Strategy, MC and MA Flashcards
Appreciation of how strategic decisions are formulated / Competitive Advantage at Business Level / Corporate level strategy / Industry level strategy
What is management control?
focuses on execution
Are employees likely to behave appropriately?
What is strategic control?
is our strategy still valid and if not how should we change it?
Example Kodak: did the continually question the relevance of their strategy?
Teese’s Shape, Sense and Seize framework
Dynamic Capabilities
Two views to strategy
Rational-Analytical View
Emergent View
Rational-Analytical view to strategy
Prescriptive
Intended
Developed using formats strategic planning systems
Emergent View to Strategy
Over time
New opportunities leading to adaption
Business Level Strategy
Porters Generic Strategies
Bowmans Strategy Clock
Using these to formulate appropriate management controls
Porters Generic Strategies (PGS)
Cost Leadership vs Differentiation
Differentiation (PGS)
Focused Strategies
Boundary very important here
Interactive to ensure they are consistently different
Cost Leadership (PGS)
Focused on reducing costs
Diagnostic important here
Bowmans Strategy Clock
1995 Goes against Porter - says you can be profitable in the middle region "hybrid" Price low to high (x axis) Perceived Benefits low to high (y axis) Hybrid (3) Differentiation (4) no frills (1) (6 7 8) danger zone
Corporate Level strategy
Value adding or destroying?
Extent of diversification
Typology of the firm
Economics of Diversification
Scope of economies
Synergistic Benefits
Scope of economies
eliminate costs by operating two companies under one parent
E.g. Virgin and Sainsburys
Synergistic Benefits
Market power - strengthen brand and competitive position
Corporate Growth
Increased shareholder value
Strategic Typologies
Miles and Snow 1978
Defenders, prospector, analyser, reactor
Defenders (Miles and Snow)
Stable environment
Protect market share and current position
Tight control - centralised
Prescriptive strategy
Analyser (Miles and Snow)
Slow change
Seek market opportunities but protect existing areas
Prescriptive
Prospector (Miles and Snow)
Growing, Dynamic
Explore and take risks
Decentralised, flexible
Emergent strategy
Reactor (Miles and Snow)
Growing or Slow
Responding only to others
Prescriptive
Industry Level
Porters 5 forces
Product life cycle
Porters 5 forces
Threat of new entrants
Bargaining power of suppliers (Switching costs?)
Bargaining power of buyers (Switching costs?)
Threat of substitute products/services
Rivalry amongst existing competition
Product life cycle
Development / Growth / Shake out / Maturity / Decline
Low rivalry / growing rivalry / some exits / stronger buyers / extreme rivalry
What is the strategy at different stages
Advantages of Diversification
Palich et al 2000
Market power- driving existing rivals out/discouraging new
Internal Market efficiencies - tax advantages
Portfolio theory - reducing the unsystematic risk of the firm
Get around TC
Economies of scope - sharing resources etc.
Disadvantages of Diversification
Palich et al 2000 Managers drawn to overinvestment - empire building and managerial entrenchment. Hubris etc. (Microsoft/Linkedin) Loss of control strain on management being spread thinly Inta-firm conflicts
Three models of diversification
Palich et al 2000
Linear model
Inverted U model
Intermediate Model
Linear Model of diversification
Obviously does not hold.
Inverted U Model
Optimal level of diversification
Reaches a certain point and begins to negatively affect performance
Related is superior to unrelated
Intermediate model
Related no more superior than unrelated
Results of Diversification
Palich et al 2000
Firm diversification is related to accounting and market performance
Link between the two being inverted U shaped model
Questions to consider
Are there any stable industries anymore?
Can any company really have a prescriptive strategy?
How would you expect each strategy to use different MC
