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Complete summary for Strategy and Organization
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This is a complete summary for the first year course Strategy and Organization. It consists of chapters 1-4, 6-8, 10.
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InhoudsopgaveH1 – Introducing strategy............................................................................................................................... 4
1.1 Introduction....................................................................................................................................................4
1.2 What is strategy.............................................................................................................................................4
1.2.1 Defining strategy.....................................................................................................................................4
1.2.2 Level of strategy......................................................................................................................................4
1.2.3 Strategy statements................................................................................................................................4
1.3 The exploring strategy model.........................................................................................................................5
1.3.1 Strategic position....................................................................................................................................5
1.3.2 Strategic choices.....................................................................................................................................5
1.3.3 Strategy in action....................................................................................................................................5
1.4 Working with strategy....................................................................................................................................6
1.5 Studying Strategy............................................................................................................................................6
1.6 Doing strategy differently...............................................................................................................................6
1.6.1 Exploring strategy in different contexts.................................................................................................6
1.6.2 Exploring strategy though different ‘strategy lenses’............................................................................6
H2 – The environment................................................................................................................................... 7
2.1 Introduction....................................................................................................................................................7
2.2 The macro-environment.................................................................................................................................7
2.2.1 The PESTEL framework...........................................................................................................................7
2.2.2 Building scenarios...................................................................................................................................8
2.3 Industries and sectors.....................................................................................................................................8
2.3.1 Competitive forces – the Five Forces Framework..................................................................................8
2.3.2 The dynamics of industry structure......................................................................................................10
2.4 Competitors and markets.............................................................................................................................11
2.4.1 Strategic groups....................................................................................................................................11
2.4.2 Market segments..................................................................................................................................11
2.4.3 Competitor analysis and ‘Blue Oceans’................................................................................................11
2.5 Opportunities and threats............................................................................................................................11
H3 – Strategic capabilities............................................................................................................................ 12
3.1 Introduction..................................................................................................................................................12
3.2 Foundation of strategic capability................................................................................................................12
3.2.1 Resources and competences................................................................................................................12
3.2.2 Dynamic capabilities.............................................................................................................................12
3.2.3 Threshold and distinctive capabilities..................................................................................................12
3.3 ‘VRIO’ Strategic capabilities as a basis of competitive advantage...............................................................12
3.3.1 V – Value of strategic capabilities.........................................................................................................12
3.3.2 R – rarity................................................................................................................................................13
3.3.3 I – Inimitability......................................................................................................................................13
3.3.4 O – Organizational support...................................................................................................................13
3.3.5 Organizational knowledge as a basis of competitive advantage.........................................................13
3.4 Diagnosing strategic capabilities..................................................................................................................14
3.4.1 Benchmarking.......................................................................................................................................14
3.4.2 The value chain and value system........................................................................................................14
3.4.3 Activity systems....................................................................................................................................15
1
, 3.4.4 SWOT....................................................................................................................................................15
H4 – Strategic purpose................................................................................................................................. 15
4.1 Introduction..................................................................................................................................................15
4.2 Mission, vision, values and objectives..........................................................................................................15
4.3 Owners and managers..................................................................................................................................16
4.3.1 Ownership models................................................................................................................................16
4.3.2 Corporate governance..........................................................................................................................16
4.3.3 Different governance models...............................................................................................................16
4.3.4 How boards of directors influence strategy.........................................................................................17
4.4 Stakeholder expectations.............................................................................................................................17
4.4.1 Stakeholder groups...............................................................................................................................17
4.4.2 Stakeholder mapping............................................................................................................................18
4.4.3 Power....................................................................................................................................................18
4.5 Social responsibility and ethics.....................................................................................................................18
4.5.1 Corporate social responsibility.............................................................................................................18
4.5.2 The ethics of individuals and managers...............................................................................................18
H6 – Business strategy................................................................................................................................. 18
6.1 Introduction..................................................................................................................................................18
6.2 Identifying strategic business units..............................................................................................................19
6.3 Generic competitive strategies.....................................................................................................................19
6.3.1 Cost leadership..........................................................................................................................................19
6.3.2 Differentiation strategies......................................................................................................................19
6.3.3 Focus strategies....................................................................................................................................20
6.3.4 ‘Stuck in the middle?’...........................................................................................................................20
6.3.5 The strategy clock.................................................................................................................................20
6.3.6 Lock-in and sustainable business strategies.........................................................................................20
6.4 Interactive strategies....................................................................................................................................21
6.4.1 Interactive price and quality strategies................................................................................................21
6.4.2 Interactive strategies in hypercompetition..........................................................................................21
6.4.3 Cooperative strategy............................................................................................................................21
