Chapter 6 - Network level strategy

Question 1

what can we say the strategy in network level strategy is concerned wiht+

Answer 1

relating the network to the broader environment

Question 2

elaborate on the entirety of this chapter

Answer 2

It starts with the issue surrounding inter organizational relationships. This is an issue because all corporations need to have relationships. Suppliers, buyers, and all that. There are differnet types of actors with whom the orgnization can form relationships.

In addition to who, there is the “why” of the relation. We bring out the business model aspects. In total we have: learning, lending, linking, lumping, leaning and lobbying. These are just different reasons for the relational objectives.

Then there is the questions surrounding how the relationships emerge. We turn to relational factors. There are multiple interesting things that affect the behavior of the relationship, but perhaps the most interesting is “power”. The important dynamic is that firms that have resources that are highly in demand, will have a lot of power in their relationships.

Then, relational arrangements is the topic. Especially in cases where activities cannot be outsourced to outsiders on the basis of normal market relations, either due to risk of dependence or because of the need for the structural coordination of activities. Under such conditions, collaborative arrangements can act as a synthesis of hierarchy and market relations.

regarding the issue and paradox:
The issue is about how firms should go about inter organizational relationships. There is a demand for cooperation and there is a demand for competititon. Competition is the natural thing here because of how each firm ultimately care about their own interests. If we want a larger market share, we need a better position, which we can only get from making other peopl’s shares smaller.
However, we cannot do everything by our selves. We need relationships. However, it is the nature of these relationships that is the issue here.

The perspective that advocates for independence, is really about independence. They consider resource dependence etc as extremely bad because of the uncertainty it entails. Therefore, if we can keep things at the market level and keep relations very transacational in nature, then we are not dependent like that. In the cases where there is a need for additional coordination of activities or the outsourcing would imply too big a risk of dependence (probably in the case of scarce resources) it is preferred with an acquisition. Why? because the acquisition will reduce the uncertanty that follow from th dependence. For instance, if we become too dependent on the partner, they have the power to start charging us higher prices etc. This is not beneficial to us. The discrete organization perpsective want to avoid this.
Porter has summarized the sentiment of the discrete organization perspective: “Alliences are rarely a solution. No firm can depend on another independent firm for skills and assets that are central to its competitive advantage. Alliences tend to ensure mediocrity, not create world leadership”.

THe embedded perspective does not just jump on any relationship either. Their approach is to build up trust in long term relations. This allows each part to focus on their own specialized competence. Therefore, the key to make this view/perpsective work, lies in mutual dependence and reciprocity. For instance the japanese way.

Question 3

whati s hte basic question in this chapter+

Answer 3

independence vs collaboration.

firms can choose to work wotgether by using market forces. Or they can make connections and collaborate.

Question 4

elaborate on inreraction between firms

Answer 4

we consider 4 questions:
who, why, what and how.

1) Relational actors
2) Relational objectives
3) Relational factors
4) Relational arrangements

Question 5

elaborate on relational actors

Answer 5

Relational actors refer to the firms that are connected in the network. It is the external parties that the firm interact with.

There are 2 categories of relational actors:
1) Industrial actors
2) contextual actors

industrial actors are those who perform value adding activitites. We have buyers, suppliers, competitors and complementors.

Contextual actors sets conditions under whcih the industry must operate. we have political parties, technological parties, economical, and socio cultural.

Question 6

elaborate on relational objectives

Answer 6

relational objectives is the “why” of the relation. The key in this topic is hidden agendas. firms might or might not have clear agendas with each other. This is typically a result of differnet goals that are mutually exclusive.

Relational objectives is most ypically concerned with cooperation. There are multiple ways firms can cooperate, and it is basically the exact same shit as synergies.
- Resources
- Activities
- Product offering

However, there are some differences.
In network level strategy, the objective of leveraging resources is: learning and lending. Lending is typical with copyright and all that. Lease. Rent. Can be beneficial for both parties.

Integrating activities have the following perks:
- Linking: making use of the supply chain. Basically just a value/supply chain. The alternative is literally every firm has to make everything from scratch.
- Lumping: leverage scales by coop. For instance alliences in airlines etc. Allows each firm to tailor their strategy to a subsegment, and ultimately create a total network that works as a cohesive unit.

Value proposition:
- Leaning: Create a strong package together. F1 team (aero) and engine makers.
- Lobbying

Question 7

elaborate on relational factors

Answer 7

recall that relational factors represent the “what” in the network level strategy.

we can think of it as the objectives held by the parties involved. These objectives will shape the relationship.

Some common factors are:
- legitimacy
- Urgency
- Frequency
- Power

Question 8

what is the struggle in this chapter? elaborate on the demands

Answer 8

firms want to pursue own interests. This is the basis of firms. Then we know that various relationships are extremely important in creating leverage and building a stronger position. A strong position “can” demand a strong collaborative spirit. But then, how much should a firm care about other firms in the network?

Also, competition is not only about rivals. We also have competition in the network we collaborate in. A very good example of this is how suppliers will make use of a weak buyer and set difficult demands. This creates a scenario where the supplier benefits more from the relationship. if the buyer is strong, has a strong position, the supplier cannot do this to the same degree.

In general, we can say that creating a deal so that some other firm is dependent on us, is highly beneficial for our gains. it makes us competitive. In general, the less dependent a firm is on other firms, the more power it have. This is a crucial point. INdependence = power.

This was the demand for inter organizational competition.

Then, on the other side, there is the demand for inter organizational cooperation. Strongly competitive behavior is present where the goals of both parties are interwhined long term. the most typical example is complementary goods.

Question 9

elaborate on the perspectives

Answer 9

keywords: embedded vs independent

we have the “discrete organization” vs “embedded organization”.

The discrete organization is about being independent. Value chain interactions are transactional. The focus is to build up a powerful position that allows the firm to get great deals at both ends of the supply chain.

On the other hand, the embedded perspective is about allowing firms to specialize and together create a strong chain.