Chapter 3 - The Environmental Context of Organisations Flashcards
What are the differences between macro/meso/micro environments and how can each environment be analysed?
Macro - broader features and forces -> PESTEL
Meso - industry level, seeking CA -> 5/6 forces, strategic groups
Micro - firm level Rs and Cs -> VRIO
What are the techniques/models/frameworks/concepts that can be used to understand a specific environment?
6th force (compliments) Business ecosystems Business models Game theory Competitor analysis Segmentation and strategic groups
How does Game Theory work and who explored this framework?
Brandenburger & Nalebuff (1995)
“Successful business strat is about actively shaping the game you can play, not just playing the game you find”.
“The game of business is all about value, creating it and capturing it”.
What are the key principles of Game Theory?
Involves allocentrism, and focusing on actions/behaviours of others.
Way of forward thinking - about implications or potential reactions and responses to your actions.
Assessing your own added value, as well as that of other competitiors in the game.
What is the ‘Value Net’ in Game Theory?
Used to identify the players in the game, their interactions and roles.
E.g. companies, customers, complimentors, suppliers, substitutors.
The ‘Net’ is full of competition and coopetition.
What are the 5 PARTS that Game Theory believe when changed apprpriaely can give rise to a sucessful strat?
Players Added Values Rules Tactics Scope
What are Strategic Groups according to Hunt (1972)?
“Groups of firms within the industry that are highly symmetric” with respect to various factors, such as cost structure, systems of controls, personal views and preferences for particular business outcomes/goals.
Within these groups, firms can influence industry dynamics, e.g. price/innovation/quality.
Example of application of Strategic Groups?
Surdu and Mellahi (2017)
Classed Ferrari as distinct with high product price/reputation but offering little variety of models.
Classed Peugeot/Renault/Fiat together with the opposite characteristics.
What were Needle’s (2010) critiques of PESTEL?
Compartmentalises/reduces connections between factors.
Some factors should be linked and are dependent, e.g. hard to understand political without considering eco.
Fairly deterministic/ circumstantial as focuses on factors operating on the firm but NOT that firms could influence the env.
(only outward-in)
Static, only thinks about present factors. Doesn’t consider what could arise (Unlike scenario planning)
How can PESTLE and Game Theory be used in conjunction?
By using PESTLE to identify potential areas of change, could use Game Theory to analyse this.
By considering the impact on the Value Net’s players and how they could react.
Consider impact of reactions on how power could shift/redistribute among players?
HOWEVER, consider that PESTLE could oversimplfy some very complex factors and relationships.
What are Carter, Clegg and Komberger’s (2008) thoughts on managing uncertainty?
“We naively assume that economists and statisticians can guide us safely though this turbulent world”.
How have Shell used Scenario Planning?
Pioneered this framework in late 60s/early 70s
Used in oil industry where high volatility and unpredictability
Dedicated team to produce global scenarios every 4/5 yrs
Stories/what if situations, NOT FORECASTING
Considering how various forces may create effects
Tries to address uncertainty/ambiguitiy
Tries to create clearer LT psoition to aid ST decisions
Helps consider black swan events
