Strategy Content

Question 1

Business Level strategy: the issue of competitive advantage & components of a business system

Answer 1

How can a company be successful?

Business System: the configuration of resources, activities and products/service offerings intended to create value for the customer

components of a business system:

1. Product Offering:
   supplied value proposition of the firm to the client
2. activity system (value chain):
   value creation processes leading to the supply of product and/or service offerings
3. resource base (stock of assets):
   base for value adding processes and creation of product offering

Question 2

the product offering: risk of an unfocused approach

Answer 2

risk of an unfocused approach are…
1. low economies of scale:
the less specialized the company, the lower the opportunity to leverage the resource base
2. slow organizational learning:
ability to built up specific knowledge and capabilities is slowed down
3. unclear brand image:
companies which stand for everything stand out in nothing
4. unclear corporate identity:
difficulties to explain why people are together in the same company
5. high organizational complexity:
exponential increase in complexity through more bureaucracy
6. limits to flexibility:
forced into choices due to operational necessity

Question 3

the product offering: defining and selecting businesses

Answer 3

companies must focus in two ways

1. selecting a limited no. of business:
   analyze characteristics of interesting businesses to be able to judge wether they are attractive enough (Porters 5-forces analysis)
2. focusing within each selected business:
   determine what they want to be and what they don’t want to be. choose distinct market segments and target specific product offerings.

Question 4

the product offering: product bases for competitive advantage

Answer 4

price - to be able to compete in price, product offering, activity system and resource base should be on low cost base.

features - achieve USP by different intrinsic functional characteristics than competing products

bundling - selling a package of product/services wrapped together

quality - not has to be different, just better

distribution - having the product available in the right place, moment way

image - having a more appealing image than competitors

relations - customer prefer to know supplier well

Question 5

the activity system: value chain

Answer 5

= value chain, set of value creation processes leading to the supply of the product offering

primary activities
inbound logistics: receiving and storing
operations: turn inputs in final product
outbound logistics: collecting, storing, distributing
marketing and sales: way customer can buy product
services: maintainance of product

Support activities
firm infrastructure: activities supporting the entire value chain
HRM: management of personell force
Technology development: improvement of technologies
procurement: purchasing of inputs

Question 6

the resource base: types of firms resources

Answer 6

1. tangible resources: land, building, materials, money
2. intangible resources:
3. 1 relational resources: relationship, reputation
4. 2 competences: knowledge, capabilities, attitude

Question 7

Sustaining competitive advantage

Answer 7

C.A. is sustainable if it cannot be copied, substituted or eroded by rivals and is not made redundant by developments in the environment.

Sustainability depends on 2 factors:
1. competitive defendability
2. environmental consonance:
C.A. and environment have to fit together

Question 8

Paradox of Business Level Strategy

Answer 8

Market adaptation
ability to understand the rules of the game in the market where one is operating

vs

resource leveraging
creating value by controlling assets across business and organizational system

Question 9

Perspectives of business level strategy

Answer 9

outside-in
markets, opportunity drive (external potenzial), market demand/ industry structure, adaptation to environment, attaining advantageous position, external positioning, acquiring necessary resources, bargaining power & mobility barriers

inside-out
resources, strength driven, resource base & activity system, adaptation OF environment, attaining distinctive resources, building resource base, external position, superior resource and imitation barriers

Question 10

Corporate Level Strategy: the issue of Corporate Configuration

Answer 10

What should be the profile of the cooperation?

1. Cooperate Composition
   In what line of business should the co. be active?
   1.1 corporate scope
   on how many businesses should the corporation be active?
   1.2 corporate distribution
   what should be the relative weight of each line of business?
2. Corporate Management
   What organizational system is required to run the co.?
   2.1 integration mechanism
   how should synergies between businesses be realized?
   2.2 Management mechanism
   who should ensure that synergies between business are realized?

Question 11

corporate management: integration mechanism

Answer 11

Centralization:
bringing resources & activities together into one organizational unit

coordination:
orchestration of resources, activities, product offerings split between different business units.

standardization:
creating a common norm for resources, activities, product offerings across business units

Question 12

corporate management: management mechanism

Answer 12

Control:
the power to enforce integration on the basis of formal authority

cooperation:
achieving integration by means of mutual adjustment between BU.

Question 13

Paradox Corporate Strategy Level

Answer 13

Business Responsiveness
ability to respond to competitive demands of specific business area in a timely adequate manner

Multi-Business Synergy
the additional value created by working in two or more business areas, over and above the sum of the business parts

Question 14

Multi-Business Synergy - Three major forms
+
Multi-Business strategy - six categories of synergy

Answer 14

Leveraging resources:

1. Achieving resource reallocation
2. achieving resource replication

integrating resources

3. linking value adding activities
4. sharing value adding activities

aligning positions

5. improving bargaining position
6. improving competitive position

Question 15

Business Responsiveness: major problems of multi business firms

Answer 15

1. high governance costs: coordinating activities
2. slow decision making: more layers of management
3. strategy incongruence: misfit with business demand
4. dysfunctional control: corporate center misses specific business know-how
5. dulled incentives: lack of autonomy has a negative impact on motivation

