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FHS > Strategy > Flashcards

Strategy Flashcards

1
Q

Survivor bias

A

Denrell (2005):

  • only see start-ups past 2 years: under-sampling failure
  • corr risks vs high performance
  • entry and exit bias inferences from reverse engineering causes of success
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2
Q

Performance data

A

Cubbin and Geroski (1987):
- regression to mean for most. - 17% sustained above average. Biased towards success.

Denrell (2005): performance is a noisy signal of capability - many factors impact including luck

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3
Q

Diligence approach

A

Powell (2017): diligence-based strategy
- people not eco agents so analysis of comp adv matters less than dil execution of fundamental activities

Powell and Arregle (2007):

  • 2 axis as persistence of errors
  • fail to capture opp, imitate, solve
  • heterogenous in absence of comp adv

Denrell (2004):
- simulation models produce long-run performance under ass about underlying firm heterogeneity, diff emerged no differences in initial stock

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4
Q

Diligence examples

A

Flybe / Ryanair
Boeing
Grant Thornton - Patisserie Valerie

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5
Q

Generic strategies

A

Porter (1985):

- cost leadership and differentiation

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6
Q

RBV sources

A

Wernerfelt (1984)

Prahalad and Hamel (1990):
- core competencies

Barney (1995): VRIO

  • valuable (exploit opp or neutralise threats)
  • org: can take adv
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7
Q

Industry life-cycle

A

Johnson et al (2011):

- development, growth, shake-out, maturity, decline

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8
Q

Evidence for / against RBV > Industry

A 
Rumelt (1984): 
- dispersion within industries 5-8x as large as across 
 Rumelt (1991): 
- industry at best 8% dispersion 
- collective vs unique endowments

Waring (1996):

  • intra-industry rents persist
  • pharma/ software vs airline/utilities
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9
Q

Stategic factor markets

A

Barney (1986):

  • logical impossibility for a theorem for high profits
  • info in public domain
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10
Q

Alternative view to add to RBV / Industry view

A

Dyer and Singh (1988):

  • linked with coopetition
  • networked of relationships in which firm embedded in = dis(adv)
  • idiosyncratic interfirm linkages source of relational rents: beyond boundaries of the firm
  • e.g. 55% value in product in US is purchased -> many highly specialised inputs
  • relation-specific assets, knowledge sharing
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11
Q

Dynamic capabilities

A

Eisenhardt and Martin (2000)
- set of specific and identifiable processes (alliawcing, strategic decisions, product development), path dependent in emergence
Felin and Powell (2016)
- organisational design is key enabler of dynamic capabilities
- Valve case study
- adhocracy: polyarchy, self-selecting teams, open - guard against obsolescence in a volatile industry

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12
Q

First mover difficulties

A

Aldrich and Fiol (1994):

  • carve out new market, raise capital from sceptical investors, recruit untrained employees
  • cognitive legitimacy (taken for granted) and sociopolitical legitimacy (acceptability)
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13
Q

Network effects

A

Van Alystne et al (2016):

  • more people use platform, greater value for players. Virtuous feedback cycle.
  • important for development phase.
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14
Q

First move advantages

A

Liberman and Montgomery (1988):
- geographic, switching costs, tech (patent or learning curve), network externalities, brand loyalty, scale economies, meld customer expectations

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15
Q

Adv fast follower

A

Cusumano et al (1992):

- buyer education, free-rider effects on RandD, marketing/distribution channels

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16
Q

Small firms innovate

A

Pavitt (1990):

- tech discontinuities tend to come from small firms as large are hindered by bureaucracy and conservatism

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17
Q

Complementary assets

A

Teece (1986):
- successful commercialisation requires know-how in Q to be used in conjunction with other capabilities. Cospecialised assets.

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18
Q

Tech: broader eco-system

A

Adner and Kapoor (2016):

  • “right tech, wrong time”
  • necessity of broader ecosystem
  • e.g. HDTV pioneered in 1980s but 30 years..
  • consider pressing issues in broader eco-system
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19
Q

Formal planning author and studies

A

Andrews (1971): formal planning - creation, evaluation, implementation

Boyd (1991):
- meta-analysis of 21 studies found the link between formal planning and performance weak

Mankins and Steele (2005):
- deliver 63% of the financial performance their strategies promised

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20
Q

Under-develop planning capabilities

A

Brews and Hunt (1999):

  • in stable environment
  • planning = learning how to adapt
  • e.g. utilities, banks (reg, shadow banking)
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21
Q

Design school

A

Andrews (1971):

  • determine strategy -> implement strategy
  • ‘after full-blown, explicit, simple strategies are fully formulated can be implemented’
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22
Q