6.4.4 Game theory.........................................................................................................................................22
H7 – Corporate strategy and diversification.................................................................................................. 22
7.1 Introduction..................................................................................................................................................22
7.2 Strategy directions........................................................................................................................................22
7.2.1 Market penetration (A).........................................................................................................................22
7.2.2 Product development (B).....................................................................................................................22
7.2.3 Market development (C)......................................................................................................................23
7.2.4 Conglomerate diversification (D)..........................................................................................................23
7.3 Diversification drivers...................................................................................................................................23
7.4 Diversification and performance..................................................................................................................23
7.5 Vertical integration.......................................................................................................................................24
7.5.1 Forward and backward integration...........................................................................................................24
7.5.2 To integrate of to outsource?...............................................................................................................24
7.6 Value creation and the corporate parent.....................................................................................................24
7.6.1 Value-adding and value-destroying activities of corporate parents.........................................................24
2
, 7.6.2 The portfolio manager..........................................................................................................................25
7.6.3 The synergy manager...........................................................................................................................25
7.6.4 The parental developer........................................................................................................................25
7.7 Portfolio matrices.........................................................................................................................................25
7.7.1 The BCG (or growth/share) matrix.......................................................................................................25
7.7.2 The directional policy (GE-McKinsey) matrix........................................................................................26
7.7.3 The parenting matrix............................................................................................................................26
H10 - Mergers, acquisitions and alliances..................................................................................................... 26
10.1 Introduction................................................................................................................................................26
10.2 Organic development.................................................................................................................................26
10.3 Mergers and acquisitions...........................................................................................................................27
10.3.1 Types of mergers and acquisitions.....................................................................................................27
10.3.2 Timing of mergers and acquisitions....................................................................................................27
10.3.3 Motives for Mergers and Acquisitions...............................................................................................27
10.3.4 M&A processes...................................................................................................................................27
10.3.5 M&A strategy over time.....................................................................................................................28
10.4 Strategic alliances.......................................................................................................................................28
10.4.1 Types of strategic alliance..................................................................................................................28
10.4.2 Motives for alliances...........................................................................................................................28
10.4.3 Strategic alliances processes..............................................................................................................28
10.5 Comparing acquisitions, alliances and organic development....................................................................29
10.5.1 Buy, Ally, or DIY...................................................................................................................................29
H6 Behavioral theory of the firm.................................................................................................................. 29
H7 Agency theory......................................................................................................................................... 30
7.1 Introduction..................................................................................................................................................30
7.2 Separation of ownership and control...........................................................................................................30
7.3 Managerial behavior and ownership structure.......................................................................................30
7.3.1 Managerial behavior and ownership structure in a world with certainty and symmetrical
information....................................................................................................................................................30
7.3.2 Monitoring and bonding.......................................................................................................................30
7.4 Entrepreneurial firms and team production.................................................................................................31
7.6 Theory of principal and agent..................................................................................................................31
7.6.1 The principal can observe the agent’s behavior (symmetrical information).......................................31
7.6.2 The principal cannot observe the agent’s level of effort (asymmetrical information)........................31
7.6.3 The principal can observe a signal concerning the agent’s level of effort...........................................31
H8 Transaction cost economics.................................................................................................................... 31
8.1 Introduction..................................................................................................................................................32
8.2 Behavioral assumptions: bounded rationality and opportunism.................................................................32
8.3 Dimensions of transactions..........................................................................................................................32
8.3.1 Asset specifity.......................................................................................................................................32
8.3.2 Uncertainty/complexity........................................................................................................................32
8.3.3 Frequency.............................................................................................................................................32
8.4 Peer groups...................................................................................................................................................32
8.4.1 Advantages of peer groups...................................................................................................................32
8.4.2 Limitations of peer groups....................................................................................................................33
8.5 Simple hierarchies.........................................................................................................................................33
3
, 8.5.1 Team production..................................................................................................................................33
8.6 Multistage hierarchies: U-form and M-form enterprises.............................................................................33
8.7 Organizational markets................................................................................................................................33
8.8 Markets and organizations: are these all there is?......................................................................................34
8.9 Governance in a three-level schema............................................................................................................34
H1 – Introducing strategy
1.1 Introduction
Strategy is about key issues for the future of organizations.
1.2 What is strategy
Strategy is the long-term direction of an organization.
1.2.1 Defining strategy
The long term includes the three-horizons framework.
o Horizon 1: Current/core activities such as getting rid of inventory
o Horizon 2: Emerging activities that must earn new profits
o Horizon 3: Not so sure, typically risky research and development maybe
decades ahead
Horizon 1 should be pushed as far as possible, whilst still looking at 2 and 3.
Strategic direction, managers try to set the direction of their strategy to long-term
objectives (e.g. maximizing profits).
Organizations have many internal and external stakeholders. Organizations consist of
diverse/competing workers. This causes boundaries, how to manage relationships
with what is kept outside.
1.2.2 Level of strategy
Inside an organization, strategies exist at three main levels.
Corporate-level: overall scope of an organization such as geographical
scope/acquisitions/recourse allocation.
Business-level: how a single business should compete in markets. Including
innovations/responses to competitors moves.
Operation: how recourses can be delivered to fulfill corporate- and business
strategies.
All strategies must be aligned and integrated with each other.
1.2.3 Strategy statements
Strategy statements (strategy summaries) should contain the goals, scope of the activities
and advantages.
Mission, helps keep managers focused on the central strategy.
Vision, the desired future state of the organization, what do we want to achieve?
Objectives, more precise goals over time, what do we have to achieve?
Scope, customer or clients; location; extent of internal activities
Advantage, how to achieve the objectives?
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