Business Strategy Cases Flashcards

Question

Describe the strategy formulation activities under "diagnosing"

Answer 1

Diagnosing: 3. External assessment: investigate structure and dynamics of environment surrounding the organisation: scan of direct (market) environment and the broader (contextual) environment, including what makes the system tick, and in what direction are things developing? 4. Internal assessment: investigating the capabilities and functioning of the organisation. Includes assessment of the: - business system - (resources, value chain), and - organisational system (org structure, processes used to control and coordinate, org culture) AND compare to rival firms

Answer 2

Conceiving: 5. Option generation: creating potential strategies, can be specified at varying levels of detail 6. Option selection: Evaluate options. Criteria could be perceived risk, anticipated benefits, organisations's capacity to executve, expected competitor reactions and follow-up possibilities). Sometimes formally articulated, but generally at least partially based on experience and judgment of decision-makers involved. Called "strategic decision-making".

Answer 3

Realising: 7. Action taking: perform tangible actions to realise the strategy; from setting up and operating the business system to getting the organisational system to function on a day-to-day basis 8. Performance control (how well did you implement it?): Measure whether the actions being taken are in line with the option selected, and whether the results are in line with what was anticipated; can be formal or informal. Incentives, targets, performance indicators, corrective steps. Deviation could be a signal to re-evaluate the original solution or problem definition.

Answer 4

If there is a clear pattern to the organisation's actions

Answer 5

The main variations in division of labour are along the following dimensions. a) Top vs middle vs bottom roles: How much empowerment of middle and lower levels is beneficial for the organisation? - Diagnosing (external and internal assessment): more common in bottom roles - Option selection: top management (at least decision) b) Line vs staff roles: Which should be responsible for the strategy formation process? - Line managers: responsible for realisation --> sometimes also given role of conceiving. Could do all strategy formation activities without staff support. - Staff from all existing departments may provide input - Can use staff in strategy departments: varies from general process facilitation to process ownership to full responsibility for strategy formulation. c) Internal vs external roles: Keep strategy formation activities in-house or outsource them? - External: diagnosis activities (external and internal assessment), or facilitate strategy formation process. Some have responsibility for option generation.

Answer 6

For more formal e.g. strategic planning system with tasks, responsibilities, decision-making authority, budget, evaluative mechanisms Coordination-Control-RAP-Function: - Easier coordination, especially of a large organisation. - Top management has more control - Unambiguous responsibilities, clearer accountability and stricter review of performance generally leads to a better functioning organisation. For less formal: - Formal planning systems have difficulty with essential strategy-making activities that are difficult to capture in procedures, e.g. ILIPSE creating new insights, learning, innovation, building political support, entrepreneurship - Once established, planning bureaucracies create rules, regulations, procedures, checks, paperwork etc, making the system inflexible, unresponsive, ineffective and demotivating.

Answer 7

1. Deliberate strategising: the ability to act intentionally; think before acting 2. Strategy emergence: The ability to think and act at the same time and let strategy (a coherent pattern of action) emerge Central thought: duality of wanting to intentionally design the future, while needing to gradually explore, learn and adapt to an unfolding reality. Few strategies are purely deliberate or emergent, but usually a mix between the two.

Answer 8

DC-COP 1. Direction: Without plans and objectives, the organisation would be adrift, unable to judge what is effective behaviour 2. Commitment: Plans enable early commitment to a course of action --> can invest resources and mobilise themselves, and dare to take actions that are difficult to reverse and have a long payback period. 3. Coordination: Plans coordinate strategic initiatives within a firm into a cohesive pattern, avoiding overlapping, conflicting and contradictory behaviour 4. Optimisation: Plans facilitate optimal resource allocation by managers evaluating and choosing the optimal course of action before committing resources to the most promising strategy and initiatives 5. Programming: Plans are a means for programming all organisational activities in advance for better precision, and more reliability and efficiency. - -> good for stable environment

Answer 9

1. Opportunism: keep an open mind to grab unforeseen opportunities and respond rapidly to new conditions 2. Flexibility: Keep options open and don't commit the organisation too early to irreversible actions and investments. 3. Learning: The best way to find what works is to give it a try and learn 4. Entrepreneurship: Different people in the firm will have different strategic ideas. Provide inviduals, teams or units with enough autonomy to pursue innovative initiatives. Facilitative various divergent projects simultaneously, increasing commitment or closing them down as their potential unfolds. 5. Support: Getting things done in firms includes understanding the political and cultural dynamics of the organisation to build enough support to move forward and seeing where side steps or reversals are needed, pragmatically shaping strategy depending on what is feasible, not the ideal. - -> good for dynamic environment

Answer 10

HAD DIFF - Hierarchical - implemented top-down - Advantages (DC-COP); gives organisation direction, can make commitments and prepare, achieve optimal resource allocation and coordination, programme the organisation - Deliberateness over emergence - Intentionally designed and executed - think first, then act - Formally structured and comprehensive - Forecast and anticipate, figure out the solution

Answer 11

Approach: - Emergence over deliberateness - Gradually shaped (incrementalism), finding out the solution, thinking and acting intertwined, unstructured and fragmented strategy formation - FLE - Postpone commitments, stay flexible, experiment with and learn through parallel initiatives and increase commitments as ideas gradually prove their viability in practice Why incrementalism: It acknowledges that strategy formation is a process of innovation and organizational development in the face of wicked problems in an unknown future. 1. Wicked problems (unique, complex, linked to other problems, can be defined and interpreted in many ways, no correct answers, no delimited set of possible solutions, are interactive) - -> action will change the problem, so the plan is outdated as soon as implementation starts. - -> planning leads to paralysis by analysis - you are never done analysing a wicked problem! 2. Innovation process --> can't plan it 3. Disruptive process of organisational change --> requires broad cultural and cognitive shifts. Changing people's cognitive maps requires complex processes of learning and unlearning. Cultural and political changes are also difficult to programme.

Answer 12

Strategic renewal is the process of constantly enacting strategic changes to remain in harmony with external conditions. Issue of strategic renewal: How can a path of strategic changes be followed to constantly renew the firm and avoid a situation whereby the firm 'drifts' too far away from the demands of the environment?

Answer 13

Strategic changes are directed at renewing the business and organisational systems to create a new fit between the basic set-up of the firm and the characteristics of the enviornment. They are fundamental alterations to the business system or the organisational system E.g. a reorganisation, a diversification move, a shift in core technology, a business process redesign, a product portfolio reshuffle.

Answer 14

1. Areas: Does the strategic change take place in the business system or in the organisational system? 2. Magnitude: What is the scope (how broad) and amplitude (how big) of the strategic change 3. Pace: What is the speed and timing of change? Need to keep the firm in step with the shifting opportunities and threats in the environment. Move quickly in a short period of time, or move more gradually over a longer time span?

Answer 15

- Business system: the way a firm conducts its business; the specific configuration of resources, value-adding activities and product/serivce offerings directed at creating value for customers. - Organisational system: the way the organisation has been configured; how the individuals populating a firm have been configured, and relate to one another, with the intention of facilitating the business system.

