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
Examples of coopetition
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
26
How to make coopetition successful
Chin et al (2008): - development of trust Bouncken and Kraus (2013): - inlearning occurs and uncertainties. - pool risks, share costs
27
Emergent strategy examples
- Ikea: mail order -> flat pack furniture - Airbus A380 - germany and france diff software incompatibilities - $6bn - Johnson and Johnson: medical plasters -> talcum -> 40% sales consumer
28
Tech examples
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
29
Non-market actors
Entities that make the rules, awareness, campaigns | - Regulators, citizens, activists, media, govt
30
Issue framing
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
31
Non-market issue lifecycle
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
Non market surveys
Deloitte (2013): - 'regulatory risk' McKinsey (2012): - customer 74%, govt/regulators 53%, employees - inc in future
33
Back and Allen
(2010) : - (ia)3 framework - flexibility vs consistency (cynicism) - juggling non-business - after-thought, uncoordinated - Toyota and BP
34
Non-market examples
- cambridge analytica vs cola - Huawei: consistent image - BDO - EDF nuclear (Bonardi)
35
Institutional theory
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
Political connections theory
- 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
Political connection studies
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
Political connection example
Sebastian (2010): Excelon Tom Ridge, draw support nuclear power plant - as jobs in recession - Dec 2009 - on board - was former govt of pennsylvania
39
Non-market added complication and how grown in complexity
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
Diversification statistic
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
Conditions for good corporate strategy
Porter (1987): | - attractiveness test, cost-of-entry test, better-off test (gain comp adv)
42
Reasons why diversify
Montgomery (1994): - market power - agency view - resource view (excess capacity that cannot be sold in markets - growth for management - attract them)
43
MandA statistics
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
How best to diversify
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
MandA issues
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
How best to conduct MandA
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
Problems with diversification
- bureaucracy (standardisation_ - influence (politics) - incentives
48
Alliances
- 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
MandA examples
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
Behavioural strategy goal
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
Confirmation bias
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
Hubris
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
Status quo bias
Sibony et al (2017): | - inertia
54
Choice architecture
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
Devil's advocate
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
Scenario planning
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
Disruptive innovation
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
Dierickx and Cool (1989)
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
First mover advantage paper
Fudenberg and Tirole 1980s: | - Fat Cat: innovate to have less competition e.g. Highland spring water. Here not win-lose.
60
Non-market strategies
- Information provision (technical and political) Political capital helps pass this info. - Representation (certain constituencies interests). Change narrative. - Majority building
61
Why don't have uniform distribution of MandA
- financial cycle / liquidity - Game theory: upsets the balance of forces so others make big moves - Behavioural: ego reasons
62
What Porter and RBV ignores
- Diligence approach - network of relationships (Dyer and Singh 1998) - similar to coopetition - non-market Use institutional logic in parallel with industry level analysis
63
Examples of nontradeable assets
Reputation - historically path dependent
64
Issue framing example
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
Defining the industry example
Netflix compete with fornite more than BDO - compare with other screen time experiences
66
Example if merger integration failure
Essilor (optical expertise) and Luxottica (frame distribution and branding) - 'executives have been battling for supremacy' - stock fallen 15% since the merger
67
Coopetition forms
sharing costs, distribution channels, innovation efforts, marketing campaigns, risks
68
Define unique competitive position
Creating a differentiated offering that should reap significant abnormal returns
69
Define non-market
Relationships that don't unfold in markets yet nevertheless affect the company's ability to reach its objective
70
Key question with diversification
'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
Definition of diversification
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
Example of unsuccessful diversification
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
Define competitive advantage
a resource, intangible or tangible, of a firm that allows the firm to outperform its competitors
74
Why plan
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
Strategy planning plan
- evidence against - emergent - Quinn - Brews Hunt / Beinhocker and Kaplan - planning to learn - Dynamic capabilities - Scenario planning