Strategy

Question 1

Definition: The firm

Answer 1

A unit of economic activity

Question 2

What is the dependent variable?

Answer 2

Y –> Sustainable Performaance
- Book Value (Lag- Lag – Past financials, historical data, past performance)
- Output
- Performance (Gross Margin, ROI)
- Market Value (Lead – Measure the future CFs, Value of future CFs)
- Market Capitalization

Question 3

What is the Independent Variable (explainatory variable)

Answer 3

X –> Strategic Actions

Question 4

What is Lag and Lead?

Answer 4

Lag:
- Book Value
Lead: Market Value

book value represents the historical cost structure of a company, while market value reflects the market’s assessment of a company’s future potential. Market value tends to lead book value, reflecting changes in the market’s perception of a company’s future prospects before these changes are reflected in its book value.

Question 5

What influences a companies sustainable (superior) performance?

Answer 5

The strategic actions (independent variable/explainatory variable) and the rest of the equation is Error which is in reality Luck (37%-45%)

Question 6

What is R^2?

Answer 6

The coefficient of determination –> the proportion of variation explained by the model

Question 7

What is the market?

Answer 7

Economic Exchanges
* Market
* Firm
* Rival
* Customers
* Suppliers
* Investors
* Employees

Question 8

What is the non-market?

Answer 8

Rules of the game - Rules of economic exchange
o Government
o Politicians
o Social Movement Organization
 Aims and Organizations focused on social goals)
 Religious groups(Scientology)
 Fridays for future
 Non-profit, greenpeace, Amnesty…
o Media
o Society (noncustomers)

Question 9

What have employees and suppliers in common?

Answer 9

• Employees and Suppliers both are resources of the firm, from both procuring something from them (Arbeitskraft or Materialien etc)

Question 10

What is the connection between Robert Frost and Tradeoffs?

Answer 10

• Famous poem which is often used as a metaphor for decision-making and tradeoffs. Different ways in life/decision which also hold trade offs

Question 11

What is the link between Pankaj Ghemawat and commitment?

Answer 11

Economist and strategy expert:
One of Ghemawat’s key concepts is the idea of “commitment”. Ghemawat argues that companies that are more committed to a particular market or geographic region are more likely to be successful over the long term. This commitment can take many forms, such as investment in infrastructure, marketing, and research and development, as well as a focus on building relationships with customers and suppliers.
Ghemawat’s work highlights the importance of considering the tradeoffs involved in making commitments and the need for companies to carefully balance their investments and priorities in order to succeed in a globalized world. By understanding the tradeoffs involved in commitment and taking a strategic approach to decision-making, companies can achieve long-term success and achieve their goals.

Question 12

What causes tradeoffs?

Answer 12

• Inter-DECISIONAL dependence
• Inter-ACTOR dependence
• Inter-TEMPORAL dependence

Question 13

What is Inter-decisional dependence?

Answer 13

▪ Decisions that are inter-dependent with other contemporaneous(gleichzeitig) decisions of the firm.
▪ Must understand the fit (i.e., inter-dependence) of one choice with other contemporaneous decisions.

Question 14

What is Inter-actor dependence?

Answer 14

▪ Decisions that are inter-dependent with decisions of other firms – e.g., rivals, suppliers, alliance partners….
▪ Strategic decisions shape and anticipate choices of
these other firms

Question 15

What is Inter-temporal dependence?

Answer 15

▪ Decisions guide future choices
▪ Can involve irreversible commitments, financial and
psychological sunk costs, commitment vs waiting (e.g., option value)
- R&D Investment - Particularly long term huge investment, need to keep investing over decades
- sunk cost

Question 16

What commits a firm?

Answer 16

Resources:
- Time (most important)
- Financial resources
- Physical resources

Question 17

What is Performance Management?

Answer 17

More than telling people how they are working.
Process through which managers ensure that employees’ activities and outputs (and behaviors) are congruent with the organization’s goals in order to maximize individual and, by extension, organizational performance.

Question 18

What are the 6 Steps of Performance Progress?

Answer 18

Step 1: Define performance outcomes for company division and department

Step 2: Develop employee goals, behavior, and actions to achieve outcomes – this helps to set individual expectations to be tied to organizational goals

Step 3: Provide support and ongoing performance discussions – This should be frequent check-ins and being given the tools and help that is required to succeed (e.g. providing coaching and feedback aimed at helping employees to improve). These can also overlap with training and development issues

Step 4: Evaluate performance – we are making judgments on how well an employee has performed relative to expectations. There are many approaches to evaluating performance. As this is a social judgement, biases and errors are bound to affect it and we will also explore those

5 and 6 are not in chronological order but next to each other:
Step 5: Identify improvements needed – employee performance should be measured and evaluated to inform talent decisions (e.g. should an employee be promoted or fired?). Part of these set of questions also concern how employee performance should be rewarded. This step also includes improvements needed to the performance management system: is this performance system working well?

Step 6: Provide consequences for performance results