I (nformative) B (bull) S (shit) Flashcards
Strategy as plan, pattern and position (Mintzberg 1987; S).
Plan
1) Consciously intended course of action to deal with a situation”
2) Made in advance of the actions to which they apply
3) Developed consciously and purposefully
4) Sometimes: Stated explicitly
5) Fit between internal capabilities and external possibilities: assessment of competitive advantage /strengths
6) Unique to each organization
Intended Yes
Emergent No
Realised (or unrealised): Not necessarily
Framework: Swot, Regional strategies scenario planning
Ploy 1) Maneuver that outwits opponent 2) All warfare is based on deception Intended Yes Emergent No Realised (or unrealised): Not necessarily Framework: ?
Pattern
1) Strategy as a pattern in a stream of the actual actions
2) Consistency in behaviour
3) Focus on core competency (intention to consistency)
4) Uncovering the core
5) Descriptive, not prescriptive
Intended Not necessarily
Emergent Yes
Realised (or unrealised): Realised
Framework: Upsalla, Internationalization process model
Position
1) May overlap with preceding P’s: Also develop before we implement it
2) difference: only small number of strategies to choose from (small number that makes sence for company/industry/environment(
3) Compete in the niche that generates rent (niche=a place with economic profits according to Mintzberg)
4) Strategy=mediating force matching organization to environment. I.e. Linking internal competencies with external environment (based on core competencies and environment, where do we want to play?)
5) Playing in a niche to avoid competition
6) Means of locating an organization in an environment
7) Outside-in view on strategy
8) Position can be preselected through plan/ploy or can be reached through pattern
Intended Yes Emergent ? Realised (or unrealised): Yes Framework: - Generic strategies(market scope vs. competitive advantage: focus, cost leadership, differentation),
- Five forces (1.
rivalry, 2. Threat of new entrants, 3. Suppliers, 4. Customers, 5. Threat of Substitute Products)
Strategy as configuration / learning (S).
Organization is viewed as a configuration of its characteristics
Company’s strengths or weaknesses are determined in the context of a problem
Thus, whether competencies are good/bad for a particular strategy is relative to the problem
Strategy maintains stability and recognizes the need for change (major transformations e.g. structure changes)
Close link between formulation and implementation
Centralized power, flexible organization (start-ups as an example: founders create and implement strategy
Frameworks: Resource-based view, Dynamic capabilities, Organizational structure and strategy (Role of structure)
Multinational company (S).
A firm that has business activities abroad
Why care? – Global FDI increases exponentially, multinationals have been responsible for this
Drivers of company internationalization (Hitt et al. 2016; S).
Need of specialized assets (resources)
Capability building (capability to build new capabilities to compete)
Intense competition at home (retaliation?)
Economic growth
Globalisation (respond to competition)
Diversification (reduce risk)
Economies of scale/scope
Location advantages
Experimental learning
Technology (scalability – born global)
International experience of founders “born globals”
Internationalisation experience
Distance between home and target countries (culture and institution)
Drivers of globalization (S).
Technology (Ease of communication) (World Wide Web)
Transportation time dramatically reduced
Market liberalization (Trade and Resource movements)
Global products and customers
Global competition
Political changes
Convergence of tastes
Semi-globalization / regionalism (S).