Answer 16

1. Organisational members hold up: 2. Organisational system, comprising organisational: a) structure b) processes c) culture ...which holds up: 3. The business system

Answer 17

1. Organisationl structure: (anatomy) (division of tasks and responsibilities) 2. Organisational processes: (physiology) linking individuals and coordinating tasks 3. Organisational culture: (psychology), including joint beliefs, values and norms

Answer 18

1. Input-based 2. Throughput-based 3. Output-based

Answer 19

1. Supply-based structure: based on different core inputs (e.g. oil division, gas division, renewables division) 2. Supply channel structure: based on different supply channels (e.g. direct purchasing unit, auction-focused unit, intermediary-based unit) 3. Supplier-based structure: based on different core suppliers (e.g. supplier Bosch unit, supplier Siemens unit)

Answer 20

1. Functional structure: based on value-adding activities (e.g. marketing, HR) 2. Technology-based structure: based on different core technologies (e.g. mechanical technology unit, electronic unit, digital unit) 3. Geographic structure: based on location of activities (e.g. European division, Asia/Pacific division, Americas division)

Answer 21

(MAP-BBC) 1. Market segment structure: based on different groups of clients served (e.g. consumer market unit, small business unit, large business unit) 2. Account-based structure: based on different major clients served (e.g. BMW, Daimler) 3. Product group structure: based on different products being focused on (e.g. savings and loans unit, stocks and bonds unit, foreign currencies unit) 4. Business unit structure: based on different product-market combinations being focused on (e.g. retail banking unit, private banking unit, investment banking unit) 5. Brand-based structure: based on different brands being used (e.g. premium brand unit, B-brand unit, private labels unit) 6. Channel-based structure: based on different distribution channels being used (e.g. onling retailing unit, retail stores unit, franchisee support unit)

Answer 22

How many management layers needed? | How much authority to delegate to lower level sof management?

Answer 23

- Def: The arrangements, procedures and routines used to control and coordinate the various people and units within the organisation. - They can be institutionalised as ongoing integration mechanisms (e.g. financial budgeting and reporting processes) or just needed for a short period (e.g. task forces, committees, project teams). - They can be more or less formal (e.g. communication via hallway gossip, personal networking, influencing decision-making through informal negotiations)

Answer 24

- Def: The worldview and behavioural patterns shared by the members of the same organisation. It encompasses the values and norms of the organisational members. Effect: - It offers a filter to make sense of things - Culture can act as a strong integration mechanism, controlling and coordinating people's behaviour. - BUT an organisation culture is not always homogeneous; strongly divergent sub-cultures might arise in certani units, creating 'psychological' barriers within the organisation.

Answer 25

1. A few large change steps (discontinous or disruptive change) 2. Numerous small change steps (continuos change path)

Answer 26

1. Scope of change: Narrow/broad. Broad if many aspects and parts of the firm are altered at the same time (could be comprehensive). Narrow when you focus change on a specific organisational aspect (e.g. new product development processes) or department (e.g. marketing) 2. Amplitude of change: High/low. High if change is a radical departure from previous situation. Low when only a moderate adjustment - If comprehensive and radical change --> large magnitude - If narrow and moderate change --> small magnitude - If a focused radical change (narrow, high) --> medium-sized change steps - If a comprehensive moderate change (broad, low) --> medium-sized change steps

Answer 27

1. Timing of change: (when changes are initiated) intermittent (stop/go) or constant. If intermittent, need to determine the right moment to start. If constant, swhen to start is less important, as long as there is no peak at any one point in time. 2. Speed of change: (Time span within which changes take place) high or low.

Answer 28

Revolutionary change v Evolutionary change - Revolutionary change: Change processes that do not build on the status quo, but overthrow it. Disruptive change - radical, high speed change - Evolutionary change: Change processes whereby a constant stream of moderate changes gradually accumulates over a longer period of time. Incremental To fundamentally transofrm the organization, a break with the past is needed, starting with a clean slate. But there is value in continuity, buildign on past experiences, investments and loyalties; to achieve lasting strategic renewal, people in the organisation will need time to learn, adapt and grow into a new organisational reality.

Answer 29

1. When organisational rigidity is so deeply rooted that smaller pushes doe not bring the firm into movement, 2. When large change is needed in a short time

Answer 30

PC-PICSS - psychological resistance to change - cultural resistance to change - where culture perpetuates obsolete assumptions about the market or organisation --> hard to reshape the organisational belief system - political resistance to change (winners and losers) - Investment lock-in (invested a lot into a certain product portfolio, activity system or technology) - competence lock-in - the better a firm becomes at something, the more it focuses on becimnig even better. But if the firm's competence based threatens to become outdated due to market or technolgoice changes? - Systems lock-in: e.g. to an open standard (GAAP accounting rules) or a proprietary system (e.g. SAP) - Stakeholder lock-in: long-term contracts, commitments to governments/communities...

Answer 31

1. Competitive pressure (market position eroding quickly) 2. Regulatory pressure 3. First mover advantage: be the first, build entry barriers for late-movers, capitalise quickly on know-how that is dissipation-sensitive or for which the patent period is limited

Answer 32

1. Where strategic renewal hinges on widespread organisational learning (time is needed to experiment, reflect, discuss, test and internalise). 2. Power may be too dispersed for revolutionary changes to be imposed upon the firm

Answer 33

- Revolution over evolution (supporting role) - Radical (high amplitude), comprehensive (broad scope), dramatic, sudden break with status quo - Abrupt, unsteady, intermittent; stable and unstable states alternative - Creative destruction; pursuing revolutionary change to gain a competitive advantage (breakthrough technology, new business model) or change industry rules --> a break with the past is needed before new methods can be adopted - Disruptive innovation (turnaround) - Shock therapy to fundamentally change people's cognitive maps, solve lock-in problems. - Under pressure things become fluid; In a crisis, people become more receptive to necessary, painful changes. - Punctuated equilibrium; stability punctuated by episodes of revolutionary change; stability is not inherently harmful, as it allows people to get to work; downside = organisational rigidity

Answer 34

- Evolution over revolution (fall-back if all else fails); revolutionary change commonly leads to the need for further revolution at a later time; it creates its own boom-and-bust cycle through a strong organisational yearning for stability - Uninterrupted improvement, gradual, steady, constant, continuous adjustment, persistent transient state, gradual development (long term view), organic adaptation - Moderate, piecemeal, undramatic - In the cold everything freezes (a crisis blunts their motivation for expeirmenting and learning as they brace for an imminent shock and seek security) Conditions: everyone must be motivated to continuously improve (reject stability, accept bounded instability), learn and adapt

Answer 35

Competitive advantage: How can a company be successful? This depends on the unique business system it has developed to relate itself to its business environment, whereby the resource base, activity system and product/service offering are all aligned to provide goods and/or services with a superior fit to customer needs

Answer 36

The configuration of: 1. Product/service offering: value proposition (output) 2. Activity system: value chain (throughput, an integrated set of value creation processes leading to the supply of product and/or service offerings) 3. Resource base: stock of assets (inputs, all means at the disposal of the organisation for the perofrmance of value-adding activities ...intended to create value for the customers = The way a firm conducts its business

