Strategic Management
incremental strategic change
- Gradual change in alignment with environmental change - Building on successful strategies used in the past - In successful businesses there are usually quite long periods of continuity where strategies are largely unchanged or change incrementally
disadvantages of shareholder model
- diluted attention - vulnerable minority shareholders (principal-principal problem) - short-termism
advantages of shareholder model
- higher rates of return - reduced risk - increased innovation and entrepreneurship - better decision making
governance issues in principal-agent theory
- knowledge imbalance - monitoring limits - misaligned incentives
advantages of stakeholder model
- long-term horizons - less reckless risk-taking - better management
disadvantages of stakeholder model
- weaker decision-making - uneconomic investments - reduced innovation and entrepreneurship
shareholder model of corporate governance
-Maximizing wealth for investors and owners -focuses on developing and improving the formal system for maintaining performance accountability between top management and the firms shareholders -drives a firms decisions toward serving the best interest of investors
Pure emergent strategy
1. consistency of acton over time
Scenario Process
1. define scope 2. identify key drivers 3. develop distinct scenario 'stories' 4. identify impacts 5. monitor progress
3 conditions for a perfectly deliberate strategy
1. precise intentions of the organization 2. make the intentions common to all actors 3. collective intentions must have been realized exactly as intendded (no external interference)
weak signals
Advanced signs of future trends that may help to identify inflexion points - often unstructured and fragmented bits of information. E.g. mortgage failures in California in 2007 were a weak signal for the financial crisis that hit the global economy in 2008.
Horizon 1
Current core activities. Extend and defend core business, but expectation is that in the long term they will likely be flat or declining in terms of profits.
Non-Market Environment
Economic, political, legal, technological
horizon 3
Initiatives to create potential business not in existence
Strategic drift
Occurs when the strategy of the business no longer matches with the environment in which it operates
marketing and sales
Provides Value to Customers. Activities help customers buy the organization's products or services. (ex: Advertising)
Coporate Social Responsibility (CSR)
a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders
organisational field
a community of organisations that interact more frequently with one another than with those outside the field and that have developed a shared meaning system
market
a group of customers who share common wants and needs
industry
a group of firms producing products that are close substitutes
stakeholder model of corporate governance
a model where the business is accountable to all its stakeholders, not just the shareholders
recipes
a set of assumptions, norms and routines held in common within an organizational field about the approproate purposes and strategies of the field memebers
community and society stakeholders
affect by what an organization does
knowledge imbalance
agents typically know more than principals about what can and should be done
the value chain can be used to understand the strategic position of an organizaton and analyse resources and capabilities in 3 ways
as a generic description of activities, analyze the competitive position of the organization, analyse the value and cost of an organization
horizon 2
build emerging businesses
strategy canvas
compares competitors according to their performance on key success factors in order to establish the extent of differentiation
legitimacy
concerned with meeting the expectations within an organizational field in terms of assumptions, behaviours and strategies
Corporate Governance
concerned witht he structures and systems of control which managers are held accountable to those who have a lgitimate stake in an organization
Operations (Value Chain)
converting the materials into the final product
Economic Stakeholders
customers, creditors, competitors, suppliers, distributors, unions
3 challenges organizations need to meet in the macro environment for ecological issues
direct pollution product stewardship and sustainable development
outbound logistics
distributes goods and services to customers
unconnected strategies
egies originate in enclaves: actor(s) loosely coupled to rest of orgainization piroduce(s) patterns in own actions in absence of, or in direct contradiction to, central or common itntentionis; strategies organizationally emergent whether oI niot deliberate for act
internal stakeholders
employees, owners, board of directors
Coordinated Market Economies
encourage more coordination between companies, often supported by industry associations or similar frameworks. There are legal and normative constraints on hostile acquisitions on the one hand, and various supports for consensual and collective arrangements between management and labour on the other.
principal-agent model
explain relationships in governance chains
resource commitment
extent of branding, marketing effort, extent of vertical integration, product or service qulity, r&d spending and technological leadership, size of organization
scope of activities
extent of product/service range, extent of geographical coverage, number of market segments served, distribution channels used
critical principles of blue ocean
focus and divergence
Low Power/High Interest
gadflies, to keep informed
identifying the key drivers for change
here the pestel analysis can be used to uncover issues likely to have a major impact upon the future of the industry, region or market. you can use the scenario cube
functional strategies
how components of an organization deliver effectively the coporaye and business level strategies in terms of resources, processes and people
business level strategy
how the busienss competes in their market
The ideological strategy
ies originate in shared beliefs: intentions exist as collective vision of all actors, in inspirational form and relatively immutable, cointrolled normatively througl indoctrination and/or socialization; oiganization often proactive vis-ci-vis environment; strategies rather deliberate
Primary activities in the value chain
inbound logistics, operations, outbound logistics, marketing and sales, service
service
includs those activities that enhance or maintiain the value of a product or service, such as installation, repir, training and spares
4 phases of strategic drift
incremental strategic change, strategic drift, flux, transformation or death
liberal market economies
institutional environments where both formal and informal rules favour competition between companies, aggressive acquisitions of one company by another and free bargaining between management and labour.
