intrapreneurship. This approach rather emphasises the individual and the ability to perform entrepreneurial activities within a large organisation.
What is a Differentiation strategy
Differentation involves uniqueness along some dimensions that is suffiently valued by customers to allow a price premium. - Within each market businesses may differentiate along different dimensions.
disruptive innovation
Disruptive innovation: creates substantial growth by offering a new performance trajectory that, even if initially inferior to the performance of existing technologies, has the potential to become markedly superior. This superior performance can produce spectacular growth, either by creating new sets of customers or by undercutting the cost base of rival existing business models
Managers and employees can be considered as Internal stakeholders. What can external stakeholders be divided into?
External stakeholders and mainly divided into these types: -Economic (e.g suppliers, shareholders, banks) -Social/political (e.g policy maker, government agencies) -Technological (e.g standars agencies, ecosystem members) -Community (e.g Local residents, unions)
Why high failure rate in m&a?
Flowed human characteritics - Hubris and other cognitive distortions. Blame cultural differences.
Game theory
Game theory encourages an organisation to consider competitors likely moves and implications of these moves for its own strategy -Game theory is particulary important where competitors are interdependent *Get in mind of competitors; *Think forwards and reason backwards
game theory in public sector
Game theory encourages an organisation to consider competitors' likely moves and the implications of these moves for its own strategy. it can be used to generally understand advantages and disadvantages with different strategic options. The principles of game theory can thus be of more general assistance and it has been suggested that public organisations and their leaders should: 1 Be knowledgeable about partners, their strategies, needs and decision making 2 Be flexible adjusting their own strategies or objectives to meet the overall aim 3 Develop clear lines of partnership communication and decision-making 4 Share the power equally between parties 5 Get agreement on partnership operation and benefits 6 Consider own roles and motives for engaging with the partnership 7 Create partner trust
International Strategy. GLOBAL VS LOCAL
Global strategy = This is a strategy that maximises global integration. In this strategy the world is seen as one marketplace with standardised products and services that fully exploits integration and efficiency in operations. The focus is on capturing scale economies Transnational = This is the most complex strategy that tries to maximise both respon- siveness and integration. Its aim is to unite the key advantages of the multi-domestic and global strategies while minimising their disadvantages. In addition, it maximises learning and knowledge exchange between dispersed units. In this strategy products and services and operational activities are, subject to minimum efficiency standards, adapted to local conditions in each country. In contrast to the multi-domestic strategy, however, this strategy also leverages learning and innovation across units in different countries. Export = This strategy leverages home country capabilities, innovations and prod- ucts in different foreign countries. It is advantageous when both pressures for global integration and local responsiveness are low ex GOOGLE Multi domestic = . This is a strategy that maximises local responsiveness. It is based on different product or service offerings and operations in each country depending on local market conditions and customer preferences. Each country is treated differently with considerable autonomy for each country manager to best meet the needs of local markets and customers in that particular country
4 different CSR stances
Laissez faire. In this view, organisations should be let alone to get on with things on their own account. Proponents argue that the only responsibility of business is to make a profit and provide for the interests of shareholders.29 It is for government to protect society through legislation and regulation; organisations need do no more than meet these minimum obligationsThis laissez-faire stance may be taken by executives who are persuaded of it ideologically or by smaller businesses that do not have the resources to do other than minimally comply with regulations. Enlightened self-interest. is guided by recognition of the potential long-term financial benefit to the shareholder of well-managed relationships with other stakeholders. Here the justification for social responsibility is that it makes good business sense. Long term. Forum for stakeholder interaction. Here the argument is that the performance of an organisation should be measured in a more pluralistic way than just through the financial bottom line. Such organisations adopt the principle of sustainability in strategy, one that ensures a better quality of life by attending to all three dimensions of environmental protection, social responsibility and economic welfare. Performance here is measured and rewarded in terms of the triple bottom line Shaper of society. Regard financial considerations as of secondary importance or a constraint. These are visionary organisations seeking to change society and social norms. Public-sector organisations and charities are typically committed to this kind of stance.