Answer 37

1. Low economices of scale 2. Slow organisational learning (for specific knowledge and capabilities) 3. Unclear brand image (stand for nothing) 4. Unclear corporate identity (difficult to explain why its people are together in the same company, lack of internal identity) 5. High organisational complexity (not a simple and manageable organisation) 6. Limits to flexibility: less specialised firms are often forced into certain choices due to operational necessity (can't alter the many standard products) due to specific procedures, routines, systems and tools

Answer 38

Which products should be developed? Which markets should be served? --> limit focus on a limited number of businesses and within each business on a limited group of customers and a limited set of products

Answer 39

A set of related product-market combinations. A business is delineated in both industry and market terms

Answer 40

A group of firms: - making a similar type of product (airline industry, Swatch in watch industry) - employing a similar set of value-adding processes (e.g. consulting, mining industries, Swatch in fashion industry so focus on fashion design and marketing) - employing a similar set of resources (e.g. oil industry, IT industry)

Answer 41

1. Traditionally defined industries 2. Upstream industries (extration/growing of raw materials and their conversion into inputs for the manufacturing sector) v downstream industries (takes output of manufacturing companies and brings them to clients, often adding services)

Answer 42

1. Buyer attributes/demographics (as predictors of buying criteria or buying behaviour), e.g. by geophraphy, age, education. 2. Buying criteria/needs, e.g. price, purpose, style 3. Buyer behaviour/actions, e.g. adoption (early or late), purchase location, use (how often) Can have a narrow or broad market definition in each of these categories

Answer 43

- Industry (e.g. airlines railways, shipping) - Market (e.g. London-Paris transport, London-Jamaica Transport, London-Barcelona Transport) Typically, a business is narrower than the entire industry and the set of markets served is also limited. e. g. ferry business (part of shipping industry serving London-Paris transport market) e. g. Charter business (part of airline industry serving London-Jamaica and London-Barcelona Transport market, but not London-Paris)

Answer 44

1. Select a limited number of businesses: analyse the structural characteristics of interesting businesses to judge whether they are attractive (Porter's five forces analysis) 2. Focus within each selected business on distinct market segments and target a few special product offerings to meet their needs, aligned with a focused activity system and resource base --> product positioning

Answer 45

- Competitive scope is about determining in which product-market combinations within a business a firm wants to be involved (where to compete, and how). - Can be widely-oriented or very tightly focused. How can it be focused: - Broad scope: large number of segments within a business, with varied product offerings, e.g. sport products for many segments - Narrow scope: - -- segment focus (1 market segment, multiple products) - -- product focus (multiple market segments, 1 product) - -- niche focus (few customer segments and limited product line)

Answer 46

- Price --> need low cost product offering, activity system and resource base - Features --> different intrinsic functional characteristics (but others can copy) - need different specialised resources and activitiy systems - Bundling - a pcakage of products/services 'wrapped together' e.g. Apple products, kindle, bundle with warranties or financing - Quality - better usability, reliability, durability (through materials used, people involved, manufacturing process employed, quality assurance procedures or distribution system) - Availability (distribution) - available at right place at right moment in right way (e.g. out-of-doors impulse ice cream purchases, emergency) - Image - logo can double the price, e.g. Lacrosse, good reputation --> trusted business partner - Relations (with customers) --> more intimate knowledge of the product offering), customer gains more influence on what is offered (e.g. Daimler-Bosch)

Answer 47

Primary activities (on bottom): (IOOMS) - in-bound logistics (receiving, storing, disseminating outputs) - operations (transofrming inputs into final products) - out-bound logistics (collecting, storing, distributing products/services to buyers) - marketing and sales (providing a means by which buyers can purcahse the product and inducing them to do so) - service (providing service to enhance or maintain the value of products) ``` Secondary/Support activities (on top) (FiHT-P) Firm infrastructure (all general activities that support the entire value chain, e.g. planning, legal, accounting), HR Management, Technology development, procurement (purchasing inputs) ``` To the right: Margin

Answer 48

The activities can provide the basis for a competitive advantage. Its uniqueness will usually not depend only on few specialised activities, but on the extraordinary configuration of the entire activity system.

Answer 49

1. Tangible resources (land, buildings, materials, money) - these can be purchased 2. Intangible resources (these must usually be developed): a) Relational resources: relationships, reputation b) Competences: aligned: - knowledge: rules and insights that can be extracted from and help make sense of information (e.g. market insight, competitive intelligence, technological expertise) - capability: the organisational's potential for carrying out a specific activitiy or set of activities - attitude: the mindset prevalent within an organisation

Answer 50

Virgin's service competence combining customer knowledge, adaptation capabilities and a customer-oriented attitude

Answer 51

If it cannot be copied, subsituted or eroded by the actions of rivals, and is not made redundant by developments in the environment. So sustainability depends on two main factors: - Competitive defendability: difficult for rival to imitate, or rivals can't find an alternative route of attack. Could include ability to outpace rivals, staying one step ahead. - Environmental consonance: all kinds of environmental influences can undermine the fit between the firm's competitive advantage and the environment itself (e.g. analogue printing competence is no longer relevant)

Answer 52

Market adaptation v Resource leveraging Market adaptation: the ability to understand the rules of the game in the market where one is operating Resource leveraging: Creating value by controlling, disseminating assets across the busines and organisational system

Answer 53

Outside-in perspective (market adaptation) v Inside-out perspective (resources leveraging)

Answer 54

MAIS-PR - Markets over resources - Adaptation to environment, opportunity-driven (external potential and positioning), driven by market demand - Understand industry structure, incl bargaining power and mobility barriers - Need to acquire necessary resources - To attain advantageous position

Answer 55

R-DRIBS-MPT - Resources over markets (the starting point of the strategy formaiton process is the question of whcih resource base it wants to have. Acquiring or refining difficult-to-imitate competences and exclusive assets requires major investments and will to a large extent determine the culture and identity of the organisation). - Attaining and building distinctive and superior resources and creating imitation barriers - Strength-driven (internal potential) focus on resource base and activity system - Adaptation of environment to the firm - Market positioning is tactical based on a resource-driven strategy

Answer 56

What should be the profile of the corporation? This involves: 1. Corporate composition: in what lines of business should the corporate be active 2. Corporate management: What organisational system is required to run the corporation?

Answer 57

1. Corporate scope: In how many businesses should the corporate be active? 2. Corporate distribution: What should be the relative weight of each line of business, allocating resources accordingly

Answer 58

1. Integration Mechanisms: How should synergies between businesses be realised 2. Management mechanisms: Who should ensure that synergies between businesses are realised?

Answer 59

Diversification: when a corporation enters another line of business. This can be: - horizontal diversification (market development) (to another related business within the industry (integration) or outside the industry (horizontal diversification), e.g. Bosch moving into e-bikes) - vertifical diverisfication (backward vertical to integrate supplier business, forward vertical integration to integrate buyer business, e.g. Hugo Boss moving from textile into retail (risky, as with Magna (BMW manufacturer) considering buying Opal from VW))

Answer 60

Boston Consulting Group matrix: x-axis: relative competitive position y-axis: business growth rate size of bubble: copmpany's sales in a line of businesses ``` General Electric Business Screen: x-axis: competitive position y-axis: industry attractiveness size of bubble: total business size shaded bit of bubble: firm's share of the business ``` Number of bubbles: corporate scope Relative size of bubbles (or shaded bits of bubbles): corporate distribution

Answer 61

1. Centralisation: physically bringing resources and activities together into one organisational unit 2. Coordination: orchestration of resources, activities and/or product offerings split between different business units 3. Standardisation: creating a common norm for resources, activities and/or product offering characteristics across business units to achieve economies of scale and rapid competence development (powerful, but how much?)