Emergent approach to strategising

A

Mintzberg (1990)

  • formation and implementation inextricably entangled’
  • allow innovation but avoid extreme incrementalism - muddling and reactive improvisation
  • reject assumption of universality - not ‘one best way’
  • must emphasis learning
  • pure deliberate no external force whilst pure emergent require order despite absence of intention
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23
Q

Logical incrementalism

A

Quinn (1978):

  • integrates analytical and behavioural
  • strategic subsystems
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24
Q

Coopetition

A

Coopetition is identifying the value net and seizing strategic opportunities by cooperating with complementors

Brandenburger and Nalebuff (1996):

  • value net: all players in the game
  • value creation vs value appropriation

Gnyawali et al (2008):

  • coopetition is simultaneous cooperation and competition between org actors
  • 50% collaborative relations in same industry
  • cognitive-psychological stress
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25
Q

Examples of coopetition

A

American Airlines and United Airlines
- update fleets as Boeing only recoup cost if enough buy

Samsung and Sony: LCD 7th gen in 2003 - tech nd manufacturing plant South Korea - leader over past decade

5G incremental cell sites
- pool networks together as mass civil engineering challenge

Apple and Kindle: 2007

Airline alliances: OneWorld

Toyota and GM: fuel cell-powered cars

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26
Q

How to make coopetition successful

A

Chin et al (2008):
- development of trust

Bouncken and Kraus (2013):

  • inlearning occurs and uncertainties.
  • pool risks, share costs
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27
Q

Emergent strategy examples

A
  • Ikea: mail order -> flat pack furniture
  • Airbus A380 - germany and france diff software incompatibilities - $6bn
  • Johnson and Johnson: medical plasters -> talcum -> 40% sales consumer
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28
Q

Tech examples

A

Polariod: complementary assets - digital manufacturers in 1996 then went bankrupt 2001
Spotify: buyer education
Tupperware: tech
Ebay: network
Microsoft network: base of computer operating systems produce network externalities -> barrier to competitive replication
Amazon: Steve Kessel run digital book section - head of book sales - became the competition
5G: educate consumers of the benefits - marketing
Lyft: learn from Uber - NY storm 8 fold prices - 10% market share since 2015

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29
Q

Non-market actors

A

Entities that make the rules, awareness, campaigns

- Regulators, citizens, activists, media, govt

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30
Q

Issue framing

A

Bach and Blake (2015):

  • promotes a particular problem definition, causal interpretation, moral evaluation or treatment recommendation
  • e.g. Dubai Ponts World acquire PO US assets - competitor Eller and Co - roots in UAE - linked with AL Qaeda - Senator Charles Schumer
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31
Q

Non-market issue lifecycle

A

Ian Wilson

  • identification, interest formation, legislation, adminisation
  • show how they evolve
  • 2 curves: issue impact on firm, firm impact on issue
  • Pro-active (develop issue) -> responsive (adaption) -> damage control (compliance)
  • media/private activists -> political / legal institutions
  • use media to find growing issues and shape early (Dell)
32
Q

Non market surveys

A

Deloitte (2013):
- ‘regulatory risk’

McKinsey (2012):

  • customer 74%, govt/regulators 53%, employees
  • inc in future
33
Q

Back and Allen

A

(2010) :
- (ia)3 framework
- flexibility vs consistency (cynicism)
- juggling non-business
- after-thought, uncoordinated
- Toyota and BP

34
Q

Non-market examples

A
  • cambridge analytica vs cola
  • Huawei: consistent image
  • BDO
  • EDF nuclear (Bonardi)
35
Q

Institutional theory

A

Myers and Rowan (1977):

  • gain legitimacy/ survival practices, independent of immediate efficacy of the practices
  • adv due to laws, credentialing systems and public opinion
  • integrity, social and environmental responsibility
36
Q

Political connections theory

A
  • having access to lawmakers, because of personal ties and knowledge of those lawmakers.
  • stock price values so assume must be comp adv

Bonardi (2011):

  • can be VRIN but also lobbying, public good
  • causal ambiguity
  • stock variable that is accumulated - Diereckx and Cool

Acemoglu:
- best intentions, beliefs shaped by who you know

Baron (2013):

  • exercise restraint in grey area
  • govt more control in pharma than consumers but growing

Information is key for sustainability e.g. Google Big data - between 2009-15, the White House had 427 meetings with Google. Then can impact interest formation.

