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RSM Summary Managing Business Strategically (BMS)

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Course
Managing Business Strategically (BMS)

Institution
Erasmus Universiteit Rotterdam (EUR)

This summary contains ... 1. Information from the lectures of content module 1-6, 2. Relevant strategic models, 3. and information from the following articles: -Value Creation and Value Capture: A Multilevel Perspective (Lepak, Smith, Taylor 2007) - Dynamic Capabilities: What are They?...

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Uploaded on September 21, 2022
Number of pages 73
Written in 2022/2023
Type Summary

strategy
strategic management
value creation
value capture
strategic diamond
resource based view
industry based view
strategic groups
competitor analysis
learning and experimen
porters five forces

Institution
Erasmus Universiteit Rotterdam (EUR)
Education
MSc Strategic Management
Course
Managing Business Strategically (BMS)

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Summary Managing Businesses
Strategically

Summary Managing Businesses Strategically .................................................................... 1
Content Module 1 ............................................................................................................. 2
1 What is strategy? .................................................................................................................. 2
What is a business model? ....................................................................................................... 5
2 The economic logic of business: Value creation and value capture .......................................... 6
3 The economic logic of business: Business models ................................................................... 9
Content Module 2: Managing strategic resources and dynamic capabilities .................... 15
1 The resource-based view ..................................................................................................... 15
2 (Sustained) competitive advantage ...................................................................................... 17
3 Dynamic capabilities ........................................................................................................... 20
Content Module 3: Dynamics and Interfirm Rivalries ....................................................... 24
1 Strategic groups .................................................................................................................. 24
2 Competitive Dynamics and Multimarket Contact ................................................................. 26
3 Disruptive innovation .......................................................................................................... 35
Content module 4: Learning and Experimentation as Strategy ........................................ 37
1 Limits of strategic management ........................................................................................... 37
2 Learning and experimentation ............................................................................................. 39
3 Lean strategy & experimentation......................................................................................... 43
Business experimentation ...................................................................................................... 44
Content module 5: Digitalization and Firm Strategy ........................................................ 46
1 Digitalization and the Theory of the Firm ............................................................................. 46
2 Implications for value creation and value capture ................................................................ 52
3 Many firms focus on digitalization 1.0 .................................................................................. 54
Content module 6: Business ecosystems and platforms ................................................... 56
1 Ecosystems: the role of complementors ............................................................................... 56
2 Competition and cooperation in Ecosystems ........................................................................ 63
Pipelines vs. platforms ........................................................................................................... 68
3 Multi-sided Platforms .......................................................................................................... 70

MBS – Strategic Management - Marthe Borst 634503

, Content Module 1
At the end of this session, you should be able to
1. Describe the essence of strategic management
2. Evaluate the existing business model of a real-world company with respect to its
ability to create and capture value

Article related questions
1. What is value, with a focus on the difference between use and exchange value?
2. How can (a) individuals, (b) organizations, and (c) society create value?
3. What determines the ability of (a) individuals, (b) organizations, and (c) society to
capture value?

1 What is strategy?
Main takeaways
1. Strategy refers to the centrally integrated, externally oriented concept of how we
will achieve our objectives.
2. A strategy has five elements, each strategy therefore needs to answer five questions.
3. Perform a sensitivity analysis.

Strategy refers to the centrally integrated, externally oriented concept of how we will
achieve our objectives

A strategy has five elements, providing answers to five questions:
1. Arenas: where will we be active (what business will we be in)
a. Product categories
b. Market segments
c. Geographic areas
d. Core technologies
e. Value-adding stages (e.g., product design, manufacturing, selling, servicing,
distribution)
2. Vehicles: How will we get there
a. Internal development
b. Joint ventures
c. Strategic alliances
d. Licensing
e. Franchising
f. Mergers & acquisitions
3. Differentiators: How will we win in the marketplace
a. Image
b. Customization
c. Price
d. Product styling
e. After- sale services

MBS – Strategic Management - Marthe Borst 634503

, 4. Staging: What will be our speed and sequence of moves
a.