Answer 62

1. Control: the power to enforce integration on the basis of formal authority (division or corporate level manager). Could be through direct supervision (telling business units what to do) or indirect (giving themobjectives that must be met or discussing variables). Various levels of authority: from full decision-making power to coordinator or liaison officer with limited formal power. 2. Cooperation: achieving integration by means of mutual adjustment between business units; it may be in the business unit's interests, or they see the overall corporate interests, e.g. exchange ideas, have joint initiatives

Answer 63

- Financial control style: control only through financial objectives - Strategic control style: Some central services, some standardised systems and activities, centre tries to coordinate activities that reach beyond business unit boundaries. Control though strategic objectives - Strategic planning style: strategic business units have relatively little autonomy from the corporate centre. Many key activities are cnetralised or standardised, corporate centre secures cross-business coordination. Control by direct supervision.

Answer 64

Business responsiveness v Multi-business synergy Business responsiveness: The ability to respond to the competitive demands of a specific business area in a timely and adequate manner (internal communication and control distracts from this) Multi-business synergy: The additional value created by working in two or more business areas, over and above the sum of the business parts (synergies are not automatic, they take hard work!)

Answer 65

1. Leveraging resources (resource base) 2. Integrating activities (Activity system, value chain) 3. Aligning positions for the product offering

Answer 66

Achieving resource: a) allocation (e.g. money and personnel) and b) replication (e.g. knowledge and capabilities)

Answer 67

Where integration of value chains is more efficient or effective than if totally separated: a) linking value-adding activities: vertically related business units with an internal customer-supplier relationships --> vertical integration of sequential value-adding activities to meet a specific type ofcustomer demand b) sharing value-adding activities (business units combine them, e.g. logistics, production, marketing --> scale advantages or quality improvements). Corporate centre may organise certain support activities centrally, e.g. HR, IT support, procurement

Answer 68

Improving: a) bargaining position (offering a broad package of related products and servces to specific customer groups) b) competitive position (prevent business units from competing against on another, support each other to attack a third party (e.g. through a common standard or aggresively pricing selected products)

Answer 69

HSS-DD 1. High governance costs (from coordinating activities, bureaucracy) 2. Slower decision-making (more layers of management, more coordination meetings) 3. Strategy incongruence (misfit of strategy) with business demand, e.g. VW Skoda (low end) and Bentleigh (high end) 4. Dysfunctional control (corporate centre misses specific business know-how needed to judge business unit strategies, activities and results) - frustrating, good people leave, business steered in wrong direction 5. Dulled incentives (lack of autonomy has a negative impact on motivation, compounded by poorly delineated responsibilities, lack of clear accountability and 'captive' internal customers)

Answer 70

Portfolio perspective | Integrated perspective

Answer 71

RAUSIC-FS-CAPc-BP - Responsiveness over synergy - Acquisitions are simple to accommodate - Potentially unrelated (diverse) composition - Collection of business shareholdings: portfolio of highly autonomous business units in which the corporation has a financial stake --> responsiveness - Low, incidental coordination between BUs (e.g. if purchasing same thing, coordinate) Pursue financial synergies only using capital allocation and performance control to: - Strive for a balanced portfolio of mature cash producers and high potential return on investment cash users, at an acceptable level of overall risk.

Answer 72

SRIAS-DaMS-JC - Synergy over responsiveness - Tightly related (focused) composition - Highly integrated (interdependent) with high, structural coordination between BUs - Acquisitions and divestitures are difficult Setting direction and managing multi-business synergy: - Joint strategy development - Strong central core of integrated or shared resources, activities and/or product offerings, with business applications

Answer 73

What should be the nature of the relationship between a firm and other organisations in its surrounding? - Relational actors: with which groups or firms can, or must, the company interact? (e.g. Daimler working with google for google maps naviation system) - Relational objectives: what expectations and objectives do organisations have wrt an external relationship (ask them to state them explicitly) - Relational factors: Which factors also have an impact on how relationships between companies unfold? - Relational arrangements: What is the precise coordination or dispute settlement mechanism between the cooperating companies? (legal agreement? Hand-shake?)

Answer 74

1. Upstream vertical (supplier) relations: providers of raw materials, parts, machinery and services (or suppliers of all production factors), but also with suppliers further upstream in the industry --> to gain better quality, reliability, process improvement, influence the product, e.g. natural resources and Honda 2. Downstream vertical (buyer) relations: Customers (actul users or intermediaries trading the output), e.g. get retailer's market data 3. Direct horizontal (industry insider) relations: competitors - e.g. to standardise the car plug so they can all be used; lobby infrastructure suppliers for electric cars, fundamental research, economies of scale 4. Indirect horizontal (industry outsider) relations: Complementors: relationships with companies outside the firm's industry, e.g. marketing things together around a lifestyle, packaging, software + hardware

Answer 75

PEST: - Political/regulatory actors: organisations setting or influencing the regulations under which companies must operate, e.g. governments, lobbyists, parties, regulatory bodies, international institutions) - Economic actors: organisations that influence the general state of affiars with which the firm interacts, e.g. tax authorities, central banks, employer's federations, stock exchanges, unions - Socia-cultural actors: individuals or organisations with a significant impact on societal values, norms, beliefs and behavrious, e.g. community groups, media, opinion leaders, religious organisations --> better PR - Technology actors: organisations that influence the pace and direction of technology developemtn and the creation of knowledge, e.g. patent offices, universities, research institutes, standardisation bodies

Answer 76

1. Leveraging resources - e.g. Telecom + Vodafone using each other's networks, but still competing 2. Integrating activities 3. Aligning positions on the product offering. between companies

Answer 77

Improve either the quantity or quality of the resources at their disposal through: 1. Learning: objecitve is to exchange knowledge and skills, or engage in the joint pursuit of new know-how. 2. Lending: If a firm cannot make full use of its resource, it can lend them to others, e.g. for technology, copyrights and trademarks --> licencing. Physical resources can also be lent.

Answer 78

1. Linking: Relationships where products/services are exchanged, e.g. vertical link between a buyer and a seller. Enables focus on a limited number of value-adding activities 2. Lumping: Firms bring similar activities together to gain economies of scale, e.g. sharing operations (airline alliances), logistics systems (e.g. postal partnerships) or payment facilities (e.g. inter-bank settlement agreements). Usually between industry insiders.

Answer 79

1. Leaning: Firms get together to improve their bargaining position vis-a-vis other industry actors (e.g. standards) e.g. more bargaining power with suppliers, offer a more attractive package of products and services to buyers, developing industry standards with insiders. Could heighten entry barriers for interested industry outsiders 2. Lobbying: firms cooperate with one another to gain a stronger position vis-a-vis contextual actors (e.g. want stricter or less regulation) - stronger voice towards political and regulatory actors, put pressure on standard setting bodies, tax authorities, universities etc.