Mega trends, inflextion point, weak points
Mega trends = Political, social, technological, takes time and effects other factors very hard Inflextion point = when a trend shift direction swiftly ex Economy in saudi when they found oil Weak signals= Advanced signals that can find inflextion points before they happens, EX BIG SHORT MOVIE
PESTEL Analysis: the different parts
PESTEL provides a list of potentially important factors affecting strategy. Crucial to identify the key drivers for change (with high impact; current and in close future) in an industry of sector. Political. The role of governments Economical. Macro-economic factors (exchange rates, business cycles and growth rates) Social. Changing cultures and demographics Technological. Innovations (such as internet) Legal. Legislative constraints or changes (safe legislation or restrictions on mergers) Environmental. 'Green' issues (pollution and waste)
What does porter mean with "stuck in the middle" ?
Porter argues: IT is best to choose which generic strategy to adopt and then stick rigorously to it. Failure to do this leads to a danger of b eing stuck in the middle - doing no strategy at all.
There are three main types of corporate parenting roles/rationales: portfolio manager, synergy manager and parental developer.
Portfolio manager Office size: small • Focus: downward, investing and intervening They identify and acquire under-valued assets or businesses and improve them. do not get closely involved in the routine management of the businesses, only acting over short periods of time to improve performance by target setting, intervention and the provision (or withdrawal) of investment. Synergy manager Office size: large • Focus: across, facilitating cooperation Obtaining synergy is often seen as the prime rationale for the corporate parent. The synergy manager is a corporate parent seeking to enhance value for business units by managing synergies across business units. Three risks, excessive costs, overcoming self- interests, illusory synergies Parental developer • Office size: large • Focus: downward, providing parental capabilities The parental developer seeks to employ its own central capabilities to add value to its businesses. Rather parental developers focus on the resources or capabilities they have as parents which they can transfer downwards to enhance the potential of business units. DONKEN BUYS CHIPOTLE s. Key value-creating activities for the parent will be the provision of central services and resources. two critical risks, Parental focus. The 'crown jewel' problem
Ownership models
Publicly quoted companies State-owned enterprises Entreneurial business Family businesses Non-for-profit organizations Partnerships Employee-owned firms
Strategies in Highly competitive environments - critical success factors
Redefine business-level strategy -Cannibalize own advantages -Dynamic capabilities Avoid attacking competitors weaknesses to not awaken competitors awareness -Incremental moves / change -Market disruption as core competences -Surprise, unpredictability & irrationality -Misleading signals & bluffing
What are the blue Ocean - four action framework?
Reduce - What factors should be reduced well below the industry standard? Create - Which factors should be created that the industry never offered? Raise- Which factors should be raised well above the industry standard? Eliminate - Which if the factors that the industry takes for granted should be eliminated?
Resources vs capabilities. What are the difference? Physical, Financial, Human.
Resources: What we have (nouns) e.g Physical: Machines, buildings materials etc Financial: Balance sheets, cash flow, suppliers of funds Human.: Managers, employees, partners, suppliers. Capabilities: What we do (verbs) Physical: Ways of achieving utilisation of plant, efficiency, productivity Financial: Ability to raise funds and manage cash flows Human: How to gain and use experience, skills, knowledge, build relationships, innovovate and motivate
Scenario analysis - characterisation
Scenarios are plausible views of how the environment of an organisation might develop in the future based on key drivers of change about which there is a high level of uncertainty. -Build on PESTEL analysis and key drivers for change -An organisation will typically develop a few alternative scenarios (2-4) to explore and evaluate future strategic options. -Scenario analysis is used in industries with long planning horizons, for example, the oil industry or airlines industry.
Different governance models
Shareholders model + Higer rates of return +Reduced risk: Shareholders can diversify their risk by using the stock market to buy shares in many different companies +increased innovation and entrepreunership +Better decision-making Disadvantages -Diluted attention -Vulnerable minority -Short-termism Stakeholders model. Staleholder = individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends. They can be owners, employees, customers, suppliers and communities. +Long-term horizons +Less reckless risk-taking +Better management Disadvantages -Weaker decision making -Uneconomic investments -Reduced innovation and entrepreneurship
Forecasting (connected to PESTEL) 3 differnet forecasts
Single point = Confidence for future/certaintly Range= less certaintly (different outcomes graded unlikely, possible, probably) Alternative futures = What happens if competitor invest in machine A = they don't buy, our sales increse, 40% likelihood they invest B= they buy machine, our sales are the same, 30%likelihood C= they buy machine, and slash prices our sales goes down, 30% likelihood this happens
What is small and big strategy
Small strategy is about financial performance typically of firms in competitive industries. Big strategy is about significance. Impact and purposes that stretch far beyond financial performance.