We’re not that global, we are regional
Emergence of regional blocs stalls globalization
Cross-border economic integration is regional
Advantage: Scale & scope without the risks of global operations
Difference between product and competitive strategies (S)
Product strategies: Choices regarding a company’s product line in different geographical markets
Product mix vs. product adaptation (Coca cola: Adapts the sugar level in core product, but also offers different product mixes in different countries (pink/green/purple etc)
Local responsiveness (customer tastes/needs/norms differ)
Global integration (Standardize, when little variation in customer preferences, , cross-country arbitrage cost-saving: scale and scope advantages,)
Competitive strategies: Analyzing sources of competitive advantage, and locating parts of the value chain in markets that offer the best opportunities for the company to enhance its competitive position
Sources of corporate competitive advantage:
Location advantages
World-scale volume
Global brand
Access to supply and distribution channels
Global competition vs. global business (Hamel & Prahalad 1985; S)
Global competition
Companies pursue global brand, distribution channels
Battle global competitors
Companies can cross-subsidise national marketshare in pursuit of global brand and distribution positions
If you are not present on given market, global competitor cross-subsidies from that market
Global business
the minimum volume required for cost efficiency is not available in the company’s home market
Global investments are made to achieve scale & cost efficiency, since not available in the home market
Product adaptation vs. product mix (S)
Adaptation: Altering products to fit tastes (n.b. decoupling point)
Mix: Offering different combination of products
Example: (Coca cola: Adapts the sugar level in core product, but also offers different product mixes in different countries (pink/green/purple etc)
When to pursue global integration and when local responsiveness (S)
Case for local responsiveness: when customer tastes and preferences differ or when it is too expensive to coordinate, OR legal requirements (due to shipping costs etc., McDonalds)
National or regional differences in customer needs
Differences in cultures/tastes; norms
Locally made products, import substitution
→ Tailored products/services
Case for global integration: when cost pressure is high (we need benefits of EOScale), no to little variation in preferences (Commodities, transportation, Apple)
Standardized products and marketing
Little variation in customer preferences
“Cross-country arbitrage” to drive down↓ costs or heighten ↑ quality
→ Scale and scope advantages
Multicountry vs. global competitive strategy (Whirlpool case; S)
Multicountry (aka multidomestic) competition
Each country market is self-contained
Different customer preferences, competitive positions, …
For an MNC, competition in each market is independent from the other markets (different product offerings, rivals)
Global competition
Prices and competitive positions strongly interlinked across markets
Same competitors in many markets
MNC’s advantage stems from worldwide operations
Home base + other countries
3 global competitive strategies and rationales for each: a) building global presence, b) defending domestic position, c) overcoming national fragmentation (Hamel & Prahalad 1985; S)
Build global presence
Achieve capability to make & sell globally
Cross-subsidize important markets
Reduce competitor’s margins to stymie R&D
Gain first-mover advantage
1) access volume, 2) cross-subsidise to win world, 3) redefine cost/volume relationships, 4) first-mover advantage, 5) low-cost sourcing from location advantages
Defend domestic position (=by going global, so I can lower my price eventually),
Gain ability to retaliate
1) Spread costs, 2) gain retaliatory capability 🡪 by gaining cross-subsidising capability from other market
Overcome national fragmentation
Look at entire value chain as rationalize what make sense to do and what doesn’t make sense
1) Reduce costs at national subsidiary, 2) rationalize R&D and manufacturing, 3) distribute decision-making across subsidiaries (so HQ doesn’t decide everything)
Example: open R&D in Holland to catch clever students, even though we did not have operations in Holland before = global competitive strategy
Regional strategies I: a) home base, b) portfolio, c) hub (Ghemawat 2005; S).
a) Home base:
Up-stream activities and support activities are in home-base (centralized: R&D, Manufacturing, Sales), but down-stream are also internationalized (sales divisions)
Global integration, centralization, EOS,
Advantages: relatively low risk, works well when the economic concentration outweigh the economics of dispersion
Disadvantages: high shipping costs from home region, running out of room to grow
Example: Zara everything in northern Spain
b) Portfolio:
Up-stream activities and support activities are in home-base (centralized), but some up-stream activities, e.g. manufacturing are together with sales(down-stream) internationalized.