Answer 80

1. Legitimacy: Relations are highly impacted by what is deemed to be legitimate (written and unwritten codes of conduct). Which agenda is chosen and how interaction is take place are decided by what both parties acept as 'the rules of engagement'. There is 'trust' when it is expected that the other organisation will adhere to these rules. 2. Urgency: Relations develop differently if one or both parties are under time pressure to achieve results 3. Frequency: Relations depend on the frequency of interaction and the expectations of future interactions with each other (one-off transaction or a more structural relationship with multiple interactions) --> strong impact on outcomes, influenced by level of urgency and how much is going in parallel 4. Power: the ability to influence others' behaviour in inter-organisational relationships. A firm can derive power from having resources the other needs.

Answer 81

1. Balanced, loose relationship: mutual independence - full freedom to act in accordance with own objectives, can break off the relationship without any penalty. Neither organisation has significant influence over the other 2. Balanced, tight relationship: mutual dependence (or interdependence) (fine): mutually dependent with mutual sway. 3. Unbalanced, loose relationship: unbalanced independence --> powerful firm is more independent, giving it more freedom to act; the other is independent, but can be influenced by the other firm. 4. Unbalanced, tight relationship: Unbalanced dependence (could be critical): where there is asymmetrical dependence, one part can dominate the other. The organisation with the lower level of dependence will have more freedom to manoeuvre and impose its conditions --> need a good contract. E.g. where supplier is not dependent on you as a customer, but you are on them --> can come close to the hierarchy-type relationship found within a firm

Answer 82

Bilateral v Multilateral agreements Non-contractual arrangements v contractual arrangements v equity-based arrangements Nb: In equity-based arrangements, it involves taking a financial stake in each other or in a new joint venture

Answer 83

Multilateral: - lobbying coalition (e.g. European Roundtable of Industrialists - Joint standard setting (e.g. Linus coalition) - Learning communities (e.g. Strategic Management Society Bilateral agreements: - Cross-selling deal (e.g. between pharma firms) - R and D staff exchange (e.g. between IT firms) - Market information sharing agreement (e.g. between hardware and software makers)

Answer 84

Multilateral arrangements: - Research consortium (e.g.Symbian in PDAs) - International marketing alliance (e.g. Star Alliance in airlines) - Export partnership (e.g. Netherlands Export Combination) Bilateral: - Licensing agreement (e.g. Disney and Coca-cola - Co-development contract (e.g. Disney and Pixar in movies) - Co-branding alliance (e.g. Coca-cola and McDonalds

Answer 85

Multilateral arrangements: - Shared payment system, e.g. Visa - Construction consortium (e.g. Eurotunnel) - Joint reservation system (e.g. Galileo) Bilaterial arrangements: - New product joint venture (e.g. Sony and Ericsson in mobile phones) - Cross-border joint venture (e.g. Daimler Chrysler and Beijing Automotive - Local joint venture (e.g. CNN Turk in Turkey)

Answer 86

To profit from some of the advantages of vercial and horizontal integration without incurring their costs. It also facilitates co-specialisation to become more effective and efficient, clustering firms into more or less permanent networks. When trust and reciprocity has been achieved, relations can move beyond simple contractual obligations.

Answer 87

Disadvantages of such co-specialisation: - could combine the weaknesses of hierarchy and markets - the mutual dependence might become skewed, shifting the balance of power to one of the partners. Partial cure: use a contract to clearly define objectives, responsibilities, authority and expected results. Still the risk of deception, abuse of trust and exploitation of dependence though

Answer 88

Hierarchy benefits: structural coordination of activities. Parties collaborate on a long-term basis to realise a common goal. Hierarchy weaknesses: bureaucracy - creating red tape, unnecessary coordination activities and dulled incentive to perform

Answer 89

Market benefits: Flexibility and motivation: - flexibility to have multiple relationships of varying length and intensity, easy to change - motivation to be efficient and optimise the pursuit of the organisation's self-interest --> spurs risk-taking, innovation and change Market weaknesses: opportunism: self-interest seeking with guile, often the incomplete or distorted disclosure of information calculated to mislead, distort, disguise, obfuscate or confuse.

Answer 90

Inter-organisational competition v inter-organisational cooperation Inter-organisational competition: The act of working against each other, where two or more organisations's goals are mutually exclusive Inter-organisational cooperation: The act of working together with each other, wehre two or more organisations' goals are mutually beneficial, e.g. Lenovo (hardware) + Microsoft (software)

Answer 91

Discrete organisation perspective v embedded organisation perspective

Answer 92

C-SIM-NDBA-L-Z-P-TC-C - Competition over cooperation; every organisation pursues own self-interest. - Remain independent and interact with other companies under market conditions as much as possible. - No network level strategy, discrete organisations (atomistic): distinct and defended boundaries, arm's length and transactional relations to facilitate clear and business-like interactions --> have a contract and a believable threat to enforce them, avoid information leaking to the other firm - Vertical transactions are mainly zero-sum (win/lose); players with stronger bargaining power earn more of the economic rent. - Build a powerful position, wield it in a calculated and eficient manner and avoid resource dependence. - Temporary coalitions as a tactics for weaker companies to create power blocks - Limited, well-defined, contract-based working together e. g. Steve Jobs, Apple

Answer 93

- Cooperation over competition - Business is about value creation (a mainly positive-sum activity) --> increase the pie (win/win). By specialising in a certain area, the firm can gain scale and experience advantages much faster. Complementary resources will usually be of higher quality and lower price than if done independently. - Reap significant benefits by surrendering part of their independence and developing close long-term cooperative arrangements with a group of other organisations. - Network level strategy: Interdependence, embedded organisations (networked) (companies have outsourced non-core activities). - Durable partnerships (strategic): close and structural relations with fuzzy and open boundaries based on trust and reciprocity; they are broad, open and relationship-based e. g. Android platform, Bill Gates

Answer 94

How to send the firm in a particular direction. There are two components to this issue: 1. Corporate mission, consisting of its elements and functions 2. Corporate governance, consisting of its functions and forms

Answer 95

The broader set of fundamental principles giving direction to strategic decision-making, of which organisational purpose is the central element. The corporate mission consists of the fundamental principles that mobilise and propel the firm in a particular direction

Answer 96

All tasks and activities (can be limited to the those of the board of directors, or include government, societal groups etc) that are intended to supervise and steer the behaviour of top management --> ensure they pursue strategy in line with the corporate mission

Answer 97

The reason for which an organisation exists

Answer 98

PB values defined 1. Organisational purpose at its heart: why does the firm exist 2. Organisational beliefs: what are the driving ideas and assumptions about the nature of the environment and what the firm needs to do to be successful in its business, influenced by their collective cognitive map 3. Organisational values --> what is of fundamental importance? It determines what they see as worthwhile activities, ethical behaviour and moral responsibilities; it also contributes to corporate identity. To be influential, it must become embodied in the organisation's culture. This can also change over time (IBM was arrogant--> needed to change to develop a service culture) 4. Business definition --> where does the firm operate? Often loosely defined, e.g. mobility solutions, not automotive company. Can focus direction, but could result in missed opportunities if too narrowly defined --> could change somewhat over time

Answer 99

Whether the four elements of organisational purpose, organisational beliefs, organisational values and business definition fit together and are mutually reinforcing

Answer 100

Mission: fundamental principles guiding stratregic choices (business principles) Vision: A broad conception of a desirable long-term future state, of which the details remain to be determined; long-term business aim) Objective: medium-term aim, more specific than a vision Target: short-term aim, more specific than an objective

Answer 101

It can provide: 1. Direction: Defining the boundaries within which strategic choices and actions must take place 2. Legitimisation: Conveying to all internal and external stakeholders that the firm is pursuing valuable activities in a proper way --> acceptance, support, trust (also legitimises staff lay-offs!) 3. Motivation: Inspiring individuals to work together in a particular way NB: what is seen as a legitimate and motivating organisational purpose is strongly contested.