37
Q

Political connection studies

A

Acemoglu et al (2014):

  • Timothy Geithner as Treasury secretary 2009. 10 trading days - 12% returns
  • reversed when trouble
  • Goldman and Hank Paulson 2006

Fishman (2001):
- Indonesian companies connected to the then-President Suharto - market value varied (relative to otherwise similar companies) as rumours spread about his health

38
Q

Political connection example

A

Sebastian (2010): Excelon Tom Ridge, draw support nuclear power plant - as jobs in recession - Dec 2009 - on board - was former govt of pennsylvania

39
Q

Non-market added complication and how grown in complexity

A

Baron (2013):
- moral determinants based on well-being, justice, rights

Complexity: new media shaping reputation (e.g. OhPolly), intellectual property, health and safety, fuel standards, trade policy, consumer protection, competition policy, privacy

40
Q

Diversification statistic

A

Berger et al (1995):

  • diversification discount
  • cong: loss value 13-15%
  • market cap of individual businesses added up vs the conglomerate
  • n is low for cong

Clough (2018):

  • Digital Age still has emerging conglomerates e.g. Amazon
  • GE shake-up
41
Q

Conditions for good corporate strategy

A

Porter (1987):

- attractiveness test, cost-of-entry test, better-off test (gain comp adv)

42
Q

Reasons why diversify

A

Montgomery (1994):

  • market power
  • agency view
  • resource view (excess capacity that cannot be sold in markets - growth for management - attract them)
43
Q

MandA statistics

A

Porter (1987):

  • 33 US companies 1950-86
  • 74% unrelated divestment rate

KPMG - 83% MA not boosted shareholder returns
- often average treatment effect: lots of heterogeneity within

Dyer et al (2004):
- loss of wealth 10% over 5 years after completion

44
Q

How best to diversify

A

Palich et al (2000):
- curvilinear model: conversion under-utilised resources, strain control and governance

Collis and Montgomery (1998):

  • align in resources
  • Tyco vs Sharp

Goold and Lusch (1993):
- synergies, core competencies, managerial dominant logic

45
Q

MandA issues

A

Competition

  • Between firms: Barney (1988): perfect factor markets. NPV = 0.
  • Acquirer trying to capture more of value - Andrande (2001): -1% 16%, over 4000 deals

Estimation

  • HandH (1997): hubris
  • HandJ (1987): predicted synergies in acc dossiers. Operating limited role
  • Jemison and Sitkin (1986): secrecy, premature closure

Integration - undermine synergy benefits

  • GandH (2014): 68%, 33%
  • BandP (1995): unlearning
  • Power shifts, job insecurity, blurred roles and responsibilities
46
Q

How best to conduct MandA

A

Capron and Pistre (2002): 101 acquisitions

  • optimal resource allocation: leverage its managerial and innovation and use locally embedded marketing
  • increased commercial potential
  • if sources of synergies lie with target then market allocate gains to the target

Martin (2016):

  • take vs give acquisitions
  • Yahoo-TUmblr 1.1bn -> 712m write-down

HandJ (1987)
- asset stripping

47
Q

Problems with diversification

A
  • bureaucracy (standardisation_
  • influence (politics)
  • incentives
48
Q

Alliances

A
  • not indepth integration but learning and use of soft resources
    Dyer et al (2004):
  • 24% consider as alternative
  • learning is paramount
  • cooperated, negotiated, not so risky
  • synergies required, marketplace, competencies at collaborating

Bleeke and Ernest (1995):

  • distinctive qualities
  • median life-span 7 yrs
49
Q

MandA examples

A

Microsoft and Nokia 2013

Chrysler and Daimlet Benz

PandG marketing, sales, distribution

Aberdeen /standard: Aug 2017 -> Oct 2018 1/3 . Times: epic culture clash.9 senior managers resign. Dual CEO, tribal loyalties.

Kraft Heinz - Buffet 89-40bn 2015

50
Q

Behavioural strategy goal

A

Powell (2011):
- strengthen usefulness, grounding realistic assumptions about human cognitive, emotion and social interaction

Simon (1957): bounded
- judgement limited by available info, cognitive limitations

Unconcious biases / innate pyschological obstacles

51
Q

Confirmation bias

A

Schwenk (1984):

  • groupthink
  • Kahneman and Tversky (1974): representativeness heuristic - view most represented in info e.g. halo vs hot stove effect
  • seek info confirm and ignore refutes
  • if personal ties in board room then less likely to oppose dominant view or consider alternative in the first place
52
Q

Hubris

A

Hayward and Hambrick 97

  • not techno-economic but irrational exuberance
  • excessive self-confidence in ones own ability
  • Drucker: investment in managerial ego

Svensson (1981):
- 93% above average drivers

53
Q

Status quo bias

A

Sibony et al (2017):

- inertia

54
Q

Choice architecture

A

Felin (2014):