Advantages: Fast-to-market growth in non-home market, significant home position that generate large amount of cash, the opportunity to average out economic shocks and cycles across regions, matching currencies (economic exposures minimized)
Disadvantages: Takes time to implement, struggle to deal with rivals in nonhome regions, high risk in FDI
Example: Toyota who established in US, but took decades. GE that established in EU, but could not compete with rivals
c) Hub:
Strategy for companies seeking to add value at the regional level
Multiple home-regions, some as stand-alone divisions, (up-stream activities the same in different regions) and multiple foreign regions (with only sales (downstream))
Spread fixed costs (that aren’t justifiable for a single country) among several countries in a region
Often involves transforming a foreign operation into a stand-alone unit (Hub)
Hubs can be very independent of eachother
Purest form: Multi-home-base. Regional HQ’s is a minimalist version of the hub strategy
Challenge: achieving balance between customization and standardization.
Example: Toyota when they make car design exclusive to certain regions, Zara if they established a hub in China, to serve Asian region
Regional strategies II*: d) platform and e) mandate (Ghemawat 2005; S).
d) platform
Regions add customization
Up-stream activities(manufacturing) in the value chain are shared and consolidated.
Cost-efficiency: allowing customization a top of common platforms (decoupling points)
Ideally invisible to company’s customers (example: shared service center)
Example Platforming runs into difficulties when managers take standardization too far
Example: Ford combining the European and US operation, which destroyed the European market (since US fuel is cheaper, thus they want bigger cars)
Benneton shirts
e) mandate
Regions supply particular products
Cousin of platform strategy (regions specialize as well as have scale)
Mandates/Centers of excellence that are responsible for suppling particular products or perform particular roles for the whole organization
and have decision-making power
Need global network to succeed
Roles & products are different by region but are used throughout the organization
Unlike in “Hub”, which are used within the region
Pit-falls: 1) too much power → highjacking of overall strategy, 2) specialization to the extreme creates inflexibility (disruption of single location fucks entire network) 3) broad mandate cannot handle variation in local markets
4 subsidiary roles (Bartlett & Ghoshal 1986; S).
Strategic leader: Subsidiary serves as a partner to the HQs and develop and implement strategy
Contributor often in R&D in cluster even though market is unimportant
Risk of subs. to focus on local tasks and priorities that are not important for the overall global strategy (–> Should be channels toward corporate important projects)
Implementer: Just enough competence to maintain its local operation.
Efficiency is key
Most national units of most companies are given this role
“Black hole” needs to be developed
Corporate espionage to exploit learning potential (McDonalds vs. Burger King)
Or Strategic alliance
Value of competencies of upstream vs. downstream subsidiaries for the organization (S).
Upstream competence: “Universal” (transferable to other markets, can be centralised)
→ subsidiary with this competence is more valued
R&D
Manufacturing
Downstream competence: Competence is local-for-local (highly contextualized)
→ subsidiary is less valued
Marketing
Sales
Hierarchy vs. heterarchy (Birkinshaw & Morrison 1995; S).
Hierarchy (LOW autonomy): Critical resources located at the top. Control and monitoring of subsidiaries. Strategic decision making made by the HQ. Less lateral communication, brings transaction cost down.
Heterarchy (HIGH autonomy): Resources widely dispersed between HQs and subsidiaries. Strategic decision making and initiative also made on subsidiaries level. Control to a higher degree through norms, and not with calculative measures: More lateral communication
Subsidiary autonomy defined (S).
The ability of units and sub-units “to take decisions for themselves on issues that are reserved to a higher level in comparable organizations” (Brooke 1984)
The degree to which the foreign subsidiary of the MNC has strategic and operational decision-making authority (O’Donnell 2000)
Advantages and potential downsides of subsidiary autonomy (Context holacracy case; S).
Advantages:
Higher responsiveness
Faster decision making
Downsides:
Increased communication/transaction costs
Centers of excellence (mandate strategy) → pitfall: rigidity and hijacking of overall strategy
Agency theory: Subsidiary acts in their own benefit (rather than HQ benefit)
May happen due to:
Host country laws
Customer requirements
Specific/unique resources/capabilities
Strategic vs. operational autonomy (Birkinshaw & Morrison 1995; S)
Strategic autonomy: Make own decisions on how and what to do “go-to-market”
Operational autonomy: Has to live up/fulfill strategy and requirements from strategy. Focus is on cost efficiency (decisions on how to produce)
Business groups defined (Holmes et al. 2018; S).