Low Power / Low Interest
irrelevants, minimal effort
benchmarking
is used as a means of understanding how an organization compares w others
Range forecasting
is where organisations have less certainty, suggesting a range of possible outcomes. These different outcomes may be expressed with different degrees of probability, with a central projection identified as the most probable
monitoring limits
it is difficult for principals to monitor closely the performance of their agents. the limit is made worse because pricnipals ususlaly have many investments so their attention is likely to be split several ways.
identifying impacts of alternative scenarios on organizations
it is important for an organization to carry out robustness checks in the face of each plausble scenario and to adapt strategies that appear vulnerable and develop contingency plans in case they happens
technological stakeholders
key adopters, standards agencies and ecosystem memebers supplying complementary products or services
High Power / High Interest
key players, Manage closely
principal agent theory stresses the importance of
knowledgeable principals, effective monitoring systems and well-designed incentives in order to make sure that large organizations actually pursue the purposes that their owners set fro them
4 types of corporate social responsibility
laissez-faire, enlightened self interest, forum for stakeholder interaction, shaper of society
megatrends
large social, economic, political, and technological changes that are slow to form, and once in place, have an influence for seven to ten years or longer.
inflexion point
moments when trends shift in direction, for instance turning sharply upwards or downwards
developing scenario stories
necessary to knit together plausible stories that incporate both key drivers and other factors
strategic groups
organisations within an industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases
Planned strategy
originate in formal plans: precise intentions exist, formulated and articulated by central leadership, backed up by formal contr-ols to ensure surprise-free implementation in benign, controllable or predictable environment; strategies most deliberate
monitor progress
over the vario scenarios drawn up, organizatiosn should monitor progress over time to alert themselves to whether and how developmenets actually fit scenario expectations. here it is important to identify indicators that might give early warning about the final direction of environmental change and set up systems to monitoring these
social/political stakeholders
policy-makers, local councils, regulators, government agencies,
Hofstede's Cultural Dimensions
power distance, individualism/collectivism, uncertainty avoidance, long-term orientation
support activities in the value chain
procurement, technology, human resources, firm infrastructure
central hub positions
provide power within netowkrs. a central hub connects many organisations.
stakeholder mapping
provides a systematic way to identify the expectations, needs, importance, and relative power of various stakeholders
inbound logistics
receiving, storing, and disseminating inputs to the products
blue oceans
represent untapped market space, the creation of additional demand, and the resulting opportunities for highly profitable growth
Umbrella strategy
s originate in constraints: leadership, in partial control of organizational actions, defines strategic boundaries oI targets within wlhich othel actors respond to own forces or to complex, perhaps also unpredictable environinent; strategies par-tly deliberate, partly emergent and deliberately emergent
five important entry barriers
scale and experiences, access to supply or distribution channels, capital requirements, legislation or government action, expected retaliation
Strategic Dimensions
scope of acitivites vs resource commitment
defining scenario scope
scope refers to subject of the scenario analysis and the time span
cultural web
shows the behavioural, physical and symbolic manifestations of a culture
Governance chain
shows the roles and relationships of different groups involved in the governance of an organisation
Forecasting Approaches
single-point, range and multiple futures
High Power / Low Interest
sleeping giants, Keep satisfied
Consensus strategy
startegies originate in consensus: through muttual adjustment, actors converge on patterns that become pervasive in absence of central or commotn intentions; strategies rather emergent
Imposed strategies
strategies originate in environment: environment dictates patternis in actions eitlher through direct imposition or through implicitly pre-empting or bouLnding organizational choice; strategies most emergent, although may be internalized by organization and made deliberate
Process Strategy
strategies originate in process: leadership cointrols process aspects of strategy (hiring, structure, etc.), leaving content aspects to other actors; strategies partly deliberate, paitly emergent (and, again, deliberately emergent)
Three horizons framework
suggests organizations should think of themselves as comprising three types of business or activity, defined by their 'horizons' in terms of years
market environment
suppliers, customers, competitors. here companies typically compete for resources, revenues and profit
two limitations of benchmarking
surface comparisons and simply achieving competitive parity
Entrepreneurial Strategy
tegies originate in central vision: intentions exist as persoinal, uinarticulated vision of single leader, and so adaptable to new opportunities; organizatiorn under personal control of leader and located in protected niche in environment; str ategies relatively deliberate but can emerge
developmental market economies
tend to have strong roles for the state, which will either own or heavily influence companies that are important for national economic development. Formally or informally, the state will often encourage private-sector firms to coordinate between themselves and with national economic policy-makers.
Value Chain
the categories of activities within an organization which together create a product or service
network density
the frequency and number of connections among people in a network
corporate level strategy
the overall organizational strategy that addresses the question "What business or businesses are we in or should we be in?"
value system
the set of inter-organisational links and relationships that are necessary to create a product or service.
Categorisation
the ways in which members of an organizational field categorise or label themselves and their activities have signfiicant implications for what they do
Porter's Five Forces
threat of entry, threat of substitute, supplier power, buyer power, and competitive rivalry
flux
triggered by the downturn in performance caused by growing gap between organization and environment. in this phase strategies may change but in no very clear direction, changes may even be reversed so that strategies loop back on themselves.
alternative futures forecasting
typically involves even less certainty, focusing on a set of possible yet distinct futures. Instead of a continuously graduated range of likelihoods, alternative futures are discontinuous: they happen or they do not, with radically different outcomes
4 main reasons its hard to avoid strategic drift
uncertainty, path depeendency and lock in, cultural entrenchment, powerful people
misaligned incentives
unless their incentives are closely aligned to the principals interests, agents are liable to pursue other objectives that reward them better. principals might introduce bonus schemes in order to incentivise desired performnce, but then agents may game the system.
2 issues in market segment analysis
variation in customer needs vs specialization
Single-point forecasting
where organisations have such confidence about the future that they will provide just one forecast number
broker positions
which connect otherwise seperate groups of organizations, and are ofteen associated with innovativeness