Cooperative Strategy
Sometimes too much competition can be damaging and it is in the interest of competitors to restrain competition
What is Stakeholder mapping. And what factors decide what stakeholders focus on?
Stakeholder mapping identifies stakeholder power and attention in order to understand political priorities. Stakeholder mapping can help in understanding the following issues: • Determining purpose and strategy 'Which stakeholders need to be most considered? • Whether the actual levels of interest and power of stakeholders properly reflect the corporate framework of the organisation. • Who the key blockers and facilitators are likely to be and the appropriate response. • Whether repositioning of certain stakeholders is desirable and/or feasible. • Maintaining the level of interest or power of some key stakeholders. The power and interest of stakeholders depend on the particular issue being considered - different issues require different maps. Even powerful stakeholders may not attend closely to everything. Three factors are particularly imporant. Criticality - how much does it matter to the stakeholder? Channels - Are the communication channels good? Cognitive capacity - there may be too much information to process effectively.
Who are the stakeholders?
Stakeholders are those individuals or groups that depend on an organisation to fulfill their own goals and on whom, in turn, the organisations depends.
diagnos the change concept maybe part 3 check later
Strategic change program according 8 steps 1. time (how quick) 2. Scope (how much change required ) 3. preservation (what need to stay the same) 4. Diversity 5. capability (what is the managerial and personal capability to implement change 6. capacity (what is the degree of change resiurces availble) 7 readiness (are the staff ready for change 8 power ( what power does leader need to have to make the change)
Key elements in managing m&a and alliances
Strategic fit Organisational fit Correct valuation Integration Co-evaluation - Appropriate exit strategies
Motives of M&A
Strategic: Extension,Consolidatoin and capabilities. Financial:Financial efficiency, tax efficiency and asset stripping. Managerial: Personal ambition and bandwagon effects
Two limitations of strategy
Surprise: The impact of unexpected events Serendipity: The impact of change, luCK and happenstance
TOWS Matrix
TOWS analysis will look to match internal factors to external factors to help identify relevant strategic options that an organisation could pursue. It can help an organisation to see how it can take advantage of opportunities, reduce threats, overcome weaknesses and exploit any strengths A TOWS is a commonly used strategic planning tool and can add real value to an organisation, helping to take strategic planning one step further.
What is a focus strategy? Explain two different kinds of focus strategies?
Targets a narrow segment or domain of activity and tailors its products or services to the needs of that specific segment to the exclusion of others. Two types of focus strategy. Cost-focus strategy -Identify areas where broader cost based strategies fail because of the added cost of trying to satisfy a wide range of needs. Differentiation focus strategy - Look for specific needs that broad differentiatiors do not satify so well
The strategy clock
The Strategy Clock is a tool that allows for a dynamic approach for examining alternative generic strategies and gives more scope for hybrid strategies. focuses on cost to consumer and differentiation strategy.