5. Economic logic: How will we obtain our returns

Strategy Diamond as a configuration of
interdependent choices

MBS – Strategic Management - Marthe Borst 634503

,Sensitivity Analysis -testing your strategy

Porter’s generic competitive strategies

MBS – Strategic Management - Marthe Borst 634503

,Ansoff growth strategies

What is a business model?

A business model consists out of four interrelated domains: changing one domain has effect
on the other(s).

Difference between business model and strategy
Business model is the reflection of the realized strategy and captures the economic logic of
strategy (how a firm creates and captures value). i.e., a business model is just a block of a
strategy

Three characteristics of a good business model
1. Aligned with the company goals
2. Self-reinforcing
a. Choices that are made while creating a business model should
complement one another. There must be internal consistency.
3. Robust
a. A good business model should be able to sustain its effectiveness over
time by fending off four threats: imitation, holdup (can customers,
suppliers or other players capture the value you create by flexing their
bargaining power), slack (organizational complacency), and substitution.

MBS – Strategic Management - Marthe Borst 634503

,2 The economic logic of business: Value creation
and value capture
Main takeaways
- Firms create economic returns by creating and capturing value.
- Customers will select products with the greatest customer surplus.
- The key question for firms should be how to increase the customer surplus.
- Value captured from exchange value depends on the isolating mechanism & bargaining
relationships between buyers and sellers

What is value?
How does a customer judge the extent to which an existing product/ service meets her
needs, or whether a new product/ service on the market would better meet her needs?

How to assess value?

Use value refers to the specific quality of a new job, task, product, or ser- vice as perceived
by users in relation to their needs. i.e., Use value is the willingness to pay.

Exchange value is defined as either the monetary amount realized at a certain point in time,
when the exchange of the new task, good, service, or product takes place, or the amount
paid by the user to the seller for the use value of the focal task, job, product, or service.

Both definitions suggest that value creation depends on the relative amount of value that is
subjectively realized by a target user (or buyer) who is the focus of value creation and that
this subjective value realization must at least translate into the user’s willingness to
exchange a monetary amount for the value received.

Treacy and Wiersma Value Disciplines
Product leadership

Customer intimacy
Operational excellence
MBS – Strategic Management - Marthe Borst 634503

,Two important economic conditions may be necessary for value creation activities to
endure:
1. Monetary amount exchanged must exceed the producer’s costs of creating the
value.
2. Monetary amount that a user will exchange is a function of the perceived
performance difference between the new value that is created and the target user’s
closest alternative.
→ Without these, neither the user nor creator of value will be repeatedly engage in
these activities on the long term.

There’s a significant variance in the parties or targets (1) and in the potential sources or
creators (2) of value.
1. Parties or targets
b. Creation of value for business owners
c. Creation of value that targets individual employees, teams, or organizations
d. Society or nations
2. Sources or creators
a. Behaviour of people (individuals or groups)
b. Organisational level
c. Industry or societal level

Value creation refers to both the content and process of new value creation
1. Content side:
a. What is valuable?
b. Who values what?
c. Where resides value?
2. Process side:
a. How is value generated?
b. What is the role of value?

Confusion with the process of value capture or value retention.
→ Value created by one source or at one level of analysis may be captured at
another.

Value capture: non-imitable product
The ability to capture value depends on barriers to imitation:
Causal ambiguity - Real drivers of corporate success for outsiders
- Firm’s true assets used to produce product / service
- Relationships between assets
Time-compression diseconomies - Inefficiencies / higher costs that occur when
product is developed relatively faster than first
mover
Isolating mechanisms - Barriers that impede flows of knowledge across
firms

MBS – Strategic Management - Marthe Borst 634503

, Value capture: Bargaining power

Value capture form customers and from resource suppliers: comparisons with other
suppliers and buyers

Value chain model & Value system

MBS – Strategic Management - Marthe Borst 634503

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