#1 Basic Concepts of Strategy

Question 1

What is activity system Governance

Answer 1

The actors that perform the activities

Question 2

What is activity system Structure

Answer 2

The way in which activities are linked and their importance for the business model

Question 3

What is activity system Content

Answer 3

Selection of activities

Question 4

How does the view on strengths and weaknesses differ between the design school and the configurational school?

Answer 4

Design school: Rarely change and should be explicitly articulated
Configurational school: Should be determined in the context of a problem

Question 5

What is an activity

Answer 5

The engagement of resources to serve a specific purpose toward the fulfillment of the firm’s objective

Question 6

What is an activity system

Answer 6

A set of interdependent organizational activities centered on the firm, including those conducted by the firm and other firms it interacts with. A way of describing the business model.

Question 7

What are the 4 design themes?

Answer 7

NICE framework:
Novelty (innovation)
lock-In (path dependency, network externalities)
Complementarity (synergies)
Efficiency (effectiveness)

Question 8

What are the three core views on drivers of performance / competitive advantage?

Answer 8

ARK
Activity based view - efficiency in activities
Resource based view - deriving rent from unique resources
Knowledge based view - creation of firm-specific unique knowledge.
This can be applied to analyze both firm-specific and location specific advantages.

Question 9

What is the view on structure and strategy in the design school and configurational school respectively?

Answer 9

In design view, structure follows strategy.

In configurational, neither takes precedence over the other

Question 10

Explain the design school of strategy.

Answer 10

Strategy is formal, structured planning resulted in an explicit strategy, based on assessment of competitive advantage.
Formulation of strategy first, then implementation of strategy. The management formulates the strategy, the company implements it.

Question 11

Explain the configurational school of strategy

Answer 11

Seeing strategy as a process of learning more than of conception. Formulation and implementation are not separate, but should be carried out together.
Based on the idea that in advance, it’s hard to say whether some asset, tool or process will form a strength or a weakness

Question 12

What is the revenue model?

Answer 12

The pricing strategy for the specific product

Question 13

What is the overall objective of a business model

Answer 13

Exploiting a business opportunity by creating value for the parties involved. That includes fulfilling the customers’ needs and create customer surplus while generating a profit

Question 14

Why is it important to emphasize that activities are interdependent?

Answer 14

Because that explains why activity systems develop over time as the competitive environment changes

Question 15

Why does the revenue model play an important role for value appropriation?

Answer 15

Because the revenue model determines the price, which is the fundamental tool of value appropriation

Question 16

What creates switching costs leading to lock-in effects?

Answer 16

Path dependency and network externalities

Question 17

What are the two sets of design parameters that capture the firm-centric design of activity systems?

Answer 17

Design elements

Design themes

Question 18

Explain the types of design elements

Answer 18

o	Content (the set of activities that are performed) (What)
o	Structure – the linkages and sequencing of activities (How)
o	Governance (which actors will perform the activity) (Who)

Question 19

Explain the main types of design themes:

Answer 19

(NICE framework) How it creates value

• Novelty (adoption of new activities (content), new linkages (structure), or new ways of governing activities (governance)
• E.g. Apple, the first electronics company that included music distribution as an activity
• Lock-in – can be manifested as switching costs, or as network externalities
• Complementarities (synergies)
• Efficiency

Question 20

What is a multinational company

Answer 20

“A firm that owns and controls operations in several countries”
• Importance is on control of foreign operations. With this criterium a firm exporting to internaitonal markets will not qualify as a multinational company
• It requires subsidiaries in several foreign country. These could be sales/marketing, distribution centers, R&D, manufacturing or similar.
Global FDI flow and stock is increasing –> Importance of MNEs increase.

Question 21

What is globalization?

Answer 21

Global cross-border integration and convergence. From an international economics perspective , this means the integration of markets. For businesses, this means that most products are now global, targetted customers with increasingly convergent tastes. Also global competition.
A usual metaphor for for Globalization is that “The world is flat”. Means decreasing importance of borders, global competition and connection through technology.

Question 22

What are some of the drivers of semi-globalization / regionalism?

Answer 22

“Advantages of scale & scope without the risks of global operations” - avoid the inherent complexity of global trade.
• Some of the same fundamental forces that drive globalization are also in opposition:
○ Technology: Increasingly different internet governance. EU/US Right to be forgotten, Great firewall of China
○ Deliberalization of trade and ressource movements - TPP, EU border controls
Political changes - Brexit

Question 23

What are the main drivers of globalization?

Answer 23

• Technology
		○ Reach customers
		○ Manage operations
	• Liberalization
		○ WTO, trade liberalization
	• Global products and customers
		○ Developing countries increasingly consume, not only produce
	• Global competition
		○ Self-enforcing, since global competition is obviously also caused by globalization
		○ Businesses locate where it makes most sense --> offshoring, outsourcing
	• Political changes
		○ Recently: Eastern Europe, China
Earlier: Japan, South Korea, Singapore

Question 24

What allows for international strategy to be different from “mainstream” strategy?

Answer 24

Semi-globalization is what allows international business strategy to be truly distinctive from “mainstream” strategy. No integration only “mainstream” strategy”. Perfect globalization only “mainstream” strategy, since the world could be treated as 1 country.