Answer 102

1. Forming function: Shaping, articulating and communicating the fundamental principles that will drive the organisation's activities 2. Performance function: Contributing to the strategy process with the intention of improving the future performance of the corporation 3. Conformance function: ensuring corporate conformance to the stated mission and strategy

Answer 103

1. Board structure: one-tier (US, Britain) or two-tier (Germany) board structure or free to choose (France, Switzerland). - Two-tier: formal division of power with management board with top executives and a supervisory board with non-executives with the task of monitoring and steerig the management board. Slower, Supervisory Board not so well informed, but better checks and balances. - One-tier: executive and non-executive directors sit on one board. Quicker, everyone better informed, but agency problem 2. Board membership: Legal requirements (Germany --> half represent the workers, half the shareholders), also other differences (number, stature and independence of non-executive directors) 3. Board tasks: could be limited (just vote on proposals, little power to contradict CEO's will). Others meet regularly and formulate proposals, practively select new top managers and determine objectives and incentives. Depends largely on how proactive non-executive directors define their role.

Answer 104

Economic profitability v Social responsibility Profitability: To be an attractive investment, a firm must earn a higher return on the shareholders' equity than could be realised at a bank. (Profitability is not only a result, but also a source, of competitive power. It provides a company with the financial leeway to improve its competitive position and pursue its ambitions) Responsibility: Acting in the interest of others, even when there is no legal imperative. Firms require a certain measure of economic profitability to compete and survive, and they need to exhibit a certain amount of social responsibility if they are to retain the trust and support of key stakeholders. In countries with a market economy, it is generally agreed that companies should pursue strategies that ensure economic profitability, but that they have certain social responsibilities that must be fulfilled as well. Here endeth the consensus.

Answer 105

Shareholder value perspective v Stakeholder value perspective

Answer 106

Corporations are established to serve the purposes of their owners, generally being to raise the share price and dividends, and the long term profitability too. Corporations are instruments to create economic value - Profitability over responsibility - Challenge = getting agent to pursue principal's interest (principle-agent problem) --> most important players in corporate governence are independent outside directors, preferably with a significant amount of company shares - Pursuing self-interest; recognising that it is expedient to pay attention to stakeholders does not mean it is the corporation's purpose to serve them (there is no moral obligation to do so). Serving stakeholers as a means, not an end

Answer 107

Corporations are joint ventures between shareholders, employees, banks, customers, suppliers, governments and the community with the intention of increasing their common wealth (so serve the interests of all parties involved) --> serving stakeholders is an end in itself. No reason why the supplier of one ingredient in an economic value-creation process has a stronger moral claim on the organisation than the providers of other inputs. - Responsibility over profitability - argument for stakeholder representation on the board, and stengthening CSR. - Balancing interest of various stakeholders; how essential is its input to the organisation's economic success? How legitimate is their claim? - Pursuing joint interests motivates. Cooperation is more effective than competition. Most supporters of the stakeholder values perspective acknowledge that organisations have a moral responsibility towards secondary stakeholders too, e.g. local communities, governments, the environment and society in general, but opinions differ whether it should be a part of the organisation's purpose to serve this broader body of constituents.

Answer 108

What are the drivers propelling industry development, and what patterns of development do industries exhibit?

Answer 109

1. Dimensions (state): which elements can be characterised, causing a shift in industry rules? 2. Paths (direction): which development paths can be distinguished along the various dimension? 3. Drivers (determinant): which factors in the environment can change and influence the direction of the industry development? 4. Inhibitors (determinant): what are the sources of industry rigidity that oppose industry change? e.g. electric cars: expensive, range, lack of infrastructure Industry development is the result of a change in one or more of the underlying factors determining the behaviour of Porter's five forces

Answer 110

CC-VH-IE / CEVICH 1. Convergence v divergence: of business models, e.g. convergence of airline industries, copying Ryan Air for domestic flights. Mutation to compete on a different basis v selection (less successful firms adapting to the dominant industry design) 2. Concentration v fragmentation: of market share. Concentration of aircraft and food retailing industries. Fragmentation of airline and telecom service industries. 3. Vertical integration v vertical fragmentation: integration of media and IT service providers, fragmented semiconductor industry since 1980s 4. Horizontal integration v horizontal fragmentation: integration (where boundaries between different buisnesses in an industry become increasingly fuzzy (e.g. consumer electronics and defence industries). Fragmented (construction and airlines). Inter-industry integration where producers of different products and services are complementary or converge on a common standard or platform; or fragmentation from neighbouring sectors, e.g. accountancy 5. International integration v international fragmentation: integration of food retailing and business education. Fragmentation if increasingly confined to a region (internet retailing) 6. Expansion v contraction: in demand. Can be cyclical.

Answer 111

1. Gradual development (equilibrium environment): one dominant business model, slowly replaced by an alternative that is a slight improvement --> firms have little trouble adjusting, competition is based on the shared rules of the game, so advantage for established firms 2. Continuous development (fluctuating equilibrium environment): relatively frequent but modest changes to the dominant business model. Advantage for rapid adapters 3. Discontinuous development (punctuated equilibrium environment): one dominant business model for a long time, suddenly displaced by a radically better one. Advantage for rule breakers (with the new business model) (insider or new entrant) 4. Hypercompetitive Development (Disequilibrium environment): Business models are frequently pushed aside by radically better ones. Constantly changing rules of the game, so impossible for firms to build up a sustainable competitive advantage. Advanage for rule breakers.

Answer 112

Drivers in the contextual environment (PEST): - Political/regulatory drivers (e.g. new trade regulations,environmental protection laws, privatisation moves) - Economic drivers (e.g. changing exchange rates, economic growth, labour productivity) - Socio-cultural drivers (e.g. changing health needs, environmental awareness, consumption habits) - Technological drivers (e.g. new scientific breakthroughs, innovative technologies, communication standards) Internal drivers in the industry

Answer 113

1. Incumbent rivals (e.g. improved competences, new products, new brand positioning) 2. Suppliers (e.g. innovative products, new foreign entrants, consolidation) 3. Buyers (e.g. changed needs, increased price sensitivity, lower brand loyalty) 4. Substitutes and complementors (e.g. changed rpoduct range, new technological standard) 5. New entrants (e.g. new business model, diversification strategy, new alliance)

Answer 114

When that one firm is the major driver of industry development. If there is not industry leader and the evolution of the industry is due to the complex interaction of many different change drivers, the industry dynamics determine the path of industry development

Answer 115

Industry rigidity factors (that fix the rules of the game and competitive positions) include: 1. Underlying conditions: Some structural industry factors can be inherent to the industry and resist attempts to change, e.g. economies of scale (airplane manufacturing), buyer concentration (defence systems), buyers valuing product differentiation (clothing) or price (chemicals, construction) 2. Industry integration: Some industries can be locked into a specific structure for a long time due to the complex linkages between various aspects; e.g. music industry needed internet delivery methods, new standards, copyright protection... 3. Power structure: Powerful industry incumbents have little to gain and much to lose if the rules of the game change 4. Risk averseness: of companies, customers, suppliers and distributers. 5. Industry recipes: The common understanding of the rules of the game can limit people's openness to rule changes (cognitive map of industry incumbents) 6. Institutional pressure: Firms can experience strong pressures from all kinds of institutions prescribing behavioural standards. This gives companies legitimacy, but makes them less willing to question industry conventions. The industry evolution is path dependent - the path that the industry has travelled in the past will strongly limit how and in which direction it can develop in the future.