Business groups: networks of semi-autonomous firms tied together through cross-ownership and complex governance structures, pursue mutual objectives, crucial to many economies (chaebol in South Korea, Tata Group India)
Factors facilitating the formation (antecedents) of business groups (Holmes et al. 2018; S).
Business groups is a response to weak “factor markets” and institutions in some countries
Ancendents: Business groups create internal markets & governance within groups
Capital and trade:
financial resources transferred between affiliates,
helpful because it’s easier to enforce than outside contracts,
helps underperforming affiliates,
lowers transaction (search & negotiation) costs
Labor:
recruitment, training and job transfers managed internally
Promotion opportunities → aids recruitment
Factors:
Lack of resources (finance, people, technologies)
Weak institutions (institutional voids: absence of intermediaries in markets e.g. financial institutions, supplier contracts, laws governing business transactions)
Advantages and disadvantages of product diversification at business groups* (Holmes et al. 2018; S).
Advantages:
Creates stronger internal markets
Allows to extend competitive advantage & brand into new industries
Reduces risk: investment spread across a portfolio of businesses = risk reduction through diversification
Disadvantages:
In practice, product diversification is sometimes bad for performance
Both for group and affiliates
Causes of rivalry (S).
Rivalry: competition between companies 3 drivers of rivalry (Chen, 1996) Awareness of the competitive relationship Motivation to act / respond Capability to do so Causes Several equally strong players Low growth in the market, or no growth High fixed costs Excess production capacities Little opportunities for differentiation High strategic stakes Major barriers to exit
Multipoint competition (Chen 1996; S).
According to Chen: Porter is too vague 🡪 then came “strategic groups” which was better 🡪 then came Chen (looking at the firm, which is best)
🡪 Focus: Firm serves as a basis for competitor analysis, analysing competitive tensions between pairs of firms & the potential for them engaging in rivalrous behaviour (unlike Porter who focuses on the industry)
Model used to predict rivalry: action and re-action
How can a firm, before launching an attack:
Assess its pre-battle relationship with a given competitor
Assess the likelihood of a response from that competitor
Identify the competitor that is most likely to attack
But: two firms in the same industry are not necessarily competitors
Competitors: “Firms operating in the same industry, offering similar products and targeting similar customers” (p. 104)
Multipoint competition: refer to situations which firms meet the same rivals in many markets (products, geographic or market segment), thus they the retailitation can be in one of these many markets, which may lead to a reduction of competitive pressure
Multipoint competition research: mutual forbearance hypothesis (Edwards, 1955): competitors engaged in multiple markets are less motivated to compete aggressively because of possibility of retaliation in others
Amazon is the next big competitor to Maersk and Saxo.com
Definition
Action (attack): a specific competitive move initiated by a firm that may lead to a them acquiring rival’s market share or reducing their returns
Response (retaliation): a specific countermove prompted by a rival’s attack that a firm takes to defend or improve its share or profit position
Multimarket contact: means firms are present in the same markets, however as each market has different players with different positions, each of these markets plays a different role in a firm’s overall market profile.
Competitive asymmetry (Chen 1996; S).
“the notion that a given pair of firms may not pose an equal threat to each other.”
A may see B as a competitor, but not the other way around. (Harboe vs. Coca Cola)
arises due to low market commonality & resource similarity??
The likelihood that A will attack B may be different from the likelihood that B will attack A (same for response)
Each competitive relationship, in terms of market commonality and resource similarity, is unique and directional (not symmetrical)
D(a, b) ≠ D(b, a)
Market commonality (Chen 1996; S).
Market commonality=ensartethed
“The degree of presence that a competitor manifests in the markets it overlaps with the focal firm” (p. 106)
Strategic importance of shared markets to the focal firm
Competitor’s strengths in these markets
High market commonality: makes competitors aware and motivated to respond