What are Hybrid strategies
The argument for pure generic strategies is controversial -Porter acknowledges that the strategies can be combined (hence, hybrid) -Southwest Airlines (USA) famously pioneered low cost air fares but also seeks to differentiate on convenience, frequent departures and friendly service. Technological or managerial innovations where both cost efficiency and quality are improved Hybrid strategies allows to be between low-price and differentiation strategies. Hybrid strategies involve both lower prices than differentiation strategies, and higher benefits than low-price strategies. It can be an effective way of entering a new market, for instance overseas. Example: IKEA; low prices with differentiated Swedish design. '
Dynamic capabilities (3 types)
The concept of dynamic capabilities, by which is meant "an organization's ability to renew and recreate its resources and capabilities to meet the needs of changing environments" if you want to be successful you need to be changeable 3 types Sensing = Sensing implies that organisations must constantly scan, search and explore opportunities across various markets and technologies Seizing=Once an opportunity is sensed it must be seized and addressed through new products or services, processes, activities etc. recconfiguring = . To seize an opportunity may require renewal and reconfiguration of organisational capabilities and investments in new technologies, manufacturing, markets, etc.The company needed to discard some of its old capabilities, acquire and build new ones and recombine them
The growing importance of Corporate governance
The separation of ownership and management control - Defining different roles in governance Corporate failures and scandals - Focusing attention on governance issues Increased accountability to wider stakeholder interests and the need for corporate social responsibility(green issues)
Describe the 4 different strategy lenses
The strategy lenses are ways of looking at strategy differently in order to generate many insights. Looking at problems in different ways will raise new issues and new solutions Design: (logical process and analysis and evaluation). The view that strategy development can be 'designed' in the abstract. This means systematic, analytical and logical. Experience (outcome of people's taken for granted assumptions of ways of doing things). The view that the future strategy of an organisation is often heavily influenced by its experience and that of its managers. It suggests that the personal experience and interests of key decision-makers need to be understood. Variety (emergence of new ideas from the variety of people). Emphasises the importance of promoting diversity in and around organisation, in order to allow the seeding of as many genuinely new ideas as possible; looking for future strategies at the bottom instead of the top. Discourse (importance of language for understanding and changing strategy). View that the language is important as a means by which managers communicate and explain and change strategy, but by which they also gain influence and power and establish their legitimacy and identity
Key factors in choosing the method of strategy development
Urgency - organic development is slowest, alliances accelerate the proess but acquisitions are quickest. Uncertainty - an alliance means risks and costs are shared and thus a failure means these costs are shared. Types of capabilities - Acqu works best with hard resources (production units) Culture clash is the big issue. Modularity of capabilities - if needed capabilities can be clearly separated from the rest of the org an alliance may be the best.
Describe the VRIO framework
VRIO framework is the tool used to analyze firm's internal resources and capabilities to find out if they can be a source of sustained competitive advantage. Value: Do resources and capabilities exist that are valued by the customers and enable the organisation to respond to environmental oppurtunities or threats? Rarity: Do resources and capabilites exist that no or few competitors possess? Inimability: Are resources and capabilities difficult and costly for competitors to obtain or imitate? Organisational support: Is the organisation appropriately organised to exploit the resources and capabilities?
Three essential elements in a business model
Value creation -What is offered to what customer segment? *Customer needs and problems: value and benefit *Target customer and market segment *Value for other participants Value confinguration -How is the value proposition structured? -Composition and selection of resources and activities -Identifies what participants perform what activities Value capture -Why does the model generate a margin? *Revenue stream and payments *Cost structure and drivers *Apportion of value between stakeholders
Consolidation
We are going to do the same thing as we did. We try to keep what we have.
Product development:
Where organisations deliver modified or new products (or services) to existing markets. Example: LIDL is going to sell insurances, that you can go on holiday with LIDL. This can involve varying degrees of diversification as mentioned before. Sony first developed its Walkman into CS's and recently to MP3's, this is an example of little diversification, although the technologies differed. Product development can be an expensive and risk activity for at least two reasons: New strategic capabilities Involving new processes or technologies that are unfamiliar to the organisation can involve risks. Success frequently depended on a willingness to acquire new technological and marketing capabilities, thus its involves heavy investments and high risk of project failures. Project management risk It can cause the risks of delays and increased costs due to project complexity and changing project specifications over time.
Issues in Governance
Who are the shareholders? - should boards respond to demands of institutional investments managers or the needs of the ultimate beneficiaries The role of institutional investors - should they actively intervene in strategy? Establishing the specific role of the board -in particular the role of non-executive directors Scrutiny and control - statutory requirements and voluntary codes to regulate bords
Scenario analysis
technique that develops plausible alternative views of how the environment might develop in the future. Difference from forecasting this more about learing about different possibilities for enviromental change STEPS 1. Define a Scope (industry, region) 2. Identify key drivers (PESTEL) 3. Develop Destinct scenario stories 4. Identify impacts 5. monitior progress
decision to integrate or subcontract
the balance between these decisions Relative resources and capabilities. Does the subcontractor have the potential to do the work significantly better? Risk of opportunism. Is the subcontractor likely to take advantage of the relationship over time?