Answer 116

Firm compliance v Strategic choice Firm compliance: The ability of companies to understand and adapt themselves to their environments (or be selected out). Strategic choice: the ability to act without regarding the rules of the game to gain significant competitive advantages

Answer 117

Industry dynamic perspective v Industry leadership perspective

Answer 118

Industry development is an autonomous process, whch individual firms can hardly hope to shape. Adjust or risk being selected out. Industries are complex systems, with a large number of forces interacting simultaneously, none of which can significantly sdirect the long-term development of the whole. - Compliance over choice; play by the rules, adapt. - Uncontrollable evolutionary process - Environment selects fit firms (as in Darwinism) - Success due to fitness to industry demands - Low and slow ability to change industry - Convergence to dominant design - Profit is largely industry-dependent - Changing the rules of the game is extremely difficult, slow and hazardous, and should be left up to those 'high rollers' willing to play for 'high stakes' with only a low chance of success (venture capitalists and entrepreneurs).

Answer 119

The industry can be shaped in an infinite variety of ways by innovative firms within the bounds of the possible. Therefore, industry development can be driven by firms willing and able to take a leading role. - Choice over compliance - Firm creates fitting environment - Success due to manipulation of industry demands; if a vision of the industry of tomorrow is compelling enough, people inside and outside the company will start to anticipate, making it a self-fulfilling prophecy. A firm must then work out a new competitive business model. If it seems to offer a competitive advantage, this can attract sufficient custoemrs and support to gain 'critical mass'. The better the firm is at builing new competences and setting new standards, the more power it will have to determine the direction of industry development. - High and fast ability to change industry - Change the rules (innovate) - Divergence, create new design - Profit is largely firm-dependent

Answer 120

How can leaders get power, and how and where can they exert it?

Answer 121

1. Sources of leadership influence: What are the sources that leaders can derive their influence from? 2. Levers of leadership influence: What are the generic ways for leaders to seek influence and where do they have to focus on? 3. Arenas of leadership influence: Where do leaders need to direct their influence to achieve strategic changes?

Answer 122

1. From the position (determined by the their position and their willingness to exert them - it must be a credible threat) 2. From the person (depends on perceptions of people being led)

Answer 123

1. Legitimate power: When a person has the formal authority to determin certain organisational behaviours and other employees agree with this situation, e.g. authority to assign work, spend money, and demand information 2. Coercive power: Capability to punish or withhold rewards to achieve compliance, e.g. giving a poor performance review, withholding a bonus, dismissing employees 3. Reward Power: Ability to offer something of value to a person in return for compliance, e.g. giving praise, awarding wage raises, promoting employees

Answer 124

1. Expert power: Has superior knowledge or skills in an important area so others want to comply. Can be based on specific knowledge of function areas (e.g. marketing, finance), technologies (e.g. IT), geographic areas or businesses. Also skills: e.g. sees the issue/solution, asks the right questions 2. Referent power: Has charismatic appeal by which he can influence other persons, e.g. due to likeableness, forcefulness, persuasiveness, visionary qualities and image of success Nb: probably need both

Answer 125

The act of influencing the views and behaviours of organisational members with the intention of accomplishing a particular organisational aim; the act of getting organisational members to follow. Leaders are individuals who have the ability to sway other people in the organisation to get something done.

Answer 126

The capability to influence

Answer 127

1. Input control (highest leverage, least direct impact)- selecting the right people and environment 2. Throughput control (lowest leverage, highest direct impact- getting involved hands-on in the activities of others (should be more the exception) 3. Output control - e.g. management by objectives; reaching agreement on performance targets, monitoring how well they are being achieved.

Answer 128

The parts of the organisation most resistant to change 1. The political arena: managers must build widespread political support to impose their strategic agenda and get ensure acceptance and compliance for implementation 2. The cultural arena - manages must be able to change people's belief and associated behavioural patterns to change an organisation; visionary (new image of desired future state of the firm) and missionary (new set of beliefs and values to guide the firm) and teaching, using rational persuasion, inspirational appeal, symbolic actions, motivational incentives and subtle pressure 3. The psychological areana - leaders must win the hearts and minds of people to change the organisation. People must be willing to 'follow the leader', prerferably actively, with commitment, courage and even passion --> need respect and trust of colleagues, and must meet emotional need for certainty, clairty and continuity.

Answer 129

Control (imposition) v Chaos (initiative) Control: the ability of managers to shape ther own future and that of their firm Chaos: the level of authority given to the employees to do things differently, weigh situations, solve problems and take initiatives. Argues a period of disorganisation is often a prerequisite for strategic renewal - to unfreeze existing structures, processes, routines and beliefs, and open people up to different possibilities and provoke creativity. It also encourages self-organisation, e.g. in the market (invisible hand). Managers who want to release the energy, creativity and entrepreneurial potentil pent up in their organisation must be willing to let go and allow some chaos to exist.

Answer 130

The organisational leadership perspective v Organisational dynamics perspective

Answer 131

Top management can - and should - take charge of the organisation (visible hand). Organisational inertia and a growing misfit between the organisation and its environment are not inevitable, but result from a failure of leadership. If people are left to sort things out by themselves, this inevitably degenerates into strategic drift. - Control over chaos - Authoritarian, top-down, imposed organisation - Controllable creation process (doesn't have to be leader's ideas, but he needs to have control) - Leaders shapes new behaviour using their vision and skill - High, fast malleability - Strategise, then organise

Answer 132

Managers rarely have the ability to shape their organisations at will. The political, cultural and learning dynamics leave top manageres with relatively little direct power over the system the want to steer. Focus on facilitating the process of self-organisation, releasing creative and entrepreneurial potential. Managers can encourage empowerment, stimulate learning and innovation, bring people together, take away bureaucratic hurdles. Ensure the invisible hand of self-organisaiton functions property and does not lead to out-of-hand disorganisation. Organisations develop according to their own dynamics. - Chaos over control - Uncontrollable evolutionary process - Democratic, bottom-up, self-organisation - New behaviour emerges from interactions - Low, slow - Strategy follows organisation

Answer 133

How should the firm organise its activities across borders?