  • interface of options available for individuals / impacts salience
  • knowing about the biases isn’t enough
  • independent judgement process (multiple gateways)
  • opportunities to check biases before manifest
  • Google internal prediction markets
  • culture conformity / tick box mentality
55
Q

Devil’s advocate

A

Schwenk (1984):

  • initiate assumption negotiation
  • informal dissenter - articulate opposing view
  • objective vs carping critic
  • solids confidence to disastrous, think rational and objectively
  • need sincere commitment
56
Q

Scenario planning

A

Schoemaker (1995):

  • avoid tunnel vision
  • institutionalises the hunt for weak signals
  • requires intellectual courage to reveal evidence that doesn’t fit with current conceptual maps - not variations on one theme
  • simplify avalanches of data into no. of possible states
57
Q

Disruptive innovation

A

Christiansen 1995:

  • “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.
  • targeting overlooked segments of customers at bottom of market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill
  • important for non-substitutability
  • counter-intuitive: lot of innovation from low-level/end
  • e.g. Christensen et al 2015: Netflix - 1997 service appealed to only a few customer groups—movie buffs who didn’t care about new releases, early adopters of DVD players, and online shoppers - not Blockbuster’s customers - not until went onto online streaming 07
58
Q

Dierickx and Cool (1989)

A

Framework to gauge the sustainability of stream of quasi-rents from the deployment of nontradeable assets. Choosing the appropriate time path of flows to accumulate a stock of these assets.

Asset stock accumulation

  • For non-traded assets - e.g. rep and loyalty
  • Distinguishing stocks and flows.
  • Factors impact imitability: time compression diseconomies (crash-course RandD) and asset mass efficiencies (initial level -> pace of further accumulation), interconnectedness of asset stocks, asset erosion (easier for flows than stocks), causal ambiguity (discontinuous process)
59
Q

First mover advantage paper

A

Fudenberg and Tirole 1980s:

- Fat Cat: innovate to have less competition e.g. Highland spring water. Here not win-lose.

60
Q

Non-market strategies

A
  • Information provision (technical and political) Political capital helps pass this info.
  • Representation (certain constituencies interests). Change narrative.
  • Majority building
61
Q

Why don’t have uniform distribution of MandA

A
  • financial cycle / liquidity
  • Game theory: upsets the balance of forces so others make big moves
  • Behavioural: ego reasons
62
Q

What Porter and RBV ignores

A
  • Diligence approach
  • network of relationships (Dyer and Singh 1998) - similar to coopetition
  • non-market

Use institutional logic in parallel with industry level analysis

63
Q

Examples of nontradeable assets

A

Reputation - historically path dependent

64
Q

Issue framing example

A

Uber spent $2m lobbying for congestion pricing in NY since 2015 - better than tax or quote - less cars has counterintuitive benefits - shorter wait times and less owning cars - combine transit and uber

65
Q

Defining the industry example

A

Netflix compete with fornite more than BDO - compare with other screen time experiences

66
Q

Example if merger integration failure

A

Essilor (optical expertise) and Luxottica (frame distribution and branding)

  • ‘executives have been battling for supremacy’
  • stock fallen 15% since the merger
67
Q

Coopetition forms

A

sharing costs, distribution channels, innovation efforts, marketing campaigns, risks

68
Q

Define unique competitive position

A

Creating a differentiated offering that should reap significant abnormal returns

69
Q

Define non-market

A

Relationships that don’t unfold in markets yet nevertheless affect the company’s ability to reach its objective

70
Q

Key question with diversification

A

‘Best owner’: are the businesses in the portfolio worth more under the management of the company in question than they would be under any other ownership (Goold & Luchs 1993

71
Q

Definition of diversification

A

a firm expands the scope of its business by entering new markets or offering new products
- problematic if lots of costs but not reaping many benefits

72
Q

Example of unsuccessful diversification

A

GE - electrical products then into finance
- diminishing growth to overall stock market since 2008 - dramatic reshaping and break up

Texas instruments - exploit their competency in semi-conductors to consumer goods such as calculators and watches. However, TI failed as they had no experience in managing such consumer-oriented businesses - synergies not sufficient

73
Q

Define competitive advantage

A

a resource, intangible or tangible, of a firm that allows the firm to outperform its competitors

74
Q

Why plan

A

Beinhocker and Kaplan (2002): counterintuitive notion not designed to make but creates prepared minds and intensive knowledge so can better react in unpredictable events

75
Q

Strategy planning plan

A
  • evidence against
  • emergent
  • Quinn
  • Brews Hunt / Beinhocker and Kaplan - planning to learn
  • Dynamic capabilities
  • Scenario planning

FHS (8 decks)

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