Question 16

Perspectives of corporate level strategy

Answer 16

Portfolio:
responsiveness, collection of business shareholdings, diverse, BU responsiveness, CF optimization and risk balance, exerting financial control, capital allocation and performance control, highly autonomous, low BU coordination, acquisitions are simple to accommodate

Integrated:
synergy, comment core with business applications, focused, multi-business strategy, integrated resources, activities and positions, joints strategy development, setting directions and managing synergies, highly integrated (interdependent), high coordination between BUs, acquisitions are difficult to integrate

Question 17

Network Level Strategy: the issue of inter-organizational relationship

Answer 17

what should be the nature of the relationship between a firm and other organizations in its surroundings?

relational Actor
with which groups or firms can or must the company interact?

relational objectives
what expectations and objectives do organizations have with regard to an external relationship?

relational factors
which factors also have an impact on how relationships between companies unfold?

relational arrangements
what is the precise coordination or dispute settlement mechanism between the cooperating companies?

Question 18

inter-organizational relationship - aspects of inter-organizational relations

Answer 18

relational actor A 
relational objectives
relational arrangement
relational objectives
relational actor B

Question 19

relational actors - 4 main categories of relationship

Answer 19

1. Upstream vertical (supplier) relations:
   relationship with supplier defined as providers of raw materials, parts, machinery and services but also with suppliers further upstream in the industry.
2. downstream vertical (buyer) relations:
   relationships on the output side. can be customers or intermediaries trading the output.
3. direct horizontal (industry insider) relations:
   relationship between the firm and other industry competitors
4. indirect horizontal (industry outsider) relations: relationship with companies outside the own industry of the firm.

Question 20

relational actors - SEPTember distinction (PEST)

Answer 20

1. socio-cultural actors
   - individuals or organizations that have a significant impact on societal values, norms, beliefs and behaviors may interact with the firm.
2. economic actors
   - some organizations influence the general state of affairs with which the firm interacts.
3. politocal/legal actors
   - the firm may also interact with organizations setting or influencing the regulations under which companies must operate.
4. technology actors
   - there are also organizations that influence the pace and direction of technology development and the creation of knowledge.
5. external stakeholder

Question 21

relational objectives - inter-organizational cooperation objectives

Answer 21

leveraging resources

1. learning: exchange knowledge an skills
2. lending: lend not fully used resources to others

integrating resources
3. linking: relationships where products and services are exchanged
4. lumping: gain economies of scale by bringing similar
activities together.

aligning resources

5. Leaning: firms get together to improve their bargaining position vis-av-vis other industry actors
6. lobbying: firms cooperate with one another to gain stronger position vis-a-vis contextual actors

Question 22

relational factors - 4 general categories

Answer 22

1. legitimacy - relations are highly impacted by what is deemed to be legitimate. which agenda is chosen and how interaction is taken place are decided by what both parties accept as the “rules of engagements”.
2. urgency - inter-organizational relations are also shaped by the factor “timing”. Relations develop differently when the parties act under time pressure to achieve results.
3. frequency - relations also depend on the frequency of interaction and the expectations of future interactions that the firm that are involved have.
4. power - is the ability to influence others behavior in inter-organizational relationship

Question 23

relational factors - relative power position in inter-organizational relationships

Answer 23

balanced-loose relationship: mutual independence - full freedom to act
balanced-tight relationships.: mutual dependence - Interdependence
unbalanced-loose rel.: unbalanced independence - Y in influenced by X
unbalanced-tight rel.: unbalanced dependence - X dominates Y

Question 24

Paradox Network Level Strategy

Answer 24

Inter-organizational competition
act of working against each other, where two or more organizations goals are mutually exclusive.

inter-organizational cooperation
act of working together two or more organizations goals are mutually beneficial

Question 25

Perspective network level strategy

Answer 25

discrete (getrennt) organization
competition, independence, atomistic, distinct & defended boundaries, arm’s length & transactional relations, win-lose, bargaining power & calculation, no network level strategy, tactic, limited, well-defined, contact-based

embedded (integriert) organization
cooperation, interdependence, networked, fuzzy & open boundaries, close & structural relations, win-win, trust & reciprocity, network level strategy durable partnership (strategic), broad, open, relationship-based

Question 26

Network Level: Relational Arrangements - examples of collaborative arrangements

Answer 26

non contractual (not bonded by law):
1. multilateral agreements (3+, networks)
lobbying coalition, joint standards roundtable, learning communities
2. bilateral agreements (two parties)
cross-selling deals, R&D staff exchange, market info sharing agreement

contractual (legally enforceable)
1. multilateral agreements (3+, networks)
research consortium, international marketing, export partnership
2. bilateral agreements (two parties)
licensing agreement, co-development contract, co-branding alliance

equity based (financial stake)
1. multilateral agreements (3+, networks)
shared payment, construction consortium, joint reservation system
2. bilateral agreements (two parties)
joint venture (new product, cross border, local)