Answer 134

1. Dimension of globalisation: what is global? 2. Levels of globalisation: what is the subject of globalisation? 3. Internal composition: In which countries does a company want to be active in, and how much involved do they want to be? a) International scope: which countries are selected to do business in b) International distrubiton: how are the value adding activities distributed across the selected countries 4. International management: How should a company organise itself todeal with its border-spanning nature. Three integration mechanisms: standardisation, coordination, centralisation

Answer 135

Global means one or more of the following: 1. Worldwide scope: Spatial dimension - a geographic term, and being more than international. Globalisation as the process of international expansion on a worldwide scale. McDonalds globalising, not global (in half the countries, but often in only a few cities, half revenue from USA) 2. Worldwide similarity: Variance dimension - homogeneity around the world. Globalisation as increasing worldwide similarity. e.g. global product v locally tailored product. McDonalds relatively global (some leeway on menue and interior design) 3. Worldwide integration: Linkages dimension - the world as one tightly linked system (e.g. GFC). Globalisation as increasing worldwide integration. Global market if events in one country are significantly impacted by events in other geogrphic markets. McDonalds only slightly global (some activities are centralised or coordinated, but generally relatively little need for concerted action.

Answer 136

Opposite of the process of globalisation; characterised by decreasing international scope, similarity and integration

Answer 137

Increasing international scope (not increasing worldwide scope, which would be globalisation)

Answer 138

1. Globalisation of economies - macro level: Are the world's economies generally experiencing a convergence trend? 2. Globalisation of businesses - meso level: Are customer demands similar around the world? Do producers compete with one another on a global scale? Distinguish globalisation of industries with markets 3. Globalisation of companies - micro level: Do individual firms compete on a global scale?

Answer 139

In which countries does a company want to be active in and how involved is it? 1. International scope - geographic spectrum: In how many countries does the company want to be active in, and which countries should these be? 2. International distribution - distribution of value adding activities: How can resources and activities best be divided across the various countries? --> Use advantages of the different countries - labour cost, capital cost, productivity, high/low tech, e.g. semiconductor industry. Decision will alrgely depend on the strategic motives that stimulated the firm to enter the international arena in the first place.

Answer 140

1. Export via agent or distributor (sales) 2. Export via sales subsidiars (marketing, sales, service overseas) 3. Foreign production subsidiary (product, assembly) 4. Integrated foreign subsidiary (R and D, production, assembly, marketing, sales, service overseas)

Answer 141

GE business screen, but use: x-axis: competitive position (of the business) y-axis: country attractiveness (low, medium high): incorporates market growth, competitive intensity, buyer power, customer loyalty, government regulation and operating costs

Answer 142

Internationalisation is only economically rational if 'the international whole is more than the sum of teh country parts' - if cross-border synergy can be reaped. to offset the extra cost of foreignness and distance. The firm therefore needs integration mechanisms.

Answer 143

1. Standardisation: Equalising activites in each country to achieve economies of scale or to serve border crossing customers who want a predictable offering, e.g. B2B, travelers 2. Coordination: Aligning activites in different countries to serve border-crossing clients in a coordinated manner, to counter the border-crossing client's policy of playing off the firm's subsidiaries gainst one another (cross-border price shoping), or to respond to or attack competitors using cross-subsidisation. 3. Centralisation: Integrating activities at one central location to gain economies of scale or use the competitive advantage of a particular country. Centralisation of knowledge intensive activities is sometimes also needed to guard quality or ensure faster learning.

Answer 144

1. Decentralised federation - 'multinational' 2. Coordinated federation - 'international' 3. Centralised hub - 'global' 4. Integrated network - 'transnational' Depends on the type of cross-border synergies the strategists envisage

Answer 145

- Decentralised federation - 'multinational' - Organised along geographic lines - Subsidiaries are autonomous, low level of standardisation and coordination, few centralised activities, strategic decisions decentralised - Loose simple controls - Mainly financial flows between HQ and subsidiary

Answer 146

- Coordinated federation - 'international' - Organised along geographic lines - Close HQ-subsidiary relationship - some standardisation and coordination - Core competences, technologies, processes and products are developed centrally --> mainly knowledge flows (technolgy, systems, processes) between HQ and subsidiary. - Formalised control systems (i.e. planning, budgeting, administration).

Answer 147

- Centralised hub - 'global' - National units relatively unimportant (all main activities in home country) - High levels of standardisation and centralisation; strategic decisions are centralised - Coordination directed by HQ - tight simple controls - Mainly flows of goods between HQ and subsidiary

Answer 148

- Integrated network - 'transnational' - Close HQ-subsidiary AND subsidiary-subsidiary relationships - Each national unit can become the worldwide centre for a particular competence, technology, process or rpoduct. - Low level of centralisation - Complex coordination (strategic decision-making shared) - Some standardisation - Large flows of inofrmation, components, products, resources and people.

Answer 149

Global synergy (globalisation) v local responsiveness (localisation) Global synergy (globalisation): The ability to create value by leveraging resources, integrating activities and aligning product offerings across two or more countries. Local responsiveness (localisation): The ability to remain attuned to specific national market demands, responding adequately and timely to unique characteristics

Answer 150

Leveraging resources: 1. Achieving resource reallocation: money, machinery, people relocated abroad; e.g. managers specialising in market development go to new subsidiaries, older machinery to less advanced markets 2. Achieving resource replication: replicate intangible resources such as knowledge and capabilities, thereby leveraging know-how wrt technology, production, marketing, logistics and sales. Integrating activities: 3. Reaping scale advantages: pooling certain activities. Can be used for production, logistics, procurement, R and D. Can achieve by standardising and coordinating activities across borders, or by centralisation 4. Reaping location advantages: country specialises in what they do best, e.g. inexpensive or specialist inputs (labour, raw materials, infrastructure), attractive buyers or related industries Aligning positions 5. Dealing with cross-border customers: provide standard products, one global account, counter cross-border price shopping, playing the subsidiaries off against each other 6. Dealing with cross-border competition: through cross-subsidisation, attach in a few national markets The wider the geographic scope, the greater the potential benefit.

Answer 151

Differences in: 1. Market structure 2. Customer needs: cultural expectations, incompatible techical systems, languages 3. Buying behaviour: types of information they use, relationship with supplier 4. Substitutes: tea or softdrinks as beer substitutes? 5. Distribution channel: number of layers, sophistication, concentration, negotiating power 6. Media structure: for marketing communication - e.g. number of TV stations, regulation, cost and effectiveness 7. Infrastructure: do products rely on digital telephone, high-speed motorways, national healthcare system? Do services require an efficient postal service, electronic banking? 8. Supply structure: availability, quality and price of materials, components, labour, management, capital, facilities, machinery, research, information and services 9. Government regulations

Answer 152

Global convergence perspective v International diversity perspective Depends on the business; some are more suited to a globalised approach than others.

Answer 153

(Like a US corporation) - Globalisation over localisation - Growing international similarity - Growing integration of international linkages - Technology and communication - Diversity is costly: convergence can be encouraged - Global synergy focus - Standardise/centralise - Centre for global innovation - Global structure (centralised hub)

Answer 154

- Localisation over globalisation - Fostering international diversity - Cultivating fragmentation of international linkages - Cultural and institutional identity - Diversity is reality: divergence can be exploited - Local responsiveness focus - Adapt/decentralise - Locally leveraged innovation (exploit country's competitive advantage) - Transnational structure (integrated network)