Strategy

Question 1

What are the two viewpoints of business strategy?

Answer 1

• Industrial organization economics
• Resource-based view

Question 2

What is the ‘Industrial Organization Economics’ viewpoint when looking at business strategy?

Answer 2

Industry analysis & competitive positioning
- central characteristic of the business environment = competition
- sources of profit => external environment

Question 3

What is the ‘Resource-based’ viewpoint when looking at business strategy?

Answer 3

Emphasis on resources & capabilities
- source of profit => within the firm

Question 4

What is the starting point of the outside-in approach?

Answer 4

Understand the market (competitors, ease of entry, …)

Question 5

What is the starting point of the inside-out approach?

Answer 5

Prior experience, capabilities, resources, …

Question 6

What is the outside-in approach?

Answer 6

STRUCTURE (industry structure)
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CONDUCT (firm behavior)
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PERFORMANCE (firm results)

Question 7

What is the inside-out approach?

Answer 7

RESOURCES (firm resources)
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CONDUCT (firm behavior)
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PERFORMANCE (firm results)

Question 8

Both viewpoints have something in common, what?

Answer 8

Both viewpoints link superior performances to a competitive advantage

Question 9

What are the five P’s for describing strategy? (Mintzberg)

Answer 9

• Plan
• Pattern
• Position
• Perspective
• Ploy

Question 10

What does ‘Plan’ stand for in the five P’s for strategy?

Answer 10

=> INTENDED STRATEGY

Strategy is a plan:
- direction, guide, course of action into the future
- path to get “from here to there”

Question 11

What does ‘Pattern’ stand for in the five P’s for strategy?

Answer 11

=> REALIZED STRATEGY

Strategy is a pattern: consistency in behavior over time

Question 12

What does ‘Position’ stand for in the five P’s for strategy?

Answer 12

Strategy is a position: locating particular products in particular markets

• looking down => product meets customer
• looking out => external marketplace

Question 13

What does ‘Perspective’ stand for in the five P’s for strategy?

Answer 13

Strategy is a perspective:
An organization’s fundamental way of doing things
(how does the organization perceive the environment and acts upon it)

• looking up => grand vision enterprise
• looking in => inside the organization

Question 14

When comparing corporate and business strategy, what is corporate strategy?

Answer 14

Which industries should we be in?

-> growth direction company (+speed)
-> markets/products (portfolio management)
-> how to coordinate activities/business units (communication structure, power business units, etc,…)

Question 15

When comparing corporate and business strategy, what is business strategy?

Answer 15

How should we compete within a particular industry or market?

-> how to compete in a particular market
-> how to position yourself in a particular market

Question 16

When comparing corporate and business strategy, we saw that there was also a third strategy. Which one and explain?

Answer 16

Functional strategy

• functional areas such as marketing, manufacturing, HR, logistics, etc,…
  => corporate and business level strategies
• operation level: which resources to use, how many, …

Question 17

Explain: mission, values, vision

Answer 17

Mission: Why do you exist?

Vision: What do you want to be?

Values: (ethical values)
=> what you believe in + how you will behave

Question 18

Why is it necessary to develop a clear strategy statement?

Answer 18

formulation/implementation

Question 19

Strategic objective: explain + opinion about “maximizing shareholder value”

Question 20

Strategic scope: explain the dimensions

Question 21

Strategic advantage: what is a customer value proposition?

Answer 21

Mapping your value proposition against those of rivals

Why should customers buy YOUR product or service?

Outside-in

Question 22

What is the difference between total costs, average costs and marginal costs?

Answer 22

Marginale kost:
dit geeft u de mate waarin de totale kosten toenemen wanneer de output met één eenheid stijgt

Question 23

What is/are the economies of scale?

Answer 23

the average cost declines over a range of output
-> fixed costs are spread over additional output => higher operational efficiency, implying lower variable costs

Question 24

Explain: economies of scale, constant returns to scale, diseconomies of scale

Answer 24

• When average cost decreases as output increases = economies of scale
• When average cost remains unchanged with respect to output increase = constant returns to scale
• when average cost increases as output increases = diseconomies of scale

Question 25

What is the minimum efficient scale?

Answer 25

The smallest level of output at which economies of scale are exhausted

Question 26

Why is the economies of scale curved U-shaped?

Answer 26

Variable costs = increase as output increases, such as expenses for labor and materials

Often when output increases: capacity constraints

Bottlenecks! (increased variable costs)

Question 27

What is/are the economies of scope?

Answer 27

The firm achieves saving as it increases the variety of activities it performs

Question 28

Why does the economies of scope work?

Answer 28

Investments made in developing for example know-how, can be applied to producing related products

Thus
- the firm leverages its core competences
- the firm competes on capabilities
- …